Thomas Koulopoulos* says you may not have millions to invest, but that doesn’t mean you can’t learn a thing or two from billionaire Elon Musk’s investment strategy.
Photo: Steve Jurvetson, via Wikimedia Commons
We’ve all heard about how important it is to live in the moment and focus on the here and now.
However, nobody ever built the future by just living in the present.
There are some things that demand we step well out of the comfort of the present and far into the uncertainty of the future.
The most successful people can do both.
I have three questions to see how well you’re doing in balancing today with investing in tomorrow.
Question #1 — Would you make this investment?
Let’s say I was your financial advisor and I asked you to invest between $220 and $1,500 in a crazy hare-brained venture that promised to transport people through major urban centres in underground tunnels using pneumatic tubes.
What you know is that no venture capitalist will touch this, you will be competing with Richard Branson (who is also trying do something similar), you’ll likely have to deal with the politics of local municipalities, and the idea is the brain child of Elon Musk (pictured), whose companies all share the inability to show any significant profit yet.
Would you do it?
Question #2 — What would you tell Musk?
Maybe you wouldn’t do it, but if you were advising Musk would you support his dropping $100 million into this sort of outlier investment?
Let’s face it, when was the last time transportation infrastructure was disrupted in any way even close to this?
What I’ve found from working with some of the wealthiest people on the planet is that there are very few options to grow your wealth when you have billions to invest.
You really are left with very few options, and most all of them involve ventures on an enormous scale that come with enormous risk.
So, if it’s good for Musk but not for you and me, perhaps the conclusion is that Musk’s investment is only right for billionaires.
Perhaps not.
Question #3 — What’s in this for me?
We love to live vicariously through billionaire flights of fancy — but, were not all able to be as instrumental in building the future.
So, perhaps, the more important question is, “What in the world could you possibly learn from Musk’s investments?”
You may be scrimping and saving for a nest egg or simply trying to figure out how to save enough to put your kids through university.
So, there’s not much left over to gamble with.
Not so fast.
Musk isn’t gambling.
If I’ve learned one thing from working with hundreds of entrepreneurs, it’s that none of them sees what they are doing as a gamble.
They are convinced of its merits, even if nobody else is.
It may be hard for you to think of an investment in the same way, especially when there’s the chance you may lose it all.
But I’m not suggesting you start making crazy bets.
Here’s what I’d like you to consider.
What if you were to look at your portfolio of investments in the same way that Musk does?
I firmly believe you can and should by following these four basic rules.
1) Balance your emotional and financial portfolio
Most of what Musk is banking on is a nearly $200 billion windfall from the time and effort he’s investing in Tesla over the next 10 years.
But doing that will require an exceptional level of focus and commitment.
Some critics say what Musk is doing is scattered and fragmented across too many companies.
But to put your all into something you need to be incredibly efficient in how you use your time.
One of the worst ways to do that is to do nothing but that one job.
The beauty of having a portfolio of activities, all of which you’re passionate about, is that at any given time something is going right.
The feeling of success and achievement you get from whatever is working helps to deal with those parts of the portfolio that aren’t.
Spreading your financial and emotional risk over a variety of efforts keeps you motivated and energised.
2) Always have a long play
Musk is investing in the long future.
We are all tempted by the immediacy of short-term returns.
You may not be playing in Musk’s league but time passes just as fast for all of us.
If wealth buys you anything it’s patience.
But the inverse is also true; patience buys wealth.
Always have long plays as part of your portfolio of investments.
3) Go where others fear to go
Musk is taking on the problems that everyone acknowledges but yet nobody is willing to take on.
One of the most consistent truths among the uber wealthy is that they venture to go where everyone else fears going.
While there is comfort in the predictability of the present, predictability rarely pays off in a big way.
That’s not to say that predictable investments shouldn’t form part of your portfolio, but it does beg the question, are you also considering the outliers that may offer the greatest returns?
4) Your success is your responsibility
Above all else, Musk is investing in himself.
Perhaps the greatest lesson we can take away from Musk’s strategy is his unyielding commitment to invest in himself by taking risks that are predicated on his performance.
Taking all the responsibility for where you are and how well you’ve accomplished what you’ve set out to do is an immutable law of success.
Focusing on the here and now is a wonderful way to be present and appreciate the moment.
Unfortunately, failing to balance that with the long term benefits of an investment strategy that bets long may also be the worst way to build the future.
* Thomas Koulopoulos is the Founder of Delphi Group. He tweets at @tkspeaks.
This article first appeared at www.inc.com.
