When it comes to achieving success as an investor, you should adopt business strategies that entrepreneurs commonly follow; on the other hand, when you are ready to develop a business idea, you should think like a professional investor. The perspectives of investors and entrepreneurs are not similar, but they can be approached in ways that they can intersect for success.
A serial investor and a serial entrepreneur can share an intense passion for what they do; while this is not a prerequisite for investing or doing business, it certainly helps. To a great extent, this is how billionaire investor Warren Buffett approaches his tradecraft: instead of thinking about acquiring shares of a company, he envisions owning a significant part of the business for the purpose of having voting power. Buffett thinks about the executives of the companies he invests in as if he was evaluating business partners.
Treating Business Ideas Like Investment Ideas
Something that Buffett often mentions when he is asked about his evolution as a successful investor is that he received excellent mentorship from Charlie Munger, an investor who never believed in “buying scraps.” Munger insisted on only acquiring shares if the price was right and the company showed promise; day traders who “buy on the dip” and hope that the market will magically turn things around are effectively gambling.
Entrepreneurs should not enter an industry with the idea that market conditions will bring them short-term riches. This is what happened to many real estate flippers who acquired properties before the housing bubble burst in 2008, and we all painfully remember what happened next. Starting a business should be approached with the mentality of making a solid investment that shows long-term promise based on the strength of the company.
Investing Like an Entrepreneur
Many day traders approach Wall Street like a weekend in Las Vegas, but they do it on a daily basis, thus ending up like blackjack grinders or poker rounders. Grinders and rounders are players for whom the game has become a means to pay the bills; the thrill of gambling has gone, and they hit the casino several hours a day just to make enough to get by.
To invest like an entrepreneur, you should have a business plan that puts money management as a high priority. The foundation of money management is to never invest what you cannot afford to lose, and the same goes for any capital you allocate towards starting a business. Once you make a decision to become an investor, your focus should be to stay in business and to always have enough money to make the next investment.
Entrepreneurs look for resources they can use to keep their business afloat, and you should do the same as an investor. Resources are not limited to investment capital that will allow you to take positions on the market, research and formulation of decision-making strategies are the most valuable resources to investors; while the information needed to fuel these resources can be obtained for free, you will have to spend time and effort researching and devising strategies.
