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Stop asking $3 questions and start asking $30,000 questions. 

Every day we wake up, there are a million money-related decisions we can make. 

Should I eat out? 

Should I buy this new kitchen appliance? 

I’m going grocery shopping—should I go to Whole Foods or another store? 

By narrowing down a few key beliefs, you can eliminate 99.9% of decision making and focus on more important things. 

By doing this, you don’t have to worry about spending at a general level. Why? If the rules you set are followed correctly, they will lead you to the right place. 

When you’re suddenly faced with the choice of paying extra for guacamole on your Chipotle bowl, the decision becomes effortless if you’re taking care of more important issues like contributing a higher percentage to your 401k. 

That’s the difference between asking $3 questions and $30,000 questions.

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My parents sacrificed everything to give me a chance at a better life when they immigrated to three different countries before I was 12. So, everything I learned about personal finance was through the lens of their struggles and experiences.

I believe it’s no accident I pursued a career in finance and became conscious about budgeting and money management. My parents’ experiences instilled a core belief that I should save and invest diligently to set myself up for the future—because they didn’t have that opportunity.

I lived with my parents until I was 26—not because I thought it was great for my social life (it wasn’t), but I understood that paying off my student loans meant I could start saving and investing for my future sooner. I remember the day I sent my final student loan payment. I don’t know what it’s like for people who have millions of dollars in their bank accounts, but I have never felt as rich as the day I was completely debt-free. 

Financial literacy is a taboo topic in our society and seldom taught in schools. It’s the responsibility of our elders and wise entrepreneurs to impart that knowledge onto young people in order to prepare them for life. Luckily around the time that started focusing on these decisions, I discovered Ramit Sethi. 

Sethi is a personal finance entrepreneur and author of the 2009 New York Times best seller I Will Teach You To Be Rich. His approach to finance is to recognize that money should not rule our lives but instead be a tool to help us reach our long-term goals. His ideas have helped many young adults (including myself) figure out their finances and set up systems and rules for their money.

His goal is to make personal finance exciting and rewarding, a contrast from the pretentious, dry, guilt-inducing rhetoric we associate with the personal finance space. Sethi stresses the importance of finding what you enjoy and spending lots of money on it. 

“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.”

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Sethi recently shared his personal Money Rules. He says that everyone should develop a point of view for the important things in life such as: money, relationships, health, parenting. 

Part of creating your money rules is making them creative for YOU. Rules generally sound bad or restrictive, but developing personal money rules can be fun and interactive. Reframing the idea of having rules can be empowering and freeing, especially when they are so personal. 

Money rules should be tailored to you and your values, they are not meant to be cookie-cutter decisions. In this post, I want to summarize Sethi’s Money Rules. In a follow-up, I will share my own list. Like the 12 Favorite Problems exercise, having rules about money is a great forcing function to focus on what really matters and where our priorities lie. 

Rules can be about people, not just money. After all, what’s money for? At a certain point, after you’ve covered the basics—you should use money for the people and things you love. 

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Ramit Sethi’s Money Rules and Explanations:

1. Always have one year of emergency fund available in cash: 

Sethi explains that he’s more conservative than most. He wants to make sure that he sets himself up so that if something catastrophic happens (like a global pandemic), he doesn’t have to worry about his finances. Traditionally, Sethi recommended that people have 3-6 months saved, but recently changed it to one year. For most people, having a one year emergency fund is overwhelming. First, it’s a lot of money and there’s a trade-off where money stays in cash instead of being invested. You should try to keep the money in a high-yield savings account. The key is planning for the best and worst scenarios so that if something happens, you can buy yourself some time if you have to look for a job. 

How to implement Rule #1: 

• Create a detailed personal budget that tracks your income and expenses.
• Calculate your monthly fixed (rent, utilities) and variable (food & dining, shopping)  expenses to know exactly how much you need in an emergency fund. If one year is too overwhelming, try to save 3 months.
• If you have money left over each month, transfer it to a high-yield savings account like Goldman Sachs’ Marcus.

2. Save 10% and invest 20% of gross income, minimum: 

Sethi says that saving 10% of gross income can be used for things that come up in the future such as: emergency fund, vacation, down payment on a house. Investing 20%, especially when you’re young means every dollar will be worth many times more in the future. The real money is generated from investments, not savings. Choosing to prioritize these values on gross income instead of net income is like living life on ‘hard mode’. If you prioritize saving 10% and investing 20%, you’re doing great on the income and growth side and can worry less about smaller aspects of your financial decisions. This is the kind of rule where if you just follow it on its own, you’re ahead of the game financially. 

How to implement Rule #2:

• Calculate your annual gross salary and allocate 10% to a high-yield savings account, and 20% to investments. 
• I calculated how much I need to save annually and have an automatic transaction from my checking to my savings account each week. Moving smaller increments makes me not notice that it’s missing from my spending account.

3. Pay cash for large expenses. 20% down, minimum, on a house: 

Paying cash for large expenses doesn’t mean handing over a stack of $100 bills for large purchases. You can still buy expensive things with a credit card to accrue rewards and take advantage of financial protection, it just means not going into debt to pay for the item. It’s having the cash available in savings to pay for things in full. For a house, 20% down payment minimum (if not more). If you go to buy a house and you’re not ready to put 20% down, you’re not ready to buy a house. There are lots of large expenses in life, and we should be able to plan ahead 5-10 years and estimate what those will be. If you’re planning on buying a $60,000 car in 5 years, you can plan to save $1,000 per month in a sub-savings account. The longer your time horizon, the less you have to save each month to hit your goal.

 How to implement Rule #3:

• Assign every dollar in your budget a job. My budget includes a line item that allocates money to my savings account. I consider this an expense in my budget since I’m paying—myself.
• When I was planning to propose to my now fiancée, I calculated my budget for a ring and allocated an appropriate amount into my savings account each month to completely cover the cost when it was time to make the purchase. 

4. Never question spending money on books, appetizers, health, or donating to a friend’s charity fundraiser. 

When Sethi was in college at Stanford, he received a very generous scholarship that covered the cost of any book he wanted completely for five years. When he left school, he wanted to continue the freedom of unlimited books. In the grand scheme of life, the cost of books is not that expensive. He made a policy for himself called “Ramit’s book-buying rule”, whenever he finds a book that’s interesting, he buys it immediately without hesitation. 

When Sethi was younger, his family rarely ordered appetizers in restaurants. He says it’s extremely freeing now to be in a restaurant and when faced with a decision which appetizer to order, to just get both. The amount he spends is small relative to the joy he or his family/co-workers experience when they can order whatever looks interesting on the menu.

 How to implement Rule #4:

• I have a fun implementation of this rule. When my friends started getting married, I made a rule that I would give them a very nice chef’s knife as a gift. I love cooking and it’s something we have to do almost every day. With a good knife, prep becomes easier and the recipient of the gift will always think of you.

5. Business class on flights over 4 hours. 

This one is simple, it’s something that Sethi wanted. In his early 20s, he scoffed at anyone who he thought was wasting money on business class travel. He realized over the years that Business class is nice, and because he could afford it and comfort was important, he made it a rule. The decision-making process becomes even easier when the constraint of time is included. When a flight is longer than 4 hours, his assistant books a flight in Business class—no questions asked. But, if a flight is short, he doesn’t mind sitting in a coach seat. Part of having these rules is not going from 0-60, but finding what is important and valuable to you. 

How to implement Rule #5: 

• Nick Maggiulli wrote an excellent post on this topic called Climbing the Wealth Ladder. He framed making financial decisions based on your net worth. If a purchase decision is 0.01% of your net worth, it’s trivial and you shouldn’t spend too much time thinking about it. As you move up in levels of wealth, $1 decisions, $10 decisions, $100 decisions eventually become trivial. 

6. No limit on spending for health (personal trainer) or education (courses, events, etc.)

There are some things in life that you just don’t look at the price tag for.  Sethi says that if he sees a course or event that sounds interesting, he’s in—regardless of cost. He emphasizes that everyone should have this rule on something in their life where prices are irrelevant. If you like a certain type of organic food (ex. strawberries), you can find something that’s half the price but you will always buy the one you think is better even if it’s more expensive. 

All of us have something that is valuable and meaningful to us. For Sethi, this just happens to be health and education. When it came time to look for a personal trainer, he didn’t want to watch YouTube videos, he wanted to find someone who would give him faster results and he didn’t have to spend extra time thinking about it. These things are important to him, so he uses his money as a tool to help him live a “richer” life. 

How to implement Rule #6:

•  To a certain extent, we all have things we buy where the price tag doesn’t matter. If you’re doing well on saving and investing with money left over, you shouldn’t have to stress about buying something that makes you happy.
• I value experiences over material possessions, so I will always default to spending more when I’m on vacation or out with friends.

7. Buy the best and keep it for as long as possible.– Everything Cheap comes out expensive.

Sethi grew up in a frugal home. There were six members in his family, his dad worked and his mom took care of the family at home. His uncle was a photographer who had a Leica camera. Leicas are some of the best cameras in the world, they are like a functional piece of art. His uncle gave that camera to his dad in the 70’s and the camera still works—in fact, it was the camera that Sethi learned to take photos on. 

He started to see what it’s like to have something that’s the best and keep it forever. That camera has been in his family for generations and it will continue to be. Best can also be synonymous with reliable. For the things that you use day-to-day, like your phone—get the best, but then keep it! Sometimes people buy the best but flip it frequently. If you buy the best and amortize the cost over a long period of time (10+ years), the cost is often more affordable than buying cheaper and changing every year. With clothing, buying the best means materials will last and you will have peace of mind that things won’t wear and tear easily. Plus, if something does break, tear or rip, buying the best often means that it will get taken care of free of charge. 

How to implement Rule #7:

• It can cause some initial sticker shock, but buying quality products that last can be a game-changer for your overall wealth. If you don’t have to replace what you buy frequently, you can be free to save and invest more money. I bought some All-Clad pots and pans recently that I hope will be with me for decades.
• There’s a Subreddit dedicated to these items called /r/BuyItForLife
• The inverse is also true—I have 10-15 cheap T-shirts from Uniqlo and know they won’t last forever. That’s perfectly okay too.

8. Earn enough to work only with people I respect and like. 

This is a rule that only tangentially touches money. Sethi says that when he wakes up in the morning and looks at his calendar, he doesn’t want to work with someone who makes him look at the invite and say, “ugh! I have to meet with this person today”. He says that he has fired senior people at this company who have not been nice to other co-workers. He made it a priority to work with people that he respects, loves, and trusts once he earned enough money. Money gives him the ability to use it in such a way that he can work with people he enjoys being around. 

How to implement Rule #8:

• This is another rule very specific to Sethi. Most people are not in the position that he’s in, we don’t have the benefit to make hiring decisions and choose who we work with. 

9. Marry the right person.

This is frequently the most confusing money rule for people. What does marrying the right person have to do with money? The decision on who you marry is one of the most important financial decisions you will ever make. Is your partner aligned with your values? Do they think about saving and spending in generally the same ways that you do? Have you saved up 30% of your income while they have $75,000 in credit card debt? If so, you have a huge problem. Do they get nervous or scared about spending money? Are they abundant or scarcity-minded? You’re going to be thinking about these things every day for the rest of your life. 

Money is an integral part of a relationship. If you have different money values from your partner, you’re going to have problems. Marrying the right person means having the same values on simple things like what kind of bread you buy (spending extra on organic), or complex decisions like sending kids to public or private school. What hotel are you going to stay in? How often are you going on vacation and are you bringing your families? These are big questions that will haunt you if you don’t think about them properly together or they’re going to provide you joy if you find a partner who thinks about them similarly to you. 

How to implement Rule #9:

• The thinking behind finances for couples is extremely outdated. It used to be that men controlled the finances and women got allowances. The premise of most of I Love Lucy was Lucy spending her allowance one way or another. 
• Communication and respect for your partner go a long way to getting on the same page about your finances. This is both for married couples and especially those who are thinking about getting married.

10. Prioritize time outside the spreadsheet.

At a certain point, your money will work according to the systems you set up. Everything is good. You’ve won the game, and now it’s time to live life outside of the spreadsheet. This means prioritizing family, loved ones, and health—not sitting and looking at Excel every day.  A “rich life” is lived outside of the spreadsheet. There are so many more interesting things in life after you get the 85% solution implemented with savings and investments. Tweaking assumptions is not going to improve your life, but picking up a fun hobby will. 

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As people think about developing their own money rules, they should actually be confusing to others as you dial in at what is special to you. Rules are individually built like a custom-tailored suit, they should be set up in a way that is made only for you. 

If someone says, “appetizers, what’s that about??”, Sethi smiles because he knows that rule is his. That’s what a truly cohesive set of money rules will feel like. 

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The next post will be a summary of my own Money Rules and explanations.

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The rules of caddying are simple: “show up, keep up, shut up, and don’t lose a ball.”

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When I was 14, I begged my parents to buy me a new set of golf clubs. Tiger Woods had just completed the Tiger Slam and golf was “cool” for kids my age. My plan was to try out for the high school golf team, but I didn’t want to play with the cheap set of Wal-Mart clubs I got for my birthday a few years prior. After all, I wanted to be just as good as Tiger.

Until that point all I needed to do was ask my parents for something and they would usually buy it if the price was within reason. Sensing this as the perfect opportunity to teach me an important lesson about personal finance they told me to get a job. The set of Titleist clubs I was drooling over cost $2,500. If I wanted them badly enough, I had to work hard and save. 

For a high school student, caddying offered an opportunity to be around the game while making good money. My parents saw it as a way for me to be out of the house, get some exercise, and network with successful people. We found Rolling Green Country Club, a club near our house, and I applied. 

My dad drove me to the club six days a week during that first summer so I could be there by 5:30 am to put my name badge in the draw bucket. The draw is where the caddie master randomly selects your name to determine the order for loops. Some days you’re lucky and can start caddying right away, while other days your name ends up at the end of the list and you sit around waiting. Not caddying means not making any money that day.

Your senses awake before you do that early in the morning. There’s the distinct smell to the fresh-cut grass, the gasoline from the mowers, and cigar smoke. There’s the dew in the grass and the stillness of the morning before the sun rises. The sound of golf clubs clunking and banging together as the bag room attendant drives them up to the driving range or first tee. 

Lesson 1: Life isn’t fair

Kids whose parents were members at the club always seemed to get priority on the list no matter which way the draw unfolded. Either their parents or their parents’ friends would request to have them as caddies, pushing those who weren’t connected further down the list. I spent a fair amount of that summer sitting around waiting, but I took what I could get and worked my butt off when given the chance.

After a week of little action I was called into the caddie master’s office. “Here,” she said, giving me a ticket. “Mr. and Mrs. Snodgrass are going off the first tee in a few minutes.” The Snodgrasses were probably in their 80s. They were the stereotypical older couple who had belonged to the country club for decades. I sprinted to the first tee and shook Mr. Snodgrass’s hand. 

“What’s your name, son?

“Hi, Mr. Snodgrass. I’m Lev.”

“Okay, Bev. Nice to meet you. Go on.”

“Great start…” I thought. He couldn’t pronounce my name correctly.

Mr. Snodgrass walked slowly to the first tee to hit his drive. Mrs. Snodgrass followed soon after and we were off! Mrs. Snodgrass’ ball couldn’t have traveled more than 50 yards. I was so nervous on my first loop that I told Mrs. Snodgrass she had 263 yards left to the green, as if she was about to hit a par-5 in two. I think it took her 10 more shots to reach the green. 🤦‍♂️

My job that day was to fore-caddie. Fore-caddying means you’re not carrying a bag, but running along while the golfers are riding in carts. You’re essentially doing the same job you would do for one person while carrying their bag, but for two or four depending on the group size. Fore-caddying was less physically tiring because you don’t have to carry a golf bag, but more mentally tiring because you had to keep track of multiple golf balls, get yardages for every player, and make sure you’re not in anyone’s way. 

Lesson 2: Hard work

Before long, I had several loops under my belt and a few hundred dollars in the little shoebox where I collected my caddie earnings. The money was good for a freshman in high school. You were given cash and didn’t have to worry about grown-up things like paying taxes. I think I finished that summer with 40-45 loops. My parents were proud of me for working the full summer towards my goal. 

I caddied at Rolling Green for five summers. I got familiar with the members and developed a great relationship with many of them. As you move up the hierarchy of the club from a “B”, to an “A”, and finally an “Honor” caddie, you develop a bond with many of the members and they begin to trust you. Initially, all they think you can do well is clean their clubs, but as you gain some experience and show you know what you’re doing members will ask you to read their putts. You develop a knack for knowing their playing tendencies: how far they hit their drives, if they get angry and throw their clubs in frustration, or if they’re cheap tippers. 

I had more than 500 loops over the course of my caddying career. A typical golf course measures around four to five miles if you walk in a straight line… which never happens. Most of those rounds were in the middle of summer when it’s hot and sticky and you constantly have to keep moving so you don’t get hit in the head by a flying white projectile. 

Lesson 3: Interpersonal relationships

You become a friend, a psychiatrist, a comedian to the people you caddy for. You can help your player stay positive or learn how to deliver bad news if they hit a bad shot. You see business deals get made and hear stories about their families, politics, religion. I learned how to have conversations with just about anyone I met and to talk about anything. Listening is an underrated life skill—as a caddie, you practice that all too frequently. 

I did a lot of growing up as a caddie. I saw how even the most wealthy and successful people could be insecure about their wealth when they compare themselves to others. In the end, I understood that grown-ups never actually grew up: they were just a bunch of kids who played outside seeking distraction from their daily lives. I learned how people joke, lie, bully, brag, cheat, and relate to each other.

Caddying helped me achieve my goal of making enough money to buy a set of golf clubs, but it taught me so much more because the lessons I took from those five years early in my life will be with me forever. 

What are your current 12 favorite problems? What are the questions that inspire you and captivate you?

These are hard problems and they don’t have simple answers. They are the questions that will drive your learning. Since much of your writing will go through these filters.

The thing I absolutely love about this assignment is your list of questions always changes. I’ve done the exercise four times now between Write of Passage and Building a Second Brain and the list is always different — that’s because your life changes and priorities change, and that’s okay!

Feel free to do this exercise a few times a year and notice what changes. That will tell you a lot about your current priorities.

Here is my list on 7/1/2020:

1. How do I utilize my personality to help coach and mentor people?
2. How can I automate my finances so I don’t think about them anymore?
3. What training do I need in order to be promoted to a people manager?
4. How can I build systems to write a more interesting newsletter and blog?
5. What’s the best way to learn Python to automate parts of my job?
6. How can I be better prepared for the next 10 years of my career?
7. Is finance really what I want to be doing for the rest of my life?
8. What habits can I form today that will make me the writer I want to be a year from now?
9. How can I use my time more effectively during COVID?
10. Can I transition into a career that allows me to work from where I want?
11. What should I learn to build systems and tools to help as many people as I can?
12. Is not getting an MBA the right long-term career move?

In the last scene of The Wizard of Oz, Dorothy wakes up surrounded by her family. She looks around to see the faces of the people she loves and says, “there’s no place like home.” Dorothy’s repetition of the phrase “there’s no place like home” condenses the meaning of what home means for each of us. Home is a place we associate with familiarity, love, and safety. 

People always ask me where I’m from. Depending on how much time we have, my answer is entirely different. The question of where home is should be simple, but it hasn’t always been that way for me.

If “where are you from?” means “where were you born?” then I’m from Russia. If it means “where did you grow up?” then it’s Israel, Canada, and the United States. 

By the time I was 12 years old, my family moved to our fourth country and seventh city. Since then and for the last 20 years, the Chicago area has been where I live. When I think where I want to live for the rest of my life there is no question that’s Chicago.

A few weeks ago I had the idea to write about Chicago’s architecture. Surely, it’s an interesting topic—I love architecture and have always been fascinated with skyscrapers and unique buildings. I wanted to learn more about the history of the city but I just couldn’t find the words. I got demoralized and thought, “why bother?”

I questioned what it was about Chicago architecture that made me want to write about it in the first place. It wasn’t the iconic Chicago School, Postmodern, or Art Deco styles. The true reason Chicago’s architecture resonated with me was a deep-rooted connection I now have to the city I’ve spent most of my life in. 

I wanted to write about my home.

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My childhood identity centered around moving. 

I was born in St. Petersburg, Russia. My parents planned to move to the United States shortly after I was born but the U.S. changed policies that closed the processing of visas for Soviet Jews. With thousands of other families, my parents began their immigration journey. When I was four we moved to Israel. When I was seven we moved to Canada. The first two years in Canada were in Montreal, then two more in Toronto, and finally a year in Ottawa. 

In the summer of 2000, my mom received a job offer in Chicago. This finally allowed my parents to receive a working visa and move to the United States. 

When I was growing up I didn’t understand why we kept moving so frequently. “I just made new friends, now I have to make new ones again?”, I kept asking. Each city and each move allowed my parents to inch closer to their goal. Their immigration was far from easy; many people would have given up along the way. I know their sacrifices to give me a better life came at the expense of their own career growth and financial security. I don’t take their path for granted and truly appreciate what they did. 

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Discovering and Falling in Love with Chicago

I grew up in the suburbs of Chicago but rarely spent time in the city. I most often saw the city from a golf course on a hill near my parents’ house. As you step onto the 6th tee, the Chicago skyline becomes visible in the distance. On a clear day you can see both the Willis Tower and John Hancock Center, and admire the beauty of the skyline. I played hundreds of rounds at that course and each time I looked at the city from that spot it gave me a sense of hope and wonder. I would imagine the future as I would one day get to explore and live in the city that was staring back at me. 

I didn’t truly get to know Chicago until college. As a commuter student I had to take the train into the city each morning. DePaul University’s finance school is located in downtown Chicago’s Loop. It is within walking distance to some of the most iconic architecture in Chicago’s history including the Chicago Board of Trade Building, Monadnock Building, Rookery Building, as well as the Art Institute of Chicago. DePaul’s own building was built in 1912 and used to house the A.M. Rothchild & Co. store before it was purchased and converted to its current downtown college campus. 

I spent many hours walking around the city during breaks from class. Chicago comes to life with any stroll through its downtown streets. Chicago is truly an experience with its enormous buildings that reach up into the sky at various angles and in a variety of shapes. The skyline comes into view when walking through plazas, parks, and streets with the sun penetrating through the clouds.

When I needed a few hours of quiet study time I made the 5-minute walk from DePaul’s campus to my favorite coffee shop. Intelligentsia is located in the lobby of the historic 16-story Monadnock Building. The north half of the building was designed by the firm of Burnham & Root in 1891. At the time, it was the tallest load-bearing brick building ever constructed and employed the first portal system of wind bracing in America. The decorative staircases in the building represent the first structural use of aluminum in building construction. 

The south half, completed in 1893 is similar in color and profile to the north half, but the design is more intricate. When completed, it was the largest office building in the world. 

The more I explored, the more I fell in love with the city. Even now, a walk through Millennium Park on a sunny day is always hard to beat. Situated just north of the Art Institute, the 25-acre space is used to showcase cutting-edge art, architecture, and landscaping. It’s a backdrop for concerts and festivals and truly one of the best places to observe the city.

The best way to see this city is by going on the architecture boat tour— it’s one of those activities that appeals highly to tourists, but something both tourists and residents need to do at least once. When you’re on the boat, you glide through the city as if you’re in a movie. The greatest hits of architecture slide past you as you weave down the river. From that vantage point, the buildings look powerful and strong. Like paintings at the museum, each getting space around it like a magnificent work of art.

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Moving to and Living in Chicago

It wasn’t until several years after college that I moved into my first Chicago apartment. In the summer of 2014, I started a new job downtown and found an amazing apartment in Logan Square overlooking the city skyline. It made me so happy to see this view every day, knowing how long I’d wanted to live there. The neighborhood is home to a diverse population of various backgrounds. Due to the increase in housing costs in nearby neighborhoods, Logan Square is home to Chicago’s aspiring artists.

Zig-zagging through the streets in that neighborhood is a lesson in Chicago’s architectural history. Most people are attracted to Logan Square for its beautiful park-like boulevards. The neighborhood is world-famous for its unique architectural styles, from Bungalows and Two-Flats to the grand Greystones along Logan Boulevard.

With my office in the Loop, I have a front-row seat to the constant changes happening to Chicago’s skyline. The birthplace of the skyscraper, Chicago is reinventing itself as it prepares for a new batch of tall, eye-catching towers. There are currently five towers taller than 800 feet under construction in the city, including the Vista Tower. The 101-story skyscraper will be the city’s third-tallest building when complete and the tallest structure in the world designed by a woman. 

When I started dating my now fiancée, her apartment’s balcony faced the Vista Tower construction site and I would always marvel at the progress. The tower should be completed later this year and will feature six shades of glass for its distinct exterior curtain wall. This will act as a unique centerpiece to an already impressive skyline. 

Near her old apartment and the Vista Tower, the Chicago Riverwalk is an open, pedestrian waterfront located on the south bank of the Chicago River. On the rare occasion we had nice weather, I would walk west towards West Loop from her apartment to my office and momentarily escape the bustle of the city to admire nature and the unique architecture on the river.

West Loop has experienced significant change over the time I’ve lived in Chicago. What was once used for manufacturing and warehousing, it’s now home to corporate office space, luxury loft condominiums, restaurants, and bars. The current site of McDonald’s headquarters was where Oprah Winfrey’s Harpo Studios were located. Google’s Chicago offices were once a 10-story cold storage building that anchored the meatpacking district that surrounded it. You literally cannot walk down a street in the West Loop these days without seeing something under construction. 

From a purely pragmatic standpoint, the crucial factor of choosing where to live is being able to walk everywhere and Chicago is perfect for that. The neighborhoods are easy to navigate, find what you need, or seek out interesting things to do. Many of the city’s great restaurants are dispersed around town and it’s normally very easy to walk anywhere your appetite desires. The cuisine is diverse and the people are warm and welcoming.

Here are some of my favorites: 

1. Logan Square: walk around the lush green boulevards and appreciate the historic greystones and bungalow-style homes. I would grab a bite to eat at Giant or Lula Cafe and coffee at Intelligentsia.
2. Lincoln Park: this is one of Chicago’s most affluent neighborhoods. Due to a quirky zoning law, Lincoln Park is home to some of the city’s most expensive single family homes. If you have a spare $45 million laying around, you could buy this monstrosity. For food, I recommend Galit, Athenian Room, or Pequod’s—unquestionably the city’s best deep dish pizza.
3. West Loop/Fulton Market District: the neighborhood is undergoing a development boom and is one of the fastest-growing in the city. Grab the legendary burger at Au Cheval, if you can tolerate the 2-3 hour wait. Spoiler alert – it’s worth it. I remember taking a friend here and enjoying a lovely walk around the city while we waited for a table. Honorable restaurant mentions: The Publican, Avec. Grab a coffee at Sawada.
4. Ukrainian Village: According to real estate website Redfin, Ukrainian Village was named as the hottest neighborhood nationwide in 2016. The neighborhood is adorned with brick and stone homes from the 19th century and is more affordable relative to other popular Chicago neighborhoods. Ukrainian Village’s best kept secret is my favorite sushi restaurant Kai Zan. The owners treat us like family and it’s truly a pleasure to eat there every time. I’ve only been there about 70 times now 😁.

For all the great things Chicago has to offer, one would be naive to think that the city is perfect. 

1. Residents have to deal with miserably cold winters.
2. The city has a history of not using tax dollars efficiently, ranking in the bottom in fiscal health in the United States.
3. While uncommon in most areas, there is an issue with gang-related gun violence.
4. There has been little success in trying to provide good social and labor structures in poorer neighborhoods. 
5. The education system is a mess. The running joke is that young people move to the city for fun, meet a mate and move to the suburbs to put their kids in better schools.

Despite its flaws, there is a fierce hometown pride among Chicagoans. It’s a very welcoming place to newcomers, especially for my family nearly 20 years ago. Mix New York City hustle with midwestern generosity and you get Chicagoans. They have a rust-belt blue-collar edge with the swagger of a major urban socialite. The people make the city, and the city definitely makes the people. After finishing high school, college, and becoming a naturalized US citizen while living in Chicago, I gained a sense of belonging and stability that I never had when I was younger. Chicago has taken me in with open arms and has given me my best friends, work, and my fiancée. I became an adult in this city and watched it grow and evolve before my eyes. I can’t wait to see what the future holds in my home, Chicago. 

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Thank you to my Saturday Crossfit for Writing group, Justin Milokay, and my fiancée Blair Zimelis for their help and conversations with this essay.

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Reflections from five weeks in an online writing course

You probably already write. You may have a journal, an old blog, or a semi-active Twitter account. But you’ve always wanted to do more. You follow authors and writers that inspire you. You want to publish consistently. You want to write more compelling pieces. You want to have a newsletter that people actively engage with. But you never really knew how – or where – to start.

If this resonates with you, you’re not alone. Adam Tank and I shared a similar experience. This article is our attempt to share the most impactful principles and tools we learned from the course and the tangible benefits we’ve seen since the course ended.

How I Settled on Write of Passage

I knew of the course from David Perell. David and I met through Twitter in 2014. Around 2016-17, David’s audience and email subscribers began to skyrocket. He was beginning to build a business that would teach hundreds of students how to write online. In 2019, I thought about ways to accelerate my career. I knew part of that was improving my writing and communication skills, so I naturally turned to David’s writing course for guidance.

The five week Write of Passage course is designed to help students:

1. Set up a writing infrastructure (personal website, email newsletter)
2. Shift their mindset from a consumer of content to a producer of content.
3. Accelerate personal and professional opportunities by writing online.

The course challenges students to take action and develop a repeatable process for generating new ideas, turning them into published pieces of writing, and getting them into the hands of like-minded people.

In fact, Adam and I used the tools we developed during the course to write and distribute the article you’re reading now. More importantly, we used the community of fellow writers (and now friends!) we met to help edit and refine this piece.

Making Friends on the Internet

“Make friends over the internet with people who are great at things you’re interested in. The internet is one of the biggest advantages you have over prior generations. Leverage it.”

Patrick Collison

We are still in the early days of online communities. Establishing meaningful ‘virtual’ relationships is a challenging task when reaching out to like-minded people feels awkward and uncomfortable. But Adam and I realized the smartest people we follow write, share, and discuss their best ideas in public with other virtual connections. It was apparent that future friends, co-authors, or business partners were just a few conversations away.

One of our goals in taking an online course was to tap into a community of writers from all ages, countries, and industries. We discovered that learning in a live online format is fun and the social experience helps students learn faster. Through small feedback groups, relationships begin to form on the internet first, and then later in the real world. Learning and community become one and the same.

Adam and I were placed in the same feedback group at the start of the course. Our small tribe got to know each other personally through critiquing each other’s work and engaging in one-on-one feedback sessions. This made our large class of 200 people seem small.

Joining a community of people committed to writing better, learning faster, and motivating each other sharpened our thinking. We now agree that life is too short to try and learn everything on your own.

This brings us to the first major principle we took away from the online writing course – the importance of accountability.

Principle One: You’re not paying to write. You’re paying to be held accountable to write.

It’s easy to drive yourself to the gym, sit down at the piano to play, or open a notebook and write. Right?

All of these are easy – in theory.

In reality, we find ourselves saying things like,

“I just don’t have the time.”

“I’m too tired.”

“It’s too early.”

Most often, life just gets in the way.

There’s a reason people pay personal trainers $50/hour to help them work out. There’s a reason people pay music teachers 3x/week for 30-minute practice sessions. And there’s a reason people like Adam and I paid $1,000 for a five week writing course.

We paid for accountability and habit formation

The fact is that most of us need a system of accountability to accomplish activities that are mentally and physically challenging.

As it turns out, writing consistently is incredibly challenging. And before Write of Passage, this is the primary reason Adam and I found ourselves writing only when we had the energy–it’s really hard to write consistently when you’re tired, stressed, or just not in the mood.

The class provided us with powerful tools that keep us accountable for writing and publishing consistently every week. Here are a few that have been the most impactful:

Crossfit for Writing

Crossfit is an intense, ‘cult-like’ workout program. People pay $100+/month to complete notoriously difficult exercises in a small group setting. Each class is an hour or less and combines high intensity interval training with things like weight lifting, running, and jump roping.

During Write of Passage, students have the option to meet every Saturday to do Crossfit, but for writing. The goal of the session is to create one piece of written content from scratch in less than two hours. And, if it’s ready, hit publish.

Anyone that has been through one of these sessions knows how exhausting it is. It feels like you just did a grueling workout. But having a system for creating content, receiving feedback, and publishing in under two hours is remarkable.

Another exhilarating two hour ‘CrossFit for Writing’ session in the books.

I feel good about our new blog post @artank! pic.twitter.com/3TP90KvNqA

— Lev Naginsky (@levnaginsky) April 25, 2020

Adam and I, as well as many others, have continued these weekend Crossfit for Writing sessions since the course ended. What you’re reading right now was written over the course of one of those.

It is the single best accountability mechanism we have to push our classmates to consistently write and publish content each and every week.

Newsletter and personal website

Another tool we created during the course was the infrastructure for a personal website and newsletter. This creates the ‘online home’ for all of your content and a place where people can go to engage with what you’ve written.

One of the best parts about this infrastructure is the awareness of how many people read your content and what they engage with. For Adam and I, this has created a self-sustaining accountability loop where each time we publish, we receive feedback from readers in the form of engagement (likes, follows, emails, newsletter subscribers, etc.) and this engagement encourages us to continue publishing.

This feedback loop has taken us from inconsistent, private writers to prolific, public ones. For example, The Future of Online Education was born out of a Crossfit for Writing session, published a few days later, and led to the most daily visits my website has had to date.

Principle Two: Building a personal Colosseum of written work, brick by brick

One of the easiest ways to showcase thought leadership and authority is to write online. Writing immediately focuses your thinking and compresses ideas to their core.

When we first started the course, every piece of writing felt like an important piece of art. As we wrote and published more, we realized that each piece is NOT a Rembrandt painting, but simply a brick. Slowly, post by post, your body of work starts taking shape and over time, you build an intellectual Colosseum.

“Writing has a wonderful property: if the quality of the things you make is compelling, then the value of the things you make is compounding.”

Justin Mikolay

Traditional writing education strips away peoples’ ability to make their own choices and doesn’t hold them accountable for the words they write. Traditional writing is about not offending anyone.

When you write online, you are responsible for your own writing and thinking. When you share your ideas publicly, and receive instant feedback on those ideas–the quality of those ideas don’t just become interesting, they have the potential to become transformative.

The internet gives people the power to both share and instantly refine their ideas; refining those ideas until they are so sharp that they pierce through mainstream conversations and spread through society like wildfire. Good writing means taking a stand and opening yourself up for critique. In this way, each person that interacts with your content challenges your ideas so they get sharper and stronger over time.

Over time all of your written work becomes a personal ‘Intellectual Colosseum’ that you can point to and say, “This is what I’ve built. This is the proving ground for my ideas.” You can then invite people into your Colosseum to appreciate, reflect upon, or challenge your work.

In practice, this looks very ordinary – tweeting a link to a post you’ve written or sending a short newsletter to your family and friends. But over time, those tweets, posts, and articles add up to a massive body of work that can reach anyone, at any time, forever.

Principle Three: Creating a Serendipity Vehicle to leverage the power of the internet

One of the reasons David Perell encourages people to write online is to create a ‘serendipity vehicle’, a magnet for ideas, people, and opportunities from every corner of the globe.

Our Write of Passage class started on February 19th and ended on March 25th. How are these newly created serendipity vehicles working for us? Here are screenshots of our respective site statistics from October 2019 through April 2020:

Both Adam and I have seen our unique visitors, total visits, and page views grow more than 10x since taking the course. But statistics don’t tell the whole story.

One of the biggest questions Adam had before writing online was how it would impact his professional life (positively or negatively). Writing publicly about embarrassing stories and failures can be a double-edged sword. On one hand, you want to write interesting and compelling content that people can engage with. On the other hand, sharing personal stories and challenges can harm your professional image and credibility.

So far, so good. The personal connections he’s created since building his serendipity vehicle have been nothing short of magical. Here’s one of the many examples of emails he’s received from complete strangers wondering about the future of water:

He has also been surprised to find professional colleagues and clients engaged as well, even on LinkedIn:

But it’s not just Adam. The engagement I’ve received since I started sharing my writing has been beyond my expectations. I wrote a post about my favorite finance blogger, Nick Maggiulli, who reached out to me after I published thanking me for the post:

Austin Rief, co-founder of the newsletter Morning Brew shared my article about the future of education:

This is the power of the internet at work. The is serendipity coming to life. And it’s all because we started writing online.

Was it worth it?

Spending $1,000 on an online writing course was not an easy decision to make; however, when you have that much skin in the game, you feel motivated to stay committed. For us it has proven to be a phenomenal investment that will compound over time. But like anything in life, you get out of it what you put into it.

Those of us serious enough about writing continue to invest in the principles we discussed. We hold Crossfit on Saturdays, write consistently, and keep one another accountable to publish.

To think that Adam and I didn’t know one another just a few months ago seems absurd. The same goes for fellow alumni like Charlie Bleecker, who writes about life’s most intimate topics or Zakk and the digital transformation of large organizations. We even met Juan David Campolargo, a hungry 17-year-old fueled by optimism and countless others.

Hindsight is always 20/20. When I told David that I wished I started writing sooner, his reply was perfect:

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Acknowledgements: This post would not be possible without my co-author, Adam Tank. Thanks Zakk, Charlie, and Blair for their feedback.

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Mainstream live online education is coming sooner than we expected. If you haven’t noticed the trend, you will soon.

Thanks to new technologies like Zoom, education is fundamentally shifting for both students and teachers, becoming:

• Active instead of passive.
• Communal instead of solo.
• Responsive instead of static.
• Live instead of pre-recorded.

I can barely contain the excitement and certainty I feel about online education. It’s evolving, maturing, professionalizing as an industry as we speak. We’re about to see the emergence of the Harvards & Stanfords of online learning with at least as much credibility and prestige

— Tiago Forte (@fortelabs) November 12, 2019

Prior to the internet, information was a scarce resource. In order to learn new things, people had to spend hours combing through stacks of books in libraries and sift through entire shelves of encyclopedias. In 2012, after 244 years, Encyclopedia Britannica stopped the presses.

Schools were designed to get students to attend and complete traditional assignments in order to learn. Grades were given to determine how well students retained the information. But as we now know, learning doesn’t work this way at all.

I’m confused.

How did we conclude that the best way to prepare kids for the future is to cluster them into a setting where they are organized by age, into grades, and forced to learn the same things, at the same time and pace, 7 hours a day, 5 days a week, for 12 + years?

Huh?

— Ana Lorena Fabrega (@anafabrega11) February 2, 2020

With the ubiquity of the internet, information went from a scarce resource to abundant and virtually free. The bottleneck shifted to accountability, self-discipline, and commitment to learning, not just completing. Self-paced education became common and information was available to anyone who was willing to find it.

The knock on self-paced online education has been that pre-recorded modules haven’t worked for the majority of subjects. Imagine watching six hours of history lessons by yourself. Because of this, online courses have traditionally had low completion rates. The static formats have not lent themselves to an immersive experience that’s more conducive for learning.

In the last few years, live online classes over Zoom have introduced structure, accountability, and community into the equation. This has been a fundamental shift for how students learn and how teachers teach online. Classes became active, communal, and dynamic. Students are immersed in the content with their peers where they learn together and motivate each other.

Having a community of people who help you learn and pull you back in when you fall off track is a powerful accountability mechanism. Plus, learning in a live format is more fun and the social experience helps students learn faster. Relationships begin to form on the internet first and then people get together in the real world. Learning and community become one and the same.

Teachers have tried designing accountability mechanisms for students, but communities already have these naturally built in. People who you respect would be disappointed if you didn’t uphold certain standards. People learn new things because it would be embarrassing if they didn’t learn them within their communities. We’re designed to buy into a culture and live up to those standards. Recreating education is simply building new communities.

Schools are moving online.

Here are 10 ways online education is better than the traditional model, especially for kids.

1. Ship Fast, Ship Often: Traditional school is too passive. Students learn best when they make things. The more students create, the faster they’ll learn.

— David Perell (@david_perell) March 15, 2020

Thanks to programs such as Lambda School, online education is becoming more mainstream. Lambda has been able to show tangible transformations in students who have substantially increased their salaries after their nine-month program. These results aren’t flukes, they’re happening again and again.

https://twitter.com/Austen/status/1120371071243309057

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I have seen these changes first hand in my own learning experience.

Last year, I signed up for Tiago Forte‘s Building a Second Brain course. At the time, it was only available as a self-paced version and I completed the modules at my own speed. The material was phenomenal, but I felt like I didn’t get as much out of the course as I originally expected.

Then, I took David Perell‘s Write of Passage course which completely shifted my perspective on the online education format. Course lectures were pre-recorded but classes were in a live group format where students got to interact, review new material, and discuss topics in breakout groups. It was so energizing to see the entire student body in a live Zoom call (~100 students).

Once the five week class was over, myself and several alumni decided to continue having Zoom calls every Saturday morning in a session we call ‘Crossfit for Writing’.

Having 'Crossfit for Writing' sessions with my fellow Write of Passage alumni on Saturday mornings is like brain therapy.

I had no idea what I was going to write about this week, and two hours later I have a skeleton of a pretty good blog post.

— Lev Naginsky (@levnaginsky) April 18, 2020

As Tiago was getting ready to kick off a new cohort of Building a Second Brain in a live format, I re-joined immediately. Then, Tiago opened applications for BASB alumni to become mentors for the course. I was excited to take the class in a live format but also have the ability to teach what I learned to broader group of people. I thought about the prospect of networking and building further relationships with smart, like-minded people and to continue learning.

The most important lesson for me has been the identity shift that I experienced over the last year. I wanted to take some online classes to learn to be more productive and write online, but I was able to take much more from the experience. I was able to lift the psychological block that kept me from sharing what I learned online. I was able to become more active on Twitter, start a weekly email newsletter and this blog. No longer did I experience the impostor syndrome that my ideas weren’t important.

The last bottleneck lies between your ears. In the age of abundance, your ego is your only barrier.

Will Mannon

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Acknowledgements: This post was inspired by a podcast episode with David Perell and Tiago Forte. Thanks to Ben, Jen, Zach, Adam, Blair, and Charlie for their feedback.

Being on Twitter in 2020 is like being in a famous Parisian café in 1800.

Café Procope in Paris was the center of the literary and philosophic life of the 18th and 19th centuries. It was frequented by La Fontaine, Voltaire and the Encyclopedists: Benjamin Franklin, Danton, Marat, Robespierre, and Napoleon Bonaparte. Today, Twitter is the global town square, neighborhood hub, networking space, hotel bar, the social pulse of the internet. It is frequented by the smartest people on the planet. People come to share their best ideas. Intellectuals gather to share their most cutting-edge thoughts. It’s a free conference hall where you can choose the speakers and the attendees.

If used to its full potential, a Twitter account could be worth more than a college degree. For my friend David Perell, this is 100% true.

I think my Twitter account is worth more than my college degree.

😯

— David Perell (@david_perell) February 1, 2019

I met David on Twitter in mid-2014. At the time, he was a college student at Elon University with ~300 followers. He thought I was an influencer with ~800 followers. Funny how our perceptions change. We connected over a mutual love of golf, a curiosity about technology and venture capital, and a common belief in the power of the internet. Fast-forward six years, David has amassed a Twitter following well over 50K people. More impressively, he was able to build a business that has taught thousands of students to write online, including myself.

Why is Twitter so powerful? It doesn’t matter where you’re located. Solely based on the quality of your thinking and content, you can build an audience and gain success. Twitter reduces the distinction between insiders and outsiders. Simply by attaching yourself to a community, you can understand how insiders think and speak. A great example of this is within Financial Twitter (FinTwit), where people like Nick Maggiulli and Morgan Housel have become insiders through their fantastic writing and prolific tweeting. Twitter provides amazing and instant feedback, allowing writers to test their ideas to create and further distribute their work. Morgan Housel said, “Twitter is great for writers, investors, and entrepreneurs because when you post your thoughts you get instant feedback that’s more unfiltered than anything you’ll get face to face.”

If Facebook is for people in your past, then Twitter is for people in your future.

Before you’ve built an audience, Twitter can feel like you’re shouting into the void. There is massive reach inequality on the internet. In order to attract an audience, it helps to be known for something. Being different is essentially free marketing. Having a unique set of skills and style helps to stand out. Over time, you become the only person who does what you do. Then, simply stay inside your circle of competence and carpet bomb your niche. You can tell the world about your talents by sharing the best of what you learn. When someone is mindlessly scrolling their feed, your profile will stand out in the crowd.

The best way to build an audience is to provide value. Chances are you won’t be able to send one tweet that will turn you into a billionaire like Uber’s first employee, Ryan Graves. A more sensible approach is what Gary Vaynerchuk calls the One Dollar Strategy, leaving your worthwhile two cents on $50 tweets. Attaching a quality reply to a viral tweet is a great way to stand out and reach a large audience while providing great insight. The way to be discovered is to either put out consistently great content or become part of a community and provide value. Educate others, avoid using “spammy” hashtags, or you’ll just end up hurting yourself in the end.

One way I was able to provide value to Twitter users, even without a large following, was to create a robust list featuring Twitter employees. Twitter used to own and maintain a list of their tweeting employees, but shortly before the company went public, the list was deleted. I was able to create this list myself with more than 1,100 employees at the time, which came in handy when there was news about the company. The list I put together is followed by over 100 people and was featured in this article by CNBC. (Scroll to #103)

An observation about life is the more effort that’s put in, the more fulfilling the outcome. This is true for everything from relationships, education, work, cooking, vacation destinations, or social media. It takes work to get to a place that feels fulfilling. Fred Wilson has written about this idea in No Pain No Gain. On Twitter, that means you should follow individuals instead of publications and ruthlessly unfollow anyone who doesn’t provide you valuable information. As long as you’re following someone, you agree to be brainwashed by their ideas for as long as you follow them. Therefore, it is best to find and follow obscure, interesting people. Then follow the people and ideas they follow. You can surface interesting ideas by seeing the topics the people you follow on Twitter like.

When it comes to sharing information, respect your audience’s time and attention. I’ve been using Twitter for over 12 years. When I started, there was no etiquette to what someone should share. As Twitter became a place where the best and the brightest shared their thoughts, I feared that people would not care what I had to say. I would always think, is what I’m saying valuable to others or self-serving? Will it make someone laugh? Will it be thought-provoking? As the years went on, my engagement with the platform plummeted. It wasn’t until taking Tiago Forte’s Building a Second Brain and David’s Write of Passage online courses did my mindset shift. I used what I learned to capture, organize, and share what I learned. Write of Passage alumni Joe Wells said, “The amateur hoards his knowledge…He believes that if he shares what he possesses with others, he will lose it.”  How silly of me. Feedback is critical for good work and I gave up valuable time by not sharing what I had to say.

Finally, Direct Messages are the single most powerful part of Twitter that no one talks about. Twitter is what LinkedIn has always tried to be. A place to learn, make friends and create opportunities for yourself. It could be the best networking tool in the world. When finding like-minded, interesting people, keep conversations active in DMs to set up meetings in-person or by phone. Try to see if there is a way to work together. As David Perell said, try to structure your life on Twitter for serendipity. The internet rewards people who publish their ideas frequently. Each article, email newsletter or tweet can be the vehicle for personal or career opportunities. The more you can share, the more opportunities you invite into your life. 

This quote from Bill Gurley summarizes the power of Twitter so well:

“Twitter is the most amazing networking and learning network ever built. For someone who’s pursuing their dream job, or chasing a group of mentors or peers, it’s remarkable. In any given field, 50-80% of the top experts in that field are on Twitter and they’re sharing ideas, and you can connect to them or follow them in your personal feed. If you get lucky enough and say something they find interesting, they might follow you, and the reason this becomes super interesting is that it unlocks direct message, and now all of a sudden you can communicate directly or electronically with that individual. Very, very powerful.

If you’re not using Twitter, you’re missing out.” 

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Acknowledgements: Thanks to David Perell for the Twitter workshop that inspired this post, and to Charlie, Ben, Pranav, Adam, Zach, and Blair for their feedback.

Should you trust your hard-earned retirement portfolio to a robot? 

The math doesn’t lie. The answer is a resounding NO.

All automated investment services, or ‘robo-advisors’, have the same value proposition. They are easy, low-maintenance, automated investment advisors. They use algorithms to set a predetermined proportion of your portfolio in basic index exchange-traded funds after a series of questions to determine customers’ risk tolerance. The algorithm then recommends a diversified portfolio and does this automatically. If you contribute $10,000, it will allocate X% to US stocks, Y% in foreign stocks, and Z% into emerging markets, and so on. 

To give an example based on my own risk tolerance, this is what my portfolio would look like on Wealthfront. 

These services have quickly amassed billions of dollars in assets under management (AUM) from young professionals. Wealthfront reached $20 billion AUM as of September 2009, Betterment had $16.4 million as of April 2019. They market their platforms on Nobel Prize winning research to build their models. In reality, they just tell investors to buy simple index funds. 

Before diving into some research, I actually think the idea is brilliant. Investors contribute, the platform takes care of the rest for a small annual advisory fee of 0.25%. For this fee, the platform promises to lower your taxes, using strategies like “tax-loss harvesting”, and to manage your risk. On top of these annual fees, investors need to pay the individual index fund expense ratios that invest into their portfolio. This model is a great deal for companies like Wealthfront. They attract young, ignorant professionals early and invest their money for the rest of their lives, skimming larger and larger fees from their accounts as their wealth grows.

The dirty little secret is most investors do not have a grasp of compound interest. They certainly do not understand how compound fees work.

If a 25-year old invests $100,000 of retirement funds with Wealthfront, they will likely pay the company over $100,000 in fees by their 66th birthday.

If they invest additional money from their salary over that time, the fees will grow even higher. 

You might say, “I don’t want to invest myself. I would rather have someone do it for me.” I can’t fault you for wanting to pay for convenience. I have good news for you. Vanguard has what’s known as Target Retirement Funds. These are automated investment vehicles that rebalance overtime, adjusting for risk as you grow older based on your intended retirement date. In my case, the Vanguard Target Retirement 2055 Fund is what I would choose.

This is basically Wealthfront without a 0.25% fee charged on top of your account. You will not be able to avoid fees entirely, but in Vanguard’s case – they are quite small.

I’ve built a simple model to show the differences in portfolio values and costs if you invest without fees, if you invest in a simple low-cost option with Vanguard, or with a robo-advisor service. As you will see, the cost of using a robo-advising service like Wealthfront and paying 0.25% over time adds up significantly. How significantly? Spoiler alert: it’s a lot. 

Let’s take a look at some examples. 

In the first scenario, let’s assume a $10,000 initial investment, a $5,000 annual contribution, and a 7% investment return. 10 years after starting the investment, the fees are not that large. These fees start to compound and get much larger later down the road. By the time you reach retirement age and are ready to use these funds, you will find out that the robo-advisors have taken over $100,000 of your investments over the years through the 0.25% they charge.

How is that possible? Every time you pay the 0.25% fee to the robo-advisor, that money is no longer yours to invest and grow at a compounded rate. It might not seem like a lot at first, but it’s significant over a 40 year investment career. 

If you’re an aggressive saver and a successful investor, the magnitude of these fees will be even worse. Our second example will assume the same $10,000 initial investment, but this time the annual contribution will increase to $15,000 and the investment return will be 8%. By the time you reach retirement age, the robo-advisor will take over $350,000 from your account.

Are robo-advisors a scam? Well, not in the Bernie Madoff sense. But I don’t see how investors do themselves any favors by investing this way. These robo-advisors do not promise to outperform the markets any more than a regular index fund. Personally, I would not invest in something knowing the long-term impact the fees will have on my wealth. As Ramit Sethi wrote in the terrific personal finance book, I Will Teach You To Be Rich:

“Most of us have been taught to ask $3 questions. We should really be asking $30,000 questions.”

Or in this case, $300,000 questions.

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Acknowledgements: Thanks to Adam, Ben, John, and Blair for their feedback on this post.

How often have you seen statements like this? 

On this day in 1997: Amazon goes public

If you invested $1,000 in the IPO, it would be worth $1.2 million today pic.twitter.com/9nI4RP30Iv

— Jon Erlichman (@JonErlichman) May 15, 2019

I have not been investing for a very long time. I certainly have never invested through a recession. During the Global Financial Crisis, I had just graduated from college with thousands of dollars in student loan debt. By the time I finally paid those off in 2017, I thought I missed one of the greatest bull runs in history. 

Once my student loans were paid, I was able to focus more on investing over the last few years. As someone whose career is in finance, it can be easy for me to be over-confident in my personal finance decisions. Naturally, I seek out the expertise of smart people. How do they think? How do they act in challenging financial situations? How do they set themselves up to do well financially over the course of their life?

Nick Maggiulli is a data scientist and financial blogger at Of Dollars And Data. He writes about why most traditional financial advice has failed us. Nick helps investors see that investing decisions are never as easy as they seem. He sheds new light on personal financial decisions, using storytelling and data to help his audience understand these situations at a deeper level. 

Nick’s philosophy is that each investor experiences life and investing differently. We get married, have kids, lose jobs, get sick, experience loss, change careers, and the list goes on. Our lives are dynamic, and the financial decisions we make are dynamic too. In order to make wise financial decisions, we need to understand our biases, our wants, our strengths and our weaknesses. Once we understand ourselves, we will be better equipped to make smart financial and life decisions.   

I found Nick Maggiulli’s work in July 2018 and have been an avid reader ever since. At that time, he had 80 posts on his blog, which I read almost immediately to devour the financial wisdom he shared. Nick has written a blog post every week for 167 weeks in a row, allowing me to learn interesting and insightful data along the way. 

If you are interested in reading Nick’s work, here’s where you should start: 

Popular posts: https://ofdollarsanddata.com/popular-posts/

Of the 167 posts on his blog, I want to share five that have resonated with me the most: 

How to Invest a Lump Sum

If you only read a single post to understand the essence of Nick’s blog, this is it. As investors (and humans), we have the tendency to believe we can time the market. We think we have the power to increase our rates of return by using a dollar cost average strategy (DCA) instead of investing in a lump sum manner. Maggiulli includes a fascinating data visualization to show that DCA underperformance increases as the length of the buying period increases.

Climbing the Wealth Ladder 

As I begin to build wealth, thinking about where and how I spend and save my money is so important. This post helped me frame financial decisions in the context of “income levels”. A good proxy to use is 0.01% of your net worth. Let’s say you are at the grocery store and you are deciding whether to purchase a dozen regular eggs for $1.99 or a dozen cage-free eggs for $2.99. If your net worth was $1,000, this single choice (paying $1 extra for cage-free eggs) could have a slight impact on your finances as it would represent 0.1% of your total assets. However, if you were worth $10,000 (or more) the decision to spend $1 more would likely be trivial to your finances since it represents less than 0.01% of your wealth.

• Level 1. Paycheck-to-paycheck: $0-$0.99 per decision 
• Level 2. Grocery freedom: $1-$9 per decision 
• Level 3. Restaurant freedom: $10-$99 per decision 
• Level 4. Travel freedom: $100-$999 per decision 
• Level 5. House freedom: $1,000-$9,999 per decision 
• Level 6. Philanthropic freedom: $10,000+ per decision.

The Constant Reminder

We have a seemingly endless supply of investment advice at our disposal. The truth is the decisions we make today will have compounded effects decades later. In the short run, they are almost invisible. In the long run, however, our decisions can lead to incredible results. 

“When you increase your savings rate from 5% to 10%, you don’t get 5% more money at the end, you double the amount of money you have. The first day you form your exercise habit is the day you lose the weight. The first day you form your writing habit is the day you wrote your best work. It all compounds back to the moment when the habit is formed.”

You Have No Competition

The same is true in writing online, or personal finance. We naturally get intimidated by all the competition out in the world. Investing is the study of human behavior. It’s important to remember that we are only competing against ourselves. Maggiulli’s goal is to get the reader to re-examine their behavior. Michael Jordan said it best:

“Every day, I demand more from myself than anybody else could humanly expect. I’m not competing with somebody else. I’m competing with what I’m capable of.”

Seven Things I Learned From One Year of Blogging

As with most of the posts on Of Dollars and Data, the ideas can be applied to personal finance, online writing, or life in general. In the context of writing online, this post focuses on the perseverance to continue doing the work – as hard as it may be. Successful people in life share a common trait in anything they do, they don’t give up. Hard work and luck go hand in hand to create successful outcomes. As Samual Goldwyn said:

“The harder I work, the luckier I get.”

The Depth of Privilege

This is a non-investing article but still excellent. Nick discusses that we should all be able to step back and understand the depth of privilege in our own lives because some people unfortunately don’t have the same opportunities. Privilege goes beyond growing up with wealth or having more than others. It’s in the color or your skin, the community you grew up in, and so much more.

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Nick Maggiulli won’t give you all the answers when it comes to your finances. But that is not the point. He does an incredible job of framing complex financial problems into easy-to-understand, relatable stories backed up by data and facts. At the end of the day, each individual investor is responsible for their decisions. Nick’s writing has helped me frame my own financial goals, and has given me the data to confidently make those decisions.

You can subscribe to Of Dollars And Data here.

The biggest worldwide story over the last month has been the rapid spread of the COVID-19 virus, first identified by health authorities in Wuhan, China. As I’m writing this blog post, the virus has spread to more than 70 countries, more than 90,000 cases have been confirmed, 8,000 of which have been classified as serious. 

The Coronavirus has disrupted daily life, rocked the business world, and brought the rapid climb of the global stock market to a sudden halt, turning into market correction territory quicker than at any point in history. It took just 6 days for the S&P 500 to fall 10% from its all-time high on February 20. 

As companies act to help control the spread of the virus around the world, corporate emergency plans have forced employees to work remotely. My goal is to discuss how the the scare of a global pandemic is catalysing the eventual acceptance and ubiquity of remote work.

As China’s seaports and airports are at the epicenter of global trade, one of the biggest causes of the economic slowdown has been getting goods in and out of China due to roadblocks, quarantines, and factory closings. “Due to the coronavirus outbreak, cargo volumes at U.S. ports might be down by 20 percent or more on a year-on-year basis compared to 2019,” said Cary Davis, an official with the American Association of Port Authorities.

Companies that have direct business exposure to China and its trade logistics have been the earliest to feel the effects and sound the alarms. Apple warned investors that the supply of iPhones would be affected by the spread of the virus. Apple relies heavily on production of their products in Shenzhen, China, and consumers in China make up about 20 percent of their business in terms of global revenue.

Regardless of their direct or indirect connection to China, companies around the world are taking precautionary measures to cancel any non-essential employee travel, and recommended that employees work from home, whenever possible. According to financial data platform, Sentieo, 77 public company transcripts mentioned “work from home” or “working from home” in February. This is an increase from just four mentions of the same phrase in February 2019. The vast majority of these transcripts also mentioned “Coronavirus”.

It’s hard to find definitive statistics on how many people work remotely. Gallup’s most recent survey in 2016 showed that 43% of employees worked remotely in some capacity; that was up 4 percentage points from 2012. Another survey showed remote workers make up anywhere from about 5 percent (those who typically work from home) to nearly two-thirds (who sometimes work remotely) of the workforce, depending on the measurement. What is absolutely certain is that the trend has been ticking up and a pandemic like COVID-19 has the potential to fast-track the move by making it more universally accepted and prominent. Kate Lister, president of Global Workplace Analytics said, “What these temporary uses tend to do is show companies that a) it can be done, and b) having people already accustomed to working remotely makes the transition much easier.”

Companies that help enable the transition are benefiting as a result. In fact, their share prices are actually rising as investors take notice of the benefits of remote work. Shares in Zoom, the teleconferencing software company, skyrocketed over the past week as more white-collar workers work from home and telecommunicate. Although, anecdotally, some investors mistakenly invested in shares of $ZOOM instead of $ZM, causing shares of the incorrect company to spike nearly 80% in one day.

Companies who have predominantly remote work cultures and whose businesses are not impacted by the spread of a possible global pandemic are not seeing major disruptions to their everyday activities. One company in particular that pioneered the remote work culture and benefited tremendously as a result is the project management company, Basecamp. Basecamp was founded in 1999 with 4 people. They currently have about 50 employees spread out across 32 different cities around the world. They work from home, from coffee shops, from co-working spaces, or anywhere with internet access. The co-founders of the company, Jason Fried and David Heinemeier Hansson wrote a book in 2013 called Remote: Office Not Required and have been vocal proponents of this shift.

Basecamp’s internal handbook and communication guide are publicly accessible for all those who are interested. It discusses what they believe makes them successful and able to run a business remotely that has been cash-flow positive since the very beginning. Basecamp was early to the idea that remote work increases the talent pool, reduces turnover, lessens the real estate footprint, and improves the ability to conduct business across multiple time zones, to name just a few advantages. 

Fred Wilson, investor of USV, recently published a blog post detailing his “zoom room”. Wilson said that he converted his office a year and a half ago to only have a couch, a chair, and displays for video conferencing. He describes how meetings now primarily occur through Zoom; therefore eliminating the need for a traditional desk and chair in his office.

As we think about the future of remote work, and whether this latest catalyst will have lasting effects on how business is conducted around the world, one has to wonder which businesses and industries will be able to take long-lasting advantage of such changes. In a survey of 11,000 workers and 6,500 business leaders by Harvard Business School and Boston Consulting Group, the vast majority said that among the new developments most urgently affecting their businesses were employees’ expectations for flexible, autonomous work; better work-life balance; and remote working. (Just 30 percent, though, said their businesses were prepared.) 

Technology is a big reason for the change. Nowhere is that more true than today where millions of workers and thousands of companies have already discovered the benefits of working remotely. In companies of all sizes, representing virtually every industry, remote work has seen steady growth year after year. The youngest people entering the workforce today don’t remember a time when people weren’t always reachable, so they don’t see why they would need to sit in an office to work. The average yearly cost to rent office space in Chicago, where I live, is about $7,000 per worker, per year. I’m not even talking about more expensive cities such as New York, San Francisco, or Washington, D.C.  With such exorbitant costs, the eventual push towards remote work almost seems inevitable.