To say that Wall Street has been on a bit of a wild ride lately is a bit of an understatement. Economic turmoil in China has created plenty of anxiety on the world stage, and we’ve certainly felt the impact in our markets. Of course, China isn’t the only culprit. Many investment experts have been saying (for some time) that the prices of stocks have gotten ahead of the actual value of stocks. When that happens, the market has to correct itself.
I’m not here to offer financial advice. But there are some parallels between what we see in the stock market and how businesses operate. And there’s an old saying about the markets that goes something like this: “Bears and bulls make money, but pigs get slaughtered.” What’s that got to do with running your business?
True investment professionals may be either conservative or aggressive in their approach—but they take a long-term view of things and they look for value. They research and plan and invest. And they make money. Individuals who speculate in the market are (often) looking for a quick buck. They’re not interested in value or in building anything. They’re interested in how quickly they can make a big score—and then move on. Rather than research and plan, they speculate (read that as “gamble”) on what the next big thing might be. And often they are the big losers.
Successful businesses are like that. Some are conservative. They grow at a regular, consistent rate. But they’re always improving and growing. Others are more aggressive and push the envelope a bit harder. They may grow faster. What they have in common is that they know their markets, they have a plan, and they work that plan consistently (and make adjustments when necessary). The people in charge of these companies invest in the company (time, money, effort, etc.). And even the fast-growing companies don’t explode overnight. It takes time. And they both create something of value.
Speculative companies aren’t like that. They may create a lot of buzz, but after a few years it’s as if they never existed. And although they may spend a lot of money, it’s fairly rare that they make a lot.
Conservative, aggressive, and speculative companies all face their share of ups and downs. One of the differences, however, is that the conservative and aggressive companies tend to ride out those undulations. The speculative companies fly off the rails. They don’t have the long-term plans—or the disciplines—required to stay the course.
Smart investment advisors take time to figure out what their clients’ risk tolerance is. They advise those who aren’t comfortable with risk to take a more conservative investment stance. Those who have a higher tolerance for risk are encouraged to be more aggressive. The same thing is true in business. We all want to grow, but not everyone is cut out of the same cloth. Some should be more conservative and some can be more aggressive. Either on can be a good growth strategy.
But those who aren’t willing to do the hard work of thinking, planning, executing, evaluating, and adjusting aren’t going to grow—at least not for long. They’re just going to fly off the rails when things get uncertain.
Are you doing the long, slow, hard work of investing in your business? Or are you simply speculating?
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