Why I didn’t get a 4.0 in College (The first time anyway)

My undergrad GPA was 3.97.  In all off my classes but one I earned an “A”.  I steered clear of the dreaded (by me) “A-“.  However, ultimately, I got one non-“A” grade — a “B-” in International Marketing.

I am proud of this “B-” for a variety of reasons.  But let me first tell you quick story…

I signed up for International Marketing because it satisfied two university pre-requisites 1) Multi-cultural. 2) Global.  Two birds, one stone.  It also looked to be an easy “A”.  Finally, it seem like a class that would have a good percentage of female students. Hey, a lonely engineer can and should play the odds!

Anyhow, things went well at first.  I was invited to several study groups, and I picked one based on the attractiveness and relative intelligence of the students.  I finished midterms with a solid A.

Everything seemed fine until the final exam.  The professor said that the final exam would be take-home, open-book, and open-note.  It would be graded on a curve.

I took my test home and started answering it.  It was a difficult and unusual test.  Questions like “The 5th P of marketing is _________” and “The example of _________ in Japan shows how the supply/demand curve can be invalid.”  I soon got contacts and calls from my teammates and classmates asking to “share answers.”  I refused.  They were baffled and said, “everyone is doing it, why shouldn’t you?”  I said, “I don’t cheat.” Some looked at me as if I had the plague.  I suppose they feared I would rat them out.  I did neither.  I did not cheat, and I did not rat.

I got a “D” on my final exam and initially a “C” for the course.  I went to the professor and complained that the 5th P was distribution AKA place, and so on.  He agreed to change my grade to “B-” because of my previous grades and my demonstration of knowledge.  As I said, I did not rat out my fellow students who had cheated.

It is ironic, perhaps, that I got a B- on an easy class.  International Marketing was not nearly as hard as Solid-State Physics 2. Believe me!  How does the barrier voltage of a PN junction respond to an increase of 10 degrees Kelvin? List the factors that determine your decision.  That is HARD.  What if the n-type doping is increased 10X?  That is relatively HARD.

I could have cheated and gotten an A, but I would not have earned an A. I probably could have ratted out those who I knew had cheated and also gotten an A — but that is simply not my style.  I got a “B-“, but I did it my way!

That was not the only take home exam in my undergrad.  All the rest were in engineering courses… and I was never asked to cheat.  I think that speaks to the psychology of most engineers. We, in general, do not lie, cheat, or steal.  That does not mean that there are not exceptions.  It only means that I have seen few.

What is the moral of my short tale? 1) Professors — Don’t give take-home tests. 2) When in doubt, trust Engineers. 3) Don’t cheat.  You will sleep easier.

What does this have to do with entrepreneurship?  A lot!  You WILL be faced with moral dilemma on a regular basis and you will feel like the fate of your business is on the line.  And it may well be. It is tough– tougher than I ever imagined. I have stretched the truth, and I have regretted it.  But I have also told the truth when I made a mistake on an Excel spreadsheet that it is very unlikely anyone would have noticed.  I have said “I made a mistake, attached to this email is the correction, I apologize for the oversight.”  And, OH!, the relief in hearing back from my client: “Thanks for pointing that out.  We appreciate your diligence.”  [These are not exact quotes, but they are my best recollection.]

I have learned, contrary to popular belief, that honesty can and does work. Further, to err is human. If you admit (your own personal) human error, the “good guys” will appreciate the candor. If you get significant backlash to admitting error, you are probably working with the wrong people.

I have learned to sculpt and even, sometimes, bend the truth.  However, the truth remains intact. Wordsmithing is necessary and important. Retaining personal integrity is even more important. Admitting and correcting mistakes is the best course of action — the sooner the better.  Just ask GM!

The Revised Entrepreneurship Lifestyle

Work, work, and more work.  Add a side of worry.  But, also excitement and elation.  Work is more often invigorating, rather than taxing.  However the days and nights can be long.  I’ve been pretty much working 80+ hours per week.  That may sound bad, but it’s not.  Why?  Because, as Frank said, “I did it my way!”

The beauty of the situation is that my company, Sigma1 Financial has several big things going for it:

  1. Investors.  Sigma1 now has seed capital for growth.
  2. Good, powerful references.  I’ve made some friends in high places during the HALO beta tests.  These are good guys who apparently liked me, my software, and my work ethic.
  3. Revenue.  Sweet, sweet revenue.  This means money to plow back into marketing, technology, and, yes, legal.  Sigma1’s law firm charges $250-$350 per hour — but they can because they are worth it.
  4. Insight.  More important even than the technology, because I have been obsessed with one thing for a long time — portfolios.  How to improve them by using everything I know, can learn, and can discover.  And I’ve discovered some very useful things.
  5. Technology. The single most powerful piece of technology is the tech to robustly optimize diverse, configurable, user-defined risk models.  The other cool tech is synthetic expected-return modelling that works in concert with semi-variance optimization.  And there is more cool tech, sometimes written in less than a week based on client requests.

So, it is summer and a spend most of my waking hours “working.”   Sometimes, though, the work feels like play.  Like tinkering. I get to explore ways to mitigate financial risk for real people and  institutions.  I get to work directly with portfolios large and small (well…. large and small are relative terms, eh?)  Lets just say many, many millions.  And I work hard to help make them better.  I don’t control anything; I just provide insights, with the help of the HALO Software Suite I developed.

The difference between now and then (say last year) is this:  I learn a lot almost every day.  I am learning  sh** tons!  Then, during corporate vassalage, I learned little of value at work.  My learnings then were largely trivial. I was not given much latitude to learn; I was leashed.

The leash is severed, by my own hand.  And I work as hard, or harder than ever in my life… for me, for my company, and for my investors.  And it is a roller coaster ride.  So far, it is a thrilling and largely fun ride.  When the ride is over, I keep getting back in the queue.  Each ride is different, but so far anyway, each ride does not disappoint.


The Finance of Self-Employment

I have been self-employed as a consultant since 2008. I opted to go independent for a variety of reasons, primarily to afford myself more freedom in choosing  what work I do, and how I do it. I felt too restricted by corporate policies at my previous job. I worked for 11 years at a tech company on their Online Marketing department.

There were a number of financial things I had to learn after deciding to become an independent consultant. Going independent was initially daunting – this was my first venture into working independently. Thankfully I had some friends who were also working as independent consultants, who were able to share some of their experience with me. The first thing I did was to obtain an LLC in order to separate my business and personal finances. By “doing business as” my LLC instead of as myself, I reduce the likelihood of a client being able to sue me for all my personal assets; limiting the liability to just business assets.

Another financial consideration taxes – not only did I now have to think about the so-called “self-employment tax” (having to pay the full amount of the FICA / payroll tax, which previously my employer paid half of), but I also had to plan to pay quarterly estimated tax payments. Previously all my taxes were withheld from my paychecks by my employer. As an independent consultant, I now work as a 1099-contractor and my clients do not withhold taxes from what they pay me. I have to set that money aside each quarter or worry about paying a penalty during my annual tax return.

Between the federal income tax, state income tax, and FICA/payroll tax, I generally have to set aside 40% of my income to cover my quarterly estimated income tax payments.

Now after having to consider all that, the next thing I had to figure out was how much was I actually going to charge for my services, how I was going to invoice my clients and how quickly was I going to expect to receive payments. I have had to refine all these over the years  and finally have a good pricing model that all my clients seem comfortable with, along with a consistent payment model. For shorter one-time projects, I send an invoice upon completion of the project, with a net-30 payment expectation (which I’ve built into my consulting agreements with my clients). For longer-term / ongoing projects, I invoice on a regular basis – either weekly or monthly, depending on the client’s preference, with the same net-30 expectation. I prefer to have a relatively flexible invoicing model and not stick to a single, rigid model.

Finally, as I grow my business, I need to take into account how I am going to pay other people for their services. I have opted for a subcontractor model over an employee model for my business. My work and income is still too volatile to even consider hiring employees, and working with subcontractors on a per-project basis works far better with the current way my business works. I have also opted for a revenue sharing model, instead of a set hourly rate with my subcontractors. Since my current rates are still considered somewhat low for my industry, I am paying a higher revenue share (80/20) in order to get better quality subcontractors. Over time I plan to increase my rates and decrease my revenue share until I reach a revenue share that’s 60/40, but still guarantees a fair income to my subcontractors.

So as you can see, there are a lot of financial considerations with becoming self-employed. My recommendation is to find a good CPA (accountant) to help, especially with the tax side of things. If you can afford to also hire a bookkeeper (or find good software to help you keep your accounts receivable and accounts payable in order), do so. These can be critical to your success.

Entrepreneurship Books

Entrepreneurs have been recommending books for me to read to help my startup succeed.  The first was “The E-Myth Revisited” and the second is “The Lean Startup.”  Both offer interesting bits.  Personally, I find “The Lean Startup” more relevant to my business.

The interesting part is how the books conflict.  E-Myth says to have a very in-depth business plan down to the minutest detail — document everything and every process.  “The Lean Startup” basically says have a one-page business plan draft, but feel free to revise it often.

To avoid information overload I think I will limit myself to two entrepreneurship books per month.

The easiest way I’ve found to avoid doing entrepreneurial work is to read entrepreneurship books!

New Career and Lifestyle

My new routine:

  • Get up whenever (9 am, 10 am, noon, 1 pm)
  • Start coding
  • Eat periodically
  • Test code
  • Research specialized mathematics
  • Write notes, largely mathematical and/or statistical
  • Do other non-technical business stuff
  • Keep coding
  • Go to bed whenever (midnight, 1 am, 2 am, 4 am!)

A few realizations:

  • Coding seldom feels like work.  I like/love it!
  • No one I know understands what I’m working on
    • Generalized risk-model portfolio optimization
    • Concurrent multi-risk model optimization
    • Convex and non-convex optimization
  • The rare person who might understand likely works for the competition
  • Math is fucking cool!
  • My health is important.  I must exercise and eat right to fulfill my life goals.

In addition to kick-ass software development, I have adopted a fitness and “diet” lifestyle with help from my personal trainer and my wife.  For April I will be working out approximately 6 hours/week.  My current break-even (basal+) metabolic rate with 4 hours/week strength training is about 2400 kCal/day.  Under the new regime, I should lose 4-5 pounds of mostly fat in April. Then I will go back to a build and bulk phase were my weight stays constant, but my muscle/fat ratio increases.

My body-fat-percentage goal is about 14-15%.  My max bench press is currently 210 pounds, but I’d really like to hit 225-250.  I also wish to maintain symmetry… I want my other  keep my other strength progressions roughly proportional to my bench press progress.

4 to 7 hours per week of fitness training is my goal.  I find most work outs somewhat unpleasant, but not all.  However, I like the results.  The hardest part of my new lifestyle is the workouts.  The second hardest part is the “diet”… six balanced meals a day. Luckily, my work (a new career in financial software) is mostly joyful.

This is far better than 50+ hours a week in unsatisfying work in my previous career. All in all the change is wonderful, so far.