A good friend of mine and fellow co-worker mentioned something recently when leading our daily stand up meeting at work the other day. He tied in a concept of the difference between gambling and the difference between investing in the context of high leverage activities. He said (and I’m badly paraphrasing from memory) “In gambling the odds are against you, but in investing the odds work for you”. The whole point being that we should invest in high leverage activities (odds working for us) to see great results (at least my interpretation of his talk).
If you think about it Gambling and Investing are very similar in nature, you are both taking a risk when doing these activities. Sometimes the risk is very tangible – for example going to a casino and playing a game with high stakes. In investing there could be less tangible such as the consequences if you don’t invest such as missed opportunities, but there isn’t a risk per se.
Let’s look at some definitions (both from google):
Gambling – take risky action in the hope of a desired result.
Investing – devote (one’s time, effort, or energy) to a particular undertaking with the expectation of a worthwhile result.
So what I can glean from this definitions is that gambling is something easily done while investing takes action. In a simple way it makes perfect sense. It’s very easy to purchase a lottery ticket in the hopes of winning a million dollars, but to invest in the stock market effectively to earn a million dollars it takes time, research, effort, mental energy, and a lot of fortitude.
Gambling to me is a passive activity, you are hoping for something to happen and not taking action towards obtaining it. Not only are you hoping for something to happen, you’re taking risky action such as putting up a lot of money, doing something dangerous, etc…
With investing there’s not really a huge risk, but rather an expectation. Because you devoted time, effort, and/or energy towards the activity of investing, you are expecting a result. For example if I continue to go to the gym 2 – 3 days a week and investing in my physical self, the expectation is that I will start to lose weight and gain strength (if I’m devoting my time, effort, and/or energy towards going to the gym). If I sit around eating delicious high carbohydrate deep fat fried chicken all day… in HOPES that it won’t kill me… well… I’m certainly taking a gamble.
This applies to all sorts of life lessons – are you taking out a huge loan on a new house, because you hope you are getting a raise? Are you getting into massive amounts of credit card debt in hopes that you’ll be able to pay it off? What are you gambling away at? And what are you investing in? Try and think about ways you can invest in your life, rather than gamble your life away.
Thanks fo reading!