Burnout / Life Choices

monkey_brah's picture
Rank: King Kong | banana points 1,016

Mod Note (Andy): make sure to see the top comment below by user APAE

All,

Created a burner account here to talk about burnout and life choices. For reference, I went to a semi-target, did 2 years at a BB/EB, and have finished up ~1 year in PE. In between, I took a prolonged summer gap - left the BB/EB on the first day possible while keeping a bonus, and pushed my PE start date as late as possible.

A few hours after finishing up my last day of work, I flew to a European music festival with my best friends. They would come and go for different countries as banking vacations allowed, but I just kept moving country-to-country with little-to-no plan. Overall, about ~50% of it was with friends while ~50% was solo. I met a girl I liked and traveled with her for a week. This gap had me travel Europe, Asia, Australia, and NZ.

While traveling, I met so many people with different ways of living. A few kayaking guides told me how they would move to a different country (and continent) each year and work on a new river - life never got old. Aussies take month-long breaks almost every year and have travel as a defining part of their culture.

Deciding what to do next.

Switching gears, I'm having a major problem deciding what to do next. At the heart of the problem for me is two separate but equally important concepts.

1. Compounding Returns:

Using the rule of 72 and historical returns (not guaranteed but the best starting point) of 8%. invested capital should double on a real, inflation-adjusted basis every 9 years. Therefore, it should 16x every 36 years. Therefore, every $100K accumulated by 30 should be worth about $1.6M real dollars by a normal retirement age of ~65 as long as it's not touched. You could save $300K and be on track to retire with $5M real dollars, and in the interim 36 years be a beach bum (as long as you can cover your expenses, which should be pretty easy).

I'm well -on-track with $300K given some fortunate bonuses and a high savings rate (2/3rds) and a lucky inheritance (1/3rd), and could actually go do this today. But more widely applicable is just the incredible power of compounding returns over time and therefore the importance of working hard and saving in your 20s.

2. Living While You're Young:

Even though it's so important to save in your 20s due to the importance of compounding returns (articulated earlier) and setting yourself on the right career track (talked about all over WSO), it's also so important to have life experiences. I figure that by the time I'm 35, I'll most likely be married with kids and wish I was at work (even with a lovely wife and child, it would be good to get some time away).

Lots of traveling in hostels and partying in clubs really doesn't make sense in your 40's/50's, and I know that many of the life experiences I've been fortunate to have are only possible now. At the same time, I've sacrificed 7+ years to get here (college / banking) and any major break would take me off of "the track" and limit options in the future.

At some level, I feel that the prolonged summer gap has hurt my work ethic - I still get things done, but I spend a lot of time staring out of the window thinking of the waves and the beach. I know this is a privileged position, and I'm fortunate not to be paycheck-to-paycheck like a lot of America. At the same time, I'm losing time each day and I'm only getting older. Hoping this thread can be somewhat of a permanent place to talk about work/life trade-offs. Thanks for reading.

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Comments (94)

Jun 19, 2018

8% compounded....if you can do that you should be working. Young man, do you realize that for your entire adult life the backdrop has been of unprescidented and previously unimaginable levels of global monetary stimulus (15 TRILLION globally)? We will likely have a bad, bad recession at some point when this financial crack starts to wear off, and even more likely a decade or more of literal 0% growth (see Japan's Lost Decade - although our demographics are different - which actually makes it worse in some ways).

Don't think for a second that just because you have a few shekels (literally) in the bank at 30 you can just wander the earth like Caine.

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Jun 26, 2018

People who saw their investments tank in 2008 had a ruke awakening about stock market returns. 8% might be the average when you look at the performance over many years, but the volatility along the way can be nauseating - and the downswings happen ferociously. If you want to use that money during one of the down cycles you're out of luck.

Lots of young people think they can just time the market and get out just before the calamity, but the market humbles you because it's harder to do than you would think. Investing is fun and there is a lot of money to be made, but when its money you are counting on for something that totally changes the psychological dynamic.

Jun 26, 2018

I agree with what you are saying, but with a time horizon of 30+ years, I wouldn't have to worry as much about YoY volatility compared to those with a shorter timeline who have higher sequence-of-returns risk. No need to time the market.

Jun 27, 2018

All I'm saying is... that day 30 years from now when you want to sit back in a hammock and enjoy the fruits of your labor could be the same day that some event beyond your control happens and ruins what you thought you'd be able to enjoy. If your magic number is $1.6M - better diversify or hedge some way so that it doesn't get sliced to $800k because the banks went oops. Owning hard assets like land or rental properties in addition to paper money could help you ride out such a storm. Another way it could play out is that years go by and you get frustrated that the investments you picked don't yield the returns you've expected - so it amounts to lost time in your plan. Then what?

Crazy stuff happens in life and a 30 year plan often plays out differently than you think. Expect the unexpected. But if something like that happened I'm sure you'll figure it out and recover!

Jul 20, 2018

Good topic. I'm a way different boat. 27 now, engineer making about 70k, and want to apply for an MBA in a couple years to switch to consulting or banking. Would be 32 then, which isn't TOO old..... but still. Wish I made choices earlier in my life to be in your situation. I know you have worked hard and earned it... whichever you choose, you'll be in a good spot.

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Jul 20, 2018

Thank you. I've heard banking is eminently do-able from the MBAs that we discuss on here. 32 is still young, we still have 2/3rds to 3/4ths of our career ahead of us.

A fair bit of it is luck, though I do try to not think about it like that. An internal locus of control is one of the most important things to have.

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Jun 19, 2018

Very interested in seeing this discussion develop, especially with input from some of the more experienced users.

"There's no reason to be the richest man in the cemetery. You can't do business from there." - Colonel Sanders

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Jun 19, 2018

Grappling with the same question, live now versus live later...

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Jun 19, 2018

You sound like you can handle it. I'd say most users here would be ill-suited for a life of travel, it's really hard to have nothing productive to work on, seemingly no reason to exist. If you can find a reason, just go out and follow whatever winds are at your back.

I'm going through something similar and have decided to save up for my goal then do the 4% withdrawal rate. There's tons of blogs on people doing this, and many people that have made the leap actually ended up making good or more money due to the side gigs/passion projects they pursued.

If you remain sharp, these life experiences will help you a lot more in life. If you feel the need to return to suburban middle class america life, join an MBA program. Apparently they love getting some actual diversity on their roster. Most likely, you'll want a more relaxed re-entry to society where you can still travel and enjoy the finer things of life but still have a nice routine and some stability. At that point, you can look into moving to Australia or Europe with their crazy amounts of vacation and relaxed hours. Probably at that point your future SO will play a large part in that decision.

I've heard many stories of people spending their life wishing they had gone on X trip, or traveled more, or whatever life experience they missed. I have met people who wished they hadn't gone so crazy, but it's almost always drugs or cheating on spouses. I have yet to meet anyone who regrets throwing caution to the wind and following their inner wanderlust voice.

Perhaps someone here has some regret after 'just going for it'?

Jun 19, 2018

Sounds like we both follow the same 'FIRE' crowd.

Agreed that most wish they have traveled more and gotten more life experience. Back in banking, I found all the old, divorced MDs really sad. Many of them couldn't even grasp the idea of traveling during their forced garden leave, and instead stayed home and organized their rolodex (seriously). They also talked bitterly about the one MD who took 6 months to live in Italy during his garden leave.

To your question - there was one poster here (I'll see if I can find it) who regretted doing something similar to what I'm proposing. He came back and settled down in his 40s with a few million to a normal suburban life, while his colleagues who kept pushing in high finance were taking private planes and looking into high-level political aspirations. Having gotten a bit of exposure through my current role, I'm relatively confident I wouldn't have major regrets on the road less traveled but I can never say for sure.

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Jun 19, 2018

If there's something specific you want, like flying in private planes or getting into politics, it is a lot easier to go directly after that, and floundering around working crazy hours in a stable industry position isn't the best way to do that. It's not easy, but there are tons of examples of people getting second winds later in their lives and going on to be uber successful. The thing is, they're successful doing what they actually want to be doing, not just following The Plan.

Since you know the FIRE crowd, I'm assuming you already have a lot of "go for it" advice from other places, and can calculate out the numbers pretty easily. What are your major hang-ups, and why'd you post on this forum specifically?

Jun 19, 2018

I posted on this forum because I use WSO extensively and I am currently in PE. This decision is obviously quite different when you're giving up six-figure incomes and would have a tough time returning -- would be much easier to leave if I knew there would always be a seat for me, like in some other more blue-collar industries. Therefore, I can get more solid answers here vs. other places.

I've run the numbers previously but the right answer still isn't obvious. Probably the biggest hang-ups to keep from leaving are that 1) compounding returns from anything saved in your 20s is huge (per this post), and 2) I've always planned to keep as many options open as possible. It's why I went into financing & banking, and why I'm currently still looking at b-school (though I'd prefer not to). This would be the first time where I'm actively shutting doors.

Other posters below have mentioned that this doesn't need to be an all-or-nothing. I'm also considering entrepreneurship and search funds, both of which would be intense but give me the flexibility to travel and to have greater autonomy.

Jun 20, 2018
monkey_brah:

Other posters below have mentioned that this doesn't need to be an all-or-nothing. I'm also considering entrepreneurship and search funds, both of which would be intense but give me the flexibility to travel and to have greater autonomy.

Owning a business/entrepreneurship does not actually give you flexibility or autonomy. When I left finance to start a company, I thought it would. The company and your investors end up owning you, and you become solely focused on trying to grow your business.

I worked fewer hours, made a lot more money and was way less stressed as a senior banker at a boutique than I am as a startup CEO, and my company is actually doing well. I can't imagine what it would be like if things were going South.

Jun 20, 2018

This is rarely mentioned by people who talk about being entrepreneurs. You might not have a direct boss to answer to but you sure as hell have to be accountable to clients and investors.

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Jun 21, 2018

Very true, but its a different kind of stress. You have risk, which is unheard of in banking, but the rewards are greater too. You can make a TON more money when you have ownership/equity. Yes, you have to answer to investors, but that's a very different beast than being one cog in a corporate machine. You have a lot more autonomy about macro-level business decisions, and you certainly have more flexibility about your work schedule. You sound like a driven person, so you're unwilling to exercise all those benefits to their fullest extent, but that doesn't mean they don't exist.

Also consider this. As a senior banker you made a lot of money and were less stressed. How long did it take you to get there? A decade? 15 years? How long have you been at your startup? My guess is that ten years into this experience, you'll have more money and less stress than you did 10 years into the banking career, and you'll own what you've built.
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Jun 19, 2018

"'FIRE' crowd."

Tbh, I think a lot of Millenial/Gen Z folk on the path to high paying jobs are beginning to take not of the whole FIRE movement. Mostly because they have the incomes to do it but also because the type of analysis required lends itself well to the personality of the aforementioned types.

Will be interesting to see how the future looks when a bunch of former ambitious kids nope out of the rat race at ~35-40.

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Jun 22, 2018

Though I am young and not very wise, I offer some thoughts. Take them with a grain of salt. It seems to me that the best path to take is the one that you choose. What I mean by that is when you imagine yourself in your 80s, what do you want to have? Is it going to be money, power, relationships, peace of mind, perhaps a mix of all the above? I think it's been incredibly helpful in motivating me to work harder when I reverse engineer the life that I want to have. In other words, I get a vision for myself in my 60s, 70s, and 80s and then ask, "how do I get there?" Warren Buffet has been a helpful illustration, and while I don't expect to be worth 80B in my life, I can envision myself happy as a prominent businessman who has an incredibly positive influence on the lives of many. I envision myself with a substantial amount of wealth that I can be generous with and use for great feats of good. I envision that, and it motivates me to sacrifice certain things now for more down the road. There is an old proverb that says "if you don't know where you're going, it doesn't matter how you get there." I think ending up as an old, bitter, divorced prune is a lot easier to do than it looks. Just make the choices you see those guys making. If you want to end up different, find someone who did it "right," ask him/her how they made their decisions, and then seek to emulate them. I think you'll find that if you stay focused on the type of person you want to be, you'll turn out to be a lot more like him than if you just do what everyone else does. The path towards wisdom isn't the easiest or the most traveled, but wise people somehow always seem to get repeatedly lucky in life. Seems like as good as path as any for me.

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Jun 19, 2018

Shouldn't you also be accounting for inflation? If you assume 3% (about as historically reasonable as your 8% returns) then just back of the envelope, your real purchasing power in 36 years is basically $1.5mm in today's money. Which is nice, compound interest rocks, but what are you doing with that? Still being a beach bum for your entire life?

This whole idea means you never have one major capital event. No major surgeries (since your beach bum lifestyle presumably doesn't include a cadillac health care plan), no marriage or major vacations, no buying a home, no children, no loved one who you could save from illness by spending some of that nest egg money.

And once your 65, what then? Still loafing around the beach? That money won't take you far. This isn't even an argument for all the flashy things money can buy you - but your priorities may change when you're 30, and to lose out on earning and career development potential in your 20s can be devestating. There are thousands of people equally smart and talented as you, and likely more motivated, who will have years of extra experience - how do you break back into a well-paying job when you decide maybe you DO want kids?

Jun 19, 2018

All doctors I know have told me many times that it is so sad for them when they see patients who have lived all of their lives accumulating money for their retirement only to see it all go to waste when out of nowhere, they are diagnosed with cancer or something happens to them where they are not in the best mental or physical state to avail the money. As someone else said in this thread, try to break up your normal routine by working and then having some fun doing what you want every once in a while for vacation. There is no way for you to predict what might happen to you in the future.

Jun 19, 2018

Usually returns like those are quoted after inflation.. Though OP is definitely high balling it, should be more 6-7%.

Jun 19, 2018

Yeah I mean 8% after inflation is crazy. As another poster said, if you can hit those kinds of returns you're looking at double digit returns. You should 100% be working if you can achieve that. If it's 6%, which still isn't bad, that's still less than half of the amount he/she is assuming.

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Jun 19, 2018

Mid 30s here, and I hear where you're coming from. I think constantly about traveling and exploring the world. Don't underestimate how difficult it will be to get back into the workplace after an extended amount of time (I didn't do it, but I've seen others try, its hard).

I wouldn't say I'm "living the dream", but after working for so long, you will have gained enough respect in the office and in your career to take extended vacations. With 3-4 weeks of vacation time per year, find someplace to work where its acceptable to use all of it. That way you're taking 1 or 2 week-long trips per year, and a few extended weekend trips. You can then go literally anywhere you want with no financial restrictions on what you want to do. Europe for 4 nights, Asia for a week, South America for a week, skiing for 4 nights, another trip to Europe, etc - you can do all that in a single year. All while doing it right, without having to worry about expenses. Then next year find new places you want to go, and do it again.

Always be planning new trips and thinking about the next adventure. I usually have my trips/vacations, at least in terms of general places I'd like to go, planned out a year in advance. For me at least, planning things out and seeing where I want to go is half the fun. It keeps you sane during the constant daily grind.

In my opinion, I'd much rather satisfy my travel bug doing this, and going to try and visit everywhere, rather than bumming around in the same location for an extended amount of time, with no money wishing I could eat at all the cool restaurants.

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Jun 19, 2018

Co-sign this, listen to this guy.

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Jun 19, 2018

Yeah this is great advice. I'm a big proponent of the simple principle that life is about balance. I know a lot of people in the boomer generation that took the 'extended travel' route, and they are actually extremely depressed now because they feel like they've experienced everything and there's nothing else for them to really look forward to. If you take intermittent trips in the year like m8 mentions, you breakup your routine and enjoy yourself enough and also satisfy your 'achievement' itch. In some ways this helps you be more productive because it gives you a fresh perspective right when you come back from the vacation. Life doesn't have to be an either or......

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Jun 20, 2018
MonkeyWrench:

Yeah this is great advice. I'm a big proponent of the simple principle that life is about balance.

Love it. Balance. Is going part-time an option?

~Stay Golden

Jun 19, 2018

Not sure which bank you work for, but multiple week plus trips per year is a good recipe for a pink slip the next time the market goes south and dealflow dries up.

"Anything less than the best is a felony"

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Funniest
Jun 20, 2018

Thanks for the advice chief, but I don't work at a bank, I work in PE, and I'll be just fine. It's your performance that matters, not how many days you have logged sitting at your desk.

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Jun 20, 2018

False, based on my experience of maxing out my vacation every year and still getting promoted. Same thing with my boss.

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Jun 21, 2018

I've gotten more shit from people for not taking time off than for taking it tbh...might just be my group...

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Jun 22, 2018
Get_Yield:

Not sure which bank you work for, but multiple week plus trips per year is a good recipe for a pink slip the next time the market goes south and dealflow dries up.

if you think logging hours at the desk is the only way to do well/get promoted, it's time you get out of banking and goto a coding boot camp asap, because YOU will not last through the next cycle...

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Jun 20, 2018

My view also, virtually word for word.

Jun 20, 2018

Good suggestions; focus on balance first. Burnout management not bail.

~Stay Golden

Jun 22, 2018
m8:

Mid 30s here, and I hear where you're coming from. I think constantly about traveling and exploring the world. Don't underestimate how difficult it will be to get back into the workplace after an extended amount of time (I didn't do it, but I've seen others try, its hard).

I wouldn't say I'm "living the dream", but after working for so long, you will have gained enough respect in the office and in your career to take extended vacations. With 3-4 weeks of vacation time per year, find someplace to work where its acceptable to use all of it. That way you're taking 1 or 2 week-long trips per year, and a few extended weekend trips. You can then go literally anywhere you want with no financial restrictions on what you want to do. Europe for 4 nights, Asia for a week, South America for a week, skiing for 4 nights, another trip to Europe, etc - you can do all that in a single year. All while doing it right, without having to worry about expenses. Then next year find new places you want to go, and do it again.

Always be planning new trips and thinking about the next adventure. I usually have my trips/vacations, at least in terms of general places I'd like to go, planned out a year in advance. For me at least, planning things out and seeing where I want to go is half the fun. It keeps you sane during the constant daily grind.

In my opinion, I'd much rather satisfy my travel bug doing this, and going to try and visit everywhere, rather than bumming around in the same location for an extended amount of time, with no money wishing I could eat at all the cool restaurants.

Unless I'm missing something, this seems very reasonable.

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Jun 19, 2018

I like how well you seemed to have outlined this and showed some actual thought towards this next life step you want to take. One of the questions you have not answered is what is it you actually want to do. What would constitute a life worth living?

One of the best parts to honing in on wealth through your inheritance and the steps with which your family set you up is that you have the means to do something to help other people. So, what is that? Because would you really be satisfied with simply moving country to country working different rivers? I don't think you would've made it this far if so.

I think this is the first life decision you're getting ready to make and that's probably scary. It's the choice of what to do with your life and not just what's next coming up like the easy path of good school->banking->PE exit->b school etc.

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Jun 19, 2018

Not that this is super relevant, but I always wondered why traveling is so common for Australians? I'd love to take weeks/months off and just do whatever without a care in the world.

Jun 20, 2018
BubbaBanker:

Not that this is super relevant, but I always wondered why traveling is so common for Australians? I'd love to take weeks/months off and just do whatever without a care in the world.

We are forced to take leave, so usually we take long breaks. And also we have a lot of holidays.

Australians have a culture of travelling a lot. Personally for me, I make a vow to myself to travel to somewhere new when I have a break from work or have a holiday, the amount of things you can experience is endless and I would rather do it whilst I'm young.

Jun 20, 2018

Yeah I've been travelling most of my life growing up for my family's job, but markedly less now that I'm working. I'm definitely trying to change that, vacation days be damned.

Jun 19, 2018

8% is a fucking weak ass bullshit return to hang your hat on. you deserve to die in a cube if that's all you can figure out how to pull

heister:

Look at all these wannabe richies hating on an expensive salad.

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Jun 20, 2018

I think he implied a passive / retail investor 8% which I think is extremely optimistic unless we get QE infinity.

Jun 20, 2018

Yeah I know and I was heated when I wrote that. But my point is, here are the options I see:
-Live like a surf bum backpacker but have a fun lifestyle. No family because families cost money.
-Be some financier character making W-2 money and compounding your 8% a year. You can have a family, but not a lot of fun.
-Be an entrepreneur. Make returns way higher than 8%. Live an exciting life and afford a family. Probably work at least as much as the financier, but you work on your terms. You might also fail.

He's trying to figure out how to have his cake and eat it too. 8% is bullshit cube farm shit

heister:

Look at all these wannabe richies hating on an expensive salad.

Oct 24, 2018

The "you might also fail" is the part holding most people back... a lot of entrepreneurs are sleeping at work and eating Ramen noodles while they bootstrap their companies. I'm ok for the moment working in finance, going to Costco and living in the suburbs with an 8% return.

Oct 24, 2018

Different strokes for different folks. I was miserable in a cube. Costco is dope. 8% is a kinda bad return.

heister:

Look at all these wannabe richies hating on an expensive salad.

Most Helpful
Jun 19, 2018

I love what @m8 wrote.

People bandy the word "balance" around to the point it's become a cliche, but it rings true.

You've painted two extremes in your mind: working and sad, or independent and happy.

News flash: it isn't that binary. You can construct a happy and working scenario. It's hard but possible. Way easier is an independent and sad scenario, and unfortunately I've seen several acquaintances fall into that by walking away to "discover themselves" when there was nothing to discover.

The important thing to do is study the variables that make you happy.

  • Are you someone who has to feel like the business you're working on is pushing the world in a direction that matches your values, or are you agnostic to the outcome that the success of your work creates as long as you're paid well and developing strong skills?
  • Do you prefer a strongly hierarchical environment where the levers for progress are fairly transparent and you know what inputs create outputs in terms of growth in responsibility and promotion, or are you happier in a more fluid environment where success is measured more qualitatively and your trajectory is less linear?
  • Do you love being inside a large organization with massive resources where you know everything you need is in-house and you simply have to invest the time to hunt down who can help you with something, or does that sound like torture because you love the freedom and flexibility of a small organization where you have the freedom to identify and build for yourself the tools you need to get things done?
  • Are you happy having a boss and going to sleep every night knowing the buck stops somewhere else, or are you able to identify that you'll never ultimately be satisfied until you're the only one who can tell yourself what to do?

These are just a few easy examples, there are limitless more criteria you can use to define a grading mechanism that you can always assess a new opportunity (or your existing position) by.

The point is that you need to know what lens you're going to look through. A cheap hostel in Prague is probably a complete no-go through the lens of "I need to find semi-permanent housing for a six-month stay in this city" even though it's probably a great option for "I'm here for just five nights on my seven-month stint between jobs".

Similarly, a middle market buyout job may be really unattractive for someone who comes from a social background that includes parents who will never let them starve, knows they can't stand a rigidly hierarchical work environment, and is pretty passionate about the impact of their work ... while it may be the perfect situation for a first-generation college student who values stability and predictability immensely because he supports elderly parents and low-education siblings.

You could do what @m8 outlined and find a job that has a culture healthy enough to offer real time off and comps you well enough to take real advantage of it.

Or, depending on your risk profile, you could pursue the options you already mentioned.

monkey_brah :

I'm also considering entrepreneurship and search funds, both of which would be intense but give me the flexibility to travel and to have greater autonomy.

Entrepreneurship is very unlikely to give you the lifestyle you seem to dream of.

It's a real grind. Your brain never turns off, you know you can use every single minute of the day to improve every single aspect of the business. It's relentless, and most people with the mental composition to take that path aren't ones to ignore that call.

Secondly, so much business is location-dependent. As a founder, you are 80% of the company at the early stage. It doesn't matter that you've run it for four years, raised a seed and a Series A, have 12 engineers and 6 business staff (sales, ops, etc.). You are the Head Head of Sales that gets called in when the Head of Sales isn't able to push someone across the finish line. You are the Head of People who has to resolve the comp, title, or "I want to do X-function and I'm angry that Tim gets to do it instead of me" issues that pop up. You are the Head of Product, because even when you do get a VP of Product, he has to show you his plans and weigh it against your (and the CTO's) feedback. Traveling heavily doesn't jibe well with this.

The search fund or microfund route may be your very best bet.

The best thing here is that you can run the initial 12-24 month process for this without leaving your current job. Seriously. The first steps are always formation, deal sourcing, and capital raising. You can do the first two of those while employed by someone else. The third is harder.

Formation is a thing you can learn by brute force. You either pay lawyers to teach it to you, or you self-study by either (a) talking to enough GPs or consultants/lawyers/other service providers or (b) scouring the Internet to find primers, white papers, and diagrams.

You don't have to actually pull the trigger on the costs of making your entire web of entities before you move on to the sourcing stage. There are pros to doing so, however. If you do find a deal, you don't have to run simultaneous processes of getting the entities set up at the same time you're trying to raise the equity and debt capital.

Either way, you then go get a domain (so you're not using a Gmail address) so when you're emailing and calling people you look credible. Go get expensive business cards. You'd laugh at how much this matters.

I don't know how much sourcing you're involved with at your current shop, but most people are stupid and mentally delete every deal they come across that isn't a fit for their firm's strategy without wondering whether the deal makes sense to do period.

You will inevitably find some thing somewhere that is mismanaged, mispriced, misunderstood, or has some dislocation otherwise. That inefficiency is your opportunity.

Get in touch, do the calls, uncover all the info, and see if they're amenable to being bought. If they are, congrats, you just sourced a proprietary opportunity. Now all you have to do is get it funded.

There's a litany of conferences that cater to fundless sponsors. You show up and do a speed-dating circuit with a bunch of lenders, equity co-sponsors, or institutional LPs. There's also the entire universe of search fund LPs who are very amenable to a cold email and a pitch. In this hypothetical case, you'd be miles further along than the prototypical two-man MBA team that's saying "commit me money now while I go take two years to find a target". You've got the deal and you're just trying to finance it.

If you want a (relatively speaking) low-effort scenario where you are free to travel, exercise, and generally live your life as you see fit, you actually want to avoid the mismanaged businesses. You want to find a company that's healthy and run well where management is already handling things well and will simply incorporate your board-level inputs as (mandatory) steering advice.

Hell, you could easily do this by finding true lower middle market sponsors and just trawling through their portfolios. You can find decent shops in second-tier or third-tier cities that were founded by people who did banking stints at the Jefferies, William Blair, Houlihan, DA Davidson type places, worked at a fund that isn't too prominent, and live in that region for personal reasons.

This means that their companies have basic operational principles in place, know how to work with a sponsor, and would probably be an attractive bolt-on target for a bigger sponsor-backed business somewhere.

This setup would mean you could have one deal in a fund entity throwing off $X00k in management fees (whether you charge a standard 2% or do a budget-based model) where your involvement is almost purely phone calls.

You are thus location-agnostic and simply fly in for the quarterly or bimonthly board meetings. You can stack BD meetings for your days back in country: other funds (buy the business outright), other prospective capital partners (fund a second deal for you), big companies (buy the business as a bolt-on).

///

I know three different guys (28-37 years old) who are doing more or less this very thing.

One used family money (so he had it easiest). To his credit, he worked hard in the banking job his dad got him (eye roll) and private equity job his finals club alumni handed down. He started b-school knowing he had dry powder behind him for anything cool he found, and he found a classmate to be his partner to start a search fund. The other dude was president of the b-school's pro bono local small business consulting club, so they ended up buying a couple vet clinics they sourced through that.

Second guy started cold-calling businesses as a second-year analyst and found a target before his hedge fund job start date. He stayed at the hedge fund for five months before walking up to his PM and asking if the fund would carve out a slug to do his deal. He had it stitched up beautifully. It was about $50m, he had a unitranche loan committed for 4x, so he only needed $10m for a business with strong cash flow. His PM fired him. Figuring he had nothing to lose, he emailed the CIO/founder and asked for a conversation on his way out. The guy ended up doing it personally, told my friend he had balls and was too smart to stick around as a trader. He still owns the company and has not exited it yet.

Third guy is a funny dude, in an unethical way. He will always find a way to fuck someone. The stories are always hilarious and all of us always laugh with him all the way through dinner, but I wouldn't do a deal with him ever.

He got into an M7 school and then fabricated an emergent family circumstance that meant he needed to defer, completely made up a scenario you wouldn't want to lie about. He got the deferral.

He did the beach bum thing in Southeast Asia (came back with outlandish sexcapades to share, the guy is fucked up in ways that aren't fit to print) and just did a bunch of phone screens for opportunities from platforms like Axial and Bankerbay.

He bought a business for <$10m right after the holidays, comes back to close the deal. He then takes this resume line item ("independently sourced, negotiated, and structured X deal") plus some "nonprofit" he allegedly started in that foreign country and applies Round 3 to HSW ... and gets in (I won't say which). Unreal.

Then he uses smart guys at school who want the resume line item that they manage a portfolio company for a funded and active search fund to run the business. He is legitimately hands-off. Other people are doing the work. He goes and does the whole 'travel with all the rich foreign kids' thing, then sells it to a classmate's family company a year after graduation. That classmate really wanted to prove to daddy that his shiny MBA was worth it.

He is now managing his second and third deals, ~$80m and ~$120m, both funded by that family. Crime (against morality) sometimes really does pay.

///

My point here is that there are all kinds of unorthodox ways to build the life you want. Figure out what that looks like, then spend as long as you have to working to make it real.

The fact that you've got the savings you do means you have literal years of runway to stick with it until it becomes true. You just need one 'yes' for the whole thing to work, then you're off to the races.

Don't get lost in daydreams. Take actionable steps to leverage your skill-set and interests to construct the outcome that fills your dreams.

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Jun 20, 2018

Holy shit, great post. How did the third guy fund the purchase of his first company? The one before applying to HSW. I've always found the search fund path extremely intriguing.

Jun 20, 2018

I don't know, I've never heard. Frankly, I'm not sure I want to know.

Jun 20, 2018

i've been daydreaming about the search fund route for years now. had a guest speaker in a class that did this and recently exited via a sale, which is inspiring. one thing that stuck with me from the session was he spends 99% of his time dealing with people and the rest on ops and everything else.

the stanford materials are all great but as you said following the steps doesnt make you stand out anymore.

the main risk of doing this while at work is conflict of interest and if employers really want they could come after you. the grail really at this point is to go raise a SPAC instead :P

Jun 20, 2018

SPACs are a nightmare if you value privacy, anonymity, or discretion. Being publicly traded comes with its own set of headaches.

"Search fund" has historically meant:
- a 1-3 person team operating on a budget-based management fee
- a fixed duration 'search' period (originally 12 months, in the past decade 24 is the new norm and 36 is not uncommon)
- a transaction below $50m

The line between that and a simple 'fund of one' or 'SPV' is very thin. Of the three examples I just shared, only the first would tell you he runs a search fund. The other two guys will say they are a 'fundless sponsor', which is correct.

The point I'm making is that there's numerous ways to skin a cat. The important thing is that you have a deal worth doing. With that, you have a tremendous amount of freedom on vehicle structure, fee model, and what you call yourself.

    • 1
Jun 20, 2018

Since we're on topic: Do you have any preference for the sectors you'd go after?

Jun 22, 2018

This is pretty awesome and all but...
Dont you end up throwing your money in and end up with a actual business on hand? What happens If it tanks? Thats not a non trivial risk right?

Or is the idea to skim fees off the investors? Sorry i come from a trading background so i dont really understand pe but the part where the business wildly succeeds and does not do worse than before seems to be missing. But then again this is the financial indistry, im ok with skimming 2 and 20 if any

Jun 23, 2018

On your "throwing your money in" comment, the classic search fund model has effectively no GP commit at all. If one is present, it's low dollars. In exchange, the LPs have very attractive terms: a hurdle rate, attractive fee structure, and some other legal minutia.

If you're doing private buyouts of microbusinesses, yes, you're using proprietary capital (and whatever credit you can access).

You're correct you face concentration risk. If the business under-performs, you're hurting. The entire point of the search model is to identify a business with proven operating history, steady cash growth, and management who simply haven't had the vision or relationships to be able to expand to the next level.

This is why MBAs are the prototypical 'searchers': they're young and unencumbered (no wife or kids), have a great rolodex thanks to their graduating class and alumni base, and eager to prove themselves and make a name.

It isn't about the business "wildly succeeding". That's startup land. It's about taking a thing from $10m to $50m in valuation. You'd be surprised how easily doable in a 2-5 year timeframe that is, given the right inputs: healthy but underutilized company, attractive capital structure on the deal, hardworking operators, ability to open doors (rolodex).

This is why the calendar runway is often 24+ months. It all boils down to the caliber of the company you're buying.

The second guy in my longer post above found his target vertical from a buy-side deal he ran. He was at an 'elite boutique' and on an industrials deal. A large sponsor-backed company was doing a bolt-on, and he had to get smart on the space. All the work he did showed him the multiples that some of these $50-200m deals were getting closed at.

He literally just took that list of comps and started hunting for tinier versions of each successful acquisition. It was a brute force task, but he found something that he knows sponsors or their port-co's will pay 10x+ for.

The reason he still owns the company he bought is that the sales cycle in that manufacturing vertical is 6-8 quarters (buyers want to see you at the big annual trade shows two or three times to know you're going to stick around), so he hasn't yet seen the hockey stick spike in revenue. He invested heavily in an expanded sales team, and he has them leverage intros he's able to pull from his former fund's CIO who knows a bunch of PE fund guys who own the types of businesses that would use his business as a vendor. That spike will come.

In short, if you can find the right company, are able to map out a clear path to exit, and that path ideally includes some information asymmetry you're able to capitalize on, you can grow a small business into a middle market business.

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Jun 23, 2018

Wait so your telling me these MBA kids and pe guys are actually able to learn how to run or improve a business? I don't mean that in a sarcastic way, I really appreciate your post! Im just more used to dealing with numbers and models where everything basically comes from a random number generator. I mean I'd like to think that you can figure out how to run a business if you have enough common sense and hustle but I always felt entrepreneurship/starting a business is heavily affected by luck. I don't really know much about how pe works but your post just made the whole thing sound way to easy

Jun 24, 2018

Yes, I am.

You would be surprised how common-sense the majority of operating decisions are.

In operating roles, the differentiators between top performers and the crowd are all basics: work ethic, perseverance, communication skills, management (delegation, seeking inputs, providing feedback, creating appropriate organizational dynamics, developing culture), and the like.

Just doing a steady B+ job (hopefully flipping into the A-/A at times) at these things will get you steady single-digit growth year-over-year.

  • Know that you have an annual review with your second-largest client coming up in three months? Put it on your calendar, bring in the account manager, talk about the feedback he's logged from the client, and ask what his suggestions would be if the goal was to double the contract size. Chances are there's low-hanging fruit that he never had the moxie or initiative to suggest proactively, and if you identify it with enough calendar runway, you can add whatever feature or capability the client has a high probability of loving to see before that meeting. Boom, 15% extra revenue out of an existing client.
  • Hire some young and hungry MBA student (or three) from the closest competitive school nearby to come on board as an executive swat team for the semester. Give them a prompt to review all your active clients and do a pattern analysis. Maybe they come back at the end of the quarter with some data that out of six software products you offer, the average client only pays for 2.5. This is a simple cross-sell opportunity. You can redirect your sales staff to spend 20% of their time reconnecting with existing and happy clients to do demos of your other products they don't use. Maybe half of those products they aren't currently paying for are products that came out of development after those clients were already closed and paying.
  • Figure out what the largest events in your industry are. The conference circuit is mindblowingly large. There are probably half a dozen or more annual events with 2,000+ attendees that aren't even on your company's radar. Sign up for them a year in advance like everyone else does. Email or call the organizers and ask for their help filling out your meeting schedule. This is their job, they literally have a team dedicated to this; they want their attendees to extract maximal value from the conference. Make some brand-new marketing material for your business: a one-pager/teaser and a brief summary deck. Email it to the people you'll be meeting and try to do a half-hour phone call ahead of the event. Develop the relationship across the next year or two (everyone goes to the same events, you'll start to recognize friendly faces) and some business will inevitably fall into your lap.

I could go on. The point is that most of the levers of small, compoundable success are fairly evident to anyone willing to pay attention to the company.
- Sell more of the same stuff at the same size but to new people.
- Sell bigger sizes to bigger players.
- Find new stuff to either build internally or acquire inorganically so you can sell it to your existing people.
- Find a way to do more with less. (Automate the plant so you can fire people; unleash your existing BD team on bigger players so revenue per employee grows; conduct a value analysis to see if your product can support higher pricing to existing customers; etc.)

Insight and vision, on the other hand, are the logarithmic inputs. They are uncommon traits and can't be predicted. Inspiration strikes when and how it chooses best. A person can prepare himself for the most favorable odds of inspiration by investing heavily in meeting the most interesting and capable people, reading the most relevant and stimulating material, and developing strong mental fitness (neuroplasticity, healthy sleep patterns, developing 'openness' [look up the five core personality dimensions], etc.), but at the end of the day it's a trait that can't be quantified.

You're correct that luck is a tremendous factor in starting a business. In operating an established business in a day-to-day role, however, common sense and hustle really do carry you damn far.

It isn't easy. You have to manage your psychology (see the brilliant comment from @m_1 below). The stress can consume you and prevent your brain from ever turning off. It interrupts your sleep, clouds your thought, erodes your health, and drains your energy.

Few people are dealing with a similar problem set, so it's often hard to find qualified advice. Those who can offer it are facing identical bandwidth constraints as you are, so when you want an answer that very day before the boulder rolling down the hill absolutely obliterates you, they haven't even emailed you back. On top of that, the natural instinct is to avoid showing your narrow peer set the duress you're under, so you have to decipher who's worth revealing any level of honesty to.

The level of bullshit you get subjected to is inspiring. People will steal from you (inventory, long-term clients, an office you wanted to lease...), treat you poorly (abuse or berate you for a problem they created, lie about you either intentionally or accidentally), waste your time (cancel a meeting on you while you're on the plane to their city), string you along with a bunch of nonsense that wastes your time, subject you to their personal problems, and create legal liability you have to guard against.

Again, it isn't easy. I don't mean to paint that picture by any means.

All that being said, if you have the risk tolerance, owning your own thing (note that I didn't say starting it necessarily) can be a brilliant way to control your own destiny and get paid quite handsomely for it in the end.

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Jun 27, 2018

This is brilliant, thanks for sharing
Just one more question, what do you think of managment consulting people then? Again from they trading side we find it I incredulous that fresh grads from university are expected to be able to provide advice to businesses that have been around longer than their parents and collect a fat paycheck in return. How do you feel about them?

Jul 2, 2018

If you read the prior chain of comments I've made here, the core takeaway ought to be that smart people who work hard tend to be able to improve the performance of whatever mousetrap is on the table in front of them.

Management consulting isn't a field I was ever interested in (McKinsey breathed hard down the back of my neck in undergrad), but I can recognize the most glaringly obvious fact about the industry: it attracts, trains, and grants experience to very smart and hardworking people.

"Fresh grads from university" aren't expected to contribute the way an experienced Partner or Engagement Manager can. They're expected to work really hard at information acquisition (talking to all the key constituents inside the client, reading all the dusty files sent over, pulling every conceivable industry report possible...) and process management. That's it.

(The reason they collect a fat paycheck is because the consultancy wants to retain them after making the non-trivial investment in getting them on their sea legs. Unfortunately [for the firm], few do ... but if they ever stopped offering the comp, all the Ivy League summa cum and Oxbridge firsts kids would stop banging down the doors to get in.)

The average consultant who leaves MBB with three years of experience is not equipped to be the CEO of a FTSE 100 name. He very probably can help a $15m manufacturing company triple its valuation in a few years, though, and do it through simple stuff like I mentioned in my last comment.

    • 2
Jun 25, 2018

@APAE

really great advice, well-articulated examples of how luck, fortune, the light and dark side all play a role in meeting your highest intentions.

was a truly inspiring read. thanks, I really needed that.

Jun 25, 2018

Bigtime salute coming from someone whos worked at a search fund. Would add that you could also leverage undergraduates from your alma mater as interns to help out in the search process. The "principal" of the search fund I was interning at basically got 20-30 hrs of work per week FREE off of 4-6 interns EACH where we were just searching through thousands of forsaken companies on his behalf. Wasn't at a target school so the principal got away with it by promising connects into IB which he/she barely if at all did. Not the most ethical way, but the she/he bought a company & paid nothing for HUNDREDS of hours of our blood, sweat, & tears. lol

Don't break yourself on the way to making yourself

Jun 25, 2018

@APAE

One used family money (so he had it easiest). To his credit, he worked hard in the banking job his dad got him (eye roll) and private equity job his finals club alumni handed down. He started b-school knowing he had dry powder behind him for anything cool he found, and he found a classmate to be his partner to start a search fund. The other dude was president of the b-school's pro bono local small business consulting club, so they ended up buying a couple vet clinics they sourced through that.

Are you referring to GSP?

Jun 26, 2018

No I was not, but I loosely know one of those (GSP) guys too and I'm amused at how identical their story is, come to think of it. They are primarily franchise owners.

The guy you're thinking of has a younger brother doing the exact same thing, although in a different industry. Check them out too.

Jun 27, 2018

Haha I will thanks

Jun 22, 2018

I was in the same position except I was in trading and I wanted to do something more entrpreneurial instead of travelling cause trading just feels stupid after a while. If it didnt work out I planned to go back to school and do the whole dance all over again.

I punched in some figures and came to same conclusion as you, income/raises forgone and rate of return which is what really causes the oppotunity cost to blow up.

I quit in the end. My view is the markets are probably going to retrace a bit anyways during these past few years (but honestly who knows) which reduces pv quite a bit. Plus trading at least is probably going to be more Tech focused in future anyways and My experience could help me get back in, whereas there is a risk of becoming redundant If I was just another old school punter on the desk

Jun 22, 2018

Here is my cautionary tale and a year of very questionable judgment.
I am twenty-seven years old. I left my NYC job about a year ago dealing with similar burnout to move into the mountains for 1 year. I didn't feel international travel was rewarding over an extended period as it doesn't suit my personality- I need a home base. The first six months were bliss, I would wake up each day, spend 2-3 hours on my projects and then enjoy the rest of the day hiking or skiing or doing chores, which I came to enjoy. I started meditating and committed 1-2 hrs to that a day. It was the purest form of life I've ever experienced.

Now it is a just less than a year later and the loneliness has gotten to me. I have a few months left on a lease and I am not planning to leave until summer is over. That said I do miss quite a bit about NYC, but subway heat does not excite me. I was in the city yesterday and was reminded what it is like wearing a suit in the midst of summer. Part of me wants it, but there is another half that I am not sure is committed to getting back. I did not have the tact to leave myself a clear path back into the workforce, so I am starting anew. I've had some success phone interviewing for corp. finance/strategy roles although even getting back to NYC to interview is a hassle.

Leading up to this point I had have literally saved every dollar I've made outside of basic living expenses. I was living for less than $20k/yr in NYC and working such extreme hours that I didn't have time to spend. I'd treat myself to a few beers on the weekend and a splurge spend things like a guitar every couple months to keep me from burning money and keep myself in the apartment. I also became obsessed with FIRE during that period and that ultimately consumed most of my time. As I look back at life, my views of money have led to a lot of poor decisions.
Over the course of all this, I made some investments and took a little risk (it's nothing more than dumb luck or being right place right time, but I feel any decent finance professional should know how to allocate and achieve greater than 8% and do a decent job of hedging it with minimal effort) and achieved pretty crazy returns on my savings with a decent portfolio and a single great investment (XPO Logistics which I purchased for around $20 a few years ago and more this time last year for $50 as it really started to pick up steam).

When I first moved away I thought I was smarter than everyone and that I didn't need anyone. The reality was that I'd become a toxic person to be around. My friendships and relationships were suffering as I pushed myself into isolation and in the past few weeks my long-term girlfriend and I have decided to part ways as she no longer wants to be a part this life. In additon to the distance and her being in NYC we had some personality differences, I am not sure if that was a function of this stress and choice. Given the past year, I have pretty much lost all optimism regarding future endeavors. I am isolated in a way most cannot comprehend. My only interactions are with bartenders and grocery clerks. I look forward to them.

I am stuck in a weird purgatory. I have enough to live somewhere with a general store and acre of property, but not enough to live in NYC without taking a big risk or finding a new job. As much as I want a challenge, I am not sure how this challenge will come to me. I am not sure if I am cut out for the corporate grind any longer. And even risking money via markets seems precarious in the next five years. It's a hard dichotomy to overcome because this freedom I worked so hard for doesn't feel as I'd imagined. Deciding to move back is a struggle though because it always feels like you're being exploited in NYC.

As I research entrepreneurship I feel more and more uneasy with the idea of risking a significant amount on something that could leave me defeated Also the hours would be worse than before. The only other option would be purchase an apartment and use HELOC to invest/speculate, but that sounds crazy and risky. Worst case scenario would be debilitating.

The decision really was very shortsighted on my end. I was feeling stressed with work and isolated myself during 5 years of my social prime. Once I'd destructed everything around me I ran away thinking society was the problem. I realize it's me now.

As much as you're looking for a change, find comfort in security and find comfort in challenge. As the previous poster said, happiness/sadness isn't binary. Happiness is the value of your relationships and the people you surround yourself with and working to be around those people may be an unfortunate reality for many people. Burnout is natural, take breaks, plan ahead, and always be working towards something. Moderation is the key to everything.

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Jun 22, 2018

I hope you find something to get you back into the swing of things. Best of luck to you.

Jun 25, 2018

Thanks for sharing juan_ton. I've been interested in the FIRE movement, and your post has given me some new perspective. Have a few questions if you don't mind answering.

The lifestyle you wrote about in your first paragraph is something I dream of. A simple disciplined life while working on various hobbies/projects has been my idea of happiness.

  • In the first half of your post, it seems like what might have been missing are the social aspects of life. If you had that, how differently would that change your perception of your time in the mountains?
  • You mentioned money being a concern. If that was not an issue, what would your next step be?
  • In a scenario where your able to satisfy your social desires and have enough money, what would your next step be and do you see yourself finding fulfillment?

Thanks in advance

    • 1
Jun 30, 2018

Yes, I am missing the social aspects of life and as I look back, the darkness really presented itself as two things unfolded. The first was ski season ending and the second was the erosion of a long term relationship. The first sounds pretty cheesy, but riding chairlifts and meeting new people everyday provided some excitement and sociality. The relationship stuff was tough to handle, I felt it was partly due to the stress of being apart, and I can't help wondering if another person would have been more accepting and understanding of the circumstances. I believe the answer is yes. I've come to the realization it's for the best and I am looking forward to finding someone new. Had things been different and the two of us had been on the same page (we'd always talked about opening a bakery on a river somewhere with a house attached in the Northeast or Rocky Mountains) then I believe I could have achieved fulfillment on a professional, personal, and social level in my current state.

I still feel it was an incredibly rewarding experience and have lots to take away from it. In addition to the self awareness, I experienced the best skiing of my life. I don't want people to read what my initial post and take away that working towards a simple life is futile. DO IT, but have a long term plan and realistic expectations. Self reliance is incredibly rewarding, but it is hard for me to stay motivated without any support (be it work, friends, family, SO ,etc.) for a sustained period.

If money were of no concern at all, and I had enough to provide a high quality of life for myself, my SO, and future children, then I would open the bakery/restaurant (maybe I would call it the Benevolent Baker) on a river somewhere while maintaining a residence in NYC . I would meet the perfect girl have kids and send them to the best private schools while simultaneously giving them some pretty unreal life experiences. I'd operate the business as a charity and hire convicted felons. I'd travel back and forth often and possibly open a very small restaurant in NYC with the most sincere attention to detail you've ever seen. I think you'd need $10m to live comfortably for perpetuity as a family without an active income stream while having enough to actively pursue worthwhile personal projects.

If I moved back to NYC to satiate my social desires after realizing that is the only place I am happy right now, but did not have to worry about money, I would probably become a middle school algebra teacher in Bedford Stuyvesant. The salary is too small to consider now, but I feel that would be a rewarding way to contribute. The kids are still young enough to be impressionable and showing patience in a subject like that and showing them they can "get it" would change lives. I watched a Ted Talk the other day about an illiterate inmate who taught himself to read and invest. That made me think, teaching financial management in addition to regular lessons would change lives for those who wouldn't otherwise have motivation or recourse. After a few years I would open some kind of creative space/restaurant ( I have a passion for a specific style of food and would incorporate above plan) that could act as a platform for my friends to launch their ideas, show their art, play their music.

The last two questions were very similar, but it was fun exploring hypothetical, twice. Yes, I see myself finding fulfillment at some point in the next 5-10 years. I hope I have answered everything and provided some insight.

    • 1
Jun 30, 2018

To summarize that all, I think fulfillment on a personal level comes from adding value to the people around me. I know what it is, I just haven't figure out how to get the best ROI quite yet.

    • 1
Jul 1, 2018

Thank you for sharing and being open. Best of luck finding that perfect balance.

Jun 25, 2018

Great post. But don't you have other options than NYC? If you like the mountains and nature why live there? I'm sure there are some solid finance gigs in Denver and maybe even SLC.

Jun 29, 2018

in response to tengleha, i see life in a very binary way, ie. live in the mountains as a hermit/family man or work towards "success" in New York. i don't think denver or (especially not) slc make acceptable surrogates, the mountains are always close enough. There is something about the surrounding stimuli/mentality and my family that make it desirable in New York, so city life without that would be meaningless. it just comes down to having the balls to find something new that pushes me out of my comfort zone.

Jun 30, 2018

To summarize that all, I think fulfillment on a personal level comes from adding value to the people around me. I know what it is, I just haven't figure out how to get the best ROI quite yet.

Aug 1, 2018

Update: I am back at work in NYC, I thought I'd found a position I would like but it's the same shit. If you have the chance to do something unique and push yourself out of your comfort zone, take it without hesitation. Also, learn to save and invest your money NOW because compounded interest can change your life.

    • 1
Aug 1, 2018

Thanks so much for the fulsome posts and for the update. OP here. Would love to hear more about your journey (perhaps as its own post) towards FIRE and your career path.

Jun 22, 2018

Dude...you could die tomorrow, and THEN what would you have? Nothing, because you'd be dead. You don't have to blow 300k on travel....Spend 30k, circle the world in a backpack, and settle down in a back-office job as a business manager for the equities technology team. You're overthinking this.

Jun 22, 2018

Appreciate the advice, but you misread this. What I mentioned (not as a suggestion but rather a possibility) was spending nothing (beach bum, with income matching expenses) and letting the money grow. Definitely not spending the whole $300K on some outlandish trip.

I've already done some world-circling, and I'm trying to find the right mix.

    • 2
Jun 22, 2018

When I was in my early 20s, I had a very similar set of ideas on how I would plan my life, especially when it comes to investing. But then the 2008 financial crisis happened and that blew all of my careful financial planning out the window. When the market dropped by about 60%, it wiped out roughly 10 years of gains. Lots of retirements were ruined and many young folks' college savings accounts were destroyed. Witnessing this sunk in a reality that no matter how hard you plan and calculate your risk and returns, some black swan event beyond your control can happen at an inconvenient time and wipe out all over your plans irrespective of how much progress you made over the years.

I've also lived through life crisis after life crisis - my wife's pregnancy, unexpected medical bills, unemployment, sick parents. All of these family related problems made it impossible to build up a nest egg no matter how hard I planned.

My best advice for handling for finances for 20-somethings is to live within your means and save, save, save. Then invest that money in a variety of investments - not just stocks and bonds, but some gold coins, silver - other hard goods that retain value over time. You can even invest in tangible hobbies like LEGO sets as they can be resold at a higher value years later - that way you get an asset you can have fun with too. Try to build a passive income stream - such as owning a rental property. (I'm not quite there yet myself, but it's a goal.) If you can own your residence, that will save you tremendously because you won't have to pay a mortgage or rent. Most importantly - STAY OUT OF DEBT.

As a married guy, I urge you to understand that marriage is the worst financial decision that could be made by a young man living in the West because we live in the age of no-fault divorce. I got married at 25, and what I didn't anticipate was how much harder it would become to make financial investment decisions because your income is no longer yours - its "ours" (i.e. hers). And even with a level headed wife, when you are in a marriage, that woman has the metaphorical gun of the State pointed at you at all times. A divorce will cause nuclear level damage to your life plans. She has the power to take half of your assets, your kids, your house (and make you still pay for it), and you will be paying her alimony for many years after the divorce is settled. Marriage puts your carefully crafted life plans into the hands of a family court judge. Many women also cause their ex-husbands severe legal trouble by filling for restraining orders during the divorce process - which enables the government without due process to seize your firearms and tarnish any background checks run on you by labeling you as a domestic abuser. Look up the screwy laws on alimony and separation of property, which vary widely from state to state. It's terrifying. And the courts are rigged against you because you are a man.

If you want more on this topic, look up the Youtube channels Entrepreneurs in Cars, Sandman, and Howard Dare.

I hope this helps you see the iceberg that me, as a 30-something, wishes someone informed me about 15 years ago.

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Jun 22, 2018

Entrepreneur here.

Bringing this up since you mentioned entrepreneurship and flexibility. It's a bit of a two way sword and I want to provide you with a little bit of perspective.

The good?

I live very autonomously as I have no investors to answer for and make very very good money at a young age (probably ~$1M this year) but I definitely am preoccupied thinking about my business 24/7 and like the others said, no matter the size of your business, you end up dealing with random black swan events all the time. It's a complete grind until you start making money, and then the grind morphs and becomes more stressful once you're responsible for employees. Feels weird to say this but I really do feel like I have a responsibility to ensure the company succeeds so the work my team puts in bears fruit and they are able to put food on the table for their family.

Before diving into the negatives I should preface this with the fact that I'm very happy with what I do and I was happy most of the time while working. To me, there's nothing as exciting as building your own company from scratch and changing the world even if it's done in a small way.

Here are some examples of the bullshit I've had to deal with:

  • Employee came to me effectively asking for rape counselling. I was 23 or 24 and had no idea fucking idea WTF to do. I just tried to be empathetic and told her the company would be happy to pay for counselling + I'd help her source a psych/counselor.
  • I woke up one day and checked out inventory levels...and there was $1M+ in inventory missing. This was a lot of money for me at the time and was a total make/break situation for the co. Ended up locating the inventory but it was very stressful.
  • Google entrepreneurship and isolation, it's a real and very weird thing. You can't talk to your employees or anyone who can relate for the most part to anything your business is going through. It would freak your employees out and they'd quit. You also can't appear to be weak at all as they rely on you and assume you have everything in check. Go ahead and complain to your girlfriend or wife and she 100% will not get it. She'll say something nice but she doesn't really know what it's like knowing that one fuckup will mean multiple people don't have jobs anymore and you'll likely end up in financial ruin.
  • I used to have a severe back problem called spinal stenosis and degenerative disc disease. Still have both but they aren't as severe. Anyways, sometimes my pain would get so bad I couldn't really walk and my feet would go completely numb or I'd throw up because the pain would be so bad. Didn't really have a choice but to keep working though. For a while my diet was primary oxy or gabapentin with something to keep my energy levels high like Adderall. Couldn't take a break because my company was on the brink of finally bringing in good money and it would mean disappointing my team/employees.
  • PayPal froze all the money in our account that we took for preorders and we needed it to pay for inventory and fulfill orders. Luckily I managed to convince them to release about 20% of the cash and the rest I borrowed from a friend who was a drug dealer. Incredibly stupid but you don't have credit at 18 so where else are you going to get $25,000? It's a tiny amount of money for me now but back then I had no idea where to source that.

Now, on the plus side, I can do pretty much whatever I want at 25. I've focused on hiring good management for my main company and have taken more of a strategic/capital allocation role while letting my team focus on dealing with the daily bullshit, but a lot of it still comes up.

Keep in mind too though that successful entrepreneurs are an extreme anomaly. I have a few friends, well former friends, that used to be super into entrepreneurship when we were younger and they either fucked up in a big way and gave up (one killed himself after going bankrupt) or they have some shit job somewhere working for peanuts saving capital for their next venture.

If you're in PE though and have cash, then a lot of this probably doesn't apply since you'll have an easy time raising capital. I was a dropout that bootstrapped so it's a different game.

Jun 23, 2018

I've never heard of the isolation issue before, but that's an interesting issue. You share some perspectives here not discussed a whole lot in the mainstream. Great post!

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Jun 23, 2018

Thanks. It's probably the thing that's been the weirdest to deal with. I can't really relate to people anymore which sounds like a bad thing but doesn't bother me. It's just different.

Jun 24, 2018

Isolationism is a real issue for all the reasons you mention. I actually joined a business coaching group that is only available to entrepreneurs running their own company making $X. The class met quarterly, was expensive and focuses on increasing revenue AND free time. Got a lot out of it but by far, the biggest gains I received was connecting with 20 or 30 other entrepreneurs to discuss our issues. I used to think of it as expensive group therapy but I really looked forward to the meetings. All different ages, all different types of businesses. Amazing how many similar growth and employee issues there are.

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Jun 25, 2018

Yeah I decided to eat the ridiculous fee and join EO a few weeks ago. Local chapter was $11k but should be worth it.

Jun 25, 2018

That's a great group. I was in Strategic Coach for 7 yrs at about 10k per yr all in. That's a lot of therapy. Been out for about 7 yrs and I miss it but still get in touch with some of the other freaks (I mean entrepreneurs) .

I have to say I loved those meetings and the dinners before and after. It was inspiring. It fundamentally changed how I think and operate. Probably should go back as the new theme is running a "self managed company" which sounds good to me.

You'll meet some GREAT people! Good luck with that and have a blast.

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Jun 24, 2018

what kind of business do you run? would make an awesome thread.

Jun 25, 2018

Agree that it would be interesting to hear about the company you've built.

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Jun 26, 2018

I have a few different consumer brands + eComm retailers. All direct to consumer.

Jun 25, 2018

It really comes down to what gets you excited. For some people, they can't be happy unless they're traveling and exploring. For others, they see that as aimlessly wandering and can't be happy unless they're working to build something (be it a career, family, a company, relationship, etc.). It's one of those things like individual diet or sleep cycle, where there are some things that are bad ideas, but there's no silver bullet that's applicable to all.

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Jun 26, 2018

Well said!

Jul 2, 2018

Thanks! :)

Jul 2, 2018

Probably working this July 4th due to a live deal. When I start my search fund, interns will have every holiday off!

Jul 12, 2018

Hah lofty aspirations

Jul 12, 2018

Proper communication / process management would go a long way towards that goal

Oct 24, 2018
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