The role player (The Financial Athlete #89)

When I was 12, I was “6th man” on the basketball team. Normally, the “6th man” gets enough playing time, but I sat the bench during every minute of the playoffs. Our coach was opposed to the idea of bench rotation. Only his starting line up played ball. Although his game plan was unfair to the players on the bench, it delivered a championship. I felt happy for the players in the starting lineup, but for me, personally, it felt like a hollow victory. I contributed no more than any spectator. The experience effected me. I decided if I wasn’t good enough to start then I wasn’t willing to ever play on a team again. Consequently, that championship game was the last game I put on a basketball uniform.

Moreover, for a long while I believed I deserved to be the shooting guard in the starting lineup. After all, whenever I played one-on-one against the kid who took this position, I always beat him easily. Years later, I came to understand why the coach selected him over me. The offensive role the coach desired for this position was mostly to feed the ball to the Center and Forwards and let them score the points. I was an aggressive player who liked to take the ball to the hoop myself. The other kid was better suited this role better than I.

It’s important to be clear about your roles in life. This brings us to a very important question: What is the role of the investor? Previously, I conceived my role as an investor was to develop businesses and real estate with the infusion of cash. I felt I was contributing to society because my money helped create jobs, and to watch a company grow from infancy was exciting. As it turned out, most companies slowly progressed or didn’t progress at all. Some companies progressed on track, but investors lost on these too because of subsequent dilution of shares.

All in all, my “investments” in these companies amounted to no more than a transfer of wealth. I would have to make big returns on other speculative investments just to breakeven. Since then, I have redefined my principle role as an investor. It is simply to invest for positive cash flow from real estate and paper assets. This goal is not as lofty as investing to boost economic development, but it is far more practical. It may not hold the potential of sky high returns, but neither is the risk too pronounced.


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