Cake
  • Log In
  • Sign Up
    • Facebook pages based around BitClub Network communities in countries including Malaysia and South Africa remain active, with tens of thousands of members.

      Prior to the internet stock bubble crash in 2001, I was having dinner with an investment fund partner who I had done some work for. His advice was that if everyone you know was telling you they were going to be rich, it was time to get out of that market. A couple years later I met two young engineers, one who graduated from MIT, who were adamantly claiming they were going to retire at 40 based on their stock investments. A year later was the crash and they learned the most important lesson of investing:

      There’s no easy way to get rich.

      If it sounds quick and easy it’s a scam. The people who I’ve met who were successful investors devoured Value Line and annual reports and every financial piece of data available to find the opportunities that might provide an above average return. And they’d spread their risk so that one bet wasn’t the end of them.

      There’s a great book, the name of which escapes me, that details the “irrational exuberance” of average investors through every bubble from the Tulip Craze in Holland in the 1700s when one bulb went for the price of a house to the the stock market boom and bust in the 1980s. Every time, there’s a belief that the market will continue to go up forever.

      If only it were true and that simple.

      Curious if @JazliAziz can provide some perspective on the speculative investment environment right now in Malaysia.

    • The other thing that over-keen investors do is to build their entire future expectations into one deal. Success is mostly drawn from a series of well-planned investments, often over years.

      We see this flaw at work in the London mid-level restaurant scene, where new owners that have never run a restaurant, often start by building themselves a spreadsheet (along with fairy tale assumptions on growth, bookings etc) that makes them believe they can cash out in 3 years and then retire to the beach. But this just embeds short term thinking. In a business where repeats or recommendations are essential to delivering stable long term profits, this short termism prompts owners to often disregard customers (after all, they'll be out soon, right?). Because of this, the forecast numbers fail to materialise, and the venture fails.

      The other thing that is often seen hand-in-hand with exuberant investing is over leveraging. This is, perhaps, a facet of my first point, as investors max out on one project because they are reluctant to accept that they may (in reality) have to work a bit harder for longer. Betting the farm (and someone else's farm) on one project suggests an inherent laziness - something you can ill-afford when investing.

      The most successful people I know have never considered when they might retire to the beach.

    • Thanks for responding! The fact that it isn’t ubiquitous in the daily news there is a positive thing.

      ++++++++
      @CygnusX1 I am reminded of the story of a reporter asking Warren Buffet how he knew so much. Buffet grabbed a pile off his desk that was 500 pages and said, “This is how much I read every day.”

      I think restaurants can be a viable business model for someone who wants to quit an unsatisfying day job. But the amount of effort required in selecting a viable location, cuisine, where to buy used equipment, learning how to cook under pressure, order and inventory management, licensing, training, payroll, etc. has to be immense. There’s a show I watch, The Connors, and I cringed at the “evaluation” process the main characters went through in deciding to open a cafe—how many viewers will decide now to imitate that rigorous process and open a restaurant that closes in less than a year?

      But hey, it’s only television. What harm can it do?

    • A lot of businesses are viable, even to prospective owners with no prior experience.

      However, it is vital that owners (a) understand and know their market, (b) have a clear vision of how they will compete or differentiate, and (c) have gone some way towards creating a financial plan with realistic assumptions on pricing, costs and financing.

      It goes without saying that many budding entrepreneurs either fail to do this, or pad their financial models with utterly unrealistic assumptions. One of these being that the market for their product will start strong and continue to grow throughout. Another being that they don't need to put any material resources on the line themselves.

      I have some insight here as my firm provides asset finance facilities and one of the key "fails" in our underwriting process is absence of owner equity, or "skin in the game", as it is often called.

      It is amazing how many people approach us, asking for 100% finance against an asset, whilst having little or no financial resources of their own invested in their business. Of course this is not a problem per se, as long as we get all the equity returns from the operation of the asset. Unfortunately, these types of business owners generally seem to believe that it is they who should accrue the equity returns since they own the business (even though they have no tangible sums of their own at stake).

      So, the other thing potential owners need to consider is whether they have an appropriate level of their own resources to commit to a venture. At this stage, with money invested, owners naturally tend to be more inclined to tone down the optimism, and make assumptions that imply possible negative factors that would working capital to overcome.

      [On the subject of 100% finance, this might seem to be a great thing, but it isn't. Owners would normally end being fully subordinated to the funder and end up being simply managers of a business that they own in name only. Not what they went into business for, I would suggest].

      When starting a business, the preparatory work is significant (as it should be).

      By failing to prepare, you are........wait for it.......preparing to fail.

    • I almost went into asset based lending when I started out in banking: the idea of visiting clients in retail or manufacturing and learning their business seemed interesting. Instead, I jumped from banking to manufacturing and learned a bit that way. Do you visit the client sites to evaluate the assets backing up the loans, or is that role for the younger lot who are okay with “living out of a suitcase?” I’d imagine the annual travel would be significant.

      I’ve been blessed on two occasions to have experienced business owners talk me out of poorly conceived business ideas. It’s amazing how easily a few well-directed questions can poke holes in your “million dollar idea.”

    • My "assets" are towards the larger end - oil tankers, bulk carriers, aircraft and rolling stock - with capital expenditures to match, and global location. When I worked in banks we tended to have relationship managers in situ in various geographies that handled the client side, whilst we concentrated on the structuring and execution. That said, given the amounts involved, we would tend to go out to visit clients quite regularly nonetheless, and I have great memories of trips to Hong Kong, Singapore, Japan and Australia as a result.

      The frequency of travel doesn't have to be too onerous, but there are always those that secretly like being on the move all the time and make sure that they are!

      Your observation on being talked out of business ideas is a good one. If one has an idea, and a million dollar one at that, it is really easy to paper over the cracks and flaws in one's enthusiasm. That is natural, so taking soundings from non-involved third parties with good experience and/or judgement, has to be important. Acknowledging their advise, even more so.

      Even someone with no particular experience (a friend or relative, maybe) might be able to suggest aspects you had not considered but which might have critical significance. As my father once asked, "why do all the dumb guys have all the smart questions"?

      Far from being a problem, the process of taking soundings is essential to success. You end up with a stronger proposition that can stand the test of time. When I started my independent business over a decade ago, it was on an entirely different strategic basis to that which I had originally intended. I made the changes based on a lot of informal conversations with former business colleagues, friends, family etc. Even the guy serving coffee at my local train station.

    • When I was single and thinking of chucking my career to be a screenwriter, I heard a wonderful interview with the film director Jody Foster. She said that she listens to everyone’s ideas from the DP to the lead actors to craft services to the Teamsters driver who brings her to and from set. And then she takes the best ideas to create something amazing. I think I tend to be more of a self-sufficient lone wolf so it’s often outside my comfort level, or even awareness, to ask other’s for their perspective. You also need a thick skin to listen to all the bad advice and the negative-without-much-thought-behind-it assessments that will come from requests for input. That’s why I’m always cautious as to who I ask to provide honest feedback on my dream: it’s easy to advise someone to pursue or abandon their dream when you don’t have to suffer the consequences of the wrong decision.