Shannon: “If Mark Cuban was an NBA player today, how would he spend his money? How would he invest his money?”
Mark: “If I’m just a two-way player, I’m living like a student, because you don’t know how long it’s gonna last. And one of the hard things is, you know, I didn’t grow up with money, and so it’s hard, when you first get money, to understand what it is—how much you have and what you can actually do… You hear all these stories and you think big, and you know how that goes, right?... You hear stories about people losing it all… So, I tell guys all the time: Save your money… One broken ankle and it’s over… Don’t invest in the restaurant. Don’t invest in the clothing label. Don’t invest in the liquor company… Or music. That is death… Those businesses are hard because there’s no barrier to entry.”
This is a trimmed-down transcription of a conversation between Shannon Sharpe and Mark Cuban on the "Club Shay Shay" podcast.
If you’re not familiar with Mark Cuban, he’s a prominent American entrepreneur, investor, and media personality celebrated for his business acumen, candid advice, and involvement in various industries.
Mark is a co-founder of Broadcast.com, a minority owner of the Dallas Mavericks, and a key investor on the hit ABC reality show Shark Tank. If there’s one person whose business advice you want to take seriously, it’s him.
While Mark shared several other valuable tips during the podcast, this roundup focuses specifically on his perspective regarding investments with a low barrier to entry—and why he believes they’re a poor choice for beginners.
What ventures does he prefer?
Mark Cuban’s take on investments with low barriers to entry is blunt but rooted in hard truths: these ventures are “death” because they invite overwhelming competition and often lack the structural advantages needed to sustain profitability.
For beginners, especially those stepping into the world of business for the first time, understanding this perspective is crucial. Cuban’s advice isn’t about discouraging ambition—it’s about being strategic and protecting your financial future.
The Problem with Low-Barrier-to-Entry Ventures
Low-barrier-to-entry businesses—like restaurants, clothing labels, or liquor brands—are appealing because they seem accessible. Anyone with enough capital can open a restaurant, launch a fashion line, or create a spirit brand.
But this accessibility is exactly what makes them risky. When anyone can enter a market, everyone will, leading to oversaturation and razor-thin profit margins.
Take the restaurant industry as an example. According to the National Restaurant Association, 60% of new restaurants fail within the first year, and 80% close within five years.
Why? Because the barriers to entry are low, leading to a flood of competitors, most of whom lack the expertise to navigate tight margins, labor issues, and fluctuating food costs.
Similarly, launching a clothing label is no longer about skill or craftsmanship—it’s about breaking through the noise of thousands of other brands using the same online platforms to sell to the same audience.
Music labels or liquor brands face similar issues. For instance, many celebrities have launched tequila brands, but only a handful, like George Clooney’s Casamigos, succeed at scale.
The rest struggle because there’s nothing preventing someone else from doing the same thing, creating endless competition.
High-Barrier-to-Entry Ventures Are the Smarter Play
Cuban emphasizes the importance of focusing on investments with high barriers to entry. These are industries or opportunities that require significant expertise, resources, or innovation to succeed, effectively weeding out less-prepared competitors.
Examples include advanced technologies, specialized manufacturing, or industries with complex regulatory hurdles, like pharmaceuticals.
A great real-world example is Cuban’s own journey. He made his billions by co-founding Broadcast.com, a pioneering internet radio company. The tech space had higher barriers to entry—it required technical knowledge, infrastructure, and an innovative edge.
As a result, his business wasn’t competing with thousands of others; it was innovating in a relatively untapped field.
Another example is Tesla, which thrives in the electric vehicle space because of the immense barriers to entry in automotive manufacturing.
From building a production line to securing raw materials for batteries, entering this space is nearly impossible without billions of dollars and years of expertise. Compare that to starting a coffee shop, and you see the advantage.
Why Beginners Should Think Strategically
For beginners, Cuban’s advice may feel counterintuitive. After all, low-barrier ventures seem easier and more approachable. But that’s the trap: these ventures are easy to enter but hard to sustain.
Instead, aspiring entrepreneurs and investors should think long-term and ask themselves, "What will make my investment hard to copy?"
One approach is to invest in your skills and knowledge, which create personal barriers to entry. For example, becoming an expert in coding, digital marketing, or supply chain logistics gives you a competitive edge in fields that require these skills.
Cuban himself has emphasized that knowledge compounds over time, making you an irreplaceable part of your venture.
Another strategy is to look for industries where demand is growing, but entry still requires effort and expertise.
For example, the renewable energy sector is expanding rapidly, but succeeding in it requires navigating regulatory frameworks, understanding the technology, and having substantial capital.
Similarly, blockchain technologies are complex and require deep knowledge, creating barriers that deter casual competitors.
The Role of Risk Management
Cuban’s warning about low-barrier ventures ties into a larger theme: financial risk management. As he notes, one injury—like a broken ankle for an athlete—can end a career.
Similarly, investing your savings in ventures prone to failure is a financial injury waiting to happen. According to CB Insights, 38% of startup failures are due to running out of cash, a common problem when people overestimate their ability to survive competitive markets.
For beginners, this means diversifying and taking calculated risks. Instead of sinking your savings into a trendy venture like a café or clothing brand, consider spreading your investments.
For instance, putting money into low-cost index funds while working on a high-barrier business idea allows you to build financial stability and long-term growth.
Cuban’s Lesson in Practicality
Mark Cuban’s advice boils down to this: Think beyond what seems easy. Low-barrier-to-entry ventures lure you in with simplicity but rarely offer the security or growth potential of high-barrier opportunities. Instead, focus on building or entering businesses where you can create or leverage a competitive advantage.
This doesn’t mean you can’t pursue your passions. If you dream of starting a restaurant, do it smartly—partner with experts, differentiate your concept, or bring something new to the table.
But understand the risks, and don’t gamble everything on a venture just because it looks straightforward. As Cuban might put it, “If it’s too easy to start, it’s probably too easy to fail.”
But what if you’ve already invested in a low-barrier-to-entry venture?
If you’ve already invested in a low-barrier-to-entry venture, don’t panic—it’s still possible to succeed with the right approach. The key is standing out in a crowded market by offering something unique.
Focus on what sets your business apart, like a signature product, exceptional service, or a niche audience. For example, Patagonia thrives by aligning its brand with sustainability and outdoor lifestyles, creating a loyal customer base.
Next, aim for operational excellence. Small improvements in cost management, supply chain efficiency, or customer service can boost profits. Look at how Amazon started as a simple online bookstore but dominated through relentless efficiency and innovation.
Leverage technology to outpace competitors. Using tools like AI for marketing or inventory management can give you a significant edge.
Similarly, building strong customer loyalty through rewards programs or personalized experiences can protect your business in a saturated market, much like Starbucks.
If growth feels limited, consider diversifying gradually. Use insights and cash flow from your current business to expand into harder-to-replicate areas, such as proprietary designs or specialized services. Even if the venture doesn’t work out as planned, treat it as a learning experience for your next move.
Mark Cuban’s advice is clear: success in low-barrier industries requires strategy, innovation, and differentiation. While these ventures are tougher to sustain, with smart decisions and focus, you can still carve out a path to profitability.