What makes a good investment?
Having spent the last year investing in various ventures, a question that I often find myself asking is “is this actually an investment worth making?”.
The issue is that that’s really not an easy question to answer.
When we go into investment, it’s easy for us to be focused on the bottom line. We tend to look at what we view to be the “facts” of the company in their figures — are they making the profit margins I want? Where are their cost centers? Are there any relevant revenue issues I can foresee? And while there’s definitely a place for these concrete estimates in investing, it’s often not what makes a good investment.
If I’m not looking at numbers, what should I be looking at?
This is where it gets murky. Investors will tell you to invest in an idea you believe in — an idea that you think will change the world. And while that’s very good advice, how do you know the difference between an idea that you truly believe in and an idea that’s just good?
Having heard various concepts being pitched to me from friends, family, and other connections, I’ve heard everything from the very good (artificial intelligence for a mass market) to the very bad (literally a cattle ranch). Yet, I haven’t found myself being able to invest in all the very good ideas, nor refuse all the very bad ones.
That’s when it struck me. Believing in something has to go beyond thinking it’ll change the world or that it’s an idea that’ll make you money. You have to invest in ideas that you can see yourself fully contributing to wherever possible. For you to believe in an idea, you have to be willing to do groundwork to make the idea work (and not just throw money at a problem).
That’s what I think a good investment is. A good investment is a reason for you to get up in the morning, go to the office, and put in an 8 hour day to make your various ventures work through more than just financing.
It’s the reason that I’ve found myself painting the flagship store for a stationery chain, writing code for a technology startup, and sampling enough alcohol to put a man in hospital for a chain of bars. These are all things I genuinely enjoyed doing, and all ideas that I was willing to actually work to make happen.
So the simple answer to the question I pose in my title is this: Do you want to wake up in the morning and do whatever it takes to make that idea work? If yes, then that’s a good investment for you to make.