The investor mindset

Karimi loves her shoes. She has shoes of all colours and she particularly likes high-heeled shoes.

She just cannot turn away from a good shoe offer whenever she sees one. It’s hardly ever about the price, but how good they look on her.

She has been nicknamed in the office as the Imelda Marcos (widow of former Philippine President, well-known for her vast collection of shoes) of the organisation. She works in the heart of town, which is convenient for her as she can window shop during lunch break.

Consumer mindset

One day she decides to venture into business. Everyone seems to be doing some sort of hustle and she does not want to be left behind.

She naturally chooses what she loves to do pretty much because she loves to do it. She starts a business of selling high-heeled shoes to her colleagues.

She is selling what she personally likes. However, her colleagues do not buy much from her, her margins are low and she gives up on it in a month.

Nekesa works for a bank in Thika. She also likes shoes and even enjoys wearing the same kind of high-heeled shoes as Karimi. She is a bit more rational about her purchases though and even if she does buy an expensive pair now and again she tends to bargain and ensure she is getting value for money. She also decides to venture into business to generate additional income so that she can enroll for her master’s degree.

Through her various conversations with her colleagues, she has realised that many of them are going to Nairobi to shop for clothes, shoes and bags.

She knows there are enough people in Thika bringing clothes and bags form Nairobi and other parts of the world. She therefore decides to focus on shoes.

She does enjoy shopping for them after all, but more importantly, she has realised they are also not in great supply in Thika.

After talking to and observing her colleagues a bit more, she understands that the true scarcity and need is with flat shoes.

Most people would wear these types of shoes to get to and from work, as well as during the day over the weekend. She is personally comfortable most of the time in heels but decides to supply mostly flat shoes as her business.

She starts of by getting them from Nairobi saving people the need to go there to look for shoes. The business starts of very slow but in about three months has picked up and is giving her a decent income.

Two people, different approaches

Both Karimi and Nekesa like shoes. In fact they both like high-heeled shoes.  Both started a business selling shoes.

However one has a consumption mindset and the other an investment mindset. Karimi started this business because she likes shoes, because she is a consumer of the product she is trying to sell.

Nekesa started her business to solve a problem. Consumers think about what they would prefer to consume. Investors are usually solving a problem.

There is a gap, and Nekesa identified and filled the gap. Think about it, what really was the gap with Karimi? She is trying to sell to people in the heart of town.

People who have the same access as her to the shoe suppliers. Nekesa had noted the inconvenience that people were going through, as they had to go to Nairobi to get shoes. Investors always identify the gap and seek to fill it. Karimi assumed that other people should ordinarily like the same thing as her. She confused her personal consumption tastes for investment rationale.

She went out and bought high-heeled shoes because she likes them, not because she had found out that other people would like them.

It’s almost as if she was trying to get people to look like her and she wanted people to feel what she feels when she wears her shoes.

Nekesa also likes high-heeled shoes but she did research and found out that most people would use the flat shoes more and they were also harder to come by. Investors do the research and find out where the demand is.

Karimi invested in shoes because other people were doing side hustles. Nekesa invested in shoes to create additional income to fund further education.

Consumption tastes can be influenced by what other people are doing. Investment is driven by objectives and returns. As we can see Karimi gave up easily. Instead of redefining her product, she quit.

Nekesa knew what she was trying to get out of it and persisted. Investors can go through challenges but don’t quit.  You can change shoes for any other consumption versus investment scenario.

A lot of people buy property with a consumption mindset. They buy property only in places they would live in instead of property that actually makes investment sense.

Where you want to live and where you want to invest can be two separate things. When I worked in the stock market, I noticed people would also buy shares based on their personal tastes.

For example, they would not invest in Bank X shares because of the queues, whilst those queues are the exact reason why Bank X made perfect investment sense.

You may personally not want to bank there but it doesn’t mean you don’t invest there. Don’t confuse your consumption preferences for investment opportunities or investment rationale.  To invest, put on the investor mindset.