Seeding, Accumulation And Profit Taking

in LeoFinance29 days ago

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Financial resilience is all about staying afloat (from a financial point of view), no matter the external context. It’s the ability to continue functioning even during economical crisis, black swan events or political turmoil. As you can imagine, this is not a linear process, in which you set up a certain goal, like making one million dollars, and then work towards reaching that goal, and call it a day when you made it. It’s more of a continuous integration, a lifestyle that will allow you to nudge the unavoidable fluctuations of being alive, pretty much like Neo dodged bullets in that famous Matrix slow motion sequence.

This continuous process involves some changes at how you manage your assets. In my personal experience, there are at least 3 identifiable stages, each of them with its own characteristics. These are seeding, accumulation and profit taking. Although they share meaning with technical trading terms, they are stretching way more than that. Let’s try to look at each of them in detail.

Seeding

Like the name implies, this is the process in which you are planting the causes for some profitable activities to unfold. This may come in any of the following forms (and not only limited to them, obviously):

  • investing (putting money in stocks or other assets with a provable track of outperforming saving)
  • side hustling for personal projects
  • education about new technologies, business types or emerging markets
  • networking with resourceful people
  • applying for a better job (without being forced to, that is, just like a way to upgrade your status)

The most important part of this process is that you’re not getting anything in return, immediately. It’s a matter of giving away, in small installments, time, money or attention, and following up on the processes to assess their evolution.

When planting a seed, there’s a certain amount of time that passes in the dark, without any feedback. Even more, there’s no guarantee that at the end of this incubation period you will get something out. It may, or may not happen, and it’s important to understand that you control only the seeding part. You don’t control the weather, the quality of soil or other unpredictable events. You may, in time, adjust for improving the context, like trying to aim for better “weather”, or “richer” soil, but it’s all part of a process, there’s no initial guarantee.

It’s important to keep this mindset and understand the extent to which you’re able to move things around, because otherwise it’s very easy to get disappointed and give up seeding entirely.

Accumulating

Once some of these seeds are starting to produce results, it’s time to accumulate. By “producing results” I’m not implying you’re already making more money that you invested in the seed, but merely that you have a process which you can control. This process can be about money, but sometimes it’s about experience (in a job, in a startup), about relevant relationships, or about fixating the results of some recent learning experience.

For instance, you may get some traction with a personal side project, one that you hustled hard for in the seeding stage. Getting traction is not an immediate sign of profitability. Just because it’s start moving, it doesn’t necessarily mean it will produce more money than you can put into it, it just means there’s some need for it in the market. You may be the one servicing that in the best way for those in need, or you may not (for a million reasons).

I’ve been in that stage many times, and I made the mistake of “calling it”, a lot. At some point in my life I ran a business that showed significant traction for more than 2 years (a coworking hub) only to realize I won’t be able to continue in a profitable way (as a matter of fact, I lost a significant amount of money in that process, not to mention the opportunity cost). The reasons for that were a mix of market conditions (the demand dwindled because the political context was worsening) and underfunding.

To make a long story short, the accumulation stage is more about patiently looking around, understand from where the value comes in the process, how can you influence that value, and how you can streamline the value generating process. Most of the time, this takes years.

Profit Taking

This is the most delicate stage of all, but probably the most important one. By “profit taking” I understand two things. First, that the process is already producing in excess of what you invested in (being it money, or knowledge, or opportunities). And second, that you are willing to take out from that process the excess.

Taking out the profit means the excess is not re-feeding the process anymore and it can be used for something else. It can obviously be lifestyle (upgrading parts of your existence, from where you live to how much you travel) but it can also be fed back to the seeding process. It’s easier to understand this if we’re talking about money, because numbers are simple: take out 100,000 from that business and put it in 10 startups, 10,000 each.

But it works in other areas too, like education. For the sake of the argument, let’s pretend the seeding project was some crypto-related activity. After 3-4 years of understanding the intricacies of the process, of evaluating your own capabilities and how can you provide value, you can “take profit” by investing what you learned in something else. You may start another seeding process in which you get involved in some newer and smaller projects, but from a different position (investor, developer), or you may start selling that expertise for money, to people who are in need for that. You already generated some excess education, and you can put that to work, you can take profits.

It doesn’t take too many of these cycles to understand how this goes. If you did this at least once in your life, if you can get to a point where you’ve been through seeding, accumulation and profit taking, then you are in a very good place. You already did this once. Now you only need some mindset adjustments to restart the circuit, and do it in such a way that will make you financially resilient.

About that mindset changes, though, we’ll talk another time.

Photo by Brooke Lark on Unsplash

Initially published on my blog.

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A lot of work goes into the first stage which stands as the foundation for the others. We really need to invest in our seeding stages to ensure a solid base on which to accumulate and take profits