Friday, July 27, 2012

What Is It to Succeed?

In his Democracy in America, Alexis de Tocqueville asserts that "In democracies the love of physical gratification, the notion of bettering one's condition, the excitement of competition, the charm of anticipated success, are so many spurs to urge men onward in the active professions they have embraced, without allowing them to deviate for an instant from the track." While I can't speak for all democratic countries, I certainly think the "charm of anticipated success" has spurred many Americans, in particular, to create their own businesses. 

Whether these businesses end up being profitable in the long-term is frequently beside the point.  According to the U.S. Bureau of Labor Statistics in 2005, only 66% of small businesses remained in operation two years after opening, and only 44% remained in business four years after opening. Still, 100% of these businesses were started by people who expected to succeed.

See? It's not your fault, Kristen Wiig in "Bridesmaids!"
Cupcake shops have tough business models.
I guess this is what's intriguing to me. When the majority of small businesses fall apart in under five years, how can so many Americans expect success?

This topic was brought to mind as I was reading this article about how Curt Schilling, former baseball player and probable future Hall of Famer, started a video game company because he was looking to continue making money after his retirement from baseball.* All in all, he poured over $50 million of his own money into the company, to say nothing of millions of dollars in loans that the State of Rhode Island gave him.

As you can probably guess by the fact that I'm writing about it, the company went belly-up. Still, even as the company was crumbling around him, even as million dollar plus checks were bouncing, even as pregnant wives of employees were finding out at doctors' offices that they no longer had medical insurance, Schilling remained optimistic. In thinking back on the experience, Schilling said, "I had to beat the Yankees three times in nine days. I never doubted I was going to do it. My whole life was spent doing things that people didn't believe were possible, because God blessed me with the ability to throw a baseball. And I carried that same mentality into everything I did here."

In short, he expected to succeed, and this expectation cost him (and many of his employees) everything.

In bringing this up, I don't mean to subject Schilling to more ridicule than he's already received (as if Curt Schilling gave two craps about my humble dot net). All I mean to suggest is maybe, just maybe, we all shouldn't expect to succeed quite so much. Maybe we shouldn't start video game companies without having a background in programming. Maybe we shouldn't bundle good mortgages and bad mortgages together and sell them as a financial instrument. Maybe we shouldn't run for President and refuse to share our tax returns.** 

Look: I'm guilty of this thinking as well. I audition for plays expecting to get cast. For the show that I'm in now (which is a great show, a lot of fun to be in, and furthers my professional goals), I have to drive an hour and half round-trip to get to performances. So, I work from 8-5, rush home, drive up to be there by 7, get out by 11, and get home by midnight. Wash, rinse, repeat.

Look: I know a person has to work hard to get anywhere in the world. I even think this is reasonable, just, and equitable. However, my question is, at what point are we defining success? In my case, is my great success getting cast? Getting to rehearsal on time? Getting to opening night? Getting to list a decent credit on my resume?

And how much is that success worth when compared to getting to spend time with my wife? This variable has been sadly lacking for the last several weeks. I miss spending good time with my wife.

Success and reasonable living seem to be at odds.

*It's like rich athletes who go bankrupt have never heard of an index fund.
**To be fair, I don't really like either candidate. I was just having a difficult time finding an expectation of success comment for the President.

Monday, July 2, 2012

Lending Club Update - July 2012

¿Que Bueno?
Since my last Lending Club update, I am significantly closer to getting back in the black. My new total to the right, while still negative, is a lot closer to zero than it was in April. Yes, I realize the irony in looking forward to a 0% rate of return.

Why has it improved so much, you ask? Well, a limited portfolio like I have is a double-edged sword. On the one, pointy end (they'll cut you, fool), having only a small number of notes at Lending Club means that if one of your borrowers stops paying, your rate of return, like mine, will probably fall over 20%. On the other end (the end where I do the cutting), if everybody else you lend to pays on time, your rate of return will, relatively quickly, work its way back up.

So where does that land me as far as sticking with Lending Club as an investment? I actually plan to keep buying.

You see, I'm something of a contrarian when it comes to receiving bad news (though not nearly as much of a contrarian as Nelson -- how's that RIM stock working out for you, buddy?).* I think that most people in my position, after seeing a double-digit negative return figure in an investment, would probably stop putting money in that investment vehicle.

Not me. In the same way that when there's a plane crash, I actually feel safer getting on a plane the next day, now that I've had my first Lending Club default, I'm actually eager to keep putting money into what I consider to be high-quality loans. While it'll still be a limited investment (the biggest chunk of my investing money goes into my 401(k) right now due to my employer's awesome matching program), my plan is to get up to 50 notes in the next few months. I'll then reassess where I'm at.

What do you think? In my position, would you have stopped investing? Let me know if the comments.

*I thought about including a smiley face here to indicate that I was joking, but I figure we're all big boys here, and big boys don't need to use emoticons.**
**One might also argue that big boys don't need to use footnotes to explain when they're joking. To this harrowing assessment, I have no retort. In the words of the immortal Phoebe Buffay, "I have tasted my own medicine, and it is bitter!"