Saturday, February 25, 2017

Why I cannot be an entrepreneur and why I blame the stock market for it

I published this post on the Medium on February 24. You can follow me on Medium here.

The government is encouraging me to do it. It’s all over the Internet. All the self help blogs are telling me to go for it. Books are being written trying to convince me that it’s the only way to go. Medium is recommending me articles that are cheering me on. It seems like everyone these days wants me to become an entrepreneur.

However, I can’t become an entrepreneur. When I tell this to people, they try to convince me that I have what it takes. They try to reassure me that I have the ability. Gee. Thanks! But I don’t doubt my ability. I just can’t do it. Why, you say. Well, I blame the stock market.

I have been investing, if you can even call it that for the initial years, for over nine years now. I have learnt by making mistakes. I still make mistakes. Some I know of and some I don’t know of but will surely come to know of in the future. The mistakes are too many to mention in this post and discussing them in depth would be a digression anyway, but one of the most important things that markets have taught me is the concept of reward to risk ratio.

Source: Investopedia

I apply it to everything in life. I learnt the hard way to apply it to investments, but the rest followed naturally. Now I apply the concept of reward to risk ratio consciously to all the big decisions, and subconsciously to the small decisions. Work. Relationships. Everything. And this is exactly why I can never be an entrepreneur.

Over 95% of start ups fail. So, in the very least, by its very nature, it’s a high risk venture. But people who enter in this domain already know this. Still they do it. Because they are optimistic that they will succeed. Irrationally optimistic. They have to be. They pretty much don’t have a choice. If you enter an area where the odds are so hugely stacked against you, you need to be irrationally optimistic. And that’s what makes most start-ups fail. And that’s what makes the few who actually succeed, succeed.

Those who succeed can actually cause a paradigm shift. The payoff can be huge. Not only in terms of money, but in terms of contribution to society and progress of mankind. Now if the stock market offers me the opportunity to take a position where I have only 5% chance of succeeding but the payoff could be huge, would I take it? I have learnt the hard way to say no to such opportunities. But for the fun of it, let’s say yes, I will take such a bet. But would I bet my house on it? Hell, no! Hence, while I have huge respect for people who are willing to do this, it’s not for me. If anything, markets have taught me the importance of diversification and not putting all the eggs in one basket. And the Stock Gods do have their ways of knocking me down whenever I see overconfidence beginning to creep in. So quite happily, I would like to say pass. But done feel bad for me and my like. We certainly have a role to play. I like to call it entrepreneurship for non entrepreneurs. More on that another day.

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