One day at the bar…
(estimated reading time 1 minute 51 seconds)
Stranger: Hey what do you think about diversification?
Me: Well commonly accepted wisdom says it’s a good idea.
Stranger: Everyone is telling me I need to diversify. I must be doing something wrong I have almost all my money in my business. Am I’m crazy?
Me: No you’re not crazy.
When you’re building companies. Diversification is tough.
Because as they say in poker…You’re pot committed.
You need to understand that advice was built for people with stable incomes, jobs, pensions and retirement celebrations/watches.
You have none of that as an entrepreneur or business owner.
To be honest you don’t want it.
Sure, you would like to be diversified.
So, think of it as sort of a temporary imbalance.
And by temporary, that could be decades.
A temporary imbalance while you’re growing this thing called a business.
You’re going to be undiversified.
Now it’s important to understand that whether you thought about it in his way or not you made a decision somewhere along the line.
That it was worth it?
Taking this risk had value.
It was worth the risk.
The way to calculate that in traditional terms would be that your return on investment (ROI), would be greater by putting your money into your business than it would anywhere else.
And it would normally be multiple times better.
Like it’s such a good opportunity in your mind.
It’s such a good opportunity for return on investment.
When I say return-on-investment. I mean on all things time, money, energy, passion.
All of those things pouring all of that into your business would be such a great return on your investment.
Nothing else matters!
You don’t even think about it!
So, whether you made that decision on purpose or not that is the decision you’ve made as an entrepreneur or business owner to be pot committed!
So, when people come around talking about diversification you now know the reason your money is invested this way is that it provides you with the greatest potential return on investment (ROI) by far compared to any other option you have.
That’s the reason.
This is the path you have chosen.
You have chosen to be a maker of things.
That, at least temporarily, requires that you’re ALL IN!