In stocks, there are three basic groups of people. The first group buys low hoping to sell high a few days, weeks, months later. The second group goes ever further, buying stocks on margin, trading in futures and options, taking on tremendous risk to make a killing. The final group buys companies that pay out dividends based on earnings, often reinvesting those dividends into purchases of more stock. They’re patient, willing to watch the business grow, and reinvest their profits along the way.
In real estate investing, there are three basic groups of people. The first group tries to buy property for little or no money down, hoping to flip it as quickly as they can to make a quick buck. The second group buys the biggest properties they can qualify for, pulling out equity along the way to reinvest further, controlling a ton of property but being leveraged to the hilt. The final group makes calculated investments, puts more down, plans on holding it for a long period of time, and grows wealth more slowly.
In personal finance, there are three basic groups of people. The first group takes their paycheck and spends it almost immediately on whatever interests them at the time. The second group goes even further, plunging deep into credit card debt to finance their whims and taking on considerable risk. The final group saves at least 10% of their income, lives below their means, and takes a deliberate, patient approach to financing their dreams.
In this wild world of web entrepreneurship, there are three basic groups of people. The first is brimming with ideas, dabbles in many of them, either makes a modest amount of money or gives up within a brief period of time. The second group builds a technology, raises venture capital ramps up very rapidly – often without a business model – in hopes that they either get acquired or figure out how to generate revenue before running out of cash. The third group focuses on an idea with an obvious or proven business model, often in a niche where they can quickly become competitive, slowly building customers and reinvesting profits along the way.
In most areas of life, it seems as though there are three groups of people – the toe-dippers, the speculators, and the bootstrappers. A gross generalization, but in my experience a generally accurate one.
The first group often lacks the focus to be successful. They lack the fortitude to stick things out, the patience to see things through. They often lack the confidence to step into things full-swing. The toe-dippers are the buddies you knew in high school or college who always talk about starting a business but never get around to it. They’re the people who complain about how much they get paid but never think about how carefully they spend the money they do get.
The second group is full of confidence, but often lacks patience. They’re often larger than life people driven more the desire for quick riches, fame, popularity and power. Some of them do reach their goals and become successful – they become a real estate mogul or a Google acquisition. But most don’t – most flame out. The speculators are the ones who lose their shirts on a stock tip. They’re the ones who make personal guarantees on their business and give up all the equity in hopes of a big pay day. They’re the ones who are brash, full of bravado, who dream of being in the “in-crowd.” Some are successful – the Donald Trumps of the world. But many more are not, and many lives are destroyed during the fall.
The third group is willing to be patient. They know that anything truly worth having is worth working hard for, often for long periods of time. They don’t believe in instant gratification. They believe in solid ideas executed well. They believe in humility, looking to find or create value more than riches. Their paths aren’t necessarily more successful (although I imagine they’re statistically more likely to succeed.) But the virtues they possess and develop along the way – perseverance, humility, patience, diligence – are worth more than the money. They’re the Warren Buffets and Seth Godins and Jason Frieds and Danny Meyers of the world. They’re the mom and pop who run the general store everyone loves on the corner or the guy who runs the construction company that has slowly become the premier firm in the area. They’re the ones who are willing to delay financial rewards in order to make success more likely, who invest their time in doing things the right way and reinvest the money they receive to make their companies thrive. They’re the family that regularly saves and invests their income in boring instruments, lives in a smaller house than they qualify for, drive used cars and love it.
Again, I’m generalizing. There are shades of all three of these people in most of us – I know I have all of them. But I believe that one is more fruitful than the others – not just in financial terms, but in terms of family life, security, well-being, happiness, virtue.
Not putting yourself out there is folly – too many people live with envy, bitterness, jealousy because they’re seeing other people succeed and are afraid to take the plunge themselves.
Taking on enormous risk hoping to hit a home run is also folly. It demonstrates greed, a desire for power, and opens the heart up to temptations and vices way too numerous to mention. Even if one succeeds, it can often be at the expense of family life and personal character.
My goal is to live a life of prudence, discipline, patience, humility and self-control. My goal is to take smart risks, to pursue my goals with tenacity, but to do so intelligently and with respect to my family, friends, coworkers, customers, employees, and community. My goal is to achieve success the long, deliberate way, hopefully developing a character worthy of such success along the way.
What about you? What path do you want to traverse down? Which is the most worthwhile?
