Saturday, January 13, 2007

My First $1,000

My old friend Auren Hoffman has tagged me with yet another blog tag--this time, it's to tell the story of your first $1,000.

Alas, my story won't be as interesting as Auren's tale of baseball card trading.

You see, I was down in Baja California when I felt a strange hand tugging on my stainless steel harness....

Nah, just kidding.

I actually made my first $1,000 (not counting various scholarships and the like) as--brace yourself--a teacher.

In my final year at Stanford, I became a teacher of public speaking in the School of Engineering's Technical Communications Program. The TCP is an unusual but extremely successful program in which student teachers (mostly liberal arts undergrads) teach a graduate-level course (doing all the work including final exams and grading with essentially no faculty supervision) to Engineering grad students and Stanford business school students.

As an added bonus, since I started school young, I was 19 when I started teaching the course.

In the end, I loved the experience, and ironically enough, teaching the class helped me take my public speaking to the next level. (The less kind would say that it simply made me even more verbose than before!) When you're a 19-year-old teaching a class of 50 graduate students, you grow up fast!

At the munificent sum of $10 per hour (back then, this was real money--several of my fellow teachers actually made a living after graduation from this program) I made roughly $200 per week.

I would like to return to teaching someday (hopefully at a higher salary!) but I'm afraid it will have to wait a few more years. I've still got a few more companies in me yet!

Competence, Self-Esteem Keys To Happiness

(Note: This story was emailed to me by a friend. It originally appeared 2/12/2001. Remarkably, it no longer appears anywhere on the Internet. I believe its message is important, especially given my recent post on consumerism and envy, so I'm re-posting it.)

Competence, Self-Esteem Keys to Happiness
By Charnicia E. Huggins

NEW YORK (Reuters Health) - Fame and fortune might be appealing, but new study findings suggest that they do little to fulfill one's psychological needs. Competence and autonomy, on the other hand, are essential in the pursuit of happiness, researchers say.

"People aren't very satisfied by money, luxury, popularity, and influence, even when they get them,'' study author Dr. Kennon M. Sheldon, of the University of Missouri-Columbia, told Reuters Health.

"What really does it for people is engagement in self-chosen or personally meaningful activities (autonomy), in which they are reasonably effective or skillful (competence), and which also permit them to connect with or contribute to others (relatedness).''

In two separate studies, Sheldon and his colleagues tried to find the basis of happiness by asking groups of students to describe the "single most personally satisfying event'' they experienced during the previous month and week.

One of the studies included a comparison between a group of American students and a group of students from South Korea.

Study results, published in the February issue of Journal of Personality and Social Psychology, show that the students consistently identified self-esteem, relatedness, autonomy, and competence as the top four elements key to satisfying experiences.

The South Korean students ordered the qualities differently, being more likely than the American students to place relatedness at the top of their list of psychological needs.

Certain needs may be "universal to humans in general, but the relative salience that people place on them depends on the extent to which their cultures encourage and support those needs,'' Sheldon and his team explain.

In a third study, Sheldon's group asked students to identify their most unsatisfying event experienced during a semester. One example of an unsatisfying event was a student who "broke up with a girlfriend of 2 years, 8 months.''

Similar to the results of the first two studies, the students responded with descriptions of events that did not meet their self-esteem, relatedness, autonomy, and competence needs, the report indicates.

In all three of the studies students rated money or luxury as least important to achieving personal satisfaction--ie. happiness, the authors note.

"People KNOW that money and notoriety aren't 'it,''' Sheldon said. "That's why we all recognize it when we hear it, why it seems to make so much sense.''

"But we forget,'' he said. "We forget to check in with ourselves, to feel what's really important, what's right, what's real (a capacity we all have).''

To help individuals prioritize their psychological needs, Sheldon offers the following advice:

"Step back and ask yourself ''how am I feeling, is what I'm doing meaningful to me, right now?''
"If the answer is 'no,' make changes,'' he suggested.

Quote of the Day: Reason and the Best Solution

"The idea that good decisions should be made by consensus reflects a view popular since the Enlightenment, that in an environment of free exchange of ideas, Reason should always guide us to the Best Solution. In fact, only a minute number of essentially technical problems have a single best solution. The more complex problems of everyday living have a host of solutions, many of them equally good alternatives backed by equally valid arguments. People of good faith, good intelligence, and sound reason often differ profoundly on which of these alternatives to pursue."

--Daniel Greenberg, Sudbury Valley School

Friday, January 12, 2007

I Love PAMF (a tale of medicine done right)

We hear so many complaints about the medical system in this country, when it works, it can be pretty darn good. This post is a tribute to the Palo Alto Medical Foundation (PAMF).

My little girl started coughing and had a fever on Wednesday. Yesterday, after being better for most of the day, her fever started getting worse. By 6:30, she had a fever that (according to the ear thermometer at least) read 105 degrees F.

Now all of you parents have probably gone through this calculation before--how sick is my child? Can it wait until morning? Do I have to go to the emergency room and wait for hours?

Instead, I called the special advice line and left a message with my concerns. Less than an hour later, a doctor called back to discuss the situation, and recommended that I bring her in. Because PAMF is open until 9PM, the doctor told me to come right in. We were in a waiting room by 8 PM with a nurse taking her temperature.

When the doctor came in, he examined her and though she might have pneumonia. So using the computerized system, he quickly ordered up a chest X-ray. 5 minutes later, an X-ray technician led us about 200 feet down the hall to the X-ray machine. Another 5 minutes later, we were back in the waiting room, talking with the doctor (but not before the tech showed my daughter and I the X-rays on his computer screen).

The doctor showed us the pictures on his screen, explained the indications of pneumonia, and wrote an electronic prescription for antibiotics. After checking the time and informing me that all non-24-hour pharmacies closed at 9 PM, he sent the prescription electronically to a 24-hour Walgreens. We were home 8:50 PM, and 10 minutes later, when I arrived at the pharmacy, they were already putting together the prescription.

Alas, one thing that PAMF can't do is stay up with your sick child; I had a restless night helping my daughter sleep (in the end, she slept on top of my chest!), but I'm very glad that she was able to start her antibiotics last night.

It's nice when something really works. Not only did PAMF perform well above my expectations, every person along the way was kind, reassuring, and went out of their way to communicate expectations and reasons. Can you do the same in your business?

(This post partially inspired by Jackie Danicki's tales of the NHS in the UK. Anyone for socialized medicine?)

Thursday, January 11, 2007

The Real Story Behind Mike Arrington and Nick Denton

As my last post on money, envy, and New Yorkers noted, I worry that the creeping culture of celebrity and consumerism is slowly winding its tentacles around the Valley.

There's no greater sign of this than the trend towards personality-driven feuds between bloggers, which, despite a patina of respectability, are no different in principle than the latest Paris Hilton-Lindsay Lohan "firecrotch" bitchslap.

And like said celebrity feuds, I can't help but wonder if these contretemps are staged by the combatants' flacks, just to attract more ink.

For example, take the extended fracas between Web 2.0 kingmaker Mike Arrington and gossip impresario Nick Denton. After Denton's gossip rag Valleywag shifted its coverage from its original staple of "Executive Wife Hot Or Not" to Web 2.0 coverage, the virtual tabloid has been beating Arrington like a drum, with a seemingly endless series of scathing posts.

Not to be outdone, Arrington fired back on TechCrunch by writing about Denton's inability to outdo his own alleged Nemesis, Jason Calacanis.

Personally, I'm pretty sure all of these conflicts are part of a master plan to suck in coverage. And sadly, it seems to be working, as this post demonstrates.

But, I finally have a smoking gun--visual proof of Arrington and Denton's true relationship!* Take a look for yourself:

I do like happy endings.

* Obviously, this is not actually a real video...but it could be!

Tuesday, January 09, 2007

I Love Jott/God Bless the Internet

Many of my friends have heard me use the phrase, "God bless the Internet" when it comes to the incredible variety of free and useful services available today.

One of the services that I've been digging the most recently is Jott. (Disclosure: I am not an investor in Jott. I am not an employee of Jott. I don't know anyone at Jott. I don't even think I know any of the investors. In other words, this is a completely unbiased plug!)

What Jott does is simple: Once you set up a Jott account, you can call the special Jott telephone line, and leave yourself a brief (~15 seconds) message. Jott automatically converts your message into text and emails it to you (though you can log into their Web site to listen to a recording). That's it.

The reason I find Jott so incredibly useful is that I do so much of my thinking in the car, or on the move. While I have a digital voice recorder to leave notes to self (a la Norm MacDonald), the effort required to actually replay the messages and transcribe them leaves them languishing in the car for weeks, or even months.

Jott takes my thoughts and puts them in the most easily usable form--email. It's free, it's simple, and it's reliable. I have no idea how on Earth they'll manage to make money (untargeted audio ads don't seem like a reliable revenue stream), so all I can say is...God bless the Internet!

Optimizing, Satisficing, and the #1 Finance Move To Make

Normally, I let my buddy Ramit do the personal finance blogging, but recent events compelled me to write at least one quick post.

Over the holidays, I had dinner with an old friend of mine, a brillant and wonderful man with degrees from Stanford and Yale Law School. He is a partner in a prominent law firm, and one of the smartest people I know.

He confessed to me, "I have $200,000 in cash sitting in my bank account because I'm just not sure what to do with it."

Now my friend is clearly smart enough to know what to do with his money. In fact, the problem is that he is too smart. Like many smart people, he is trying to optimize rather than satisfice his finances.

Satisficing is a crucial concept--it means settling for "good enough" rather than trying to achieve the perfect.

For 34 years, Burton Malkiel has been preaching the values of satisficing in personal finance. All you have to do is to invest your money in low-cost index funds, and wait. As Malkiel notes:

“An investor with $10,000 at the start of 1969 who invested in a Standard & Poor’s 500-stock index fund would have had a portfolio worth $422,000 by 2006, assuming that all dividends were reinvested,” Mr. Malkiel writes. “A second investor who instead purchased shares in the average actively managed fund would have seen his investment grow to $284,000.”

That, he says, proves both the advantage of index funds and his underlying premise, which is expressed in the book’s title. Stock prices, Mr. Malkiel says, follow a random walk, “one in which future steps or directions cannot be predicted on the basis of past actions.”

This means that “investment advisory services, earnings predictions and complicated chart patterns are useless,” he says. His recommendation is to buy stocks and to hold on for the long term. History shows that you will be rewarded: over time, earnings and dividends tend to increase, driving prices higher.

My advice to my friend was simple: Just put your money into a simple asset allocation fund that splits its investment between stocks and bonds, and stop worrying.

But my dirty little secret is that I realized that I wasn't taking my own advice. Instead, I had constructed a wildly complicated Excel spreadsheet based on value-averaging to split my money between every imaginable asset class in order to squeeze out the best possible risk-adjusted returns.

Naturally, when my life got busy, I failed to carefully rebalance my funds every 3 months, per my model, and I had actually built up quite a cash position myself.

In reality, I too was optimizing, and doing it rather poorly. I'd probably have twice as much money today if I just stopped trying to outsmart myself.

So I resolved to myself to stop worrying about the optimal solution and market timing, and just take my own good advice. Last week, I poured my cash into a simple asset allocation fund, and I plan to forget all about it.

In the end, if you're an entrepreneur, focus on building your company, not managing your money. Pick the good enough solution that lets you sleep at night and spend your time on the things that really matter.

Sunday, January 07, 2007

Money, Envy, And Why New Yorkers Are Crazy

For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. (Timothy 6:10)

It may seem strange for an arch-capitalist and entrepreneur to decry the love of money, but please bear with me.

I recently read a series of articles in New York Magazine called Money: New York's Have-Lots and Have Nots. While these articles are well-written and entertaining, they left me filled with fear and loathing, convinced that there is something terribly wrong with the American relationship with money.

The problem with American culture isn't a love of money per se, it is a love of consumption. Article after article described in loving detail the gloriously narcissistic spending of New Yorkers (spending, which to my eye, looked absolutely insane).

Alex and Michelle, both 27, are in almost identical financial situations—similar salaries, similar spending habits—and are seemingly all the closer for it. When they go shopping together, they try on everything, pretending they can afford it all but purchasing just one or two items. Both guessed they spend about $500 a month on clothes and beauty products. Alex jokes about how her savings account isn’t really for putting money away, “it’s just sort of like delayed spending.” Michelle—who’s single and happy to live in her Soho studio for many more years—doesn’t think twice about this lifestyle. “Unfortunately, I have good taste” is how she put it, as serious as she was sarcastic.

As my friend, personal finance guru Ramit Sethi might put it, WTF? 27-year-olds spending $6,000 per year on clothes and beauty products?

Or how about this little gem of a passage:

You went to the ATM two days ago and suddenly you’re there again, trying to remember how it went so fast (oh, yeah, that . . . $46 you blew on vodka-and-sodas). Our spending patterns, if we think about them, tend toward the irrational—we drop . . . $200 on jeans, then agonize over whether to take a cab or the subway home. And we wonder, How does everyone else do it?

Or how about our obssession with the super-rich, such as this secret nightclub for models and billionaires:

Deep in the wilds of Chelsea, there is a door. The door has a screen, and the jet-black eye of a promoter behind that screen, peeping out to gauge your social viability. Are you a model? Or a billionaire? It will be hard to get in otherwise.

My point is not to decry this spending (though I must admit, this really makes me sick). I'm not one of those nutjobs who believe that people should donate any income above $30,000 a year and give away all their possessions. As far as I'm concerned, whether you made your money or inherited it in a trust fund from your robber baron ancestors, it's YOUR MONEY, and you should be free to do whatever you like with it, whether that's giving it to starving African children or blowing it on overpriced cocktails in a vain attempt to bed attractive young women.

Rather, it's to warn you, the entrepreneur, against consuming this sort of consumerist tripe.

I'm a pretty Zen kind of guy. I know that extrinisic aspirations like being rich, famous, and good-looking don't bring happiness, even when fulfilled. I know that wealth beyond a certain level (say, $50,000 per year) does not bring increased happiness. As Daniel Gilbert puts it in Harvard Magazine:

“The difference between an annual income of $5,000 and one of $50,000 is dramatic. But going from $50,000 to $50 million will not dramatically affect happiness. It’s like eating pancakes: the first one is delicious, the second one is good, the third OK. By the fifth pancake, you’re at a point where an infinite number more pancakes will not satisfy you to any greater degree. But no one stops earning money or striving for more money after they reach $50,000.”

Yet despite all these fine beliefs and intentions, I found myself thinking things like, "Damn, I'm 32 years old, and I don't make $700,000 per year."

And if I'm thinking it, what might other readers be thinking?

I've often joked that the two things that have hurt American women more than any other are women's magazines and "Sex in the City." You couldn't design a more penicious and orgiastic glorification of spending and consumption, or an entertainment more perfectly adapted for inducing feelings of inadequacy and greed.

Yet while New York Magazine appeals to a more upscale crowd, it is all too similar to its consumerist cousins in its effects. This is consumer porn at its worst, and while I enjoyed reading the articles, I felt the same afterwards as if I had eaten a giant bag of Doritos: Full of calories, self-loathing, and some kind of artificial and probably carcinogenic substance that nature never intended.

I can't help but wonder if one of the reasons that Silicon Valley has been so successful as a high-tech hub (in comparison to New York) is the lack of the same consumerist culture. After all, the richest guy I know, a Google billionaire, still lives in the same rented apartment in Mountain View as when he was a grad student. And Priuses have largely replaced the Ferraris so common in the 1980s.

Yet even in this Valley of Heart's Delight, the creeping spectre of consumption holds sway. New players like Nick Denton's Valleywag bring a tabloid-style emphasis on the lifestyles of the rich and semi-famous, while old-school Gentry Magazine continues to be a purveyor of the wonders of the seven-car garage.

Of course, I'm not going to call for the abolition of our celebritard culture. After all, it's not as if there's some giant media conspiracy to use the Brad Pitt-Angeline Jolie saga to distract us from unconstitutional shennanigans (or is there?). To quote the immortal Walt Kelly, we have met the enemy and he is us. The National Enquirer, Cosmopolitan, and New York Magazine exist because we buy them. And to tell you the truth, I'm not ready to give up my Weekly World News bat-boy fix either.

All I'm suggesting is that you, the entrepreneur and discerning reader, be aware of what's going on when you read the latest about Larry's yacht or yet another Yelp party. Sometimes, you just have to know when to put down that bag of Doritos.