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I just happen to vehemently disagree with the notion that you can let revolving debt ride while you pursue high-risk investments Starting a business is not a h

I just happen to vehemently disagree with the notion that you can let revolving debt ride while you pursue high-risk investments Starting a business is not a high-risk investment (unless you put your own money into it) And if you truly believe in your business, then why wouldn't you want to invest everything into it? Because, excuse me for saying so, that would be silly. Think about my business separately from me for a moment. If the business needs money, the best place to get it is from people who have money, not from me who has little.

timr 18y ago
This reminds me of a JWZ quote: "Linux is only free if your time is worthless." The same principle applies here. A business is exceptionally high-risk, if you value your time at more than zero. It's not like a savings account, where you put your money in, ignore it, and you're guaranteed to get it back someday. It's not even like a stock or a bond, where you have a framework to evaluate your investment, and can make prudent choices with a little bit of effort. When you start a business, you're investing your time -- your future earning potential -- into a vehicle that has a poor history of return, and no framework for evaluating the odds. That's as risky as it gets. This point plays into your second comment: sure, it makes sense to get as much of your funding from outside investors as you can get on favorable terms, but it's naive to think that outside investors are going to save you from investing in your own company. Investors don't want to take the risk unless you have some skin in the game, and founders don't want to relinquish control before they need to do so. Thus, in reality, founders end up investing in their companies heavily. They're already committing their most valuable possession (time); it makes sense to double-down with money, too.
- CatDancer 18y ago
  Have you read Founders at Work?
  - timr 18y ago
    Yes.
    - CatDancer 18y ago
      Well, I think there's different kinds of risk, and mathematically from a financial point of view they may look the same, but it's not the whole story. For example, suppose I want to take a year off and go hiking. I could have worked that year instead, made 100K, invested that in the stock market, and be a multimillionaire by the time I retire. So from a financial point of view, going hiking is a really terrible idea. Or, suppose, I feel like taking that year and doing a startup. And suppose I have a 90% chance of failure. OK, you can run the numbers, and probably show that, on average, I'll do worse than if I took a job for a year. So, yes, looking at it that way, you can say that my starting a business is an "exceptionally high risk". Except... what if I'm working on a project that I feel like working on? A part of the interview with Steve Wozniak that I found quite fascinating was that he said he didn't feel like he was taking a risk with Apple. Sure, he could have worked all those extra nights and weekends and had it come out to nothing. Yikes! Invest all those hours, that he could have been working to make money, and end up with zero. But so what? He was doing something he wanted to do, that he found really exciting, building one of the first computers that people could own themselves. Is there a danger that one will become overly caught up in a startup, and do foolish things? Sure. I been there. I've done that. If I had found the right mentor they could have advised me to bail on my startup a year and half before I did, and saved me a lot of grief. Does that mean that you "have to" or that it is "realistic" that you're going to wildly over commit? No. Just because most Americans are overweight and unhealthy doesn't mean that it is "realistic" for me not to have a moderate exercise program and eat healthy food. it makes sense to double-down with money hmm, I've already responded to this point, as far as I can tell. I'd be happy to expound more if someone wants a more detailed explanation, but otherwise I think I'd just be repeating myself.

timr 18y ago

This reminds me of a JWZ quote: "Linux is only free if your time is worthless." The same principle applies here. A business is exceptionally high-risk, if you value your time at more than zero. It's not like a savings account, where you put your money in, ignore it, and you're guaranteed to get it back someday. It's not even like a stock or a bond, where you have a framework to evaluate your investment, and can make prudent choices with a little bit of effort. When you start a business, you're investing your time -- your future earning potential -- into a vehicle that has a poor history of return, and no framework for evaluating the odds. That's as risky as it gets. This point plays into your second comment: sure, it makes sense to get as much of your funding from outside investors as you can get on favorable terms, but it's naive to think that outside investors are going to save you from investing in your own company. Investors don't want to take the risk unless you have some skin in the game, and founders don't want to relinquish control before they need to do so. Thus, in reality, founders end up investing in their companies heavily. They're already committing their most valuable possession (time); it makes sense to double-down with money, too.

CatDancer 18y ago
Have you read Founders at Work?
- timr 18y ago
  Yes.
  - CatDancer 18y ago
    Well, I think there's different kinds of risk, and mathematically from a financial point of view they may look the same, but it's not the whole story. For example, suppose I want to take a year off and go hiking. I could have worked that year instead, made 100K, invested that in the stock market, and be a multimillionaire by the time I retire. So from a financial point of view, going hiking is a really terrible idea. Or, suppose, I feel like taking that year and doing a startup. And suppose I have a 90% chance of failure. OK, you can run the numbers, and probably show that, on average, I'll do worse than if I took a job for a year. So, yes, looking at it that way, you can say that my starting a business is an "exceptionally high risk". Except... what if I'm working on a project that I feel like working on? A part of the interview with Steve Wozniak that I found quite fascinating was that he said he didn't feel like he was taking a risk with Apple. Sure, he could have worked all those extra nights and weekends and had it come out to nothing. Yikes! Invest all those hours, that he could have been working to make money, and end up with zero. But so what? He was doing something he wanted to do, that he found really exciting, building one of the first computers that people could own themselves. Is there a danger that one will become overly caught up in a startup, and do foolish things? Sure. I been there. I've done that. If I had found the right mentor they could have advised me to bail on my startup a year and half before I did, and saved me a lot of grief. Does that mean that you "have to" or that it is "realistic" that you're going to wildly over commit? No. Just because most Americans are overweight and unhealthy doesn't mean that it is "realistic" for me not to have a moderate exercise program and eat healthy food. it makes sense to double-down with money hmm, I've already responded to this point, as far as I can tell. I'd be happy to expound more if someone wants a more detailed explanation, but otherwise I think I'd just be repeating myself.