First off, this post is inspired by this excellent blog post by an acquaintance – read here.
The parallel entrepreneur can expand beyond as the investor as well. But not the investor in the sense of the word we are accustomed to by Wall Street propaganda. The investor simply invests ones money in search of a return – they can have fancy names such as “angel investor”, “venture capitalist” etc but are at the core the same thing.
A good example of the investor-entrepreneur – one who blurred the lines between being a consumer and a producer of capital investment – was Cornelius Vanderbilt. In his early years, while running his own ferries he also invested excess capital in business associate’s ferries. For example, he would invest 50/50 with another operator and take a percentage of the profit from the fares and 50% of the take from the on-board bars (the real cash cow from the business). This allowed him to earn in parallel to his own operation. This in essence is a form of diversification away from just scaling one’s own business to earning favorable capital returns from other businesses. Often the marginal gains to capital might be better at a certain point investing in someone else with different ideas and talents. Vanderbilt, of course, snowballed his gains into ever greater enterprises and constantly had streams of cash rolling in, so to him these were but merely elements in the money sieve. He ended up as a railroad tycoon and, as a percentage of economic output, one of the top 5 wealthiest men in history.
It is up to one to decide the value of their time at any given point. As the linked article states, the idea is to optimize how time is spent on something – once one project is in the testing and data collection phase, there are fewer gains to time investment and it is preferable to work on another project. The same applies with capital allocation – you may have excess capital from a venture that is otherwise time intensive, and it may be better spend reinvesting in another entrepreneur’s idea vs. scaling your own at a certain point in cycle. Or it may not. But even the robber barons/gilded age tycoons had times in their careers where more money was to be made investing with others than pure scaling and reinvestment, as the timing might not be right with the decision to scale while the capital is in excess.