With age comes wisdom, is a belief propagated by the aged. The fact is that in many cases, the assessment of facts and predictions, leading to decisions, can be better made by those unburdened by experience.
One of the recommendations I offer in my books on investing is that investors present entrepreneurs seeking funding with “What if” lists. Indeed, I suggest to those seeking funding that they create and propose both the questions and answers to these questions posing risks.
Of course, the questions are usually negative in that they are intended to present possible catastrophic problems like “What if the plant burns down? What if your most important employee is hired by a competitor?, What if your biggest customer goes broke?, etc.”
Regarding investing one’s own money or that of clients, as one gets older there is a natural tendency to be more aware of and concerned about risk of capital loss. The fact is that investment decisions are increasingly being made by people who have not lived through periods of financial stress and institutional fear. The younger investment managers have not had the experience of depressions, market crashes, homeland threatening wars, etc. The broad changes they have personally experienced have been those relating to changing social values and technological progress.
One of my favorite jokes is that of the restaurant server, frustrated by the complaints of a certain table of customers, who starts asking customers at other tables “Is anything right?”.
Therefore, as I approach a later stage of personal development, I am suggesting that in assessing the merits of exposing capital to risk by investing in early stage companies, specifically those developing technology, that the following positively focused questions be asked.
If successful in raising the necessary capital, recruiting the right people, having the right ideas and doing so within a period of market need:
How many people will be benefitted by the availability of the product or service?
How many people will share in the financial profit of the success of the business?
How many multiples of the investment made will possibly be returned to the investors?
Will the community of the company be enriched by the success of the company?
What if the company is acquired by another company on favorable terms?
What if the technology has wider application than originally perceived?
What if customers become dependent on the company for the product?
What if the company becomes recognized for its ability and integrity?
Is there a greater risk to the investors than the amount of money being invested?
The point is that having experience and understanding that most human endeavors are likely to disappoint, does not preclude the taking of a positive and constructive approach to looking forward, instead of the more conservative approach of looking backward which is often favored by those who are more mature.
Arthur Lipper, Chairman
British Far East Holdings Ltd.
+1 858 793 7100
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