A while ago, one of my Twitter followers sent me the following message:
“Hey Banker, any chance you can do a post about your business?
I am at the start of my career (early 20s) and entrepreneurship seems enticing, both for the potential to make money for yourself and the doors it can open into MBAs.
How did you know when it was time to pull the trigger, and did you sink any of your savings into the business when you did? How did it fit into your FIRE goals?”
The message was referring to my unsuccessful foray into entrepreneurship back when I was 26. You can read more about it here.
We then chatted a bit more and he added the following observations:
“I think the core tension for me is that FIRE prioritises saving responsibly but lots of entrepreneurial talks and books focus on the all-in aspect of it.”
I never thought about my entrepreneurship experience as an idea for a post, but I certainly found the questions insightful. I agreed to give it some thought and share some perspectives on the topic.
Winners And Losers
If you spend enough time in the personal finance corner of Twitter and Instagram, you will likely walk away with the following impression:
Entrepreneurship is for winners. 9 – 5 jobs are for losers. Period.
It’s an enjoyable, balanced read and his visual evidence for survivorship bias couldn’t be punchier:
I spent two years trying to get my business off the ground. When it finally gained some steam, I took a year off work to focus on it full time.
Then, after a year of back-breaking work, I had to face up to the fact that things weren’t going anywhere – and headed back for the office. As you can imagine, I didn’t feel that good about myself at the time.
I didn’t know about it back then, but the experience was far more valuable than the money I never made or the time I could have spent otherwise.
Two years later, it was one of the factors that helped me score a spot in a fantastic MBA program.
It then helped me persevere through some tough stretches at work while many of my colleagues capitulated and headed for “greener” pastures. By that point in time, I knew the difference between the rose-tinted version of entrepreneurship and the real thing.
But most importantly, it helped me zero in on the kind of work I enjoyed – and the activities I would much rather leave to others.
I realized I looked forward to cold calling sales prospects and engaging with potential clients, and that I didn’t mind hearing a frequent “no” in the process.
I also found it enjoyable to develop true subject matter expertise in a specific area – and to use that expertise to help others.
And I certainly didn’t mind the hard work (to a reasonable extent).
What I didn’t like, however, was the operational aspect of running a business. Hiring and managing people. Taking care of mundane finance and accounting tasks. All the office admin.
It was that process of self-discovery that made me realize that investment banking might be a good fit for me. Despite what M&A bankers like to tell themselves, it is essentially a sales job, albeit one with a multi-year sales cycle and with someone else taking care of all the admin.
That realization may well have been the most valuable aspect of my entrepreneurship experience.
The one fact that’s often lost in the noise is that very few people actually have what it takes to be an entrepreneur.
If you fit the bill, great. But if you don’t, that’s fine as well. And if it takes some experimentation to understand it, then so be it. Either way, you are better off.
Burning The Ships
In case you haven’t come across it before, the story goes as follows:
A general leads his military to invade a hostile country. Upon disembarking from their fleet, he orders his men to burn the ships – leaving them with the option of conquering the country or being killed.
That’s certainly the approach many entrepreneurship books seem to encourage. But is that really the experience of most successful entrepreneurs?
Jeff Bezos was a highly paid hedge fund employee. Bill Gates was a very bright, well-educated kid from an affluent family.
Michael Bloomberg amassed a multi-million fortune while at Salomon Brothers – and that’s before his $10m payoff upon getting kicked out.
Sure, most entrepreneurs have proper skin in the game. But it’s not like they’ll go to the breadline if their business isn’t successful.
More often than not, they’ve got the combination of money and desirable skills to fall back on if things go south. Can you imagine whiz kids Zuckerberg or Musk not being able to line up a great gig if Facebook or PayPal failed?
And by the way, you don’t need to “drop out of Harvard”. You can easily defer your coursework and I’d be surprised if someone as smart as Gates or Zuckerberg didn’t take advantage of that option.
Thus, the narrative of “risking it all” is false marketing at best, intentional delusion at worst.
Yes, it may require some upfront investment by you, depending on the business model and your approach. But given the flood of VC money sloshing around in the system, a differentiated idea and the skills to execute on it represent the most important factors in securing financing.
There’s no need to sell all of your possessions and put all of your relatives at the risk of living in abject poverty for the rest of their lives.
Risk and Reward
The biggest risk you take in striking out on your own isn’t money, career prospects, or the stigma of failure. Instead, it is time. There are many people out there who struggle for years before folding and going back to corporate employment.
The only way to hedge that risk is to make sure you are developing highly marketable, transferable skills in the process – and to call it quits when you stop making progress.
As with all calculated risks, you will never have the benefit of hindsight. That being said, the risk-reward tradeoff is probably to the upside.
Yes, you may well end up with a slight delay in your career progression. Perhaps it takes you a few years longer to reach financial independence.
If you are unhappy with that trade-off, chances are that entrepreneurship isn’t for you in the first place – and that’s okay.
Happy (self) employment!
About Banker On Fire
Enjoyed this post?
Then you may want to sign up for our exclusive updates, delivered straight to your inbox.
Banker On FIRE is a London-based M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
Find out more about me and this blog here.
If you are new to investing, here is a good place to start.
For advertising opportunities, please send an email to bankeronfire at gmail dot com