The Importance Of Owning Your Own Platform

Today Medium announced that they will be laying off 50 people to refocus on their mission. That mission, they say, is to make publishing more accessible to everyone, and to allow the highest quality content to get noticed even if it comes from someone without many followers.

I can totally get behind that mission. But at the same time, this announcement demonstrates the importance of controlling your own platform and owning your content by actually publishing on your own website. Over the last year or so, some pretty big publishing outlets have migrated entirely over to publishing on Medium. Today’s announcement by Medium underscores why that is a bad idea.

Now, I won’t say that the sky is falling for Medium. As noted in the announcement, the last year has been the best for Medium so far as far as key metrics are concerned, and I see no reason to doubt that. Anecdotally, I have seen more people using it and I’ve noticed it appearing in search results more often. They will probably work out whatever problems they are having and move forward.

With that said, it does demonstrate the problem of relying on another platform. There was a time when the best publishing platform was Livejournal. Then there was Blogspot. And Tumblr. Now there is Medium. So while this is not the end for Medium, what happens when the next great publishing platform comes along? It is trivial for readers to leave and start reading somewhere else, but it is a much larger task for the publishers to migrate to the next great platform.

The solution is to maintain complete ownership of your content, on your own site, on your own domain name. Then use those publishing platforms to help promote your content. That’s the approach I am taking with my blog over on Lernabit. It works great, and I don’t worry about the next Medium coming along and ruining it.

What Is Money? The Answer Could Reshape Financial Education

Author’s Note: This was my winning entry for a HeroX challenge to find the root causes of financial illiteracy and propose a solution. I’ve reposted it here to gauge interest in me moving forward with the idea by developing it into a personal finance course. Visit BiteSizedFinance.com to join the email list and show your support for an entirely new way to think about financial literacy.

Note that the essay was written and submitted in spring 2016, so some of the statistics like unemployment data might be a bit outdated, but the general point of the article is still valid.

What is money? Almost everyone thinks they know the answer to this question, but usually they are wrong. The truth is, the majority of people don’t truly grasp the concept of money at a basic, fundamental level. To most people, money is just something you use to buy stuff, whether it is food, housing, or a new car. They don’t realize that money is something more abstract than that. This misunderstanding about money is the root cause of financial illiteracy, which is a problem of great importance in the United States and globally. But to fully analyze the extent and implications of this problem, it is worth backing up to define what is meant by the term “financial literacy.”

Financial literacy is often defined in terms of basic personal finance skills like budgeting, saving, and diversification. Thus, the usual advice to solve the problem of financial illiteracy almost always consists of teaching those skills to people at an early age so that they can “start while they are young” in order to have a reasonable shot at retiring some day. But while teaching those skills is important, it does not impart true financial literacy.

True financial literacy is an ability to increase one’s net worth regardless of the economic climate. With that definition, it starts to become clear why those basic skills mentioned earlier are not sufficient. Saving, budgeting, and diversifying are only useful to the extent that you actually have money to save, budget, and diversify. It does not address the issue of how to create that money in the first place. That piece of the puzzle requires a deeper understanding of money.

At an abstract level, money is just a carrier of value. If a plumber fixes my water heater, he has created value for me by doing something I don’t know how to do. In exchange, I give him some money that he can exchange elsewhere for other valuable goods and services. Money is a way to simplify the exchange of value throughout a very complicated network of individuals, businesses, and governments. But despite the complexity of the overall network, every single connection consists of a very simple exchange of value. Thus, the process of making money can be summed up into two words: find value.

In practical terms, that means money can be acquired by one of three primary methods:

  1. Get a job – By helping a business make money, you have created value for them. In exchange, you get money.

  2. Invest – By noticing price discrepancies between various forms of value, you get a bargain price on your exchange, resulting in profit.

  3. Own a business – You deliver a valuable product or service in exchange for money.

Of these three basic methods of income creation, the first two have shortcomings. A job is a very reactive approach to generating income. Of the three methods, it is the one most subject to economic fluctuations. In addition, it is limited by the amount of time in a day. When working for an hourly wage, even if you could work every hour of every day, there is an upper limit to how much you can make.

Investing also has problems of its own. Specifically, to make any substantial amount of money from investing requires either a lot of money up front or decades of patience. This is a great way to grow wealth, but not a very realistic way of creating wealth.

This leads us to the third option: owning a business. By starting a business, you are building a machine that creates value for others in exchange for payment, and that machine continues to become more valuable over time as the product improves and it develops stronger relationships with customers. In addition, the initial startup cost can be greatly reduced by leveraging your existing skill set, reaching out to your network, and structuring creative deals that aren’t reliant on money. This makes it more effective than jobs and investing as a means to create initial wealth.

These facts are supported by evidence. By looking at the most recent list of people on the Forbes list of the 400 richest Americans, we can see how the most successful and financially literate people in America go about creating wealth.

Of the top 10 people on the list, six of them built their fortunes from starting businesses, while one person did so by investing and three inherited their wealth. Of those who inherited it, all of them inherited from their parents who themselves created businesses. So of the 10 richest people in America, nine of them are rich as a result of entrepreneurship.

A common counter argument to this is that those people created their fortunes decades ago when the economy was much different than it is today. That is true, but further data shows that to be irrelevant. Of all the people on the list, 17 of them are under the age of 40. By looking at only those young people, we can see how people have created vast wealth in more recent decades.

By looking at that subset, the argument still holds up. Of the 17 billionaires under the age of 40, 13 of them built businesses. The remaining four all inherited their wealth from parents who built businesses. (Note that Mark Zuckerberg was on both the top 10 list and the under-40 list, so there is some overlap). Not a single person on either list built their fortune from having a job, and only one (Warren Buffett) became rich primarily as a result of investing.

The data clearly indicates the power of entrepreneurship to build wealth. But what has not been shown is the distinct lack of any organized effort to teach entrepreneurship in schools. To demonstrate that problem, we have to look no further than the levels of unemployment around the world.

Presented in table 1 is a chart showing the unemployment rates of over 200 countries. Of the 200 countries included in the chart, nearly half of them (45%) have unemployment rates of at least 10%, while over two thirds (69%) have unemployment rates over 5%. Currently, the U.S. unemployment rate is about 5%. However, the most recent Gallup poll shows that the underemployment rate is a more discouraging 14%. The implications of this data become even more startling when viewed in light of the student debt crisis.

Unemployment rate of every country
Table 1: The unemployment rates of 200 different countries

 

Currently, student debt in the United States alone is over $1 trillion. That debt is not removed by bankruptcy and it damages the financial growth of young people for the rest of their lives. Even worse, that money is being borrowed by young people in the hopes of improving their job prospects. But as the unemployment data demonstrates, those jobs simply aren’t there. There are too many people looking for jobs because they don’t know any other way to create income. The data clearly illustrates the need for a complete change in what we teach kids about money. By looking at the data, we can develop an entirely new paradigm of financial education. That new approach to teaching would involve a few key components.

First, let’s teach young people about the basic fundamentals of how money works. By teaching them the most basic concepts of money, they will understand the need to be creators of value. This will be the “why” of entrepreneurship.

Second, we need to teach them the skills required to start businesses. It is not enough to teach them why they should start businesses. They also need to learn the technical skills required to generate income, such as product design, sales, and marketing. This would be the “how” of entrepreneurship.

Third, this new way of teaching should come at an early age, ideally before high school. On one hand, we need to encourage young people to stop defaulting to the same recipe of going to college to get a job, which only results in an imbalance of value consumers vs. value creators. But at the same time, college will still be the right choice for some people. Thus, this change needs to occur at early grade levels so young people have at least a few years to decide whether or not college is appropriate.

Financial illiteracy is the result of not understanding money at a fundamental level. By teaching those basic concepts of money with a focus on entrepreneurship, we can get young people to create new value and generate income while giving them the confidence to skip college altogether. The outcome of this would be an end to the student debt problem and the unemployment problem in one fell swoop. That would be a truly revolutionary approach to financial education.

The Creator’s Paradox Of Choice

Quite some time ago, I set up this blog with the intention of having it as some sort of brain dump for all of the things I enjoy writing about. Despite having many different interests, I haven’t created any content because I can’t find what to write about. In fact, the breadth of my curiosity has been precisely why I can’t find a topic.

This dilemma reminds me of the famous (and excellent) TED talk about the paradox of choice.

The interesting thing about that is that the paradox is often discussed in the context of consumers, but the problem also exists for creators.

I have been very busy lately building Lernabit, and that will always take priority over blogging. But my inability to blog has mostly been the result of being faced with so many topics that I’ve ended up not writing about any of them. I have interests ranging from business and entrepreneurship, to science, to programming and web development, skepticism and critical thinking, and even news items and opinions.  Not to mention that I could also create a blog in which I cover any two of those topics and how they overlap. For example, a blog looking at the world of business technology would be exciting to me. With all of these possible blog topics available and interesting to me, I didn’t cover any of them.

I don’t think I’m the only one who has this problem. As creators, builders, and tinkerers, we often have many ideas running through our head like a fire hose that is sometimes hard to turn off. It gets very difficult to just focus on one topic, or one project, or one business idea. Instead, we work on one thing for a few weeks or months, fail to get traction, and move on to something else. This is damaging in so many ways.

From a business perspective, it is bad because it often leads to us giving up on something that is fundamentally a good idea that just needs a little bit of tweaking.

As builders, it limits depth of knowledge. We cover a topic briefly, obtain a surface-level understanding of it, and quit. One thing I have learned from web development is the importance of building and maintaining a long term project, because it teaches a very different skill set than just hacking together a weekend project. When you maintain something over months or years, you learn a lot about good code structure, correct database design, building for scale, and so many other potential problems that aren’t noticeable after just a few weeks. A lack of focus can cause builders to miss out on those learning experiences.

I have been thinking about some possible solutions to this problem. For really big projects, it is helpful to think about it as a series of numerous small projects. For example, on Lernabit, I wanted to find a way to optimize the audio streaming to use fewer system resources. I took that on as a project of its own. Instead of saying, “How can I make Lernabit use fewer resources?”, I asked myself, “What is the most efficient method of audio streaming in general.”  I turned into a more abstract problem that ended up teaching me a lot more about how audio streaming works. And instead of just tweaking some code, I set out to make some rather substantial changes to the basic infrastructure that will make the site scale better in the long run. The whole project was like a game as I tried to squeeze more juice out of the system.

Another approach I use to overcome paralysis is to give myself some free time to just… tinker. It is very similar to Google’s “20% time” for employees (which I don’t think they do anymore), or more recently, their Google X Lab, which is a space to just experiment without any expectation of profit. This time is very valuable to me. I use it to explore new programming languages, tools, and just learn random things that may or may not end up being relevant to building my business.. This is how I have learned about Grunt, AngularJS, React, Bower, Java, TypeScript, and countless other tools. I’m only using a few of those on Lernabit, but all of them taught me something new and made me see programming from a different perspective.

Whether you are a writer, or a programmer, or a builder of businesses, it is important to find one thing and focus on it. But don’t be afraid to experiment, tinker, and just let your mind run. It’s better than doing nothing.