When I was about 10 years old, I immigrated from Vietnam to Canada. It’s been more than 28 years since I came to Canada. I don’t have a lot of memories of my childhood back in Vietnam. Somehow, there seems to be one particular piece of memory that I often recollect from time to time – my first attempt at entrepreneurship. It wasn’t dramatic, nor memorable, nor exciting at all, but somehow, I kept on getting flashbacks of that experience. So for this post, I’ll share the lessons that I had learned as a young entrepreneur with you.
While growing up, my family used to be wealthy. Well, at least that was what I heard from my extended family. By the time that I was old enough to remember, all the wealth was gone (due to the war and trusting the wrong people). As a result, I didn’t have any toys to play with nor did I get any allowance when I was young. I had to be very resourceful and build my own toys or find things to play with to keep my young mind occupied and entertained.
Every Item You Have Is A Valuable Possession
Since I didn’t have anything valuable, when I did get something of value, it was like a gift from heaven. One day, I got a very nice pen as a gift from my mom (it might have been my birthday, but I can’t be sure of that). The pens back then didn’t come filled with ink like the ones that we have today. So in order to write, I had to dip the tip of the pen into an ink bottle and then write on paper. A very primitive item, but a valuable item in my possession.
Once I got the pen, I somehow instantly became entrepreneurial. Instead of using the pen like any other kids my age, I started to think of ways to turn my one and only pen into two pens or more. Since I knew how much the pen cost and where my mom bought it from, my plan was to try and sell my new pen to one of my classmates and make more money than the cost of the pen.
When A Pen Is More Than Just A Pen
The next week, I started to show my new pen to my classmates to see if anyone liked my pen. My goal was to either trade my pen for items that were worth twice the value of the pen or sell it for cash for the twice the value of the pen. I don’t remember exactly how many kids I showed my pen to, but I had a taker who was willing to pay me the amount that I wanted for the pen – double the cost of the pen.
Is This The Art Of A Deal?
My first business deal, I made 100% return on my investment. At least that was the thought when I made the deal. I was feeling proud and thought that I’ll be on my way to build a business empire. However, one thing was missing from this deal – the payment. You can’t make a profit if you are not paid yet. I don’t remember the exact detail of the deal, but it seemed like I delivered the pen to my classmate and allowed him to use the new pen with the promise to pay me in the near future.
100% Profit Or 100% Loss?
A couple days had passed, that classmate of mine promised that he’ll pay me the next week. Two weeks passed, he once again promised he’ll pay me in the near future. This promise to pay kept on getting pushed from one week to another. So my first business deal with a potential to make a 100% profit started to look like a 100% loss. I wish I was able to recall if I was ever able to collect the money. However, my guess is that I probably wasn’t able to collect any money and I lost all my investment. The memory might have been painful and I might have blocked it out and only remember my first attempt at becoming an entrepreneur.
Fail: First Attempt In Learning
From that failed first attempt to become an entrepreneur, I learn many important financial lessons that formed the backbone of my money management habits (On a side note, there is a great post by The Green Swan that talked about failure). I often reminded myself to thoroughly evaluate the risk of any investment that I make. The credibility of the people/organization that I deal with needs to be validated. How difficult it is to recover my investment capital if something goes wrong needs to be weighted against the potential profit that I will make. How much control do I have to determine when and how I get paid?
First Financial Lesson: Diversify Your Investment
This was a tough lesson for me to learn. All of my investment was in the value of the pen. My success or failure depended on a single transaction and the creditworthiness of an individual. In a way, my judgment was clouded by the potential of the profit that I’ll make without thoroughly evaluating the repercussions of the risk of nonpayment. From then on, I learned not to invest my money in a single investment, regardless of how much potential that investment has.
Second Financial Lesson: Know Your Client’s Credit History
Another tough lesson for a young entrepreneur. It’s important to have collateral to secure against when you are providing credit or loans to others. What was even worse was that I did not evaluate the creditworthiness and payment history of the person that I provided credit to. After that, my policy is to only lend to an individual if I am 110% confident that I can recover my money if the worse case scenario happens.
Third Financial Lesson: Trading Short-term Pain For Long-term Gain
When I decided to try and make more money with my one and only valuable possession, I was trading my short-term pain of not having a pen for the potential of having lots more pens in the future. Though that short term pain stung pretty bad and it cost me everything I had at that time, the long-term money habit that I gained from that experience was priceless. Some lessons are best experienced at a younger age rather than later in life.
My Two Cents
I learned at a young age that if I am going to be financially successful one day, I will need to be resourceful and leverage what I have to increase my wealth. The action that I take may mean a short-term sacrifice or trade-off, however, in the long-term, the benefits that I receive will be a lot greater. To fully reap the long-term financial gain, one needs to look past the short-term financial pain.
Do you have any childhood experiences that shaped or changed your money habit? Are you willing to make short-term financial trade-offs to gain the potential for long-term financial success?