Kalzumeus Software Year in Review 2016
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After following Patrick's writings and stories for a number of years now, I can confidently say that his relentless transparency has been one of the greatest gifts I received in the industry. His advice may not strictly work for everyone in the literal sense, but I believe that diligently attempting to use his suggestions as a template is, itself, a highly productive exercise in programming and business.
There is one particular note I want to make about patio11's success: Patrick is a phenomenal marketer with remarkable business savvy who happens to be a programmer. He is not primarily a programmer, which is evidenced by his recent work at Stripe and the work he is best known for on HN (essentially, writing about shipping software, not the software itself).
This is not to say he is not a good programmer - I simply can't comment on that, though I have reason to believe he is after seeing Starfighter's game. Rather, he leverages that skill set as a means to an end, not an end in itself.
I think this is a really important point to make because I see many people who try to pursue significant career success by e.g. ranking up on TopCoder, or open sourcing impressive software. While those things can lead to success, there is a vast, long tail of people who are very capable programmers with no recognition doing those things. Healthy self-promotion and efficient improvement/maintenance of one's technical skills has a much higher probability of success than attempting to become Fabrice Bellard.
This is demonstrative - in my opinion, the sum of all of patio11's advice can be summarized as follows: Don't be a programmer, be a $SOMETHING who happens to program, and program well.
Fucking this. I battled for years thinking I was less of a programmer because Im also a marketer. But holy shit does the combination work like a charm. It is like a 1-2 punch that knocks out the competition. Downright unfair. I love it. When companies that work with me realize that I can work in defining, building, shipping, and selling the product, they dont want to let go. Its such a powerful combination of skills that I encourage everyone to acquire them. If you code and learn to market there is a crazy amount of things you can do to make money. Its ridiculous how much.
Beyond that, you can learn a ton to start just by reading things like the Google analytics or AdWords/FB help docs. All of them.
Everything else is all about experience and learning what works and what doesn't and why. There's a lot of good stuff to read out there if you can separate the good stuff from the "gurus" peddling their latest course. Industry sites like Marketingland, ClickZ, industry subreddits like /r/ppc and /r/analytics, etc.
Can you also recommend any resources that helped you become a better seller and marketer?
Books, lectures, etc? Thanks!
Another example would be outright ordering products, warehousing, selling, and fulfilling the orders. That is riskier, but the rewards are much higher.
As far as how to become a better marketer, sadly, you just have to do it. With practice, you will find a style that works for you and that you're comfortable with.
Point is that you dont have to sell onlinem or setup a website, store or anything to start learning. My first experience was selling stuff from a catalog. I was 14.
For many technical people it's quite exhausting to preach what they think is nonsense.
Think of who and how people benefit from your project.
"Become very good (top 25%) at two or more things."
http://dilbertblog.typepad.com/the_dilbert_blog/2007/07/care...
HN Discussion: https://news.ycombinator.com/item?id=12226242
Off the top of my head: Leadership, Public Speaking, Persuasion, Writing, Storytelling, Design, Mental models, Systems thinking, Mental focus, Nutrition/Exercise, etc.
Getting decently good at one (or more) of these won't take too long and will have immediate benefits to your current work and even your personal life.
Maybe try to find some aspect of marketing that you are interested in; it's a large field full of topics I'd imagine programmers would find interesting.
–Accounting
–Risk analysis in banks or fintech companies
–Statistics ("Data Science")
–Lots and lots of other jobs that have "analyst" in the title, e.g. marketing analyst
Anecdotally, supply chain and business operations are two big areas where I have success.
You don't even really need any domain knowledge to get started in those fields. I did a 6 month internship at one of the world's largest companies that has a consistently top ranked supply chain organization. They had the expense of a 10 person recruiting team (all expensive line managers and directors, not HR personnel) coming to campus for 3 days, and only gave offers to two of us. And I explicitly said during my interview I knew jack all about supply chain. Their response was that supply chain was their expertise and they had training for that if I needed it, but my general analytical skills and Excel knowledge were far more rare (in their applicants).
Turns out they were piloting a new inventory management methodology and were using Excel-based "models" to trial it manually at a dozen manufacturing plants before deciding if it was worth the 8- or 9- figure cost to have SAP make that an official model in their system. It involved running batch exports from SAP every morning, putting that into Excel, updating the figures, and sending that out to the plants. But the pilot had scaled to a high volume plant that basically maxed out Excel, and they were struggling to make it work. All I did was essentially refactor a lot of logic to do batch operations (made a few VBA scripts that connected to the Excel spreadsheet with an ODBC connection and ran a series of SQL statements instead of in-cell functions).
It's been about 5 years since then, and I still get calls every few months for contract work essentially doing the same thing (Excel got bogged down -> needs a refactor).
Part of my day job involves essentially doing the same thing, but in a more generalistic sense on business operations. Process engineering is a portable skillset across verticals. Whether it's in supply chain, sales, marketing, or operations, there's always a bottleneck that's preventing growth or efficient resource utilization. I am a piss-poor programmer. I have never once been hired or paid explicitly to program, and I don't have enough experience in any particular language to pass even a junior level programming interview. I get paid to make irritations or problems go away while causing the least amount of friction utilizing whatever constraints exist. In the course of doing so I've tweaked C# and PHP programs. I've written bash, awk, perl, VBA, Python, and NodeJS scripts. I've written a whole lot of SQL. And I've refactored an incredible number of Google Sheets and Excel workbooks. I'm not valuable because I can program; I'm valuable because I can reliably and consistently resolve whatever issue is thrown my way in a self-sufficient manner, and ramp up on whatever knowledge or tool is needed to do so incredibly quickly whether I have prior exposure or not. I'm not a consultant that provides a report that then requires additional resources to execute; I provide a working solution (or prototype) that immediately solves the issue. And in the case of a prototype, provides a stopgap solution that (crudely) solves things in the immediate term and provides an explicit, working example of the functionality that their engineering resources need to incorporate into their internal tools/processes for a long term fix.
One piece of advice that seems to serve me well: people hate change. And people also tend to hate relying on others to perform their job. The greater the change, or the more reliance on a programmer to make modest changes to a process, the more resistance and ill will you'll create. Engineers thrive for perfection, and invariably lean towards "optimal" solutions that are very invasive and supplant existing practices, rather than supplementing them. patio11 didn't create an entire Customer Management System or appointment management system that had automated appointment reminder functionality. He created a simple system that supplemented whatever process and system was already in place and added incredible benefits with minimal additional steps.
I've taken 50MB Excel reports that took a couple hours to pull manually and reduced them to <1MB and updating automatically with data connections. That's real time savings.
Then there's the other marketing plumbing like properly setting up analytics (non trivial), conversion tracking, tag management, connecting various ad platforms, setting up automation in an ESP, etc.
It actually shocks me how many senior marketers have no idea how to do this stuff, but then again that is my marketplace advantage.
It actually shocks me how many senior marketers have no idea how to do this stuff, but then again that is my marketplace advantage.
And to be fair, software engineers also tend to suck at that type of marketing plumbing. Did engineering put your conversion snippet directly within an onclick event on the submit button? Then they chose a poor implementation method with a lot of gotchas that could compromise your reporting. You could be over counting by including clicks on submissions that never go through due to validation handling. Or you could be under counting conversions because they didn't properly intercept the submit event and there's a pretty little race condition between the page submitting and your conversion code executing. Or a half dozen other potential pitfalls that need accounted for when using the onclick or onsubmit event.
Marketing Engineering is definitely a good niche to be working in.
I wouldn't call myself a Marketing Engineer by any means. I am learning how to be a better coder, but, despite the buzzwordiness of the title, I feel like Marketing Technologist is a better descriptor (for me at least).
If you're looking for W2 work and are on the business side, focus on analyst, specialist, or strategist roles at fast growing small- to mid-sized companies. Too large and the duties will be too defined for you to grow; too small (or not growing) and you'll likely be too expensive for the value you provide. Look for job descriptions that are written as fishing expeditions; these are indicative of an environment that's changing too fast to define precise duties. Which is also indicative of them hiring for general aptitude rather than specific experience, and the role will expand to the extent of your abilities. If there's a particular area you want to grow, find a role that could justifiably expand to include that. Focus on the existing pain points during the interview, resolve those when you get hired, then fill your newly available excess time at work by systematically seeking out and resolving other pain points (this is where you'd try to work you way into the area you want to grow, if there's a specific one). As for salary growth; there are quite a few strategies to getting larger than usual annual raises if you execute well, play to the companies political landscape, and articulate your value in the right way during your reviews.
If you're looking for contract/consulting work, it's essentially the same thing. Advertise for and resolve specific pain points you've solved in the past, get recurring business by fishing for additional pain points once you're in the door. You'll organically grow a portfolio of work that'll make it easier to get in the door at new companies, and you'll have a steady stream of recurring business (once you've demonstrated your competence, companies are more willing to take a chance on engagements outside of your prior experience). In fact, most of my contract work has come from previous W2 employers that got really used to the convenience and flexibility of having me around.
My email's in my profile; feel free to contact me if you want to chat more about it. My approach is optimized around me, but if I know more about your situation I can probably give more relevant advice for you.
But this is the exception, not the rule. Digital marketing is the only other area I can think of that also has a rapid pace of change, and coincidentally is also the most exhausting area I've done work in because of the amount of ramp up it takes to relearn the landscape if there's even a small gap in engagements. Most other business functions are slow changing, and workers in those functions resist drastic change simply because drastic change isn't part of their usual expectations for their working environment. Small, incremental changes are a lot easier to work in. As long as each incremental change brings enough benefit to be worth it, it's easy to win people over. But a completely new process will have just as many warts (whether training-, process-, or expectation- based warts) as their existing process, and just replaces one set of problems with another. So they'll resist it.
Sales
Deep knowledge of some domain (real estate, finance, agriculture, retail)
Accounting
Operations
Namely, either some aspect of business (items 1,2,4,5) or some aspect of industry (item 3).
Pinboard made $256K last year, so I operate in at least the same financial ballpark. But I do my taxes on TurboTax and have never spoken to an accountant or lawyer. My business is a sole proprietorship.
From my perspective, Patrick overcomplicates everything he undertakes with business processes and overhead. From his perspective, I'm probably a irresponsible slacker.
The upshot is that there are as many ways to run an online business as there are people, and how you do it depends as much on your personality as on objective factors. Big props to him for writing about his experience so openly, and in a way that so many people clearly find helpful.
1. Patrick is a US citizen who lives and operates his businesses in Japan, which automatically makes accounting and filing taxes several orders of magnitude more difficult than filing taxes for a business that operates in the US.
2. Appointment Reminder, as an entity, operates in regulated industries, most notably medical care. That requires HIPPA compliance, which carries legal and financial risks if compliance is not accurately implemented, maintained, and insured. Patrick's conscientiousness in terms of business process is very much to his credit, and the consequences of Appointment Reminder going down, losing customer information, being hacked, etc are much higher vs. comparable issues with Pinboard.
3. Patrick engages with large companies as a consultant on a somewhat regular basis, with contract values that are substantial, and with counterparties that have legal departments that are also substantial. The level of legal and process overhead required to close these deals, execute on the project, and collect payment is comparably substantial.
In summary: you and Patrick have very different lives and run very different types of businesses. He's not "overcomplicating" his business operations - he's being smart and diligent in ways that benefit him greatly in terms of both revenue and risk mitigation.
Also, for what it's worth: I would highly recommend against operating as a sole proprietor. LLCs are inexpensive, easy to set up, easy to maintain, and mitigate significant personal legal/financial risks.
Insurance would also likely benefit you - a basic computer systems / PII policy would mitigate your (generally small) risk in this area: without insurance, getting sued by anyone even moderately persistent would likely put you out of business.
Think of it as the business equivalent of earthquake insurance: you can save a bit of time/effort/money by going without it, but as soon as an adverse event occurs, you REALLY wish you had it.
Likewise for accounting - we probably have similar businesses in terms of overall complexity (that is, not much), but Bench + my accountant save me so much time and effort it's silly to do accounting and bookkeeping myself any more.
Hope this helps. (Happy Pinboard customer.)
Not sure what it's like in the US, but in Canada this isn't some magical easy way to escape liability. The accounting, tax burden and how you draw a salary changes significantly when you incorporate. Not to say it isn't worth it, but it isn't as simple as "do it".
>Insurance would also likely benefit you
Sage advice for any business.
A corporation is a whole other mess of tax and accounting regardless of which side of the border you're on. Weirdly enough, a few provinces have ULCs - Unlimited Liability Corporations - which have useful tax propertes for American corporations looking to expand their operations northward.
So an example of cases on how the LLC is useful in protecting you is needed.
Legal expenses are, as you say, a question of personality and risk tolerance. After we sold Matasano, I talked to people who'd been operating other large consultancies, and was shocked to learn that there are big firms that just sign every contract their clients give them. We got every contract reviewed, one by one, at significant expense. They just signed and started working. Our outcomes were comparable!
We still get everything reviewed at the new company. It costs money, but not so much that it changes the economics of the work, and I've had enough close calls over 20 years of working that it's worth it just not to worry. But reasonable people disagree about this all the time.
I do think you're wrong about the sole proprietorship thing, though. An LLC is extremely cheap (you don't even need a lawyer) and protects your personal assets from business liabilities. On the other hand, your legal strategy probably just involves fleeing the country to hide amongst the penguins along the 70th parallel.
Can you give one specific example of something you wouldn't have been able to do correctly and on time yourself, that has at least $1000 in value to you? I've been doing my own taxes (with a six figure tax bill and often 15+ 1099s) for ten years; I'm pretty confident I've not made any meaningful errors other than typos or transposing labels on the odd stock entry, a mistake that would cost me $0 even if audited.
I--at least for a W2 worker who is a US citizen living in the US--have a uniquely bad tax situation, and I'm pretty confident that I'm not missing any major tax breaks, short of doing absurd accountancy.
Another common clause is non-competition, which is binding between companies even in California. And, yes, you could just tear down the company and boot up a new one in order to deliver work for a client's competitor, but the risk/reward equation is reversed in that situation: your consulting firm is more likely to drop a client than to endure a lawsuit.
Eventually, we moved to a format of having a 2-page "contract" which basically specified our rates, gave a few short sentences on the most important topics (rates, billing policy, IP licensing, liability), and used this both as a "price proposal" as well as a final "contract".
This worked very well for 85% of customers. Another 15% were either specific situations, in which legal counsel was required, or were (usually large) companies that had a fixed contract which we could either accept or not.
Partick lives in Japan, and mostly does business with US companies. Complying with international tax regulations is probably complex.
Are you incorporated? Do you have any type of business insurance? You can probably get away without much of that stuff if you're running a social bookmarking site, as your customers are very unlikely to ever sue you. If you're handling appointments for medical institutions in the US, being sued is a very real possibility, as is running afoul of legal regulations, and you'd better structure your business properly to handle it. Meaning both knowing exactly what the rules are to stay in compliance with them, and being incorporated and having the right kinds of insurance so that any mistakes or accidents don't bankrupt you personally.
Partick also sold his businesses. If you ever did, it would probably go a lot better to have well-organized finances and tax info set up by a proper accountant. I'm guessing you have no desire to ever do so right now, so it makes sense for you to not bother, just another reason for some of the differences.
But I grew my business in the last year, and had a wider variety of expenses as a result. Keeping track of it all was eating too much time and mental space, so I'm handing off bookkeeping to a local cloud accounting firm.
I haven't incorporated, but past a certain income threshold, I would, as that would save taxes and let me make investments pre personal tax within the corporation. I've also spoken to a lawyer for a visa related to the business, and about a copyright issue.
Is pinboard mostly "finished", and you just have to maintain it? I imagine that would greatly simplify accounting and overhead. If so, that's a great situation!
The site isn't finished so much as frozen. I.e., I have a lot of stuff I plan to do, but it's been a suspiciously long time since I've done anything at all.
(You have been keeping invoices, right? You need those in case of audit, which will almost certainly happen at some point).
I'm assuming you are declaring all expenses which are business expenses. If you're doing that and the number of invoices is small, then you probably have a fundamentally simpler business than most businesses.
Might still be worth a one off conversation with a good tax lawyer or accountant to see if you're making any business-101 level errors. If you've never had that sort of conversation, it's somewhat likely.
Example: in Canada, most entrepreneurs I know have no idea that health insurance is a business deduction, and that they can get group health insurance through a chamber of commerce. This usually pays for itself due to the tax deduction plus reimbursements. So there may be similar no brainer, no maintenance changed you could make, once.
Full rack at HE (Fremont) @ 10 Mbps: $900 1/4 rack at Datacate (Sacramento) @ 10 Mbps: $350
If you're willing to go north a little bit, ViaWest might give you basically the same deal in one of their Oregon datacenters.
It's two different approaches to life and business and it affects all of your decision-making.
More seriously, he is primarily a writer just as much as I am, just on a different topic.
1. Personal experience: businesses and products don't always last. Your product that is pulling in great money might last, or it might not. You could be down to $100k next year, or 50k, or $0. Tech moves fast. You are almost certainly overpaying taxes significantly, say, $50k+ a year.
I've had a product that pulled in $100k a year for many years on autopilot, and it just died one year.
2. $50k a year could be invested and compounded annually for many many years. Life isn't about income, it's about net worth. Having a higher net worth is like borrowing years from the future. You don't need to (just) build income, you need to build up net worth and income from different sources.
That will allow you to build a new product, or just keep enjoying life once your income stream shuts down.
Maybe I'm a jerk for minimising my taxes, but I'd prefer more money in the bank now vs later.
I'm not US based, but given he does everything himself there's no reason to assume he has everything optimised. Every country is different, but most tend to have similar tax concepts to some extent. I'm based in Belgium, and if I wouldn't optimise anything on $200k income, I'd be paying close to 50% tax. If you do, you can comfortably get away with legally only paying a fraction of that, say, 15-20%, if not less.
His easiest way to save on income tax would probably just be to sell his business / product, so that he can book a capital gain. Capital gains are taxed lower than income. But that isn't exactly an optimisation unless the difference is significant enough. Definitely worth doing if you don't see it growing much from this point though, or if you're bored with it. That capital (for a business doing $225k a year in profit, maybe $500-650k after tax?) can then be reinvested tomorrow in other assets generating capital income, i.e. stocks, which is preferred to income taxable at income tax rates.
The assumption is: A mostly unmaintained business has the risk of becoming obsolete rather quickly.
Better to have cash in the bank now than a potential income over the span of several years. Furthermore, tax-wise, it is cheaper to sell than to keep the business.
The question for every business is probably: Did the business reach its peak (under the current owner) and is it more feasible to sell right now or can it provide your above-a-certain-threshold income for several years to come?
The reduced tax rate for capital gains is merely a side effect, but could favor the decision to sell or not to sell in one direction or another.
Would you care to elaborate why the advice is so bad?
What he has is something that hasn't been taking a lot of his time with a fairly stable customer base of people like me, who pay for the service because what is does is useful enough for me and not because somebody on the other side is working his ass off.
It is a widespread belief that you should add features to prevent users either getting bored with your service or to diversify into other groups. What is rarely appreciated is that new features are a cost that may drive current users away when they dilute a product. If you solve a problem well for a large enough group of people, it may be sensible to just step away from the keyboard.
However, the question of selling crossed my mind. I'm not ready yet, but I'm interested in reasons why people sell their businesses – or not.
Out of curiosity, what happened?
Looking back, I probably lost $250-300k there that I could've gotten if I would've sold it.
Assuming that $80k is a reasonable salary for a solopreneur business (which seems iffy to me and probably to the IRS), you're saving 15.3% on $38k (80k to 118k), then 2.9% above that. Your profit distributions are taxed at ordinary income rates, so zero difference there. So on $250k, you'd save about $9k total, in return for higher audit risk and slightly more hassle and expense in maintaining the S-corp. Not crazy to say that's not worth it for some people.
It's also not an option in some locales (NYC doesn't recognize s-corp and taxes them as corporations, negating any benefit).
s-corp distributions are taxed as ordinary income (not capital gains) [1]
even though long term capital gains rates don't apply in this case, you cited an incorrect number. they peak at 23.8% not 15% [2]
[0] https://www.irs.gov/businesses/small-businesses-self-employe...
[1] https://turbotax.intuit.com/tax-tools/tax-tips/Small-Busines...
[2] http://www.taxpolicycenter.org/briefing-book/how-are-capital...
Huh? Where did you get 15% from? The other $170k would be taxed at ordinary income rates, so most of that income would fall in the 28% or 33% bracket.
Maybe it's some kind of code review/search tool...?
I sometimes wonder if no one will ever say out loud how much they'd love this (at bigger companies), or if it's just me that can't easily learn 100 new names/faces/roles/projects.
I've been thinking of turning my coworkers into an Anki deck to study on the subway. That would really help me, come to think of it.
Right. I was "implying" that perhaps the business wasn't as good a business as I thought.
On a yield basis, that seems like a great deal, but given the work involved (+ chance of the business being disrupted), I'm not sure I like that profit to price paid ratio. It certainly isn't a price I would have paid.
- knowing when to move on to something new (Appointment Reminder -> Starfighter) when he didn't have the 'fire in his belly'y any longer
- financial planning using a simple spreadsheet: the retirement fund!
- when to borrow money and how to calculate risk
- when to join a company (rather than start something new)
- the value of personal leverage (personal and professional development)
- when and how to sell your startup
- the trials of shipping (six weeks became three years)
- setting goals for the future
- the value of family
I've added Patrick's year in review to a few other bootstrappers and solopreneurs that I have felt are helpful, instructive or inspiring:
I spent a lot of years helping scale a consultancy, and I walked away from that business for a year and a half to do Starfighter with Erin and Patrick. If you doubt how much money we made doing what I told Patrick to do (because my business partners told me to do it), well, Matasano's acquirer is a public company, and this is broken out in their financials. How was what I did any different from what he did?
Project-based consulting is lucrative, but also demanding and stressful. If you're doing the same thing over and over again to make money, then unless you start scaling headcount, it will get to feel like a treadmill. Meanwhile, if you try different things, some of them don't work out, and then people write comments like yours tearing you down and questioning your motives.
Question about consultancy stuff... In your opinion is it easier or harder to scale one vs a product business, and do you think one type is inherently easier to scale earlier on?
The question of how to scale a product company has a very situational answer; it depends on how valuable the product is to its users and what the customer acquisition strategy is.
I think it's cognitively harder, at least in business terms, to scale a product company --- you have so many more variables to play with. But I also believe what Steve Blank says about this, in the sense that once you get a good set of values for those variables, the business sort of scales itself, in the same sense that a well-designed airplane "wants" to stay in the sky.
The business side of scaling a consulting company is mostly about people management and recruiting.
I think they're equivalently hard from a technical perspective. Maybe a consultancy is just a little bit technically harder.
Have you found yourself to have a preference having been in both worlds? Is one inherently more enjoyable for you?
That number seems _excessively_ high. Having seen what top-tier lawyers and McK/BCG/Bain consultants charge, that rate seems almost absurd. Patrick is a celebrity amongst the HN set, but I don't think he has the cachet/reputation/prestige to get away with those "rack" rates with F500 executives.
This reminds me of of that recent indiehackers article posted here where they extrapolated one weeks of revenue to some absurd ARR figure.
I can see landing a couple of gigs at this rate, but it is disingenuous to present this is something he could land consistently...
This is actually a result of Patrick's "charge more" mantra. Confidence in the value provided and delivering on the value.
6k/day is high; quite high. But it's not implausible.
If Patrick has the talent to lift sales by 1-3% in 1-2 weeks of A/B testing and optimization he should systemize his process/technique/magic and found a company around this talent and rake in millions.
I understand that you have more experience selling contracts in a B2B environment, so why not pivot Starfighter into this? Turn your star applicants into in-house consultants and train them on the Patio system and then go from there.
I heard Apple sales are down, might be a good place to start ;)
I feel like this is every HN discussion about "rates---comma---raising them": a mean-spirited attempt to convince the audience on the site that high rates aren't really possible, because if they were, the person telling you they're possible would be wealthy beyond the dreams of avarice. Once again: Patrick is just offering a more refined and savvy version of advice me and my Matasano friends gave him, and our outcomes are part of the record of a reasonable large public company.
This, by the way, is why I'll never write this kind of end-of-year wrap-up post (and, for the same reasons, why I'll never open source code unless I absolutely have to). It's also a big part of what I'm trying to get my hands around for the Starfighter wrap-up post. When we started Starfighter, everyone said "you're going to have such an amazing time because of all the HN credibility you have". But pretty much every time Starfighter actually came up on HN, I just wanted to hide under a rock. Even when the site is civil, it's still committed to grind away any joy you take either in accomplishing something near or even in just sharing something interesting you learned.
You could sort of understand an atavistic urge to shit all over someone sharing an interesting experience that was pleasant or impressive. There's a bad Morrissey song about that. But look what happens when you share an interesting story that obviously involved significant unpleasantness and an honest accounting of one's limitations: a giant thread full of people piling on to question your motives and life choices. You can't win.
It's like the worst possible version of "tall poppy syndrome", where the small- to- medium- sized anomalies get chopped down, but Elon Musk is a demigod.
So. It seems clear to me that every project/venture that either of you have attempted, whether a mega success or not has clearly taught you both a lot, and both of you make attempts to pass some of that knowledge out. At times publicly, and frequently you'll see posts of people appreciating private feedback/help as well.
I admire specifically that when all three of you set out to do something that would have made you happy and be profitable. Yes, people like to talk of pivot, and changes; but if any of those change entirely what you wanted to build, what is the point? I'm glad you all chose to stop early enough to move on to the next thing, having learned new things along the way.
Your posts and Patrick's posts are always interesting, and insightful. I promise you, some of us lurkers are paying attention very closely.
It's the crab bucket:
https://news.ycombinator.com/item?id=1465278
If you succeed, people have to tear you down (to feel better about themselves). If you fail and dare to be honest about it, people have to tear you down (in order to feel superior). People are terrified of failure because if it could happen to e.g. patio11 or you or me, it could definitely happen to them so they must immediately distance themselves by giving themselves the feeling of superiority, and because just telling themselves they're superior in a quiet room alone isn't good enough, they must perform it in public for an audience to get an extra hit. Clack clack clack go the claws.
He even says at one point, "Spoiler alert: there is virtually no difference in the mechanics of work done between $100 an hour, $200 an hour, and $30k a week — all of the leveling up there is in sophistication on who you go after, what engagements you propose and deliver, and how you package things for clients." which would lead me to believe that he's just charging $30k a week, just as he would charge $100/hour.
I think people need to just take this stuff with a grain of salt. i have worked with quite a few large companies over the years and I don't believe any of them would pay $30k a week for: "I combined a modest amount of programming skill (typically Rails, Ruby, and Javascript) with substantial experience with using engineering skills to move marketing/sales levers, including by doing SEO, email marketing, A/B testing, (light) UX design (typically around high-value parts of a SaaS business like signup flows or purchasing pathways), etc. I turned down essentially any gig which was strictly engineering in character and rather aggressively went after bigger projects which were “closer to the money” every couple of months.". That said, I could very easily see a company hiring someone for a $30k contract to do those things, the weekly rate just seems extremely misleading to people that are struggling to charge even $100/hr (which is not a bad rate by any means).
Yeah, it's not the exact skills you're talking about, but it's similar.
I guess I'm also confused about "I don't believe any of them would pay $30k a week for" vs "I could very easily see a company hiring someone for a $30k contract to do those things". Isn't hiring someone on a contract to do these things for a week consulting?
I think cityzen mean $30k a week vs. $30k total. The wording was maybe a little loose, but that is what I gathered from it.
My point about $30k a week is that if ONE person walked into a room and said, "Hi, I'm Bob, this is what I do and my rate is $30k a week" it wouldn't fly very far. Now, If ONE person walked into a room and said, "Hi, I'm Bob, this is what I do and it's going to cost you $30k" is very different, whether it takes 30 minutes, one week or a year.
From my experience, many people read Patrick's blog and similar blogs to try and understand the economics of how to make more money as an independent developer. At some point this stuff becomes more about luck than it is about actual development economics. The boring companies most developers have the "privilege" of working with just don't have the ability to make these connections and justify budgets like this, worded in the context of "this is my rate per week"
And I do think this advice is applicable to non-training stuff, but Patrick already wrote about it at length so I won't get into that here :)
> whether it takes 30 minutes, one week or a year.
Ah, sorry, I misunderstood. Thanks for clarifying.
I actually think that might be why bootcamps became an attractive proposition; it's much easier when you're selling months at a time rather than weeks or days at a time, in a sense.
I'd guess that "full time consulting" would work out roughly along the lines of
* Average billing per week of consulting: $15k
* Round trip business class airfare: $3k
* Hotel, food, transportation at destination: $2k
* Profit per week of consulting: $10k
* Weeks spent doing consulting per year: 20
* Take-home (gross) salary: $200k
I'd guess this is more than Stripe pays him, but not dramatically more; and if I had a wife and child I would certainly prefer to not spend half the year away from them.
I have never ran a consultancy full-time, and didn't particularly want to start now. It was certainly an option, but spending a few years building Atlas seems much more fulfilling.
How does that work exactly? I mean, logistically -- if you're coming in from outside, you generally won't know what their standard travel policy is.
I also thought, early in my consulting career, this would be a big deal. It never was. Nobody who can hire 10 programmers is surprised what a trip from Nagoya to SF or NYC or Berlin costs.
Just interested - does that mean that you've never actually been a full-time consultant?
And do you really think that it's within the realm of possibility to pull $30k/week for 35 weeks/year? (ie: $1m+ after your $50-100k in expenses).
I've written a ton on this topic, on HN and my blog. So has Thomas, among many others.
Professional services can be very lucrative; film at 11. My lawyer charges $750 an hour and my accountant $600. I have no difficulty believing they have 70% utilization. I know there are HNers that find this difficult to credit. If you take nothing else from the 3 million words I've written, take "you can charge vastly more for your skill set than you do if you connect the deliverables directly to business value." (True for consulting, regular employment, selling products, etc.)
It's boringly straightforward to scale the business after you've done it once. Success breeds success; you ask your newly satisfied client for referrals and follow-on work, you use case studies made with them to target firms at similar or slightly higher levels of sophistication, you turn the one-off engagement into something that you can predictably pitch and execute like a restaurant can predictably cook eggs to order, etc.
A 30k rack rate at those utilization rate is a high number but not an impossible one.
It is not a number you will get for software contracting. It's one you'll get for solving business problems that cost/are worth much more to your clients than that.
Sometimes that involves software.
Feels like 1/2 of the Startups for the Rest of Us podcast! Which is to say, sharing the experiences when things didn't go as planned is also helpful.
- financial planning using a spreadsheet, then moving to more expensive lifestyle, getting in debt and having the retirement fund turn negative when he has a wife and child and is closing down his companies. Something we can all learn from?
- when to borrow money and how to calculate risk: Except he says not to trust his calculation of risk when he encourages the reader to play poker against him if possible because he's so bad at risk estimation.
- when and how to sell your startup: again no, he says it put him in a bad position to be wanting to sell quickly, and he glosses over 'how' with "I know how because I've done it before". The only good read there is "don't wait until it is declining before selling, like Bingo Card Creator was".
- the trials of shipping (six weeks became three years): the trials of promising and pre-selling a thing, then changing your mind and doing a startup instead, and trying to turn that into a positive. (Aside: Three years? I wonder how long before there's a reasonable chance that some of the purchasers died before the release?)
- setting goals for the future: where he keeps saying he didn't meet his goals, or they have changed?
- the value of family: "I had not felt as effective as a husband / father recently as I wanted to be" - the value of family is lower than a side-business he was bored of and wants to sell? Lower than a "huge amount of personal fulfillment" that he got instead during that time? Lower than the guilt of refunding customers over his video series? If you were a potential customer and he said "I choose to spend more time with my family, I can't do this work justice, sorry, here's a refund", wouldn't you be fine with it?
I don't dislike him at all, I do respect him, and I like the transparent views into his life and businesses and plans and thoughts, but I'm not seeing the same things you are at all. If anything these are more cautionary tales along the lines of "you can sometimes get what you want with hard work, but it comes with a price".
Assuming all his customers are roughly 20-40 years old, the annual mortality rate is ~0.1% IIRC on average (mortality rates, because of the exponentiality of the Gompertz curve, only begin substantially increasing post-40 years, up to the ~90s with annual mortality rates like 10-50%). So then the 3-year mortality rate would be 1-(1-0.001)^3=0.002997001 or ~0.3%. So roughly you would need ~334 customers to expect 1 death over 4 years (100/0.3, since 333.3333333 * 0.002997001 ~> 0.9990003332), with the full binomial distribution covering 2/3/4/5/6 deaths as well (but not much higher with any meaningful probability). I forget where I read it, but I feel like I remember that at least 1000 people pre-ordered the course, in which case the mean number of deaths becomes more like 3 with up to 9 deaths, etc.
The hits he's scored are materially not so big, in part because he's avoided major commitments - and had he done more of the things he finds boring and stressful he would have more commitments, more hits, and probably be wealthier - but it's a sucker's game to get into comparative success. You don't get to have any of these experiences at all if you stick to the salaryman path, and that's the underlying appeal; the audacity of being able to strike out on your own and actually make it work for a while. It keeps a dream alive for a lot of clock-punching developers.
If any of his companies were making him a good enough living, I don't think he would have gotten a day job at Stripe.
"when he didn't have the 'fire in his belly'y any longer"
I've been running my own company for almost 5 years after 5 years of side-projects and failures. To actually go from a project to a successful company, you need to do lots of boring work that has nothing to do with technology or development. Most of it is a slog, but is still required. You can eventually outsource this and hire other people, but this will take some time.
You will lose your fire at some point, but you still need to push through this. I've tried to partner with many different friends over the years on different business ideas and ventures. They all failed at some point because my partner (usually another developer) would get bored when things got tough or they had to work on something other than a cool library.
If you can't get through this, it's probably better to stick to working a job.
The other problem with Patrick is that everything he builds is from a developer perspective. Starfighter was a cool concept, but much too complicated for most people (from the business side of things. You need to spend time and money with tutorials attempting to convince business owners why this new concept is better than what they are currently using).
This is actually the lens through which I view his writings: master solo marketer. He's managed to build a brand around these parts that, when viewed critically, is hard to explain. That's not easy. Some of the business decisions described here are baffling.
That's an accomplishment, yes, but I'm positive that I make 2x more with consulting than Amy nets from Freckle. I also know multiple SaaS founders much, much more successful (like 5x - 10x) than Freckle in much less time.
To be clear, it's not that Freckle is a disaster or anything, she should be proud of it, but it hardly means that she's qualified to be teaching people as some kind of brilliant guru, imo.
Not to mention that, unlike Patrick and Tim, she can be extremely abrasive and rude if you disagree with her about anything.
Someone like DHH or Jason Fried is closer to what I had in mind.
I'm pretty turned off to the Tim Ferrises of the world generally speaking. They rub me off the wrong way as MLM schemes. Not as icky but enough similarities...
Mind you, I'd wager 95% of people trying to teach have zero previous experience, much less on-going experience.
If you wanna go after Amy, you're being foolhardy.
And sure, we could make a lot more consulting too, especially since I have proven product chops. But who wants to deal with clients all day? All that negotiating and educating and meeting and trying to persuade them not to screw up their own projects, all their politicking, the invoicing and paperwork and phone calls and email change requests… no thank you.
I spent about 5 hours a month on Freckle, which is why it's not a multi-million-dollar business. But $700k/yr with 1 full-time employee works beautifully for me.
Try to beat that for an hourly rate with your consulting business.
You insinuate that 30x500 is a scam or something. I can assure you it's not. But it does actually take work :)
Which ones?
I know this stuff happens. I've been there, done that. But I don't have a reputation as a business guru, either.
"Doing [meat-and-potatoes work on marketing and sales that the business needed] was a real joy back when I was running Bingo Card Creator, but repeating it felt a lot like repeating high school."
Oh boy, that's exactly how I feel when I'm in the mood to make a new product. Patrick nailed it.
I've always considered my side projects and businesses failures, but judging by these numbers I've been more successful than I realized. So I feel good about that, but I think I really need to re-evaluate my goals and how I pursue them. Because I've been extremely negative about what are apparently successes.
Perhaps I also need to be more open to hiring a broker next time I sell a project.
1) "Tokyo is a wonderful city and I love it a lot – enough to not regret the rent"
2) "the balance in my Excel file went progressively negative. This was expected, but caused me a bit of stress."
Ogaki is a city where Patrick successfully launched his first startup - Bingo Card Creator.
Patrick met his wife in Ogaki.
Then McKenzie family moved to Tokyo, which "helped" Patrick:
- to fail at his another startup - Starfighter and converted him from entrepreneur to an employee;
- "not felt as effective as a husband / father";
- to accumulate "health debt".
What is so "wonderful" about Tokyo and what is there "to love"?
I lived way out in the sticks, in a village with one convenience store, no train station, one bus stop, and a grocery store 30 minutes down the mountain.
Life there was simple and great; I enjoyed my job, the stress was low, rent was low.
I moved to Tokyo in search of better opportunities, which I found. Stress was high and I reacted by eating too much; as a result, I'm about 40 kg heavier than I was in my old location. Additionally, the stress has taken its toll on my sleep quality, my finances, and my health in general. Among other things, people remark that I lose my temper far more easily now than before and also that I seem much more moody than before; I'm also on antidepressants now.
Despite all of that, Tokyo is a wonderful city and I love it a lot. The job, stress (and related health issues), and finances completely aside, Tokyo is an amazing place to live. If you think of any given locale as having X number of doors in any given category (food, shopping, opportunities to meet people, business opportunities, etc.), then my old location had perhaps 5. Tokyo offers literally millions upon millions. It's a megacity and perhaps quite unique in its density and variety of neighborhoods, all of which contribute to an opportunity to live a really interesting, varied, and international life in one place.
While I could transfer my dislike for my current environment at work to Tokyo itself, I think it would be unfair to do so; as unfair as it would be to transfer my like for the life/work I had in my old location to the location itself.
So it might well have made a mistake inflating lifestyle while cutting consulting AND before any of the businesses were "done".
I have the good fortune of being in a low cost of living city that's also a real, wonderful city: Montreal. Excellent place to start and scale a solopreneur business.
Currently scaling up my business processes (accounting, support, etc.) which increases business costs. I'd be very wary of moving anywhere more expensive until I've increased revenue to match. (This shouldn't be a problem – outsourcing the backend processes will let me move on several revenue generating projects I've been deferring while dealing with a backlog of administrative stuff)
If you don't mind saying, did you ever considered other forms of debt, e.g. applying for a loan at the bank? If yes, what tanked it?
This is complicated by my business being international in character, where banks in two countries both think that perhaps a bank in the other would be more appropriate.
On the other hand, I guess that makes AR a fine example of a company that would have benefited from Stripe Atlas if it had existed back then? :)
(a) LLC
(b) S-Corp
(c) C-Corp
The rules, AFAIK but IANAL:
- Sole proprietorship (single person) can file taxes for an entity with TIN as LLC, S-Corp, or C-Corp
- S-Corp can elect to file as a C-Corp at any time
- C-Corp can issue multiple classes of shares; S-Corp cannot
- Easy to convert from an S-Corp to a C-Corp
- Difficult to convert from a C-Corp to an S-Corp
- LLC has lowest setup cost
- C-Corp requires you to pay double taxes on some income.
- LLC and S-Corp taxation effectively identical
In my opinion it makes sense to incorporate an LLC, then decide between filing taxes as LLC or S-Corp at the end of the first tax year. If at any time you want to raise investment, file the requisite paperwork to convert the S-Corp into a C-Corp.
But as you point out, most LLCs can file taxes as S-Corps, which gets rid of the major difference.
Fun fact: LLCs can also have multiple share classes.
<a href="2012/01/23/salary-negotiation/">previous writing on the subject</a>Is it fair to read this to mean that patio11's net worth is < 250 k$? (Based on the fact his liquid assets were negative prior to the sale of AR, and said sale netted less than the price of a house in Tokyo, median price: ~250 kUSD.).
My impression was that he had liquid assets and took on debt in order to avoid potential cashflow issues should he deplete his liquid assets.
I would hazard a guess that the value in the range of (new house, new house in Tokyo) refers to (sale of AR - $120k in debt) rather than his total net worth after the sale.
http://resources.realestate.co.jp/buy/what-is-the-average-pr...
We have a mental model from the 80s. Decades of recessionary prices catches up.
All three of us are software developers. We like developers. We spend a lot of time talking to developers, in particular about their careers.
We had no trouble finding clients, but a lot of trouble convincing clients to take the CTF model seriously; virtually all of them wanted us to function like a traditional recruiter, offering 10 candidate profiles for every open req. That's a job that is 90% saying "no" to people.
It was dispiriting watching developers we knew to be strong get rejected for positions because they didn't have the right resume, or didn't solve some pen-and-paper programming puzzle quickly enough. It was a drag for all of us. It made us unhappy.
Life is too short.
Sorry about that horrible timing.
I mean, change some puzzles/tests or simply recommend someone to the job if you knew he had the skills?
Wasn't this what you were solving? Matching positions to great devs.
Anyone that has spent time working outside of firms that hire this way (which includes stockfighter's founders), realizes that the technical interview today is very expensive, throws away a lot of candidates, stifles all axis of diversity, and ultimately it's not really all that predictive of on the job performance. A CTF is not an ideal predictor either, but I'd argue it's better.
Stockfighter found that their best candidates by the CTF were receiving terrible ratings by the companies they send them to, because they lacked the shibboleths required to pass the interviews. They'd only have success if the company filtering after being presented a candidate was minimal, and then they saw that yes, the job performance of the candidates that were good at the CTFs were at least as good as those that came through the traditional recruiting process. Apparently there wasn't enough appetite for that kind of process, and thus, Stockfighter made no sense as a company.
That's a pity, because I share their view that technical interviewing is broken. I just don't see how we can systematically improve it without the kind of data that you can only get at huge companies that hire thousands of engineers a year.
I understand and appreciate the mentality that your comment comes from. But the premise of our startup wasn't Steve Blank-style customer development, where we started with a vague idea of the space we wanted to be in and then worked with customer prospects to figure out exactly what product we would end up building.
Rather: the company we started was an experiment, a very opinionated one, to see if we could port a hiring model that had worked extremely well for us at one company to a larger set of companies.
I think there's a way to make that model work, but I've become convinced that "contingency recruiter" isn't the way to deliver it.
The last "innovation" I've witnessed in the space was the Hired model, and everyone is trying different versions of that now. It's a hurtful model that abuses the inefficiencies and lack-of-transparency in the two sided market. (For anyone wondering what I mean: When you sign up on Hired they ask you what your preferred salary range is, then, as of last time I checked, they show _that exact value_ to the companies looking through prospective candidates. So guess what the first offer you get is? Not what a "fair" market rate is, but exactly what you typed into the sign-up form.)
I do a lot of talking to recruiters as part of helping them use our Stack Overflow Talent product, and honestly it feels like taking crazy pills half the time. Having to answer "why?" to "You need to at very least explain what your company actually does, or maybe the tech stack you use" makes me feel insane.
I loved Starfighter, but thinking back what I liked most about it was the content you and Erin and Patrick wrote about it. Your point about "life is too short" is very very poignant.
I guess the whole point of this comment is for me to say I completely respect that decision, you all did the right thing. Trying to convince people who would rather just throw more money at a wall than try something unique to use your unique product is an awful feeling.
I'm very glad to hear your new project is easier to make money off :)
I'd better do a stupid coding test online that have to schedule a phone call during working hours with a guy who just want to get away from the phone call and could barely present his company and what he's recruiting for.
Standard interviews: multiple choice trivia, red black tree programming puzzles.
Innovative interviews: Custom code exercises with custom unit tests written by the company, ssh exercises where a server is created automatically per candidate and he has to connect to it and configure/fix/change some stuff.
After many interviews (both given and received). I have definitely settled that:
1) I'd rather write a stupid program on HackerRank than deal with an annoyingly scheduled phone interview (where I might be expected to spell that code over the phone WTF). Automation is nicer than the average interviewer. A proper code editor for coding is better than the average shared editor.
2) No matter what we try to do: 20% of candidates won't show up + 20% won't be able to code a program to print numbers from 1 to 10. There's nothing we can do about that (the sad state of interviews is probably all because of that).
3) For the first initial screening, very simple exercises are all that's needed (see 2). Hacker Rank is perfectly appropriate for that.
s/the recruiting/any
or, simpler:
s/in the recruiting space//
Did you think you could change the way people hired overnight?
There probably is a way to do what you set out to do, but it seemed obvious to me from the moment you announced it would take years of slogging and building a track record to change such ingrained processes at companies.
Revolutions on that scale are never going to happen in a few months. The reason I thought you guys had a shot was that you'd be stubborn enouh to stick to it in the face of resistance.
I have thoughts on how I'd do contingency recruiting differently if I had to do it over again, and I have thoughts on what I think a better model for this would be than trying to do contingency recruiting from day one.
What I don't want to do is write them up in HN comments that will further sap me of any will to do a real writeup.
I think you need to find the few rare companies that are interested in this recruitment/selection model.
9x% of places are doing standard resume review and interviews. They don't have the will nor the expertise to evaluate CTF (or any similar) contests and candidates.
Matasano?
We'll probably put it back on the air at some point in 2017. It's down for a lot of little reasons (inefficient AWS configuration, occasional need to babysit, the need to adjust a lot of little messaging things around the site so as not to make people think we're still recruiting off it, &c) that add up to enough hassle that it's easier to have it be down for now.
Twilio has a feature to allow you to make calls which appear to come from a non-Twilio phone number. To do this, you have to make an API request (see here: https://www.twilio.com/docs/api/rest/outgoing-caller-ids); Twilio then responds to your application with a code that the user needs to enter, you tell that code to the user (via e.g. displaying it to their web browser), and Twilio calls the user to ask for the code. If they key in the correct code on their phone, their number is verified for your account, and you can now use it as the caller ID for future calls from your application.
Because this causes an actual real-world phone call but doesn't look like a phone call to either Twilio or Appointment Reminder, it (at the time of the attack) bypassed some protections like, to name one example, AR's anti-abuse rate limiting logic.
The bad guys "attempted to verify" the phone sex lines in the Caribbean, in much the same way as a legitimate AR customer would attempt to verify their office phone number so that appointment reminders would appear to originate from their office (and they'd get callbacks) as opposed to originating from our 1-800 number.
Some of our customers are at larger institutions, which require you to put in an extension prior to reaching the customer. Think "hospitals." The bad guys put in an extension with over 100k digits to keep their phone calls from timing out. (Dial a 5, wait a second, dial a 5, wait a second...)
The economic incentive here is "If someone calls a premium-rate number that you control, you get paid money." The economic damage is "If someone calls a premium-rate number, that someone pays to do so", so all the money the bad guys made came from either Twilio or I.
Doing freelance / consulting work on the side while bootstrapping your product to profitability seems increasingly common now. Though this is definitely more sustainable in locales with lower costs of living while you also don't have to provide for a whole family.
You can't bill the hours you spend finding clients or networking or redoing your website or waiting around through four months of utter doldrums before being overbooked and killing yourself to keep your promises.
Don't get me wrong, I love consulting and I've done a lot of it. But sometimes you just want solve problems and get predictable checks, even if your effective hourly rate works out lower.
When I pay my lawyer $300/hour for contract work, all I can think of is, "How does the poor guy make a living?" Because I've seen the grim reality of the math. My lawyer works damm hard for that nice office. At least patio11 had a weekly rate (or maybe a per diem), and not an hourly rate.
It's simpler, faster, and cheaper.
Plus you can use Cloudfront and use AWS Certificate Manager for SSL.