Business and Marketing Lessons Learned (From the Finance Industry)

One way or another, we are all investors. Nearly everyone has some savings or maybe investment funds, and you may also own stocks or other types of financial investments. But if you’ve ever been a student then, through your education, you have invested in yourself. We can apply investing principles to many aspects and activities in business and life.

Investing Lessons For Marketers and Business Owners 1
What Entrepreneurs and Marketers Can Learn From The Investment Industry

While many folks have also learned basic investing and personal finance principles along the way, few realize how these foundational concepts can inform best practices in business, marketing, and life in general. 

This investing and finance lessons list was originally published on Discourse by Onfolio. Here are six investing concepts that can help us be better marketers, entrepreneurs and business owners.

Avoid the Hype (Business and Investing FOMO)

Pump and dumps, meme stock frenzies, and FOMO (fear of missing out)… all of these are commonly encountered in the investing world. Grabbing onto unknown and untested trading ideas or trends is always risky. And let’s not even get into crypto and meme coins. 

Now, limiting the size of an investment (making a smaller bet) can help reduce risk, but it doesn’t change the odds of success (and those are usually low to start with). But making a bet at all requires your time and attention, and you can never get those back once spent.

The business world is awash in ‘quick win’ gimmicks, tips, and tricks. And marketers (both SEO/organic and paid), in particular, are attracted to these tactics, which promise easy, push-button wins. At best, such methods offer short-term and unsustainable gains. And they are rarely as easy as promised, which usually makes these schemes more trouble than they are worth. 

Such shortcuts may not only fail to deliver the hoped-for gains but also result in negative outcomes. Consider a site trying a link-building scheme that could give a short-term boost but risks severe and potentially permanent action by search engines.

In the software development space, untested or sloppy code can ship faster but causes technical debt. This has a long-term debilitating effect on product quality and supportability. Shortcuts rarely come without risk, to your business or that of your clients.

Quick-win thinking also has a corrosive effect on the culture of your business, encouraging team members to prioritize short-term gains over the long-term sustainability of the company.

Always (always) start with long-term goals in mind. From that viewpoint, carefully consider new opportunities. It’s even okay to consider apparent quick wins and gimmicky ideas. Brilliant, crazy ideas are often buried in a pile of just plain crazy ideas, so it’s OK to look.

…whether it’s a stock pick or a career move; a marketing campaign or a new business initiative, don’t simply jump on the next trend or hype train.

But remember that nothing in business comes without a cost. When internal resources are deployed on a ‘new idea,’ these team members work on one thing at the expense of another. And that other thing may be a potentially bigger or higher probability opportunity. The solution is to always make data and common sense a part of your decision-making process.

The best way to avoid the risks that come with ‘the hype’ is information. Use the data you or your business already has. You can also tap into the expertise of others, both within and outside your company. 

Leverage this information to do your own research and due diligence. Ultimately, every new initiative — small or large — should be carefully considered in the context of those primary (business or investing) objectives.

So, whether it’s a stock pick or a career move; a marketing campaign or a new business initiative, don’t simply jump on the next trend or hype train. Do your research, assess the risks, and make a calculated decision.

Tools Are Not Strategies; Metrics Are Not Results

Data and metrics are not the goal. They describe results along the way. And tools help execute a process, but they are not the strategy itself. But this is a temptation in many industries and interest areas. 

Traders and investors often become fixated on a particular fundamental or technical indicator when analyzing an asset. They may have had a big winning trade once, and become so myopic (focused on this one measure) that they forget the larger goal. 

The objective of an investor is always to preserve and grow a portfolio’s value. Businesses are driven by precisely the same “preserve and grow” ultimatum. Yet business operators and marketers are just as easily distracted by tools and automation, or data measures (whether hard numbers or the vanity type). 

Similarly, workflows, processes and tools are all a means to an end. They are not the objective itself. 

Digital marketers are especially susceptible, given how numbers-driven their role is. Yet, much of this data is latent and inexact, at best.

Regardless, these metrics may track the status of a particular business process or initiative, but they usually don’t reflect the bottom line or hard targets of the business. 

This metrics myopia can also turn viral. It sometimes becomes transmissible, spreading from practitioners to management and clients; it’s especially virulent in large organizations. Without a clear line of sight on business goals, it’s natural for staff to become focused on ancillary tasks or KPIs.

Similarly, workflows, processes and tools are all a means to an end. They are not the objective itself

Yet people throughout the business and investing world are easily distracted by such things. So-called pet projects fall into this category as well. These may have secondary benefits but are, at best, stepping stones to larger objectives. Keeping your focus on those primary objectives is the key. 

As the saying goes, the map is not the terrain. Reaching goals (not just pointing to them) requires consistent focus on the right things, and executing and iterating over the long term.

“Nuthin But Net” (Profits) 

It is one of the most common challenges among investors, both big and small. That is, holding a winning position; a stock or other asset that has gone up in value, and now shows a large unrealized profit.

Why is holding a winner so difficult? Because it’s not a winner until you exit the position.

And this principle applies directly to marketing and business as well. Let’s consider some background.

Having positive P&L (profit and loss) on an investment feels great, but many people struggle to take profits, because after they sell, it might go higher! Yet, when they start losing unrealized gains, they can also become paralyzed and watch the investment spiral to a loss, hoping it will get back to its previous high level. If you have traded anything, then you know…you’ve probably been there.

This conundrum of human nature is, I think, also reflected in the well-known Stanford University marshmallow experiment. This 1972 study looked at human behavior, specifically related to delayed gratification. In the study, children were first given one marshmallow, and were told they could eat it now or wait and get two marshmallows later.

In marketing it might mean following up a successful PR campaign with a sales push to get new deals in the pipeline.

You might say this study illustrates a human weakness that is opposite from the profit-taking challenge. They are actually the same. The point is not about the number of marshmallows representing profit. It’s about probabilities and planning.In the study, the kids had a 100% chance of getting two marshmallows. The ones that decided to go for two were clear about the opportunity and set a goal for themselves, and then applied the discipline to wait. As a result, they doubled their ‘profits.’

So, with a 100% guarantee, why did the other kids find it so hard to wait? Some will say the problem is discipline (and that’s partly true). But it’s also that they lacked a clear plan.

Now, in a trading context it’s tempting to view the two marshmallows as potential future profit. But in the trading world (and in business), doubling your marshmallows (or money) is never guaranteed. 

Only the unrealized profit they have now (on the plate in front of them) is 100% guaranteed — but that’s only if they exit their position. So, with a 100% guarantee of profits today, why do so many traders and investors find it hard to act? Again, discipline is essential. But discipline is applied to reach a goal, and reaching goals requires a plan.

In my view, both the kids and the investors lacked a clear goal. Having objectives – measures of success – is critical, and targets should be based on a balance of cost/risk and projected returns/reward. In most cases, it’s important that the objective be known right from the beginning. ‘Start with the end in mind’ is common wisdom. When that “end” (objective) is reached, we must also have the discipline to realize that gain.

In investing it means closing the trade and taking profits. In marketing it might mean following up a successful PR campaign with a sales push to get new deals in the pipeline. In the startup world, closing a fundraising round only replenishes cash on hand, but launching the product or hitting the next milestone is the true goal.

A winning strategy isn’t a win until you exit the position (or realize the goal of the campaign, project, etc). Even realized gains, in isolation, can be deceiving. Revenue is not profit. In the long run, net profits are all that matter. Nuthin but net (profits).

The Power of Compounding Returns 

This is a timeless maxim of personal finance. Income investors, who seek dividend yields over principal growth, know this well. Even humble index fund investors, who make up a huge proportion of the global investing community, benefit from it. We are talking about the miracle of compounding returns

Traditionally, compounding returns means putting the income or dividends generated from an investment back into that investment. Taking profits on price growth in the underlying asset, and then reinvesting gains into the same — or similar — assets can also be part of a compounding strategy.

In practice, a successful compounding strategy starts with sound investments that align with the ultimate objectives of the business or portfolio.

Either way, the real power of compounding comes from the time period over which the capital is invested. Many people focus only on the rate of return (yield), but a healthy return rate, combined with a long time horizon is how the magic of compounding happens.

Warren Buffett said, “investors will realize a far, far greater sum from a single investment that compounds internally…than from a succession of (short-term) investments.”

This cornerstone concept of investing is sage advice for business owners, too. A successful business is built on a foundation of product/market fit and healthy margins. But to continue growing and generating yield, (salary and income growth, monetary dividends, positive social impact) a business must operate with a long-term growth mindset. As such, I think it applies to anyone seeking a more rewarding life in general.

In practice, a successful compounding strategy starts with sound investments that align with the ultimate objectives of the business or portfolio. It also calls for careful risk management — when making your initial move, and also avoiding low-value or risky distractions. As discussed in the previous point, it’s built on a foundation of active planning and goal-setting, and those goals should align with the business mission over the long-term.

It’s always been a truism in business; but even in the ever-changing digital marketing space, there are no shortcuts to success. The concept of compounding returns can be applied to many non-monetary assets as well. Consider that website authority or a Facebook ad pixel can grow in value over time. Even business relationships, such as those with an affiliate manager, partner, or investor, can grow stronger with age.

It may not seem obvious at first, but viewing the full spectrum of business, investing and life decisions with an eye towards compounding returns is empowering. It cultivates a quality and consistency mindset and lends itself to bigger, bolder long-term goals.

A Clean Slate Every Day (Mark-to-Market)

Mark-to-market is an account management function that is used by financial services firms to assess risk and exposure. Traders also apply this concept in order to achieve a mental ‘clean-slate.’ It’s a way to start each day with a fresh outlook.

Whether yesterday was good or bad (a losing or winning day), this idea – that we start from zero every morning – allows us to stay focused. It helps us keep moving forward and consistently execute on the plan, without the baggage or distraction of what happened yesterday. It also promotes adaptation.

Whether it’s an investment idea, a marketing campaign, or a major business initiative, it’s critical that we become neither overconfident nor paralyzed by fear and indecision.

Being preoccupied with yesterday’s particular outcomes, whether positive or negative, distracts from the bigger picture and plan. It makes it harder to recognize and respond to real problems. This clean-slate mentality allows for a more flexible and adaptable approach to problem-solving.

Jeff Bezos famously invoked a similar idea in his 1997 Letter to Shareholders, which he has attached to every annual report since. Whatever your opinion of Bezos, it’s worth a read. This became part of the so-called “Day 1” culture at Amazon and reinforces some of the ‘long-term’ ideas noted above. 

Daniel Slater, an innovation leader there, wrote, “Day 1 is both a culture and an operating model (and) is about being constantly curious, nimble, and experimental.” 

Whether it’s an investment idea, a marketing campaign, or a major business initiative, it’s critical that we become neither overconfident nor paralyzed by fear and indecision.

Tomorrow will never be the same as today. So, have a plan (that reflects your end goals), consider new data and opinions as they emerge, and then adjust or execute on the plan. Then do it all over again the next day.

Know When To Quit (Stop-Loss Strategies)

A trade or investment is not a winner until profits are taken. The flip side of this coin concerns the losers. And it’s a discipline that even the most successful investor struggles with: taking losses.

In trading, the practical side of taking losses often involves the discussion of stop-loss orders. These are placed as a sort of ‘emergency exit’; if a certain price is reached and a trade turns into a loser. But, in any investment and many life circumstances too, the idea of having a stop-loss – a point at which you will stop or get out of a situation – is even more important. It’s also much harder to apply than most folks realize.

…having the discipline to ‘exit the losing position’ and take the loss can be even harder than taking profits (as discussed above).

So it is with business operations and, for many founders, with the business itself. When is it time to pivot or just shut down a campaign, project or business?

It all comes back to the original objectives and plans. All activities require investment (of energy, time or money) and all should have a clearly defined end goal. By working backwards from that goal (or potential benefit) it is possible to determine an acceptable cost.

From there it becomes easy to decide on an acceptable cost overrun (or principal loss, in the case of investments). In theory, this is the amount (of time/energy/money) that you are willing to lose in pursuit of the given goal.

If that negative threshold is reached, the stop-loss is triggered. Now, having the discipline to ‘exit the losing position’ and take the loss can be even harder than taking profits (as discussed above).

Whatever the breakpoint is, it only works if the stakeholders or person in charge follows through and makes the difficult decision. The most successful founders and business operators get that way through a balance of careful planning and risk-taking. And the classic market mantra most definitely applies in business and throughout life: cut your losses and let your winners run.

Lessons Learned

The world of investing offers a wealth of actionable information and principles.

These concepts not only help build good personal and business finance habits, but also teach us how to manage risk and maximize outcomes of all kinds. Whether the “investment” is time, energy, or money (for both individuals and organizations), these timeless principles can often be implemented. If you liked these investing principles that also pertain to marketing and business I’ve shared even more at my consulting service site, JPHendricks.

Each idea may be applied and adapted to many different scenarios. But the outcome is often the same. It’s about resisting short-term thinking (and ignoring distractions), setting effective goals, and then staying focused on those objectives. While focus is key, staying adaptable and unencumbered by yesterday’s wins or losses is essential. One of the greatest tests of this adaptability is facing our losses and mistakes, and acting on the same.

Ultimately, the challenges faced by investors are no different from those faced by marketers or business operators. They are internal struggles of mindset and discipline. Fortunately, there are invaluable lessons we can take from the history of finance and investing — if we are willing to learn them.

by Jason Paul Hendricks

Jason’s experience ranges from bootstrapped solo startups to corporate roles with publicly traded Fortune 500 companies. On Digital Downshift he shares what he has learned over three decades of entrepreneurship and career-hood, both his mistakes and successes. With an obsession for business building and continuous learning, Jason seeks to apply these lessons (and help others do the same) to achieve more happiness and security.

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