Can having a grasp of ancient philosophy lead to more successful outcomes for business angels?
The usefulness of studying philosophy at university came up in a conversation I had recently. What is its relevance in today’s world I was asked? Can ancient Greek philosophers like Plato teach us anything about how to conduct ourselves in an environment so far removed from Greece thousands of years ago?
According to the latest stats the number of students opting for philosophy is rising, why?Because philosophy can be described simply as the art of rational thought and every branch of knowledge depends upon rational thinking. Without wishing to sound like a university prospectus, philosophy gives us the ability to theorise and derive knowledge through reasoning. So philosophy can help with anything and that includes careers and business!
If philosophy lies at the root of every branch of knowledge, then having a philosophy must also come in particularly handy when you decide to become a business angel investor or any type of investor for that matter.
I use the example of Plato as one of this this particular philosopher’s books The Republic usually forms the basis for the study of a subject in most undergraduate degrees. Let’s look at one famous quote from our Greek philosopher of choice; “A good decision is based on knowledge and not on numbers.”
Let’s think about that for a moment. To be successful in business an entrepreneur at the very least needs to be good with ‘numbers’. So assuming that most business angels will have had experience as an entrepreneur in the past, we can safely assume that they are. But an entrepreneur cannot be truly successful without knowledge no matter how good they are with numbers.
The same goes for the business angel investor. Given the poor success rates of businesses funded by business angels it wouldn’t take a giant leap to conclude that a large percentage may have the ability with numbers, but without the right knowledge to help the business they invest in achieve success.
These success rates be improved by having the right knowledge to make good investment decisions.
Rule number 1 – your goal shouldn’t be just to make money
To be successful business angels shouldn’t just be in it for the money when they decide to invest in a fledgling business. Before you invest in a business or businesses you need to ask yourself why you are doing it. How much are you or you and your co-investors prepared to sacrifice in both time and money to ensure the business is a success and achieve a greater pay-off tomorrow? Angel investing cannot be an end in itself, it must be driven by the correct balance between the desire for short-term profit and the ability to sacrifice this desire for success further down the line.
Rule number 2 – success requires knowledge
To achieve this success there must also be the right kind of knowledge brought to the table to increase those chances of success. Do you really know the business you are about to invest in? If not then the chances are your investment will be more concerned with numbers than knowledge, a recipe for failure.
Rule number 3 – philosophy doesn’t have all the answers
Before I get carried away, philosophy doesn’t offer all the answers in business, it only allows us to develop theories which as we have seen can often be overturned. George Soros, one of the world’s most successful investors has more than an active interest in the subject, he is said to have entered finance to support himself as a philosopher. Soros has a stated commitment to one particular branch of philosophical thinking known as ‘fallibilism’ which means anything he believes may in fact be wrong and be questioned and improved.
This is where the title of this blog is a red herring. There isn’t a secret philosophy of angel investing as such, only the acceptance that success is not certain and neither is knowledge which is what Plato himself was thinking about more than a 2,500 of years ago!