What a multi-millionaire investor taught me about business, even if he isn’t in one!
Last Saturday I celebrated a multi-millionaire’s 60th birthday. The quiet and unassuming private investor is a self-made millionaire twice over. He started investing in the early eighties, and within a decade, had made his millions. Then came the first financial crisis in 1997. At that time, the market looked so good that he went all in. By 1998, he had lost all his money. Fortunately, he had two assets, his home and an overseas investment. By pledging his home as collateral, he managed to get a bank to loan him money with which he rebuilt his investment empire. This time, it took him 2 years to regain twice the amount his lost, and he then never looked back.
When asked to recount what he had learnt over the past 60 years, his first reaction, answered in unison with his wife, is marrying the right person. And after that, he gave 6 tips, which, while applicable to his wealth-building activities, is also equally applicable to building a company. So here are the 6 things that made my friend a multi-millionaire, and which might help you build your business ten-, twenty- or even hundred-fold!
1. Think long term
He recounted two stock counters he is currently holding. One he purchased more than 15 years ago; another more than 5. Each has a strategy linked to them. For one counter, he had hoped to be able to cash in on it after 5 years. Five years came and the situation he had planned for hadn’t yet occurred, so he just added another 10-year time horizon onto that counter. He is very sure that he would be able to realize a phenomenal gain within that time. My friend is very strategic, and he applies strategic thinking to his trades. The same should to be applied to business too. We should not be afraid of building a strategic picture that rides five or ten years into the future. If we didn’t have that, we would not be building on the compounding nature of experience.
2. Be contrarian
You can never win big playing along with the market. Every time he made money, he made it betting against the market. When he goes with the market, he gets out at zero, or negative gains. The same must be said of running a business. You need to do things that others are not. You need to be willing to pick up the job that no one wants to do; or has failed to see. These are the opportunities that help you win big in the market, as it will help you win big in investing.
3. Never buy on leverage
If you cannot afford to lose the money, don’t bet on it. Unless you can get free money, it is difficult to go into a market with your hands tied behind your back. After all, the market doesn’t march to your beat; and the time horizons are usually much longer than your can imagine. So if you are unable to make a bet and walk away from it, then don’t do it. That applies also to your business deals. Don’t pin all your hopes on an innovation that you need to go to market with in 6 months. Chances are, your time line would be too short, and your product too weak.
4. Don’t second-guess yourself
When you have made a decision to do something, do it. And then don’t second-guess yourself by making what-if statements when the market moves one way or another. Second-guessing will slow your reaction, which will ultimately cause you to miss the “right” time. And remember that each trade, as is each new product you launch in the market, is still a bet. You must take risks and this means the market can go with you, or against you, in the short run. But if you were a long term, contrarian player, you will not react to such knee-jerk reactions, keeping your eye on the bigger prize. When you make a decision, make it with conviction and then stay the course.
5. Always do your research
When investing in companies, make sure you have read the annual report. When buying property, always ask the people in the know about the back-story. He recounted that a very high-end property had come to the market at a deep discount. It seemed like a steal, but that raised some alarm bells. There has to be a catch. So he did some asking around and finally found out that the property was haunted. The unit finally changed hands at an even lower price, but he didn’t like the sound of that. Even in business, you cannot just jump into an opportunity without digging deeper. And don’t be afraid to walk away from it if it smells funky; even when the price was right! There will always be other opportunities out there in the market.
6. Play to your strengths
He concluded that his children wouldn’t be able to invest like he does because they don’t possess the inherent strengths to trade as he does; even despite their finance degrees. He therefore tells them to do things that they are good at, while he will do things that he is good at. Not everyone can be a good salesperson; not everyone can be a strategic thinker; not everyone can be an analyst. But don’t pretend to be someone you are not, and don’t try to do something you are not good at. Play to your strengths and be content that some people will make millions from investing, just as others will make millions in business.
My friend has built three and a half decades of wealth using these 6 key values; and they have served him well. Yet when we look at them deeper, they don’t just apply to the world of investing, they are equally applicable in business. And perhaps if all SME leaders looked at the business in the same light as an investor does in his trades, we might see more quiet successes in Singapore than in any other country in the world. Now wouldn’t that be something?