On July 11, 2011, I began selling my stocks and investing my savings into my own startup.
Obviously, the downside financial risk of investing in my own startup was much greater than the downside financial risk of investing in the S&P 500; my shares in my startup could very well be worth zero at some point, while that will (most likely) not be the case for the S&P 500.</p>
It turns out that the risk in investing my time and money in a startup of my own was actually much more mitigated than it appears at first glance. Here’s why:
Over the past year, I have learned an incredible amount about business in general and specifically starting one. Don’t get me wrong, I am not on the MBA-hating bandwagon, and I do not regret receiving my MBA one bit. However, I learned a lot more in this past year starting my own company than I did in my two-year MBA program. And spent a lot less money. I’ll go into the value of the MBA in a later post.</p>
By investing in a startup of my own, I was investing in my continued education – kind of like a MGSD (Masters of Getting Stuff Done) degree. So even if my shares in my startup are worth zero eventually (hopefully not), it’s easy to chalk it up as an investment in my continued education.
When individual investors first start investing in stocks, they are taught that – as partial owners in the company – they can help steer the direction of the company through voting on their shares. Nuh-uh… at least not for the average U.S. individual investor. As much as you’re told otherwise, you really have no control over the direction of a public company in which you invest. And for the few votes you get, you receive thick stacks of legalese from groups trying to sway your vote one way or another.</p>
As the co-founder of my startup, I am one of only two people in control of my startup’s destiny.
Healthy vs. Unhealthy Focus
As much as I tried to tell myself I was a buy-and-hold / set-it-and-forget-it investor in the stock market, I wasn’t. I knew it’s not worthwhile to watch the daily movements in the market, yet I would do it anyway. Watching the stock market is an unhealthy addiction. The pangs of anxiety from a down day in the stock market can’t be good for the blood pressure. Chip Conley’s guest post on Tim Ferris’s blog is excellent, and Conley’s anxiety equation is very applicable:</p>
ANXIETY = UNCERTAINTY x POWERLESSNESS</p>
Investing in the stock market is riddled with anxiety, because a) it is full of uncertainty (which is why most professional investors don’t beat the market), and b) you’re powerless when it comes to its random movements.</p>
I no longer helplessly watch and stress over the fickle movements of the stock market, because I have a more important, worthwhile, and healthy thing taking my attention: my startup. As stressful as running a startup can be, it is a much healthier stress. When it comes to your startup, you’re not powerless and you can limit the uncertain things.</p>
Forget the stock market. Invest your money and time in your own startup. You’ll come out ahead regardless of share price.</p>