It’s Never Too Late to Pivot a Career

My wife and I just went to see Ready Player One in the theaters. It blew my mind. I understand why it won’t be everyone’s cup of tea, but it has a tight plot and pays loving homage to tropes, characters, and memes dear to gamers worldwide. We all need our heroes, and the early creators of video games are underappreciated today for their contributions to the field, though their influence was as great as J.R.R. Tolkien.

On a personal finance note, what interested me about the movie was the situation of the author. His Wikipedia article can be summarized as such:

  • Currently 46 years old
  • For most of his youth, was an amateur stand up poet, of no particular note
  • In his mid 20s, transitioned to becoming a screenwriter, without much critical/commercial success
  • In 2010 at age 38, he wrote a novel for the first time and it became a rip roaring success
  • At the same time, he was able to monetize it further by selling the film rights and even writing the screenplay

What can we learn from him?

  • You just need to hit one home run to make it big (unwritten, but we can assume that he tried to sell publishers on other manuscripts which were rejected, before his big break)
  • It’s never too old to transition your career (he actually did it multiple times, from poet to screenwriter to author)
  • You can derive unexpected synergies from past careers (writing the screenplay on his bestselling book, and probably his experience with movie pacing led to a good book)
  • When you do have a success, monetize the crap out of it before it recedes from public memory

Armed with that confidence boost, now you too can go out there and write the next bestseller.


Think Ahead to Minimize Regrets

Three articles today, all with the same theme about regrets. Each has a different story to tell regarding personal finance.

  1. Going without a car. It’s easy to do in a big metro area with good public transportation. We all know that. Still, the author does a good job crunching the numbers on how much saving they derive, and how to compensate for the lack of a car when you’re out in the countryside and want to visit natural parks or get groceries.
  2. Bride regrets her expensive wedding. This does hit home due to my recent wedding. In planning my wedding, I had an ongoing conversation with my now wife about costs. We are both frugal people, and in the end came to a happy balance where we were able to have a quality memorable experience by not skimping on the things that matter while not fretting about minutia.
  3. Letting go of FOMO. Also known as “fear of missing out” – it’s supposedly big with the millennial crowd. My personal experience with Bitcoin was reading the first summary of its original release posting on Slashdot, back when I followed tech news religiously. In this article, various academic elite all comment on why they, and many other experts, missed the Bitcoin bubble. Yes, many of them thoughtfully evaluated the technology very early on, like I did, and concluded that it had minimal value except as a tool for money laundering and other illegal activities. None of us really entertained buying because we knew the intrinsic value was likely close to zero. Still, it’s not easy to have that kind of lottery ticket regret when you recognize a bubble early and could have ridden it. The article does suggest ways to mentally cope; perhaps the best one was that other experts similar dismissed it too.

Can You Avoid Paying Income Tax?

Elon Musk is depressed from overwork, just like many American his age. This is why your life goal should be to strive for full financial freedom by creating enough income streams such that your needs are fully met without you having to devote your time to it.

If you’ve read my book, you’ll know that I’ve identified being a digital nomad operating your own online business as one of the best ways to achieve that end. While I was pondering this, I wondered if there was a loophole in the system, a backdoor lifehack to circumvent existing laws regarding residence, territoriality, and taxation. That is, can you avoid paying all income tax completely?

As it turns out, others have wondered the same thing. Basically, most countries will not tax you if you haven’t lived in that country for a certain amount of time to qualify for residence. Usually it’s something close to  less than half of the calendar year. By staying below that level,  you avoid being considered a tax resident of that country. The US is a little different, being one of only two countries (along with Eritrea) to tax you on worldwide income regardless of residence, though it does give a foreign earned income exclusion.

The loophole is due to laws regarding residence and taxation that have not yet caught up with modern innovations in travel, communication, and technology. Before with income tied to jobs which were tied to location, countries can get their share of tax from your employer or from you based on your residence (if you operated a small business, for instance). However, now we have online web businesses that we can run from anywhere in the world. If governments can’t tax us at the source of production (because the business is “based” in a tax haven) or by residence (due to the digital nomad being constantly on the roam, never staying long enough in any country to gain residence), we’re free from all income tax.

As an example, let’s take a British citizen who wants to start a web business offering cultural sensitivity consulting to large established companies. This adventurous individual incorporates in Bermuda or the Cayman Islands, and then proceeds to travel the world, never staying long enough in any single place to owe taxes. This is made easy with visa free access to many of the world’s most fun destinations, and eventually our nomad settles on a regular cycle of Ireland -> Thailand -> Singapore -> Australia -> Panama -> Ireland. Meanwhile, all the web income generated from work done remotely is not subject to tax in any of the countries visited, since the corporate income is categorized as earned in the tax haven.

Let’s celebrate this with a Joan Baez song glorifying the joy of avoiding taxes:



Business Idea – Specialty Daycare

Post inspired by this article

Given that my previous post was about the advantages of catering to the whims of the rich (and their desire for “exceptional” good/services), it’s to be expected that I’ll have thought about a particular implementation of an idea that does this.

Rich people, and even some busy working professionals in the upper middle class, living in the big cities have a hard time finding affordable child care. Yes, there are those large magnet places (one colleague called Kiddie Academy the Burger King of daycares) you can just drop off your kids at, but why not aim for the best and most specialized?

What if you (I use this term loosely) start a daycare that offers something different? I suspect most rich people want to give their kids a leg up in life without creating a pressure cooker environment so early in life. So instead of a daycare that forces kids to do homework, why not one that allows them to learn and play but immersed in another language? Mandarin is the hot niche language of the age, and any educated parent knows that being a childhood learner is better than trying to learn it as an adult.

The ideal owner-operator will be a white female (whites are more comfortable with their own kind, and Asians think whites are more loving and nurturing, while women are see in general as better with people, not to mention less likely to molest/abuse a child) who speaks fluent Mandarin at the same time. Playtime, lessons, and general language of conduct will be entirely in Mandarin. Other usual child activities like puzzles, stories, and colouring books will of course be present. The service will be marketed to wealthy upscale urban couples.

The idea was inspired in part by another coworker, who specifically hired a Hispanic au-pair to babysit her child. She specifically wanted someone who could speak Spanish to the baby. Apparently, this phenomenon of getting a leg up on your peers is starting earlier and earlier in the competitive Bay Area.


Startup Philosophy – Cater to the Whims of the Rich

Warren Buffett has always published insightful yearly shareholder letters. This year’s is no different. The key passage that stood out to me was his critique of the hedge fund industry. With the exorbitant fee model, and given the fact that even their own managers don’t invest in their own product (what’s the opposite of dogfood?), why do they still survive?

Uncle Warren explains the answer:

I believe, however, that none of the mega-rich individuals, institutions or pension funds has followed that same advice when I’ve given it to them. Instead, these investors politely thank me for my thoughts and depart to listen to the siren song of a high-fee manager or, in the case of many institutions, to seek out another breed of hyper-helper called a consultant.

That professional, however, faces a problem. Can you imagine an investment consultant telling clients, year after year, to keep adding to an index fund replicating the S&P 500? That would be career suicide. Large fees flow to these hyper-helpers, however, if they recommend small managerial shifts every year or so. That advice is often delivered in esoteric gibberish that explains why fashionable investment “styles” or current economic trends make the shift appropriate.

The wealthy are accustomed to feeling that it is their lot in life to get the best food, schooling, entertainment, housing, plastic surgery, sports ticket, you name it. Their money, they feel, should buy them something superior compared to what the masses receive.

In many aspects of life, indeed, wealth does command top-grade products or services. For that reason, the financial “elites” – wealthy individuals, pension funds, college endowments and the like – have great trouble meekly signing up for a financial product or service that is available as well to people investing only a few thousand dollars. This reluctance of the rich normally prevails even though the product at issue is –on an expectancy basis – clearly the best choice. My calculation, admittedly very rough, is that the search by the elite for superior investment advice has caused it, in aggregate, to waste more than $100 billion over the past decade. Figure it out: Even a 1% fee on a few trillion dollars adds up. Of course, not every investor who put money in hedge funds ten years ago lagged S&P returns. But I believe my calculation of the aggregate shortfall is conservative.

Emphasis mine. That there is the key to understanding that there is money to be made in catering to the whims of the rich. I’ve always thought but never said out loud that the keys to a successful startup are one (or more) of the following:

  1. Get paid
  2. Get laid
  3. Feel special

This sets apart the *great* startup ideas from the merely good ones. Take for example Airbnb, Uber, and Coffee Meets Bagel. For the end user they offer convenience, but they also offer other incentives – matchmaking or earning money – to the participants. Contrast that to any sort of home food delivery service (which were hot startups not that long ago). Sure, they were nice incremental convenient improvements on the status quo, but they weren’t life changing. I could just as easily call up the restaurant myself for not that much difference in value.

The special sauce comes with #3. Basically the user must think there’s something mystical or unique about the service’s secret sauce that’s an improvement over everything else. Airbnb and Uber are great ways to monetize (for a decent amount of money) assets that you already have. Nothing else out there is comparable. CMB gives you the right amount of control over matches and simplifies the overwhelming dating world.

The last category can be a stand alone business idea all by itself. Just think to all the hostess cafes in Tokyo where a cute young woman caters to your every whim (except sex). That’s a huge boost to a shy nerd’s self esteem. Great niche to be in, as these guys tend to be high earning engineers! A hedge fund can basically be thought of as a hostess cafe for the wealthy. Here come all these experts to fawn over you and make you feel special. I bet that at some level the rich know that they’re going to lose money compared to an index fund, but nothing beats the thrill of having access to Ivy League educated experts at the tip of their finger. That fulfillment, and not any actual investing expertise, is essentially the business model of a hedge fund.


Business Principle – Make Lives Easier, Simpler

Sometimes on here I’ll post interesting business ideas I have, right down to the specifics. At other times I’ll speak more on general principles guiding a successful business.

Let’s start by identifying a need. One thing I’ve always needed since I was young is a way to save interesting articles online for posterity and re-reading later on. I was a big reader and when news and blogs emerged online, I wanted to save things before they got deleted or moved behind a paywall. In other words, I was practicing something similar to scrapbooking, which was a great childhood hobby for many people in the previous generation.

Now for someone who is technical, it’s easy for me to save documents as html files or print via chrome as a pdf, create a series of folders, and organize things the way I like. It’s so quick and easy for me that it’s hard to fathom that the same is not intuitive for people who are not so technical. This represents a larger global need but not a personal need, and it’s hard to be a successful visionary creating something that you personally don’t need.

In this example, someone can start a company letting people easily pin photos or essays or articles onto their own free personable shareable scrapbook. It’s called pinterest.

The principle here is to meet a need (especially old hobbies in a changing world) and to make life easier and more convenient for all involved, but especially the non-experts.

What would be something analogous yet uninvented? In my own field of health care, there’s a need for the medically illiterate to help them manage their medicines. What about a personal pill tracker that synchronizes with your medical chart at the doctor’s office and give you timely reminders to take your medicines on your phone, as well as information about why you’re taking a certain medication and side effects or precautions to watch out for? Google is already attempting something with its own Google Health initiative, which syncs nicely with its Android devices.


Why It’s Easier to Create a Tech Startup

Picture this. You are a new biology PhD, and you have a great idea for a new drug that will cure a disease. It will be revolutionary and improve the life of millions. You will have complete monopoly of the market and you’ll be able to charge astronomical prices. You work hard, spending years of nonstop research, jumping through FDA hoops, and all the time attracting little funding and earning little money for your efforts. Finally your efforts are rewarded and you cash out in stock after twenty long years.

The opposite story is that you are an unemployed tech worker laid off in the 2008 recession. You team up with one of your college roommates to launch a new social media platform or sharing economy app. You attract incredible venture attention, get to siphon off six figures for yourself in income, and even though the product isn’t profitable, you have enough “eyeballs” to get bought out by a big company like Google or Facebook.

This isn’t too far from reality. The first story is roughly that of Gilead Sciences, a pharmaceutical company behind sofosbuvir, a revolutionary treatment for hepatitis C. Though the company was founded way back in 1987, it took them until 1992 to go public, and they only got $86.25 million in IPO proceeds. Many decades of slogging through developing later they finally got to their big moneymaker, only for it to make headlines for being too expensive, gaining FDA and legislator scrutiny.

The second is pretty much any moderately successful tech startup. YouTube probably fits the bill the best, but Uber and Airbnb are comparable as well, both of which are valued in the tens of billions.

It’s a headscratcher. Innovation in biology and medicine is tough. There’s a lot of man hours spend pursuing potential drugs, some of which don’t pan out. And then when you finally do discover something, gain FDA approval, and expect to make a reasonable profit, you are blasted by the media for price gouging. Why would any budding entrepreneur focus on bioscience, when there are faster and cheaper ways to wealth in tech? In contrast, tech is capital-light, valued highly by the market, and doesn’t take much expertise to get going.

Think about it this way. Any unemployed guy in his family’s basement can bust open a coding book, learn how to make apps, and start a company. It takes true skill and deep expertise to do the same in the biosciences. Innovations in biology arguably add more to human happiness and lifespan than a new app that remembers where you parked your car.

One is true innovation, the other is mere banality. But when it comes to making money for the lowest investment, there’s no comparison.


Making Out Like a Bandit While Your Startup Burns

That’s what skewered shareholders are accusing of Theranos founder and CEO Elizabeth Holmes of doing.

Funny, this whole thing reminds me of that Futurama episode when Fry is convinced by a snazzy partner to launch a startup with all pizzazz and show and no actual substance. The goal of course is to angle for a buyout/cashout while eventually jilting the investors. This is really what Theranos has done.

Let’s look at the facts behind the situation:

  1. Elizabeth Holmes assembles a prestigious group of people more for their credential and connections than for actual talent and knowledge of the industry
  2. She dresses like and bills herself as the female Steve Jobs, leveraging her Stanford professor and school name
  3. The company says it has a secret technology that will disrupt and revolutionalize the lab testing industry (if this were real, the 800 lb gorillas like Medtronic, which is making continuous glucose monitors for diabetics, and Quest, which processes many lab specimens, would have jumped on it already and innovated themselves or bought the technology from Stanford)
  4. The company actually ran some specimens on Quest machines and sent the results on as their own
  5. Internal dissenters who warned and tried to whistleblow were fired, bought out, or otherwise silenced

What can we learn from this? Well, the company is likely bankrupt from shareholders and the FDA bombarding it with lawsuits. The stock is worthless. The big question that remains is whether Holmes gets to keep any of her salary and already cashed out stock, or if there’s some attempt to claw it back by shareholders. If the clawback is unsuccessful, this will set a precedent for future entrepreneurs that selling the idea is more important than having an actual product.

So go ahead and try it at home. Craft a pitch of a zany idea backed by data that makes it plausible. Hype it up, attract investors, grow the userbase (easy to do in tech) or hire enough big name people to generate enough buzz, and then cash out or sell out.


Newsflash: Clickbait Beats Real News

So much for making an honest buck the old fashioned way. Teenagers in Macedonia have cashed in on the Trump craze by creating sensationalist but false news articles and then sharing them virally on social media. By all accounts, this was a lucrative arrangement, with some top performers grossing $10,000 per month from AdSense revenue.

From the perspective of the educated elite, it can be disheartening that people are dumber than before, so much so that they believe what they read. For these people, the more outrageous the news, the more clicks and donations are generated. Real news by contrast just doesn’t have the same appeal.

However, on this site here we are politically agnostic. So what’s the take home message from the success of fake news? Sensationalism sells (by generating clicks and eyeballs, and get shared virally due to the outrage they generate). In contrast, bland and boring rarely gets one very far. You know what else sells? Sex. Just take a look at the average Yahoo news article. A cursory glance at the sidebar shows the following ads:

  • She Hid the Truth Until This Photo Appeared (black/white photo of a half naked actress)
  • She Didn’t Notice And The Fans Began to Cheer (photo of skimpy female sports player on the ground)
  • McKayla Maroney is Completely Unrecognizeable Today (photo of young gymnast smiling)
  • United Airlines Furious After Crew Revealed This (flattering angle shot of smiling flight attendant, emphasizing her smile, figures, and tights)
  • Jim Cramer: Homeowners Must Move Fast On Rebate (photo of a shrugging Jim Cramer)
  • It May Be the End of Social Security (RIP tombstone of Social Security)
  • Federal “Mortgage Payback” Goes Into Effect Today (businessman in a suit)

The overriding theme is: how to make easy money, pictures of skimpy women, and threats of easy money being taken away. Empirically, this is what the audience is interested in. Does this erode trust in institutions and authority? Are businesses promoting bad behaviour by appealing to base instincts, or are they simply catering to their customers? You decide.

Regardless of your opinion on the ethics of this type of advertising, the conclusion that we may draw here is that targeted sensationalist messaging can really enhance revenue. As the successful fake news sites can attest, this can be a self-contained business idea in itself. For example, if you’re unscrupulous, you can start a website (for very low cost) aimed at exposing the truth behind prescription drugs and how natural remedies are so much better. Then write fake news articles with studies showing how ___ vitamin beats a common prescription drug for ___ common diagnosis. You can throw in there a few snippets or quotes from prestigious doctors. Then add another article about how there is a mainstream medical conspiracy trying to cover up these cheap cures. Then advertise with sensationalist message on Yahoo (so desperate for revenue they are that they can’t afford to cut off clickbait, unlike Google and Facebook).

Shifting gears, if we want to be a bit more ethical, we can still adopt this style of marketing but still maintain our integrity by posting well-researched articles grounded in reality. Look at the most successful personal finance bloggers and travel bloggers out there today:

  • Young Adventuress – young attractive female living life of leisure
  • Mr Money Mustache – outrageous claims of financial independence early
  • Legal Nomads – young attractive female living life of leisure
  • Nomadic Matt – I live a leisurely life of travel at a young age, and you can too

All of them employ clickbait tactics in some aspect. The female bloggers may not realize it, but the fact that they are young attractive females contributes significantly to their readership.

The technique is yours. Whether you use it for good or ill is up to you.