Belief, Risk, and Common Cents
There’s a question I’ve been struggling with lately.
Why do people invest?
I’m not talking about traditional 401Ks or blue chip stocks. That’s a very responsible form of investing. There’s risk, but it’s minimal. In the grand scheme of things, it may be one of the safest risks we take. Most people know they should invest money to put towards retirement.
The type of investment I’m talking about isn’t so Wall Street meets retirement goals. What I’m trying to wrap my head around is much more Sandhill Road meets abundance of faith.
Let’s put it this way: It takes something altogether different to invest in something unproven. Whether that something is a startup, a business idea, or an entrepreneur, investing in this world has almost nothing in common with investing in a bond or an ETF. What I’m talking about is a whole lot riskier. And it usually takes a whole lot more money just to get started.
From the venture capitalists throwing in millions all the way down to the private angel investors putting down $5,000 at a time, mind-numbing risk is something these folks live with as the price of doing business. They put big sums down, and chances are they’re never getting that money back. This type of risk makes a night at the baccarat tables look like a casual stroll in the park.
So what makes them do it?
An easy answer suspicious-minded folks turn to is greed. But I don’t think it’s that at all. I don’t see pledging big bucks on a wild idea as greed. Did I mention they’re almost certainly not going to get their money back? Going in with that knowledge just doesn’t say greed to me.
In my experience, greed shows up when things are easy. Starting a business is not what most folks would consider easy. So if it’s not greed, what is it?
Some might say recklessness. Given the odds, it’s easy to think that way too. But I don’t think so. Investors who go in big on an idea tend to do their homework. They take big risks, but they’re also careful.
Maybe they’re just crazy? Again, I don’t think so.
The real reason I think these folks invest is because they believe. Even if they know their money is most likely lost, they’re so bought into an idea they’re willing to risk a lot on being a part of making it happen. Maybe they don’t even think it will work. But they sure as hell believe it should.
So yea, maybe most ventures are doomed to fail. Maybe that doesn’t matter. Maybe what matters is being part of the team doing amazing things to make their dreams a reality.
I most certainly don’t have the answer to this. But it’s a question I turn back to almost every day. Why do people invest? What makes them do it?
More importantly (for me at least), am I the type of person someone would invest in? I’ll admit that’s a scary question. And I’d be lying if I said it never kept me up at night.
I don’t have the answer to this either. But I know it has everything to do with belief. Not necessarily me believing in myself - although that’s important - but my ability to get others to believe in my ideas.
I should also say it’s really not about the money, at least in my case. Yes, capital is necessary. But there’s many ways to accomplish that. What really keeps me thinking about investment is defined far less by dollars and cents than it is what gets people to believe.
Because if I can get someone to put big dollars on my dream precisely because they believe in me and think my ideas should exist - well, let’s just say if I can sell that person, convincing everyone else should be a piece of cake.