Mutual Improvement

Luck and Lightning

There's a well known quote from Louis Pasteur that says "Chance favors the prepared mind". But we aren't always so aware of what we chanced into. I've had a ration of fortune and misfortune in my life, and it is hard to always see what is coming. In terms of my financial life, one of the best things I ever did was accept a job I almost turned down. On top of that, I only had the chance at good fortune as a result of bad luck.

I had just finished a Master's degree at the University of Cambridge in the UK. I had applied to a couple PhD programs back in the states but had been turned down. I was bummed, but I figured I'd work harder on my applications and try again. In the meantime, I needed a job. A friend had started working at a small company in Seattle and told me about some openings, but it seemed beneath my newly minted credentials. Instead, I managed to land an opportunity at the University of Washington - a foothold into academia where I figured I'd eventually make a career. My friend was persistent. He told me I HAD to come interview. I did, and liked the folks I met. I got an offer there as well, with lower pay, but with something I'd never heard of before: stock options. I told the Dean at the university about the other offer, and he encouraged me to think about accepting it. He'd heard of the company and thought what they were doing was exciting. "The University of Washington will always be here", he said. I owe that guy a big thank you.

That's how I became employee 65 at Amazon.com. As the company grew, and business boomed, I couldn't believe my luck. But another thing I noticed, looking around at all my equally lucky co-workers, was that a number of these folks hadn't stumbled quite so blindly toward the spot where we all now stood. Some of them were veterans of four, five, by some accounts more than twelve, startups in the past. We were all lucky to be be struck by financial lightning, but these folks had been climbing hills in the rain for years, waving all manners of lightning rods toward lady fortune, trying to win her attention.

What I learned from that experience, is that there are some opportunities with rare but valuable payoffs. Success may still be due to luck, but getting struck by lightning on one hill may be more lucky than getting struck on another. My eyes were on academia when I stumbled into the world of internet start-ups. Its worth asking yourself what hill you are climbing, what the payoff looks like should you get struck by lightning on that hill, and is there some other hill you ought to consider hiking toward. "Chance favors the prepared mind", and sometimes the only preparation we can take is thinking about which hill we ought to climb.

Interview: Jason Fried of 37Signals on Money and Happiness

One of the ideas Benjamin Franklin had in setting up the original Mutual Improvement club, was sitting down with friends and learning from each other's experience in matters of business and life. 

Over the last 5 years, I've come to know Jason Fried, the CEO of 37 Signals as a friend, teacher, political debate partner, and as a guide on matters of entrepreneurship.  Jason has a lot to say about defining your own success, how a business grows  through relationships,  and a whole philosophy (and book) about "getting real" and he covers those topics on his blog at Signal vs. Noise.

In the style of Franklin's junto, I pinned Jason down to answer my own 14 questions, in which we learn not only some wise words about money and happiness, but also about the best thing Jason ever bought, as well as secrets about his Las Vegas craps habit and his commitment to love.

Photo by James Duncan Davidson/O'Reilly Media, Inc.

Josh: Alright man! I want to talk about money and happiness. Tell me about how you learned about money. When you were growing up, how did you think about money?

Jason: My parents put me to work the day I could start working. That was 13 where I lived. I went down to the village hall, got a workers permit, then I was taken to the local grocery store and put to work as a bagger. I think I remember someone telling me "a bagger is always better than a beggar."

That's where it all began. And I've worked since then.

I like what Ben Franklin said about the value of money. "If you ever want to know the value of money go try to borrow some."

Josh: I take it there wasn't a lot of "Money is the root of all evil" in your house. What were the money lessons you learned when you were young?

Jason: No, none of that. Money isn't evil, but it's not holy either. Money is just a tool. It lets you do things, build things, make things, enjoy things, etc.
Money lessons I learned... Debt is generally a bad idea. You are better off earning it than borrowing it. And $1 is $1. Be frugal and spend wisely.

Josh: What was your major at university?

Jason: Finance

Josh: Right. People associate you with design and development, but what led you to pick finance as a major?

Jason: My dad is an investor. He worked for someone else when he got out of school, but eventually realized he was built to work on his own. So he started trading and hasn't stopped. I discovered finance and design at the same time. My dad used to bring home glossy annual reports. I used to page through them. I was fascinated with the design, the charts, the numbers, the tables. That's when I discovered information design. And the information was financial information. So it all came together for me there.

Josh: Do you think you learned any concepts in economics or finance classes that influenced your approach to product development?

Jason: Not really. I didn't pay much attention in school. I basically feel like school got in the way of my education. I've always been a learn by experience kinda guy. But...

My economics teachers were fantastic and I did learn a lot from them. I like economics more than finance, but I went with finance as my major because I think it was easier. I just wanted to finish school and get out there. I had already been working my own small biz on the side since freshman year. School was getting in my way.

I do like the concept of sunk cost and satisficing though. Those were powerful lessons. I learned about scarcity in Economics and maybe that rubbed off onto my ideas about software.

Josh: Tell me your take on "satisficing" - what is it and how does it influence your products?

Jason: Well, at 37signals we abhor "science projects" mainly because they are time sucks and you can often come up with a much simpler solution that works well enough.

Satisficing is about factoring in the costs of perfection and often realizing that a sub-optimal solution is often the better one when all things are considered.

So when we're looking at a feature or an idea we always look for the simplest solution first. How can we spend 1 hour on this instead of 10. The 10 hour solution may technically be better, but is the marginal benefit worth the cost? And it's usually not. This isn't the same as cutting corners, but it's close. It's educated cutting corners.

Josh: To me, your approach to software is very economics driven. First of all, you are in business to make a profit. Lots of developers aren't that clear on what they are doing. Marginal Utility also strikes me as a key concept in your approach. While a lot of engineers will add and add features, you seem to get that it matters where you are on the utility curve.

Jason: Yes, marginal cost and marginal utility is very important to us. Especially with a self-imposed small team. We have to make sure what we're doing is worth it since we can't do a lot at once.

And since we're small we can incur significant opportunity costs if we focus on the wrong thing for too long. That's why we're always on the lookout for the simplest possible good solution.

Josh: So let me get a bit more personal. What do you think is the relationship between money and happiness?

Jason: I think money can help you with happiness if your happiness requires expensive things, vacations, plastic surgery, etc, but it doesn't buy you happiness. I think you have to be a happy person to be happy.

One thing I've found is that having a little more money than you need helps me not worry about things as much. When you don't have to worry about things you can focus more of your time on being productive with whatever you are doing.

It's a lot like early man... Before we could farm, we had to focus all our time on finding and hunting food. That didn't allow us any time to learn. But once we nailed farming it freed us up to do other things. Expand our minds. Experiment. Become more intelligent. I see having more money as a similar opportunity.

But I've never been one to life above my means anyway. If I don't have it I don't spend it.

Josh: Do you have any money problems?

Jason: Such as?

Josh: You tell me. I spend too much money on coffee, and I give my kids whatever they want.

Jason: No, I don't have any money problems. But I'm not married and don't have kids, so money problems may be in my future

Josh: I'm also an emotional investor, I learned that I really don't like losing money.

Jason: I don't like losing period. Money, sports, ideas, etc.

I'm generally conservative with money. I don't need to make 15% a year and try to jump on that hot stock.

One thing my Dad always taught me... No one ever went broke taking a profit. And Buffet said "I got rich by selling too soon." Those are the same things. And I'm a big believer in both of those quotes.

But, shit, I love playing craps when I'm in Vegas.

Josh: What do you think is the cause of most people's money problems?

Jason: Debt. They spend more than they have. That's where the real problems begin.

I don't think you have money problems until your problems are someone else's benefits. When someone is making money off your money problems you're in trouble.

I'm not talking about a mortgage, I'm talking about credit card debt or personal loans with no payoff in sight.

Josh: You're making me think of my broker!

Jason: Sorry!

Josh: what is the best thing you've ever bought with money?

Jason: Probably a house (since it should ultimately make me more money) and a car (because I love cars). But I've bought a lot of things just to have them around me. I like to buy things I find beautiful and inspiring. I've found that when you surround yourself with things of great craft it rubs off on you. I just want to be inspired. So money has allowed me to experience some of the greatest things man can make. And I find that to be a huge asset. 

Another thing money can buy you are experiences which are very formative and valuable.

The ability to see things and be places you couldn't be otherwise. That's real value.

Josh: What is the best thing in your life that money can't buy?

Jason: Aren't there songs about that question?  Money can't ultimately buy you health, love, and happiness. It can help with these things, but money is the background singer in that band.

Ya know...

Josh: I'm not letting you wiggle away from my mushy question. Which of those things that money can't buy is the most important for Jason Fried? Happiness, Health, Love?

Jason: Love.

Josh: I always knew you were a lover! Thanks for the interview.

Jason: Thanks for asking.

September's Theme: Wealth & Money

September is traditionally the worst month for the stock market, for personal debt, and for general money morale.  Summer spending sprees are registering on our statements, the happy hours and late evenings on the outdoor porch sipping mimosas are getting a bit more chilly and forced, and vacation time is at an all-time low and seems to be accruing backwards, if at all.

Therefore, it'll make a good theme for the month.  The related book of the month is The Millionaire Course, by Marc Allen.  And, if you haven't seen it lately, you really should see The Color of Money again.  What a great movie.

New Series: Mutual Improvement Club

I've been reading a number of books in the general field of "mutual improvement" lately.  A few of them include: Influence, Introduction to Neuro-Linguistic Programming, Dianetics, Strangers to Ourselves, How To Solve It, The Art of Living, What We Believe But Cannot Prove, The Millionaire Course, etc.  My coworkers at the Robot Co-op have been reading a different subset of books on the same topics.  From math to psychology to cults to Buddhism to science, they span across a number of ideas and topics, but I can't help but believe that there's a strong common thread between them all.

I'm going to attempt to announce a new book or movie or documentary or hero every month that is in some way related to the ambiguous thesis of this blog: that by combining ideas from different fields we can make progress towards a richer understanding of ourselves, our peers, our culture, and the world, with the ultimate goal of using that understanding (whether logical or emotional) to engage with live more richly.  It's difficult to talk about these things without sounding really cheesy, so another one of my goals is to keep the tone and vocabulary of these discussions as unpretentious and concrete as possible.  Staying grounded in the real and tangible is something I'm going to have to remind myself to do often.

Anyone that wants to read or tag along is welcome.  I'll announce the first book in this series tomorrow.