Buffett on Charlie Munger: Work For Yourself An Hour Each Day

I’ve gotten to the part in The Snowball that involves Charlie Munger. A very interesting person, although perhaps not someone I’d like to have a beer with (I’d feel stupid), he is probably best known as Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway.

Even before meeting Warren Buffett, Munger was wealthy according to most standards from real estate investing. Here is a quote from a Buffett interview in the book:

Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, ‘Who’s my most valuable client?’ And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.

Now, I’m sure just being a successful lawyer would be plenty for many people. But if you aren’t satisfied with your current situation, why not work for yourself an hour each day? Instead of just idle dreaming, set aside specific time for action. Perhaps the key is small chunks of time, but at regular intervals.

Example. If you’re an administrative assistant making $10 an hour and you don’t want to be, don’t just sign up to work another hour for $10. Working longer is not necessarily the best idea. Instead, give up the $10 (or $8 after taxes), and improve yourself in some way or create something so you’ll be making a lot more. There is no one solution, look into yourself. Nursing school? Investment books? Finding a mentor?

Finally, another quote from Charlie Munger about the desire for independence:

I had a considerable passion to get rich. Not because I wanted Ferraris – I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people. I don’t where I got that notion from, but I had it.

I think I’ll be buying a copy of Poor Charlie’s Almanack the next time I run low on things to read, even though it costs fifty bucks.

Update: I bought a copy of Poor Charlie’s Almanack and will be reviewing it shortly. I still think this idea of working for yourself for an hour each day is great advice and timeless.

Crediting Hard Work vs. Innate Talent For Success

The conclusion from this Harvard Business Review article has stuck with me all day. Researchers looked into whether people think of their success as the result as either hard work or innate talent, and how it affected them later on. The distinction turns out to be important. Something to think about if you’re raising kids as well.

How often have you found yourself avoiding challenges and playing it safe, sticking to goals you knew would be easy for you to reach? Are there things you decided long ago that you could never be good at? Skills you believed you would never possess? If the list is a long one, you were probably one of the bright kids — and your belief that you are “stuck” being exactly as you are has done more to determine the course of your life than you probably ever imagined. Which would be fine, if your abilities were innate and unchangeable. Only they’re not.

No matter the ability — whether it’s intelligence, creativity, self-control, charm, or athleticism — studies show them to be profoundly malleable. When it comes to mastering any skill, your experience, effort, and persistence matter a lot. So if you were a bright kid, it’s time to toss out your (mistaken) belief about how ability works, embrace the fact that you can always improve, and reclaim the confidence to tackle any challenge that you lost so long ago.

On a related note, have you heard of the Dan Plan? Apparently a guy read Malcolm Gladwell’s book Outliers about how it takes 10,000 hours to become an expert at something, and decided that he wanted to go from never playing golf before to winning a PGA Tour event. He’s somewhere around 2,000 hours now. Even though I think I would have picked something different, I’ll definitely have to check back on his progress later.

Free 9/20 Only: Incorporation & LLC Formation Service From MyCorporation

MyCorporation Promo

If you’ve been considering making your side venture a formal separate entity, MyCorporation is offering their LLC formation and incorporation filing services for free for one day only 9/20/11 until 11:59 PST with the coupon code MYFREE (regular price $99). Also included is a copy of Quickbooks Simple Start (though I think this is always free…) and a free domain name registration. You must still pay shipping and the applicable filing fees charged by each state. I’m sure they’ll also try to upsell you some additional services, but you can decline them.

MyCorporation is owned by Intuit, makers of TurboTax and Quicken. Accordingly, you can view such online incorporation services as similar to TurboTax for taxes. Yes, you could fill out your 1040 tax forms all by yourself, but it’s much easier to go through a question-and-answer software that walks you through it and explains the steps. You could also incorporate yourself as well, may prefer some guidance. However, if you’re doing something complex or out of the ordinary, then you should hire a professional to handle it (accountant for taxes, lawyer for incorporation).

When I formed my S-Corporation years ago, I used one of their primary competitors LegalZoom and paid about $150 for the service – not including the state filing fees and shipping. It was good to have someone look over the forms before submitting, while avoiding the $1,000+ fees from a lawyer.

The decision between staying a sole proprietor/partnership or forming an LLC/corporation is not always simple. If you’d like to dig into the details on your own, I recommend the book LLC or Corporation? How to Choose the Right Form for Your Business from Nolo Press. I chose to go the S-Corp route primarily for the income tax savings. You can even have a LLC and chose to have it taxed as an S-Corp, as if things weren’t confusing enough!

California vs. Amazon.com in Sales Tax Battle

California, along with many other states, is broke. As part of an attempt to create more revenue, California passed a more aggressive law to force online merchants to collect sales tax. A 1992 Supreme Court decision stated that retailers that don’t have a physical presence in a state don’t have to collect sales taxes for sales to that state. But some states have passed new laws that redefine “physical presence” to include online affiliates and any subsidiaries.

Amazon.com affiliates are the thousands of websites like this one, where if you click on a link to a book or other product and buy something within a certain time frame, I get a commission of a few percent of your purchase. It’s a safe bet that the majority of blogs you read participate, even if the actual revenue is relatively small. But, by California’s new definition, if just one person is both an affiliate and lives in California, then Amazon.com has to start collecting sales tax from everyone in the state. What’s Amazon’s solution? Easy, cut off all CA affiliates immediately. That’s what they’ve done everywhere else. From CNN:

Other states that have passed the so-called “Amazon tax” in recent years include Connecticut, Illinois, New York, North Carolina, Arkansas and Rhode Island. The retailer has dropped the associates program in all these states, except New York, where it has a brought a lawsuit against the state.

Many other merchants that operate online like Overstock.com have been doing the same thing. They’d much rather lose the incremental revenue from affiliates than have to effectively increase prices for all customers from an entire state. For many website owners, Amazon is their primary source of income, and this move will force many of them to pick up and move.

At the same time, not paying sales tax is one of the expected benefits of buying from Amazon. (Even though in many states you’re technically still supposed to calculate and send it in manually, people rarely do.) This understandably annoys the national brick-and-mortar merchants like Walmart or Target.

As both a consumer and an Amazon affiliate, I am a concerned onlooker. These are two behemoths playing a high-stakes game, but I feel empathy towards those small businesses that just lost a huge chunk of their revenue overnight through no fault of their own. They seem to be collateral damage in this battle.

More reading: NYT, IBT

Book Review: Rework by Fried and Hansson of 37Signals

Rework is a book written by the founders of 37Signals, a company that makes online collaboration software like BaseCamp. They also write about running small businesses on their blog Signal vs. Noise. It is readily admitted that this book is a condensed and tightly edited version of topics from their blog. I don’t read their blog regularly, but had heard of it when I came across this book while browsing inside Barnes & Noble.

This is a short book with a casual writing style, complete with about 60 “chapters” that read just like blog posts. Many of the posts chapters make it a point to contradict common “rules” within the entrepreneurial and/or MBA-driven world. Here are few overall ideas that I noted, which the authors support with their own experiences.

  • Don’t learn from your mistakes. Learn from your successes.
  • Don’t make your business big. Small is okay.
  • Don’t do surveys or market research. Make something you would want to use.
  • Don’t wait for perfect to launch. Just make a decision and correct course as needed.
  • Don’t make your product do everything, especially if it means you’ll have to do it half-ass. Make it do important things, well.
  • Don’t hire based on GPAs or degrees. 90% of Fortune 500 CEOs did not come from an Ivy League for undergrad. The most common undergraduate school among them? University of Wisconsin.

I don’t use any of the 37Signals products, but they have their own niche, and they make what seems like good money at it. I believe their target sweet spot is for people who are self-employed or wish to work in a small but passionate small business that has no intentions of hiring 500+ employees or filing for IPO. This book is not for those with Facebook or Twitter-like aspirations, but if you’re trying for something smaller, I would recommend reading this book.

Book Review: The 4-Hour Workweek Expanded Edition

I recently finished re-reading the updated edition of the popular book The 4-Hour Workweek by Tim Ferriss. I read it quickly when it first came out in 2007 or so, but this time I think was more ready for the message.

In the last lifestyle book I read, The Art of Non-Conformity, the goal was to find a convergence between your work and your passion. Ferriss goes the opposite way and clearly separates them. Forget “dream job”, matching your true dreams with a job is too hard for most people. Instead, the ideal job is the one that gives you enough money in exchange for the least amount of time. Now you can pursue your dreams.

This is a critical difference. The overarching goal is now to create automated income and free up time.

Highlights & Notes

Motivation and getting started. The timing will never be just right. Just go for it and correct course as needed. The price of failure is often low, while the price of never trying is often high.

Creating your own income. Includes various ideas on starting your own business with the goal of high income and low time commitment. Resell someone else’s products. License a product. Create your own product. Physical objects are okay, but informational products are even better if you can pull it off. Ferriss himself made his first big money by selling nutritional supplements using ads in magazines. (Not exactly a product to be proud of, which I guess fits into his point above. Good thing he’s great at marketing.)

Shifting from 9-5. Let’s say you don’t want to quit your current job yet. The goal is again to separate work from time. If you can do the work that you spread out over 40 cubicle hours in just 20 hours at home, that will create a lot of free time for you to start that side business. For some, this may be enough to start pursuing your other dreams. Detailed instructions on how to negotiate a remote-working arrangement, starting with a two-week trial and reaching a full-time remote situation.

Time management. As said elsewhere, it’s critical to stop wasting your time and energy on things are really aren’t important. Being busy is not necessarily the same as being productive. Cut out interruptions, stop time-wasters like checking e-mail all the time, and batch tasks together.

Have others work for you. Hire virtual assistants from India. They aren’t just drones, if you teach them a system and allow them to use their own discretion, they can really remove a lot of your workload. Outsource whatever you can, remember that you’re not trying just to maximize profit.

What if I actually succeed? How will you spend your time? Instead of the potentially vague pursuit of “happiness”, he asks why not simply pursue what excites you and makes you feel alive. Ferriss enjoys “mini-retirements” where he does long-term international traveling. People also tend to find satisfaction with tasks that require continuously learning and/or include helping others.

Recap

Even though sometimes I have the urge to go against popular opinion, especially when the author’s primary skill seems to be marketing, I have to say that I really enjoyed reading this book. For me, it provided a good balance of big picture theory and practical advice. As with any book of this type, 99% of the readers won’t be able to actually attain a 4-hour workweek. But in return for ten bucks and a few nights of reading, I definitely felt I got good value.

I would recommend anyone who has the entrepreneurial urge to read this book, and I’m keeping my copy around because the included companies and links are useful for future reference.

Side Business Idea For Geeky College Students: Hacking iPhones

WaPo has a story about a college student who makes $50,000 a year from jailbreaking iPhones for strangers. By opening up the operation system to tweaks, “jailbreaking” allows iPhone users to do some cool stuff like share 3G connections, switch to T-Mobile, and install non-Apple-approved apps. I can see how non-techy iPhone owners would happily pay money to enhance their iPhone, given that they are already paying $70-$100+ a month for service.

The article doesn’t provide proof or details, but with some simple reverse math, here’s how it might work. $50k a year is about $1,000 a week. If he says he can do 40 unlocks a week, that means he had to charge $25 a pop. Not bad for a cash business with zero overhead besides having an iPhone. Now, there are some risks of data loss, but I’m pretty sure that with some careful reading any college student could figure it out. There are plenty of sites that will guide you through it. In case you’re wondering, in July 2010 the courts ruled that jailbreaking was legal.

This reminds me of when I was in college, I supported my gadget desire by taking advantage of the dot-com boom and the emergence of eBay. A new start-up would offer up stuff with a “we-lose-money-but-make-it-up-in-volume” discount, and I would sell them on eBay for a profit. For example, a Palm Pilot (remember those?) might be on sale for $100, and I could sell it for $150. If I bought three, that meant I could sell two and keep one for free. If I was more motivated by actual money then (I wasn’t) I should have bought 10 or 20, and made some real money.

The main problem with this plan? Supply and demand. Just one day after this article hit, a guy is offering to jailbreak your phone for just five bucks in San Jose. I guess that’s where you’ll have to start using stuff like marketing and finding a good location to stand out. Hello real-world experience!

Life Planning Exercise: Creating My Perfect Day

I am currently reading The Art of Non-Conformity by Chris Guillebeau (review coming shortly). In one of the early chapters, he talks about an exercise where you write out how your perfect, idealized day would go in great detail, hour-by-hour. I’ve read about this method other places, but never actually write it down. As I go into it, I found myself getting really into it and making several changes throughout today. Here goes:

Early Morning
I wake up, naturally, after 8 hours of sleep. Many people don’t need that much sleep, but I do. I love waking up naturally, but will set an alarm as a backup, because… I have to wake up the kid(s) and get them ready for school. I still don’t have kids, but I really want them.

I make their lunch, and perhaps drop them off at school in my 10-year old Honda if it’s close enough. I take the dogs for a walk in the neighborhood park. I then do my exercise for the day. Most days it will be something active and fun, like swimming, bicycling, tennis, or running. To mix it up, sometimes with a buddy or group. Swimming in open water is fun, since I live by the ocean.

Morning to Early Afternoon
I shower and change into shorts and a t-shirt. I work at home and live in a temperate climate, so that’s what I wear every day. At the computer, I check the morning’s e-mails and do some work. Work consists primarily of reading books and online articles from thoughtful authors (not 24/7 cable news or superficial fluff), and then researching and writing on topics like personal finance, nutrition, web design, or graphic design. I actually only do specific jobs for clients occasionally, because I’m tired of dealing with customers. Writing is so much less stressful. I might also run a small e-commerce website, but nothing that requires constant attention. Part of the year, I teach something small at a local community college.

I only work 4 hours a day. I can do this because I’m smart with money and have saved up a big chunk. Mrs. MMB works half-time as well, still 9-5 downtown, but only 2-3 days a week. With a relatively simple lifestyle, our income still pays the bills with a little left over. Our portfolio is left to grow for “advanced” retirement once the kids are in college and Mrs. MMB quits completely around age 50. I feel like I’ll be doing something that earns income until at least 60.

Afternoon
I work until a late lunchtime, and then I take the dogs for another walk. If Mrs. MMB’s not working that day, we do this together. She loves to garden and much of our food comes from there. Some days, we walk to a local eatery with the dogs and dine al fresco.

I wait for the kids to come home from school or pick them up. We ate some snacks, then I help them with their homework. Next up: sports, 4-H, girl/boy scouts, or science club or whatever fills up the afternoon. I love being able to spend time with them. We shop every day at a local market for ingredients for that night’s dinner, before the after-work rush. Did I mention I never have to go to Costco or any megastores on the weekend?

Evening
Dinner is a family affair. Once a week, the grandparents come over for dinner or we go over to their place, since we live in the same city. After dinner and homework is finished, perhaps a DVD or pre-planned TV viewing. I could say “NO TV!!!”, and I’d still like to severely limit TV viewing in the house, but do think there is good content out there. Why not watch it together? Otherwise, we might play a board game or learn about that year’s Big Adventure. I am not a fan of video games at all, unless educational and done well.

I used to worry that once I had kids, I wouldn’t be able to travel anymore. However, I’ve been learning about parents who take their kids traveling around the globe for a year or longer. I don’t think that’s my style. I’d rather visit one single country/region for an entire month during the summer. I call it Big Adventure. Renting a house or apartment for the entire month would be more economical, and we could use that house as a base. During the rest of the year, we could research the country’s language and culture to plan out activities.

After the kids go to bed, I’ll probably be exhausted as well. If not, I’m sure I’ll poke around the internet some more before I pass out.

How would your perfect day go?

Flowchart: Should You Work For Free?

Here’s a decision chart that’ll amuse those of you who work independently, perform some freelancing/consulting work, or just happen to be especially good at something. Should you do the work for free? Well, it depends:


(click to visit site)

By Jessica Hische at ShouldIWorkForFree.com.

Two Completely Different Ways to Boost Productivity

While procrastinating today, I of course ran across a couple of tips on productivity and success that both powerful and very different.

First is an essay called Good and Bad Procrastination by Paul Graham. It includes a lot of insights into procrastination, and my favorite was the idea that it was okay to put off less important, scheduled, to-do list-type things whenever you get a chance to focus and do some really great things:

The reason it pays to put off even those errands is that real work needs two things errands don’t: big chunks of time, and the right mood. If you get inspired by some project, it can be a net win to blow off everything you were supposed to do for the next few days to work on it. Yes, those errands may cost you more time when you finally get around to them. But if you get a lot done during those few days, you will be net more productive.

In fact, it may not be a difference in degree, but a difference in kind. There may be types of work that can only be done in long, uninterrupted stretches, when inspiration hits, rather than dutifully in scheduled little slices. Empirically it seems to be so. When I think of the people I know who’ve done great things, I don’t imagine them dutifully crossing items off to-do lists. I imagine them sneaking off to work on some new idea.

The second is the Jerry Seinfeld Productivity Secret by Brad Isaac:

He told me to get a big wall calendar that has a whole year on one page and hang it on a prominent wall. The next step was to get a big red magic marker.

He said for each day that I do my task of writing, I get to put a big red X over that day. “After a few days you’ll have a chain. Just keep at it and the chain will grow longer every day. You’ll like seeing that chain, especially when you get a few weeks under your belt. Your only job next is to not break the chain.”

“Don’t break the chain,” he said again for emphasis.

This idea of incremental change is not new – see this post on Kaizen for example.

Some things are best achieved when you attack it a little every day – things like debt reduction, learning a language, or weight loss. Other things you may have to wait for the inspiration, but when it comes, it pays to put it above all else. Perhaps a great business idea or investment opportunity.

The E-Myth Revisited: Small Business Book Review

I bought The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael Gerber at a outdoor market because it was a finance “bestseller” and I’d seen it on a few reading lists. It’s been sitting on my bookshelf since (along with many others…), but once I picked it up and read a chapter, I went ahead and finished over the next two days.

Why Businesses Fail

The “E-Myth” stands for the Entrepreneurial Myth, which I’ll paraphrase as the belief that all a successful business needs is a hardworking, skilled, fearless entrepreneur. When we think successful small business, we think of Bill Gates or Richard Branson of Virgin. Is it really that simple? 40% of small business fail within one year. 80% of them fail within 5 years.

This book states that, in reality, a successful business needs three roles to be fulfilled:

  • a technician which understands the technical aspects of the business,
  • a manager which plans and organizes, and
  • a entrepreneur who provides the vision and energy.

You might think you have all of these characteristics already, but these roles are often in conflict with each other. Most businesses start out with only one role really filled – that of the technician. A plumber starts a plumbing company. A baker starts a bakery. A graphic designer starts a design shop. Usually, the motivation is that they don’t want a boss. The end up have a poorly trained boss – themselves.

When things get hard, usually the technician wins out. The perceived solution is to work harder, do everything by yourself, so that you can “do it right”. This is where many businesses start to fail. Now, if you’re really stubborn and hardworking, you can make this stretch out for a long time. You’ll also be really tired and unhappy.

I actually see this first part of the book as separate from the next part. It teaches you to look at how you are running your businesses. Are some of the roles being too strong, or being neglected? The manager tends to micromanage, and the entrepreneur tends to be the frustrated dreamer.

The Solution

Okay, so now what? How do you take your business to the next level?

Gerber says to look at the franchise model, and uses McDonald’s as an example. Don’t focus on the fact that you may hate the food there. The true power of McDonald’s is that every single aspect of the business was broken down step-by-step and laid out that a random person off the street could “read the manual” and open up their own McDonald’s restaurant. Where to locate the restaurant. The layout of the kitchen. The menu. How each hamburger is ordered, stored, cooked, assembled, and finally delivered to the customer.

What’s your system? If you were to train a reasonably smart person without any knowledge in your field, how would you break down your business to them? What is the unique value proposition that you offer, and how do you achieve it? What does each roleplayer do? As the saying goes, “Explain it to me like I’m a 10-year old.”

Recap

I view this book as “big picture” type of book that will definitely get you thinking differently about your business and business goals. Since it is also relatively short and easy to read, I would recommend it to anyone who wants to work in a small business, or is already working in one. (It’s also really easy to find at the library or used for cheap – try Amazon or Half.com.)

The book is definitely more applicable to a small business where you plan on one day being more “hands off”, like a restaurant, a store selling widgets, or a big design agency. But even for the many people out there who are perfectly happy being a one-person show, you can still apply the concepts of this book. You can break yourself down into what your special roles or tasks are. Write it down. You may not have ever thought of yourself in this way. Then you can focus on those areas, and either get rid of or outsource the tasks that you don’t need.

Now, some critics will call this book common sense from a self-appointed guru. In this way, I feel this book is a bit similar to Rich Dad, Poor Dad by Robert Kiyosaki. I didn’t really like the rest of his books, but the idea that you should buy assets that grow instead of liabilities like cars or gadgets can be helpful. But reading it was definitely a net positive for me, as was reading The E-Myth Revisited. Both are not the best writers out there, but still manage to convey their message.

Developing and Monetizing a Niche Website

The following is a guest post from reader Dan, who shares his story of starting Maciverse.com and developing it to where it earns $1,500 in passive income each month.

In January of 2008 I closed shop on my first attempt at blogging. Six months earlier I thought that creating a blog about efforts to train for my first marathon would be extremely successful. It didn’t take me long to realize that the only thing more boring than writing about running is reading about someone Else’s runs. When I shut the doors on 26miles385yards.com I wasn’t giving up on blogging, I was giving up my blogging about topics that no one wanted to read.

It was also in January of 2008 that I launched Maciverse.com, a Mac Help blog. I’ll admit that I was late to market with the whole Apple blogging idea but I believed I had a bit of a different take on Apple computers and felt that I could fill a niche.

It was 6 months after Apple released their first iPhone and there was significant talk from media outlets and financial advisers about how they were anticipating a significant “halo” affect from iPhone and iPod sales into Mac computers. The more I heard this idea, the more I realized that there would be a growing audience of individuals looking for help with use of their new computer. Just a few years earlier I purchased my first Apple computer and had quickly fallen in love with the products the company built. There was a learning curve but I was picking up use of the Mac quickly and found myself sharing tips with even the most experienced Apple product owners. So I decided to create Maciverse as a site where I shared my tips to the new Mac user.

Maciverse didn’t explode overnight, but through steady and consistent effort the site has grown from just a handful of visitors each month to over 1 million visitors each year It continues to increase in size by about 20% each month without a single dollar spent on advertising. We now cover more than just hints and tips for your Mac and have grown to a team of 5 authors sharing everything the know, love, and sometimes hate about Apple products.

With the traffic growth has also come residual income. but in reality, for the first year Maciverse didn’t make more than $100. My first check from Google Adsense came in year 2 and at that time I was just happy to be breaking even. But over the last 12 months Maciverse has gone from making just a few dollars a month to continual earnings of over $1500 a month. Increasing the number of visitors to the site has helped with the financial gains, but the biggest reason I wasn’t always making decent income from Maciverse was because I didn’t know how to monetize my audience. Below is what I’ve learned about monetizing a Mac site.

[Read more...]