Let’s dive into history again and find out what made Mark Twain a terrible businessman and investor, even though he was a brilliant writer. Because after all, no matter how successful you are, you’re capable of making terrible business decisions.
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Quick backstory: Mark Twain famously wrote “The Adventures of Tom Sawyer” and was one of the highest-paid authors of the 1800s. He married a wealthy coal heiress whose father, on their wedding night, gave them a mansion with servants, a carriage and a coachman. So, financially, this guy was off to a fairly good start. But when you start getting a bit of money, that’s when the DANGER comes in … because you have something to play with.
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Twain’s life-changing financial losses came from speculation.
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Venture Capital Gone Bad – Beginning in 1880, Twain invested $300K (about $7 million in today’s dollars) in the Paige typesetting machine, which he thought was going to replace human typesetters. He told the press, “It can do anything a human could, except drink, swear and go on strike.” The problem was, the machine never worked that well. As often happens with new technology, it can be buggy and it’s high-risk. The Paige typesetter never turned a profit.
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If anybody knew the publishing industry, it was Mark Twain. This just goes to prove that even if you know an industry well, it doesn’t mean your investment idea is going to work. He was so overconfident in that little contraption that he spent much of his wife’s inheritance on it, and even borrowed against the assets of his own publishing company!
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Twain wasn’t finished making bad business deals. He lost money on:
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- An engraving process
- A magnetic telegraph
- A steam pulley
- The Fredonia Watch Company
- Railroad stocks
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Remember, there are three steps to amassing wealth:
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- Earn a high income.
- Keep it.
- Multiply it.
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Twain did well with #1, but couldn’t do #2 and never even started #3.
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Later in life, he was quoted saying, “There are two times in a man’s life when he should NOT speculate: when he can’t afford it and when he can.”
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No matter how successful you are, you’re capable of making terrible business decisions.
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The keyword is SPECULATE. Most financial analysts today say that Twain’s biggest mistake was a lack of diversification – he put all his eggs in one basket. He went ALL-IN on the typesetter machine … but the problem wasn’t him going ALL-IN. The problem was that he went all-in on the wrong thing.
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It’s said that Twain began to suffer depression later in life. Nobody is happy to lose their money. The problem is, once you make a big mistake, sometimes you become a coward and STOP investing. Twain passed up the biggest opportunity of his life when he considered investing in Alexander Graham Bell’s telephone … only to pass on it. Bell asked Twain personally if he wanted to invest in the new technology. Twain famously replied, “I don’t want anything more to do with wildcat speculation.”
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Meanwhile, Twain’s neighbor bought $5K worth of stock from Bell. Soon, the neighbor was rolling in the dough with the biggest jackpot of his life. Twain commented, “It is strange the way the ignorant and inexperienced so often and so undeservedly succeed when the informed and the experienced fail.”
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I was an ignorant and inexperienced boy from the swamps of Louisiana, yet even I am able to become a billionaire, and it has nothing to do with how “informed and experienced” you are but rather, WHO you network with and get advice from.
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Get with the right people, invest in yourself, and you’ll realize there is no luck in getting wealthy. It’s not an accident. You have to earn a good income, KEEP IT (not blow it), then, get the right advice from the right people and multiply your money (invest it in REAL assets).
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Don’t make bad business decisions.
