I was recently having a discussion about the rise of a charter school system in the State of Texas with a past colleague of mine. It began as an after school program inside of a church after hours, and has gained enough momentum to now be in multiple cities with ‘affluent’ people beckoning its participation within their communities. Over two decades, the after school program accelerated, snowballed, accrued assets and resources to produce a force that attracted wealth and hope as a solution to a dysfunctional educational system. Their largest ‘make it or break it’ moment came in the form of an Obama stimulus grant, during one of our most bleakest economic periods. As entrepreneurs, that is what we all aspire toward, the embracing of our ideas, concepts and solutions to world problems.
Rightfully, this is how we define success in our society. In a post-COVID world, we see massive corporations and Fortune 500 companies receiving bailouts by the federal government with tax payer money. In 2008, many of us within the United States heard that banks and other institutions were ‘too big to fail.’ These organizations have become so large that they embody their own ecosystem of resources without real ‘individual ownership’. Those that are publicly traded operate with hundreds and thousands of shareholders to maintain their momentum. As their capacity to produce progress slows, so does their net worth and investment. Everyone is excited to capitalize on momentum and acceleration. The faster the move, the larger the snowball.
On a smaller scale, as consumers, we attempt to embody their spirit and worth by accruing materials like cars, jewelry, the latest technology, real estate, etc. In truth, this is not the same as accruing assets that produce utility and inherent value. Many of us, become ensnared in debt to advance our assets ahead of their utility. Admittedly, it is an exhilarating feeling when you drive off the lot in your brand new car or peel the wrapping from that fresh, unscathed iPhone. We’re programmed to appreciate the new, the better and the more than we have now.
So, what’s the point? You worked hard, you deserve that Porsche. Of course you do, you busted your ass, go get yourself that car! Or, wait, take a breath and think about your financial capacity to maintain that car’s presence in your life. Monthly payments to the bank, maintenance such as oil and tires, insurance and the list goes on. As an entrepreneur, your mindset should not be about ‘budgeting and saving money’ as much as it is about building cash flows to create further momentum. When you have liquid assets, you need to capitalize on those investments to produce further gains such as stocks, other businesses, people, and leveraging current equipment to produce verticals. Eventually, the cost of the Porsche becomes a small fraction of the wealth momentum you have created.
What do I know? Well, I’ve been there. I went after the shiny car and the sexy office. I thought that these would produce better returns and not only overhead that slowed me down. So I got great photos, check them out…but what value did they really bring? Yes, they were a result of incredible hard work paying off, but in hindsight, they were the wrong investments. It is important to not only celebrate when the good is good, but invest so its even better later on.
The charter school didn’t take off because the owner drove a Tesla, though he does now. It gained momentum due to its snowballing of programs that benefitted communities, attracted new students, drew in quality educators and private donors. As the school shifted from an after school program, to a network of schools, it had enough value on the books to draw major support. The rest, is essentially history. Managing momentum and maintaining it is a whole other discussion and one I, myself, have yet to master. To summarize, don’t focus on the material rewards, focus on diversification and revenue streams. Liquid assets (cash) and a substantial cashflow will net you all the eventual rewards.