There’s More Than One Way to Become a Millionaire
February 24, 2012I listened to a radio interview recently with a talented and enigmatic artist, David Choe, who has an amazing life story. It’s filled with a lot of twists and turns, making a fortune gambling in Las Vegas, losing that same fortune in Vegas, some wild and erratic behavior, and most recently becoming a $100-millionaire overnight. Here’s the cool one-in-a-billion kind of story that makes us all think “wow, that could be me one day.”
He was a well known graffiti artist and had developed a reputation for being incredibly talented and free spirited. Somewhere along the way he met a few young guys who ran a small little start-up company and needed some artwork in the company’s offices. David’s fee was $60,000 for a job that size. He was offered the choice of receiving payment in the form of a check or in the form of shares in the new company’s stock. He liked the guys at the company and believed that they were bright enough and hard working enough to become something so he opted for the payment in stock. His “Vegas” impulse kicked in and WOW did that ever pay off!!! The company was Facebook. And, his $60,000 gamble is now worth somewhere between $100-200 million. He didn’t know exactly how much, only that it was more than 100 and less than 200. Not bad for a $60,000 gamble/investment.
Probably 99.99 times out of 100, a gamble like that would cause you to end up with a worthless stock certificate, not over $100 million. So is it worth taking chances? Or is it better to play it safe? Is it better to be lucky (like David Choe) or good (like yourself if you develop and maintain solid financial behaviors)? I think the best answer is “why not be both?” They don’t have to be mutually exclusive….
If you are counting on one lucky break to turn your story into one like David Choe’s, that might be problematic. Those stories are newsworthy primarily because they are so rare. It might be better to become a millionaire the old-fashioned way, by having great financial habits. Spend less than you make, don’t take on debt, invest in what you know, and have the kinds of behaviors that are seen in The Millionaire Next Door.
But, along the way take some chances too. Just make them smart risks. If you’re going to Las Vegas, know how much you’re willing to lose before you even walk onto the casino floor. If you’re going to play the MegaMillions lottery, know that your odds don’t increase very much if you buy 150 tickets instead of 1 or 2. If you’re going to take a risk on an investment that has the potential to be a “home run,” don’t allocate 100% of your portfolio to it just in case it’s a “strikeout.” Be judicious about your risks. When used in small doses, very high risk investments (emerging markets funds, commodities, options, micro-cap funds, highly leveraged investments, etc.) can generate returns that provide a nice boost to your overall rate of return.
When used in large doses, you might end up like David Choe…or an employee of Enron, MicroStrategies, Solyndra, etc. There is a degree of luck, or good fortune, which has helped some people generate incredible wealth. They took a chance, a gamble, a risk and it paid off handsomely. Were they smarter than the rest of us? Were they luckier? (Like Clint Eastwood asked in a movie….”Do you feel lucky?”) Can we duplicate their success? Or, do we build a solid foundation with good solid fundamental financial behaviors with a dash of higher risk “chance taking” used to add spice? If you combine the “good” with a bit of “lucky”, you just might reach your goals.