From Bob over at SeedTime (aka. christianpf.com ), I learned something I already knew. But Bob expressed it in such a clear and “common sense” way that even I could understand. As Bob puts it, financial success is more about “minimizing stupid decisions than making really good ones”. In essence, one stupid decision can undue months or years of even the most profitable of decisions.
I had a conversation yesterday with a banker about the Presidential elections and Donald Trump. He claimed Donald Trump was stupid. While I have not decided who I will vote for yet, I recognize that while Donald may be either a financial genius or just mediocre, he is not stupid when it comes to business. My lunch companion pointed out that Donald was given 14 million by family, and asserted that anyone can take 14 million and make money. I completely disagree. When you have money like that many people know it and come after you trying to get a piece of it. If you keep making stupid decisions, you will quickly burn through that money. Stupid decisions are much like lies, they tend to snowball and grow. You start with a small mistake and to “fix the mistake” you make another more risky decision that blows up in your face. And the cycle continues until you either bankrupt the business or you put a stop to it (often at a loss).
In my opinion, money is an amplifier of character. The more money you have the more catastrophic your failures and successes become. But whether it is one dollar or a million dollars, a stupid mistake is a stupid mistake. If you need some examples just look at the people who win the lottery and several years later have to file bankruptcy. This is because they did not know how to manage money and made stupid decisions. When they only made $30k a year they made poor decisions and had small debts. But when they suddenly had millions to deal with and they made poor decisions the effects were amplified. They may have had the best of intentions like helping out family and friends, but they made a series of poor decisions and not only did they lose the money but they also acquired loans and debts and lost more than they originally had.
If you start a business with a decent plan, and work that plan and avoid mistakes you will probably be successful. Finding a way to protect yourself from making stupid mistakes is a worthwhile effort. You don’t have to be a brilliant business person to be successful, just make less stupid mistakes each year and learn from the ones you do make.
