What can we learn about diversification from Dr. Dre?

In May of 2014, Dr. Dre tripled his previous year’s earnings when Apple acquired his company “Beats by Dre” for $3 billion, making his estimated net worth skyrocket to $800 million. Not only is Dre a prominent rapper, but he’s also an incredibly successful producer and entrepreneur. Forbes has estimated that if his business success continues, he will be “hip-hop’s first billionaire” very soon.

Dre was born into a very impoverished family, having virtually nothing as a child. So how, exactly, did he transform himself into the second-richest rapper in the world?

The answer: Diversification.

Okay, that was dramatic, and not entirely true. Quite a few things had to happen in order for Dre to become the millionaire that he is. But without a doubt, diversification has played a large role in both his initial and continued success throughout the years.

Diversification is a technique where one includes a variety of investments in their portfolio. Dr. Dre has definitely done that.

He started as a musician. As he acquired enough fame and success from that outlet, he moved into music production. He first became the co-owner of Death Row Records, then created his own production company called Aftermath Entertainment, where he currently serves as CEO.

After the success of this venture, he moved into the entrepreneurial realm of product design with the creation of his company Beats Electronics. When it seemed like he couldn’t diversify any further, he turned to the film and television industry. Dr. Dre co-produced the film “Straight Outta Compton” which did overwhelmingly well in theaters. And he recently announced he’ll be the star of a new show coming soon from Apple TV.

Those may not be things that can be achieved by us mere common folk. However, diversification is important, and Dr. Dre is an extreme example of profitable business diversification.

The moral of the story is: Don’t put all your eggs in one basket. When acquiring assets, it’s important to invest in various areas of the market so that if one fails, you don’t lose everything.

If Dr. Dre’s acting abilities turn out to be akin to those of Nicholas Cage and his contract with Apple is pulled, his feelings will probably be hurt. But due to his diversification, his portfolio will come out nearly unscathed.

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