Hello, What do you think the advantages and disadvantages are structurally of: 1. Making money by entrepreneurship (starting a company that makes real products i.e Apple, Coke) 2. Making money by investing/trading (ie Buffet. Soros) Thanks
investing is the female (leeching and sexy) entrepreneurship is the male (creating) There is no better ,equally needed.
"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man." --George Bernard Shaw
There is more accountability to entrepreneurship than to investing/trading. When you realize that OTHER peoples incomes(employees) are dependent on your success, it gives you that extra push to try to be successful. With investing & trading, its easy to get lazy because the only person you are hurting is yourself.(no accountability.) Hope that makes sense.
Employees may help to make money but are largely a pain in the ass. A business model free of employees probaby leads to a healthier life. Besides I'm not sure many employers give half a rat's ass on their employees' future.
Soros and Buffet simply manage huge amounts of capital; they invest it. In the case of Buffet, he leverages his insurance business to buy into business that has high threshold of entry, becuase of amount of cash required and that is benefited by government connections. Soros does much the same, except that he cheats more. There is a place for managing and placing big money in investment but it is nothing like being an entrepreneur...in big money investment you are dealing in one variable...return on your capital and capital preservation...it is all about already having the capital. Entrepreneurs have to manage three variables, capital, proprietory ideas and execution capability. Most ideas are cheap, you can steal them...an entreprenuer has to move on an idea that he cannot easily possess and raise capital on the idea from people who might rather steal the idea than include the entrepreneur at a high equity price, and then the entreprenuer has to possess or acquire the skills to exeucte the idea and manage the capital raise to actually produce and sell a product. It is much harder to do. The argument for entrepreneurs is that they create business operating assets at book value and then can sell them at multiples of book value. In the case of big money management they have to purchase business assets at more than book value and depend on management to execute to increase the multiple. In the end it is the entreprenuers who create the assets for big money investors to invest in, or they provide the management for big money investors to increase multiples on assets acquired. Without entreprenuers to create new assets or innovative management to grow existing assets there would be a shortage of things to invest in and big money would have to buy government debt. This is a timely discussion now as we are facing a shortage of things to invest in...so much capital is being held liquid by big money sources. It is not unrelated that new business formations have been crashing and investment in existing plant is at historic lows. If was not for emerging markets then there would be little creation in the whole world economy...and that market may have had too much big money thrown at it and so needs, is getting and will continue to get, some correction.