I met Peter in his taxi. As a tourist newly arrived in the city, I asked him for restaurant recommendations. What I got was an hour-long story about his life and his recent business venture. Peter’s story perfectly illustrates why understanding how business works—especially the fundamentals of finance—is not just for entrepreneurs. It’s a basic survival capability for everyone in today’s economy.
Throughout our conversation, Peter proudly referred to himself as a “business founder.” He had invested in a large retail store for luxury cars with two other partners. The taxi he was driving, he noted, was one of the brands his store sold. This prompted a silent question in my mind: If you’re a founder, why are you driving a taxi?
Before I could ask, he explained. Two years ago, after being laid off, he was presented with what he saw as a golden opportunity: a chance to invest in this luxury car venture. A general manager was already in place, so his role was purely financial. He simply invested his money and waited for the profits to roll in.
The catch? He invested far beyond his means. To secure a larger equity share and what he believed would be a massive, quick return, he borrowed heavily from his relatives, friends, and even his in-laws. He promised them high interest and a full repayment within two years.
Two years later, the return on investment was much slower than projected. His lenders began demanding their money back, and one even filed a lawsuit. Now, Peter’s entire personal network turned against him, except his own mother who stands by him unconditionally. Although his taxi earnings are negligible against the mountain of debt, he remains resilient. “Every penny I can earn,” he told me, “is better than nothing.”
His work ethic is admirable, but his misguided bravery and lack of business acumen are his downfall. He jumped in without understanding the nature of the business or its risks, violating fundamental business principles along the way.
Globally, about 90% of startups fail within their first few years. While failure is an inherent risk in any new venture, it’s often precipitated by internal, controllable factors—like the mindset and decisions Peter displayed. These are areas where we can learn and improve.
Peter’s story reveals critical gaps in his thinking, which are unfortunately common among many new business owners. Let’s break them down:
1. He Confused His Role. Peter called himself a founder, but he was an investor. A founder builds and nurtures the business. An investor provides capital. He put all his eggs in one basket without any control over the henhouse.
2. He Misunderstood Time and Risk. He believed in a quick, guaranteed return. In reality, building profitability almost always takes longer than expected. High-return opportunities carry high risk, and if a deal seems too good to be true, it usually is. The “shortcut” often becomes the longest road.
3. He Ignored Financial Fundamentals. “Cash is king” is the first lesson in business. As an investor, he should have understood the need for personal and business cash reserves. Instead, he liquidated his savings and took on massive debt for a venture he couldn’t influence.
4. He Lacked Boundaries. He failed to separate business from personal life, destroying his most vital support system. This blurring of lines is a common startup pitfall, whether it involves borrowing money from relatives or hiring based on relationships rather than merit.
5. He Had a Gambler’s Mindset. Driven by greed and blind optimism, he bet on a “once-in-a-lifetime” opportunity. A seasoned professional knows that real opportunities are not rare events; they are born from solving persistent problems. Opportunities always exist even during economic recessions. Where there are problems, there is the potential to create value and generate profit.
6. He Lacked Self-Awareness. Instead of operating within his “circle of competence” or working to expand it, he ventured far outside it. He made emotional decisions based on wishful thinking, seeking an external savior – the venture to change his financial situations – instead of building his own capability.
At the end of our ride, I asked Peter what he would do differently if he could go back in time. His response was, “I will never ever become a business founder again.” This is the true tragedy. When faced with failure, he blamed the act of being in business itself, rather than reflecting on his own actions and knowledge gaps in order to gain valuable lessons from this experience.
As long as we seek financial comfort, we are involved in wealth creation. The truth is, all of us is in business, in one form or another. Employees sell time, labor or skills, while entrepreneurs sell products or services. The more we understand core business principles, the better we can create value, generate wealth, experience freedom, and build the life we want.
This isn’t just about starting a company. It’s about navigating our careers and our finances with intelligence and foresight. In the new economy, that’s not a specialized skill, but a basic survival capability.