“A millionaire dentist is not the same as a millionaire stock trader”
In his book, Fooled by Randomness, Nicholas Nassim Taleb expands on the idea that the quality of a decision is not determined by the outcome of it.
We all have multiple paths our lives could take. We could live this life 1,000 times and never end up with the same outcome. However, the decisions we make can lead to a range of outcomes.
A day trader pounding the keys, buying, and selling stocks, may end up a millionaire in this lifetime. But if he were to replay that decision over and over his range of outcomes would be extremely wide. Many of those would end in financial ruin.
The dentist, providing a necessary service to his community and collecting his fee, will have a much narrower set of possible outcomes. Nearly all of them end up in the upper middle class. He probably will not become a billionaire from his dental practice, he will also likely not end up in the poor house.
The same applies to how we buy and build our businesses. I see people wanting to build a HoldCo, wanting to own multiple companies and delegate management, and wanting it all right now. They take on too much debt, do too many deals, and do not pay the dues necessary to be successful. Maybe they end up extremely successful. I hope they do. However, the range of outcomes from that approach is wide. Many of them do not have a happy ending.
Another approach is to build slowly. Buy a business only when you are certain it is the right fit. Take on only enough debt that you are sure you can pay back. Will it take longer? Yes. Are the range of possible outcomes narrower and further up the scale? Also, yes.
This is how we have built our HoldCo. It has taken us 13 years to get to where we are. We have done 6 major acquisitions in 13 years, less than 1 every 2 years on average. We have never taken on more debt for a new acquisition than the existing structure can reasonably pay off. We have bought relatively boring businesses in stable markets. We have never asked our management team to grow at an insane pace to justify a high multiple paid.
When you see your neighbor strike it rich in Bitcoin, trading the most recent stock, or winning the lottery, you can feel happy for their good fortune. You can also know it is probably not a replicable strategy. Stick to something stable. Whether it be building a HoldCo, being a dentist, or whatever else makes you happy. This life, and the thousands of others you may have led, will thank you.