The Best Deal... Is It the Biggest One?

[Drago Stanimirovic]

Two investors went in very different directions. One was chasing a project worth around a million dollars. The other bought a much smaller, fairly boring cash-flowing rental.

Guess which one everybody wanted to talk about.

We like big numbers. Actually, let's admit something else. We like bling. We like being able to say we're doing a million-dollar deal. We like the meetings, the plans, the contractors, the photographs from the job site. We like looking and feeling like businessmen and businesswomen.

There's nothing particularly wrong with that. Unless we start confusing "looking like we're doing business" with "actually making money".

Five years later, the smaller investment had produced the better return. And that makes me wonder how often we measure the wrong thing.

Suppose Deal A makes you $30,000 and barely interferes with your life. Deal B makes you $70,000, but requires much more capital, leverage, financing, contractors, permits, phone calls, delays and a year of your attention.

Which one actually made you richer? There's no universal answer. Sometimes the million-dollar project really is the better opportunity. But sometimes the bigger project simply means you've bought yourself a bigger job. Never confuse the size of the deal with the size of the opportunity. 

And I think there's another danger in our fascination with looking successful. Bling attracts people. Not necessarily the people you want.

The more successful you advertise yourself as being, the more people suddenly appear with opportunities, partnerships, introductions, investments and things they desperately want to sell you.

Some are legitimate. Some aren't. And eventually you may attract people whose entire business model is figuring out how to separate people who appear to have money from some of it.

Depending on where you are and what circles you're operating in, conspicuous success can attract something uglier still. People selling "protection." Sometimes literally. Sometimes in a suit and tie, under a much more respectable name.

That's another reason I don't think you need to advertise every dollar you make. You don't have to pretend to be poor. You don't have to hide what you do. But you also don't need to turn your balance sheet into your personality.

There's a line in Ecclesiastes that says it better than most modern business books ever will. To paraphrase: "Better one handful in peace than two handfuls with toil and suffering." That's thousands of years old, and I think it's remarkably good investment advice.

Because the purpose of making money presumably isn't to create the appearance that you're making money. It's not to have the biggest project in your circle. It's not to have the photograph everybody wants to ask about at dinner. It's to improve your life.

If your investments become bigger, more complicated, more leveraged, more stressful and more visible - but your return on capital, time and sanity gets worse... What exactly have you scaled?

Maybe the boring little rental isn't something you're going to brag about. Maybe it quietly produces income while you sleep, spend time with your family, work on something else or simply live your life. Maybe nobody is impressed by it. Maybe that's part of its charm.

(Would you rather make $30,000 quietly on a small deal - or $70,000 on the deal that consumes your year?)