Sunday, November 22, 2015

The BIG Idea

I would agree that most BIG ideas that are successful generate a ton of money...potentially billions, but I would also give that level of success the same odds as winning the lottery.  The biggest problem with having one idea that consumes all of your time and money is that it is not well diversified.  It is the prime example of putting all of your eggs into one basket.  Sure, if you are passionate about something then you probably have an increased chance at pulling it off but if you are just into some silly idea to make money then there are plenty of easier and safer ways to create wealth out there. 

Another big problem with BIG ideas is that we are all biased to think that there are a larger proportion of success stories out there than there really are.  This is because the media sensationalizes success stories and totally ignores failure stories.  For every billion dollar idea there are hundreds if not thousands of similar ideas that have made nothing at all...and why is that?  There is probably no better reason than that of being in the right place at the right time.  I'm sure newly minted billionaires would like to attribute their success to superior talent or relentless commitment, which in a lot of cases is true, but in most cases it probably boils down to a huge amount of luck. 

There is nothing wrong with pursuing great ideas but instead of spending all of your time and money on just one idea you should think about spreading yourself around dozens of different ideas.  The more ideas that you are involved with, the greater chance you'll be in the right place at the right time.  This is where the capital markets come into play.  If you do not have enough capital or time to be actively involved with dozens of ideas simultaneously then you could easily afford to invest in other people and companies that are pursuing similar ideas.  In fact, investing a small amount of money in a company can help to open your eyes to just how rough and unforgiving business can be.  You'll easily see your investment cut in half more suddenly than you'd expect and it is better to learn that lesson with a small amount of money rather than yours and all of your relatives' life savings. 

If you're really just trying to build wealth ask yourself this...would I rather have a 10% chance at getting there quickly or a 90% chance at getting there slowly?  Finally, consider spending beneath your means and putting the lion's share of those savings into a group of well diversified investments and you’ll be on your way to an early retirement in no time at all.