While he was studying at the Harvard University, Divya Narendra co-founded of The Harvard Connection. You may know about it, as it became a popular conversation topic after David Fincher directed The Social Network movie in 2010. In 2008, Divya created SumZero, a living source for aggregated investment fund research.
A couple of weeks ago, before Divya´s talk at the Luce Hall auditorium at Yale University, I had the pleasure to chat with him, and exchange stories about life and personal projects. I mentioned to him that photographers and artists, experience ups and downs that vary throughout their careers. Many of us operate with the high level of uncertainty in our income. But then, there are moments that additional revenues enter our homes.
Considering Divya was offering his views on strategies, and advice on “How to Write the Business Proposal” that day, I have invoked upon Divya in a discussion, to offer some key lessons he has learnt through his personal discoveries in business, to offer suggestions, in order to provide some ideas and insights on topics many photographers and artists never ask about. Here are our findings:
The biggest lesson in my career has been… Trusting instincts: Life is short – work with nice people you enjoy being around on a daily basis. Here’s another: it’s better to own a small piece of a big pie, than a big piece of nothing.
The biggest lesson relating to negotiations has been… As a business owner, I constantly interface with other businesses to evaluate potential partnerships and to reevaluate existing ones. It’s important that everyone at the table feels like he or she got a fair deal. Sometimes this means not extracting every last ounce of value, but doing what’s conducive to establishing a long-term partnership.
What are the common mistakes people make when investing their savings?
Assuming they can beat the market without doing sufficient research.
Your favorite book on Business is?
Some students dream of becoming professional photographers one day. On top of education, this career comes with the additional toll of having to buy very expensive gear to compete into the market. Do you think that someone who is starting should start buying gear slowly as their income increases or should they go ahead and buy such equipment requesting a loan?
If you compare the cost of renting versus buying, you can calculate the implied interest rate on renting the equipment. If this rate is very low, renting makes sense, and vice versa if the rate is high.
What type of advice would you offer to a mid-career freelancer, who has been able to save a little bit, and who is not happy about the interest rate given by regular bank deposits?
The biggest drivers to returns in your investment portfolio will be your overall allocation decision (i.e., how much you invest in equities versus fixed income, versus other asset classes). For photographers and artists who do not have the time or expertise to follow individual companies, the best approach is to simply diversify by buying an ETF*. Today, ETF’s can give investors exposures to the S&P 500, and many other broad market indexes while charging very low fees, often times significantly lower than fees associated with mutual funds.
In the long run, a well-diversified portfolio should yield returns far in excess of the typical money market savings account, which after accounting for inflation, offers a negative real rate of return.
ETF’s not only provide diversification at very low costs, but they are also very liquid.
Even though my years as a student of Economics are far gone, I will never forget that a business plan is a strategy for survival. Freelancers of all types should remember that a simple plan looks at your company (project) today. Although their passions may invite them to forget about certain areas of the business, and to its future, visions, goals, and objectives all must be placed on paper.
As Paul Tiffany reminds us on his ¨Business Plans For Dummies¨, a well-developed plan is critical for any start-up business. And yet you love photography, for fulfilling your creative desires. So, should you really think of making a living from it eventually, you should start seeing yourself not as a photographer, but as a photographic business. Think, Plan, and Organize.
*What is an EFT? An Exchange-Traded Fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities or bonds.