The urge to go bigger and bigger

Its a tale as old as time.

A real estate investor makes their first real taste of money. They sponsored a deal and either sold it or refinanced it and made a million bucks. Maybe more. Maybe their net worth is suddenly $5 or $10 million and they are still young, energetic and hungry for more.

What happens next?

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The difference between responsible investing and gambling

As far as I’m concerned there are only 3 levels of wealth in this world:

Level 1. You can feed your family and pay your bills without stressing about it.

Level 2. You can walk into a restaurant and order whatever you want without looking at the price.

Level 3. You can travel anywhere you want without worrying about the flight or hotel costs.

Beyond that I don’t think money has any actual impact on the quality of your day to day life.

The interesting thing about business is just how common it is for someone to risk it all to make even more money when they already have all three levels of wealth covered.

Any given real estate deal may have a 1-20% chance of failing depending on debt levels, strategy and a lot of things outside of your control (like interest rates and a recession).

Why do badass investors who are very good at what they do get so obsessed with the game they can’t stop pushing all the chips onto the table and risking the house? How is there ever an excuse for someone with tens of millions in net worth to go totally broke doing a deal at the wrong time or with a poor strategy?

Its a good question and I think I’ve figured out part of the answer.

The first is that this is an ADDICTING game. Folks get hooked to chasing bigger and bigger deals just like a music star get addicted to the spotlight and a gambler just can’t pull themselves away from the table. There isn’t much more fun than putting together complicated and lucrative real estate deals and making things happen.

The second is that some people are wired for a constant state of motion. Entrepreneurship is like hunting. You spend a lot of time laying on a rock waiting for opportunities and a relatively small period of time chasing down the gazelle in the field. Motion and business is also addicting, and its rare for a high powered businessperson to feel comfortable waiting out a bad market or just not working very hard. Productivity is often the only hobbies that people know, and it is one of the worst addictions of them all.

The third is that the opportunities get more and more lucrative as you have more and more success. The badasses come out of the woodwork with business proposals. The phone rings and more and more important figures appear at the other end of the line. The potential to make even more and more money presents itself. They all want a piece of YOU and it is flattering. It gets to be impossible to say NO to everything – especially if you are a person who is used to saying YES to every opportunity.

You begin to build an exaggerated opinion of your own abilities. You attribute most of the previous wins to your brilliance and not enough to the market conditions, your team, or just sheer luck. You stop listening to advice or warning signs or big picture trends that could stop you in your tracks.

The last one is that the EGO has an appetite that is impossible to fill. As you get richer and badder and accomplish all of your goals the goal post keeps moving. You meet people who are even richer. With nicer homes and bigger businesses and nicer cars. And you start talking about and thinking about changing the world and leaving your mark. And you get emotions that begin to create blindspots and overconfidence.

But what happens when the music stops? What happens when you make an error? What happens when a black swan event – totally outside of your control – drops itself right down in the middle of your business?

Many say that getting rich and staying rich require two totally different skillsets and I agree.

Getting rich requires confidence and risk tolerance. It requires constant activity and an addiction to progress. It requires charisma and leadership and energy.

Staying rich requires patience, humility and a risk aversion.

The folks who stay rich understand the marginal utility of that extra money from that big deal won’t change their life but the downside could drastically impact everything. The folks who stay rich understand that the ego is both a tool and a very dangerous emotion that must be controlled.

Few people can be one person at the beginning and another person later. Step one is recognizing the game you’re playing and figuring out if the prize at the end is worth the risk.

(if you haven’t noticed yet, this is a note to myself)

Onward and upward,


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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.