When to Invest and When to Gamble
People tend to have pretty strong opinions about words like “investor” and “gambler.”
Just a quick Google search shows there are thousands of people that want to tell me to be an investor and avoid being a gambler.
Of course, they’re usually talking about money, but really the idea lends itself to anything – life, work, relationships, etc.
The general consensus is that if you want to get anywhere in life, you should focus on investing and stay away from gambling. It’s not the worst advice I’ve ever heard, but it’s a bit of a false dichotomy. That is, you don’t really have to pick one or the other.
You don’t have to look at the world only as an investor in order to make it. In fact, you shouldn’t. Taking chances and gambling is just as big a part of success as investing is.
When you break it down, investing and gambling are just two different strategies to achieve the same goal, which is to end up with more of something than you started with. The difference is that an investor expects a return and a gambler only hopes for one.
They’re both legitimate strategies and they’re both appropriate for different situations.
In fact, all the best investors have done their own fair share of gambling. They had to in order to find the best investments. Their success came from finding the best combination of the two strategies and knowing when to move from one to the other.
Let’s dig into that.
When to Gamble
Gambling is a useful strategy in the early stages of development. Maybe you’re trying to become an entrepreneur, figure out what to do with your life, or just get to know someone. You have a lot of options and you need to test them out.
You could research and research forever before deciding how to act, but we learn more from doing, so taking chances and trying out new ideas gets you closer to where you want to be. You have no idea what will work best so you try everything and see what happens.
You gamble early in the game in order to build a solid foundation of things you know are more likely to work in the long run.
Gambling works best when you have unbalanced consequences – a little to lose, but a lot to gain.
You try things that won’t set you back too far if they fail, but can propel you forward if you succeed. You’ve got bad odds, but you can afford to lose quite a few times if just a couple things work out in your favor.
You should never gamble without a stop loss.
That means that if the potential downside of a failure cannot be determined and could go on forever, it’s probably not a very good gamble. Always know what you stand to lose because you need to be able to show up at the table to play again until you find out what works.
When to Invest
Investing is stage II. It comes after gambling. You can’t really invest until you’ve gambled because gambling tells you what to invest in. You’ve put in the time, you’ve taken the chances and you know what has the best potential.
Now it’s time to take what you know will work and leverage it into something that works really well. That’s investing.
If all you do is gamble over and over again, you’re at the mercy of the odds and the odds aren’t any good. Your success is limited, sporadic, and ultimately doomed because you’re losing far more often than you win.
If you identify those wins, though, no matter how small they are and start to develop them into systems, that’s when you’ve started investing and building on your success.
At this stage of the game, the consequences are much more even.
You stand to gain a lot if things pan out, but you also stand to lose a lot if they don’t. That’s okay because the odds are now more even as well. It’s a lot more likely that your investment will work because you’ve done the gambling that rooted out all the bad ideas, relationships, investment, etc.
Now it’s a time game where you continue to to leverage your success into even more success like a snowball rolling down a hill.
The Case for Riskology.co
Investing doesn’t work without first gambling and gambling without ever investing is destined to fail. The art is in the transition.
This website is a good example of what I’m talking about. It took a lot of gambling and decision making, but Riskology.co is, for all intents and purposes, my career, whatever that means anymore.
When I graduated from high school and had to decide what to do with my life, I tried a bunch of different things. I went to college to pursue a professional career, but I spent a lot of time trying other things at the same time like working as a roofer, playing music, writing, and starting a little ticket scalping gig.
I had no idea which was going to work best for me, so I threw myself at all of them to see what stuck.
By the time I graduated, the only things left were my professional career, music, and writing. The others fell by the wayside because they weren’t doing it for me. I started investing a lot in my career in construction, but I never stopped testing with my music and writing.
Eventually, I had to make a decision about how I wanted to structure my life and the professional office and music had to go as career choices.
Writing was left, but it wasn’t a case of just picking up and running with it.
Before I decided to leave the corporate world, I’d taken all kinds of chances on different avenues with my writing. I’d seen successes and failures for several years on my other blogs and found what kind of writing style did and didn’t work for me.
There was all kinds of stumbling, progressing, quitting, and starting again before I found the message and style of writing that would work for me and connect with a lot of people. I made the transitions as they made sense to my own situation and now I’m invested and making a career for myself.
The Final Word
Success doesn’t come just from measuring, researching, and investing. You have to gamble on things you don’t know will work. And it certainly doesn’t come from gambling with no long-term strategy.
You have to find the gambles that work best and invest in them to leverage your success.
It’s all in the transition, which just happens to be a lot like cooking spaghetti without a timer. You don’t know when it’s done, so you throw a few pieces against the wall to see if one sticks. You do it over and over again until more and more noodles are sticking.
Then you stop and eat them.
What are you gambling on right now? What are you invested in? Let me know in the comments.
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If you’re interested, yesterday Chris Guillebeau launched his final business project of the year, The Unconventional Guide to Freelancing with his partner, Charlie Gilkey. The premise is simple – you know your craft, here’s how to run the business side of it.
If you’re a freelancer (or aspiring freelancer) and you want to know how to spend less time dealing with the parts of the business you hate, more time with the parts you love, and earn more along the way, it’s worth checking out.
I haven’t read the whole guide, but I have listened to the included interviews and they’re pretty good. If you buy through my link, you’ll be supporting my investment here at Riskology.co.
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Image by: John Wardell