The other day, I was chatting with a lawyer’s client who runs a tech startup. They were talking about raising money from “investors.” https://youtu.be/QEACN_QVEvE
But here’s the thing: I don’t think that’s the right word.
👉 An investment means you put money in with a reasonable expectation of getting money out — usually from an existing flow of cash.
Example: A bakery. Customers come in, buy bread, money flows, and investors can get a share of that return.
👉 A speculation is different. You’re putting money down on something that might generate returns in the future — but only if a whole series of external conditions line up:
New money continuously flows in to cover expenses
The market decides the product is valuable (though no one has bought yet)
Eventually, a “liquidity event” (like an acquisition) creates a payoff
In speculation, there’s no steady cash flow to rely on. The bet is entirely on future possibilities.
⚠️ Why the distinction matters:
Calling speculation “investment” blurs the risk. I’m not against speculation — as long as it’s informed, and only a small slice of your portfolio.
✅ Personally, I prefer actual investments in local businesses where cash is moving today.
That’s what I cover in my book Invest Local — available on Amazon or at DavidCBarnett.com
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