ETFs aren’t perfect

The title of this essay probably offends people. It seems as if over the past 7 years ETFs have been hailed as the perfect investment instrument. We’ll they’re not. No investment is impervious to failure. Unfortunately, I get the feeling that many are investing much of their nest egg in ETFs believing one or all of the following:

  • “There are little or no fees compared to actively managed investments so you’ll make more money!”
  • “Every ETF is invested in a diverse array of stocks protecting the investor from a downturn.”
  • “ETFs will always maintain liquidity.”

To start, ETFs are the untested elephant in the room. They gained immense traction after the recession in 2008 and have gained even more significant market share from 2014-2017. They have not been tested. We do not know how they will hold up in a market downturn in terms of liquidity or even compared to the portfolio of companies they represent.

Because ETFs are passively managed, they have the ability to create a speculative bubble within seemingly strong large-cap stocks. In order to create enough purchase volume for an ETF, the vehicle has to invest in larger companies. For that reason, companies like Facebook, Apple, and Netflix are all included in major cross-sector ETFs labeled as “Blue Chip”, “Emerging Growth”, “Technology”, and so on. As a single investor holds positions in multiple ETFs with large investments in the same companies, a problem is created. The investor did not explicitly choose to allocate X amount of his investment to Netflix because it is a good company. The blind investments cause companies become overvalued. The overvaluation, in turn, leads to more blind investments through ETFs. It is a vicious cycle.

If so much more of the market is being passively managed compared to pre-2008, then who is ultimately guiding these passive investments? The answer is fewer and fewer active investors.

See this website. The US Stock market is currently outpacing GDP by 30% for the first time since 1999. ETFs aren’t perfect and they could be the root of an imperfect market.

  • Edit #1: Do I even need to get into levered ETFs? Do You think an ETF labeled “3X Gold” actually backs your investment by purchasing three times the amount of gold of your purchase price?
  • Edit #2: No, I am not saying the market is going to crash tomorrow and that ETFs are going to be the only culprit. I am not saying ETFs need to be done away with. Everything in moderation… 40% of the market’s total value probably shouldn’t be indexed via ETFs… that is worrisome. I am saying that ETFs aren’t perfect.

I feel my life lacks necessary structure... and so do you.

People put a lot of faith in routines. I have a morning routine, but that's about it. All of my other consistent daily doings I would classify as bad habits rather than routines. 

I hear much about people whose lives are essentially one large structured routine. Is this a good thing? I think so because, in theory, it allows you to accomplish what your body and mind lust for daily. The things we want to do, and know we can do, but consistently feel are out of reach. Each person can juxtapose bad habits they want to give up /vs./ what giving those habits up will allow them to achieve.

For example:

  1. I don't want to stare at my phone for an hour in bed before I try to sleep
  2. I want to wake up earlier more consistently 
  1. I don't want to make excuses about not working out or going to the gym
  2. I want to be fit and find a consistent method of working out that I enjoy
  1. I don't want to waste time while at work surfing the web or doing something generally distracting 
  2. I want to achieve larger professional goals by making more progress at work each day

Throughout each life goal that I am failing to accomplish, there is a common theme - the desire for real progress through consistency. The need for a routine.

You don't think about brushing your teeth, you just do it. When teeth-brushing becomes pushups, do you stay fit for life? I am not sure, but it's worth thinking about.

Augmented Reality (AR) is the future of experiential marketing... and everything else.

No to be confused with Virtual Reality (VR), Augmented Reality (AR) does not always require goggles and headphones. The premise is to alter the reality that we currently live in and experience using technology. For instance, this rock climbing wall that has been turned into a real-life video game:

This is a simple example. However, when you break open the box and look at the potential for this type of technology - everything changes. Don't get me wrong... VR is cool, but AR is the future. With nonintrusive technology, reality changes. Experiential marketing is obvious, but the applications are endless. Think about it for a minute. The future of major league sports will eventually be flipped on its head as people like Jon (rock climbing guy) continue to combine the physical with the technological. 

There is no reason why my eventual son or daughter won't get a full-ride to Harvard for being the best quiddich player at their high school - and I fully expect them to. 

A Weird Moment in History

Not that I am ashamed of this, but it's not something I have traditionally shared with people often. Now that it has been about 12 years, I am over it. I had a video on Park that has over 5 million views. Of course, it was a video of me explaining the composition of non-newtonian fluid at the ripe age of 12, right? Nope, just me getting rocked in the face by a giant blue yoga ball. Thanks, @YJLee - I'm not going to say we started a trend, but...

- Thanks Break, Big Blue Ball

Product Artists Collective (PAC)

I like to build things. I've been working on projects for as long as I can remember. In fact, I cannot remember a time when I was only working on one project. This is not to say that I am not consistent. One of those projects ended up lasting for 6 years and culminated with the sale of a company. The thing is, when it started, it was just one of many things I was working on and it slowly took precedence as it grew. 

I also like music. One artist that has always resonated with me beyond the music is RAC (Remix Artists Collective). It is more than the music itself, it is the concept. RAC consistently releases cohesive albums through inconsistent cross-genre collaborations. While the main producer behind RAC remains the same, the artists that he forms tracks around constantly changes. Have a listen to one of my favorite songs by RAC featuring the artist Penguin Prison. 

To a frequent listener, the song is clearly RAC and it sounds audibly consistent with the rest of the album Strangers. However, Penguin Prison brings a distinct tone, cadence, and sound to the track that would otherwise be inaccessible to the creator. 

So, here is my intention: I would like to create a Product Artists Collective or PAC 

The organization is to provide structure to an otherwise unstructured multitude of "side hustles". 

The idea is simple. There is only so much time available to create and build. There is a desire to constantly work with different interesting and talented people. There is a way to remove the cumbersome administrative tasks that always suck up the initial weeks or months of a project before the building even begins. PAC structures all of that. 

PAC dedicates 6-month cycles to each project. Every project is a separate sub-entity of PAC that has it's equity even split between the board members assigned to that project. Two of the board members are constant (@Packtrick Allen and Myself). Any number of additional board members can be added on a project by project basis as needed to create something awesome. Each project, like a movie, is meant to have a beginning, middle, and end.

Maybe January 2018 for project #1? More to come...

Indesigner. Here is Everything...

This is a crosspost from reddit, the original post including Q&A is here.

Patrick Allen and I started indesigner as side project about a year ago. We have built our niche in the home improvement professionals industry. As we both have other full-time jobs that prevents us from spending each day focusing on it, the inner-workings of indesigner have to be lean. The past year has taught me how long it takes to work out the kinks in a small business like this one. Although it is not a science, the company can currently be broken down into sales, operations, and IT/Support.

Let’s start with sales:

  • First off - what are we selling? Website design and development for $65/hr and premium Wordpress hosting for $29/month. No upfront cost, billed once a week, and a free 30 minute intro call with your personal assistant to get you quote on how many hours your project will take. Once you approve the quote, work gets started. Our average project so far is around $1900.

  • The sales process begins with a cold email to a person in the home improvement industry through their contact page like this one. We try to send 1,000 of emails a week but sometimes don’t because nurturing the leads the respond is hands-on and takes time. Note:We will usually serve Facebook ads to these leads for about a week before the first email, maximizing impressions so that they feel like they already know our brand when we first reach out. We believe this causes a significant jump in our open/click rates.

  • We use as a CRM. If someone responds to our first email with interest, we reply answering their question (requests for examples, pricing, etc), we mark them in the CRM and take notes accordingly.

  • Usually these potential customers need to be spoken to on the phone. Our goal here is to get them through the pipeline as soon as possible. To sign up, they must go to our website, enter their email, click “get started” then fill out a short form that includes their billing information.

  • The process up to this point can take anywhere from a couple of emails and 1 phone call to two months and four phone calls (about 5-10 minutes each) to get people comfortable taking the next step. As we send up to 1,000 emails week after week, the hands-on sales workload begins to build up.

  • We have also began to test some inbound marketing by using an evil popup on our website which converts well when we place Facebook ads against it (people enter their email to find out “7 things every interior designer or home improvement professional should know when building a new website" , but we still haven’t had anyone close from it yet.

Operations is next:

  • Our back end is a piece of custom software my much smarter technical cofounder built. We screen freelancers or freelance companies, negotiate hourly service prices, give them the lowdown on indesigner (a bunch of onboarding docs), then give them an indesigner email, phone number, and login to our dashboard (think uber for website design). Once they complete this process, they are a certified personal assistant.

  • Once a potential client closes by entering their credit card information they receive an email telling them to hang tight while we match them with a personal assistant based on their needs. All of our personal assistants then receive an email telling them that there is a project up for grabs on the back-end

  • A personal assistant can log in and claim the project by typing ACCEPT into a terms box that basically informs them they are taking on responsibility for this project from start to finish and that the moment they press enter, this email will be sent from their indesigner email account to the new client. Our back-end then populates a wordpress instance along with a live beta link where the project can be seen while it is worked on.

  • The personal assistant calls and emails the new client within 24hrs to schedule or jump right into the welcome call. During this call the client gets specific on what they are looking for and the PA gives them a range in hours for the project.

  • After project kickoff the PA logs and details hours on the back-end that are billed weekly to clients through freshbooks. Once a week the PA fills out an update for each project they are on until completion

Last but not least, IT and support:

  • Most support needed comes from the PAs to my technical cofounder. Whether its fixing a bug, editing an instance, or just messing around with our AWS config to solve problems - he makes sure everything is taken care of immediately so tha the PAs are never waiting on us / have no excuses if something goes awry.

  • IT and support also includes facilitating the movement of a client to us as a host, helping them point their domain, setting up their email through google apps or fixing their current email config, etc

And that is about it. My cofounder and I are both entrepreneurs at heart and love the idea of a bootstrapped, cashflow positive business with operational efficiency and a lean workload. However, we have come to understand how hard it can be. We also have a big vision in which our software/web app/mobile app becomes the easiest way for people to get paired up with someone verified (quality control) to work on their web or mobile app.

Here are our current hurdles. We are cashflow positive with $11,250 in revenue over the past 30 days, but feel as if stagnation is approaching. The sales process is burdensome. IT/Support is burdensome. We don’t have much money to hire a sales person - about $1,500/month + commission. We have tried working with a student, but its hard to find a good one, sales takes a while to onboard, and our current student has a co-op next semester. We want to work on inbound marketing but have trouble coming up with a concrete plan that feels right. If you made it this far, thank you for reading all of this and feel free to ask questions/offer any words of wisdom you may have!