I was reading the Four Hour Work Week this afternoon and I came across something I had never seen before. I’ve actually started to read this book three times but have never made it to the end because it is so inspiring it makes me want to stop reading and start changing my life. Timothy Ferris is a genius and this book is phenomenal; I recommend everyone read it.
Today I started near the end of the book and made sure to finish the parts I hadn’t read in my previous attempts. It was all incredible as usual, but there was one sentence that tickled my fancy. (side note: where the heck did “ticked my fancy come from? It’s such a stupid expression I just had to use it).
This one sentence gives a lesson I only recently learned and wish I had known years ago. Ferris wrote:
You don’t have to recoup losses the same way you lose them.
This is powerful stuff to me. It is really a more direct version of the old saying, “Don’t throw good money after bad.” I like direct. It’s easier for my little brain to understand.
I also like taking risks. I’ve lost a fair amount of money in the 26 years I’ve been on this planet. I made a horrible investment in a black hole of a classic car that sucked up every dollar I made in high school. I also lost a decent amount of money on certain stock market investments in the last few years. Overall I’ve made money in the market, but there were some particular stocks/options where I lost everything.
The difference between losing money on my car and losing it in the stock market was how I reacted to the loss. For the car, I literally spent over a year trying to sell my ’62 Impala somewhere near breakeven, which only forced me to spend another year dumping money into the stupid thing to make it work. If I had just sold it and taken a huge loss right away, I actually would have saved money in the long run.
For the bad stock investments, I just invested other money in different companies and had great returns that covered my losses. Instead of doing the same thing that had already lost me money, I did something different. No worries about lost money. No stress about how my timing sucked. No spending a year trying to right a wrong.
It’s much easier to make a new “right” than it is to right a wrong.
I’m Seeing Big Losses Today
There are two places where I am losing a lot of money at this very moment. Thousands of dollars to be precise. I’m losing money on some long term stock options and this website.
The options are investments that are good until January of 2012 (and some in Jan of 2013) and most of them have tanked in the last two months. Make sure you come back for the Race to $1 Million this month and you’ll see how bad my net worth is being affected by these losses. It sucks.
I expect the options to rebound, but I’m not confident enough to buy more. Their value has dropped so much that I’d rather hope for a rebound than take such steep losses.
I will let the investments ride and hope for the best, but I’m focused on making the money back elsewhere. I’m not going to waste energy worrying about those particular losses because I will recoup them at work, in other investments, or with this website.
A Website Can Be Expensive
Speaking of my website, here is another place where I’ve lost thousands of dollars. To be exact, I’ve spent $2,156.29 in real money on this site. That money has been spent on computers, software, a new domain name, advertising, a new site design, video equipment, props, a new logo, and more. And for all that time and expense I’ve pulled in a whopping $145 in advertising revenue.
Those numbers might make a lot of people freak out.
I could load up my pages with so many advertisements that you couldn’t tell where the original content ends and the ads begin. I could start focusing my posts on SEO optimization and repeat the same keywords 37 times throughout the post, making it annoying and almost unreadable. I could add a plugin that creates advertisement hyper-links on random words and constantly barrage readers with visual crap.
But I won’t. I believe this site can eventually be very profitable without ever assaulting my readers’ eyes with that nonsense. I respect you too much for that.
Instead of increasing revenue, I could just decrease expenses. I could stop making videos and songs because it’s expensive and time consuming. I could stop investing in the look and feel of the site, and we could go back to the old days of the crappy theme with a crappy logo.
But I won’t. I want this site to look as handsome and sound as glorious as I do in real life. I seriously doubt that’s even possible, but I’m trying.
One day this website could make a ton of money. Or it might not. At any rate, I can cover my losses on this site from my day job and ensure I never sacrifice quality for cash flow.
Looking at the negative value I have in this site doesn’t make me anxious or unhappy. It really doesn’t elicit any emotional response from me. And if I get to the point where I am done investing in this site and it still isn’t profitable, I won’t let that stop me from walking away.
“You don’t have to recoup losses the same way you lost them.”
Thank you Tim Ferris.