I was out to dinner with a old friend who mentioned she works with some wealthy clients who seem to make huge returns on all their private investments across all asset classes. “Everything they touch turns to gold, it seems,” she said.
Considering this, I think it’s less about what they touch and more about what touches them.
What I mean: These people have great networks of connected folks that feed them great intelligence on opportunities. They get access to information before other people do. With equities, this can / will get you in trouble for insider trading (though I’m sure it still happens all the time) but with investments in real estate and startups, winners are often the result of early access to information.
Realtors often snatch up properties they know are undervalued quickly before they even hit the MLS. Normal, non-insiders never even see these opportunities.
VC investors have early access in the same way. They take meetings with companies long before Techcrunch writes about them. If you’re a VC insider you might hear that this “new thing” is looking for money and have access as an angel before the company even gets their first larger round of financing.
Shout, Jeff Bezos’s parents were the ultimate insiders when they gave Bezos a couple of hundred thousand during the company’s initial friends-and-family round.
So the trick is this: Figure out a way to become an insider.
Going to a great school helps a lot.
Starting a successful company is another way to gain attention outside the elite university track.
Outside of these two things, networking like crazy and figuring all sorts of ways to make yourself interesting and valuable to other people is the only way to make people want to share their time and intellect and information with you.
Investment success always takes hard work and should be backed with due diligence but there is some magic that occurs when you have the leverage of a large, intelligent, accomplished network — far more high-quality opportunities just come to you. “No one bats a thousand” but becoming an insider is certainly a way to significantly improve your average.