My Worst Investment Ever Podcast

Viola Llewellyn is the co-founder and president of Ovamba Solutions, Inc. She oversees innovation, strategic implementation, investor communications, and business development. digital undivided included her as one of only 34 black women in the US to have raised more than US$1 million for a technology company. She is a TED speaker and has been lauded as a Global Technology Pioneer by the World Economic Forum. Recently she was listed in LATTICE80’s Top 100 Women in Fintech 2019. Her family is from the Central African republic of Cameroon.  She was born and educated in the UK and lives between Africa and the US.    “Oh, this is a great idea. (At least) 1.1 billion human beings on the African continent, you guys are rushing in and are doing something that’s not charitable; it’s going to be fantastic. What could possibly go wrong?” Viola Llewellyn, quoting friends, family and supporters Worst investment ever  Idea to fill African SME funding niche between microfinance and banks   Back in 2013, Viola and her business partner Marvin Cole decided they wanted to create a business that would help African business, that is, SMEs, to get access to capital, so that they could grow. Everyone knows that small businesses need capital to sustain themselves. Africa has microfinance institutions and banks. But the whole new era of peer-to-peer, marketplace lending was just beginning, and the partners hit on the idea to be first movers in the African market to do this. Viola points out that when people start a new venture, no one thinks about failure. The partners also hadn’t seen any models that they could emulate the good and improve on the bad. All they knew was that we were going to create technology, be innovative, find business partners, raise capital, and help these businesses to grow. And they would be the heroes of the continent.   Partners revel in broad support for their finance revolution   To kick things off in 2013, they did a successful friends-and-family raising and spoke to everyone they knew all of them knew that, “Oh, this is a great idea. 1.1 billion human beings on the African continent, you guys are rushing in are doing something that’s not charitable, it’s going to be fantastic. What could possibly go wrong?” At first, not a lot went wrong at all. It was almost 2014 and there was a new association that was formed to bring all the peer-to-peer platforms together, which was what the partners thought they were. Viola points out that is not what Ovamba does today at all. It is now a marketplace maker that funds businesses that are in the trade sector. It creates and innovates technology to do all of that. So the failure she shared with Andrew was what led to the hugely successful innovation that emerged at end of her tale.   Dynamic duo draws strength from their diverse perspectives   In April 2014, Viola’s business partner (who she says is a great deal more cautious and sensible than she is) says they were going to a big association conference. She recalled her youth here and considers herself very lucky. Viola was unable to attend university because she made what she called one of worst mistakes a young woman can make: getting pregnant while not being married. At the time, her life was derailed but that upheaval put her on her own path to understanding the world from a very different perspective compared that of her business partner, who has an MBA. And because she went into sales and marketing, she loves to jump feet first into anything and figure it out later. She does not believe you need to go systematically from A to Z, as long as you can see the Z.   Marketing activities net big-fish investor at conference  So ahead of the conference, Viola started creating templates and presentations and sent them out to everyone who might be attending. She had a lot of promising responses and apparently everyone was interested to know what the partners were doing.   “A factor about the beginning of either a bubble or a new industry or a new asset class is that everyone jumps in the pool. There are sharks, piranhas, dolphins, and mermaids in the water. They’re all there. Everybody’s trying to find anything to jump onto.”  That includes the start–up community, which is how they were involved. One company was most aggressive and ended up being signed as their first institutional investor. Viola described it has the most beautiful courtship: trips to London, meetings, and all the while, other businesses were also trying to figure out deals.   Failure to ask right questions should have been first alarm  The day came when they started to negotiate the transaction and that was when the first red flag went up. The partners thought they were being clever smart by asking: “Who else has done business with you and how did it go?” And everybody said: “It went fantastically.” But Viola and her partner had failed to ask: “Who went through a cycle of misunderstandings or violations of contract and how was it resolved?” All they could see was the shining end of the journey, so they signed the contract, received an equity investment and were told that they were going to get a large amount of capital to fund all of the businesses on their platform.   All set to reel in US$12m funding for clients and nothing happens  When it was time to get the US$12 million – to fund all of the businesses that they had invested marketing and time in, while promising them and underwriting these transactions, they now had have a pipeline of close to $60-70 million that they were going to fund, all the while expecting returns that were going to skyrocket them all to success – there was silence. The expected funding seemed to evaporate. They would ask the investors: “Hey, where’s that money?” and would get the answer: “Oh, we’re trying to work some things out.” Again: “Hey, where’s that money?” Then they started to see a) individuals leaving the investment company, b) a slowdown in documentation, c) changes in the interest rates that were previously agreed upon, them, d) new clauses that we’re going to put ceilings on the outlays. Suffice to say, after all the demand they had rounded up, and there was literally no money to fund it.   Venture stranded in Africa as it is penniless and unable to keep promises to clients   They were in the middle of Africa. They had billboards up in the streets. They had done a massive amount of press and marketing, putting themselves out there as some kind of new heroes of the fourth industrial revolution. And now they were unable to give out any of the promised funds. The partners were left to scramble, explain, create new reasons, new excuses, and redo their risk parameters. It was an absolute disaster in which they missed their growth window, and instead, had to retract and almost start the company all over again. They had to terminate partnerships and relationships, consolidate situations with the clients they knew were not going to default. It really put a dent in the relationship with their group of clients.   “We’re in the middle of Africa. We’ve got billboards up in the streets. We’ve done all this press and marketing, hailing ourselves as the new heroes of the fourth industrial revolution. And now we can’t give any of that money (to the SMEs we’d promised to allocate it to).”  Personal cost includes great angst and husband’s pension fund  Personally, Viola’s stomach was in knots every night, her pride reduced to near zero. Meanwhile, her husband, who had such great faith in her future success and who had invested from his pension fund to help her build the company, now had to work extra to ensure that as a family, they were not going to end up hungry. Viola is also grateful that she and her business partner were able to maintain a good relationship throughout the crisis.   Immense challenge to face all the let-down people   But she and her business partner had to find new ways socially to deal with the people who had relied on them; hundreds of businesses, connected to as many families, many who had complained that microfinance would not work for them. They also had to face the people who had written articles hailing the venture and its leaders as “the brand new thing”. All of that came to a crashing end. They also had to negotiate a much wider narrative that says African businesses are failures, that black people cannot manage businesses. They had to go back and face everyone and explain what was going on.   Government, big-four accounting firm, gender prejudice throw up extra obstacles  Adding more strife to injury, their asset class was completely new, and the government of the country was unable to understand what they were trying to do and thus went to war with their already embattled business. They also had to go toe-to-toe with a big-four accounting firm in the quest that their start-up venture be given the chance consolidate and stabilize. It was frightening, embarrassing and shameful. And as a woman, some of those parties would also say to Viola: “You’ve got no business being in business here.” She had to fight all of those battles and rescue her pride at the same time. But that was 2015 to 2016. It is 2019 now and Viola reminds listeners of her bio. So she and her business partner went through that valley, which slowed them down considerably, but the light was: “But the great thing out of that is it taught us how to grow organically, with very little support." “The great thing out of that is it taught us how to grow organically, with very little support.” Viola Llewellyn Some lessons The strength of a future engagement relationship, or even investment, is based on how well you can recover when things go wrong. Never put all your eggs in one basket. When it comes to investment, you have to diversify. That means also that for start–up founders, the first capital raised should be the beginning of the next capital that raised. Viola has come to realize It is very difficult to raise money when you need it. The easiest money to raise is the funds that you don’t need. This Viola says is the bizarre, but very real, paradox in the business of start-ups. “People throw money at people who have money, this is insane.” Viola Llewellyn   Therefore, as an action item, never stop raising capital. It is far better to have the offer of funds and be in a position to say “No” than to be looking around and be unable to find funding, because the desperation makes the seeker a higher risk. When you do equity, and if there is debt that is attached to that, the two should be close together. But if the debt on the contractual basis fails, the equity comes back to you. Sometimes the next back–up plan should be the incremental release of either the pipeline, the opportunity, or the drawdown capital. One cannot throw the entire thing up and say: “This is it. This is the whole lot.” There has to be a process. So that if there is, if you have to cut a piece off, the rest of it is still in place, and you can come through and fund your market. When you’re a start–up, be aware you can be taken over by passion and the dream. And Viola has said the following in every talk she’s given: “No business plan survives contact with the enemy. And the enemy is reality and the marketplace.” Viola says that everything you thought of in your business plan; none of it is true. Investors asking start–ups for their business plan is hilarious. She wonders how a start-up is supposed to know any kind of reality and put it in their business plan, especially when they are the first to market. There are other parameters people should be considering, “and it ‘aint your business plan.” Andrew’s takeaways Don’t compare your insides with other people’s outsides. Andrew likes this piece of wisdom that wise friend told him a while back because it helped him realize that everyone is in some way drowning in their own cesspool of thoughts and striving to respond to all the difficulties that beset people and everything that’s going on, and that at times, like Viola: “Life is not easy for anyone.” Beware The E-myth. When someone is involved in a start-up business, they succumb to a nearly delusional state that Michael Gerber calls “the entrepreneurial seizure”. All they feel is the passion, the energy, the excitement, and that nothing is ever going to go wrong with their enterprise. Andrew suggests we have to be very careful about that, because it can blind us. We don’t even look at the possibility of the many things that can go wrong in a new business. With trust in your partner/s, it is possible to get through horrendous business crises. While Andrew was listening, he was sure that Viola and her business partner would fall out over the situation, because it was so painful and difficult. Whenever raising money Never expect that the people you are raising money from have the same objectives as you. Their objectives are different. Don’t ever expect that they’re going to feel the way you do. Once you understand their thinking about things, it will help you. You really don’t know anything about the company or bank that may invest in you. The amount of politics and other matters that happen at a company, or with the people that you’re raising money from, is essentially a mystery. Money can be withdrawn from situations not because the company/people don’t want to invest, it can be just down to some other situation that is occurring within the fund-source company. Whenever you’re doing business with anybody, don’t be afraid to go way beyond what is being given to you as far as recommendations. You never know what you will find out so get recommendations from fans of a company and enemies; check, follow up and try to understand anyone you are about to do business with. Actionable advice Strive for a level of authenticity in yourself that you can call upon when things go wrong. People can tolerate a bad outcome and forgive you and support you if they see that you have a clear understanding of what is going on. Even if you don’t have a game plan, if those affected can see that you sincerely wish to fix the problem and make sure that other people’s interests are protected, all will be well. The way to do that is to build trust with customers and all stakeholders and maintain transparency throughout any crisis. Be upfront about what is facing everyone. “That’s what saved us at the end of the day.” Viola Llewellyn   No. 1 goal for next the 12 months To raise capital from good partners and be out in front, leading that process versus having the terms dictated to her and her business partner. Parting words “The worst thing that will ever happen to you in life is that you will die and we’re all going to die. But before that happens, you better learn to embrace failure because you are only as good as the last thing you recovered from and you get to champion and cheer yourself on. From success to success from loss to recovery. And I love this journey. And I think what you’re doing Andrew is absolutely groovy. This is one of the best podcasts I’ve ever been on.” Viola Llewellyn   You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Viola Llewellyn LinkedIn Twitter Website Instagram Facebook YouTube Connect with Andrew Stotz astotz.com  LinkedIn...

Gaurav Sharma holds a post-graduate degree in management from Birla Institute of Management Technology (Bimtech), in Uttar Pradesh, India, and a bachelor of science degree from the University of Rajasthan. He has had a rewarding five years of experience at various multinational companies in the domains of wealth management, investment analysis and portfolio reporting. He is presently working towards democratization and simplification of the wealth management services by leveraging machine learning, AI and data science. Gaurav aims to solve problems across customer segments comprising the masses, the affluent middle class and high-net-worth individuals (HNIs). During his tenure at Moody’s Analytics, he gained practical exposure to global standards of investment research and reporting through various tool such as Bloomberg, Morningstar, FactSet and other proprietary tools. At Mercer, he gained exposure to asset allocation, financial and retirement planning, and investment consulting. Prior to these, Gaurav worked in the global wealth and investment management business-line of Bank of America-Merrill Lynch and supported ultra-HNIs in managing their wealth.    “If the company’s growth plans are there, it will work.But if the management is not able to understand and … make investors’lives easy by telling them everything, if they try to hide and try to play with the accounting standards, and of course, if they try to siphon off money,at the end of the day, investors will get to know.” Gaurav Sharma   Worst investment ever  Young blood catches bug for stock investing  Gaurav was very young when he became interested in the stock market and was one of those guys who “jumped right into it”. He borrowed some money from a friend’s father, who was kind enough to believe in his investment philosophy. Due to his youthful enthusiasm, he was trying to make it big very soon in the market.   First foray rides educational technology wave in India  So, he decided to invest in education technology company, Educomp Solutions (Educomp, EDSO.NS). He did some balance sheet analysis and most of the basic research, and invested in the stock around its peak in 2008-2009. The company appeared to be at the forefront of the education-plus-technology mix, and for India, with hundreds of thousands of public, private, international and specialty schools all looking to drag their classrooms away from chalk boards, it seemed a no-lose situation. He bet really big on it, the numbers looked good, and every one or two years, there was very good news about Educomp winning contracts with 15 to 20 schools. Add to that the promotion of the K-12 education system, and government policy wanting to put a tablet into every student’s hands, everything was going great.  Hidden mismanagement leads to company’s downfall Gaurav says that if the company’s growth plans are there, it will work. But in Educomp’s case, the founder and CEO of the company had other plans with regards to managing. He was not doing the right thing with regards to the proper management of the company’s money, and was siphoning some off to other transactions, investing in other asset classes by taking money out of the company books, and was basically fudging of the books. The Gaurav had done extensive research on the company’s numbers, its balance sheets, growth plans, and growth in the sector; it all looked good. But as for the management quality, he was unable to assess that very well.   Investor loses 90% of borrowed funds as stock plunges   That’s what made his life difficult, because when the shares started falling, due to the management quality, he sought to assess the business, but he could not trust the management. The stock took a beating and it ended up a 90% loss of the whole money he put in. He then exited, and the only profit was considerable lessons learned.      Some lessons Read between the lines when it comes to management. A company can have excellent prospects, great products or provide great services, have good numbers, great balance sheets, fine growth outlook, but all of that can come to zero if the management is poor. If the C-suite is lacks ability and is not smart enough to understand different root causes that can emerge to disrupt its business, it will fail and hurt investors very badly.  Sometimes it’s very difficult to prepare for corrupt management. If the founder/CEO had not misspent company funds, siphoned money off for bad transactions and family members, the company would have been in a much better state.   Numbers tell a story but they do not tell the whole story. Investors need to check the background of management, and this kind of analysis must be done on the quality of the management team, their consistency as well, because balance sheets can be fudged. Such misreporting can go on for a long time before investors get any hint of it happening. There must be checks and balances also on management, through vehicles such as active board members and shareholder activists demanding details.   Spend 70% to 80% of your time with numbers when looking at a company. The rest of your time should go into understanding the quality of the management team and the consistency of their reporting. You can even look into what the performance of members of that team at their previous companies to get a better idea of how they are or will perform in your target firm.     Andrew’s takeaways  Bad times are the best time to talk   The most important time to communicate is when we have bad news, when we’re having bad time. At such times, most people avoid communication, and most companies avoid communications at such a time.  Investors and fund managers do not expect a company to be perfect. Therefore, getting out there and saying, “This is bad”, “This is wrong”, “This is not working for us” or the like is not as bad as it feels. People are going to accept that.   Overconfidence happens to us all. It’s human. We all suffer it at times when we focus only on what we are looking at. When we do that, we build confidence through that work. And sometimes that amounts to a very false confidence.   Experience comes with age. It would be nice if people could start investing at a young age and not make any mistakes. But the truth is that sometimes we just have to make these mistakes.   Actionable advice   Read between the lines in the annual report. There are a lot of things that are actually said that are not actually written and you need to understand and act upon them, and act wisely.    No. 1 goal for next the 12 months   I want to learn more … I believe the next year will be giving me a lot of more maturity about choosing my investments in a smarter way, I’ll be able to understand more about management. As I meet more people every day, I’m trying to judge and understand what exactly goes on in their minds as they run their companies.     Parting words   Fail fast, fail early, learn fast and recover fast.     You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Gaurav Sharma LinkedIn Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast 

Nate Abercrombie lived in Syria for two years trying to learn Arabic before attending graduate school. He had hoped the language skills would help him secure a job in the oil and gas industry. Ironically, he ended up working in the renewable energy industry as a financial analyst. He loved having the opportunity to analyze and research large capital projects, but financial analysis in the wind energy business can become very repetitive. He needed a new challenge and equity research was something that he really wanted to do. Nate got a shot at Janus Capital Group (now Janus Henderson Group). It was a phenomenal learning experience and he got to know some great investors. However, Nate ultimately came to realize that the corporate objectives were misaligned with fund-holder returns, so he started thinking about next steps for himself. Something he did really enjoy about the equity research process was meeting management teams. Considering that the average investor never has the chance to listen to management, Nate decided to start the podcast, Investing with the Buyside, which has now become The Stock Podcast, which is described as: “The only investing podcast that gives everyone the chance to hear fireside chats with public company CEOs and CFOs regarding their business, industry, and financial outlook.”   “In autumn 2018, the company decided it would cut its distribution (dividend payout) by 67% … the stock went down something like 45%. So when I bought in, it was probably at around US$10/share, and it declined to about $5/share. But then over the next few days it just kept going down.” Nate Abercrombie   Worst investment ever  And still in progress  Nate said he has made a couple of bad investment missteps, but the one he spoke of was one that remains in play as he still owns some of the shares in the company he talked about. As an energy industry financial analyst, he covered the midstream space (“Midstream” is a term used to describe one of the three stages of oil-and-gas industry operations, and delineate the processing, storing, transport, and marketing of oil, natural gas and natural gas liquids). One of the things he did as an investor was that he could invest outside of the portfolios he was managing, but also invest in some of the stocks that he was not covering, but were within his sector.   Experienced oil and gas analyst makes a play at a midstream outfit  He was a big investor in exchange traded funds (ETFs), because it was very difficult to trade in and out of individual equities back then. Also, he had been cleared to invest in a couple of midstream stocks on an individual basis, and one in particular was Sanchez Midstream (SNMP:US, SNMP.K), a subsidiary of Sanchez Energy (SN.US), an oil and gas exploration and production company in the United States. These companies pay a lot of their profits out to investors, but in this industry, rather than call them “dividends”, they call them “distributions”. The distributions that they were paying out at the time were very attractive, some in the double digits, and Sanchez Midstream was no exception.   Idea was to use dividends as income while getting podcast off the ground  Nate had been exploring what was going to come next for his livelihood. He was thinking about starting his own podcast and that he was going to need extra income. Sanchez Midstream was paying out a 20% distribution yield, it had a very solid balance sheet, and it had growth. The important indicator for a midstream company, Nate pointed out, is to see volume growth in its system. And that was there too. Despite the contemporary commodity price collapse, there were some quarters during which volume growth had slid a little. But by the same token, its distribution looked extremely stable, because most importantly, the distribution was covered more than one time. Rather than call them payout ratios, this sector does the inverse, and calls it the coverage ratio. So as long as coverage is north of 1x, one times, that means that they haven’t enough cash flow to pay that distribution out.   Senior management talk up the company nicely on Nate’s podcast Things were looking good. Nate even had a member of the Sanchez Midstream management team on his podcast to talk about just how the outlook was positive and how things were going well. This was a stock he had bought thinking that it was going to provide him an income, just given the fact that he was moving to a new career and that his outlook was not very bright from a revenue standpoint. So he bought and owned the stock, and had management on his podcast to just talk about the business, and how well the company was doing.   Management announces 67% cut in dividend payout, stock plummets  Then, in the autumn of 2018, the company decided it would cut the distribution 67%. When that happens, the stock usually goes down a lot. That day, Nate recalled the stock went down something like 45%. So when I bought it was probably around $10 a share, but after the announcement, it declined to about $5 a share. But then over the next few days it just kept going down. The parent company, Sanchez Energy, was also going through its own financial difficulties. They’re currently going through some sort of strategic decision-making process to decide on the best next steps for the company. Nate as an outsider, has no accurate insight into what will happen with Sanchez Energy, but there’s a good chance that it is going to either restructure its debt or be bought out or bondholders will end up owning the company. And from Nate’s perspective, as an investor in the midstream company, his thought process is always that the midstream company will probably come out of this period doing alright.   Despite $10 to 2$ a share slide, Nate still has hope amid good recent coverage ratio  So the stock is now at around $2 a share, the company pays a 60-cent annualized dividend, which amounts to a 30% yield. The coverage last quarter was at around 1.4x. Therefore, Nate still has some hope, but he described it as a very painful learning experience for an investor. Some lessons   Listen carefully to what management says, and what they don’t say. This discipline is part art and part science. Investors need to learn to sense and arrive at a solid opinion as to whether or not management is being completely forthright, truthful, genuine, and honest.  “There were probably some … red flags that cropped up that I may not have paid enough … attention to … (this would include) the fact that they (management) didn’t really want to talk about the distribution (dividend) all that much.”  Nate Abercrombie    Andrew’s takeaways  Ensure you’re as diversified as you can be. That means not relying too much on any one company. Andrew suggests to Nate that if he wanted to get income from a midstream company, maybe it would have been a better idea to own shares in five or 10 of them. Diversification teaches us to forgo the really high return from perhaps one of the companies in exchange for reducing the risk when one or two companies go bad. Sadly, if all midstream companies suffer, diversification by adding just other midstream companies to your holdings may fail to protect you.   Management almost never tells you the risks. They are however always excited about their story and it’s very hard to get information about risk. We also have to remember that management can’t tell you the risks. If a risk is very real, ethically and legally speaking management must announce that to the overall market, not just analysts or investors. So Andrew likes to think that as we invest, the very reason we like to invest with a company is because management are so optimistic and positive, and they are creating this business. But that warmth and trust in management can also be the seeds of destruction.  Meetings with management do not add much value. Andrew says this after observing about 1,000 meetings between fund managers and analysts. This is because the fund manager could have gotten almost all the information in the meeting from the company’s website.   Many fund managers confuse understanding a business with getting an advantage from investing in the business. Sometimes understanding the business more deeply can actually be misleading, because you start to build confidence that you really know the management, the company and its goods and services. This can sometimes blind you.  Actionable advice Nate  Find a really good management team. If it’s a really risky investment, the better the management team, the better the outcome for your investment.  Andrew’s take on that  Invest with good management teams. Because things will go wrong, and good management teams will work through it and keep your interests at heart. No. 1 goal for next the 12 months Nate is trying to figure out what he will to do with his podcast. It’s harder than he ever thought to grow a podcasting business, but he has some ambitions of becoming a fund manager, and he would love to manage money again. His goal therefore right now is to get back into the investment management business, where he can help fund holders, shareholders or investors make a lot of money, and also grow the podcast.    “If I can do both (fund management and podcasting), that’d be perfect.”      Parting words   “I think that talking about (one’s) losers (worst investments) is maybe one of the most helpful ways of learning lessons in the investing world.”    You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Nate Abercrombie LinkedIn Twitter Website  Facebook Email  Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast   

Reed Goossens moved to the United States in 2012 to pursue a career in structural engineering, however he then discovered a passion for real-estate investing. With limited funds and no credit, Reed went from purchasing a small duplex to growing his own real estate investing firm, RSN Property Group. Reed now syndicates large multimillion-dollar deals across the US and certainly lives up to the “never-say-die” Aussie attitude when it comes to being a successful entrepreneur. Reed is also the host of the up-and-coming podcast, Investing in the US: An Aussie’s Guide to US Real Estate (and has recently published a book of the same title), wherein he invites other distinguished real estate investors and entrepreneurs to speak with him about their success and help guide other international investors who want to successfully invest in the US.   “The ARV (After Repair Value) was not large enough to justify how much money we ended up spending to add this third story.”   Reed Goossens    Worst investment ever ‘Networking on steroids’ typifies Aussie engineer’s view of first real estate event in US Reed moved the United States in early 2012 and was without a job, so he took the brave move of walking the streets of New York City to visit every engineering firm he could find, with his portfolio in hand and saying, “Hey, give me a job!” He quotes Tony Robbins, who says: “One ‘yes’ will change your life”. And it did. He looked at medium-sized firms, and admiring his spirit, one actually did employ him. Within two weeks of moving to the US, he was at his first real estate networking event, and he realized the Americans were on a different level than he was coming from Australia. He called the US experience “networking on steroids”. Learning about US property Realizing he had much to learn in his new home country, he spent the next six months doing just that. He realized quickly however how low the barriers to entry to the property market are in the US compared to those in in Australia, in that he could go out and buy a property for US$38,000. He was amazed, stating that you could never buy in Australia for under around $250,000-$300,000. He visited upstate New York and bought a number of properties but quickly ran out of his own money and banks were shy about lending to this new arrival. So he found a partner, and with him, started looking at properties in Philadelphia, as he wanted to try his hand at flipping houses. He was confident he could do so as a chartered structural engineer who had worked on many ground-up developments, including the London 2012 Olympic Games site. Reed finds a partner and they buy a row house in Philadelphia to flip So, he and his business partner bought an early 1900s two-story row house in Philadelphia for $110,000. Their goal was to add a story to match adjacent houses and make this row house similar to others in the city and those in New York, and thereby add value to the property. Reed did all the structural engineering drawings and they hired a general contractor (GC). Contractor’s thievery and other horrors make for a lengthy and costly project And here Reed explains the two main problems with the investment. The story he said is a very good lesson in After Repair Value (ARV) and underestimating the cost of carrying out the renovations. In the end, the ARV was not large enough to justify the amount of funds they ended up spending to add the third story. Combine that with shoddy GC work – the general contractor stole materials from them and Reed had to take over the GC work himself and handle all the subcontractors. There were other problems on the mechanical, planning and electrical sides, as the original GC had cut corners and sealed walls before the city had inspected plumbing and electrical wiring. They even found some of their stolen materials at project site a few streets from the house, as they had been networking and were invited onto another developer’s project site. Extra pressure hovers nearby as investor’s father is also involved The situation was also riding on some emotional issues. Reed’s father was also invested in their project and it was Reed’s first foray into syndication. They all thought the build was only going to take around six or seven months, but it ended up taking about a year. And they were holding it the more spending was happening on the debt, the soft costs, and just really having to try to get it out of a hole. One of the subcontractors also ended up being jailed over a bar fight. So, suffice to say, a lot went wrong. At the same time, Reed was trying to move to Los Angeles to be with his girlfriend, who was from there, and his business partner stayed to finish the job. Heart of the loss was how much the home would be worth after repairs The summary though was this and Reed points out the heart of the problem was in the ARV. They bought the house for $110,000, spent about $220,000 or $230,000 on it and sold it for only $375,000. Reed did take care of his father, and kept the promiser of a 15% gain on his investment. Personally, Reed took a loss of about $40,000, or he calls it a $40,000 lesson. He opines that if the ARV was going to be worth $500,000, they would have been very happy. Quick sale but investor takes $40k hit In the end, the house sold within 30 days, which showed there were no issues with what they produced but it just took six months too long. From the time they started looking at the property to the time that they exited and got paid, it was a full 18 months. Some lessons Never overestimate your After Repair Value. On paper everything can look great, but excessive time taken in undertaking renovations can eat into the ARV. Do a lot of research on all possible hidden costs. These can take the form of regulatory issues, materials, builder errors, and contractor overruns. Ensure you work with the right people. Obviously, try not to work with thieves, but build a great team around you, a team you can trust. Never underestimate the value of time and timing the market. Andrew’s takeaways Opportunity cost can have a massive impact. Reed was drawn into a project that became much deeper and expensive in time than he had expected. He could have been working on another deal or bringing in revenue from some other sources. It’s very hard to estimate what can go wrong. But that is part of risk management. And then Andrew discusses My Worst Investment Ever’s six common mistakes, particularly in reference to No. 2, failed to properly assess and manage risk. But also Andrew argued that sometimes we can do all we can and things can still go wrong. Collated from Andrew’s My Worst Investment Ever series, the six main categories of mistakes made by interviewees, starting from the most common, are:    Failed to do their own research   Failed to properly assess and manage risk   Were driven by emotion or flawed thinking   Misplaced trust   Failed to monitor their investment   Invested in a start-up company  Anomalies can scare us. They can also be misleading and some people get scared out of investing completely. But don’t build your career and investments around these anomalies. These will often happen and there’s not much we can plan to avoid them. Actionable advice Partner with the right people. Your team is everything. Making sure you have the right team around you, who have done it before, can go a long way toward avoiding such risks. No. 1 goal for next the 12 months In terms of investing, Reed would like to close on another 1,000 units in the United States. On the personal side, he would like to travel more and spend a lot more time on business development, podcasting, book launches, which is the type of activities he is growing to love. Parting words “A fool and their money are easily parted. So don’t be that fool.” What that really means to Reed is he recommends getting out there be educated, learn from other people’s mistakes, but at some point in your life, you’re going to have to take action. Invest in yourself first and foremost, and get yourself knowledgeable about whatever investment strategy you’re going into, whether it be stocks, bonds, mutual funds, investments, real estate investments, and be knowledgeable before you pull that trigger. You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Reed Goossens LinkedIn Website (business) Website (personal) Blog Twitter Facebook Pinterest YouTube Email Phone: +13235191111 Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast  Further reading mentioned Reed Goossens (2018) Investing in the US: The Ultimate Guide to US Real Estate

Paulo Lydijusse Caputo is pursuing an MBA at McGill University (Canada) with a concentration in global leadership and strategy. After graduating with a bachelor of economics from Faculdades de Campinas in Brazil, Paulo worked for five years at Cyrela Brazil Realty, the largest real estate company in South America, acting as a regional controller in his last role. Paulo then spent a summer launching Uber’s operations in Belo Horizonte (sixth largest city in Brazil) before co-founding Baanko, a social enterprise with the objective of supporting and scaling social-impact businesses in Brazil. At Baanko, Paulo developed an in-house business methodology framed around and aligned with the United Nation’s Sustainable Development Goals (SDGs). Paulo is interested in pursuing careers in scalable technologies and impactful industries, with particular focus on AI and entertainment. His personal interests include tennis, outdoor activities, coffee-brewing methods and barbecuing. He is the executive president of McGill’s Desautels Faculty of Management  One World One Culture Club and was recently awarded with the Mandri-Muggenburg Family MBA Leadership Award.    “I really believe in giving back and this is something that I learned since the beginning of my career. For me, this is part of it so call on me for whatever you need and whenever you need it.” Paulo Caputo   Worst investment ever Property insider buys discounted home from his employer real estate firm Around seven years ago Paulo experienced what he called a “real fail”, meaning in terms of investing, it was not a case in which he could find a way through to recover or minimize his losses. This one was “critical”. While he was working for Cyrela, the largest real estate operator in South America offered staff the opportunity to invest in one of its apartments, under apparently favorable conditions. Cyrela offered to waive all commercial, marketing and transactional fees, which meant a discount on the apartment’s face value of around 17-20% off the face value of each apartment. In Brazil, to buy a residential property, during the construction period, you only need to pay 30% of the price, then you hand over the remaining 70% after the vendor hands over the key. So lenders give you credit and you pay off the mortgage to them. His focus on all the shiny parts of the deal blinded him to the bigger picture Paulo liked the idea because he felt he was an industry insider who knew exactly what to do. Also, the apartment was conveniently located, so he felt confident about finding potential buyers. His idea was to sell the unit during its construction period, thereby being both an early investor and an early seller. He also felt confident he was investing in something that was valuable at the time and that it would generate a great return. Somewhat focusing on all the good points and so touched by a fair measure confirmation bias, he was expecting to easily find someone to buy , that he would know exactly the right time to exit the unit, and that he would the right price he wanted for it. But things did not pan out that way. Adding to his early excitement was that he was investing in a product that was part of his life, because he was working for the company that was building and selling it. He admitted that social validation was also component of the decision. He really believed in an operation that he was working for and that nothing could go wrong. Reality bites as government crisis darkens market But the political economy of South America, particularly Brazil’s, is always a roller coaster of volatility and Paulo got hit in one of its swings downward, the first episode of declining fortune for the previous government. He explained that investments in real estate involve a very high-end product. So it is high on the chain of products people can buy in their lives. A home is not something you buy every day and it is an item highly vulnerable to outside events, political, economic, and social. Apartments are the last thing Brazilians want to buy at this time So, Paulo tried to sell his apartment several times, involving the entire Cyrela sales force, all of whom he knew and were friends with. But, liquidity in the housing market was frozen. It was not a problem of the product or a problem of the price. It was just that people were averse to taking on a new home. He said when there is such a blip in the political and economic cycle, most people are not going to take on such risk. So buyers wait for the recovery, and in real estate, at least in Brazil, property is a product that is first to be hit, and the last one to recover. So before any buyers are ready again, everything needs to be back on track before you can start to resell apartments or other high-end products. So either you are ready to be comfortable for the long period that you are exposed or you have to cash out completely. Investor forced to sell property back to his employer at a loss Paulo eventually sold the apartment back to Cyrela at a big loss because he was unable to find another buyer. So of the saving he was offered at the beginning, he paid around twice or triple that amount when he exited the investment. Some lessons Operating a business and investing in a business are completely different. Paolo really thought that because he was inside a real estate company, had worked in many areas of it, and that he really knew the business, that he would be investor in that business. The signals the market sends are vastly dissimilar from the signs you can read from the inside of a business structure. As a buyer, one can only see a narrow part of the entire picture. Dig deeper if your bias and marketing departments are telling something is good. Investors can really be influenced by explicit and implicit influences. They are always being hit with different messages sent by the market of the people promoting an investment. In Paulo’s case, Cyrela invested a lot in promotions to employees, emphasizing how the discount would make buying one of their apartments a good investment, as were his peers and bosses, who were always sending positive signs that fueled his own confirmation bias – what he was expecting to hear. It is very difficult at such times to see any red flags about possible negative impacts. Talk with people who do not stand to benefit from your potential loss. Talk to people outside the deal, who never bought an apartment, never heard about a stock that you are you trying to buy or sell, and try to explain the business to them. Their probably very good questions will make you think more deeply about what you’re getting involved in. “I’m not saying don’t invest, but just saying try a different path.”   Paulo Caputo    Be aware and look for details about potential harmful impacts or events. Paulo never considered that the economic or political context would be so tough on the investment he was making. Not only that, he neither entered his mind nor his decision-making process. Sometimes such impacts can be related to the federal government, sometimes even local government, can have enormous impact on the performance of any impact.   “I think more and more that failure is a part of any success … now I can see from a completely different spectrum.” Paulo Caputo   Andrew’s takeaways Make sure you understand the characteristics of the sector that you’re investing in. Something very important to remember is whether the sector you’re investing in is a consumer staple or a consumer discretionary item, in terms of sector classification. The whole point of the discretionary sector is that it comprises products that are not used or needed every day, and therefore consumers can delay buying them. These are items such as a car, a house, a condo, even a TV. The difference between discretionary and staple items, such as coffee, or food, is that the latter are those that people keep buying even when there is a recession, although they may go down a bit. But when the economy has a hard time, it is discretionary items that really get hurt. Always be aware of external factors. Investors often forget about external factors. Everything was right about Paulo’s investment. He was working for the company, he had good information, it was a good product, he believed in it, other people around him were making money on it. If things didn’t go sour in the economy or the political situation, Paulo would probably have made a good return. But when external factors hit, they can have a massive impact on your investment and can even wipe you out, especially because they are so often events that you cannot possibly predict will happen. Collated from Andrew’s My Worst Investment Ever series, the six main categories of mistakes made by interviewees, starting from the most common, are: Failed to do their own research Failed to properly assess and manage risk Were driven by emotion or flawed thinking Misplaced trust Failed to monitor their investment Invested in a start-up company So how do you deal with external factors? Manage your risk and diversify. Andrew suggests to Paulo that the common mistake he was talking about was No. 2: Failed to properly assess and manage risk. Paulo probably assessed the risk quite well but as far as managing the risk, that is a different activity. Paulo may have liked this particular investment, but the problem that most people have is that they put a lot of their money into a particular investment. So, they’re not managing the risk of their overall portfolio. If this was 5% or 10% of the money that Paulo were investing, then he probably could have found a way to work around it and stay with it for a longer time, or he could have just cut his losses without much damage. But particularly when we’re young, it’s hard to diversify, because we don’t have the capital to do that. Don’t be driven by emotion or flawed thinking. Paulo was surrounded by people that were confirming his investment. Being surrounded however is a little different to common confirmation bias, which is that people go out looking around the internet or around brokers or other people to try to find people who agree with their idea. But here Paulo was surrounded by people who agreed, and some of them had made money over the years doing this type of thing. So it was not a case perhaps of them being misleading, there was just no one talking about how it could all go wrong. Actionable advice Surround yourself with people that can challenge your thoughts and your assumptions, and you can learn from them every time. Talk with people that you trust and that can provide you with good feedback about your reasoning and can challenge your assumptions. No. 1 goal for next the 12 months After his first MBA year at McGill, Paulo wants to do an exchange stint in China. McGill has many partnerships with universities in China and he is fascinated by Asia. His main focus is to keep striving for better understanding of AI to be well positioned for the future. Parting words Despite any failure, don’t stop, be resilient, know what you want and strive for it. “There is no path with only success and winning …(Losing) is part of the game. So play the game, bring your ‘A game’… and in the end,you’re going to win.”    You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Paulo Caputo LinkedIn Instagram Email  Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast 

Ramesh Raghavan is currently the vice chairman of Business Angel Network of Southeast Asia (bansea), one of the leading and oldest organizations of its kind in Asia, as well as an early-stage venture investor and advisor in several start-ups. He is an advisor on risk management in traditional public market investments and alternative investments to family offices and emerging hedge funds. Ramesh previously held global leadership roles in derivatives, capital markets, and sales and trading with Morgan Stanley and the Royal Bank of Scotland and has worked in New York, London, Hong Kong and Singapore. Prior to his career in investment banking, he had a fast-moving consumer goods and commodity trading career with multinational corporations. Ramesh holds an MBA from the London Business School, a Masters in International Business from the Indian Institute of Foreign Trade and a Mechanical Engineering degree from India’s oldest technical institution, the College of Engineering, Guindy, Chennai, India.     Worst investment ever  Investor takes first flight as an angel   Ramesh’s first taste of angel investing happened about 12 years ago when a former college friend approached him to invest in an “execution-type business” that seemed interesting even though it was not a fundamentally new idea. Ramesh listened because the guy had been the smartest person in the room at university and had a good work history with large multinational companies. So Ramesh decided to invest his own funds and gather an investing syndicate together because he believed in the person more than the actual idea.   ‘Too many generals and not enough soldiers’ raises first red flag  After a few months, red flags began to appear. Ramesh couldn’t see any traction. Communications were worse than the usual poor information flow from start-ups. He couldn’t get clear answers when he wanted to know what was happening with the business, and something he has learned with angel investing since is that people tend to take the money for their business and disappear, only reporting good news and failing to provide updates on the bad. Being responsible to his investor syndicate, Ramesh urged his friend to tell him what was happening and if there were any problems. Finally, he then insisted to see the business plan in which he noticed there were eight co-founders, when three or maybe four should be the maximum. That said, he stressed that there should be one “chief”. He also noticed that all these co-founders had significant multinational experience but that nobody was doing the job. Everyone wanted to get paid but nobody wanted to actually do anything. They lacked the inability to actually get down, roll up their sleeves and actually do stuff.   Time to trim inactive ‘leaders’  Ramesh’s first advice was to fire the loafers and change the whole business model. As the company was not making money, the significant salaries had to be cut to zero. If nobody liked it, Ramesh told his friend they should leave. His friend was unhappy, but after months of pushing, the friend managed to get rid of two co-founders. But issues remained. The company’s leaders still had no key action areas for which each person was responsible. So Ramesh worked with him, nearly four or five hours a session, over about six weeks to figure out how to help him create a viable potential business plan that including setting out key responsibilities for each of the co-founders, who were visibly unhappy at the prospect of doing some actual work.   Remaining team fails to listen to chief advisor   After a lot of prodding and mental anguish, Ramesh’s friend introduced him to the remaining co-founders and they found someone able to be best pitch person from the team to raise more capital, which, after a few months, they were fortunate enough to do. This gave them some breathing room. A lot of the time though, Ramesh began to realize that the team would say yes, but they would never take his advice. So the traction was very poor and he learned that it didn’t matter what he said, the red flags were clear. Ramesh also advised his friend that if the current business was not working (which it wasn’t) in the current state of the market, they should pivot the business. The friend was so stuck on his idea that he thought pivoting meant accepting failure, despite Ramesh telling him that every start-up pivots every other day. Great idea do not just take people to success in a straight line.   Investor becomes CEO and tells everyone to adapt or die  It was at this point, Ramesh took over as CEO. He had to put his foot down with the board and the team and say if they were not on board with pivoting, they should leave. After that, two other co-founders did just that which left the company with a team of the ideal size, three or four co-founders. Salaries were slashed and Ramesh had to point out that “entrepreneurship is not a salary-collection business model”. Ramesh said that despite being friends he had to be frank ab out how they should go forward giving life to the business, because he had a responsibility to the investors he had brought into the deal.   Boss tells team weekly to focus on getting customers – still no progress  As another year past, Ramesh noticed that traction was still lacking, and his friend was losing hope. He found that he was not just playing CEO but also playing therapist to his friend while taking a very hands-on approach trying to motivate the people to keep the business alive. Still without processes to manage employees, Ramesh told them to forget everything else and just focus on finding customers to pay for the business, and that all other activities were irrelevant in the scheme of things. Despite getting another investor to help out, he tried to look for progress every week, and every week, there was no progress and hundreds of excuses.   Team continues to do ‘busy work’ without achieving much  So the team was still acting like bureaucrats or employees, just sending out emails to each other. They were too used to working for large organizations, which for most of the time can run on their own. But this was a start-up, running with zero revenue, zero brand value, and zero everything. There were still too many chiefs, and their ability to manage the soldiers was very poor.   Investors call a halt after money runs dry and team effects no real progress  A few more months went by, and the team came back to the investors asking for more money. Ramesh told them there was no more money out there and that they should put in their own funds. They refused. The discussions went on but it all became too much for Ramesh and they pulled the plug. He told the team that, yes, they had tried to do something, it didn’t work out, but stressed that he was more disappointed that they had failed for the wrong reasons. If it didn’t work out for business reasons, that would have been alright. However, the fact that they could not manage the people side of the business, had a top-heavy business model for a start-up – in which the soldiers were not paid and the generals were skimming salaries at the top – was a very bad precedent, so bad that it was very unlikely they could do anything more with the company.     Some lessons  Be clear about the reason for investing in a start-up. Be clear whether you are investing in a business for the sake of friendship or for the sake of business. Be clear whether you expect a return from the investment or not. Once that is clear and you expect a return from the investment then do all the due diligence before getting involved. It can longer, but never invest just on the basis that someone is a good friend, a smart guy, or their successful corporate background, because the start-up life is a different kind of animal altogether.   Don’t invest in a business with too many co-founders. Too many chiefs are waste of time.   Investment must go to build the business. It must not go to supply the founders’ huge salaries before there are revenues and profitability. Look carefully at the business plan and determine whether the “leaders” are eating up the investment in salaries.   In a start-up, people must have a sense of urgency. Every day you have to do something that adds value and adds something positive to the basic objective of driving the business forward: Find customers, lower costs, build a network, raise revenues, or whatever it is, every day.   Don’t cling too tightly to your business idea. A least 90% of businesses start up with an idea does not work, so they have to pivot and figure out a better model for it to work.   It’s very important to take care of your soldiers in the business. They are crucial for the success of your business. First pay the soldiers and then pay yourself. Don’t pay yourself first and leave the soldiers in the air.   Vitally important is the ability to listen to and execute advice. If you execute it and it doesn’t work out for valid business reasons, people understand. But you should not give reasons that are flimsy. Don’t put your excuses on lack of capital or feedback from investors.   In a start-up, you have to be “a hungry dog”. You can’t wait to be fed, you have to hunt down the necessary capital to feed your company. You have to go after people because people don’t come after you. When you work for a large multinational, people come to you. When you are a start-up, you go to the people.   Have a good mix of talent in your team, with defined roles. Such people should be experts in their domain with specific responsibilities, not just people dressed up as co-founders who are doing nothing. Makes sure you can identify the roles, identify the action plan stemming from each role, identify outcomes, and then actually execute your business. Then you will have a much better chance of doing something much more credible.   “When you’re getting into a start-up … leave the baggage of what you did before (at the door) and be open to new ideas. Roll up your sleeves and do what needs to be done to get the business off the ground, because nobody is coming here to help you. You have to go to the people to help yourself.” Ramesh Raghavan Andrew’s takeaways  Collated from the My Worst Investment Ever series, the six main categories of mistakes made by interviewees, starting from the most common, are:   Failed to do their own research   Failed to properly assess and manage risk   Were driven by emotion or flawed thinking   Misplaced trust   Failed to monitor their investment   Invested in a start-up company  Be wary of putting trust in someone who doesn’t fully deserve it. The fourth category of the most common investment mistakes gathered through Andrew’s My Worst Investment Ever series is Misplaced Trust. Ramesh put trust in somebody who was perhaps undeserving on the basis of what Ramesh needed him for; in this case executing a successful start-up.   Investing in start-ups (number six) is an extremely high-risk venture. When you invest in a start-up, it is such a high-risk activity, that Andrew usually recommends against it. Doing business with or investing in friends’ enterprises doesn’t always work, but it can work. It doesn’t always work with family, but it can work. Some people can truly earn our trust through good performance over a long period.   When doing small business, you must do everything. If you’re thinking about going in and doing business, and you think it will give you more time, think again. You’re going to be overwhelmed and you’re going to have to do many things you never dreamed you would have to be doing.  Actionable advice   Never have a business with more than three co-founders, and each must have specific, clear, identifiable responsibilities for what they will bring to the table.   The equity should be split based on what the investors or co-founders bring to the table, rather than the pure capital that they put in.   No. 1 goal for next the 12 months   To figure out exits for some of the investments Ramesh has made so that he can convert that locked-up capital to liquid capital for better uses in the future.  Parting words   Be bold and remember that the first step in making money is actually to lose some money. So don’t worry about losing money, as long as you win more than you lose.  You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Ramesh Raghavan Email Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast  Further reading mentioned Gary Sutton (2001) The Six-Month Fix: Adventures in Rescuing Failing Companies 1st Edition 

David Wolf is the founder and executive producer of Podcast and Radio Networks. For more than 32 years, he has been the creative director, music composer, or producer of content for radio, TV, film, podcasts, audiobooks and multimedia. He has been hosting the Smallbiz America Podcast since 2005, which is now syndicated coast to coast in the US on BizTalk Radio Network and on Smallbiz America Radio. Today, David applies his experience along with the skills of his virtual creative team to help companies, organizations, entrepreneurs and thought leaders grow their brands and businesses through podcasting, audiobook production and internet radio.   “But as you know from hearing these stories, we get emotionally connected to the idea that we can save the idea we thought was the right one” David Wolf     Worst investment ever David, his wife and their two boys were living in Dallas, having moved there from Chicago in 1985 after their marriage. They had successfully built together a successful business producing music for big name brands such as McDonald’s, Southwest Airlines, Chuck E. Cheese restaurants, Exxon Mobil through advertising agencies as primary clients. They also produced work for children’s programming such as the Barney the Dinosaur shows. Music production operation builds to more than half million in annual revenue Upon arriving in Dallas, the keen 25-year-old David worked hard at building his music business, spending 85% of his time driving sales, meeting new people and getting them his music reel. The rest of the time was spent in the studio. With his wife Phyllis, a virtual team, and a collection of musicians and singers, David built up to a peak top-line revenue of around US$650,000 a year. Move to New Mexico proves financially imprudent Around the time he turned 36, he and his family decided to move to Santa Fe, New Mexico, physically moving from the market that was supplying revenue for his business. He admitted failing to fully appreciate the amount of money the business was generating through the creative work and overlooked considerations of capital preservation. Riding the wave of past success, they moved but eventually the reality of being removed from their market dawned on them, so they decided to move back to Dallas to try to regenerate what they had started around a decade earlier. Return to Dallas fails to recreate past wins Back in Dallas, they could not generate the kind of success they had seen before. There was new competition in the market, David and his wife were older, nearly 40, which in that business is considered a little bit old because the decision makers in ad agencies are in their 20s or 30s. So the move back failed to take. So they found themselves asking the question: “What are we going to do?” Brother calls with idea to take over cousin’s bankrupt bagel business Then, possible light shines from the dark. David’s brother in Albuquerque, New Mexico invites him to get involved in a popular retail and wholesale bagel bakery brand in Albuquerque and Santa Fe that had been run by their cousin but had gone bankrupt after attempting to grow too fast. David’s brother understood the physical side of the business whereas David knew nothing about it. He did however know how to market products and was drawn to the idea of something completely new in distributing an edible commodity. Buying an operation for $75,000 that had made $3.2m at its peak seemed smart So he and his family moved back to New Mexico and negotiated to buy with his considerable savings the assets of out of bankruptcy for around $75,000. He also was attracted to the business as it had been generating $3.2 million at its peak, so it felt like a good idea. But it was a very complex business that required knowing a lot more than he realized, with 30 employees, wholesale purchasing, and retail came far more complex accounting, than his experience of getting a creative fee and then paying musicians. But, David learned a lot and was excited to do so. The media picked it up as it had been a very popular brand, had seven retail stores, and they were selling to businesses such as Cisco, Shamrock, Whole Foods, and Wild. Walks in blind to complexity and risk of business type So he walked into an infrastructure set up to make the product and he was blind to the complexity and the risk that he was undertaking. That said, the recipe was great and there were a lot of underserved people in the Jewish community. Even so, the massive chain, Einstein Bros. Bagels had entered the market and had tried to buy out the cousin. It is a large publicly traded company began to do better than his cousins company, mostly because they really know how to run a chain of stores. Operators inherit unnecessarily massive warehouse After the bankruptcy proceedings, they found ourselves with 12,500 square foot warehouse, far bigger than the company would ever need. They tried to get around their competitor Einstein through wholesaling while learning how to do so and bleeding money in paying rent and utilities for the massive building they occupied. They raised loans, David used his own retirement savings, they brought in an investor but after eight or nine years he had to give up. Even though it was the worst investment I made he is very grateful and believes he’s a much better business person now because of this adventure. Family management either works well or fails dismally His brother and his wife, David and his wife formed the top management team, in what David admits was a clearly flawed model for many reasons. Some of it he put down to personal chemistry, but in many cases he blames the idea that you have people doing jobs that are inappropriate to their skill sets simply because they are family members. David was technically the CEO, had strong marketing and communications skills, picked up the financial side, raised the money and organized the banking. His brother and wife were bakery people, but they wanted to be equity partners without having capital to put in. This created many problems because they were employees were owners at the same time. There were emotional drivers as well as he truly desired to help his brother who had had mixed fortune. Death knell as company loses last of its big wholesale customers David was feeding his losses with his retirement funds, all the money he had made amassed from his music business, when he was doing what he loved and had knowledge and experience with. He fed the flailing business in the belief that he could save it and in doing so, help his brother as well. It was a painful ending. When David and the business lose one or two of their large wholesale customers, he decided around when the 2008 crash was happening that he had had enough. He was depleted and exhausted. He filed for Chapter 7 bankruptcy and with his family has to a complete restart to life. He admits being emotionally connected to the idea that he could save the idea he thought was the right one. “I really learned a lot in that very painful 10-year period about business.” David Wolf Some lessons  Stay with what you know. Don’t chase the money, don’t chase the deal. Be really sure that you are rooted in something that you can live and breathe in a very full way. David was really successful as a music composer and a creative professional, but he is still not entirely sure why he veered and walked away from what he was renowned for and what he was skilled good at. He explains that he failed to fully understand the destructive nature of walking away from what I already had experience and success in.  “And so that’s one lesson, to really ask the question:‘Do I know enough about this other thing?’” David Wolf    But he had his reasons: He was 40, burned out and quite tired of creating on demand. It also seemed sufficient a reason to just try something new.   Really evaluate and probe the idea of bringing family in to a business. Make sure that the right people are doing the right jobs. David himself on his own podcast has over the years interviewed experts in family business dynamics that say involving family either works extremely well or it is a complete disaster. So in his case, it was the latter category.     “I underestimated the risk of bringing family in, even though it sounded like a beautifully euphoric idea.”  David Wolf    Never underestimate the complexity of a business you are investing in. David threw himself into a business he knew very little about and then relied on his brother for the knowledge about baking.   Examine the fixed expense base thoroughly. David said he was foolishly optimistic that he and his family team could grow the business and underestimated many of the costs involved, especially plant rental and warehousing costs.  Andrew’s takeaways  Hold cash flow as sacred once you have it. Coddle, cradle, nurture, hold as on to and keeping building it. It is so hard to create cash flow in the first place that, when you have it, make sure you take care of it, build it and protect it. Most of all, don’t walk away from it for any reason.   Complexity is risk. Andrew says he and his coffee business partner and are always discussing ways to reduce complexity. He said he witnesses risk building up in areas of their business when complexity is growing.   If you feel costs getting too high, cut immediately and massively. The Andrew cites Gary Sutton’s The Six-Month Fix for this takeaway. In the front of this book about turning businesses around.  “If you’re the CEO of a struggling business, let’s hope we never meet. I’m Gary Sutton, a turnaround guy. When I arrive you leave. Results usually get better and fast.”  Andrew Sutton, quoting Gary Sutton You have to focus on right person, right job.  Andrew says this is critical for family and business in general. Bear this idea in mind constantly. Another way to think about this, and it’s very important, is to ask yourself the question:   “If somebody bought out our business, and they were going to run it, would they put us in charge? …Or would they go out and put a different person?  Andrew Stotz   Actionable advice   Peel back the layers of your emotional onion to really understand why you’re making a decision, whether that decision is to buy a business, turn a business around, start a new business, get into a franchise, or start a hobby and develop a business model from it. Really understand the why behind the direction you are about to take. Because, if you’re not emotionally connected to the purpose of the business, it could really hurt you down the road.   Understand and do not underestimate the power of complexity and the power of risk. Risk shows up in a lot of insidious ways so try to determine what you don’t know about the path you’re about to take.   No. 1 goal for next the 12 months   To quantify his objective. David is building a virtual team while building his business and he’s received advice to do this.   “I’d love to see it hit the quarter of a million dollar top-line mark, because our gross margins are looking really good.”  Andrew on goals in general  “I highly recommend for yourself as well as listeners, and I try to keep myself to this”   Write down your number one goal.   Identify the top three obstacles to achieving that goal.   Write down the next few steps that you need to take to get to that goal.  And especially for David after listening to his story, and thinking about all of the podcasts Andrew has done …   Write down the risks.  Parting words   “I’m grateful for the opportunity to tell this story becauseit helps me really internalize it and point to the future, as you suggested. So thanks for having me.” David Wolf You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with David Wolf Linkedin Twitter Website Facebook Email Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast  Further reading mentioned Gary Sutton (2001) The Six-Month Fix: Adventures in Rescuing Failing Companies 1st Edition 

After graduating from college at potentially the worst time in recent history, Christopher Uhl began his decade-long career in the world of corporate finance. Having become a Certified Management Accountant (CMA) and yet feeling unfulfilled with corporate life, he decided to follow his passion for trading stocks and options and created 10minutestocktrader.com in 2017. There he teaches aspiring traders how to manage a stock and option portfolios in only a few minutes a day through his free courses and access to his completely open and transparent portfolio. In 2018, Christopher created the How To Trade Stocks and Options podcast, a top-25 investing podcast that is broadcast daily and dedicated to teaching the tools, tips and tricks to help his growing audience trade faster and trade smarter. Finally, Christopher was honored in Redwood Media Group’s The Top 100 People in Finance magazine. Christopher is following his passions and using the power of the internet to generate multiple streams of income while continuing to expand his influence and network. He holds a BBA and an MBA from Henderson State University in Arkansas, United States.   “There’s no reason to think that you’re smart enough to pick the bottom.You’ve got to be able to see what’s going on … and reverse the course if you have made the wrong choice. Be true to yourself, figure out that you are wrong, make adjustments and move on.” Christopher Uhl Worst investment ever   Confessions of a reformed contrarian investor   Christopher’s story is quite recent, starting in the northern hemisphere’s summer of 2018. He had his website 10minutestocktrader.com operating, and life was going well as he looked for trades. Historically, when he had worked with other traders, he had developed a contrarian trading style. So if someone said they liked the commodity “corn”, for example, and they were going to bet on the price of corn to go up (to go long), Chris would say: “You don’t know what you’re talking about, I’m going to go short on corn.” Meaning he would invest on the idea that corn’s price was going to fall.   So last summer, gold was in a clear downtrend. Chris called its fall so “glorious” that if anyone had traded on that trend, they would have made a lot of money. But Chris thought he knew better and this was where all his problems began. So as he was looking at gold he noticed it had a high implied volatility rank. He explained that when selling options, one of the things that to look for is a high implied volatility rank.   “You want to sell something where it’s priced like a Mercedes, and then buy it back when it’s priced like a Hyundai, right? But it’s the same security.”   Christopher Uhl   Of entire account, investor puts 60% of his account into a long bet on gold   Based on its high implied volatility rank, he believed gold had found its bottom and he decided to go long. His contrarian attitude looked at the trend and he decided to go the opposite way, for no reason than it was his trading style (which he now says he has completely scrapped). He then went on seeking confirmation on Twitter, “a terrible idea” that he has also learned from, trying to find as much reinforcement as he could and trying to find other people who were also going long on gold. Percentage wise of his entire investment account, he had committed more than 60% into a long bet on gold and he admitted being excited about it. Used Twitter to seek support for his very style-based trading thesis   Another error was that he accidentally pressed four as in four contracts on gold instead of two, but left it as is thinking it would be fine. He then scanned Twitter every day to make sure everyone in that sphere agreed with his gold position. All this comes in spite of undeniable evidence that gold is going down every day. Chris admits to overconfidence and thinking he knew better than the market when the market was saying loud and clear that its direction was down, down, down. Chris has told this story many times on his podcast How To Trade Stocks and Options but he’s never gone into much detail about it.   Gold drops 2% in a day while investor is on vacation With all his contracts investing in the idea that he had picked the commodity’s bottom and that gold would go up from there, he went on vacation. While away, he received queries about how the trade was going, to which he replied: “Things are going great. Hitting all-time highs in the account and everything’s wonderful.” One day, he pulled up the trade on his phone and saw that gold had dropped a massive US$22 that day, a 2% move. Amid a sinking feeling, he asked himself the question sitting in the hotel in Orlando about to visit Disney World: “Oh, geez, did I just do something wrong?” He finally cuts his losses after doubt murmurs for too long Almost in denial, he admitted that the worst part of that was his inaction. He didn’t want to deal with his mistake because he was on vacation. But in the back of his mind, he was thinking: “What have I done?” When he and his family returned from Disney World, he watched as gold slid from $1,300 dollars an ounce, to 1,250. Then it fell to 1,200 and he continued to hold his position the entire time. It fell further to 1,180 and 1,160 and, at some point, he realized he had to stop because the bleeding had gone on for far too long and he cut his losses. With nine years of trading experience, he blew around 60% of his portfolio Chris had been trading for nine years at this point and he didn’t know why he just decided that he was ready to use 60% of his account, which he called way too much and then decided to look to Twitter in one of the standard types of errors found in investing, he pointed out was confirmation bias or recency bias. He noted he was on vacation, he let things go, and that rather than having a stop loss in place and cutting his losses amid clear indications that the market was right, he decided to let it play out, even though there was absolutely no reason for it to turn around. It could have been a perfectly normal trade In the end, he took what could have been an absolutely fine trade. He admitted that it could have been perfectly normal. He could have simply used his trading plan to put on a trade, see that it was not going his way, cut his loss, and move on, perhaps investing in the other direction. However, he took what could have been a small loss and let it turn into the biggest loser he has ever experienced. He also pointed out that it was a loser in which he lost a lot of sleep, and gained a lot of stress, all while he was supposed to be getting away from it all, on vacation with his family.   “At some point, I was like, ‘Oh, my God, I have to stop. This bleeding has gone on for far too long,’ and I cut my losses.” Christopher Uhl   Some lessons   Find trading tools and a trading plan that best suit your personality. Chris learned the hard way that that he had been trading for years without a trading plan. Your plan must include asking yourself vital questions such as: What are my entry levels? What are my exit levels? Why am I entering? Why and when would I exit? Objectively look at your plan, charts, information and circumstances. Then you can act beyond ego and personal bias when you really need to change course, and not be emotionally wrapped up in a trade. Your plan must include having a set of risk parameters in place. But you have to stick to your own rules and hold yourself accountable when things change so that you can adapt with that change and not let things get out of control.   “There is no reason to think that you or me or anyone else can pick a bottom, you cannot just decide you will be the contrarian person … (and this applies from a) broader (view) than just the stock market. You can’t tell me when the recession is going to hit. You can’t tell me when Lehman Brothers is going to collapse.” Christopher Uhl   Andrew’s takeaways Be extra cautious about calling a trend reversal. Andrew’s PhD thesis was basically on this topic, that analysts have almost no ability at picking a trend reversal. His original title was: Analysts are only wrong by 25%. The research he did looked at all companies across the world, I at all analysts across the world, from a period 13 years previously. He found that analysts would generally forecast that a company would make say “125”, then the company would make 100. So they were optimistic by 25%. You hear a lot from analysts when they market flies, but those same analysts are nowhere to be found when they market crashes. Having a plan is vitally important. Most serious professions never start doing anything without a plan. Even so, many people in the stock market, beginners and experienced people, just rush in with no plan at all and throw money at an idea.   Andrew’s six-step plan for making a sound investment. During the time this podcast has been running, Andrew has learned a lot from guests, so much so that he has designed six steps to investing, the essentials of what makes sense to him from the lessons learned: Find the investment idea. Research the return. What’s the potential upside? Why am I so excited about this? Assess the risks. Create an investment plan Execute the plan. Andrew has learned from some guests that they had really good ideas, but that they missed the opportunity to exploit them. Monitor the progress of that plan. In any good plan, you have your exits as part of risk management, which is key. But the main point of this plan is the separation of researching the return and assessing the risk. Andrew said he tries to teach myself to be Dr. Jekyll and Mr. Hyde. Mr. Hyde gets excited about the return but at some point he has to calm down and turn back into Dr. Jekyll, stop the research on the return and turn the logical attention to carry out research on the risk. “Investing in the stock market is … a roller coaster. And some people decide that they’re going to be right in the front car of the roller coaster, and people who are trading and really focused on the market. Man, it can drive you up and down like crazy.”  Andrew Stotz     Actionable advice Take the time to make a comprehensive plan of entry and exit, and then hold yourself accountable to that plan.   No. 1 goal for next the 12 months Chris has not one but nine goals and this is his plan for working to achieve them He has a whiteboard beside his bed on which he has written down those goals. Every night when he goes to bed, he reads his goals. Every morning when he gets up, he reads his goals, as he’s getting ready for the day, He gets a note card and writes down all nine of his goals. He draws a line across the bottom of the goals. He writes below each of the goals one action he could do in that day to move the nine goals closer to completion. He keeps that note card in his pocket. He refers to it during the day, looks at the actions and does one of them as soon as he can. It just takes time and a portion of his day. All he needs to do is set aside that time. He has found this method has made the biggest change for him so far this in 2019. His goals more clear every day because his taking these actions daily to realize them.   Parting words Life can be so much fun and give offer so many opportunities. Don’t be scared of the opportunities. Take them the opportunities while you are given them. But have a plan in case the opportunities don’t work out. You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points    Connect with Christopher Uhl Website Podcast Facebook Instagram Linkedin Twitter Email   Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast  Further reading mentioned Jason Zweig (2007) Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich Kindle Edition    

Pashin Katpitia is the chief technical officer and a director at Inspiron investment consultants, based in Mumbai, India. A third-generation entrepreneur, stock trader, and technocrat, Pashin is a highly disciplined trader who focusses on market realities at all times. He is committed to the growth of the investor and trading community and has trained thousands of novices and experts. Pashin has developed real-time trading systems and is a point of reference for many traders seeking support. He and the co-founders of Inspiron have recently developed a fully algorithm-driven rating and curation app for stocks and commodities that provide innovative features, such as a triple-layer market outlook for the short, medium and long term, as well as a star rating for each stock listed on the exchange. The app is called Shazpha (means success) and is available on App Store and Google Play, and currently offers coverage on all exchanges in India as well as the NYSE and NASDAQ in the United States.    “There are times when the market is not in your favor and there are times when the market is but … you need to be consistent in your approach to the market.”  Pashin Katpitia Worst investment ever   Fund manager inherits poorly performing fund from predecessor Pashin’s story starts when he first got involved in fund management in 2010. He had inherited a fund from a previous fund manager who hadn’t performed well and it was down 40%, so he was left with 60% of the initial capital. It was difficult, but because he had a system, he just followed that and was not affected by personal feelings.   Following a system, he regained losses and made a profit   It was a decent sized fund, small by global standards, but still had US$1 million and he invested in a total of four stocks. Those stocks helped him recover the losses and generate some profit in the first year so he and his investors were back to square one. The clients though had regained confidence and for Pashin it was a great feeling to have not only recovered clients’ losses made also them some money.   Fund in 2011 makes 40% profit that investors choose to re-invest  Now in 2011, the year starts off well, and Pashin moved in and out of a few investments. On the whole however he was riding on just three stocks for about eight months. By December, he and his team decided that since they had generated a good profit (about 40%), they would take those funds and spread them among the investors. The investors were on a high because just the previous year they had recorded losses and now in this year, they were looking at a 40% profit. So most of the investors said: “Let’s reinvest the money and just keep trading.” So they were all confident and started off 2012 with a program of re-investment of profit.  Now with a larger fund the investments fall foul as markets play up  So they all started off in January 2012 with the clients having re-invested their profits, and with a larger fund amounting to capital of around US$1.4 million. With that, they started larger positions in the same stocks because they had found that those stocks were still the best. Then the markets started to shift unpredictably, and by the end of March 2012, they had lost all the profits that were made in the previous year. That moment was a real wake-up call for Pashin that the markets can go wrong. It was only thanks to the system he was followed which included stop-loss points that he was left with the capital intact, and he had only lost the profits that were generated in the earlier years.  Realization that as markets can rise, they can also fall, without warning  He realized that markets can move in the absolute opposite direction to what you are expecting. And because he had increased his positions, his losses were magnified. While reinvesting returns is a good thing, he said, it can also be counterproductive, especially if you haven’t managed your risk well. So he had his team continue to trade in 2012, which was a really volatile year, and ended up losing another 18% on the capital. By the end of 2012, they were left with a little less than what the capital was they held at the beginning of the year. That said, the clients had not lost all confidence and they permitted Pashin and his team to go on trading. Later on, that paid off, as all losses were covered in 2014, followed by some impressive returns from then on.  Despite regaining losses, fund manager starts to question himself and his system  He said the point of the story was that the losses here was that, you know, it brought him to a place where he wondered if his system was effective, questioning himself. And that, he said, is the question most people face when they encounter this kind of scenario.   Some lessons Stay in the market. Pashin says the number one behavior that pulled him through was that he kept invested, calculated his risk, and managed that risk well.   Be consistent in your approach to the market. There are times when the market is not in your favor and there are times that it is. What should remain consistent is one’s unattached, unemotional approach to the market.   When intending to re-invest your profits, take a different direction. If you’re making plays on stocks, perhaps invest in commodities, such as metals or crude or another sector. Or if you want to invest in stocks, buy some other stocks and don’t invest in the same package again.   Stop losses are a must. There is no way around this idea. However, your stop loss cannot be cannot be the same level, you have to alter your stop loss based on the current market volatility. And that is something Pashin follows today. If the stop loss is too low, then what he does is gives the trade a pass; if the stop loss is within his limit, he does take the trade. And, you know, go ahead. So that's a few takeaways that I have  Andrew’s takeaways  We are human. Sometimes investing can really take a toll on our various forms of energy. Pashin referred to “mental capital”; Andrew talked about “emotional capital”, and goes on to say that our energy stores, especially in times of crisis, can be depleted because of the situation. Maybe it is confidence, or maybe it is the thinking power, or the ability to step back and see the situation we’re in clearly. These times can have a real impact on us, physically and mentally.   Diversification has its benefits and its limits. Andrew here talks about the trade-off between risk and return. Owning many stocks, and therefore being extensively diversified, will certainly reduce risk, but it will also reduce the probability of outperformance. If you get to 20 or 30 stocks in your portfolio, chances are the performance of a portfolio is going to be the same as an ETF.  Choose an investment method that fits your personality and thinking processes. Pashin is an engineer, so having a structured way of trading certainly fits and makes sense to him. No. 1 goal for next the 12 months   Since Pashin has been developing a new system of trading, he has been trying to get someone else to manage his portfolio in the same manner as he would, and this he has found a major challenge, because most people find it very difficult to trade in a mechanical way, whereby emotions are completely removed from the equation. So his true goal for the next 12 months is to be completely emotionless, continue trading, assign capital, turn his system on and take stock of the results after a year or so. Parting words   “You have to be invested in the stock market,and since you have to, you had better do it wisely.”  Pashin Katpitia  You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Pashin Katpitia  LinkedIn  Facebook Website Email Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast 

Christopher Salem is an accomplished business and emotional intelligence strategist, world-class speaker, award-winning author, certified mindset expert, radio show host and media personality, and wellness advocate partnering with entrepreneurs, corporations, and small businesses with overcoming their limiting beliefs so his clients can then adopt the process to operate within the solution – and not manage the problem – for sustainable success. Chris has worked with organizations such as JP Morgan Chase, Ralph Lauren, Microchip Technology, Anthem, the United States Census Bureau, Hubbell, and the NYPD forensics department. He has also worked with tertiary institutions, such as the University of Hartford, Bay Path University, Worcester State University, and spoken on overcoming limiting beliefs for peak performance at the Harvard Faculty Club.  Chris is the originator of the term, Prosperneur, which refers to an individual whose health and wealth are aligned in a way that leads to true prosperity. His book Master Your Inner Critic addresses this and in doing so hit the international best-seller list in 2016. He was also a co-author of a recent edition of Mastering the Art of Success with Jack Canfield. His weekly radio show Sustainable Success is broadcast on the VoiceAmerica Influencers Channel.   “I could have acted out, I could have started drinking … (and gone) back to the things I used to do when I was really young that would have taken me out. But … I made a conscious choice to be mature about this … there was nothing I could do except go forward, be present and … not allow this to sideline me for any other future decisions or risks that I would take, whether for starting a business or making an investment.” Christopher Salem   Worst investment ever Venture begins in bullish mood of mid-2000s Chris’ story is set in the boom time before the global financial crisis of 2008. House prices were skyrocketing alongside stock markets and people were doing very well. He had invested in start-up companies before, his first being back in 1993. So in around 2006 he met a couple of very smart founders of a media company who were going to revolutionize the video space on airplane seatbacks to engage business and first-class passengers with special offers. After some due diligence, he wanted to invest in what they were doing to take the company from the ground up to make it successful. With his background in media, it was also in an area he had interest in. All pieces and people in place for air-travel-tech winner And so he put a lot of time into preparation for this particular investment and when he went forward everything looked as if it were going to plan. It was a truly disruptive business idea that filled a niche and a need. That positivity was boosted by the presence of American Airlines former CEO Robert Crandall on the board of the company. Chris invested a considerable sum, not being exactly averse to some risk. Early days show promise with ‘Six-Sigma-type guys’ at the helm At first the company was showing a lot of promise with its special offers based on personalized information obtained through credit cards. If a VIP passenger’s lease on their Audi was finishing in a month, and they were going to be in Las Vegas, the company would put an offer up on the seatback monitor for the passengers to test drive a BMW when they arrive via sophisticated algorithms and processes. All of this was being run by people with excellent credentials in technology and business in general, “Six Sigma type guys”. Global crisis plunges knife in investors’ backs But then the financial crash hit. As a result, Chris and the team’s venture began to unravel. The progress of everything slowed down, and certain airlines planning to go forward, did not. Also slowly Chris began to the money invested by himself, other investors and the company’s founders being burned through quickly. All measures to save it were fruitless despite that extensive planning had gone into it, despite how great it looked on paper, and in spite of the support provide by a lot of skilled, experienced people. Despite all that, the company never made a sale to a single airline. Hard times for new parents For Chris and everyone, it was a very difficult time. His marriage was young and they had just had a son. Though it didn’t bankrupt him, it put him in a very tough situation as he had lost a significant amount of money and time doing research and managing the investment. Start-up investor reaches emotional crossroad At that time Chris had to decide whether to sit in the problem, act out and be angry about what happened, or just accept what happened, live with it and advance to what was necessary to get his money back. Eventually, he weathered the storm. Chris said he could have started drinking or doing other things that would have taken him out, but he made a conscious choice to be mature and go forward, be present not allow this to sideline him for other future decisions or risks in starting a business or making an investment. Some lessons Active investors must learn to accept that losses do happen. It’s just part of the game. Even though you’re going to win some and lose some, take calculated risks. Learn how to stay calm in these situations and be truly present. Believe in yourself and know that if you continue to do right things, with the right habits and disciplines, in time you will make the money back or you will make another investment that you put a lot of time and due diligence into that will pay off. Don’t allow mistakes to take you out of the game. So be cautious, do your due diligence. Reflect and try to emerge with gratitude and humility, because even the great investors have lost vast amounts of money. They just don’t talk about it. Andrew’s takeaways The winners are not the people hitting home runs all the time, they’re just those who don’t strike out in business, finance and investing. Everybody experiences losses at some time or other. Risk management is vital. Though Chris lost a lot in this story (he estimates 10 years of work!), many people lose everything in deals like this because they ignored the readily available risk management methods. “They say: ‘I lost everything, I lost all my money, I lost my family, I lost everything,’ because there are risk management principles that they didn’t follow, such as only investing a small amount of your money into an idea, particularly in the beginning.” Andrew Stotz The pain of loss can be crushing, but there are ways out of it. Sometimes everything goes wrong; an investment, a business idea, health, work. When you get in such a storm of defeat, the self-worth can fall and that has an impact on your interactions with the people you love and who love you and other people. Chris has some great recommendations in the next section. Actionable advice Learn how to become present and mindful in the moment. This can be done through meditation and journaling, and we then have the ability to offset the fear created from the past that triggers stress. Such stress produces inflammation in our bodies from the cortisol levels that rise and this affects us physically. This can lead to poor eating habits, failing to take care of ourselves, and this carries on to a negative impact on our emotional health. That same fear and stress from the past is projected into the future and becomes anxiety that can then lead to procrastination, and failing to act and make decisions or having a cluttered mind. When you learn to be present, we learn how to accept what happened and look at it as a learning experience. By being present, we can do what it takes to make back the money we have lost. There is always a way to make money back, but if you dwell on the problem and not the solution, it makes it very difficult to do so because you get further trapped in the problem. But meditation and journaling on a daily basis will allow you to get centered and move forward from a major loss or a major challenge that is affecting your life. Daily program to be aware how you are feeling. This is especially when you’re not feeling too good, bothered by negative emotions such anger, shame, guilt, whatever is consuming you, and be aware that they’re taking you further into the problem. So the only logical choice that you have at this point to get into the solution is to be present. And Chris here shares his daily program to get into the present and prepare the day. Make your bed. When you wake up in the morning, before you do anything, do something like making your bed or some other action to get your mindset clear and focused that you have accomplished something, something you’ll feel good about. Meditate for 10 to 15 minutes. Don’t overthink or over-analyze the thoughts that come in and out of your head. Just be present. Let those thoughts come and go and keep your focus on your breath. Write down exactly and only what comes to mind during the meditation. Don’t overthink, don’t over-analyze, just write exactly what comes to mind. This allows us to get the clutter out of our conscious mindset, and whatever is being revealed from the subconscious mind, which gives clues to the limiting beliefs that could be holding us back or triggering the way we feel in these types of situations. Andrew adds one of his own actions to this daily program: Read Practicing the Power of Now by Eckhart Tolle or listen to its audiobook. When times get so tough that Andrew feels overloaded and overwhelmed, one thing he does is turns on the audio version of that book. Tolle’s voice is very calm as he reads through the book but the key for Andrew is that Tolle brings him back to every single moment and convinces him that he is safe and not under threat at that moment. The hopes and fears of the future can be set aside, as can the fears and suffering of the past. “It’s like taking an aspirin for a bad headache. It works.” Andrew Stotz No. 1 goal for next the 12 months Chris is investing in a Canadian start-up that recently signed a deal with Fitbit. The company is providing algorithms that can detect sickness in the body, such as common colds, flu, and the like. They seek to make further advances in detecting other types of major illnesses, such as heart disease and cancer, and there are discussions IBM and Johnson & Johnson about this. His goal is to be very active, as an investor and an advisor to help the organization really make significant advancements.   Parting words Chris wishes you to believe in yourselves, forgive yourselves for any past mistakes or bad investments you have made. They’re in the past, so let them go learn from them. In the areas, you can control, perform differently. In the areas you can’t control, let them go. Be present and apply the things you have learned into the present moment going forward to reach your success. You can also check out Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points  Connect with Christopher Salem LinkedIn Twitter Website Email Connect with Andrew Stotz astotz.com  LinkedIn Facebook  Instagram Twitter  YouTube My Worst Investment Ever Podcast  Further reading mentioned Christopher Salem (2016) Master Your Inner Critic: Resolve the Root Cause – Create Prosperity  Christopher Salem, Jack Canfield, et al (2011) Mastering the Art of Success   Eckhart Tolle  (2009) Practicing the Power of Now: Essential Teachings, Meditations, and Exercises from the Power of Now