Alicia Koplowitz: Many Eggs in Many Baskets
Welcome to our seventh lesson about the world’s billionaires and their lessons on success.
So far, we’ve learned from six billionaires, and our tour has taken us to nearly every continent! Today we will visit a new one, as we head to Spain to meet our next billionaire.
Alicia Koplowitz: Diversifying for Success
Worth $2.6 billion as of August 2020, Alicia Koplowitz can teach us a lot about how starting rich doesn’t mean staying rich, unless you have a good strategy.
Alicia’s father had built his company, today known as Fomento de Construcciones y Contratas (FCC), with careful planning, during the era when Spain was under the post-civil-war leadership of Francisco Franco. Starting with a loan he received in 1952 from a German friend, he seized the opportunity present in a Spain focused on rebuilding from the destructive war of the 1930s, and grew his company in a mere ten years to the thriving one that first his wife would inherit, upon his death, before soon passing it to her daughters, Alicia and Esther, when she died in 1968.
The construction company continued to grow. Soon it was the top construction company in Spain. For Alicia, holding onto her stake in the company might have seemed a wise strategy, but in 1997, she chose to sell it to her sister for €871,000,000—about $800 million USD.
Two things happened next, of great importance for our lesson:
• Over the next 15 years, due in part to the global economic decline of 2007, FCC dropped from the first to the fifth-ranked construction company in Spain.
• Alicia, meanwhile, invested the entirety of her $800 million to found Omega Capital, owned 100% by her.
Omega Capital was built on a diversified investment strategy. Since founding it in 1998, Alicia has seen her $800,000,000 nearly quadruple. Rather than dropping to a fraction of its value, as it would have if she’d remained locked in FCC, her choice to diversify her income has made her a billionaire success.
Alicia’s Billionaire Lesson
Alicia’s success lies in understanding what is meant by diversifying income.
Imagine you want to quit your job and become full-time self-employed.
Initially, you might have an idea of how you want to make your money. Say you are an editor and decide you will pursue full-time editing.
To start, you might have some steady work. In year 2, you might have less work. In year 3, you might have so much work you need to assemble a team of editors to manage the load. But in year 4 and 5, a new editing service launches and the market for freelance editing dries up.
You, though, happened to take a wonderful Highbrow course where you learned about Alicia Koplowitz’s diversifying strategy, so you arrive prepared:
• In year 3, you used your profits to launch a romance publishing company
• In year 4, you saw that YA books sell better so you launched a YA imprint
• In year 5, you developed an app to help your writing clients track their productivity
Because you diversified your income streams, year 4 and 5 for your business saw your annual profit increase by more than 30% each year. Freelance editing dropped out, but you used your editing team to push your publishing line forward.
And that app?
In year 6, it turned into a goldmine. It gained more than 10,000 users and you made more than $100,000 on ad revenue and premium subscription purchases.
All of this, because you were willing to diversify.
What started as a plan to be self-employed could have taken you in two very different directions:
Path 1. Eggs in one basket:
• You grind hard year after year editing books as they come in.
• When work dries up, you spend your time hunting for more gigs.
• You train exclusively as an editor and don’t branch out very far.
• You hit a dead end and have to go back to a “real job”.
Path 2. Many eggs in many baskets:
• You launch as an editor, but see it as an initial revenue stream to pursue as you learn the market.
• When editing work dries up, you assess opportunities for lateral growth.
• You continually diversify your revenue streams around the market editing belongs to.
• You keep growing and growing and become “self-made”.
This second path might remind you of what we learned about realistic scalable goals, from our billionaire in Lesson 4, Mukesh Ambani. Indeed, this diversifying strategy is built from assessing the realistic potentials, based on real data, rather than a preconceived, artificial potential based on guesswork.
We don’t have a crystal ball when it comes to becoming self-made. What we do have, though, is real-time data, and the flexibility to learn from it—provided we are willing to throw away tunnel vision and embrace the diverse opportunities that allow continued growth.
Get excited for tomorrow, when we’ll head off to South America to learn from our next billionaire!
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