My wife and I have been involved in several businesses and probably will continue to be so for many years to come so when I came across
Foreigner's Finances: The Entrepreneur Test, I thought to myself "eh...I should ace this test". However, my brain immediately stopped at question #1.
#1 I believe that I am firmly in control of my own future success or failure (TRUE/FALSE).
Now Americans have an image of themselves as independent trail-blazers -- and in those either self-employed or running a business, this attitude is even stronger. (This hubris comes through most strongly in tax discussions -- "everything we have and earn is from our blood, sweat and tears and the government has no right to it!") But yet when I think back on both my business dealings and investment moves, control is not the word I would use.
I started my current company with 2 other partners and had another join us later. It was the perfect blend of different talents -- business, marketing and technology. We all met as employees in a previous company (ABC Inc) where the parent company (XYZ Corp) was bought out but ours was killed off after the acquitisition. So knowing we would all be soon out of a job, somehow we got the crazy idea to go into business together.
When we first started, our focus was not on health care technology. Instead, we were in the discussion phase to build internet-based insurance applications. Meanwhile we were doing consulting working to keep the income flowing during this bootstrap mode. However, XYZ Corp had not kicked us out of their building yet so we not only had free office space but were still plugged into their network and email systems.
One day, we saw a global email announcing a new internal product. Being quite curious, we downloaded it and it turned out to be total crap. We sniffed our noses and said "man, we can build a much better web-based product ... well why don't we?" Two months later, we had alpha version 1 of our current flagship product and we called up our contacts at XYZ Corp to rag on their attempt. Then we casually dropped "oh...and type in X.X.X.X in your browser". Now this was back in the late 90s -- the dotcom craze was in full swing but the focus was on consumer-oriented websites so to see a business application on the web just knocked our contacts' socks off. Before not too long, XYZ Corp became our first real customer and we did an about face on our business plan.
Why XYZ Corp let us stay in their offices is another story by itself. (We did eventually move when they expanded and needed even our small space.) They could have simply closed ABC Inc down and that would have been that. Instead, they sold the corporation to us for $100 in order to take a multi-million dollar capital loss write-off. But the only way that write-off would have been allowed by the IRS is if we then turned the corporate shell into a successful business. Hence XYZ Corp had very good incentives to give us consulting work and buy our products. We did good work of course but the extenuating tax circumstances meant they were willing to give us a sweet-heart deal to improve our survival odds for at least 5 years. After all, what's an extra $75K a year compared to millions in tax deductions?
In the investing arena, luck has also intruded often for the better.
- While working for ABC Inc, I put the max I could in the 401K plan with 25% allocated T.Rowe Price Science and Technology (PRSCX). XYZ Corp continued run the 401K plan until such time all participants could be notified about the plan shutdown. The plan finally was terminated in the middle of 1999 and I transferred my money into an IRA holding blue chip stocks. Just a few months later, the Dotcom bubble would burst. PRSCX proceeded to drop from $77 to $10 and is still is only at $23 after a decade. Losing a job from the XYZ Corp buyout saved me from a mind-boggling 70% loss. Instead, I got out with 24% return per year in PRSCX.
- When picking mutual funds, I decided Janus Worldwide (JAWWX) would be the choice for my international allocation. I picked this fund of course based on past performance -- after all, past performance sells. ;) But when I started filling out the application to invest in the fund, I realized my "research" was wasted as Janus Worldwide was closed to new investors. At that point, I decided to go with Janus Overseas (JAOSX) thinking "eh...same company, probably the same investment strategy". Not even close -- during the decade I held JAOSX, it outperformed JAWWX by 300%.
- When our bank froze our company credit line in late 2007 due to a technicality (wrong FEIN on the loan documents), I stopped my planned investments and sold off a big chunk of stock to make a personal loan to my company. We all know what happened next in 2008 -- Bear Stearns, Lehman Brothers, AIG, whoops. We did finally get a totally new credit line before Bear Stearns hit (whew) and started a repayment schedule on my loan. Of course, getting the money back bit-by-bit then allowed me to dollar-cost-average right into the market during the nadirs.
Hence, I would answer FALSE to question #1 in the entrepreneur quiz. It is the rare few who are in control of their future successes as it's a wild roller-coaster ride. Instead, I would say:
1) The successful entrepreneur continues to get back on after falling off.
2) The successful entrepreneur is willing to try different rides and choose the one most suited for themselves.
One final note on serendipity. There is one event that trumps all and that's having the opportunities of a U.S. citizen during this period that perfectly suits my skills. Before my parents emigrated to the U.S., relations between the U.S. and China were frozen. It took
Nixon's visit to normalize relations and re-open the door for legal immigration. When viewed in this scope, everyday I am in China reinforces how luck has been 99% of my success and all I do now is incrementally work on that 1%. After all, even if I was working an average American job, I'd still be living a lifestyle better than 99% of the world.
One final shout-out for Al Gore. Without
his efforts for government funding to develop what is now the Internet, some original founders say we would be a decade behind today's pace. Again, being in the right place at the right time standing on the shoulders of others.
(Filed in philosophy)
Standing on shoulders
Posted by Mossy
March 23, 2010 10:38 PM
Now Americans have an image of themselves as independent trail-blazers -- and in those either self-employed or running a business, this attitude is even stronger. (This hubris comes through most strongly in tax discussions -- "everything we have and earn is from our blood, sweat and tears and the government has no right to it!") But yet when I think back on both my business dealings and investment moves, control is not the word I would use.
I started my current company with 2 other partners and had another join us later. It was the perfect blend of different talents -- business, marketing and technology. We all met as employees in a previous company (ABC Inc) where the parent company (XYZ Corp) was bought out but ours was killed off after the acquitisition. So knowing we would all be soon out of a job, somehow we got the crazy idea to go into business together.
When we first started, our focus was not on health care technology. Instead, we were in the discussion phase to build internet-based insurance applications. Meanwhile we were doing consulting working to keep the income flowing during this bootstrap mode. However, XYZ Corp had not kicked us out of their building yet so we not only had free office space but were still plugged into their network and email systems.
One day, we saw a global email announcing a new internal product. Being quite curious, we downloaded it and it turned out to be total crap. We sniffed our noses and said "man, we can build a much better web-based product ... well why don't we?" Two months later, we had alpha version 1 of our current flagship product and we called up our contacts at XYZ Corp to rag on their attempt. Then we casually dropped "oh...and type in X.X.X.X in your browser". Now this was back in the late 90s -- the dotcom craze was in full swing but the focus was on consumer-oriented websites so to see a business application on the web just knocked our contacts' socks off. Before not too long, XYZ Corp became our first real customer and we did an about face on our business plan.
Why XYZ Corp let us stay in their offices is another story by itself. (We did eventually move when they expanded and needed even our small space.) They could have simply closed ABC Inc down and that would have been that. Instead, they sold the corporation to us for $100 in order to take a multi-million dollar capital loss write-off. But the only way that write-off would have been allowed by the IRS is if we then turned the corporate shell into a successful business. Hence XYZ Corp had very good incentives to give us consulting work and buy our products. We did good work of course but the extenuating tax circumstances meant they were willing to give us a sweet-heart deal to improve our survival odds for at least 5 years. After all, what's an extra $75K a year compared to millions in tax deductions?
In the investing arena, luck has also intruded often for the better.
Hence, I would answer FALSE to question #1 in the entrepreneur quiz. It is the rare few who are in control of their future successes as it's a wild roller-coaster ride. Instead, I would say:
1) The successful entrepreneur continues to get back on after falling off.
2) The successful entrepreneur is willing to try different rides and choose the one most suited for themselves.
One final note on serendipity. There is one event that trumps all and that's having the opportunities of a U.S. citizen during this period that perfectly suits my skills. Before my parents emigrated to the U.S., relations between the U.S. and China were frozen. It took Nixon's visit to normalize relations and re-open the door for legal immigration. When viewed in this scope, everyday I am in China reinforces how luck has been 99% of my success and all I do now is incrementally work on that 1%. After all, even if I was working an average American job, I'd still be living a lifestyle better than 99% of the world.
One final shout-out for Al Gore. Without his efforts for government funding to develop what is now the Internet, some original founders say we would be a decade behind today's pace. Again, being in the right place at the right time standing on the shoulders of others.
(Filed in philosophy)
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