You Knew What I Was When You Picked Me Up: An Investor's Parable

You knew what I was.

In any new and exciting investment class, the biggest challenge isn't just finding opportunities—it's learning to tell the difference between a good opportunity and a bad one that looks good. As hype grows around an asset, new platforms and sellers will emerge, some less reputable than others. They'll promise the world, but it's on you, the investor, to see them for what they are.

Financial models and due diligence are your primary tools, but sometimes, a bit of old-fashioned wisdom is the best guide. My Granddad gave me some of that wisdom when I turned 18, in the form of a short parable. It has stuck with me my entire investment career.

A man was climbing a mountain when he came upon a poisonous snake. The snake asked the man to please carry him to the top.

The man said, "No, you’re a poisonous snake, and you will bite me."

The snake replied, "No, no, no… I promise I will not bite you! I’ll just be thankful you carried me."

Reluctantly, the man decided to trust the snake. He picked him up and carried him all the way to the top of the mountain. As soon as they reached the peak, the snake bit the man, filling him with lethal poison.

The man looked at the snake and said, "But you promised not to bite me," and the snake looked back at the man and said, "You knew what I was when you picked me up."

In the world of music royalty investing, the "snakes" are the deals that look enticing but are fundamentally flawed. They are the overvalued catalogs pushed by hype, the risky assets with no stable earnings history, and the unvetted platforms that can disappear with your money.

They might promise you the world, but if the underlying data tells you it's a bad deal, you have to trust the data. No amount of hope can turn a bad investment into a good one. The goal of my upcoming book, The Sound of Money, is to give you the knowledge to identify these "snakes" on your own, so you can invest with confidence and avoid getting bit.

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