

VC Part 2: Fuck-off Money - possiblemat
http://www.danielharan.com/2008/09/04/vc-part-2-fuck-off-money/

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MicahWedemeyer
$1M or so would allow you to live a nice lifestyle while working part-time at
a fun job (like coffee shop clerk, or book-shelver at a bookstore). Then spend
some free time hacking together stuff that might eventually make money. All us
tech guys would be doing that anyway, or at least working on something
programming related.

Even if you can't spend the rest of your life like this, and eventually have
to get back to making money, you could easily go 10 years or so.

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jmtame
Why are you trying to talk about "the least amount of money I can get in order
to get by"?

I don't really understand this whole "my odds of doing something really small
are high, so f __* you all, I'm doing that. F __* VCs, f __* the world, f __*
working a lot."

That's a terrible attitude if you actually are in this because you enjoy it
and want to make a meaningful contribution to society, and not just make some
petty money.

And I can already feel the downvotes. Everyone angry at Mr. Cynical because he
crashed the "F __* VCS!" rally.

In the words of 8Ball and MJG: "Yo stupid ass ain't gone live twice. If you do
anything, do it big. If you do it small, do it big."

~~~
13ren
pg's opinion (it would seem):

 _[9] There are two ways to do work you love:

    
    
      (a) to make money, then work on what you love, or
      (b) to get a job where you get paid to work on stuff you love.
    

In practice the first phases of both consist mostly of unedifying schleps, and
in (b) the second phase is less secure._

<http://paulgraham.com/startuplessons.html>

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josefresco
Isn't it "fuck you" money not fuck-off money? 500K is barely fuck you money,
more like "screw you I'm working slightly less each year money"

~~~
wmeredith
I've always heard it as fuck-you money. Meaning you can afford to say, "fuck-
you" to anyone you want (boss, your competition, a cop, etc...) and not have
to worry about paying your bills tomorrow.

~~~
j2d2
On this topic, I've only ever heard people who don't have fuck-you money call
it fuck-you money.

~~~
marvin
Nassim Nicholas Taleb did, so you're wrong:
[http://www.portfolio.com/views/columns/the-world-
according-t...](http://www.portfolio.com/views/columns/the-world-according-
to/2008/08/14/Interview-With-Nassim-Nicholas-Taleb#page5)

Sorry about making this slightly pointless comment :(

~~~
furiouslol
On an unrelated note, I think people gives Taleb too much credit. Sure, he's a
fantastic author and the points he bring up are interesting and noteworthy but
he isn't a good trader. I just don't understand why retail investors like to
think that Taleb is in the same league as Ken Griffith and worship Fooled by
Randomness/Black Swan as a trading bible. It's not. If you try to apply his
principles on the market, you'll bleed to death slowly and maybe once a while
during a Black Swan event, you get a blood transfusion but in the long run,
you'll die. There's a reason why those out-of-the-money options are cheap.
It's called probability.

~~~
marvin
Unless Taleb is right, of course, and the market calculates these
probabilities incorrectly.

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aasarava
The point he makes is good, but the calculation seems wrong. He's using _odds_
interchangeably with _percent ownership_ , when the two are clearly different.

50% odds of making $1 million = you have a 50/50 chance of walking away from
the company with $1 million at some point -- _not_ that you're guaranteed to
walk away with $500K. You could just as easily walk away with $0.

So if your two options are: 1) 50% odds of making $1 million 2) 20% odds of
making $20 million

...then you're more than twice as likely to make money on the first deal than
on the second.

~~~
danielharan
Reading it again, I see where the confusion lies - but I didn't even want to
get into the issue of ownership.

The $500k is only the "expected value". You have a 50% chance of making $1M,
50% of walking away with $0.

"then you're more than twice as likely to make money on the first deal than on
the second."

And that's why I'd choose the first deal, even though the economically
'rational' thing to do is to go for the second, which has higher expected
value.

~~~
hugh
Personally I'd take the second deal, but that's just because I don't consider
$1 million to really be "fuck you" money at all -- it'd buy me a nice house
and give me a good head start, but it wouldn't let me retire and spend the
rest of my life doing whatever-the-hell-I-want the way $20 million would.

His point still stands, of course, if you multiply the numbers by something.
Make it a 50% chance of $10 million vs a 20% chance of $200 million, and I'd
probably take the first deal.

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sfamiliar
to answer the article's question:

$440k. done.

here's the rationale:

$200k pays off all the debt i have: mortgage, car, everything, and should
leave me with $50K in a working capital cushion. i would continue to work on
something, because i'd go crazy if i didn't, but it'd likely be another
startup idea of some sort. maybe work on student incubation.

$240k goes in a ladder of 1 year certificates of deposit at $20k each. at
around ~4% interest, each one will yield an income of ~$800/month. i can leave
that in the bank, or take it out as income. given that we're at record low
interest rates, that rate can be expected to go up. it's not the best rate
that could be earned, but it's a guaranteed rate.

my monthly expenses once housing and car payment are removed are right at
$300. $800/month leaves me $500 for food and incidentals, assuming i don't
have other income. no, it's not lavish, but it works. and every single penny i
make from paying work i can then blow on hats.

of course, if i just keep rolling the yield back into the CD by retirement age
(i'm thinking 55) each CD will be worth $70K, yielding 2800/month.

so in short, if my fuck-off-you money is $440k, i'm in pretty good shape for
the rest of my life.

~~~
abstractbill
_... certificates of deposit at $20k each. at around ~4% interest, each one
will yield an income of ~$800/month._

Shouldn't that be "each one will yield $800/year"? That makes the _total_
$800/month.

~~~
sfamiliar
each one would yield $800/year, true, however you put one in a month such that
they come up at the end of the year. 12 CDs, one for each month, each yielding
$800/year.

sorry if that was unclear.

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gasull
_Your Money Or Your Life_ is a guide for reaching your fuck-you money goal:

<http://www.yourmoneyoryourlife.org/fom-about-summary.asp>

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trevelyan
If it's me, the chance of payoff is a multiple of their expected multiple. I'm
in for the 20 mln.

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deathbyzen
Anyone else using Ubiquity who went to this site? It asked me if I wanted to
subscribe to his Ubiquity commands but I don't know what they do.

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vaksel
usually the percentages you see are different: "would you rather have 20% of
10 million or 100% of 0"

~~~
MicahWedemeyer
I would negotiate to an equity stake of at least 150% of 0.

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time_management
Fuck-you money is an illusion. A person with $1 million is not going to want
to live a lower-middle-class lifestyle, and the fact is that there is no way
to guarantee high (7-10%) returns; equity markets are actually likely to
struggle for the next decade. Most people who have a chance at $20 million
would be bored without work and, of course, want to work on the best projects
with the best people. This desire ensures that they can't be entirely
independent, although they have more freedom than the average person.

It's better to just accept that complete independence is an delusion. I hope
to make a lot of money one day, but I don't harbor the illusion that it will
exempt me from interdependence with other people.

