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My dad taught me cashflow with a soda machine (thestartuptoolkit.com)
1060 points by robfitz on Oct 28, 2011 | hide | past | favorite | 101 comments

My 11-year-old daughter for Christmas last year asked for a bubble-gum vending machine. She got the idea from hearing stories about a family member who had over a hundred machines placed at one time.

I thought it was a great idea. She placed one machine, then another. Now she has four machines, but she has only placed 2 of them. Each machine makes about a buck a day gross, 70 cents or so net.

I'm purposely not doing any of the stuff this guy's dad did -- charge for gas, insist on doing the math, etc. For now all she has to do is buy the inventory. Once a month or so to pick up the "haul."

I think if you push these things then you lose track of the point. Right now it's something she enjoys -- who wouldn't want to take a trip each month and come back with tens of dollars? If we were to get into marketing, sales, cash flow, or any of that? I think it would turn it into a chore. After all, geesh, the kid is only 11. The only thing I've told her is that she has to save up if she wants another machine, and the more machines she has placed in good spots the more money she will make.

Looking back over the previous year, I think this Christmas gift might turn out to be one of the best presents we've ever given. It has the potential to teach so many lessons. The coolest part is that it is all driven by motivation on her side -- she was the one asking for the machine, she is the one picking out the product, she is the one saving up for new machines, she is the one responsible for scouting out new locations and making the pitch to store owners, etc. If she pushes a lot, she could make some real cash. If not, then she knows more about how these things work. It's a win either way.

I didn't really mention timescales, but in my case he added the various complications gradually over about 4 years. It was never something I sat down and "learned". Whenever I started to drift away via boredom, a fun new twist would mysteriously appear.

Love what you're doing w/ the gum machines -- think it's an amazing approach.

just curious, where did your daughter place her vending machine? who worked out the logistics of where it could be placed?

The epitome of small-scale, early-stage funding. Good investment ;)

What was the initial investment?

As I remember, $160 covered the first machine and bag of gumballs. We don't spend a lot on Christmas, so this was her "big" present that year. It was interesting listening to her telling her friends about what she got!

It took her about six months of operating to save up enough for the second machine. Once that machine was operational, it took another 4 months for the third machine, and so on. (I think the fourth was a birthday present). It's been a great applied lesson in exponential growth.

To answer the other commenter's question, she placed the machines in places she visited once a month anyway. Civic groups, local hairstylists, etc. A couple of these spots didn't work out, so she had to find new places.

I would be lying if I said I wasn't disappointed that these two are sitting at home (even though she still manages to weasel 1 or 2 sales a day from the family, the little rascal) and I've wanted to talk to her about placing her machines where there is lots of foot traffic, but I've been biting my tongue. Mostly. I figure you can't motivate somebody from the outside. Every month when she comes back home with her and mom holding a big bag of quarters, I feel like that should be feedback enough.

Whoa. $160 initial investment for seventy cents a day profit? Your kid is investing at 160%!

If I spent $50K on these, I could retire! (Except I wouldn't be retired, I'd be driving around all the damn time taking care of my three hundred and twelve gumball machines. But still!)

Don't forget it's all cash income -- no waiting on invoices to post or people to write checks. You crack open the machine, and it's like Christmas.

I think if you did this with a higher-margin item, say DVDs or electronics, you could retire. But the trick is, as you note, scaling all the footwork and overhead. It's not like you can farm out the collection and restocking, not unless you really, really trust somebody. And chasing around 100-300 machines, the people that manage the site, and the product that works? It's not a trivial thing to do at all.

Not only maintenance, there's also always moving the machines around, and pitching store owners to put a machine onsite. Some of them look at it like competition. A couple guys refused to place them unless they got a piece of the action! After she finished pitching, they decided they would go out and buy their own machines. All for 20 bucks a month. Dang cheapskates. And don't forget there are big, serious players out there who wouldn't think twice of using dirty tricks (and the know them all) to quash you like a bug. She's lucky she's under the radar. Somebody dropping a couple hundred thousand for a few dozen high-end machines would not go unnoticed.

I actually like the business model a lot. It encourages direct selling, there's lots of business math, and there aren't a lot of tricky issues involved.

So yes! Kinda. If you could retire on 400-1200 bucks a month, I think it would work. Past that point, though, it gets ugly. Small scale? It rocks. Large scale? It looks much better on TV than it actually is.

A couple guys refused to place them unless they got a piece of the action! After she finished pitching, they decided they would go out and buy their own machines. All for 20 bucks a month. Dang cheapskates.

This one part of your comment baffles me. Exactly why should they share their business traffic rent-free with your daughter? Sure, she's young and presumably cute and it's just a gum machine, but it seems to me that she should be splitting the take with them or at least offering them a few bucks as a nominal rental payment. This is, after all, the situation that most business owners are in with regard to a commercial landlord. Sure, for such small sums it seems silly, but the marginal profit on most retail purchases is tiny. If the machines cost $160, the retailer sensibly sees that the capital expenditure is covered after 8 months.

I think you missed an opportunity here. If you had encouraged her to negotiate and hit on a business with more than one branch, the vending machines could be in multiple locations; if not, a quid pro quo still generates a lot of good will. My local corner store owner has a kid of 8 or 9; I suspect that his response to a proposal of this sort would be to buy his own kid his own vending machine, rather than hand 100% of the profits to your daughter. Maybe I'm missing some part of your story?

On a side note, I wish you would consider vending some other product besides gum, which isn't much good for kids' teeth. You wouldn't have bought her a cigarette vending machine if those were still popular, or at least so I assume. On a small scale, it's a classic example of externalizing the cost of the product you sell.

> On a side note, I wish you would consider vending some other product besides gum, which isn't much good for kids' teeth.

It's unfortunate but the highest margin food products with a long shelf-life, thereby making them more suited to vending machines, tend to be full of sugar and very unhealthy.

Not to mention the impulse-buy angle.

Something fun to try on a rainy Friday night -- I interviewed Katrina about her business [video link] http://www.youtube.com/watch?v=0Dc0f3WtR7Y

Posted on HN here: http://news.ycombinator.com/item?id=3170488

Daniel...this is awesome. It's pretty epic to put a video/face to the nickname.

I am definitely going to do something similar with my 3.5 year old when he gets a bit older...have to figure out what though.

I love these little things that come up on HN...this video really adds a new dimension to the story.


Electronic and DVD inventory goes stale much faster than gum does. You end up with a lot of 'unfashionable' inventory on your hands.

And don't forget there are big, serious players out there who wouldn't think twice of using dirty tricks (and the know them all) to quash you like a bug. She's lucky she's under the radar. Somebody dropping a couple hundred thousand for a few dozen high-end machines would not go unnoticed

So yes! Kinda. If you could retire on 400-1200 bucks a month, I think it would work. Past that point, though, it gets ugly. Small scale? It rocks. Large scale? It looks much better on TV than it actually is.

Fair enough. I guess I'll just stick to selling meth.

"Whoa. $160 initial investment for seventy cents a day profit? Your kid is investing at 160%!"

-- It's rather easy to earn that return on capital if you have free labor. For example: plant a garden in an unused plot of land* for a few dollars' worth of seeds, compost, and depreciation on your tools: get tomatoes and beans and cucumbers and strawberries. Of course, you'll also need to till it, plant it, weed it, and all sorts of other stuff... So if that's your idea of cheap fun, go for it, but I wouldn't go so far as to pay anyone else to manage it.

(Herbs are probably the simplest option. It's usually expensive to buy them fresh, and they are dense and simple to take care of.)

(* Also, land is much easier to come by in places which are not California, and hey often get real rain during the summer.)

Hahah! Your daughter is going to be your boss someday. :)

Anyone else here think that kids should be allowed to spend their childhoods being, well, kids?

A lot of people seem to spend their time as parents trying to teach the things they think their kids should know, but too often these seem to be things that kids need to know to fulfil their parents aspirations for them. Sure cash flow is a useful lesson (though one that I'd suggest could be taught more efficiently) but this feels a bit like a parent pushing someone down a particular line.

Now I'm not saying that this is a bad story, and certainly not a bad parent, just that IMHO the absolute best bit of this story - by a country mile - is that it's something they did together, parent and child spending time with each other. If he learned about cash flow then that's great, but it's not nearly as great as him learning about his dad and his dad learning about him.

It depends what you mean by 'being kids'. My grandfather taught me quite a bit about electronics when I was young (how to solder, what the major components do, etc.) and I loved it. We also did woodwork together. With him I designed and built my own briefcase for taking my books to school in.

For him these were things that I needed to know (he had been in the RAF as a wireless operator in the Second World War (http://en.wikipedia.org/wiki/Battle_of_the_Beams) and so electronics was important and he'd grown up at a time when people made a lot of there own things). For me it was wonderful stuff to know about. And, as you point out, I spent a lot of time with my grandfather.

My parents took me to events organized by the National Association for Gifted Children (http://en.wikipedia.org/wiki/National_Association_for_Gifted...) and also had me do various types of IQ testing. Some of those events involve my best memories of time spent with my father. Perhaps they were fulfulling some sort of wish for me, but I tend to think that they looked at me and realized that these were things that I was going to enjoy or needed.

Those interactions with my father and grandfather really matter a lot.

By that I mean do stuff because it's fun and learn things because they're interesting and there to be learned rather than because doing them or learning them serves some aspirational purpose.

I think what your grandfather did sounds ace but it sounds like you agree that the best bit was the time the two of you spent together and the knowledge imparted was secondary (even if it's gone on to be useful).

Obviously things can fulfil both criteria and that's great, but I always think that the important thing is that it's fun and the minute it doesn't meet that criteria it should be changed. Kids spend enough time at school learning things they "need" to know. Let spare time be spare time.

(As an aside my grandfather was a professional football player - while on the surface this sounds like ideal bonding material for a grandson he was big on the hard work element and spent too much time trying to get me to do repetitive drills...)

The best part was being with adults who treated me like I was an intelligent human being and who explained things to me.

Also, the fact that my parents realized that I was way ahead of the other kids when I could read at three years old and did something about it made a huge difference to my life. I think the most important thing I learnt from my parents about parenting is that parents need to look at their children and ask "what does this child need to be happy?"

I was desperately unhappy at times at school because I was ahead of the other children and bored. They dealt with the problem when they had very little money and were dealing with their first child.

I owe them a huge unrepayable debt for that.

Fun. Now there's a slippery slope that can lead to over-indulgence. As a parent your job is to protect your children, impart discipline, and teach them how to get along in this world. Keeping them entertained doesn't factor in in the grand scheme of things.

Everything is a slippery slope - discipline is a slippery slope to bullying, protection to mollycoddling, teaching to preaching.

Research has shown that play is how children learn. Not hard things like cash flow, but vital investigatory, reasoning and communication skills, as well as building confidence and independence. The parent who forgets fun is going to be forgetting a major part of their child's education.

Did we read the same blog post? The OP was clearly recalling some of the best memories of his youth, driving around with his father buying sodas for his very own vending machine. I had/have a good relationship with my father and I still wish we'd done something that cool.

I agree and all my comments have stressed that his dad was a great dad.

My point is that what made this great was that he got to spend time with his dad, doing something together that they were both enjoying, NOT that he learned about cash flow.

The lesson here is that kids love doing stuff with the parents, proper stuff, not that we should be teaching kids about business skills.

Neglecting their mental state does them no favors either. Entertainment and enjoying an activity absolutely plays into the grand scheme of things with younger children.

"Teaching them how to get along" and "keeping them entertained" are basically the same thing, in an abstract sense. If you take "entertainment" as utility (which it basically is, disregarding baseline needs like food), then your job as a parent is to give your child the tools they need to most efficiently optimize toward their own utility function. Teaching someone how to be good at business is just the second derivative of entertaining them; you're teaching them to leverage skills to optimize their resource-leveraging capabilities to then optimize their experience of the world.

A kid doesn't know what is interesting or not. You have to expose them to several things and hopefully one will spark their curiosity.

If a parent buys his 2-year-old an Ipad, it's cool. A parent buys her 10-year-old an vendine machine, she should let her kid be a kid.

I always think that the important thing is that it's fun and the minute it doesn't meet that criteria it should be changed. Kids spend enough time at school learning things they "need" to know.

There is no reason all of childhood needs to be fun-and-games, and school can't teach them everything.

Chores are an easy example. (Though certainly something to avoid overdoing)

Apparently, I was never a kid for the same reason. If you start thinking about the real world, you are no longer playing in make believe. IE Kidsville.


Not if the definition of "letting kids be kids" is to let them do what everyone else's kids are doing these days, mollycoddling their every whim and when not acting as chauffeur or butler, letting them babysit themselves with TV and video games.

Or, yes...

If the definition of letting them be kids is shutting off the TV, on sunny days pushing them out the door to go play in the dirt, and on rainy days taking them to the library, coupled with spending time to encourage and support them in the interests they develop and express. The key is engagement.

I don't see any indication in this story that the boy didn't enjoy it. Sounds as though he found it an engaging challenge, and that it didn't take too much of his time. If he wasn't doing that, he could have been playing Lemonade Stand on a Commodore 64 or Apple II. If the story was about Lemonade Stand, nobody would say "let kids be kids", so what's the problem here? Is it that this sounds like "work"?

Work, even real work, can be fun, and figuring out how to enjoy something that returns financial gain may be the lesson with the most payoff a parent could provide, given the ratio of time most adults have to spend in work versus leisure.

"Work, even real work, can be fun." Yes. I'm very thankful that even at age 14, I was working at a local Mom & Pop store, stocking shelves, breaking down boxes, washing dishes, and mopping floors. I felt great about it, and it gave me a chance to socialize and learn important lessons about the adult world. Oh yeah, and I liked the money too.

Just like anything, there is a balance. A good part of my childhood was spent making rockets or transistor radios with my father, but it was always my choice. They never forced me to learn anything, and I found that when I was free to explore almost any subject, that was how I actually wanted to spend my time instead of playing and watching TV 24/7. The most important thing is that my parents supported my interests to encourage me to pursue them.

"If the definition of letting them be kids is shutting off the TV, on sunny days pushing them out the door to go play in the dirt, and on rainy days taking them to the library..."

I push my kids outside on the rainy days too. Of course, I make sure they are sufficiently dressed for the occasion.

Finding fun in the mundane is rewarding on many levels. Having a companion during these moments can cause these episodes of fun to turn into life long positive memories.

The definition is either of those or something different altogether. The point is that it should depend on the kids and the parents involved and revolve around something mutually enjoyable (rather than "improving").

I agree work can be fun and so can learning, and I agree that Rob probably had a great time and certainly had a great dad. My point is that he had a great time because he had a dad who was interested in him and engaged with him, not because he had a dad who tried to teach him cash flow.

'(rather than "improving")'

Are you raising a child, or raising an adult?

You seem horrified by the idea that we might try to "improve" kids; I'm horrified by the idea that I might turn my kids loose in the world without any "improvement". My mind can not even express the theory of parenting you are operating under in which improvement is some sort of anathema.

I'm horrified by the idea that we might improve a child at the expense of everything else. Clearly I'm not against children learning.

You seem to be against them doing any work though. That is part of learning how to survive in this world. Look at OWS. They must have all had "great" parents who let them be kids. They still are.

A little work never ruined a kid's life. Indeed, it's an effective way to build some good healthy feelings of accomplishment, confidence, and self-worth. It may also help improve their self-control, their resilience, and initiative.

For a classic portrayal of these effects in film, consider Sen to Chihiro no Kamikakushi.

I should probably be clearer.

My concern is not with kids learning stuff. I read to my daughters all the time (they're 2 and 6 months respectively and have been read stories since the day they came home from the hospital), they will have the best education I can get them and it will be made clear to them that they are expected to go to university. We try and expose them to new things, balance indoor and outdoor activities, moderate their TV watching (and make sure that it's nothing harmful) and so on.

But what concerns me is where you get people who seem to think that kids should learn at the expense of all other activities, that fun is, in some way, a bad thing, that it will make them weak and not teach them about the "realities of the world".

For some parents setting up the sort of scenario in the story where the kid runs a vending machine is a natural extension of the personalities of the parents and the child. They'll do it, sell the idea to the kids, the kids get engaged and it becomes something that they do together and enjoy.

What I have an issue with is where parents do this sort of thing in a way which is forced, which is pushed beyond the point where it's enjoyable because it's educational and that's worth the sacrifice.

The reality is that most of the things that might be learned from this (cash flow, inventory, basic logistics) are not hard, they are things which can be grasped fairly easily by anyone bright. I bet that most entrepreneurs didn't have their parents to teach them this stuff and I bet that the practical difference between a child who did this and a child who was bought up with a decent basic attitude to money from a well managed normal allowance would be zero by age 21.

With an exercise like this balance what they're actually going to get out of it (in this case potentially very little they wouldn't otherwise learn) with what it "costs". If both parent and child are enjoying it then the cost is zero (or negative) so great, if not then I think it's something you should drop pretty quickly and try something else.

All the things you list that they might learn are great with one possible exception. I feel wary about teaching resilience, at least directly.

The world is going to throw plenty of shit at your children, almost certainly more than they deserve. They're going to learn that lesson anyway. For my money your job as a parent is to protect them, support them and help them develop the skills to deal with it when that comes along, but I think that stops short of hurling more shit in an attempt to "toughen them up".

I'm not saying that they should be mollycoddled, far from it, they do need to learn to deal with tough situations, but for my money the best way to do that is to help them manage the real world situations that come up, rather than simulating potentially unpleasant learning experiences when the two of you could be out doing something enjoyable together.

I wouldn't read so much into this. It's a personal anecdote about the entrepreneurial spirit being encouraged in a young kid. All good parents want their kids to reach their own personal maximum potential. It doesn't sound like Mr. Robfitz was forcing his son to adhere to strict GAAP accounting principles, hustle for cheaper product, or make deals for prime vending machine real estate. This is equivalent to having a paper route as a kid -- which isn't really an option these days.

I did the typical American thing and started mowing lawns when I was around 13 or 14. At first I had a single 20" push mower and had one or two lawns. Then I used our family riding mower. After I had built up some clients I took out a loan and bought a used 36" commercial mower. The loan was repaid early, in about 8 months as I recall.

About this time my dad bought a trailer and we used the family van to pull the trailer around. Not very long after that, I bought a 48" commercial mower. Along the way I also bought string trimmers, backpack blowers, and hedge trimmers. Every new customer was a springboard to more customers in that neighbourhood. All I had to do was make the lawn look great, and the new customers would come to me!

At the fall peak, I could gross about $1400/month. I was my own boss, in top shape, had plenty of money (way more than all my friends) and in general was very happy. Those experiences were invaluable, and helped form my work ethic today.

My father still has the large mower, and uses it every week to mow his own lawn - 20 years later.

What matters is that it's "fun". I would have loved to manage my own soda machine. It's a learning game.

Managing a soda machine or playing Anno 1602, it's pretty much the same thing, isn't it?

Essentially, except that playing Anno 1602 doesn't feel like a chore. More like being part of a work of gaming art.

Thinking back to when I was a kid, just about anything was fun. I remember categorizing my entire basketball collection in a spreadsheet, managing my parents' antique shop inventory, building bookshelves and birdhouses, putting together a garage sale with my brother and sister, and enjoying all of it. It's adults that forget how much fun can be found in everything around us. By delineating fun, work, learning, and development of other life skills, it's very easy to do children a disservice.

If by being kids are you focusing on purely unproductive play, or worse passively watching TV, then No.

Of course, I think there should be some of that. In fact, I think even adults should have some of that. I still play Go. I even still play Magic The Gathering and Video Games. And I watch more TV than I care to admit and let my kids watch more TV than they shoudl.

But the TV is a guilty pleasure I know I should cut back on for them and me, and even playtime comes after the home work is done and comes along with me trying to teach them things they won't learn in school. I try to make the lessons fun as well as educational, but I'll let the fun slide long before I let the educational part slide.

Paul Graham incidentally at least touches on this (and the fact that "childhood" now lasts much longer than it used too) in Why Nerds are Unpopular at http://www.paulgraham.com/nerds.html

You know, this kind of stuff is part of being a kid.

When I was in first grade, my next door neighbor and I went into a water-selling business (think lemonade stand without the lemons) that failed miserably.

My next venture was substantially more successful. Living in France, we had sticker albums associated to stories. A new movie would come out (for example, Star Wars) and shops would sell the album and sell sticker packs separately (each pack sold for the equivalent of about a buck and had 5-6 stickers in them). Each of the stickers were numbered and you would put them in your album to gradually uncover the story.

Thing was, there always seemed to be some stickers you were missing and couldn't find in the pack. So I first set up a marketplace where people could sell me their unused stickers for 1 cent and I would sell the sticker someone was looking for for 50 cents.

I don't remember any parent pressure in the matter (mostly, my parents looked at this as kids being kids) and I learned a lot about supply and demand in the process (including getting stuck with tons of worthless stickers at some point :) )

Aah Figurine Panini. Those were the days. I was doing the exact same thing.

You ever been a parent? I'm guessing not because if you were, at some point you would have arrived at the horrifying realization that kids don't grow up on their own--that by some incalculable measure what we do today will affect their self-image, motivation, and desires for the future. Of course we are an amalgam of memory and experiences, and you can't look back and identify one single event that shaped your future, as Rob addressed in the article. But it is like sowing seeds--you don't know which ones specifically will take, but with some hard work and care-taking you can be know that the result will be good.

A parents job is to offer comfort, support, and, yes, to teach the child what they feel they should know. A lot of people, this forum not excluded, have a definitive view of parenting, and if someone strays outside of that view then its not right.

For instance, I am raising my oldest with the same tenderness and security that most parents have to offer, but I choose to be strict with education. As a result he is 3 and can read, write, do mathematics, and understand higher-level concepts than his peers. He still loves power rangers and playing outside, but he also feels good when he learns something new and receives the praise of his parents, teachers, and friends.

But when he was about 1.5 I posted a thread asking for suggestions for raising an advanced child and was demonized. My view - which is just one view, is that the more you can teach a child (socially, academically, creatively) the better.

Are you going to continue to home school (I'm assuming that's what you are doing now) your child once he reaches "school age?" Just curious.

I agree that most parents believe what they do is "right," and if you don't do that, you are "wrong." To a certain degree, that's human nature (particularly with a subject like children), and if we didn't think our particular parenting method wasn't a great idea, why would we do it? Demonizing someone for a differing view, however, isn't the best way to express this.

What it means to "be a kid": experimenting, learning, challenging yourself. That's what's going on here.

I didn't need my parents to teach me to be entrepreneurial; I set up a lemonade stand in front of my house that I wanted to be the guy to provide services that people would pay for.

That depends on who is asking. If you're a responsible parent who plans creative and intellectually-stimulating activities for his/her children, by all means pick other activities.

On the other hand, for many people I know, "being kids" refers to watching TV and playing halo. I was lucky to grow up in a house without television and I had an intellectually stimulating childhood that I wouldn't exchange for the world. I hope all kids experience "the zone" and a more meaningful, well earned, type of fun than that of consumption.

The actual accounting knowledge the OP gained might not be important in the long run. The experience is.

I think it depends on the kid. Speaking for myself, I would have loved that as a kid, so much that you don't even realize you're learning important things. There are probably plenty of kids who this would have made miserable and not been worth the trouble.

I'm not saying this would work for every or even most kids, but if you can use the kids natural excitement to teach them important skills (not just cash flow, but money management, value of work, etc) then why wouldn't you? I think this is a great story, and I hope when I'm a parent I can engage my kids with something as creative.

The primary difference between 'play' and "work" is safety, both in terms of personal harm and in terms of wasted resources. Most 'play' simulates some adult activity in a (hopefully) safe way; from mud pies on up to the first-person shooter video games.

From that point of view, a business like this where the parent provides the 'safety net' so that the kid can explore without much by way of negative consequences /is/ play.

I don't know. Running a vending machine actually would sound like fun to me. It's a modern day lemonade stand.

Reminds me of a story of a similar family, posted on everything2.com a while ago after a long discussion of how to rip off soda machines by using coins stuck to fishing line or pouring salt water through them:


Lots of life lessons there.

A beautiful story. I myself was raised by two academics in safe middle class public sector jobs their whole life. Only at my 30th year did I consider starting my own business. Looking back on friends who started on their own, I do not doubt that either being an entrepreneur is 1) in the bloodline (nature) and in the upbringing (nurture).

I had a wonderful childhood - but I think I would have started my own business much earlier, had I had a father like yours. And it just goes to show, that valuable life lessons does not need to be boring chores and stern rants from the elderly.

Thanks for an inspiring read.

When I was 9 or 10 we'd go to Costco and purchase the big flats of large muffins. We'd sit around the dinner table and wrap them in cellophane and then send them with my dad to put in his office's kitchen. We sold those things for $50/each on the honor system and made a tidy profit. I hadn't thought of that in a while, but it definitely was a fun adventure.

LOL - I assume you meant $0.50 each?

Whoops! Yes, $0.50!

dang, that's some markup!

Indeed, even the US justice department only pays $16 ;)


The simplest lessons are often the most difficult to learn and internalize to the limit of it becoming second nature ( or intuition ). Brilliant dad. What a great story. Thank you kindly.

Fathers are so, so, so important.. here's an interesting excerpt from the recent Steve Jobs bio :

" It was important, his father said, to craft the backs of cabinets and fences properly, even though they were hidden. He loved doing things right. He even cared about the look of the parts you couldn’t see. "[1]

Connect the above with the speech Johnny Ive gave at the recent memorial :

" we shared a giddy excitement spending months and months on a part of a product that nobody would ever see, well not with their eyes. "[2]

[1] - http://www.amazon.com/Steve-Jobs-Exclusive-Biography-ebook/d...

[2] - http://www.youtube.com/watch?v=nPUsuY8JZJI&t=2905

This is amazing. Usually parents try to teach kinds about mature life by making them do chores or get higher marks in school. And yet what do you learn this way?

That life doesn't reward you for this no matter how many chores you do and how good marks you get.

Empowering people to figure stuff out on their own is the best way to teach. My Dad handed me the reins to out a small stock account with my own, my siblings and some of his money when I was 11. Man, can that motivate you to learn. I'd read 20 investing books by the time I got into high school. And fundamentally the most important thing it taught me was how to think about money. And its was so effortless on his part.

On a similar note, Warren Buffet made around $50,000 by the time he graduated high school by owning several vending machines, among other things.

Great story. I'm always looking for new ideas on how to teach these concepts to my own children and I love this approach. Now, I just need to find a good place for a vending machine...

I looked into this a bit (I wanted to take the same ideas and package them for elementary schools to teach to students).

Vending machines are far from ideal, although they're still plausible if you have a friend who owns a car repair shop or something similar with a few steady workers plus customer traffic.

If I was doing it today, I would take one of the single-serving coffee machines. Some of them have coin slots, pricing controls, and protected inventory. They're a bit expensive to buy individually (a couple grand) but might make sense to share the responsibilities and decisions among a class or a group of family friends.

Because of the smaller footprint, also easy to add to a teacher's lounge, office, etc and it's possible the manufacturer would cut you a break for doing something so PR-able, especially if you turn it into a repeatable school program.

Drop me a note if anyone decides to pursue something like this -- I'd be happy to help where I can: developing the curriculum, yelling at suppliers, or coming up with new lower-cost hardware.

Good thinking on the coffee machine. A former housemate worked in a corner shop and mentioned that the coffee machine had the highest percentage markup of anything for sale there, in the order of 1000-1200% if memory serves me correctly.

My father leases/finances equipment and occasionally gets the used machines back after the term expires. Was thinking that a website positioning the vending machines as a great learning tool for kids would be an interesting way to sell them. Depending on the popularity, I imagine you might even be able to build some web applications that would help the kids manage and find locations for the machines (a sort of marketplace for machine owners and location owners). There's the possibility of upgrading the machines and even adding NFC support to older ones too.

Am looking into how many machines I can get my hands on now...

It turns out that they don't lease vending machines, but he does have connections with manufacturers. Feel free to reach out if anyone is interested.

That is a great story. Shorter and simpler after mowing the lawn one dad. I told my dad I wanted to invest in stocks. He thought this was a great opportunity to teach me about money. So he loaned me money to invest in the stock market. Help me pick and buy stocks, track their values. Eventually to sell them and pay back the loan keeping profits for myself...

The only real issue was it was the start of tech bubble and I was a computer nerd. I bought all tech stocks which soared, my older brother buy shoe companies and the like...

I nearly tripled my investment while my brother lost 30ish% of his. Not sure it was quite as real world learning opportunity as he was hoping.

I think the stock market is a lousy way to teach kids about investing. In fact, I'm not even convinced that interest-bearing accounts are of much use to kids.

The time value of money is significant to a kid. Consider a kid with, say, $500 from babysitting or lawn-mowing. This could buy the kid, say, a really nice bicycle (+ helmet, lock, rack, basket, chain lubricant, etc. Assume they're old enough that they won't outgrow it for a while.) Alternatively, the kid could wait a year and expect to have an extra $20 (given the 4% annualized inflation-adjusted return on the market - what, you're investing, right? not gambling? then you get 4%. :P)

Which would you choose: about $20, or a year with a bicycle? Opportunity cost! And the $20 will just about cover the commission on trading. Ouch. Transaction fees.

The reason that the stock market is attractive to adults is that we generally have an adequate supply of Things that we need to make use of our time. There isn't another object we can spend $500 that will make that sort of an impact on our lives. Diminishing returns!

(Also, we have tens of thousands of dollars, so we can invest without being slaughtered with fees.)

"I get the impression kids are a bit slippery in that regard."

True. Come to think of it, I'm middle-aged and I'm still like that.

I can't say my parents had lessons this cool, but I did spend some of my time in my teenage years working at my cousins' vending machine warehouse, doing various tasks: counting the take (and filling out the spreadsheet), filing refill slips for the drivers, putting new inventory in the right place, trips to purchase new inventory, and even refilling a machine once. It's a pretty interesting business, and it's interesting to me to see how one can scale up the "levels of responsibility".

Brilliant story. This model is much better than giving allowance.

this is great- good thing your dad didn't pick up a slot machine, you could've ended up in politics :)

Great Story. I think one thing I am realizing with my little daughter is that kids - even at 1.5 years old - are curious and resourceful. My job as a parent is not to make her happy... but to help equip her to fullfil her purpose and passions to the fullest - that's when she'll be happiest.

That's perhaps why my parents stopped giving us an allowance early on.

My dad loves woodworking, and I remember at 5 years old, taking scraps, nailing parts together to make a very crude looking airplane and actually sold (yes, someone actually bought it) it to raise money for something - can't remember what it was. But I do remember the work, I remember getting paid, and I remember the satisfaction and fulfillment in a happy customer (even if he did buy it out of compassion).

If I wanted a toy (birthday/Christmas aside), I had to work for it (not the regular chores). It encouraged me to think... be creative... buy low, sell high. Robert Kiyosaki had similar experiences as a kid in his book "Rich Dad, Poor Dad". - As an aside the Cashflow game is really good and although it may be expensive, it is totally worth it. There is a kids version too.

I did the lemonade... I tried selling baseball cards... As I got older, so grew the ideas. In highschool video games were expensive. I started reviewing them through a couple of companies (now owned by IGN) and got my games for free to review them and write an HTML review page.

In university (ah, the advent of eBay), I started going to garage sales/thrift stores/pawn shops and buying selective items. I'd clean and test the items, put them up for sale. All my "toys" (games, computer parts, my Metcal Station, DVDs, etc) were bought through the sale of items on eBay.

Of course, this is all besides running a Computer Consulting/VAR company, creating applications, websites, and study/work.

Ah, the good old days. Forgive me for rambling... I got caught in the nostalgia.

I had a huge smile on my face while reading this.

This has got to be one of the best stories I've read in a while, and a fantastic idea if I ever have kids. I love it. Especially the idea that the dad would slowly start introducing charges to the kid. It's actually a brilliant idea, and more real-world than giving a kid chores and allowance.

Thanks for writing this article. I really enjoyed it. When I was growing up, I was terrible with cash management. My parents continuously subsidized my various entrepreneurial endeavors (building and selling skateboard ramps, selling people's stuff on eBay, manual labor...). So, I grew up really excited about the upside potential of entrepreneurship, but learned little about what it takes to manage the extraordinarily limited resources that you have when you are building businesses in the real world.

Now I help invest in and build companies and work on projects of my own. Learning the trade offs between pricing/volume, technology/cost, etc., is so valuable and I'm only starting to understand them deeply now. I think I'll do something like this when I have kids, whenever that may be....

I love this story. Awesome awesome

I made plush South Park characters and sold them to my mom's fitness/spinning clients. Learned a lot about pricing, investing, selling, creating at 10.

Highly encouraged to give children opportunities like this and not just have them do soccer

Of course, there are many worse things to spend your time on as a kid than a combination of physical exercise and teamwork.

Do you see something wrong with playing soccer? Or was the key word in that sentence the "just"?

key word was 'just'. I played soccer and it was great, my point was to diversify opportunities so kids can learn on their own what motivates them

Great story. I did a similar thing with Pokemon cards - I lived in one school region but actually attended school in another, so had access to two markets. I kept track of inconsistencies in demand and used it to my advantage, taking a plentiful card type from one area to the other and vice versa. Being a kid is serious biznuz!

Reminds me of Barry Silbert (of Second Market)'s introduction to trading - http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2699

I'm curious if this kind of youthful money making is still possible. It tends to be much rarer in the UK anyway, but I'm pretty sure there are a gajillion petty bureaucracies that would stop it - working age laws; minimum wage laws; tax / benefit laws; insurance; health and safety; etc etc etc.

But, see also "The inexplicable war on lemonade stands" which is also happening in the US.


Brings to mind two ideas.

Could a parent do all of this without actually renting a machine? Not ideal and a bit of a white lie, but would remove that cost. A father/mother could come home each night or report back at the end of the week. A bit like playing lemonade stand by proxy.

Could a simple app assist a parent in doing this and getting imaginative/realistic situations to keep the child interested? Or even a service renting physical vending machines specifically for parents and children to try this?

... Because lying to your kids is a good idea?

From OP, part of the joy was using the key to open the machine and get a drink when others were watching.

Removing the tangibility of the project (and the heavy lifting——are you teaching your kids that you'll buy and move their inventory?) seems like it might not be the best approach.

I acknowledged that it wasn't ideal and was merely wondering if it might be an option for those without the means or imagination to arrange an actual vending machine themselves.

If the machine is not real, you don't get the real consecuences of your actions, like:

  "Suddenly I couldn’t afford to make re-stocking trips
  every week, grape soda was cut for an extra column of
  Coca-Cola. I lost some niche customers."
Is this a good idea?

This is great. By the time I was 9 or 10, I was frustrated that for all my playing with tools, reading, tinkering, etc., none of it was towards a practical goal. Finding a way to give kids real-life responsibilities in such an engaging way is awesome.

I wonder if script kiddies, for example, lean towards the nefarious because there are no industrious outlets nor mentors for them to work with.

Regarding your comment about script kiddies - absolutely. So many of them have no legitimate outlet for their curiosity and skill that they end up "learning to hack" because they think it's cool. It's a really sad thing, and something I wish there was a solution for...

Very interesting idea. I need to figure out a way to teach my kids about money and cashflow using something like this method. However, as cool as this story is, I swear I read it in one of Rich Dad Poor Dad books. Maybe this is the source of the books story. I'm not sure.

From my perspective, it doesn't make a huge difference whether the idea was independently discovered by my dad or inspired by something he read--what matters is the effect it had on me.

Rob - how old were you when this started and how long did this venture last?

I'd have to ask my mom to be totally sure, but I'd estimate I ran the machine for roughly 4 years beginning when I was 7 or 8.

That's awesome. I have a 9 year old son right now (4 kids total ranging from ages 16 to 4 years old) and think this is a great story. Thanks for sharing!

Great story Rob. Your Dad was an amazing person. He taught not only the 8 year old boy but the 20 something girl the same principles. He was truly an amazing man and I miss him every day.

How did the $0.55 price turn out? Did you keep it?

Awesome and delightful!

Great example of why entrepreneurs don't need an MBA:)

Now I see the downside of having a socialist father.

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