(Photo: DavidDMuir)
It’s fun to think about getting an MBA.
They’re attractive for many reasons: developing new business skills, developing a better business network, or — most often — taking what is effectively a two-year vacation that looks good on a resume.
In 2001, and again in 2004, I wanted to do all three things.
This post is the first of two that will share my experience with MBA programs and how I created my own…
In the process, it’s my hope that these writings will make you think about real-world experiments vs. theoretical training, untested assumptions (especially about risk tolerance), and the good game of business as a whole. There is no need to spend $60,000 per year to apply the principles I’ll be discussing.
Last caveat: nothing here is intended to portray me as an investing expert, which I most certainly am not.
Beginnings
Stanford University Graduate School of Business (GSB). Ah, Stanford, with its palm tree-lined avenues and red terra cotta roofing, always held a unique place in my mind.
But my fantasies of attending GSB reached a fever pitch when I sat in on a class called “Entrepreneurship and Venture Capital,” taught by Peter Wendell, who had led early-stage investments in companies such as Intuit. The class is now co-taught by Eric Schmidt, CEO of Google, and Andy Rachleff, founding general partner of Benchmark Capital.
Within 30 minutes, Pete had taught me more about the real-world inside baseball of venture capital than all of the books I’d read on the subject.
I was ecstatic and ready to apply to GSB. Who wouldn’t be?
So I enthusiastically began a process I would repeat twice: downloading the application to get started, taking the full campus tour, and sitting in on other classes.
It was the other classes that got my panties in a twist. Some were incredible, taught by all-stars who’d done it all, but others — many others — were taught by PhD theoreticians who used big words and lots of PowerPoint slides. One teacher spent 45 minutes on slide after slide of equations that could be summed up with “If you build a crappy product, people won’t buy it.” No one needed to prove that to me with differential calculus.
At the end of that class, I turned to my student guide for the tour and asked him how it compared to other classes. He answered: “Oh, this is easily my favorite.”
That was the death of business school for me.
How to Make a Small Fortune
By 2005, I was done chasing my tail with business school, but I still ached to learn more.
Then, in 2007, I started having more frequent lunches with the brilliant Mike Maples, a co-founder of Motive Communications (IPO to $260,000,000 market cap) and a founding executive of Tivoli (sold to IBM for $750,000,000).
Our conversations usually bounced between a few topics, including physical performance, marketing campaigns (I’d just launched The 4-Hour Workweek), and his latest focus: angel investing.
“Angel investing” involves putting relatively small amounts of money — often from $15,000 to $100,000 — into early-stage start-ups. In Mike’s world, “early-stage” could mean two engineers with a prototype for a website, or it could mean a successful serial entrepreneur with a new idea. The angels usually have relevant business experience and are considered “smart money” — their advice and introductions are just as valuable as the money they put in.
After several lunches with Mike, I’d found my business school.
I decided to make (in my mind) a two-year “Tim Ferriss Fund” that would replace Stanford business school.
Stanford GSB isn’t cheap. I rounded it down to $60,000 a year, for a total of $120,000 over two years (these days, it’s $100,000+ per year).
For the “Tim Ferriss Fund,” I would aim to intelligently spend $120,000 over two years on angel investing in $10-20,000 chunks, so 6-12 companies in total. The goal of this “business school” would be to learn as much as possible about start-up finance, deal structuring, rapid product design, initiating acquisition conversations, etc. as possible.
The curriculum could be thought of as “The Start-up Lifecycle from Birth to Acquisition/IPO or Death.” But curriculum was just part of business school; the other part was getting to know the “students,” preferably the most astute movers and shakers in the start-up investing world. Business school = curriculum + network.
The most important characteristic of my personal MBA: I planned on “losing” $120,000.
I went into the “Tim Ferriss Fund” viewing the $120,000 as sunk tuition costs, but also expecting that the lessons learned, and people met, would be worth that $120,000 investment. The two-year plan was to methodically spend $120,000 for the learning experience, not for the ROI.
I would not suggest mimicking this approach:
1) Unless you have a clear informational advantage — insider access — that gives you a competitive advantage. I live in the nexus of Silicon Valley and know many top CEOs and investors, so I have better sources of information than the vast majority of the world. I don’t invest in public companies precisely because I know that professionals have better access to information than I do.
2) Unless you are 100% comfortable losing your “MBA” funds. You should only gamble with what you’re very comfortable losing. If financial loss drives you to even mild desperation or depression, you shouldn’t do it.
3) Unless you have started and/or managed successful businesses in the past.
4) Unless you limit angel investment funds to 10% or less of your liquid assets. I subscribe to the Nassim Taleb school of investment, with 90% in conservative asset classes like AAA bonds and the remaining 10% in speculative investments that can capitalize on positive “black swans”.
The problem is often that, even if the above criteria are met, people overestimate their risk tolerance. From my previous post, ‘Rethinking Investing: Common-Sense Rules for Uncommon Times’:
I’ve come to realize that the questions most investment advisers (and investors) ask are the wrong questions, or incomplete. Even if you have only $100 to invest, this is important to explore.
Most advice and decisions center on one question: what is your risk tolerance?
I had one wealth manager ask me this, and I answered honestly: “I have no idea.” It threw him off.
I then asked him for the average of his clients’ responses. The answer:
“Most answer that they would not panic, up to 20% down in one quarter.”
My follow-up question was: when do most panic and start selling low? His answer:
“When they’re down 5% in one quarter.”
Unless you’ve lost 20% in a quarter, it’s hard—nay, impossible—to predict your response.
It’s not dissimilar from a common boxing maxim: everyone has a plan until they get punched in the face.
To would-be angel investors, I suggest the following: go to a casino or racetrack and don’t leave until you’ve spent 1/5 of a typical investment and watched it disappear.
Let’s say you’re planning on making $25,000 investments.
I’d ask you to then purposefully lose $5,000 over the course of at least three hours, and certainly not all at once. It’s important that you slowly bleed losses as you attempt to learn the game, to exert some control over something you can’t control. If you can remain unaffected after slowly losing your $5,000 (or 1/5 of your planned typical investment), consider making your first angel investment.
But proceed with caution.
Even among brilliant people in the start-up world, there is an expression: “If you want to make a small fortune, start with a large fortune and angel invest.”
The First Deal and First Lesson
So what did I do? I immediately went out and broke my own rules.
There was a very promising start-up which, based on comparables using Alexa ranking correlations to valuations, was more than 5x undervalued! If it hit even a “base hit” like a $25,000,000 exit, I could easily recoup my planned $120,000!
I got very excited — it’s the next Google! — and cut a check for $50,000. “That’s a bit aggressive for a first deal, don’t you think?” asked one of my mentors over coffee. Not a chance. My intuition was loud and clear. I was convinced, based on other investors and all of the excitement surrounding the deal, that this company was on the cusp of exploding.
Two years later, it still hasn’t popped.
[TIM UPDATE, 2013: This start-up is now dead, so I lost that $50K.]
Following the Rules
Lesson #1: If you’ve formulated intelligent rules, follow your own f*cking rules.
I learned many more important lessons over the following two years, most of which I’ll share in the next post. Thus far, following the rules, the stats look something like this:
15 total investments (some of which are listed here)
0 deaths
1 successful exit
The one successful exit thus far, DailyBurn, guarantees that I will not lose money on my two-year fund. But, as they say, “Once you’re lucky. Twice you’re good.” I’m still not convinced I know what I’m doing.
My hope, and that of most angels, is that each start-up will “exit”, or be bought within 3-5 years. I’ll therefore have a more complete view of the “Tim Ferriss Fund” two-year portfolio by 2013 or 2014. There will be fatalities, no doubt.
[TIM UPDATE, SEPT. 2013: Now, I’m in 20+ investments, and I’ve made (cash in bank account) about 3-5x back what I invested. I have several million dollars on paper with investments like Twitter, Uber, Evernote, and others. If half of them pan out, I will make more in angel investing than all of my books combined. Only time will tell. Still plenty that could go wrong. Oh, and there have been more startups “deaths,” too. It’s a full-contact sport.]
But recall that the learning was my main reason for doing all of this.
I had one other exit: my own company. Using what I learned about acquisition deal structures through angel investing, I became less intimidated by the idea of “selling” a company. It need not be complicated, as I learned, and BrainQUICKEN was sold in late 2009. This means the ROI on my personal MBA is, so far, well over 2x and could end up more than 10x.
Creating Your Own MBA
How might you create your own MBA or graduate program? Here are three examples with hypothetical costs, which obviously depend on the program:
Master of Arts in Creative Writing – $12,000/year
How could you spend (or sacrifice) $12,000 a year to become a world-class creative writer? If you make $50,000 per year, this could mean that you join a writers’ group and negotiate Mondays off work (to focus on drafting a novel or screenplay) in exchange for a $10-15,000 salary cut.
Masters in Political Science – (same cost)
Use the same approach to dedicate one day per week to volunteering or working on a political campaign. Decide to read one book per week from the Georgetown PoliSci department’s required first-year curriculum.
MBA – $30,000 per year
Commit to spending $2,500 per month on testing different “muses” intended to be sources of automated income. For an example of such, see “How I Did It: From $7 an Hour to Coaching Major League Baseball MVPs.”
If you’re interested in experimenting with angel investing, whether as an angel or as a start-up, here are a few of my favorite resources:
AngelList (I’m now an advisor; here is my profile)
AngelSoft [Ed. note: AngelSoft is now Gust]
Commit–within financial reason–to action instead of theory. Learn to confront the realities and rewards of the real world, rather than resort to the protective womb of academia.
Question of the day (QOD): what would you like to learn specifically about start-ups, angel investing, or start-up financing? Please let me know in the comments with “QOD”.
The Tim Ferriss Show is one of the most popular podcasts in the world with more than one billion downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.
Comment Rules: Remember what Fonzie was like? Cool. That’s how we’re gonna be — cool. Critical is fine, but if you’re rude, we’ll delete your stuff. Please do not put your URL in the comment text and please use your PERSONAL name or initials and not your business name, as the latter comes off like spam. Have fun and thanks for adding to the conversation! (Thanks to Brian Oberkirch for the inspiration.)
Tim – enjoyed the post. Completely agree with using your cash to fund your own muses as opposed to “business in a box” grad school. I read some negative comments to this post about people using debt to pay for grad school, and how that makes this post unrealistic. My only response to that is that 99% of people using debt to get their MBA are probably doing it to gain a high paying job and/or advancement within a company. These probably aren’t the people thinking about how to start their own business and/or invest in others.
QOD: Angel investing has become a “buzz” term and investing technique over the past decade. To me, most startups should be able to find a way to bootstrap their way off the ground. If you have a business idea that requires 7 figures in infrastructure, my advice would be to start smaller… Onto the question – what’s your input on this? Why seek angel investors when there is likely a way for you to do it yourself with your own cash and resources?
Thanks in advance.
Hi Adam,
If you can bootstrap, and the money is for you (i.e. the goal is not to sell the company or have an IPO), there is no need for outside financing.
If you want to sell for some outrageous fortune in 3-5 years, that’s another story. Then you often need rocket fuel (money) to grow right on the border of out-of-control. Not an approach I suggest for most.
Tim
Tim,
Great stuff! you’ve shown that actions speak louder than ‘mba’ on a CV…
You probably do not need the reminder, but we’d still love to hear about the process of selling BrainQUICKEN and how ‘it need not be complicated.’ http://bit.ly/cdidCa
Further to some of the comments above, i submit my QOD: What is another way to get into Angel Investing [specifically in web startups] short of picking up and moving to Southern California?
Thanks again for sharing all of your valuable insights!
Tim,
Are there any circumstances in which you WOULD recommend a traditional 2 year MBA? Thanks.
I tried that georgetown link and couldn’t find a book list. Could you provide a direct link?
Tim,
This is something i’ve always wanted to get into down the road. If i was to read a book on venture capitalism or angle investing what book would you recommend? Thank you.
I’ll make a few recommendations in the next post, but check out http://www.venturehacks.com. Tons of good info.
Tim
Tim
Interesting how we are so quick to slap down a tonne of money to get an education and come out with a LOT of debt. When we can take the courses offered in the school of life and learn the same information and make the same mistakes for a LOT less. The ROI from the latter I believe makes it more profitable in terms of absolute dollars one can receive as per the academic world.
Yeah Tim!
I’m living as a guest at Stanford right now, but I’m spending my days here working on my business, biking around the campus, and plotting my next adventure up the coast.
My business mentor never finished high school, had a drug and alcohol abuse problem, lived on the streets for 10 years, cleaned himself up, started his own business with freeing himself in mind, and now, he’s retired at 35.
I lived the opposite – finished engineering school, passed on MBA offers due to financial shortages, and held a steady programming job until meltdown. Now that I’m running my own business, I feel like I’m getting a real-world MBA and I question traditional education. I plan on writing about this in-depth on my website, though I have to a certain extend already.
Ki’une
Let me add some real world examples: In Sarah Silverman’s autobiography, The Bedwetter, she mentions that after her freshman year at NYU, her father took her aside, and offered to pay for her apt and food for the next 3 years, if she dropped out of school and concentrated on comedy. It would be admirable if more parents could pure heartedly support their children’s dreams, without insisting it come in the form of a certificate. The other big achiever is Robert Rodriguez (who did go to UTA film school), but has consistently called for people to learn by taking the leap
Hello Tim,
A timely post for me. I am developing a few sites that capitilize on my experience in the entertainment production field. I have also read the four hour work week. I recently have been approached with an angel investing opportunity which brings me to my QOD question
Generally speaking , what protections on my investment should I be thinking of when crafting the deal?
In short I would be investing startup money to an individual to launch his own business web services company. He has been successful working for another company already. This investment would cover salary and expenses to give some runway to establish the company. I would have a 25% stake in the company for a 30k investment. There are other details but I wanted to know your thoughts
Regards
Kyle
Hi Kyle,
For angels, you generally don’t have much protection. It’s the nature of the beast, as you usually have options that convert to common stock. If you want to look into “liquidation preference”, you can do so (Google around), but it’s not common in seed-stage angel investing.
To build a long-term good rep as an angel, you don’t want to bruise the start-ups on onerous terms. If the start-up fails, unless they have a lot of inventory or hardware, there will generally be nothing for anyone, so there’s no use in beating them down too much.
Tim
Right on Tim. I could not agree more. Real world experience seems to always trump theory. The question is if someone is too afraid to leave their Work for Work’s Sake job to get some “experience”, do you recommend they do a real MBA?
As for me, I am up for option one. In fact each year I dedicated about $3k to continued education/development whether it’s a negotiating course, Tony Robbins workshop, public speaking seminar or social media marketing training. Then I spend the rest of the year applying them in my business and personal life.
In fact this year, my muse test is writing online (and marketing that business online) and building a following based on simple life improvement actions and understanding how to leverage social media marketing for this project and future ones. I have allotted a few thousand dollars this year and so far the return I’ve gotten has been amazing with the people I’ve met and the things I’ve learned that are very scalable to other muses and situations.
Sometimes people are so averse to spending money without a direct understanding of the return. But once you put it in the context of real world education and experience, it becomes such a valuable way to invest. As long as you’re willing to learn and act on what you learn, the return is right in front of you.
This has gotten me even more excited to test new muses!
Many thanks Tim,
-Scott
3 QOD:
What are your top 5 criteria for deciding to invest in a company?
What is your target ROI for each investment?
How are you paid your profits (ie. stock, cashflow, buyout?)
Tim:
Amazing post as always; hold people accountable for their own education in every sense of the word.
As much as I respect your edgy, authentic writing style and persona, I feel that one topic you seem to shy away from addressing directly is the completely bogus, and useless nature of the 4-year college education. Although you have never explicitly discussed it, I intuit that you agree with me on how the complete system (I won’t go into it, I try to be brief) is built upon false precepts, and shaky intentions related to socialization.
Q: Many students have started outsourcing their essay writing work online, as well as buying hacked versions of instructor textbook manuals online. Good or bad development?
Tim, excellent spot-on post that is honest and uncluttered with catch phrases.
Tim, I love the idea of designing your own educational process. Sadly, I actually did go back to grad school in 2007 for a 2-year “vacation.” I can’t say I learned anything really practical to my profession that I didn’t already know.
However, during a particularly horrible summer internship, I realized that my profession just wasn’t for me anymore. I found your book and got hooked.
I started my own muse a few months ago. I’m still getting off the ground, but I’m happier than ever.
Thanks!
Tim, thanks for this post. Even though I don’t currently have any interest in Angel Investing, you gave me a couple slaps in the face that I needed.
First, an MBA is something I’ve been considering ever since high school. The plan was to go to a good college and get my Bachelor’s in Computer Science (which I did) and then immediately follow that with Business School (none yet). Toward the end of college I was getting this nagging feeling that I don’t really NEED an MBA for anything, it just seemed like a good idea. A guy with a BS in CSC and an MBA can work anywhere he wants, right? And there’s the rub. I don’t want to work for anyone. I’ve been doing it for 2 years now, and even though the company is great, I’m realizing more and more that I am not meant to be an employee. Which makes me think “I should start a business”, which inevitably leads to “maybe I should go get that MBA…” And then I read a post like this, or a story about some guy with nothing more than a GED who figured out how to fully automate his income and live a comfortable happy life which makes me realize: I don’t need another pile of acronyms to tack onto a resume, I just need to grow a pair and start something.
The second slap was at the very end of your post: “Learn to confront the realities and rewards of the real world, rather than resort to the protective womb of academia.” It is similar to something I have read/heard before (I think either from you or Steve Pavlina…) and still completely agree with. While trying to figure out my ‘muse’ or whatever you want to call it, I have read all sorts of books and articles. I could probably teach a class on affiliate marketing or outsourcing. Currently I’m becoming an expert on patents and trademarks. And that’s where I’ve been for over a year now: constantly learning, but never applying.
Anyway, enough ranting, I just wanted to thank you for reminding me to go DO SOMETHING.
Tim,
This is a great article. I went back to school in 2009 in order to get a masters degree in accounting and get enough credits to sit for the CPA exam. To me this was a smart decisions because:
1) The school I went to get my masters paid me to attend, by offering a good scholarship in exchange for me doing research
2) The job I was able to find after finishing the one year masters degree is paying me 33% more than my last job, which means that I will recoup my investment in 3 years or less
3) I increased my network of contacts, while I still was able to work on what you call muses, and what others call alternative income streams. At the same time I had fun although school is not really a vacation 😉
Anyways, I did enjoy this post as I am always interested in investments ( be it starting companies or owning individual stocks).
My personal portfolio i invest in dividend stocks which have sound fundamentals and have strong recognizable brands, (or Moats/strong competitive advantages as Warren Buffett would call them).
These companies that I look for have been able to increase profits and then increase dividends to shareholders for over a quarter of a century each. You are familiar with those companies. Some of them include Coca Cola, McDonald’s, Procter & Gamble (PG), Johnson & Johnson (JNJ), etc. As a result I am able to build a totally passive income stream, which is rising over time as well, as most of my stocks increase dividends one an year.
Best Regards,
D.S.
Hey Tim,
Just a quick stop to say I really enjoy your post and the way you answer to some of the comments in the post give me a deeper understanding of what you’re trying to express in the post (not that you need to).
QOD: how can I get to know some of the key players on my industry? and How can I find a mentor?
Thanks.
Thanks so much, Betol.
Just a quick answer or idea to the mentoring side: take a look at SCORE in the US, which matching retired veterans in different industries to newcomers. As old-school as it seems, the Chamber of Commerce in your closest large city can also really help.
Tim
Love this – you’ve saved me $12K/year 🙂
I’ve sensed that there are big opportunity costs in pursuing an MBA – and not just in terms of the loss of income. There’s the loss of time that could be spent accumulating real-life experience, good and bad, not to mention the tenuous connection to real-life consequences, financial decision-making, and other nitty gritty. Likewise, I think there are opportunity costs in pursuing an MFA – and, for me, pursuing an MFA b/c I want to be a writer is like reading the owner’s manual for my camera, cover-to-cover, with great attention to detail – if I want to be a photographer. I might pick up some useful tips, but nothing beats just doing it and learning from my own mistakes.
The flip side of your post is understanding that well considered *investments* in my dream shouldn’t be nickel and dimed to death. Thinking of expenses as potential investments and evaluating them from that perspective changes the thought process from “minimize all costs” to “does this expense advance my ultimate objective?”.
thanks for the insight!
I didn’t go to university, I trained as a nurse. Ten years ago the qualification enabled me to start my own business in a field that extrapolated credibility from that same nursing qualification. I have often hankered after an MBA, feeling it might take me places I couldn’t get to without it.
Over time I have become disabused of this idea, I now think that the MBA has become devalued and is most useful to the corporate climber and someone who works for the man.
I have no intention of working someone else’s schedule ever again, so have come to believe that my real world learning is serving me better than an academic course. Unlike JB I am unmotivated by vast wealth. Enough for comfort and lifestyle motivate me. I care not about your personal wealth Tim, I am much more interested in how you are making enough to enable the lifestyle you want and how you are having fun with money surplus to that.
I will keep investing in me, both to increase my knowledge and to support my mental wellbeing.
I’m going to start some KIVA investing once my business sale goes through next week ( selling to a network “friend” who I just happened to suggest buying to over a coffee ;-D). Zero return on monetary investment from KIVA, but huge feel good in helping a motivated individual get a foot on the ladder. Not quite on the scale of angels, but fun in my book never the less.
Meant to say, I have a friend who lectures on a UK MBA course, he left school at 16. In the USA he wouldn’t have ahd enough credits to graduate. All his knowledge is real world and from reading around.
Tim,
Great post. I am an freshman undergrad right now and already I feel the pressure to work pointless internships, attend classes and seminars that I know will be pointless. I’m trying to come up with ways to maximize my dollar and time investment and practical work far outweighs any kind of theory. This post hit the nail on the head. Thanks.
Matt
Tim,
You mentioned that you made fatal mistakes that made it impossible for you to sell BRAINQuicken. Although it wasn’t that bad, as you sold your company later.
What are the steps one should take in order to set up a business with a view to exit few years later ?
Hey Tim,
Regular blog reader, loved your book… just wanted to let you know one of your diet methods from a blog post is examined here in one of Robb Wolf’s podcasts if you didn’t already know:
http://robbwolf.com/2009/12/01/the-paleolithic-solution-episode-4/
(these are fantastic IMO)
Thanks, Gary!
What’s the dumbest thing a startup can say to a potential angel investor – something that would make that invester run for the hills, even though the startup guy(s) probably really do have a good forecast for success?
Subscribe to two years of Harvard Business Review. You’ll learn all the latest business thinking and theories from the leading thinkers for a fraction of the price of an MBA…
…after two years stop – you’ll notice much of the material is the same thinking being recycled….
Hey Tim, this is one of your best posts!
Thank you!
If you take away the boom years in the economy (1995-2003), you don’t hear about people w/ MBAs becoming rich. Personally, I think the correlation is most likely incidental. I do think many people that have MBAs are motivated, but that’s something you develop from childhood.
I don’t tell people “don’t get your mba.” First, I ask them “Why?” If it’s to get a better paying job, I tell them to forget about it. The wages lost from 2 years, plus paying back the debt may never pay for itself. An MBA does not guarantee a better paying job.
If you want to network and start a business, going to a great MBA program will get you around other people that can help make that happen. Or you can write a book like Tim. 4-Hour Work Week is incredible.
Que bola asere!
Ya me canse de ver “Hi Tim”, pues decidi a cambiarlo un poco. Espero que te guste.
English now:
I’ve been a straight A student my whole life. However, I must admit, I have learned 1000 times more in my undertakings as a business owner than I have in my scholastic studies. What really irks me is how people draw a line between learning and entrepreneurship, as though the two were separate, which every and any business owner knows to be a fallacy. Both require learning, but entrepreneurship is action + learning, and not just any action, but measurable action. What do you focus on and how and how can you quantify the results and ultimately, make money? I love school, had a blast at university, but don’t ever think I could return to a place where so much thinking and so little action occurs. We’ll see.
Angel investing is out of the picture for me right now, but I’ll take you up on some of other suggestions
As always, un placer amigo.
Ciao,
Lauryn
Tim,
Thank you for the post. I think it speaks more to the relevance (or irrelevance) of traditional MBA programs today, than to the quality of education. This is especially true for people who want to have a more meaningful career/business rather than a higher paid job. Case in point, a new kind of MBA taught by a top ranked art and design school http://www.cca.edu/academics/graduate/design-mba rather than a traditional university. It combines some of the core MBA disciplines with a completely new approach to teaching entrepreneurship and innovation.
Whether or not it works remains to be seen, but it’s a testament to the fact traditional MBA coursework alone doesn’t matter as much anymore; challenges that put your ideas to the test do.
Disclosure: I am starting this MBA program this coming fall, so I guess I’ll find out whether it delivers on its promise.
For what it is worth: I am attending an MBA program that will cost me less than 15k dollars the whole program. I think that Ivy schools MBA programs are overrated and a bunch of their graduates got us into the mess we are now.
If you want to learn about investing: grab a couple of books and experiment using paper accounts available on the internet. Learn without the risk.
Hi Tim,
I have just a question, how do you balance academic knowledge and pratical knowledge?
Pratical knowledge like you said is the key but to build it you need academic knowledge.
So how do you mix it?
Thank
Thanks Tim,
QOD: I’d love to start a business but one of the obstacles I see in working for myself is that I’ll have noone to bounce ideas off. Do you know of startups that do well from starting individuals or is there a criticial mass in the number of staff needed?
For a cool list of MBA reading, check out http://personalmba.com/best-business-books/. If you cover this list you will have read more business material than most MBA’s. Many of these are also in audio format so you can listen in your car, shower, etc.
Evening Tim,
I’m reading this post from the side of a start-up. VERY apt timing as always!
When seeing friends struggle through their MBA – trying to balance study with work, I was kinda glad I hadn’t chosen to continue in academia.
Just how much could I get out of a programme when being torn between learning and earning? However upon friends graduation and seeing them on MBA salaries, I started to think I had missed a trick. I still have always wished I could have the business education that I simply couldn’t afford.
In place of this I have tried to earn but learn in my spare time in the hope it will come to use down the line in my own business.
Fortunately I was recently asked to pitch my idea back at my old University, to the Business School & Enterprise Centre. Thanks to my continued learning and help from your book and posts (in particular the post – “Public Speaking – How I Prepare…”
I have now been fortunate enough to be accepted on to the Enterprise Fellowship Scheme where I will be attending a year dedicated start-up business lectures – for free!!!
Learning along side 5 other start-ups, which presents the ultimate networking opportunities :O Not only that but they’re providing a business grant of around $16,000 to fund the business in its first year!
This turns the lure of a traditional MBA on its head! My own personal MBA paid off. I’m getting the education and the business opportunity at once.
I’m SO glad that I persevered in the continued learning as I would have never got through the application process and pitch without the knowledge I have gained to date.
Who knows, maybe in 2 years I could be one of the 1000 millionaires that you have helped to create :o)
Cheers me dears!
QOD – From the POV of a start-up, what is the best stage to seek funding? Is it best to try early or develop then search?
What stage is more appealing to the investor? E.g. Making a small investment in an early-stage start-up, consisting of the “two engineers with a prototype” that is relatively under the radar, OR giving a larger stake in a start-up that has had time to grow but it is clear what problems it faces.
Great article. Lots of great comments too. It’s a bit late, but I’ll throw my two pennies in.
I dropped out of an MBA program not long after beginning. I found it incredibly boring and completely lacking any sort of ‘real world’ skill building (or any indication that would happen later on). I lost $12,000 on that unfinished MBA. Safe to say I would have been better off putting that $12K to work in almost any investment, but at the very least I got the desire for an MBA out of my system…I had been back and forth on the decision to go for a number of years. So at least it only cost me $12K to realize I don’t need an MBA. 🙂
Hey,
Very interesting. I tend to believe that MBAs are not the kind of people that would do angel investing. This is a diploma you do to work for a big company and look for conformity and avoid risks.
Great post and seconding Brendan’s earlier point on how reputable startups typically need to raise their rounds of investment from accredited investors.
Hence, you only “get to play” if you can individually meet certain capital requirements. Sounds a lot like certain limitations in Monopoly.
I was feeling feisty last night and had my panties in a twist.
Disturbing…
Tim, thanks so much for this post!
I’m currently studying in a master’s programme and you’re right you can teach yourself a lot – I do support your thesis, however from my experience I would not want to miss the past year, simply because of the people I’ve met. And this point is probably the richest experience I could take from this course – nevertheless, I’m not studying at a business school but a British university, so my cost is much lower than USD 120,000.
QOD: How do you secure that the people don’t screw up your investment? Say you have a great product, a great marketing strategy, but the people mess up the process, miss important meetings, loose control – consider all the consequences of moral hazard. Do you get to know every decision maker on the team? What if the people turn out to be incapable ex post at one stage of investment (do you turn it into stages or do you pay everything at once)?
QOD: Interacting with Angel Investors. For instance, how should one go about contacting? Setting up a meeting? A pitch? A beginning to end guide to “selling” your idea to an Angel Investor.
Great post Tim! Keep up the good work–it’s inspiring.
– Chris
Also, @Helen,
You should check out the book Growing Local Value, how to build business partnerships that strengthen your community. There is a ton of stuff on investors and some quality information to get you started on how to build a business with a triple-bottom line (stakeholders are more than just the owners).
Ciao!
This is great advice. I studied things that I didn’t enjoy for years and I understand the suffering. But what about studying something that you do enjoy? What about the arts? Learning how to draw and paint, how to make a sculpture? You don’t even necessarily need the credentials, just someone that knows more than you about the subject matter. If you do want to walk the path of the majority, you may need the MBA, but if you are really about exploring life and enjoying the limited time on this earth, you may want to try enjoying what you do. I know this from first hand experience, I am know learning how to do this, thus having to unlearn pretty much everything that is “main stream”. Tim, I like how you look at things from different angles, you are very talented in deconstructing reality and putting the pieces together to make reality fit your own way.
Great article Tim.. very insightful and intelligent.. Thanks for the call to action! You’ve inspired me – yet again! =)
Tim, was this post written by a rogue VA or something? Normally I agree with nearly everything you post…but strangely I find myself in disagreement over what I consider two Mack-Truck-sized holes in your argument:
1) Is it really fair to suggest that people not go to b-school because a couple of the courses might suck along the way? Isn’t that kinda like saying, “I didn’t like (least favorite author) in high-school English so I’m never going to read another book again”?
2) Isn’t it a bit irresponsible to suggest that people drop five figures for the purpose of “gaining experience” without making a comparable investment in the education to get started? Isn’t that like telling a 15-year-old that he can skip Driver’s Ed and learn to drive simply by experience? Or telling a college senior interested in the legal profession that he should skip Yale Law, go commit six to twelve crimes, and then serve as his own counsel in court (with JD tuition money as a backstop to cover fines, penalties, and other screw-ups)?
Hope the VA’s haven’t staged a palace coup or anything, because I want the old Tim Ferriss that I can agree with completely to come back! Any chance you will spend some time in Part II engaging the numerous shortcomings of self-education?
Hi Scott,
Thanks for the comment.
Would it really be fun if you agreed with everything I wrote? 🙂
More to come in the next post…
Tim
Great information. Thanks again Tim. The new guy here at my office has a MBA and so far I’m impressed
QOD1: Exit strategies, what role if any, do potential exit strategies play in deciding which start-ups to fund?
General comments:
From what I understand according to the rules, one would need to be a successful entrepreneur AND have liquid assets exceeding $1M.
However, it doesn’t seem like the vast majority of MBA applicants are in that position. I think I am unclear about what’s being communicated here (although I am excited about the general direction of Tim’s idea).
Is the suggestion to focus on the Muse to build up enough liquid assets and acquire the requisite entrepreneurial experience to make oneself a good angel investor?
I love your concepts Tim.
I can relate clearly to this, as I am a qualified Structural Engineer, and everything I have learnt the relates to being one, has come from after University. I know of people that have started out working (instead) of going to school and not only is it a financial reward. as they are 4 years ahead of everyone else, but it is a time reward as well…as it fast tracks the knowledge.
Not having “base” knowledge that traditional education teaches us, makes us more uncomfortable when learning and doing in the real world. BUT, when we are more uncomfortable we learn at an accelerated rate (to make us comfortable again)….so this is really also a big time hack.
Tim:
I have been waiting for a post like this so thanks for writing it.
QOD: I was having lunch with a serial entrepreneur who does a lot of work with social entrepreneurship and we started talking about the idea of micro-finance for people with small business ideas in America. I know it would just like really small angel investing, but did not know if you had any input?
Hey TIm,
Let’s not forget that a good portion of people who go for an MBA do it so they can get the letters after their name, or so they can move up in their career faster, not to mention that their companies subsidize the cost as well. In these cases, the letters MBA are far more important than the education.
Hey TIm,
Let’s not forget that a good portion of people who go for an MBA do it so they can get the letters after their name, or so they can move up in their career faster, not to mention that their companies subsidize the cost as well. In these cases, the letters MBA are far more important than the education.
Ergest.
Brilliant post! I was worried you were getting soft on me w/ the last guest post 😉 I finished my MBA 1 1/2 ago in Sydney, Australia. One of the best decisions I’ve ever made… still living in Oz and surfing as much as possible. I didn’t get an MBA to impress anyone or for my ‘career’ (despise that word) but just because I felt I lacked a formal business background. What it gave me was confidence in myself by learning the MBA lingo and being able to see through the massive smoke screen perpetuated by all the shite people spew in the corporate world. The most valuable class I took, believe it or not, was Philosophy (worth the price of admission alone)… the prof laughed and made fun of us for spending so much money on an ‘MBA’ and proceeded to call all of us illiterates. He was of course being provacative but he was right and was able to make a strong case for his point. He was a subversive and introduced us to Hume’s Fork (David Hume – British Empiricist) which basically is a tool to dismantle language and sift through the enormous amount of bullshit that is fed to us on a daily basis. I never looked at anything the same way again… I used this tool and others to attack all my other profs and challenge the ‘models’ and supposed paradigms they provided us. The short of it was that my MBA ended up being an invaluable experience but not for traditional reasons. I’m proud of finishing the program and I refer to my experience often but I whole heartedly agree with your conclusions not to get one for yourself. Mate, you continue to be an inspiration.
P.S. Can you do something about the email notifications? I always get it a day late after everyone has made the bulk of comments. Cheers.
I love the tips you’ve shared here Tim. I’ve been working on my MBA for years but it’s not a college degree it’s a Massive Bank Account…. 🙂
I’m not quite there yet but with implementing many of your tips I’m sure I’ll get there sooner than later.
Thanks for all the great content.
These are the ‘core’ units that I have completed,in my own personal MBA over the last 5 years:
Product Creation, Manufacturing, Sales, Marketing, Accounting, Web site Creation, Web 2.0, SEO, Graphic Design, Warehousing, Stock Control, Wholesale Distribution, Taxation, Networking, Advertising, Time Management, Human Resources, Import/Export, Shipping, Intermediate Chinese Language skills (which is certain to now turn into a personal Phd),
Chinese business culture / relations …. etc etc the list goes on and on.
These core units I believe would have constituted maybe 3 MBA’s through a traditional route and probably taken 10yrs to complete.
Interestingly enough I have returned ‘very’ part time to Uni to study Chinese which I love but have found that my own personal study is running at
four times the pace of that at Uni .. I am too far ahead ! I have done this by maximising my business trips to China – every day I have my own personal
Chinese University lecturer visit my hotel room for 1.5 hrs and at $10ph compared to $50ph back home it saves huge $ and best of all I have completed my next terms Uni work in the space of 2 weeks freeing up time later this year for other important projects or even faster fast track language study.
I invested $12,000 (33% share) from my draw down mortgage on day one, repaid within 6 months and have not borrowed a dime since.
I am NOT wealthy but am extremely wealthy with the real life experience that a personal MBA has given to me., both through fast track learning
and life experience. I love my job and the real world wealth experience that is constantly evolving … and best of all it has allowed me to follow my passions
while I work – language and travel.
QOD – If you are an ‘idea thinker’ like myself, how do you detach yourself from the constant desire to be hands on when looking at angel investing?
i.e How much hands on exposure does the Angel Investment Co allow you .. or is that part of negotiations? Is there the need to step back, become passive and allow them to make
all the important decisions?
Great post Tim !
Great article. I, like you, thought about returning to school for my MBA last year. Then, I thought about how useless the BA degree was. LOL Real life = Real experience = Real wisdom.
Tim I am disturbed at how often you keep saying that you’re wearing panties.
Tim, love the way you live your life as if it were a game 🙂
2 major QODs:
– Once you perfected the method by building BrainQuicken, why did you choose to angel invest, rather than repeating the process? If I’ve $50k, should I build a company myself or angel invest? What are the top 3 pros and cons?
Some international problems me and my fellows are facing:
– Angel investing (investing in general) is theoritically protected by law in many 3rd world countries. But the law isn’t implemented. So in case there’s a problem, legal cases takes decades to resolve.
Should I then angel invest in law-abiding countries like the US, etc? Is it necessary to visit and personally meet the founders, etc – or can it all be done online through an intermediate company? Am I protected as a foriegn investor and would have the same legal rights as a local over there?
Keep rocking!
Hi Shariq,
I find angel investing less stressful than building companies. For investing, you don’t need to be “on” as much.
For US vs. non-US, I have only invested in the US and Canada at the moment.
Tim
Hey Tim, another great post. However, I am a bit disappointed as it’s obvious you got your idea from this topic from the late Rodney Dangerfield, who demonstrated this idea back in the great movie Back To School! Either way, I agree that experience is far more important in today’s world rather than the letters after your degree (BA, BS, MA, PhD). I DO think that education is extremely important, but really think the value of experience outweighs the $$ invested greatly!
Any release date set on the upcoming book?
All the best,
Ron Turner
Living the Dream in China
Thank you for the advice, Tim…. I just had a “Duh” moment and realised that my Uni has a kick-ass student entrepreneur society. And they do exactly what you suggest: meet up and invite cool entrepreneurs to speak.
Sometimes I suck at just seeing the obvious….:P
thanks again for your kind (and quick) answer. You’re awesome.
I think the most interesting aspect of Tim’s investing strategy is the “barbell” approach. If he invests in enough small startups, he is very likely to invest in a startup which goes on to produce 80% of all profits. The point is that we can NEVER predict these things, but we can open ourselves up for lady fortune to smile on us! (Most MBA students are convinced they can predict such things…)
I think the message for students like myself is to save 10,000 in cash and then spend 1,000 in high personal risk activities (the risks being social humiliation or personal failure rather than financial risks – I always get over the former, but I am not sure about the latter).
Your article is dead on in my opinion. Learning how to run a business in business school is somewhat akin to getting sexual counseling from a catholic priest – who, if true to his calling, can provide only academic instruction without the benefit of actual experience. There is simply no substitute for doing.
Keep it up
BRILLIANT!!!! Take the money you would otherwise spend on an MBA and actually DO something with it?!?!!? What a revolution!!!
There will be universities all over the world after you now, Mr Ferris.
In Australia, it is still VERY trendy to do an MBA, particularly if you are in “business” (not actually running a business) – I like your concept a lot better… although I may skip out on the “Angel investing” for now.
Tim,
There is one huge flaw in your advice to other people regarding the “self-taught” method. For others trying a similar strategy they will have the glaring weakness of not being you- and not having the networking abilities or existing network that you have.
Most people don’t know a single big hitter like your lunch friend that grew a company to 250,000,000.
Stanford and Harvard can help make introductions to people like that. If you already know those people, than that eliminates what in my mind is the most valuable thing that business schools have to offer. The network.
Enjoyed the post.
Hi Tim,
Great post, I actually have my MBA, but I really agree with the idea of learning by actually doing. It was a real eye opener for me, when sitting in the pub with one of my profs. we asked for some stories from his working days…never had a real job he tells us! Other then consulting, he had no actual working experience, he only dealt in thories!
I think that having an MBA is really not all that it is cracked up to be either. I was always told at the company I worked for that if you wanted to get ahead you had to have that piece of paper that stated you got this or that degree. Whatever carrot they wanted to dangle at you during that time period.
But most of what I really learned was from doing the the job, the actual day-to-day living the work. No one asked me when I got those promotions if I even used any of that class information on my job. Mostly, it was common sense and real life learning that helped me move forward. But those were the rules…
QOD: Now I have another question and I am once again learning the lessons of life as I go along. I invested much of my own money into a currently launched web-based software product. Now I am in need of some investment capital to gain market awareness and sales revenue. What would be the best way to find an investor for a small start up that doesn’t require a huge amount of investment to begin marketing and sales, brand awareness, SEO, etc., etc…..
Hey Tim,
I finished up an MBA program last year and I now find it to be a costly mistake. I went to a top 10 school but the education I got was very poor. Some of the classes were exceptional but most of them were taught by famous names with very little practical knowledge.
My favorite examples are the global econ professor (A noble prize winner no less) who told me that outsourcing will never take off (I work in the tech industry by the way) and the market theory professor who took 3 hours to explain to me that in the short term, all market movement is random.
While I did get some valuable information and connections out of the program, it was not worth the price tag. I could have done better using other avenues of learning and meeting people.
Oh well, you live, you try, you learn, you try something else. 🙂
Tim,
Here’s the short article I wrote on “real schooling” a few months back. You might like the documentary too. It’s about a Japanese teacher whose only goal for the year is to teach compassion.
http://www.risingbean.com/2009/09/children-full-of-life-and-real-schooling/#more-135
I’m glad I passed on the MBA. Under pressure from typical Asian parents, I would have gotten it for ego and CV boosting. I still don’ t know exactly what an MBA is 🙂
Ki’une
QOD:
Didn’t see it covered in the comments, but I skimmed prett fast:
What do you look for in a company that motivates you to invest? What’s the most important thing you want to see that entices you to pull the trigger?
Great post Tim, and looking forward to your next one.
My QOD: how do you know when a company is ready to sell? And what are some of the best ways of calling on contacts to help generate interest in the company?
Keep it up!
Hey Tim,
That was riveting reading… looking forward to more, maybe in the form of another book. ( I know you mentioned you plan a break from writing after the launch of superhuman)
I think the details of your past two years in reference to adventures in Angel Investing could read similar to a Ben Mezrich novel. Count me in for a copy.
Keep up all the good work.
Jeff
Great post. One minor comment. Until you’ve practiced it, EVERYTHING is theory and that fundamentally just means structured ideas – there is nothing more energizing than that – for most people your book provides just that – theoretical ( for them because they haven’t practiced them) ideas. But in the MBA program you can get the interactive network with whom you can act quickly on these ideas. The same reason you live and work in Silicon Valley when it comes down to it. As others mentioned if you don’t have this network already that is one way to get it, and it’s a network that continues to pay dividends much further down the road. YMMV.
Hi Tim,
Your suggestions for building your own Masters in Creative Writing and Poli Sci are spot on and could easily apply to many other fields. It’s about making the time and finding creative ways to do something you’ve always wanted to.
As someone who has worked in the nonprofit realm for many years, I gained mountains of experience from volunteering, serving on boards, and being a part of making things happen within several organizations. Eventually I was lucky enough to attend business school through the Bolz Center through Arts Administration where all students are fully funded so they don’t graduate with a pile of debt. In that program each student had a 15-20 hour/week real world internship where they work for a local nonprofit. At the time only one other program of the 13 centers had an internship requirement – in my experience, the networks and relationships built from real world interaction were much more valuable than those forged in the classroom.
Recently (after a 15 year hiatus) I’ve gotten back into writing – first taking a class and then joining a group. The experience has been invaluable. Scheduling time to write just like a work meeting or a doctor’s appointment and treating that time just like one of those activities (something you can’t blow off or postpone) has made a world of difference. On a side note, a friend has done the same (taking workshops, being part of writing groups and book clubs) for the past 5 years and just landed a two book deal – sure it isn’t the common outcome but it is possible.
In terms of angel investors, my only experience has been as someone who founded and runs a nonprofit and has worked in the field. Generally angels in the nonprofit sector are those with personal relationships with the staff and/or recipients as the dividends are not monetary. With the huge drop in grant funding (government and foundation) due to the economy and changing models, nonprofits are now more dependent on earned income and individual donors. Angels (whether writing checks or donating a lot of labor and skills) will play an increasing part in which organizations are sustainable.
On a final note, I discovered your blog this weekend. Thank you for your thoughtful and interesting posts and ideas. Looking forward to reading more and challenging my own perceptions of how things are and should be.
I’ve wrestled with (and been tormented at times by) this decision for a few years now. Many friends and colleagues have gone back to school for their MBAs – and the peer pressure echo chamber can get to you after a while.
I should note that I’m a high-performing business professional at a Fortune 50 company – so the expectation is not subtle.
While I share Tim’s not-hating of MBAs in general, I agree with his arguments 100% and those of some earlier commenters. I’d like to add a few of my own:
First is one of rank…sad to say.
If you cannot get into one of the elite programs (top 10 at most), then I feel the ROI of your time/money/energy/opportunity cost investment really drops. As Tim argues, there are some fantastic professors in the elite programs, but you are still left to contend with an entourage of less-stellar, less-innovative, less-inspiring teachers. I believe (based on accounts from friends
mostly in a wide variety of programs) that the balance of awesome-to-average professors is a non-linear degrading curve the lower in the ranks you get.
Mind you, there are and shall always be linchpin professors in an program at any institution. My argument here is merely one of ratio.
Second, I feel like the majority of MBA programs reinforce the old-guard of business, which (if you are to believe Seth Godin) is a dying “factory” model. The businesses and “linchpins” of the future will be born of entrepreneurial, real-world experiences without being force to think in a box.
So, it could be argued (though subjectively), that Tim’s $120K personal MBA experience provides a more enriched “culture of learning” that prepares for a likely future instead of fighting to protect the present (aka status quo).
###
Ultimately, any accumulation of new knowledge and experiences is good and should be encouraged. MBAs certainly have their place, and if life had been different I probably would have gone for one.
But given current economic realities, projections of future innovation/business, and the plain cost-benefit comparison between “traditional” MBAs and “real-world” MBAs, I think the choice is clear – at least to anyone who would dare to create and become a Purple Cow.
Cheers!
Matt
Tim,
Great post and very intriguing, especially for someone like me who is an undergrad student and hearing lots about MBA programs. It seems like MBAs are the gold standard these days (at least at universities), but obviously that doesn’t need to be the case. I always learn something when I visit your blog!
I have one question, however. If you sold BrainQUICKEN, shouldn’t your ROI be higher? It just seems like that would be the case since the company has been so successful. I know that is not the main point of the post, but it just struck me as odd.
Thanks for your help, I first read 4HWW two years ago and still go back to it every chance I get!
Alex
I don’t know, the application of calculus to business dynamics sounds pretty fascinating to me. The whole point of such courses, as I see it, is not to prove that you you will lose money on a crappy product, but to look at this idea in higher resolution. Naturally, this has the corollary that you could also see the dynamics of success in an equally high detail. Which would be useful.
I will do my best to become one of the 1000 millionaires that you are looking to create, I have a job, run a small business and have hired a web designer (from India) to build a site to test my first muse, should begin testing within 10 days. I clearly do not work only four hours a week, but that is my goal. I do my best to squeeze the things that i want to do, currently watching a lot of soccer and trying to increase my vertical enough to dunk.
I tip my hat off to you.
Tim,
Thank you for talking about this concept in such a clear way. I have been doing something similar this past year in college (still undergrad) by taking fewer credits and spending the money that would have gone towards another class on taking a class on internet marketing (well worth it) and meeting interesting people in the area I go to school.
QOD: If you’re on the other side – starting a new business model – how do you write a kick ass business model and attract angel investors? What are the benefits/fallbacks of inviting an angel into your business?
Tim – no offense, but this was a silly post from you. The MBA at GSB or HBS is all about the network and the connections. Many folks have very limited such connections with future global leaders.
Nobody goes to the MBA to “learn” from a classroom. The real world lessons you learned, most all MBAs also learn in the real world, not in the classroom. Your post could have easily been “how MBAs should complement their business school experience with real world education.” Again, easy for you to write a post like this since you already have 50x the personal brand and the connections of most pre-MBAs so naturally 100% of the MBA value — brand and connection — you have in your back pocket.
Tim,
I want to learn a boxed model for getting from prototype/idea phase to cash flow to exit. I feel once i make it to that level i can purchase, create, or license ideas’s.and fit them into a structure then streamline and duplicate. I want to be an angel investor because as you said you learn so much and have so much expose to multiple bussiness models. You get to see the good the bad and the ugly ones. Thanks for all of the great posts. I am re reading the expanded 4 Hour Work Week book currenly and am in process of working on my Muse.
QOD
Hi Tim,
Perhaps I’m lazy, but, instead “attending” my own personal MBA, are you planning incorporating more of what you learned into future blog posts, or maybe a new edition of your book?
In particular, I’d love to learn more about the subjects you listed in the following quote, especially about rapid product design:
“The goal of this “business school” would be to learn as much as possible about start-up finance, deal structuring, rapid product design, initiating acquisition conversations, etc. as possible.”
Thanks,
Josh
Tim,
I’m a big fan of 4HWW but this post left me slightly disappointed. It was nothing more than a twist on the age old question of book smarts vs street smarts. A question which I’ve resolved long ago that you probably need a bit of both but the scales tip slightly in favour of street smarts.
It reminds me of one of my favourite scenes from Good Will Hunting, when Will says to an MIT student:
“See, the sad thing about a guy like you is in 50 years you’re gonna staht doin some thinkin on your own and you’re gonna come up with the fact that there are two certainties in life. One, don’t do that. And two, you dropped a hundred and fifty grand on a f*ckin education you coulda got for a dollah fifty in late chahges at the public library.”
For most people, I would imagine dropping $120k of their own cash (i.e. not company sponsored) on anything, angel investing or otherwise, would significantly boost their IQ on the topic. And I would have guessed if you were in a position fortunate enough to angel invest you probably don’t need an MBA.
A couple of points on the other aspect about investing:
1. Not investing in public companies because you think you don’t have the same access to information as the professionals is a fallacy. Why is it then 80% of fund managers (there’s your Pareto again) on average underperform the benchmark in any typical year, despite them having better access to information than most? I subscribe to James Montier’s school of investment where more information only leads to overconfidence, rather than improving accuracy.
2. While his texts are necessary, I think the focus on Nassim Taleb has become a bit too overrated. His books are basically a long-winded way of saying “Past performance/events doesn’t equal future performance/events”. Your local fund manager could have told you that. I don’t disagree with using 10% of one’s liquid assets to hedge outlier events but I would probably find better places to stick the other 90% than AAA bonds.
Anyway, if you haven’t guessed already I’m with you on action – not academia.
Tim, why not take this one step further and question whether kids need a college education at all and direct the funds instead to building muses?
@ Scott R. – In my experience the shortcomings of self-education are almost without exception never as bad as the shortcomings of supposedly classical education.
Beyond High School (and it is really important to go to a good one of those), travelling the world a bit (which I was lucky enough to have done from a young age), learning at least one or two new languages and starting up your own businesses are far more useful (and fun) than sitting in auditoriums for 3-4 or even 5 years or more.
@Tim – Any ideas for what to do when you’re a lame cripple for 3 months after totally rupturing the Achilles’ tendon and having undergone re-attachment surgery?
Muse-wise I’m going with writing so far…but not sure if my money will run out before I finish the books (I have 3 going) and still not sure how to get them marketed properly, though I have some ideas (but not able to put them in practice while a cripple).
Would be nice to have a really fast muse to get some basic life-needs money coming in…but I guess if that was easy everyone would be doing it.
Great post anyway.
Awesome. The thing I love about your ideas and tactics is that the are probably at least 5 times more effective than doing the normal or “accepted” thing. My muse is up to $1000 per month automated income with no customer service hassles at all. Keep the insights coming!
Great post! Very inspiring. The lesson here can be applied in so many ways that I’m going to hold onto this article for a long time.
Hi Tim, Informative article as usuual. It reminded me of that part in Good Will Hunting where Matt Damon’s character says to the jumped up Harvard student who intellectually bullied his friend that he could have obtained his education just as easily from a public library. I have learnt far more since I finished University and Business School from reading books by Godin, Gladwell, Anderson and by working with bright people in places such as Dyson. I think in this day and age with so much information available online you can get an excellent education without having to fork out a kings ransom for tuition fees. Also with the cost of setting up your own affiliate site being so low in this day and age you can get an excellent education by just taking action and setting up your own business that way. Rant over. Gareth
QOD: What is a the best reading you can recommend on how to pitch VC’s and angels?
What is the best way to put together a team if you are a solo-prenuer?
QOD
How do you know if you have found a good investment? Are there any signs that clue you into “this is a bad idea?”
Tim…
QOD
I found the part about practicing losing money at a casino interesting. It mentions basically having emotional control over something which you have no physical control.
Could you explore more deeply some specific emotional control techniques regarding money? Other ways to practice giving up that control? Other actionable ways to strengthen your emotional muscles?
Thanks!
-Dan
QOD (What would I like to learn specifically about angel investing?)
2 questions actually:
1. Is it possible to develop criteria and/or methodology in which to increase the success-rate of angel investing, or is destined to be forever gut-feel and experince?
2. Is it wise/better to stick with a field of expertise (or that with which one is kowledgeable or familiar) than to jump at anything that seems like a ‘goer’ and meets your criteria?
Cheers Tim!
This IS the starting point of dealing with now(reality) and fast changing opportunities ahead(future).ACTION LEARNING instead of theoretical classroom
learning!Brilliant Tim!A real brain-based coaching advice.What`s next?
Scratch my above comment…still needed a bit of editing. Tough to do this on an Ipod Touch. =D
Yo Mr. Ferriss, I need some clarification!
Who specifically are you referring to with the term “professional” in the blog entry where you are talking about investing in public companies?
Like Analysts who work for the big banks? Hedge fund managers? Somebody else?
I need to know because as of recently i’m no longer working a job and my only source of income is from my full-time private investing investing in public companies that are micro to nano market-cap sized…and if “professionals” have routinely better info than me, i need to get working on doing whatever i can to try and get access to the same info they tend to get. 🙂
HI Patrick,
I’d say all of the above, but the opinion is mostly from experience just watching friends in I-banks and trading positions move the market with huge purchases and leveraging. The book “Liar’s Poker” also helped.
Now, in practice, it could be like poker: you play the other “normal” masses, not the pro’s, and you just have to beat the majority of investors. I don’t think I’m clued in enough to pull it off, but I also have friends who love investing in public companies and do well. Just not my DNA, it seems!
Tim
This is very interesting Tim. Like you I have thought many times of doing an MBA. But I’m convinced that unless you can fund a top school, then it’s probably not worth the cost.
I have since drawn the same conclusion and I’m putting aside 10% of my income this year to fund a few interesting short courses at London Business School and some other real world experiences.
I get the benefit of the school on my CV and I also get to expand my network.
Hey Tim – great post, I’m itching to read the next one.
I’ve been looking at this for a while and I always have to defend action against theory in our business – and to be honest I was just thinking that I need a guide to Angel Investing (for myself), and then this post came through! Synchronicity!
Take Care,
Minesh
I would love to learn more about the actual legal issues for both parties, the investor and the startup. Things to avoid, things to know and look out for. Legal part is what I haven’t seen much talked about.
I enjoyed the “Creating Your Own MBA” part.
Thanks Tim
For Mac devotees out there who want to follow Tim’s example and get their feet wet by funding some startups, you might want to consider a concept that we developed last year. A summary can be seen at macpreneurs.com.
The idea is to find an entrepreneur with a promising idea and essentially provide him/her with all the latest tools necessary to get off to a running start. The assumption is that they already have a product (preferably a digital one) and are ready to test the market. The key to the whole thing is that you would be both a major investor as well as mentor and would be able to check the progress – in terms of sales etc. – from anywhere at any time. The chances of success are likely to be considerably higher than with other startups while providing the learning opportunity you seek (hopefully along with profitability).
We expect to roll out the program ourselves by the middle of next year so thus far it is but a concept, but I thought it might be helpful for those of you looking to get started sooner.
QOD: This may sound pathetic but here goes. I need $7,000 to begin producing a drink mix I contracted a manufacturer to make. For my wife and I this is going to take nearly a year to save up. For such a small amount of money (in the big business world), who can I approach for help in getting this into the hands of people? Is there a minimum that Angel Investor’s will invest? Honestly, if I had more than 7k, I could bring the initial price of the product down by more than half, allowing the company, in theory, to make more per box. Should I aim high and provide projections or just get the bare minimum to make the idea a reality?
First, I want to thank Tim for writing his book and and putting the bug in my ear for the last year and a half. I have finally fully extricated myself from my office environment where I worked in the office 8-10 hours a day. (Well I wasnt really working the whole time) Not only am I out of the office but I am moving from Chicago to Scottsdale AZ, where at the most I will work 2-3 hours a day from home, That will give me time to find my muse, automate a business and really have time and money. Thanks Tim
Tim-
The topic of creating your own MBA is hugely important. Some of the responses (especially those against) make it clear that this is a potential paradigm/game changer.
Why not create a contest of some sort to illustrate the possiblities and promote the idea. I’ll put up 500 dollars of my own money towards the prize pool, as I believe wholeheartedly in the concept. Maybe do it as some sort of specialized angel investment for readers? I dunno, but it could be alot of fun and very educational.
And greetings from my family’s first mini-retirement in Panama!
PPC4
Hey Tim, what about Warren Buffet’s number one rule? Never Lose Money? haha I know it’s for learning purposes but surely you could figure out how to do this without losing the money right?