The One Sign Your Boss Wants You Gone by Brian de Haaff

Every boss is different. And you are different from your colleagues, too. So, it’s natural that we have different types of relationships. Some good, some meh, and some bad. But when your boss really is not on your side, it impacts all of you. That hurts. Having an unpleasant boss is adverse to your career growth and makes you feel physically, pit-in-the-stomach ill.

There just isn’t anything more miserable than working for someone who is rotten — or worse, who makes you feel rotten. I am a realistic optimist, but sometimes your boss just wants to see through you. Hate is a strong word, and I do not use it lightly. But sometimes that’s what it feels like. You feel hated.

So, how do you recognize pending misery before it’s upon you? Do you know the one true sign that your boss wants you gone?

This post is the counter-balance to my wildly-popular post last week, The One Sign Your Boss Loves You. In that post, I pointed out that a boss saying “You did a good job” benefits employees by making them feel special, giving them a sense of team, and providing protection. These are important feelings for supportive bosses to inspire in employees and loved employees work harder than ever.

As the CEO of Aha! (product strategy and visual roadmap software), I take employee happiness seriously as a leader of a rapidly growing, high-performance team. And I do my best to make sure that everyone is challenged and growing.

But what happens, though, when your boss is far from supportive?

You are not happy when your boss is nasty and you want to leave your workplace. Studies have shown that less than half of the workforce feels appreciated by their bosses and that two-thirds of them say they’ll seek new work within a year. It’s hard to bring your best to a boss who brings his or her worst. So how do you know if your boss is just incompetent or if he really wants to show you the door?

The one key sign that your boss wants you gone is that your boss ignores you.

Being ignored is worse than being ridiculed. At least when you are ridiculed, you are acknowledged. A boss who is showing hatefulness by ignoring you does three things:

Avoids you
When your boss is avoiding you, he is indicating that your presence in the workplace doesn’t matter to him. He is sending clear signals that you are not someone with whom he needs to be engaging. Avoidance is worse than dismissiveness and is akin to rendering you invisible.

Gives your work to others
By giving your work to others, your boss is saying that your work doesn’t matter and/or that he doesn’t believe that you can do it. This indicates lack of trust as well as a lack of investment in you. If your work is being given away, you’ve already been written off by your boss.

Grabs credit
A hateful boss takes credit for your accomplishments and grabs your ideas. Rather than defining his own success in part by whom he lifts with him, he is stealing your success to make himself look more grand. You can’t get ahead in that environment.

Having a spiteful boss is painful. It’s just not worth it to put up with someone who isn’t going to change, so you may need to change direction yourself to free yourself from a tyrant.

You should not reach for job change readily, but when your boss does what is described above, it may be your only path to sanity and growth.

What signs do you look for to tell if your boss is holding you up or holding the door?


Brian seeks business and wilderness adventure. He has been the founder or early employee of six cloud-based software companies and is the CEO of Aha! — the world’s #1 product roadmap software. His last two companies were acquired by Aruba Networks [ARUN] and Citrix [CTXS].



Career Choices You Will Regret In 20 Years by Bernard Marr

Every day we are faced with choices in our careers that will affect us over the long term. Should I volunteer for that new project? Should I ask for a raise? Should I take a sabbatical? Should I say yes to overtime?

But sometimes we miss the biggest choices that will cause us to look back on our careers 20 years from now with pride and contentment — or regret.

Here are some of the career choices we often make but will regret deeply in 20 years’ time:

Pretending to be something you’re not.

Maybe you’re pretending to be a sports fan to impress your boss, or you’re keeping your mouth shut about something to keep the peace. Maybe you’re pretending that you’re an expert in something that’s really not your cup of tea. But continuously pretending to be something you’re not is not being true to yourself and will keep you feeling empty.

Making decisions based only on money.

Whether we’re talking about your personal salary or your project’s budget, making decisions solely based on money is almost never a good idea. Sure, it’s important to run the numbers, but there are dozens of other factors — including your gut feeling — you’ll want to take into account.

Thinking you can change something about the job.

Much like a relationship, if you go into a job thinking, “This would be the perfect job, if only…” that’s a red flag. Chances are, unless you’re taking a leadership, C-level position, you aren’t going to be able to change things that are fundamentally wrong.


You’ve got an OK job, with an OK salary, and OK benefits, but what you really want is… You’re not doing yourself any favors settling for something that is just OK. Believe in yourself enough to go after what you deserve, whether it’s a new position, a pay rise, or an opportunity.

Working 50, 60, 80 hour weeks.

You might think you have to work that much — because it’s expected, because you need the money, because you want to look good to your boss — but no one reaches their deathbed and says, “Gosh, I wish I’d spent more time working.”

Putting friends and family last.

Being successful at your career means surrounding yourself with supportive people — and often, those people aren’t your coworkers or employees, they’re your friends and family. Ruin those relationships and you may find your career success just doesn’t matter as much.

Micromanaging everything.

This applies to your team and employees, but also to life in general. If you micromanage everything instead of sometimes just letting life happen, you’ll find yourself constantly battling anxiety and overwhelm.

Avoid making mistakes.

If you’re actively avoiding making mistakes in your career, then you’re not taking risks. And while you may keep up the status quo, you won’t be rewarded, either. Take the risk. Make the mistake. Own it and learn from it.

Thinking only of yourself.

The best networking strategy you can possibly have is to actively look for opportunities to help others. If you’re always putting yourself and your needs first, you’ll find you don’t get very far.

Not valuing your own happiness.

It’s a sad truth that people often believe they can put off happiness until later, but sometimes later doesn’t come. Prioritize being happy today. That might mean switching jobs, or it might just mean choosing to be happier with the job you’ve got.

What do you think are the biggest career choices people regret? As always, I’d love to hear your ideas and stories in the comments below.

Also, if you would like to read my regular posts then please click ‘Follow‘ and send me a LinkedIn invite. And, of course, feel free to also connect via Twitter, Facebook and The Advanced Performance Institute.

About : Bernard Marr is a globally recognized expert in strategy, performance management, analytics, KPIs and big data. He helps companies and executive teams manage, measure and improve performance. His latest books are ’25 Need-to-Know Key Performance Indicators’ and ‘Doing More with Less‘.



Why You Need Emotional Intelligence To Succeed by Dr. Travis Bradberry

When emotional intelligence first appeared to the masses, it served as the missing link in a peculiar finding: people with average IQs outperform those with the highest IQs 70% of the time. This anomaly threw a massive wrench into what many people had always assumed was the sole source of success—IQ. Decades of research now point to emotional intelligence as the critical factor that sets star performers apart from the rest of the pack.

Emotional intelligence is the “something” in each of us that is a bit intangible. It affects how we manage behavior, navigate social complexities, and make personal decisions that achieve positive results. Emotional intelligence is made up of four core skills that pair up under two primary competencies: personal competence and social competence.

Personal competence comprises your self-awareness and self-management skills, which focus more on you individually than on your interactions with other people. Personal competence is your ability to stay aware of your emotions and manage your behavior and tendencies.

  • Self-Awareness is your ability to accurately perceive your emotions and stay aware of them as they happen.
  • Self-Management is your ability to use awareness of your emotions to stay flexible and positively direct your behavior.

Social competence is made up of your social awareness and relationship management skills; social competence is your ability to understand other people’s moods, behavior, and motives in order to respond effectively and improve the quality of your relationships.

  • Social Awareness is your ability to accurately pick up on emotions in other people and understand what is really going on.
  • Relationship Management is your ability to use awareness of your emotions and the others’ emotions to manage interactions successfully.

Emotional Intelligence, IQ, and Personality Are Different

Emotional intelligence taps into a fundamental element of human behavior that is distinct from your intellect. There is no known connection between IQ and emotional intelligence; you simply can’t predict emotional intelligence based on how smart someone is. Intelligence is your ability to learn, and it’s the same at age 15 as it is at age 50. Emotional intelligence, on the other hand, is a flexible set of skills that can be acquired and improved with practice. Although some people are naturally more emotionally intelligent than others, you can develop high emotional intelligence even if you aren’t born with it.

Personality is the final piece of the puzzle. It’s the stable “style” that defines each of us. Personality is the result of hard-wired preferences, such as the inclination toward introversion or extroversion. However, like IQ, personality can’t be used to predict emotional intelligence. Also like IQ, personality is stable over a lifetime and doesn’t change. IQ, emotional intelligence, and personality each cover unique ground and help to explain what makes a person tick.

Emotional Intelligence Predicts Performance

How much of an impact does emotional intelligence have on your professional success? The short answer is: a lot! It’s a powerful way to focus your energy in one direction with a tremendous result. TalentSmart tested emotional intelligence alongside 33 other important workplace skills, and found that emotional intelligence is the strongest predictor of performance, explaining a full 58% of success in all types of jobs.

Your emotional intelligence is the foundation for a host of critical skills—it impacts most everything you do and say each day.

Of all the people we’ve studied at work, we’ve found that 90% of top performers are also high in emotional intelligence. On the flip side, just 20% of bottom performers are high in emotional intelligence. You can be a top performer without emotional intelligence, but the chances are slim.

Naturally, people with a high degree of emotional intelligence make more money—an average of $29,000 more per year than people with a low degree of emotional intelligence. The link between emotional intelligence and earnings is so direct that every point increase in emotional intelligence adds $1,300 to an annual salary. These findings hold true for people in all industries, at all levels, in every region of the world. We haven’t yet been able to find a job in which performance and pay aren’t tied closely to emotional intelligence.

You Can Increase Your Emotional Intelligence

The communication between your emotional and rational “brains” is the physical source of emotional intelligence. The pathway for emotional intelligence starts in the brain, at the spinal cord. Your primary senses enter here and must travel to the front of your brain before you can think rationally about your experience. However, first they travel through the limbic system, the place where emotions are generated. So, we have an emotional reaction to events before our rational mind is able to engage. Emotional intelligence requires effective communication between the rational and emotional centers of the brain.

Plasticity is the term neurologists use to describe the brain’s ability to change. As you discover and practice new emotional intelligence skills, the billions of microscopic neurons lining the road between the rational and emotional centers of your brain branch off small “arms” (much like a tree) to reach out to the other cells. A single cell can grow 15,000 connections with its neighbors. This chain reaction of growth ensures it’s easier to kick a new behavior into action in the future.

As you train your brain by repeatedly practicing new emotionally intelligent behaviors, your brain builds the pathways needed to make them into habits. Before long, you begin responding to your surroundings with emotional intelligence without even having to think about it. And just as your brain reinforces the use of new behaviors, the connections supporting old, destructive behaviors will die off as you learn to limit your use of them.


Travis Bradberry, Ph.D.

Dr. Travis Bradberry is the award-winning co-author of the #1 bestselling book, Emotional Intelligence 2.0, and the cofounder of TalentSmart, the world’s leading provider of emotional intelligence tests, emotional intelligence training, and emotional intelligence certification, serving more than 75% of Fortune 500 companies. His bestselling books have been translated into 25 languages and are available in more than 150 countries. Dr. Bradberry has written for, or been covered by, Newsweek, BusinessWeek, Fortune, Forbes, Fast Company, Inc., USA Today, The Wall Street Journal, The Washington Post, and The Harvard Business Review.


How Successful People Stay Calm by Dr Travis Bradberry

The ability to manage your emotions and remain calm under pressure has a direct link to your performance. TalentSmart has conducted research with more than a million people, and we’ve found that 90% of top performers are skilled at managing their emotions in times of stress in order to remain calm and in control.

If you follow our newsletter, you’ve read some startling research summaries that explore the havoc stress can wreak on one’s physical and mental health (such as the Yale study, which found that prolonged stress causes degeneration in the area of the brain responsible for self-control). The tricky thing about stress (and the anxiety that comes with it) is that it’s an absolutely necessary emotion. Our brains are wired such that it’s difficult to take action until we feel at least some level of this emotional state. In fact, performance peaks under the heightened activation that comes with moderate levels of stress. As long as the stress isn’t prolonged, it’s harmless.

Research from the University of California, Berkeley, reveals an upside to experiencing moderate levels of stress. But it also reinforces how important it is to keep stress under control. The study, led by post-doctoral fellow Elizabeth Kirby, found that the onset of stress entices the brain into growing new cells responsible for improved memory. However, this effect is only seen when stress is intermittent. As soon as the stress continues beyond a few moments into a prolonged state, it suppresses the brain’s ability to develop new cells.

“I think intermittent stressful events are probably what keeps the brain more alert, and you perform better when you are alert,” Kirby says. For animals, intermittent stress is the bulk of what they experience, in the form of physical threats in their immediate environment. Long ago, this was also the case for humans. As the human brain evolved and increased in complexity, we’ve developed the ability to worry and perseverate on events, which creates frequent experiences of prolonged stress.

Besides increasing your risk of heart disease, depression, and obesity, stress decreases your cognitive performance. Fortunately, though, unless a lion is chasing you, the bulk of your stress is subjective and under your control. Top performers have well-honed coping strategies that they employ under stressful circumstances. This lowers their stress levels regardless of what’s happening in their environment, ensuring that the stress they experience is intermittent and not prolonged.

While I’ve run across numerous effective strategies that successful people employ when faced with stress, what follows are ten of the best. Some of these strategies may seem obvious, but the real challenge lies in recognizing when you need to use them and having the wherewithal to actually do so in spite of your stress.

They Appreciate What They Have

Taking time to contemplate what you’re grateful for isn’t merely the “right” thing to do. It also improves your mood, because it reduces the stress hormone cortisol by 23%. Research conducted at the University of California, Davis found that people who worked daily to cultivate an attitude of gratitude experienced improved mood, energy, and physical well-being. It’s likely that lower levels of cortisol played a major role in this.

They Avoid Asking “What If?”

“What if?” statements throw fuel on the fire of stress and worry. Things can go in a million different directions, and the more time you spend worrying about the possibilities, the less time you’ll spend focusing on taking action that will calm you down and keep your stress under control. Calm people know that asking “what if? will only take them to a place they don’t want—or need—to go.

They Stay Positive

Positive thoughts help make stress intermittent by focusing your brain’s attention onto something that is completely stress-free. You have to give your wandering brain a little help by consciously selecting something positive to think about. Any positive thought will do to refocus your attention. When things are going well, and your mood is good, this is relatively easy. When things are going poorly, and your mind is flooded with negative thoughts, this can be a challenge. In these moments, think about your day and identify one positive thing that happened, no matter how small. If you can’t think of something from the current day, reflect on the previous day or even the previous week. Or perhaps you’re looking forward to an exciting event that you can focus your attention on. The point here is that you must have something positive that you’re ready to shift your attention to when your thoughts turn negative.

They Disconnect

Given the importance of keeping stress intermittent, it’s easy to see how taking regular time off the grid can help keep your stress under control. When you make yourself available to your work 24/7, you expose yourself to a constant barrage of stressors. Forcing yourself offline and even—gulp!—turning off your phone gives your body a break from a constant source of stress. Studies have shown that something as simple as an email break can lower stress levels.

Technology enables constant communication and the expectation that you should be available 24/7. It is extremely difficult to enjoy a stress-free moment outside of work when an email that will change your train of thought and get you thinking (read: stressing) about work can drop onto your phone at any moment. If detaching yourself from work-related communication on weekday evenings is too big a challenge, then how about the weekend? Choose blocks of time where you cut the cord and go offline. You’ll be amazed at how refreshing these breaks are and how they reduce stress by putting a mental recharge into your weekly schedule. If you’re worried about the negative repercussions of taking this step, first try doing it at times when you’re unlikely to be contacted—maybe Sunday morning. As you grow more comfortable with it, and as your coworkers begin to accept the time you spend offline, gradually expand the amount of time you spend away from technology.

They Limit Their Caffeine Intake

Drinking caffeine triggers the release of adrenaline. Adrenaline is the source of the “fight-or-flight” response, a survival mechanism that forces you to stand up and fight or run for the hills when faced with a threat. The fight-or-flight mechanism sidesteps rational thinking in favor of a faster response. This is great when a bear is chasing you, but not so great when you’re responding to a curt email. When caffeine puts your brain and body into this hyperaroused state of stress, your emotions overrun your behavior. The stress that caffeine creates is far from intermittent, as its long half-life ensures that it takes its sweet time working its way out of your body.

They Sleep

I’ve beaten this one to death over the years and can’t say enough about the importance of sleep to increasing your emotional intelligence and managing your stress levels. When you sleep, your brain literally recharges, shuffling through the day’s memories and storing or discarding them (which causes dreams), so that you wake up alert and clear-headed. Your self-control, attention, and memory are all reduced when you don’t get enough—or the right kind—of sleep. Sleep deprivation raises stress hormone levels on its own, even without a stressor present. Stressful projects often make you feel as if you have no time to sleep, but taking the time to get a decent night’s sleep is often the one thing keeping you from getting things under control.

They Squash Negative Self-Talk

A big step in managing stress involves stopping negative self-talk in its tracks. The more you ruminate on negative thoughts, the more power you give them. Most of our negative thoughts are just that—thoughts, not facts. When you find yourself believing the negative and pessimistic things your inner voice says, it’s time to stop and write them down. Literally stop what you’re doing and write down what you’re thinking. Once you’ve taken a moment to slow down the negative momentum of your thoughts, you will be more rational and clear-headed in evaluating their veracity.

You can bet that your statements aren’t true any time you use words like “never,” “worst,” “ever,” etc. If your statements still look like facts once they’re on paper, take them to a friend or colleague you trust and see if he or she agrees with you. Then the truth will surely come out. When it feels like something always or never happens, this is just your brain’s natural threat tendency inflating the perceived frequency or severity of an event. Identifying and labeling your thoughts as thoughts by separating them from the facts will help you escape the cycle of negativity and move toward a positive new outlook.

They Reframe Their Perspective

Stress and worry are fueled by our own skewed perception of events. It’s easy to think that unrealistic deadlines, unforgiving bosses, and out-of-control traffic are the reasons we’re so stressed all the time. You can’t control your circumstances, but you can control how you respond to them. So before you spend too much time dwelling on something, take a minute to put the situation in perspective. If you aren’t sure when you need to do this, try looking for clues that your anxiety may not be proportional to the stressor. If you’re thinking in broad, sweeping statements such as “Everything is going wrong” or “Nothing will work out,” then you need to reframe the situation. A great way to correct this unproductive thought pattern is to list the specific things that actually are going wrong or not working out. Most likely you will come up with just some things—not everything—and the scope of these stressors will look much more limited than it initially appeared.

They Breathe

The easiest way to make stress intermittent lies in something that you have to do everyday anyway: breathing. The practice of being in the moment with your breathing will begin to train your brain to focus solely on the task at hand and get the stress monkey off your back. When you’re feeling stressed, take a couple of minutes to focus on your breathing. Close the door, put away all other distractions, and just sit in a chair and breathe. The goal is to spend the entire time focused only on your breathing, which will prevent your mind from wandering. Think about how it feels to breathe in and out. This sounds simple, but it’s hard to do for more than a minute or two. It’s all right if you get sidetracked by another thought; this is sure to happen at the beginning, and you just need to bring your focus back to your breathing. If staying focused on your breathing proves to be a real struggle, try counting each breath in and out until you get to 20, and then start again from 1. Don’t worry if you lose count; you can always just start over.

This task may seem too easy or even a little silly, but you’ll be surprised by how calm you feel afterward and how much easier it is to let go of distracting thoughts that otherwise seem to have lodged permanently inside your brain.

They Use Their Support System

It’s tempting, yet entirely ineffective, to attempt tackling everything by yourself. To be calm and productive, you need to recognize your weaknesses and ask for help when you need it. This means tapping into your support system when a situation is challenging enough for you to feel overwhelmed. Everyone has someone at work and/or outside work who is on their team, rooting for them, and ready to help them get the best from a difficult situation. Identify these individuals in your life and make an effort to seek their insight and assistance when you need it. Something as simple as talking about your worries will provide an outlet for your anxiety and stress and supply you with a new perspective on the situation. Most of the time, other people can see a solution that you can’t because they are not as emotionally invested in the situation. Asking for help will mitigate your stress and strengthen your relationships with those you rely upon.


Travis Bradberry, Ph.D.

Dr. Travis Bradberry is the award-winning co-author of the #1 bestselling book, Emotional Intelligence 2.0, and the cofounder of TalentSmart, the world’s leading provider of emotional intelligence tests, emotional intelligence training, and emotional intelligence certification, serving more than 75% of Fortune 500 companies. His bestselling books have been translated into 25 languages and are available in more than 150 countries. Dr. Bradberry has written for, or been covered by, Newsweek, BusinessWeek, Fortune, Forbes, Fast Company, Inc., USA Today, The Wall Street Journal, The Washington Post, and The Harvard Business Review.


Win Every Interview with these 6 Steps by Laszlo Bock

Three unbelievably cool things happened to me this week. On Monday, my publisher sent me the first hardcover copies of my new book, Work Rules! It’s a real thing now! On Tuesday, the CEO of a major company told me he’d been following my interviews with Tom Friedman about how to get a job at Google, or anywhere. He asked how his company could adopt some of those same practices. Someone is listening!

And on Wednesday, a new Googler stopped me in one of our on-campus cafes. He told me, “I read every one of your articles about resumes and what Google looks for, did what you said, and just started at Google last week. I just want to thank you for helping me get hired by Google.” That was the coolest moment — more than anything I want all of us to have meaningful jobs in workplaces where we feel like owners, not replaceable cogs in a machine.

So first, my thanks to the millions who have read my advice. Thanks for the tens of thousands of posts, and for sharing your success stories with me and one another. I can’t wait to hear more of them!

Let’s assume, like my Noogler friend (new + Googler), you’ve got an awesome resume. You’ve avoided the errors that plague almost 60% of resumes, nailed the right keywords, and your accomplishments burst from the page. (And if your resume isn’t awesome – yet! – read my earlier articles about getting it right here and avoiding getting it wrong here and here.)

Now you’ve got the interview. How do you convince the person on the other side of the table to hire you? How do you win the interview?

You use the fact that most of us aren’t very good at interviewing to your advantage.

I write about hiring in Work Rules!, but here’s an abridged preview from the book:

You never get a second chance to make a first impression” was the tagline for a Head & Shoulders shampoo ad campaign in the 1980s. (A couple of cringe-worthy examples are here and here.) This unfortunately encapsulates how most interviews work. Tricia Pricket and Neha Gada-Jain, two psychology students at the University of Toledo, collaborated with their professor Frank Berieri to report in a 2000 study that judgments made in the first 10 seconds of an interview could predict the outcome of the interview. They videotaped interviews, and then showed thinner and thinner “slices” of the tape to college students. For 9 of the 11 variables they tested — like intelligence, ambition, and trustworthiness — they found that observers made the same assessments as the interviewers. Even without meeting the candidates. Even when shown a clip as short as 10 seconds. Even with the sound turned off.

In other words, most of what we think is “interviewing” is actually the pursuit of confirmation bias. Most interviews are a waste of time because 99.4 percent of the time is spent trying to confirm whatever impression the interviewer formed in the first ten seconds. “Tell me about yourself.” “What is your greatest weakness?” “What is your greatest strength?” Worthless.

There’s much more in the book demonstrating that, on average, we’re pretty crummy at assessing candidates. I write about how to get better. And how at Google we’ve applied 100 years of science to radically upgrade the quality of our assessments (still not perfect, though!).

But if you’re a job seeker (and who isn’t?), the fact that most of us don’t know how to interview well is a huge opportunity. Because that weakness lets you control the encounter. It lets you win. Here’s how:

  1. Predict the future. You can anticipate 90% of the interview questions you’re going to get. Three of them are listed above, but it’s an easy list to generate. “Why do you want this job?” “What’s a tough problem you’ve solved?” If you can’t think of any, Google “most common interview questions.” Write down the top 20 questions you think you’ll get.
  2. Plan your attack. For EVERY question, write down your answer. Yes, it’s a pain to actually write something. It’s hard and frustrating. But it makes it stick in your brain. That’s important. You want your answers to be automatic. You don’t want to have to think about your answers during an interview. Why not? Keep reading.
  3. Have a backup plan. Actually, for every question, write down THREE answers. Why three? You need to have a different, equally good answer for every question because the first interviewer might not like your story. You want the next interviewer to hear a different story. That way they can become your advocate.
  4. Prove yourself. Every question should be answered with a story that proves you can do what you’re being asked about. “How do you lead?” should be answered with “I’m a collaborative/decisive/whatever leader. Let me tell you about the time I ….” Always tell a story or have facts to prove you are what you say you are. More on how to construct and tell these stories in a future article.
  5. Read the room. All that brainpower you’re not using to desperately come up with answers to questions? Look around. Focus on the interviewer. In the first 10 seconds, is there anything in their office, or about them, you can notice and use to forge a connection? A book on a shelf? A family photo? A painting? Read the interviewer: is their body language open or closed? Are they tired and should you try to pep them up? Do they like your answer or should you veer in another direction?
  6. Make it to Carnegie Hall. How do you get to Carnegie Hall? Practice. Same goes for getting a job. When I was in my second year of business school, I practiced my interview answers — out loud — until I could tell each story smoothly, without thinking about it (but not so smoothly that I was bored with the re-telling). My roommate walked in one day to find me sitting on the futon reciting why I thought I was a great leader again and again. He figured I was stuck in some kind of Stuart Smalley-like self-help loop. But I got 7 job offers from 5 companies (that’s another story) and was on track to get another 6 before I stopped interviewing. How is that possible? Practice.

Everyone deserves an amazing job. I hope this helps you get one.


How to Create Your Own Real-World MBA – Part 2 – by Tim Ferriss

Topics: Entrepreneurship, Investing

Brainstorming in Boulder, CO with a class of founders from TechStars, where I’ve been a mentor. After this particular trip, I ended up advising (Photo: Andrew Hyde)

Disclaimer: nothing on this site is legal advice, and I am not an investing expert.

This post is continued from Part I.

Part I explained how, instead of getting an MBA, I invested the tuition dollars into angel investing. To recap, my current stats for the two-year “Tim Ferriss Fund” look like this:

15 or so total investments
0 deaths
2 successful “exits”, or sales (including my own company)

If we look at the value of my remaining start-ups on paper, based on subsequent funding and valuations, the portfolio is probably up well over 4x. This means nothing (remember Webvan?), but it’s fun to look at the spreadsheet.

This post will look at how I’ve found deals, how I filter deals, and the rules I’ve set for myself. The latter can teach broader business lessons, even if angel investing never enters your life…

Before we get started: you almost always need to be an “accredited investor” to angel invest. If you aren’t comfortable lighting your money on fire, you shouldn’t invest in start-ups–period. That doesn’t mean, however, that you can’t learn a few things from the sidelines.

Before we get started – part deux: angel investing can be complicated. I’ll be using some fuzzy math and simple examples to get the point across. This is intended as a primer, not as a guide to the intricacies of investing.

Last but not least, I’ll use a gender-neutral “he” for the sake of simplicity instead of “he or she”, which is cumbersome. Both sexes can play well in this game (check out Esther Dyson), and both can screw it up equally badly.

For those who want some resources upfront, here are a few:

If you want to be an angel investor:
Read – How to Be an Angel Investor
Read – Is it Time for You to Earn or to Learn? by Mark Suster – this is a must-read reality-check that takes into account dilution and other nasties. Though written for people thinking of joining start-ups as employees, it applies to angels.

If you want to recruit/be an advisor:
Read – Everything you ever wanted to know about advisors, Part 1
Read – the above Suster piece if you think advising a few start-ups will make you rich. Run the numbers first.

If you want to find angel investors:

AngelList (go here to pitch me or anyone else in their roster)

Consider applying to a “seed accelerator” program that will cultivate you. For a complete list of such programs and upcoming application deadlines, visit Kaljundi’s site. Here are few well-known examples:

Y-Combinator (Mountain View, CA)
TechStars (Boulder, CO)
LaunchBox (Washington, DC)
LaunchPad (Los Angeles)
SeedCamp (London)
Capital Factory (Austin)
i/o Ventures (San Francisco)

Investors vs. Bootstrapping – Some Warnings

As exciting as I find the start-up game in Silicon Valley, it can also be depressing.

I see capable first-time entrepreneurs, full of piss and vinegar, run into fundraising and get their asses kicked by seasoned venture capitalists (often affectionately called “vulture capitalists”). Two or three years later, their start-up baby is either dead or their ownership has dwindled to the point where their enthusiasm is gone.

Here are some questions and warnings that might help avoid this:

1) Why do you need funding?

If you can bootstrap to profitability and one of your goals is to work for yourself, I’d suggest thinking twice. If you take a few million dollars, you will–on some level–be working for investors. If you make a mistake and allow investors to have board control, which can happen if you spend funding faster than expected, you no longer run your start-up. 😦

2) Avoid angel investors with few or no prior start-up investments.

The family dentist wants to put in $50,000 and will give you whatever terms you want? Sounds great! Don’t do it. Ditto for the successful CEO who’s never done angel investing, as seductive as it will be.

One good friend just had her start-up implode (after millions of investment) because her primary investor, a former tech CEO, didn’t have the stomach for start-up investing. He panicked when things deviated from the business plan (um, welcome to start-up land), and began doling out funding in two-week increments and insisting on near-weekly board meetings. He became the micromanager from hell. No longer was the real start-up CEO able to make CEO decisions, and the company was doomed.

Only take investment from people who have invested in a few start-ups. Having run a start-up doesn’t qualify one as risk-tolerant enough for start-up investing.

3) Don’t take a ton of money just because the valuation is sexy, or because you give up less ownership.

This problem is more common with venture capital (VC), but it worth learning early: it’s a bad idea to take money from someone simply because they offer a high valuation. Let’s say two investors want to be your lead investor. Investor A thinks your start-up is worth $3 million and offers to buy 33% of the company for $1 million — to fund you with $1 million. Investor B thinks you’re worth $10 million and offers to also give you $1 million, but you’ll only give up 10% of the company!

Go with Investor B, right? Well, not so fast. If you come out of the gates with very little to show but a $10 million valuation, things can blow up in your face a few ways:

Your exit options become fewer. If Investor B needs a 10x return for his portfolio and has the ability to block your sale for less, this means you have to sell for at least $100 million. If you’re a first-time founder, putting $1-2 million in your pocket with an early sale for $10 million could have changed your life forever and given you “f**k you” money to do anything you wanted. Now it’s home run or nothing.

– You run the real risk of a “down round”. If you don’t make it to profitability with that $1-million round, you’ll need to raise more money later. If you haven’t made a ton of progress, including a ton of new customers, the fundraising community will be skeptical and probably insist your $10-million valuation was too high, or that you’ve lost value since that round. Now you’ll need to do what’s called a “down round” (some examples here). In most cases, this spells the end for your start-up.

OK, with those warning out of my system, let’s look at some definitions and how I’ve done things so far.

Investor vs. Advisor, and Some Definitions

When dealing with tech start-ups, the following terms are important to understand. Below are some very general definitions, keeping in mind that almost everything is negotiated and on a case-by-case basis:

“Seed” or “Series-A” = two early rounds of financing common in the start-up world. “Seed” is first, and often either family and friends or $100,000-$1,000,000 from angels. “Series-A” might be around $1,000,000-$5,000,000 and comprise primarily angels and perhaps 1-2 venture capitalists from larger firms that could later participate in larger “Series-B” or “Series-C” rounds, if needed for profitability or to compete. These “B” or “C” rounds usually involve many millions of dollars, which few angels will put up as individuals.

“Dilution” = Having your percentage ownership lowered when new investors come in. If, for example, you own 1% of a start-up at seed stage, if there are any future rounds of financing, your portion of the pie will almost always shrink–you will be diluted. This is critical to keep in mind when calculating potential outcomes as an investor or advisor.

“Investor” = someone who writes checks in exchange for equity (a certain % ownership) in the start-up.

“Advisor” = someone who advises a start-up in exchange for equity over time. “Advising” can include key introductions (to customers, partners, important hires), “syndicating” financing (getting other investors on board), developing/improving the product, helping with PR/marketing/customer-acquisition, or anything else a start-up might need.

So what percentage do advisors get? For someone who’s just doing a few intro’s, or whose name you’re using to get investors, it might be 0.10 – 0.25%. For someone who’s investing real time and helping to build the company, or someone whose involvement could make the difference between success and failure, it could be as high as 2%… or even more. There are start-ups who think giving more than 0.25% is ridiculous, and there are start-ups who find 2% a steal if they can get the right person.

Advisors generally receive their equity over a period of time, often 12-24 months.

This means that if an advisor signs an agreement for 1% that “vests” over 12 months, he would get 1/12 of one percent each month, and the start-up can cancel the deal at any time. If the start-up gets fed up with this advisor after six months, it means he gets the 0.5 percent that vested, but no more.

Different strokes for different folks, but all-star advisors generally = better investors, better investment terms, and faster outcomes. To me, that’s a legitimate no-brainer.

If I were to found a tech start-up and aim for the fences (IPO or sale), I would do what several successful tech CEOs I know are doing right now: give 3-5 bad-ass advisors 1-2% each, depending on time required, and self-fund until you hit break-even or profitability. Then, go out to raise $500-750,000 from key angels who can open doors to potential acquirers and help you get to “scale”. “Scale”, in this context, meaning the point at which you can go big, as in millions of users or nationwide, with the simple addition of money: the costs and revenues of your customer acquisition are predictable. Money in = more money out.

Last, you go to potential acquirers (often potential competitors) to see if they’d like to discuss “partnerships” or funding you; both approaches are used to start conversations that hopefully end with “why don’t we just buy you instead?” from their side.

If that doesn’t work, you get more funding, grow a lean monster, and eat their lunch.

The Start-Ups and Deal Flow

Here are the start-ups I’m involved with, whether as an investor or advisor, in no particular order:

[TIM UPDATE FROM 2013: OK, three years later, here is a more current list. Hilarious that Uber was called “UberCab” back in the day!]

Twitter (investor) – micro-blogging platform
Digg (investor) – see what’s most popular on the web
StumbleUpon (advisor) – Pandora for the coolest content on the web (this is how I find much of my most popular Twitter material)
Evernote (advisor) – capture anything in the world you want to remember
Posterous (investor, advisor) – the simplest blogging platform in the world
CrowdFlower (advisor) – crowd-source just about anything for pennies; 500,000 workers in 70+ countries.
SimpleGeo (investor) – on-demand geodata infrastructure (advisor) – the next (gorgeous) evolution of comic books
Foodzie (investor, advisor) – find and buy incredible artisinal food in the US (my favorite cookies in the world are here)
Shopify (advisor) – beautiful and easy e-commerce for selling anything
RescueTime (investor, advisor) – time and productivity tracking
ReputationDefender (investor) – monitor and repair your reputation online
TaskRabbit (advisor) – get any task done, from dry cleaning to research (use code “FERRISS10” for $10 off your first task)
UberCab (advisor) – Fully automated car dispatch with built-in reputation system – ride like a European diplomat.
Badongo, (investor) – file and document hosting/sharing
DailyBurn (investor, advisor) – exercise and diet tracking
iMarket Services (advisor) – creating hubs for niche markets like stand-up comedy
(not-for-profit – advisor) – outsource your tasks to those most in need (refugees, etc.) (not-for-profit – advisor) – eBay for helping public school children in need of basic supplies.

“Deal flow” refers to how you find the start-ups you invest in, or how they find you. All of the companies except and iMarket Services (respectively: have known the CEO for ages, chance meeting at SuperBowl party) were found through:

– Referrals from friends who are angels and tech CEOs
Y-Combinator (Posterous, RescueTime)
TechStars (DailyBurn, Foodzie,
Facebook Fund (fbFund) (TaskRabbit, Samasource)
Twitter DMs from me to the founders (Evernote, Shopify)

My Rules

What makes me interested in a start-up… or rules them out?

Let’s go through the bullet-points–general rules of thumb–first, some of which are borrowed from much more experienced folk like Mike Maples, Chris Sacca, Travis Kalanick, and others.

These are the considerations I run through when looking at start-ups, but it doesn’t mean that all of the companies in the portfolio passed all of the criteria.

In no particular order, and written as a stream of consciousness:

– If my readers won’t shut up about them, I listen (this led me to reach out to Evernote and Shopify)

– I generally look for these questions to be answered via email, but I now much prefer to have them answered through the AngelList form. If you don’t know the terms (“deck”, “traction”, etc.), you need to learn them before pitching Silicon Valley types.

– Does it offer the possibility of at least a 5x return? Good angel investors in Silicon Valley do not invest in lifestyle businesses or profit shares–they want to turn their $100,000 into millions. 5x return potential is just the entry point for working with decent angels at the seed or Series-A level. Many will be filtering for 20-30x potential, depending on the size of their fund.

– If it’s a single founder, the founder must be technical. Two technical co-founders are ideal.

– Have the founders ever had crappy service jobs, like waitering or bussing at restaurants? If so, they tend to stay grounded for longer. Less entitlement and megalomania usually means better decisions and better drinking company.

– I must be eager to use the product myself. This rules out many great companies, but I want a verified market I understand.

– I must understand their customers and be able to recruit, in military terms, HVTs–High Value Targets.

– Do the founders actually test some of what I’m recommending? My data is based on 15+ start-ups and more than $1M in direct response advertising–there are a few things I understand very well, sign-up conversion being one example. I will usually suggest 1-2 elements for testing in an initial meeting, well before investing, and if at least one element isn’t tested within a week, they’re out. If the product (usually a website) isn’t split tested or “iterated” fast enough, it usually foreshadows death for tech start-up. Speed is often the only competitive advantage smaller guys have.

– They need to understand the eco-system in which they play. What recent companies have sold for what amounts? Who are the most likely acquirers? Who are the most formidable competitors, and what types of funding (even investors) and resources do they anticipate needing to compete? It it a winner-takes-all market where only one company will reign supreme (e.g. businesses dependent on network effects), or can many large profitable companies co-exist?

– Founders must pass the “mall test”: if you were to see them in a mall, would you walk in a different direction, would you walk over to say “hi” and move on, or would you invite them to join you for coffee or whatever you’re doing next? If the founders don’t fall in the last group, don’t invest. This is a close cousin of the simpler “would you invite them out for beers just to catch up” test.

– Am I following my rules, but are other investors turning them down? These days, I take this as a positive sign. Mike Maples explained this to me: breaking your rules to co-invest with well-known investors is usually a bad idea, but following your rules when others reject a start-up can work out extremely well. DailyBurn, my only exit to date, was a mild example of this. They hit my checklist boxes, but the majority of the investors (but not all) I asked to participate declined. It thrills me that this start-up–from Alabama!–has so far outpaced most in Silicon Valley. Bravo.

Now the rules that require a little explanation:

1. Don’t do it solely for the money, but know your minimums.

Investing in start-ups has to be, on some level, a labor love. You need to love helping entrepreneurs. That said, don’t actively waste your money and life by failing to do basic math.

Set a minimum threshold for each start-up investment. The minimums could be what a success should cover, or a minimum dollar amount. For example:

A. Each start-up, if it exits at 5x its current valuation, should be able to cover 2/3 of your total fund.

Most entrepreneurs think their start-up will be the next Google, but you can’t base your investment strategy on the assumption that each company has the potential to exit for a billion dollars. Look at comparables (similar companies) that have sold, and their average purchase prices. If you want to keep it simple, you might use 5x at Series A round as your assumed “success” multiple.

What this means:

Let’s say a company is raising $500,000 in a Series A. Investors decide it is currently worth $1,000,000, so–after receiving the $500,000 infusion–it will have a $1,500,000 “post-money” valuation. (For sake of simplicity, we assume that Investors don’t require an option pool for new employees to be set aside in the pre-money valuation. For more on that, read this) Let’s also say that you put in $15,000, so you “own” 1% of the company post-money.

Remember the rule of the header: “Each start-up, if it exits at 5x its current valuation, should be able to cover 2/3 of your portfolio.”

Most of your start-ups will fail, so the successes need to make up for losses.

If we’re using the “2/3” rule, and your fund (like mine from 2007-2009) is $120,000, you shouldn’t invest $15,000 in this start-up, as 15K x 5 = $75,000. 2/3 of $120,000 is $80,000, so you’d either have to invest slightly more, lower the valuation, or add in advising and get more equity in return. This isn’t even accounting for dilution, which is likely in most cases.

B. Each start-up, if it exits at 3x its current valuation, should allow you to walk away with $300,000.

This is one of my preferred methods for qualifying or disqualifying a start-up.

As much as I might love them, I’m not going to take another part-time job for 1-3 years for a $50,000 pay-off. This is where first-time entrepreneurs who refuse to give advisors more than 0.25% often lose the forest for the trees.

Let’s say a start-up ends up with a 3-million (3M) post-money valuation. If I help them more than triple the value of their company to 10M, how much do I walk away with if there are no more rounds of funding? If they offer me 0.5%, I walk away with $50,000. If, considering the time invested, I could earn 5x that doing other things, it makes no sense to do the deal if this is my rule.

Woe is the angel who bases his or her decisions on all start-ups having the potential for a billion-dollar exit. Rule #1 in angel investing is, as far as I’m concerned, the same as Warren Buffett’s first two rules of investing:

Rule #1: Don’t lose money.
Rule #2: Don’t forget Rule #1.

2. Move from investor –> investor/advisor –> advisor

Let’s assume you have committed to spending $60,000 per year on angel investments, just as I did. This means two things:

– You aren’t going to be able to satisfy the above rule of “2/3” or the $200,000 minimum for many companies. At best, you’ll have 1-3 investments.

– 1-3 investments doesn’t work in angel investing, where most pros would agree that 9 out of 10 (on a good day) will fail.

– It’s therefore impossible for you to get a good statistical spread with $60,000 per year. The math just doesn’t work.

The math especially doesn’t work if you f*ck it up like I did (see Part I) by getting over-excited and dropping $50,000 on your first investment. Oops!

Here’s how I dealt with this problem:

First, I invested very small amounts in a few select start-ups, ideally those in close-knit “seed accelerator” (formerly called “incubator”) networks like Y-Combinator and TechStars. Then I did my best to deliver above and beyond the value of my investment. In other words, I wanted the founders to ask themselves “Why the hell is this guy helping us so much for a ridiculously small number of options?” This was critical for establishing a reputation as a major value-add, someone who helped a lot for very little.

Second, leaning on this burgeoning reputation, I began negotiating blended agreements with start-ups involving some investment, but additional advisory equity as a requirement.

Third and last, I made the jump to pure advising. Since the end of the first year of the “Tim Ferriss Fund,” more than 70% of my start-up “investments” have been with time rather than cash. In the last 6 months, I have written only one check for a start-up. The goal is still the same as in the first phase: deliver above and beyond the current value of my potential equity (if fully vested) as quickly as possible. The next post this week will give an example of this.

Comment from a proofreader and experienced angel, Naval Ravikant, who was also a co-founder at Genoa Corp (acquired by Finisar), (IPO via, and (largest white-label classifieds marketplace):

One thought – if someone really wants to invest $200K as an angel investor, you’re right in that they can’t spread it across enough companies to diversify it or have it be worth their time. In that case, they could do advisory work as you suggest – or they could fork it over to a super-angel fund. They’d end up paying a 15% in management fees and 20%+ of the profits in carry, but most of the super-angels have pretty good returns and they would get startup exposure for basically a $30K + 20% of the profits cost, and their time is surely worth more than that…

Moving gradually from pure investing to pure advising allowed me to reduce the total amount of capital invested, increase equity percentages, and make the $120,000 work, despite my early slip-ups. This also, I believe, produced better results for the start-ups.

The reason for the better results is related to a common objection.

Some counsel against pure advisors, the belief being that pure advisors have no “skin in the game.” To address this, start-ups might insist on an investment before advising can be discussed. The logic isn’t bad–that an advisor will do more if they have something to lose–but this argument has never compelled me, and I don’t know many good advisors who are compelled by it.


I feel more compelled to help companies that I have pure advising relationships with for two reasons.

First, if I’ve given a start-up capital, I’ve already given some value. If it’s pure advising, I need to prove my value within the small world of start-up investing or my reputation goes downhill. Second, because my reputation is at stake, I do more due diligence than with pure investments to ensure an excellent fit (their needs + my capabilities) before signing up. Just as important: before offering real equity for advising, a start-up will do likewise, and our marriage–if we get to that point–ends up better as a result.

The start-ups that aren’t great fits, those who haven’t mapped my strengths and weaknesses to their own, look at me, laugh, and ask themselves: “Tim Ferriss wants what?!?”

They’re right, I’m not a good fit. If their desire for me as an advisor is contingent upon an investment, they probably haven’t thought enough about how I’d be able to help (or not help). Either I really can’t help much, in which case I shouldn’t be offered advisor equity at all, or I can really help, in which case they should get me on board with a compelling arrangement for everyone. Start-ups often forgot that the advisor equity vests monthly–advisors still have to earn it or they can be fired.

It’s a hell of a lot of fun advising start-ups with good product and personality fit, even if the companies don’t become the next Google.

But, I do miss a lot of great opportunities by focusing on advising and tight fit. This doesn’t bother me. I haven’t yet lost any money. Rule #1.

Let’s be clear on one point: if you don’t deliver real results for your start-ups, you do not deserve to be an advisor. If you can’t point to a track record of some sort, you haven’t earned the right to ask for advising equity. Pull out the checkbook and pay your dues.



How to Create Your Own Real-World MBA – Part 1 – by Tim Ferriss

(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.


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 $80,000+ 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—neigh, 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)

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”.