It was 20 years ago, and not that $17,000 isn't a lot of money today, but that was more back then when we earned relatively modest incomes.
I would never have gotten up to $17,000 even if I had a winning streak as they had. I know myself, and I don't have the risk tolerance for that sort of leverage. I would have walked away long before then with almost nothing in comparison. That’s what makes us all unique – we each have our own level of ability and willingness to accept risk.
He had a good understanding of when to play what move, which helped, plus a nice string of luck. But the house rules still were not in his favor, and if you don't already know how the story ends, all the winnings were quickly lost.
I was reminded about this today when I was reflecting on how much is enough.
I once saw someone with $20,000,000 lose it because they wanted to get to $100,000,000. They didn't lose it all, they're still fine, but they wouldn't have gotten to $20,000,000 if they hadn't had an incredibly aggressive risk tolerance and motivation. Few individuals have that combination, and I sure don’t!
I have another friend that has it made financially, but keeps buying bigger cars, bigger houses and is always on a quest for “more, more, more”. I worry that this friend will see their net worth go up in smoke if the next risky business deal goes bad. Constantly taking huge gambles works until that one time it doesn’t.
See COVID's impact on businesses for another "Black Swan" example of how bad things can get. How many people could have walked away and been okay from businesses that later imploded? Having a safety net and a plan is essential for all investors, no matter what the circumstance.
My “money script” developed early in life as I watched entrepreneurs take significant risks. Don’t get me wrong, I think entrepreneurism is a great fit for certain types of people, but risk must be managed appropriately. I believe it is important to take risks – I do it with real estate investing, and there have been big risks in my career.
A poignant event in my life shaped my attitude toward risk. On boating excursions, we would often cruise by a big old house on the lake with a sad story.
It was built by a serial entrepreneur who seemed to have a golden touch until their final deal ruined everything. They lost the house and their strong financial footing. Both were never recovered.
Once again, I would have never amassed the fortune of that entrepreneur. I would have taken chips off the table early on. If you are the risk-seeking type, consider setting money aside in case something goes awry. Dialing the risk back a bit can be a smart move. Today, that wealthy boathouse owner would probably be happy with a fifth of their former wealth.
This concept may apply to your investments, too.
If you don’t have your health, nothing else matters. Another individual I knew moved in to care for an elderly relative suffering from dementia, but who also had substantial wealth. Due to a toxic mix of boredom and the Wall Street marketing machine, the individual started to speculate with their parent’s life savings. You know how this ended. While I don’t have the exact details of how it all turned out, it was tragic considering they would have been just fine financially had the fortune not been gambled away.
Consider taking time to reflect on what really matters in life once you make it to financial freedom. Eventually, capital preservation is better than capital appreciation. Don’t jump at the chance to buy a new Maserati or get tempted to double your money somehow; risk management is critical the older you are. Introspection is vital to staying grounded, so ask yourself these questions:
- What are you working so hard for?
- What other goals besides stuff and status could you pursue?
- Would you find peace and joy in helping others or making yourself a better person? Do you need to spend more time with your family? Is traveling the world a personal desire to satisfy an adventurous spirit?
The relentless pursuit of “more, more, more” only for more's sake is undoubtedly an ugly trap to find yourself in, ESPECIALLY when things go wrong. Keep building toward your financial goals, but always manage risk and be sure to take moments to reflect on what really matters in life. It’s like Kenny Rogers always said, you gotta know when to hold em, when to fold em, and when to walk away.
Thanks for taking a look,