When we sold our startup in 1998 I suddenly got a lot of money. I now had to think about something I hadn't had to think about before: how not to lose it. I knew it was possible to go from rich to poor, just as it was possible to go from poor to rich. But while I'd spent a lot of the past several years studying the paths from poor to rich, I knew practically nothing about the paths from rich to poor. Now, in order to avoid them, I had to learn where they were.
So I started to pay attention to how fortunes are lost. If you'd asked me as a kid how rich people became poor, I'd have said by spending all their money. That's how it happens in books and movies, because that's the colorful way to do it. But in fact the way most fortunes are lost is not through excessive expenditure, but through bad investments.
It's hard to spend a fortune without noticing. Someone with ordinary tastes would find it hard to blow through more than a few tens of thousands of dollars without thinking "wow, I'm spending a lot of money." Whereas if you start trading derivatives, you can lose a million dollars (as much as you want, really) in the blink of an eye.
In most people's minds, spending money on luxuries sets off alarms that making investments doesn't. Luxuries seem self-indulgent. And unless you got the money by inheriting it or winning a lottery, you've already been thoroughly trained that self-indulgence leads to trouble. Investing bypasses those alarms. You're not spending the money; you're just moving it from one asset to another. Which is why people trying to sell you expensive things say "it's an investment."
The solution is to develop new alarms. This can be a tricky business, because while the alarms that prevent you from overspending are so basic that they may even be in our DNA, the ones that prevent you from making bad investments have to be learned, and are sometimes fairly counterintuitive.
A few days ago I realized something surprising: the situation with time is much the same as with money. The most dangerous way to lose time is not to spend it having fun, but to spend it doing fake work. When you spend time having fun, you know you're being self-indulgent. Alarms start to go off fairly quickly. If I woke up one morning and sat down on the sofa and watched TV all day, I'd feel like something was terribly wrong. Just thinking about it makes me wince. I'd start to feel uncomfortable after sitting on a sofa watching TV for 2 hours, let alone a whole day.
And yet I've definitely had days when I might as well have sat in front of a TV all day—days at the end of which, if I asked myself what I got done that day, the answer would have been: basically, nothing. I feel bad after these days too, but nothing like as bad as I'd feel if I spent the whole day on the sofa watching TV. If I spent a whole day watching TV I'd feel like I was descending into perdition. But the same alarms don't go off on the days when I get nothing done, because I'm doing stuff that seems, superficially, like real work. Dealing with email, for example. You do it sitting at a desk. It's not fun. So it must be work.
With time, as with money, avoiding pleasure is no longer enough to protect you. It probably was enough to protect hunter-gatherers, and perhaps all pre-industrial societies. So nature and nurture combine to make us avoid self-indulgence. But the world has gotten more complicated: the most dangerous traps now are new behaviors that bypass our alarms about self-indulgence by mimicking more virtuous types. And the worst thing is, they're not even fun.
Showing posts with label money. Show all posts
Showing posts with label money. Show all posts
Soccer is not a game anymore - and it hasn't been for a very long time. Non-profit organization FIFA alone raked in 3.2 billion dollar during the Soccer Worldcup 2010 cycle (2007 - 2010) and has budgeted for an income of 3.8 billion dollar for the upcoming cycle. With that kind of money it is only a matter of time before criminals step in and try to take their share - which they have, in plenty.
For starters there is of course FIFA itself, with its doubtful methods of protecting its income. For example, sponsor Budweiser is the only beer allowed at soccer worldcup venues. So when a group of Dutch women tried to attend the games dressed in the orange mini skirts bearing the brand name of small Dutch brewer Bavaira, they were summarily arrested and jailed through a law that had been drawn up for the occasion in response to demands from FIFA. Seeing as about 30% of FIFA's income is derived from sponsorships, FIFA will stop at nothing in order to protect its sponsorship deals. Which is easy, because when politicans smell money and glory (both of which come with hosting a soccer world cup event) they are happy to bend over if that will help them to join the fun.
Another important player is the so-called "betting mafia" which has prompted FIFA to establish an early warning system that monitors around 400 major bookmakers world-wide for signs of match fixing. And then there are the small traders who try to sell merchandise that hasn't been bought from FIFA wholesalers at ridiculous prices, which FIFA also counts among the criminals.
But that is by no means the worst - at least not in terms of human suffering. Much more misery can be found in West Afrika, something that has increased during recent years thanks, in no small part thanks to the soccer world cup games being hosted in Africa. Countries like Nigeria, Ivory Coast and Ghana, to name a few, appear to offer an excellent soccer climate: they have provided the world with numerous brilliant (and promising) players. African soccer prodigies are a popular import product with European clubs. Soccer players are merchandise - merchandise with considerable value. For the merchandise this trade doesn't always end well. But even more serious is that in West Africa, where there is trade, crime is never far away.
In the slums of West Africa you will find no jobs, no food, and no plumbing. What you will find is thousands of young men who, for lack of a better occupation, spend their days practicing with a football, and drreaming of being discovered by one of the prestigious Europan clubs. Deep down inside they know that it takes more than some agility and ball handling skills to become a big soccer star, but in the face of the misery that is their daily lives they are more than happy to ignore that reality. As if to to attend that shortcoming, there are countless "soccer academies" around who promise to train up these aspiring young football talents into full-fledged players. At a price, of course... but often families are willing to give up everything, spend whatever savings they may have and sell what little they own, in order to give one of their children a chance for fame and glory, a decent future, and an income that would feed them all and then some. But the sad reality is that the "football academy" always turns out to be a miserable slum that the aspiring hopeful young soccer talents will never leave. Technically one may not call it slavery as such, since the victims are not property in a formal sense, but de facto it is, and at the very least this is to be classified as human trafficking, - although "inhuman" would be a better term. Criminal fraudsters usually pretend to be talent scouts representing the best European football clubs (especially British clubs seem to be popular) and promist a golden future in European soccer - as long as the "expenses" get paid up front. But instead of a golden future the victims end up in apalling conditions where most of them are stuck for life.
An interesting documentary on the subject is "Soccer's lost boys" (of which, unfortunately, I can only find a trailer on the 'web (suggestions, anyone?) and Aljazeera is currently running an episode of their series "People and power" on it, which can be viewed online (at least at this time of writing) and which I heartily recommend.
Update: A full version of "Soccer's lost boys" can be seen here.
For starters there is of course FIFA itself, with its doubtful methods of protecting its income. For example, sponsor Budweiser is the only beer allowed at soccer worldcup venues. So when a group of Dutch women tried to attend the games dressed in the orange mini skirts bearing the brand name of small Dutch brewer Bavaira, they were summarily arrested and jailed through a law that had been drawn up for the occasion in response to demands from FIFA. Seeing as about 30% of FIFA's income is derived from sponsorships, FIFA will stop at nothing in order to protect its sponsorship deals. Which is easy, because when politicans smell money and glory (both of which come with hosting a soccer world cup event) they are happy to bend over if that will help them to join the fun.
Another important player is the so-called "betting mafia" which has prompted FIFA to establish an early warning system that monitors around 400 major bookmakers world-wide for signs of match fixing. And then there are the small traders who try to sell merchandise that hasn't been bought from FIFA wholesalers at ridiculous prices, which FIFA also counts among the criminals.
But that is by no means the worst - at least not in terms of human suffering. Much more misery can be found in West Afrika, something that has increased during recent years thanks, in no small part thanks to the soccer world cup games being hosted in Africa. Countries like Nigeria, Ivory Coast and Ghana, to name a few, appear to offer an excellent soccer climate: they have provided the world with numerous brilliant (and promising) players. African soccer prodigies are a popular import product with European clubs. Soccer players are merchandise - merchandise with considerable value. For the merchandise this trade doesn't always end well. But even more serious is that in West Africa, where there is trade, crime is never far away.
In the slums of West Africa you will find no jobs, no food, and no plumbing. What you will find is thousands of young men who, for lack of a better occupation, spend their days practicing with a football, and drreaming of being discovered by one of the prestigious Europan clubs. Deep down inside they know that it takes more than some agility and ball handling skills to become a big soccer star, but in the face of the misery that is their daily lives they are more than happy to ignore that reality. As if to to attend that shortcoming, there are countless "soccer academies" around who promise to train up these aspiring young football talents into full-fledged players. At a price, of course... but often families are willing to give up everything, spend whatever savings they may have and sell what little they own, in order to give one of their children a chance for fame and glory, a decent future, and an income that would feed them all and then some. But the sad reality is that the "football academy" always turns out to be a miserable slum that the aspiring hopeful young soccer talents will never leave. Technically one may not call it slavery as such, since the victims are not property in a formal sense, but de facto it is, and at the very least this is to be classified as human trafficking, - although "inhuman" would be a better term. Criminal fraudsters usually pretend to be talent scouts representing the best European football clubs (especially British clubs seem to be popular) and promist a golden future in European soccer - as long as the "expenses" get paid up front. But instead of a golden future the victims end up in apalling conditions where most of them are stuck for life.
An interesting documentary on the subject is "Soccer's lost boys" (of which, unfortunately, I can only find a trailer on the 'web (suggestions, anyone?) and Aljazeera is currently running an episode of their series "People and power" on it, which can be viewed online (at least at this time of writing) and which I heartily recommend.
Update: A full version of "Soccer's lost boys" can be seen here.
1. Determination
This has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. That's the myth in the Valley. And certainly you don't want founders to be stupid. But as long as you're over a certain threshold of intelligence, what matters most is determination. You're going to hit a lot of obstacles. You can't be the sort of person who gets demoralized easily.
Bill Clerico and Rich Aberman of WePay are a good example. They're doing a finance startup, which means endless negotiations with big, bureaucratic companies. When you're starting a startup that depends on deals with big companies to exist, it often feels like they're trying to ignore you out of existence. But when Bill Clerico starts calling you, you may as well do what he asks, because he is not going away.
2. Flexibility
You do not however want the sort of determination implied by phrases like "don't give up on your dreams." The world of startups is so unpredictable that you need to be able to modify your dreams on the fly. The best metaphor I've found for the combination of determination and flexibility you need is a running back. He's determined to get downfield, but at any given moment he may need to go sideways or even backwards to get there.
The current record holder for flexibility may be Daniel Gross of Greplin. He applied to YC with some bad ecommerce idea. We told him we'd fund him if he did something else. He thought for a second, and said ok. He then went through two more ideas before settling on Greplin. He'd only been working on it for a couple days when he presented to investors at Demo Day, but he got a lot of interest. He always seems to land on his feet.
3. Imagination
Intelligence does matter a lot of course. It seems like the type that matters most is imagination. It's not so important to be able to solve predefined problems quickly as to be able to come up with surprising new ideas. In the startup world, most good ideas seem bad initially. If they were obviously good, someone would already be doing them. So you need the kind of intelligence that produces ideas with just the right level of craziness.
Airbnb is that kind of idea. In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places. We funded them because we liked the founders so much. As soon as we heard they'd been supporting themselves by selling Obama and McCain branded breakfast cereal, they were in. And it turned out the idea was on the right side of crazy after all.
4. Naughtiness
Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination.
Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage—hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.
5. Friendship
Empirically it seems to be hard to start a startup with just one founder. Most of the big successes have two or three. And the relationship between the founders has to be strong. They must genuinely like one another, and work well together. Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be.
Emmett Shear and Justin Kan of Justin.tv are a good example of close friends who work well together. They've known each other since second grade. They can practically read one another's minds. I'm sure they argue, like all founders, but I have never once sensed any unresolved tension between them.
This has turned out to be the most important quality in startup founders. We thought when we started Y Combinator that the most important quality would be intelligence. That's the myth in the Valley. And certainly you don't want founders to be stupid. But as long as you're over a certain threshold of intelligence, what matters most is determination. You're going to hit a lot of obstacles. You can't be the sort of person who gets demoralized easily.
Bill Clerico and Rich Aberman of WePay are a good example. They're doing a finance startup, which means endless negotiations with big, bureaucratic companies. When you're starting a startup that depends on deals with big companies to exist, it often feels like they're trying to ignore you out of existence. But when Bill Clerico starts calling you, you may as well do what he asks, because he is not going away.
2. Flexibility
You do not however want the sort of determination implied by phrases like "don't give up on your dreams." The world of startups is so unpredictable that you need to be able to modify your dreams on the fly. The best metaphor I've found for the combination of determination and flexibility you need is a running back. He's determined to get downfield, but at any given moment he may need to go sideways or even backwards to get there.
The current record holder for flexibility may be Daniel Gross of Greplin. He applied to YC with some bad ecommerce idea. We told him we'd fund him if he did something else. He thought for a second, and said ok. He then went through two more ideas before settling on Greplin. He'd only been working on it for a couple days when he presented to investors at Demo Day, but he got a lot of interest. He always seems to land on his feet.
3. Imagination
Intelligence does matter a lot of course. It seems like the type that matters most is imagination. It's not so important to be able to solve predefined problems quickly as to be able to come up with surprising new ideas. In the startup world, most good ideas seem bad initially. If they were obviously good, someone would already be doing them. So you need the kind of intelligence that produces ideas with just the right level of craziness.
Airbnb is that kind of idea. In fact, when we funded Airbnb, we thought it was too crazy. We couldn't believe large numbers of people would want to stay in other people's places. We funded them because we liked the founders so much. As soon as we heard they'd been supporting themselves by selling Obama and McCain branded breakfast cereal, they were in. And it turned out the idea was on the right side of crazy after all.
4. Naughtiness
Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination.
Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage—hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.
5. Friendship
Empirically it seems to be hard to start a startup with just one founder. Most of the big successes have two or three. And the relationship between the founders has to be strong. They must genuinely like one another, and work well together. Startups do to the relationship between the founders what a dog does to a sock: if it can be pulled apart, it will be.
Emmett Shear and Justin Kan of Justin.tv are a good example of close friends who work well together. They've known each other since second grade. They can practically read one another's minds. I'm sure they argue, like all founders, but I have never once sensed any unresolved tension between them.
Subscribe to:
Posts (Atom)
