These Workers Made ONE Crucial Mistake. You Can Avoid It.
During the early 1990s, a beleaguered IBM cut more than 25,000 jobs worldwide. Many of its employees had spent their entire careers working for Big Blue.
Some of these laid-off workers, who were in their late 40s and 50s, found it all but impossible to secure work elsewhere.
“It was the end of an era,” said Eric Rolfe Greenberg, director of management studies at the American Management Association, in 1996.
“It was the last bastion of corporate virtue falling. It was like finding out your grandmother is having an affair. The era of job security had come to an end.”
In a foreshadowing of what happened during the financial crisis of 2008, unemployment snuck up on these workers.
As Nassim Taleb wrote in his book Black Swan, “When laid off, the employee faces a total void: He is no longer fit for anything else.”
Consider your latest project, top-selling product or career within an organization as a single asset.
It might offer valuable returns today, but you must always consider how you can get ready for the next crisis or opportunity.
How To Diversify Your Career Or Business
Top investors like Warren Buffett recommend developing multiple sources of income. He said, “Never depend on a single income. Make investments to create a second source.”
If you’re an entrepreneur, creating multiple products and services will help you grow more revenue streams.
For example, Joanna Penn is an author and creative entrepreneur who regularly recommends that her readers create multiple streams of income by selling books, courses and affiliate products.
If you’re an executive, you can diversify by building business relationships within a different discipline in your company or by volunteering for an initiative.
Alternatively, you could work for like-minded peers in a different industry as part of a side-hustle.. This way if you don’t get a promotion or your company downsizes like IBM did in the 1990s, you have a backup plan.
What To Avoid When Diversifying
A rich coffee distributor once invited renowned commodities trader Larry Hite to his house in London. The distributor asked Hite about trading coffee, explaining he knew almost everything about the industry.
Hite’s advice, as recounted in Market Wizards, was simple: Manage the risks involved.
Three months later, Hite discovered this distributor turned coffee trader had lost more than $100 million.
Instead of going all in on one trade, successful traders like Hite typically allocate no more than 5% of capital to a particular trade. This approach frees them up to diversify.
“First, if you never bet your lifestyle … nothing bad will ever happen to you. Second, if you know what the worst possible outcome is, it gives you tremendous freedom,” Hite said.
When To Stop Diversifying
You might not be a trader, but creating an offer or taking on a project shouldn’t consume so much of your resources that you risk the fundamentals of your business or career.
If your business is profitable, use some revenue to hire someone who can replace you. You could also draw on your profits to invest in a financial product or another company.
However, don’t hire so many people or draw so much money from your business that you risk jeopardizing operating costs.
If you work within a larger company, decide how much time or what proportion of a budget you’re prepared to spend on a project before deciding to stop, start or continue it.
Thinking of IBM in the 1990s, always ask yourself what would happen if your role changed, you were let go or your business failed.
Ultimately, diversification will mitigate the risks of any failure on your horizon.
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