5 hours a week = iPhone 4

I've been captivated recently on Neville's blog on his project to blog every day for a month. He gave himself a punishment if he didn't do it... he would make a $300 donation to a local homeless shelter that he hated. If he did it, he'd spend it on what he called a "money experiment."

That got me thinking... what a cool concept! What can I do? His goal was to write more consistently. One thing I'd like to do better is to be more consistent in working on stuff outside of work. I recently canceled my cable, so I've got time. One goal I've been trying to hit is 5 hours a week of good solid work on my entrepreneurial exploits. It's not asking for much... I'm thinking 2 hours on Saturday, 2 hours on Sunday, and 1 hour spread out through the weekday.

So there's the goal... 5 hours a week of good solid work. What should the reward/punishment be? I just found out that I'm eligible for the iPhone 4. So the reward will be, if I can get 5 hours a week for 5 straight weeks, I will buy myself the iPhone 4. For the punishment... I'm thinking a $100 donation to the charity of one of my hated team rivals... Either the Yankees, the Bears, or the Minnesota Vikings (I'm a Brewers/Green Bay Packer fan). Well I checked out the Chicago Bears site, and they have a charity called "Bears Care." The Minnesota Vikings site talks about some outreach stuff, but doesn't exactly make it easy for you to donate money. (I see all kinds of headlines about rumors of Favre being on a plane to Minnesota... GOSH I HATE THE VIKINGS. I wish Favre would just retire!). Well, "Bears Care" wins out because I can't find any info on donating money on the Vikings site.

I will start this next Monday, 8/23. 5 hours of solid work a week. If I can do 5 weeks straight, I buy myself an iPhone4. If I can't, I make a $100 donation to the Bears Care foundation. (I don't know what's worse, giving up the money or being on their mailing list so I hafta get Bears stuff all the time. Makes me really motivated).

5 hours a week = iPhone 4

My fears

A few weeks ago, an email came out at work that announced that voluntary packages were being offered to employees with certain criteria. Basically, the package is a way for a company to get rid of employees in a nice way... they basically pay you a good chunk of change to leave. I fit the general criteria, which got me to thinking if that would be something I'd want to take advantage of. A combined feeling of excitement and utter fear came over me. I'm at a point where I've saved up enough money, plus with the benefits that were being offered, I could survive for over a year at my current lifestyle assuming no income. Not a bad buffer to have as I try to figure out how to make an income outside of a corporation.

I was in this excited but utter fear state for a few days until they had the meeting to explain the program. I couldn't help but tell my dad, which if you remember from the sabbatical experience, probably wasn't the best person to tell first. That same look of "why are you doing this to me" came over him.

It turns out I wasn't eligible for the program, because in my department my position wasn't included in the offer. But it got me thinking, why was I so scared? I know I have skills that aren't being utilized. If I were picture myself on my deathbed looking back to where I am now, I would absolutely be disappointed at myself for continuing with the status quo when I have nothing to lose. I decided to read
 Making the Courage Connection by Doug Hall for the second time, which helped a lot.

In the book, it talks about bringing your fear out and looking it right in the eye. In one of Martha Becks books (either Steering by Starlight or Finding your North Star, I forget which) she talks about the "Fear Dragon." So today, I'm going blog what my biggest fears are... I'm going to put those dragons out in the blogosphere and exaggerate the crap out of them, so hopefully you all can help me shrink it down to size.

Fear #1: My dad will be pissed/scared/hurt

I've blogged about my dad before. He loves me. I love him. But he just doesn't understand why I would even think about giving up all the security of a great paying job. He's going to be so worried about me all the time that he'll have health problems. He'll call me all the time in that worried, "why do you do this to me" tone.

Fear #2: I'll fail miserably and hafta take a job that's much worse than the job I left

My current Fortune 50 company pays very well and takes great care of their employees. If I leave, and then it turns out things are worse, I'll need to take a job at a worse corporation that doesn't treat their people as well. Plus I'll probably need to move cities and start completely over socially. I'm someone who likes a core group of friends and doesn't really like to mingle for the sake of mingling. This fear has really been accentuated by the last time I did something that went against my parent's advice and was risky: I got a puppy. I was scared to do it. My parents weren't real keen on the idea of me getting a dog, but I felt like I had done my homework and was ready. I was an emotional wreck with the puppy, feeling like I was neglecting it and all stressed out because of all the time it required. I was bailed out when my best friends were looking for a dog and took him, but that experience weighs on me whenever I have a risky commitment to make.

Fear #3: I just don't have the drive to do what it takes.

I have an issue with getting things done. I have a hard time starting things or getting this done because I'm so afraid that it'll just be a waste of time. I'm also afraid that I'll need to stick my neck out there and risk looking stupid. And finally I'm afraid I'll hafta ask people for help. I don't really like asking people for help, I just like to take care of it myself.

Fear #4: I'll never find a mate.

Most of my friends I've met through the company I work at (we are a major company in the city). I have no idea how I'd meet people to date if I'm working on a project at home without the company providing me a social circle. I'm not a bar guy. Plus if I did meet someone, instead of being able to say "I work for (Fortune 50 company)" I'd hafta say something like "I'm trying to figure out this entrepreneur stuff but still working on it" in which she would think "unemployed loser." It also doesn't help that I just ended a year long relationship recently.

So there they are, out in the open. Be happy to hear if others of you have had similar fears and what you did to overcome them.

My fears

Prepare to be disrupted

Recently I cancelled my cable... That's right, no more Time Warner Cable. It all started when I was watching CSI one day. I used to be a big CSI fan, but I realized that I didn't really care about it and I was really just watching it for the sake of it being on. So I took the step to delete the subscription from my DVR. Then I realized, I really didn't watch that much TV. And even if I did, I could get CSI from other sources like Netflix or even over the air. The only thing I needed cable for was ESPN, and that was mainly for Monday Night Football.

I would save $67 a month by not having cable. I'd be happy to pay $5 a month for ESPN during football season. But there's no way to do that is there? On the contrary... when I go on Time Warner Cable's website, they keep shoving "bundles" in my face, saying how much you save by bundling their internet, cable, and phone services. Save money by spending more? That's a bunch of bull. There's no reason for Time Warner to offer a la carte services. What's the marginal cost for beaming me just ESPN vs. 250,000 channels? Nothing. The cables are already there.

This is a classic case of a company overshooting their customer. Clayton Christensen talks about it in his book Innovator's Solution. When that happens, they are ripe to be disrupted. Other companies who can offer a "good enough" product to get the job done, and structure themselves accordingly, can disrupt larger companies. Time Warner isn't competing with Dish Network or DirecTV. They're competing with my over the air HD antenna, my mlb.tv subscription, and my local sports bar. But they don't realize that... they're still running ads for bundling and showing me how much they're cheaper vs. Dish or DirecTV.

Or, their cost structure doesn't allow it...  Or their accountants don't allow it. They probably have a king's ransom tied up in infrastructure costs. And on their books, they need to pay off the depreciation even though depreciation isn't a real cost. So they need to make a profit big enough to pay off depreciation. Little do they know they may be heading towards bankruptcy.

I love disruptive companies that take down big companies (that's maybe why I'm a Milwaukee Brewers fan and I hate the Yankees). My favorite company is Netflix, who took down Blockbuster with their new model. They had their cost structure set up to distribute movies by mail. Blockbuster had a million little retail stores. No way could they keep up with Netflix with their Total Access program. And guess what? Netflix may be in position to disrupt another big dinosaur: Time Warner Cable.

I posted a while back about how small companies can take down bigger companies. Go out and be disruptive!

Prepare to be disrupted

Math is not linear

Great presentation... echoing my thoughts about math, and education in general.

Math is not linear on Prezi

Math is not linear

Rent vs. Buy: One person's actual data

Recently, after doing my taxes and figuring out how much of a tax benefit I get for my mortgage, I thought to myself, "I wonder if owning a house really does pay out the way everyone says?" So I proceeded to tally up every expense and benefit owning a house had compared to if were to have rented a place at the same monthly payment. I've lived in my place for over 8 years. I figured it would be a great real life, raw hard core data example to share with people.

In a nutshell, after brainstorming everything I could possibly think of, it came out remarkably even. In other words, if I had rented a place for the same monthly payment I was making, I would have come up no worse for wear. In fact, I didn't even include any time costs, like mowing the lawn, weeding the yard, etc. Here's a breakdown of the costs I came up with:



The equity and appreciation that we hear so much about is offset by realtor and repair costs. What's this I keep hearing about "throwing your money away" when you're renting because you're not building equity? Well, too bad when you sell it you need a realtor. And when the roof needs fixing or the runoff water needs to be re-routed to the front because it's flooding the back, that comes out of your pocket too. Not that I have any personal experience of that.

Here are the assumptions I used to come up with the costs:

Years in house	8
Purchase Price	170000
Down payment investment	2.00%	Assumed rate of return if you had invested the down payment
Sold Price	184086	My own guess based off comps
Appreciation %	1.00%	Based off the sold price
Down payment	30000	20% of purchase price

Here's a breakdown of all the costs that went into the graph, and some more detail:

HOA fee	-150	per year	I live in a house, so this fee isn't too bad
Closing costs	-3000	one time
Insurance	-400	per year
Maintenance/Utilties	-38	per month	Garbage, water, and sewer
Down payment opportunity cost	-600	one time	Earnings if I had invested the down payment
Tax benefit	1050	per year	After the standard deduction, and 25% tax braket
Repairs	-9400	one time	See chart below
Realtor costs	-11045	one time	6% of sold cost
Appreciation	14085	one time	Based off my own estimate of comps
Equity built up	150	per month	Average over the 8 years

And here are all my repair costs, in gory detail:

Siding and wall damage from storm (deductible only, insurance covered all)	$1,000
New roof (plus deductible minus insurance)	$3,000
Roof boots (3X)	$300
Reroute runoff and drainage	$1,100
Landscaping	$1,200
New carpeting	$2,000
New drywall from fixed leaks	$800
Total Repairs	$9,400

These repair costs are even before anything a home inspector might come up with when I sell the house. Plus I need to re-seed my yard, it's looking a little sickly. And the back fence needs painting. Again, I didn't count the money I paid my neighbor kid to mow my lawn, or the hundreds of dollars of mulch, or fertilizer, or the tree I had to cut down that died... I better stop and continue this analysis before I lose everyone.

So what happened to all the great benefits that my parents and everyone else told me owning a house had? I tried to figure out what went wrong. The answer, as you might expect, is the housing market. I had a 1% appreciation per year over 8 years. I did a little sensitivity analysis... if I had gotten a 3% appreciation per year, I would've been $30,000 ahead! Whoa. OK, so let's say it was -1% (where it was in a lot of markets I bet). And the answer is... -$25,000. I think that's what everyone calls "underwater."

So this whole idea of owning a house as an asset boils down to how well the housing market does. And it's a huge swing. This is what economists call leverage... you borrow money to invest in something. So owning a house is an investment. It's owning a very risky investment. Would you put down $30,000 and buy shares of any stock? How about borrowing $170,000 on that $30,000 and buying up that stock? So why would you do the same on a house?

Here's raw data. Buying a house is a very risky investment. All the equity built up and the tax benefits gets sucked up in realtor fees and repairs.

Yes, it's the American dream. I plan on selling this house, but I will probably buy another one in the future. It's great to own your home so you aren't at the mercy of a landlord or a lease. But go into it knowing it's very risky, and be able to mitigate that risk by having a LOT of money in reserve. Buy a house because you want to live in a house, not because it's an investment. And make sure you can truly afford everything that comes along with it (see above).

Rent vs. Buy: One person's actual data

An update

Thought I’d give an update since my last posting. In a nutshell, I’ve been focused on NOTtheBookStore.com and less on the violins e-commerce site. Last quarter I tried expanding to the University of Cincinnati, with a little help from their marketing club student organization. UC’s quarter ended this week, which meant a whirlwind turnaround for textbooks. And the marketing club has gathered steam and started doing their promotional fliers and other activities.

This semester will be very interesting. UC is four times bigger than Xavier, where I had previously been targeting and have been breaking even (most of the costs are for marketing). UC is a pivotal test to see if the idea scales to bigger schools. So far it’s been slow, but with Xavier it took about a year before things took off to the point of breaking even. If UC takes off, it would give me enough confidence to hire someone to revamp the site and improve the design and flow.

The violins site has taken a back seat for the last month or so. My contact with the Chinese supplier has been quiet. She’s a family friend, so I’m confident that if I took the time to contact her again she’d help me out. I did some initial work with a Shopify site, but I wish it were more of a drag and drop. Most sites I’ve worked with, the drag and drop part of it is too simple, but programming with CSS has been too difficult. Google’s Blogger so far has the easiest to work with from a layouts standpoint. There’s still a skill gap there. Another gap has been the use of Photoshop or Illustrator to design graphics. I could really use that skill so I can update the graphics on the site easier.

I’ve started reading the book “The Other 8 Hours” based off of Adam’s recommendation. It’s inspired me to continue to do a little every day, even if it’s as small as 10-15 minutes. Hopefully the time will add up and eventually I’ll get something successful! I’ve deleted all my back episodes of CSI and took it off my DVR. Hopefully this will buy me the time I need every day!

An update

Go away grammar police

I received a comment from my “The bigger they are the harder they fall” entry recently. It was from “Anonymous” and he/she said:

“I’d prefer it if you said ‘have to’ instead of ‘hafta’. It’s just childish and hurts credibility.”

I remember grammar and its role in blogs being a topic of debate from other blogs. Here are my thoughts.

First of all, I’m very happy that someone reads this blog and is inspired enough to post a comment on it. I hope this person is a regular reader and gets something out of this blog. But I kinda – sorry kind of – doubt it. This person chooses to pick on grammar instead of commenting on content. This person would have much more credibility in my mind if he/she said “Interesting insights on how small companies can compete with big ones. Oh by the way, I’d prefer it if you said…” The other thing that tells me this person isn’t a real reader is he (I’ll use “he” from now on) almost takes personal offense to it. He uses “I’d prefer it” instead of “The right way to use it is…” And calling it childish is another clue (yes, I know starting a sentence with “and” isn’t grammatically correct either).

I know my grammar. I probably know it better than 90% of the people in the US. I did well in English class. I know my subjects and predicates, pronouns and antecedents, and parallel structure. But there’s another part of English class that people forget: the “arts” side of English, like poems, prose, and different styles that don’t follow grammar rules. Remember Catcher in the Rye? Have at it grammar geeks. My blog, and I bet most blogs out there, don’t aspire to be New York Times articles. There’s more Catcher in the Rye type poetic license. So what do you hafta say about that? 

Go away grammar police