“Opportunities come infrequently. When it rains gold put out the bucket, not the thimble.”
My biggest mistake is not putting out the bucket but the thimble. So this means seizing the opportunity and going all in. This is a famous Warren Buffet quote, sp let’s examine it in detail.
Fear of Failure
Real wealth comes when you invest heavily in sure things. The problem is how do you know it’s a sure thing? You don’t know. Therefore risk plays a big part in your strategy.
Cash Reserves Reduce Risk
In my asset recovery business, I get big deals infrequently. So a big deal would be a 6 figure purchase. I buy used and excess technology like computers and phones. Therefore a big deal means I need the cash to purchase it. I usually have the cash but not the deal. So waiting around and searching things out is part of my game.
The more cash I have the less risk there is for me. In other words, making a $20,000 purchase is common but only a fraction of my available cash position. The accumulation of many small deals gives me the same net result of one bigger deal but provides less risk through diversity.
In my experience, training gold comes from big events like COVID and the 2008 financial crisis. Did I take advantage of those opportunities to put out the bucket? The answer is no I did not, I used a thimble instead and moved to a tablespoon as things developed. Therefore I missed these big opportunities, but they will come again.
I also missed out when Real Estate escalated in early 2000, then eventually crashed, by selling out millions in Real Estate 12 months before the escalation. So missing opportunities when easy money was on the table is my specialty.
The question isn’t that I didn’t know the easy money was raining. It’s all about taking on risk. Therefore the difference between small and big wealth is taking on risk when the right opportunity arrives, which is infrequent.
Charlie Munger says being prepared while waiting is part of investing. Therefore I accumulate cash and wait for the right opportunities to come along. Most of my opportunities are small in relation to my cash position. Therefore I still make bets but they are small bets.
Can I get rich making small bets?. The answer is yes but it takes a lot of bets over a longer period of time. Therefore I say it’s easier to continue with small bets but when you see something that looks very cheap and I have the cash, that’s the time to pull out the bucket and let the cash fall in.
Having the courage of your convictions.
Sheldon Adelson, the billionaire owner of the Sands hotel and casino in Las Vegas and Macau says “I think one of the most significant characteristics about being entrepreneurial is to have the courage of your own convictions.”
So having the courage to work for yourself is a big one. Therefore when it rains gold you need to buy big.
- Have plenty of cash on hand
- Set up credit lines now.
- Be prepared. Read and watch for opportunities. Ford Motor is a perfect example.
- Bet small until the big deal comes along
- Save cash, don’t spend money on things you don’t need.
Therefore being prepared for that big opportunity that rains gold can pop up at any time.
Big opportunities don’t just come in the form of investments and money. There are people opportunities that pop up now and again too. So the same applies to people who fit nicely into your business or family.
Recently I’ve come across some pretty talented hard-working people. It’s not often that you find these people, but like great investments, they will show up from time to time, and taking advantage of this is of paramount importance.
My success is always based on other people who fit nicely into what I am trying to accomplish, which is always to increase family wealth and income.
I constantly search to improve and upgrade the people who work with me. So adjustments in how we work together are very important, and I explain this in my relationship blog posted a few days ago. Therefore my job is to get people on the same working page as me, so we are all moving in the same direction to achieve a common goal.
Read, Read, and Read some more.
Most of my preparedness comes from reading. Therefore I am constantly reading to gain more and more information, so when it rains gold, I am prepared to pounce.
Preparedness is just as important as patience in the waiting game for those rare investment opportunities that come across my desk. As my rules point out being prepared for when the right opportunity comes by is just as important as the big opportunity itself, maybe even more.
Therefore reading daily is my constant companion. Writing is almost as important because the more I write the more clear my goals become. In other words, a combination of both reading and writing gives me that edge of being prepared for the big deal. I can’t make events that bring these opportunities to me from time to time, but I can be prepared when they arrive.
I have to be prepared to jump when the right deal comes along. So I need to have the cash to make the buy. If I don’t have the cash and I’m not prepared to make the buy or bet then I will have missed out on the opportunity when it rains gold. In other words, I must be prepared by having cash and knowledge through reading, along with the courage to take that bet. Therefore I need all 3, and without the courage of my convictions then I’ll never make the big wealth Buffett talks about in this quote.
Mike Addis, Carlsbad, California, all rights reserved.