Jedi Power #2 = Effortless Effort

How do you produce more with less resources?

This is the foundational question of "Effortless Effort" or "Disproportionate Return on Investment". It's the underlying theme of the movie, Moneyball & the focus of a recent post by a good friend, The Reverend Hoffman.

What do you want? How much resource [work/money/time] is required to get it? What if you could get it for a fraction of the resource cost?

Put another way: how do you put $1 in and get 10x, 100x, 1000x back? Can you do it easily & with a high degree of repeatability? 


As a young man in college I marveled at the "smart kids" who got strait A's and seemed to never study. After consistently getting B's and studying my ass off, I approached one o' these "smart kids" and asked her secret. "The trick" she said, "isn't to study a wide set of material that might be on the test, instead, try focusing on the professor, the types of questions they've asked in the past, information they value, etc." She typically studied under 1 hour per test, I studied roughly 10+ hours per test. She got better grades, with less work. She won.

This idea stuck with me. How was she able to get such better grades with a fraction of the work? Was she smarter than me? Maybe, but there seemed to be more to it. The core difference in our approach to studying was that her's was fundamentally different from everyone else's. Somewhere in her life, while preparing for a test she asked the question, "is there an easier way to get good grades on a test?" She invested time in experimenting with different approaches, found 1 that worked MUCH better than the known alternatives, applied it, and won.

Whenever I start a venture these days I think of her. What would she do in this situation? How would she win? 

Steps to winning:

• Define what you want: good grades, profit, etc.
• Outline traditional steps to solve the problem: study, hire a contractor, etc.
• Understand the resource cost involved in each step: hours of studying, $$$, etc.
• Outline cheaper alternative steps to come to the same (or better) outcome
• Test your alternatives & use your learnings to tweak your plan

When comparing ventures, examine

• Total cost of ownership: how much resource [time, money, etc.] is this going to cost
• Total value: how much resource will it return?

Choose the venture which returns the largest total value at the lowest cost of ownership.
This philosophy of "Effortless Effort" has allowed me to invest in businesses which have had a massively disproportionate return on investment. $1 in $1,000 out. This idea has had a profound impact on my life, hopefully it can help inform some of your important decisions.
Pip pip,
Cedric

Jedi Power #1 = Alliance

How can you do more?

You can do more by creating alliances with people who want the same things as you.  They are pursing the same long term goals, with the same life/work style & the same short term goals.

As humans we’re limited.  Sadly, there are only so many hours in a day and only so much we can do in an hour.  So, how can we do more?

After experimenting for a few years, the best answer we’ve come up with is, Alliance,  a relationship based on appreciating another parties interests.

Why should you appreciate someone else’s interests?  Why should they appreciate yours? The simple answer [all morals & norms aside], you’ll only appreciate each other’s interests if they are aligned, if you both want the same thing.

It follows, the best way to do more, is to create alliances with people who want the same thing as you.

Thus, the most powerful fundamental tool in forming alliances is aligning interests. The key to aligning interests is understanding what people fundamentally want.  

When we talk with someone as a potential collaborator for any project, we ask “what do you want out of life?” People are often caught off guard but it quickly puts them in an honest place. If the response is boiled down to money, we dig deeper. What would they do with the money? Travel? Buy a house or a fancy car?

We encourage people to think about what they actually want. So often the aspirations given at the drop of a hat are reflections of those ingrained by others or the ideals of our society. When given a moment to think, or questioned further, individuals can produce a more complete picture of their ideals. This helps me to understand their goals in life and if aligning interests would be mutually beneficial. Understanding these ideals and passions is an essential part of our working philosophy.

Having this conversation, with a few appropriately probing questions, can save you a HEAP o’ time when looking for people that would work well within your group. Creating alliances through aligned interests is a powerful way to get more done.

Zen Business Philosophy

Doing what comes easily and most naturally will yield the best results. 

Would you rather fight a loosing battle or play an enjoyable game?  Most people, rational people say they'd rather play an enjoyable game than fight a loosing battle.  At first glance this seems like a obvious choice, until you dig deeper and realize most people are fighting loosing battles, doing everything possible to "win" without necessarily enjoying the ride. 

What if the answer to riddle of life isn't to "win" but instead to "be", to exist in a state which comes easily and naturally and that that will yield the best results with the least difficulty. 

A friend recently sent over a fascinating article by Steve Pavlina, which talks about Steve's journey from a failing profit chaser to a life-loving game player. When Steve focused on making a profit over everything else, he had a miserable time and ended up bankrupt, when he focused on enjoying the game of life he had a great time and made enough money to play indefinitely.  

Reading Steve's article struck a personal chord.  From 2008 through 2011 I was chasing dollars, miserably working at Microsoft for a paycheck, fighting to get ahead in the corporate world and loosing.  In 2011 I stopped trying to make money doing something I hated (working for a large bureaucratic company) and instead started doing something I enjoyed (collaborating on interesting projects with talented entrepreneurs).  Almost immediately after joining the startup we hit it big and I was effectively able to "retire" at 28.  

These days I run a technology and art based incubator (TheNerditorium.com) where I collaborate with amazing people on projects we're all deeply passionate about.  Driven by passion our projects are effortless, it's easy and enjoyable.  We're massively profitable and can sustain our income with about 5 minutes of "work" (stuff that's not entirely enjoyable) per month.  The notable point, we could bring in 10X more profit by hunkering down and doing more "work" on the most profitable parts of our business... but we'd rather play.  We're having too much fun collaborating on projects we care about which may be less profitable or even doing pro-bono work.  The really strange thing, the more we focus on projects we're passionate about, the more we seem to attract a crowd of people who want to help push these projects into reality. We recently started a a film project using home-brewed video tech, People in Motion which received over $10,000 in support from people around the world who wanted to help make the project a reality, Hollywood has even come knocking on our door to help produce & distribute the film. 

In our limited experience, the lesson seems to be that doing the easy things that come most naturally will yield the best results.  Focus on projects you're passionate about and success will follow.   

Pip pip, 

Cedric

Special Guest Post: Working, Retirement and Living More by Bill Mitchell

This month's post comes to us from a special guest and good friend, Bill Mitchell.  We first met 2 years ago at Microsoft when I candidly asked him for $5,000,000 to fund a BIG software idea.  He listened to the pitch, liked it enough to keep talking about the idea over beers (FYI, he's an AMAZING home-brewer) and eventually a friendship blossomed.  Last year he left a comfortable position at Microsoft to pursue his passions. Here is his story...

"1 year ago I was a 40-something vice president at Microsoft.   After an initial 2 year hiatus from startup activity somehow expanded into 18 years of stable employment, I decided it was finally time to step back and craft my next “2 year plan”.    Leaving Microsoft was an easy choice, because a key intersection in my optimal work Venn diagram had finally become the null set (grey area):

Yes, there were still plenty of opportunities in product areas I didn’t think the world actually needed, or that I didn’t play to my (admittedly self-assessed) strengths, or that I just found …well… boring.   Time to go…

Mid-Life Options

So what do you do when you leave a job after 18 years?  Live more?  What does that actually mean?   I canvassed colleagues fortunate enough to find themselves in a similar position, and found that they either:

1.       Retired
2.       Repeated or
3.       Went Crazy
I sometimes see my former colleagues in the “retirement” bucket at the golf course or on the tennis court or sometimes at the airport heading out on more vacations.  When I ask them what they’ve been up to, I typically get a long pause and a response like “oh, you know, golfing and stuff…”.   I guess you could say they are indeed “living more”, since they have all the time in the world to spend on vacations and leisure sports (more about this later).

The “repeaters” are the ones that I relate to a bit more (perhaps because my perma-slice makes golf a less attractive option!)   They’re the ones who dive right into a comparable job at a comparable company within weeks of leaving their old jobs, rebound-style.  They do what I was sorely tempted to do:  find somewhere (quick! It’s awkward to not have an identity == job!) to repeat my experience, somewhere where my optimal work Venn diagram hopefully revealed more opportunity. 

I confess to almost becoming a “repeater”.   Headhunters call, your ego begs you for a title again,  and ingrained mental habits draw you inexorably toward the comfort of a similar job.   On the brink of committing to a new (but “repeat”) job,  I was fortunate enough to have a  conversation with a “crazy” friend. 
My friend P left our old company five years ago and instead of retiring (he’s in his 50’s…it was an option) he immediately became a crazy tornado of activity.  He joined several exciting small companies he saw as good Venn diagram fits for him, but in non-operating roles, so he maintained directional control but without attendant 9-5 time-suck.   He also started two companies of his own, but again hired operating officers to run the companies, so he can balance his time and do even more.   He maintains enough free enough to travel extensively (he’s visited most of the world) and engage in creative passions (such as creating fine furniture).  He pursues several charity causes he deeply believes in as well.  

Crazy was the way to go….I was inspired!  Since then I have started two companies of my own, joined the boards of several exciting new ventures and am making up for lost time on a long list of once-put-off activities:  motorcycle and flying adventures, travel, new learning (mechanical design, welding) and brushing up on old studies (languages, calculus and history).

Why “retiring” and “repeating” are not Living More

Why not “retire”, especially if one has the means?  Retirement, after all, achieves the ultimate in Live/Work ratio, right?   Classic retirement, to me,  is like dining on lemon meringue pie…and nothing else…for breakfast lunch and dinner.   It might sound great for a meal or even a day but… ugh…way too much of a good thing!   You need balance.  You need protein.  You need vitamins and minerals and fiber and electrolytes and ….all that other stuff too.    Just as your brain and body need Work!

Work is not the enemy!   Fulfilling, enjoyable work with colleagues you appreciate and who appreciate you is the protein in our diet-of-life.    Or maybe cholesterol is a better metaphor:  LDLs (“bad cholesterol”) is like bad work:  you want to minimize it, because it harms you.   “Bad work” is the soul-crushingly boring stuff, or the work you perform in a poisonous political environment, or perhaps just the stuff that is a gross mismatch to your talents and abilities.  You do it because you need the money, that’s it.   But “good work”,  HDLs (good cholesterol) is not just good, it is vital.   It’s stimulating, rewarding and makes you feel alive.  The goal of Living More shouldn’t just be the elimination of cholesterol (Work), it should be minimizing bad cholesterol (harmful work) and maximizing good cholesterol (rewarding/fulfilling/satisfying work).

Repeating a job situation with a next job doesn’t necessarily net you any increases in HDL/LDL (good work/bad work) ratio.  And it generally won’t improve your L/W…if anything, with any new job you’ll see your score decrease.   Avoid the inertia!   Truly Live More not just by Working less, but by Working Better!"

-Bill Mitchell

What's your North Star?

What is the guiding light in your life? What is the #1 thing you live for, above all else? What's your North Star?

When you're young the question is easy, society tells us...

• In high school your North Star is to get into college
• In college your North Star is to land a job
• After landing a job the North Star becomes building a career

Sounds familiar, doesn't it?  This is the one-size-fits-all template we're told to follow.  Should our life's purpose center on building a stable career?  Is there more to life?  Is that really the #1 thing we live for? 

For the past 3 years I've been relentlessly searching for my North Star, for something to believe in, something to guide me.  It's been an epic journey and I've finally found it with the help of three difficult questions...

What are your 3 core values? What are the 3 most important values in your life?  Here's a list of nearly 400 values if you're looking for inspiration.  It's easy to pick dozens, the trick is boiling it down to the core three.  Take your time on this and really think it through, the more time you spend boiling this down the better, it took me about a month to come up with a decent answer and a year to come up with something I was happy with. 
1. What are the 5 daily experiences you hope to have in your life?
2. What does your perfect day look like? Include every detail, from the time you wake up until the time you go to sleep. What is your experience?  What's the color of the room you wake up in?  What's the first thing you do?  Do you eat breakfast?  If so, who do you eat with?  Spare no detail. 

Your answers to these three questions will inform your North Star.  Ideally your North Star will be 1 sentence that describes your current #1 goal in life.  It's a tool, you can use it to filter the choices you make in life.  Once you have your North Star, ask yourself if the things you're doing in life are bringing you closer to that goal.  If they are, keep doing them.  If they're not, pass. 

If you're looking for example answers to the three questions above, here are mine...

My North Star is to surround myself with people I admire and provide the freedom for us to collaborate on creative projects we're passionate about. 

My Core Values
• People
• Creativity 
• Freedom
My 5 daily experiences
• Love of a good woman
• Epic friendship
• Learning
• Building
• Nature's beauty
My perfect day
Wake up in a warm breezy room & make love to the beautiful woman next to me
Do something physically challenging
Enjoy coffee/tea with the beautiful woman
Collaborate with friends on epic projects
Have an epic dinner with people I care about while watching a gorgeous sunset
• Retire to bed with the beautiful girl I woke up next to
  

Why do you do what you do?

If you've never been to Burning Man, stop whatever you're doing, go to BurningMan.com and get tickets to next years event. It will change your life. Here's the story of how it changed mine...

At last years "burn" (what attendees affectionately call the event) I ran headfirst into the most difficult and important question anyone's ever asked. I was running to escape a sandstorm when I literally ran headfirst into an art installation. As I wobbled up and my vision cleared I saw the question, "Why do you do what you do?" To the right and left of the question were pictures of people holding up written responses, things like, "Because I love it" or "Because it's been my dream since I was 9!"  

I thought about my life and the things I did... wake up early, go to the gym, work late, go home, pass out. These were the things I did, but why was I doing them? The question stuck with me for months and when I boiled it all down it was apparent that my motivation for everything, was to find a mate. The sad part was that I was so busy working I didn't actually have time to find or pursue what I really wanted, the love of a good woman.

The question still haunts me to this day and every time I ask it to others they give one of two answers, “because I have to” or “because I want to be successful”  It wasn't until a chance encounter with a friend of a friend that I heard anything different.

While car pooling to an event I randomly ended up riding in the car of Jason Evans, eventually I asked him the question and for the first time I heard a new answers, "I work with my best friends on a project I'm passionate about, every day I wake up excited, I do what I do because I love it, I have a great life!" I was hooked, I needed to learn more and Jason was kind enough to share his story. He’s in his early 30’s, loves how he spends his days, works with his best friends and is changing the way the world produces electricity.

So... how’d he do it?  He and his best-friends saved up as much as they could, quit their jobs and started a project they’re passionate about; building large-scale solar power plants at his start-up, TUUSSO energy.

Here’s the story in his words...

“Six years ago I was a patent attorney working relatively long hours and not enjoying life. Work was work, and I viewed it primarily as a means to an end.

After a few frustrating years I had had enough and realized that law firms suck! I was a cog in a money-generating machine for partners. My only hope as a laywer was to someday become a partner myself and start making “serious money” (over $250,000/year). Looking at the partners in my firm it was clear they were slaves to their paychecks. As they made more, they spent more. With every raise in pay, they had a corresponding rise in expenses and eventually they desperately needed every penny of their paychecks.

As time went on I became increasingly frustrated with my job as a patent attorney, I needed a change, I needed to find a job that I was passionate about, I needed to work with people I enjoyed but I just didn’t have a good enough reason to quit. I’d joke with my friends that we should just leave our jobs and start a business together, we’d all laugh and no one took it too serious, until one day... I went over to my buddy Owen’s house and found out that he’d just quit his job at McKinsey & Co (the consulting firm). Suddenly I had the reason I needed to quit.

The day I resigned the partners at my law firm confided in me that I was making the right decision, they told me that if they could have done it again they would have never worked in a law firm, they would have much rather done something they enjoyed and earned much less.

Initially, I had no idea what business we were going to start. We considered starting all sorts of different ventures: I looked into starting a pool hall (something I’ve always been extremely passionate about), selling energy-related software and dozens of other ideas, eventually we landed on Solar energy. Owen had been discussing starting a renewable energy business since business school with a couple classmates, and we had a strong team to get the venture off the ground. It was near perfect timing with the industry (still nascent then) set to explode in growth over the next few years.

Owen, his friends from business school (Vivek and Byron) and I had soon dedicated ourselves to this new venture. We dove head first into the world of large scale solar power plants, raised enough money to be taken seriously as an energy developer, and are now poised to complete development on our first power plant in southern California.

So... I feel extremely lucky. I love my work, spend my days solving interesting problems with my best friends, do what I believe in and make a good living. And you know what... everyday I wake up excited and happy to tackle my work, in a way that I never would have felt punching the clock for someone else.”


Why do you do what you do?  

• Here's a homework assignment, spend 15 minutes thinking about why you do what you do, write down the top 3 reasons.  
• Ask a few of your closest friends the question.  
• How does your reason compare to theirs?  
• How does your reason compare to Jasons?  
• How far would you go to love what you do everyday? 

The Live/Work Ratio

In 2008 I had everything, a great job, nice car, big bachelor pad, full social calendar, the works. I had it all and I was unhappy. My friends and family told me I was “successful”, that I should be grateful to have a good job in a down economy. By their standards I had it made, they kept reminding me of the good pay, career path, benefits and 3 weeks of paid vacation per year. But something was wrong, I was waking up every day dreading going to work. Every day I was tired. Tired of my job, of commuting to the office, paying bills, living for the weekends, and repulsed by the prospect of waiting until retirement to start really living life. So, I decided to make a change, I committed to finding a way out, to living more and working less ASAP. I was possessed to live out my dreams while I was still young and capable, and avoid waiting for retirement to really live. 

It took a bit of experimenting, but after 3 years I found a way to start living and stop working. By focusing on the Live/Work ratio, spending-less and making-more I was able to stop working at 28 and now can afford to take the next 16+ years off while living comfortably and pursuing my dreams.

Step 1: The Live/Work ratio
The most important thing I did was to focus on the Live/Work (L/W) ratio, the amount of time I could Live (without working) for every year that I worked. The goal was to make my L/W ratio as large as possible.  

The formula for the L/W ratio is simple, savings divided by expenses (for a given time).

For example, if your yearly (after tax) income is $50,000, with expenses of $40,000 and savings of $10,000 then your L/W ratio would be 10,000/40,000 or .25. This means you could survive for .25 years for every 1 year you worked. That’s 3 months of living for every 1 year of work.

When I started this project my L/W ratio was 0.37, meaning I could Live for 0.37 of a year (4 months) for every year of Work. I realized there were only 2 ways to improve my ratio, by spending-less and making-more money.
Step 2: Spending-less

By spending-less, my L/W ratio improved from 0.37 to 2.6. This meant that I could now live for 2.6 years for every 1 year working. By spending-less I increased the number of days I could live without working by 6X.  

In 2008 my expenses averaged $3,200/month or $38,400/year. I took a hard look at my lifestyle and with a major downsizing I was able to decrease my expenses to $1,200/month or $14,400/year.
Downsizing isn’t easy. Psychologically we’re trained to associate nice (often expensive) things with success. Before I could downsize I had to ask a very tough question, “Why do you do what you do?” In this case, why was I working? Was it for the big bachelor pad, nice car and fancy dinners? Was any of this stuff making me happier? When I thought about it, the answer was simple, no. Once I realized my expensive lifestyle wasn’t bringing me any additional happiness, downsizing became a whole lot easier.  

Like most Americans I spend the largest portions of my income on housing (42%), transportation (18%) and food (15%). Since these 3 areas represented my largest expenses, they also presented the largest opportunity for savings.  Check out the interactive infographic below for a fascinating breakdown on how most Americans spent their income in 2008.
After realizing how much I was spending on housing I traded my bachelor pad in for a single room in a house with with 4 roommates and dropped my rent by 50%. I traded my nice car in for a bus pas and saved more than $700/month on car payments, rent, maintenance, cleaning, parking, etc. Finally, I limited eating/drinking out at fancy restaurants and instead hosted pot-lucks and drinks at my house.

Step 3: Making-more
Determined to make-more, I joined a start-up and left my safe, well-paying corporate gig. The business was a success and my yearly (after tax) income increased by 5X. This increase in income improved my L/W ratio from 2.6 to 16.4. I could now live for 16.4 years for every 1 year I worked.  

Leaving a stable job for the high risk world of start-ups isn’t for everyone. The good news, there are alternatives. A great source for inspiration & information on how to make more while working less can be found in the book, “The 4 hour work week” by Tim Ferris. In the book he dives into businesses models that require minimal start-up capital and maintenance.

America & the L/W ratio
Wondering how the average Americans’ L/W ratio looks? It’s bad, really bad. Just take a look at the infographic below, adjust income for taxes and you'll quickly realize Americans are spending themselves into a debt situation where they'll need to work indefinitely and never be able to retire.

According to the US Department of Labor, the average American household makes roughly $63,000 per year, that’s about $47,000 after taxes. The average American also spends an average of roughly $50,000 meaning they spend roughly $3,000 more than they make. This puts their L/W ratio at roughly -.06, meaning they can live for -22 days for every year they work. Said another way, the average American collects 22 days of working debt for every year they work, meaning that at the current pace they can’t live or work without accumulating debt. The only way for the average American to change this is to reduce the amount they spend and/or increase they amount they make. Taking a look below at the graph of consumer spending over the past 25 years, notice the largest % of spending is on housing, transportation & food. Because these categories represent such a large portion of total spend they offer the largest opportunity for savings & improving the L/W ratio.
Your Live/Work ratio
Does your life feel a little like this...

Want to live more and work less?  

• Step 1 - Find your live/work ratio.  
• Step 2 - Try spending-less & see what impact it has.
• Step 3 - Explore ways of making-more, here are some of my favorite inspirational books on the topic: "The 4 Hour Work Week", "100 Great Businesses", and Richard Branson's Autobiography