My worst financial investment ever? A winery.
Well, not a winery, but the next best thing - a “custom crush” facility that let wannabe winemakers buy grapes and make a barrel or two of wine with an in-house winemaker. You’d pay around ten grand, they would help you design the label, and you’d get a couple hundred bottles to drink and give as gifts.
It was peak wine - the movie “Sideways” had just come out, and these new “wine bars” were the thing (hello, Vinoteca on Hillhurst). Everyone was popping up to Santa Barbara to taste Pinot Noirs. In those days I was making pretty good money for a guy with no kids in his twenties, and I had a nagging sense that I needed to “diversify” my investments.
The company was called Crushpad, and I can’t remember how I heard about it. The operation was legit, and they meant well, but after 5 years, my $50,000 investment “went to zero” as they say in the venture capital business.
When I lose money, I try to make myself feel better by calling it “tuition,” so here’s what I learned.
Number one, it was the first and last time I invested outside of real estate. Invest in what you know. I thought I knew wine because I drank it. Still drink it, still know nothing about the business of it. You know what I know a lot about? Silver Lake real estate. I know a good deal and what to do to get more rent.
Second, forget about diversification. The author of “Rich Dad Poor Dad” calls it “di-worse-ification,” and I agree. Diversification is not something the average mom-and-pop investor should think about unless it’s in reference to a balanced portfolio of stocks and bonds in a 401(k).
When it comes to investing, make concentrated bets in areas you know well. You may have heard “multiple streams of income”. Yes, but one stream at a time. I’m still working on my real estate.
Third, never give your money to strangers, unless you are a professional, experienced, and well-funded venture capitalist. The most important part of investing is YOU, the invesTOR. When you give your money away, you take yourself out of the equation. I saw a guy who owned a $20mil office building pick up trash outside the front door. It was his building and he acted like it. Buy things you can improve.
Finally, I wasn’t investing, I was speculating. Speculating is gambling. You lay your chips down and pray for an ace.
We talk to so many people who see a “prospectus” or “business plan” with made up projections and fancy spreadsheets (which, at this point, ChatGPT can generate in under an hour) and find themselves giving 5-7 figures away with the promise of a 10x return that never comes to fruition (hello restaurants/cannibas/NFTs and now, AI…).
If you find yourself praying for a result, you’re speculating. I wrote a $50K check and sat back, hoping and praying it would work out. It wasn’t an investment.
The expression is “Bet on yourself.” When you buy a house or a rental property, you believe not just in what and where, but WHO, and the “who” is you.
So now I stick to what I know: real estate. I don’t even invest outside my neighborhood. All my eggs are in one basket but they're eggs I know and they're mine. I’m betting on myself.
