The Boglehead is anti-entrepreneur?

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HomerJ
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Re: The Boglehead is anti-entrepreneur?

Post by HomerJ » Sat Sep 15, 2018 10:15 pm

Ron Scott wrote:
Sat Sep 15, 2018 9:07 pm
HomerJ wrote:
Sat Sep 15, 2018 8:32 pm
Ron Scott wrote:
Sat Sep 15, 2018 5:37 am
I told a former colleague I used the BH forums and his response was “Yeah, they don’t like our tribe.”

What he meant was we believed in taking risk. He built and sold a company: I had 80% of my NW tied to my company stock for more than 15 years. Both of us had borrowed heavily at times to maximize our positions. We were all in and willing to either soar or crash.
If you had crashed, would you have posted this thread?

I submit you can't honestly answer that.
So that means you admit you're asking a stupid question. I'll buy that...
Whoa... You really didn't get my point? Have you never heard of survivorship bias? Your response to me somewhat invalidates your first post. I really thought my honest question would generate some self-reflection on your part. My mistake.
Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways.
The J stands for Jay

randomguy
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Re: The Boglehead is anti-entrepreneur?

Post by randomguy » Sat Sep 15, 2018 10:21 pm

golfCaddy wrote:
Sat Sep 15, 2018 8:17 pm
randomguy wrote:
Sat Sep 15, 2018 5:42 pm
For extreme examples about guys like Zuckerberg or Bezos. Would you say they aren't entrepreneurs because they didn't plough all their money into their company but instead diversified along the way (i.e. all those private placements where he sold stock).
Zuckerberg isn't remotely diversified. Even today, something like 98% of his net worth is tied up in FB. Pre-IPO, I'm betting it was close to 100%.
He sold enough facebook stock preIPO to be set for life (I want to say it was 45 million in an offering with some russians). Yes his wealth is dominated by facebook. His financial independence isn't. He could have held that stock and have more money today. He didn't because the risk (facebook going to zero) wasn't worth it (the difference between being worth 60 billion and 65 billion just doesn't matter).

DH0
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Re: The Boglehead is anti-entrepreneur?

Post by DH0 » Sat Sep 15, 2018 10:25 pm

Zuckerberg has 98% of his wealth in FB. If you believe having 98% of your investments in a single stock qualifies as diversified, I don't think you understand what the term means.
[/quote]

Anti-entrepreneurism at work. Diversification is relative. 2% was 'enough' to make sure he could never lose the game. Was probably more at the time, but I have a hunch that FB outperformed his other investments. What a loser for not rebalancing. The rest is fun money, which will probably go to charity anyway.

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Re: The Boglehead is anti-entrepreneur?

Post by randomguy » Sat Sep 15, 2018 10:32 pm

JBTX wrote:
Sat Sep 15, 2018 10:01 pm
I would say it is more likely the opposite is true - an entrepreneur has no patience of piddling and plodding for 30+ years and then living a frugal lifestyle by spending 3-4% of your savings and then you die. That seems utterly ridiculous to some of them.
Very few entrepreneurs are looking to get rich quick. Most entrepreneurs are not hitting up VC and trying to build 100 million dollar+ companies. They doing restaurants, lawn services, professional services, and filling niches that are too small for big players. Occasionally these companies grow (you franchise your burger restaurant, yoga pants go from 10k hippies to 10 million woman) but they are the exception not the rule. The first group gets all the press. The second group is encompasses most people.

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Re: The Boglehead is anti-entrepreneur?

Post by Sandtrap » Sat Sep 15, 2018 10:34 pm

Ron Scott wrote:
Sat Sep 15, 2018 5:37 am
I told a former colleague I used the BH forums and his response was “Yeah, they don’t like our tribe.”

What he meant was we believed in taking risk. He built and sold a company: I had 80% of my NW tied to my company stock for more than 15 years. Both of us had borrowed heavily at times to maximize our positions. We were all in and willing to either soar or crash. And we LOVED our work; “FIRE” was the last thing on our minds. We were invested in ourselves.

The way we looked at these things was that America (NY and CA in particular) is the land of the entrepreneur, where the system encouraged us to create the future instead of just reacting to it, and with hard work and luck you could reach the promised land.

We were lucky and won our games, never bottoming out. I retired and invest 80% of my money like Jack Bogle says to, and with 20% still in that company stock, still going strong.

I agree with him to some extent that BHs don’t like the entrepreneurial way of life, or maybe just ignore it as someone else’s cross to bear. BHs play Steady Eddie to the entrepreneur’s Fool?

Would you advise a young person in their 20s or 30s, inclined to the entrepreneurial life, to go for it or stick to the Steady Eddie approach, and why?
1. Like musicians and artists, business entrepreneurs pursue their passions independent of group consensus and/or outside opinion or advice. Money and wealth is not the primary motivation but a result of.
2. Conversely, those that adhere to the "Steady Eddie" approach are already inclined to that comfort zone and structure.
3. Boglehead investing and approach is not antithetical to business entrepreneurship. It is a common sense and level headed adjunct to it. Like 2 wheels on a cart, utilizing both makes for a smoother journey.
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JBTX
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Re: The Boglehead is anti-entrepreneur?

Post by JBTX » Sat Sep 15, 2018 10:40 pm

randomguy wrote:
Sat Sep 15, 2018 10:32 pm
JBTX wrote:
Sat Sep 15, 2018 10:01 pm
I would say it is more likely the opposite is true - an entrepreneur has no patience of piddling and plodding for 30+ years and then living a frugal lifestyle by spending 3-4% of your savings and then you die. That seems utterly ridiculous to some of them.
Very few entrepreneurs are looking to get rich quick. Most entrepreneurs are not hitting up VC and trying to build 100 million dollar+ companies. They doing restaurants, lawn services, professional services, and filling niches that are too small for big players. Occasionally these companies grow (you franchise your burger restaurant, yoga pants go from 10k hippies to 10 million woman) but they are the exception not the rule. The first group gets all the press. The second group is encompasses most people.
I'm speaking small business people know. Not silicon valley tech types. It is true that it doesnt happen overnight for them nor do they expect it to. Plus they may fail once or twice along the way. But the long term goal is an eventual payoff, as well as the feeling of success by building something. They would rather invest money in their business or themselves vs a retirement account that earns single digits. They value independence - both from employers or relying on uncontrollable investments like stocks or bonds.

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Re: The Boglehead is anti-entrepreneur?

Post by daveydoo » Sat Sep 15, 2018 11:10 pm

Ron Scott wrote:
Sat Sep 15, 2018 5:37 am
I told a former colleague I used the BH forums and his response was “Yeah, they don’t like our tribe.”
...
Would you advise a young person in their 20s or 30s, inclined to the entrepreneurial life, to go for it or stick to the Steady Eddie approach, and why?
I don't get this. BH philosophy is about investing; they (we?) don't care where your money came from.

When you ask non-investing questions like yours, the answers are likely to be informed by BH demographics -- which skew toward older people who have already made their mistakes. :D

It seems like there are plenty of entrepreneurs on here, and I haven't noticed that their world view is any different from the rest. In terms of investing, I think there are people who are willing to look at the data, even if it's unsettling, and people who would rather put their head in the sand and believe in magic. Just like there are people who think the lottery is a waste and those who embrace it.

And "risk-averse" is relative. I checked out Reddit /personal finance and /investing just for kicks. I smiled when one poster wrote "That 4X leveraged stuff is CRAZY -- I wouldn't touch that." Followed by: "Stick to the 2X and 3X -- that's what I do!"
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

golfCaddy
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Re: The Boglehead is anti-entrepreneur?

Post by golfCaddy » Sat Sep 15, 2018 11:21 pm

Ron Scott wrote:
Sat Sep 15, 2018 5:37 am
I agree with him to some extent that BHs don’t like the entrepreneurial way of life, or maybe just ignore it as someone else’s cross to bear. BHs play Steady Eddie to the entrepreneur’s Fool?

Would you advise a young person in their 20s or 30s, inclined to the entrepreneurial life, to go for it or stick to the Steady Eddie approach, and why?
Although no one's mind is going to change, I believe there's a tremendous amount of luck in entrepreneurship. So my advice would be to cash out your equity after you won the game. If you have a 30% stake in a $30M company, sell out and FIRE.

skime
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Re: The Boglehead is anti-entrepreneur?

Post by skime » Sun Sep 16, 2018 6:21 am

Ron Scott wrote:
Sat Sep 15, 2018 5:37 am
I told a former colleague I used the BH forums and his response was “Yeah, they don’t like our tribe.”

What he meant was we believed in taking risk. He built and sold a company: I had 80% of my NW tied to my company stock for more than 15 years. Both of us had borrowed heavily at times to maximize our positions. We were all in and willing to either soar or crash. And we LOVED our work; “FIRE” was the last thing on our minds. We were invested in ourselves.

The way we looked at these things was that America (NY and CA in particular) is the land of the entrepreneur, where the system encouraged us to create the future instead of just reacting to it, and with hard work and luck you could reach the promised land.

We were lucky and won our games, never bottoming out. I retired and invest 80% of my money like Jack Bogle says to, and with 20% still in that company stock, still going strong.

I agree with him to some extent that BHs don’t like the entrepreneurial way of life, or maybe just ignore it as someone else’s cross to bear. BHs play Steady Eddie to the entrepreneur’s Fool?

Would you advise a young person in their 20s or 30s, inclined to the entrepreneurial life, to go for it or stick to the Steady Eddie approach, and why?
OP - you and I had similar paths. I would not provide the direction for anyone to go for it or not. I would lay out the facts and let them make their own decision. I would advise them of the risk that 95% of start-ups fail within 5 years. I would also advise them that in order to build significant wealth in a reasonably short period of time (5-10 years) they need to concentrate risk (i.e. in their company). Once they build significant wealth as a result of their efforts and luck, they need to diversify risk to maintain and grow their wealth - albeit at a much slower growth rate.

Like it or not, luck plays a major part in entrepreneurial success.

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Re: The Boglehead is anti-entrepreneur?

Post by Mel Lindauer » Sun Sep 16, 2018 11:50 am

To say that Bogleheads are anti-entrepreneur is simply a non-starter.

I don't think anyone would claim that Jack Bogle, Rick Ferri and Mel Lindauer are not Bogleheads, and yet all three are entrepreneurs. In addition to those three, the Bogleheads Community includes a large number of other entrepreneurs.

The two are not mutually exclusive as seems to be implied in the OP.
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JackoC
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Re: The Boglehead is anti-entrepreneur?

Post by JackoC » Sun Sep 16, 2018 1:04 pm

JBTX wrote:
Sat Sep 15, 2018 10:01 pm
I would say it is more likely the opposite is true - an entrepreneur has no patience of piddling and plodding for 30+ years and then living a frugal lifestyle by spending 3-4% of your savings and then you die. That seems utterly ridiculous to some of them.
I think that is a simple and valid example of how most entrepreneurs and most people here differ. Although it's not that 'BH' and 'entrepreneur' are definitively mutually exclusive. I think frankly posts saying they aren't totally mutually exclusive are knocking over a straw man. Also though as I mentioned before, *most people* are very career risk averse compared to the risks most self made people of huge wealth had to take. I doubt that's so special to this forum. Maybe the tension is a little higher between a certain type of BH (never make much, never spend much) and super wealth seeking driven entrepreneurs, but the same general tension exists between the driven people and most people.

On Zuckerberg, the concept of a hedonic treadmill is well known and often discussed here in terms of consumer purchases. Same kind of adjustment goes for career success*. If Facebook folded and Zuckerberg was out 98% of his fortune it's a certainty a lot of people would view him as one of the biggest losers in a long time, and while without knowing him it's hard to say as certainly, most people in that situation would view themselves as losers and worse off in happiness than people with a lot less than the remaining 2% of the fortune. Same goes basically for whenever Z took enough off the table to eat (as opposed to still perhaps fabulously wealthy if FB cratered now). That's not being diversified, that's being less than absolutely undiversified. You generally *can't* be diversified pursuing most 'sky is the limit' opportunities. The particular opportunity which presents itself to you might require capital, passing it up to try to find a yet unknown one which does not...is not the mindset of a entrepreneur. That again does not mean you wouldn't 'have a plan', 'use index funds if possible', blah, blah blah, according to the written BH philosophy for the small portion of your wealth you didn't risk in your company. But it would still put you on the other side of a culture gap from most people here. But again, from most people in general.

*if somebody says it's not really true for career success, I don't think it's always true for consumer purchases either, it can be for either to some degree.

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Re: The Boglehead is anti-entrepreneur?

Post by Fallible » Sun Sep 16, 2018 1:28 pm

Mel Lindauer wrote:
Sun Sep 16, 2018 11:50 am
To say that Bogleheads are anti-entrepreneur is simply a non-starter.

I don't think anyone would claim that Jack Bogle, Rick Ferri and Mel Lindauer are not Bogleheads, and yet all three are entrepreneurs. In addition to those three, the Bogleheads Community includes a large number of other entrepreneurs.

The two are not mutually exclusive as seems to be implied in the OP.
I think these are good examples that show the most meaningful comparison between a Boglehead and an entrepreneur is one of similarity: they approach risk in different ways and perhaps degrees, but (and as the BH Philosophy goes) they try not too take too much or too little risk.

In other words, ultimately, they both seek to manage risk.
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Re: The Boglehead is anti-entrepreneur?

Post by dave_k » Sun Sep 16, 2018 1:34 pm

Being an entrpreneur, co-founding a company in my late 20s, and saving/investing the (eventual) excess income Boglehead style (mostly) is what led me to near FI today about 20 years later. It was riskier on the income side (at first), but I wouldn't be making my current income working for anyone else. I wouldn't be surprised if some of the higher earners on this board are entrepreneurs, looking to offset the risk of being an entrepreneur by investing more conservatively (some of the replies appear to confirm this).

Addressing an issue mentioned a couple times (as others have): I don't believe the idea that you're not truly an entrepreneur unless you put all of your money at risk and leave nothing to save. I took a big pay cut when leaving my old job to help found the company, but because of the nature of the business, and the income and investment we got to start with, I did not need to put in much of my own money. And even with the pay cut, I was still saving (though much more slowly at first) since I hadn't let my lifestyle creep up with my previous income. That doesn't mean I wasn't an entrepreneur, but I admit I was fairly risk-averse for an entrepreneur. It started as a side gig for the first year and I didn't quit my old job until we could at least pay ourselves something. I was still founding a company though, and working my a** off for less money for years with no guarantee it would ever pay off. Sometimes I though it never would, but I never regretted it.

I would encourage anyone who has an opportunity to found something they really beleive in, and is in a position to take the risk (and willing to accept failure), to take the plunge - but start saving Boglehead style as soon as you can, and don't use any more of your own money (or debt) than you have to.

Besides, how could we really be anti-entrpreneur if we're investing in thousands of companies that were started by them? And why would we want to discourage others from starting the companies we'll be investing in years from now?

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