The evolution of my perception of money

 
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How I view and interact with money has evolved through several distinct stages. I'm explicitly trying to not make value judgments on these perceptions, but merely just relate them.
Windfall spending

The fist stage I remember was through middle school. My parents would give me $50 for making straight As in school. I also think I had a spotty (because I never asked) allowance that subsequently went away in high school. In this period I'd save and then essentially spend everything at once, usually riding my bike to the local shopping center and buying either a computer game at Microcenter or Tapes/CDs (was still in that transition period) at Turtles.

In this time period I also received Bar Mitzvah money that went into an investment account at Merrill Lynch. Theoretically this money was mine but it may have just as well didn't exist. I never thought about it and didn't draw on it. We did talk about investing and I'm sure it got put into blue chips of some kind (probably GE) but I didn't really get it.

Do I have enough for this weekend?

Things clearly changed in high school, especially after self-driving age (16 in Atlanta at the time). I had more needs for money (mainly gas, clothes, movies, music and fast food). I thought about money at this time as a ledger. I always knew how much was in my wallet and was always doing +/- calculations to see if I could do this or that. It wasn't really a budget, though I did save for bigger ticket items, e.g. concert tickets.

My primary (and really only) source of income during high school was computer consulting. I'd fix random peoples' computers around the city for $15-20/hr. I remember my friends having minimum wage jobs, and thought about it, but the math just didn't add up to me. There wasn't enough value being given for my time (~$5/hr), whereas at $15-20 I thought it was awesome. My needs weren't that great, e.g. gas was $0.80/gallon believe it or not. My biggest discretionary expense was shirts from the mall. So I'd do a few hours here or there and have enough to pretty much do whatever I wanted.

I still had that investment account and I got more into it during this period, but ultimately I still didn't know what I was doing and it also never entered into my ledger world. That is, I never withdrew or even thought of withdrawing anything. I would read those AOL stock boards and made some (admittedly dumb) trades based on them. I also did want to go into Internet stocks right at the beginning (e.g. Yahoo IPO), but generally got talked out of them by my parents and broker.

Protecting principal

As you may have figured, things changed again in college. My main income was still computer stuff -- but now I was getting checks from MIT and during the summers from other places. I didn't learn about taxes until then because previously people would just give me cash and I had thought nothing of it (never even saw a tax return until college). 

I also started interacting with a bank account on a regular basis. My checks would go there as would $300/mo from my parents for food+. My bank account ended up being the Merrill Lynch account so all of that previous money immediately merged and became real to me. And that was strange.

I felt for the first time like I had a lot of money. My investments had grown so I think I had about $7500 in there. I would still do the +/- thing but on a grander scale (looking at my bank balances instead of just my wallet). It was also the first time I thought about bigger purchases. Ultimately, I never drew down any principal, but would save and spend, just for bigger things, mainly trips and computers.

Now that the money felt real, I learned a lot more about investing as well. I look back now and still think I knew nothing (e.g. investing in individual stocks), but I definitely ended college knowing a lot more in this area than when I started college. 

Honestly I'm not sure why my native instinct was protecting principal, but it was. I understand that perspective today though. I think the mere existence of principal is a psychological cushion that helps me much more enjoy day to day spending. While I was still doing +/- stuff I still felt OK about non-essential spending since I knew I wasn't actually broke.

Leverage

Right after school I started a company, learnection. I was lucky enough that my parents had set aside cash for my final year tuition, and because I graduated a year early they gave it to me. That plus previous savings meant I think I had ~$35K right out of school. 

Of course, I didn't get a job and instead started this company so it immediately started to draw down. I raised a bit of friends and family money and put in $10K of my own as well (not counting the cheap living I was doing). Putting in my money was my own idea and I think it was a great one. It meant I still treated those coffers like my own money, and since there wasn't much of it ($30K total) that was important.

This stage was my first perception of money as leverage. I don't mean the term in the way of investing by taking on debt, but as a mechanical metaphor. I'd never really paid anyone to do something in hope that their input multiplied into something much more valuable, or that the sum of these inputs could yield something much greater than the individual parts. 

In other words, I hired a bunch of my friends to work on learnection. In retrospect, the amount of money raised was way too small and I couldn't get any more raised. So ultimately there really wasn't any leverage gained, but my perception did change.

Valuing my time

After learnection, I had a brief period (1yr) where I was employed while still thinking about startup stuff (learnection and others). My salary was $65K I believe, which of course seemed like a lot at the time. However, it in and of itself didn't change me that much. In fact, I was in essence feeling the same way I felt in high school evaluating minimum wage jobs. Obviously the salary was much greater, but I also valued my time much greater. And so after a year I quit and went back to trying to make it on my own.

During this period, I did computer consulting again (now programming), this time for $50-60/hr. I would deliberately keep it to ~4/hr day so that I had ample free time to work on ideas and other stuff. I never really thought about saving even though one of the primary goals of startups is to make money. Instead I thought about making my lifestyle self-sustainable. So my ideas were more small-scale and often involved selling things (software, books, snippets of code, affiliate stuff). I wanted an independent income stream. 

I also did a lot of reading (about law and economics mostly) and just really valued my time. I'd say my strongest perception of money at the time was this time/value concept.

Saving

Ultimately I hit upon this idea semi-randomly (my last company) that started to take off, and so ended up focusing on that. A couple years in it started spinning off cash and that fueled my next stage. We did think about leverage, and in retrospect could have done some things, but ultimately kept it to just us. That is, we had no employees or investors from start to exit.

As a result we were in a position to distribute all the profits directly back to us, and that's what we did. All of a sudden, our income stream was growing a lot. And also my wife was finishing up her graduate degree, so for the first time in my life I thought about really saving. In this case, for a house.

Even though we were making a lot, we didn't really change our lifestyle at all (from lowly graduate stipend people). Instead, we were putting as much as we could in retirement accounts and our ING direct savings account. We also had no real expectation of selling the company and what that might entail -- we were just hoping to save enough to move somewhere nice upon graduation.

Freedom

Yet shortly after the whole saving process started, seemingly out of nowhere, we were talking seriously about getting acquired. And the question quickly turned to how much we'd be willing to sell for, i.e. what was our reserve price. I remember those discussions and they were all around freedom from my perspective. I wanted to keep doing what I was doing, preferably indefinitely. And that's pretty much what happened.

The company was acquired and we ended up in the 1% so-to-speak, certainly for our ages (26 at the time). We were overnight millionaires and yet our perception of money in terms of day-to-day spending/saving practices didn't change overnight at all.

I distinctly remember that we were saying OK, if we really sell this thing, we're going to buy something. What was that? For me, it was a Garmin navigator :).

Shortly afterwards we moved from Boston to Philadelphia and bought the house we still live in. We definitely bought a much bigger house than we would have had we not sold the company, but we also didn't go crazy. Instead we bought something we thought we'd be cool with long-term, including with kids, which we have now (two of them).

Discretionary spending

Up until this point in my life I still would think about day to day spending, e.g. I'd think twice about relative costs on a menu or buying a bunch of stuff on Amazon. Over the next couple of years that completely changed to the point where I never give a second thought to small bills.

Honestly though we could have done that just off my wife's salary since we don't live that extravagantly. But we wouldn't have because both of us are pretty risk averse in our own ways and don't like the idea of being near broke. So it's really the cushion of having all that principal that enables me to let go on that level.

Another thing that helped here is automating all our regular bills. I see things as they come across my email but there are never any action items on them. Everything just gets paid automatically.

The same is true of our investments. Everything is essentially on auto-pilot: index funds, bond ladder and the like.

Paradox of choice

I know this is where my perceptions diverge from others who haven't experienced our level of net worth, and I'm sensitive to that. But on the other hand not a lot of people talk about it so I think it adds value in doing so.

I don't think we (my wife and I) would feel comfortable if neither of us had a paying job for an extended period of time (decade). We don't have that level of wealth. However, we do have enough where certainly one of us doesn't need to work and we'd be comfortable with neither of us working for some period of time.

My wife immediately got a job after we sold the company, which is where she still works today. I toiled around a bit before settling on DuckDuckGo, and didn't draw any salary for five years (up until we just raised some money). I'm lucky in that I already knew what I wanted to do and had been trying to solidify that freedom for many years. My wife, less so.

It's a weird situation to be in where you want to work but salary differences don't matter all that much and small salaries seem paltry, especially when short stock market swings are on the order of your salary. You're faced with trying to find that thing you really love, and that can be a bit overwhelming when there is so much choice.

A related aspect of this that has come up since we have kids is, well, if you don't have to work -- shouldn't you be spending that time with your kids? It's a complicated question but one that has been top of mind and where I think we've struck a decent balance.

Value

In the past few years something else cropped up that I never thought would as much, even in very small purchases: value. Even though we can afford it, things that seem grossly overvalued are still unappealing and seem extravagant. We shop a lot at Target and often use coupons. Fancy dinners still seem overpriced. 

At the higher end, it's just as clear. We drive a Honda Element and a Honda Odyssey. Even though I like some fancier cars it's hard to rationalize all that extra money when we really could give it away to charity.

Productivity

I really wasn't expecting much to change after raising venture capital, but it has. Interestingly, drawing a salary hasn't really changed anything psychologically (yet). What has changed is leverage thinking is back in full swing, as is productivity

The most consistent theme in my perceptions of money over time has been valuing my time, and that is as true as ever. I've always loved services that improve my productivity and workflow, but now I seek them out as much as possible.

Leverage has taken on a new meaning, however. I knew that I was capitally starving the business, which is the primary reason I went out to explore venture capital in the first place. Others' would have just drawn down their personal principal, and I did that to some extent (mainly with my time), but couldn't stomach to do what was needed. 

It's taken a few months, and I'm still as cheap and cost-sensitive as always, but now I am willing to expend on people when I see the value, especially when it is either something that can replace my time, is on critical path for DuckDuckGo, or is laying the ground-work for being around for the long-term.

Higher levels of freedom

Over the years I've become friends and acquaintances with people much wealthier than I am today. It's very clear that there are levels above where we are now in terms of trading money for freedom. It's always been interesting to me to know where those life style step-functions are in terms of money. I think there is a distinct level around $5M. Where the next one is in a bit unclear, but $20M seems to be over it (I had a reference for that but can't find it now).

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I'm the Founder & CEO of DuckDuckGo, the search engine that doesn't track you. I'm also the co-author of Traction, the book that helps you get traction. More about me.

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