What To Do With Your Millions

http://paulbuchheit.blogspot.com/2010/05/what-to-do-with-your-millions.html

by abstractbill • 16 years ago

291 87 16 years ago

paulbuchheit.blogspot.com

timcederman2• 16 years ago

I'm surprised, given this is from Paul, that angel investing is not mentioned.

niallsmart• 16 years ago

Tim - he says "avoid long-term or illiquid investments, though it's fine to put a few percent into random things such as starups, but understand that you'll probably lose that money, so consider it an educational expense."

gaborcselle• 16 years ago

Even though Paul has been pretty successful with his angel investments ... but on average, that seems to be true.

timcederman2• 16 years ago

I probably should've been more clear with what I meant -- I might've also avoided getting downvoted below 0 if I had.

I am surprised that someone discussing what to do with your money (in the context of selling your company and being posted on Hacker News) and discussing what to do with your life did not mention the possibilities angel investing offers beyond trying to make more money.

andreyf• 16 years ago

I thought this was a clear, albeit indirect, hint at angel investing:

It's ungrateful to not make the most out of it (and also help others become a little more lucky).

blantonl• 16 years ago

To me, this pandered to a lot of purposes and ideals all in the same blog post

paul5• 16 years ago

Is that a good thing, or a bad thing?

cma• 16 years ago

"Pander to" is rarely used positively.

sown• 16 years ago

This is all reasonable.

The day before google went IPO and created new millionares, they brought in John Bogle to advise them to stay away from mutual funds or whatever and at the riskiest, stick to index funds if they were comfortable with risk and then just put the rest into stable investments if they weren't.

takrupp• 16 years ago

An interesting piece of advice I got from my finance professor way back when: Put your money into either index funds (or the more liquid, cheap to get out of Index Future) or treasuries. If you are risk adverse, do more treasuries, if you are more risk taking do more funds (or if you really want to take on risk, lever up). But always stick with these assets, as they are much more reliable than mutual funds or the ilk.

Not sure what he'd say now. US treasuries arent the sure bet they were 5 years ago and who wants to put any money into the movement of the S&P? There is something attractive to me in having a few gold bars in a Swiss lock box, though.

brlewis• 16 years ago

It's good to see Paul getting recognized for his expertise in this area. He was ignored and downvoted earlier: http://news.ycombinator.com/item?id=1245906

pwhelan• 16 years ago

I've been pretty disappointed that I haven't heard people mention charitable donations as something to do once you've hit it big. That we have talents and opportunities makes us pretty damn lucky and helping out the unfortunate -- not just the less fortunate -- shouldn't be ignored.

JMiao2• 16 years ago

being charitable is admirable and all, but i'd be pretty disappointed to see someone turn this type of article into an opportunity to impose their personal beliefs on others.

MikeCapone5• 16 years ago

Especially if it's in high-impact/low-probability causes that are starved for money. Small amounts there could make big differences if they pay off.

Eliezer Yudkowsky wrote a lot about this on LessWrong.com, about how dog shelters get a lot more money than existential risk prevention (singinst.org or Lifeboat.com), Friendly AI research (singinst.org again) or finding cures to the diseases of aging (sens.org). Of course, puppies deserve our help. But do they deserve more resources than the kinds of things I mentioned above? Or is this just the way our cognitive biases steer us, pulling at our heart strings against our best interest?

A couple of wealthy people could easily double the amount of research in those fields (in fact, Peter Thiel, formely of Paypal did pledge a few millions, but more are needed).

vl• 16 years ago

While I understand your point, I think that most people don't know what "existential risk prevention" is. And quite frankly, websites you linked to (except sens.org) convey impression of overly-paranoid semi-crazy science fiction, which is unlikely to win funding over puppies.

bad_user3• 16 years ago

> finding cures to the diseases of aging

I'll be also be old and sick someday, and I think that accepting the fact that you're going to die eventually will make you happier.

I also have a cynical view on ... increasing the life span of people can only be harmful to anybody.

> Or is this just the way our cognitive biases steer us, pulling at our heart strings against our best interest?

Again, what makes you so sure it's in our best interest?

benatkin• 16 years ago

If you think the decision of whether to give away money isn't one that can wait, you disagree on the main point of the article's advice, which is that you can go wrong by spending your money quickly, and should therefore wait until you're ready before doing anything major with your money.

Perhaps he could have given philanthropy a little mention where he suggested investing a tiny bit in startups, for experience, but his genearl advice was, "Do something remarkable." He didn't suggest investing a big chunk of the money in startups, or founding a startup, or anything else.

There are plenty of unremarkable ways to donate money to non-profits. Anyone can start a non-profit. They claim to be benevolent. So does the government. If you donate to some non-profits, you might as well be donating to the government by optimizing for high taxes. He could find someone to advise him to donate to a good organization, so the money doesn't get wasted, but that brings us back to the point about not trusting every financial advisor on the planet.

rwhitman3• 16 years ago

I've always felt that if I ever cashed out big on something, I'd probably put a good chunk of the money into building a charitable foundation and make the foundation my fulltime job. If you have the money to invest and you've already been successful at founding an organization, why not invest in something that can continue to fund raise and keep giving over the long term?

alain94040• 16 years ago

Great. One more foundation to which I have to apply, pitch and convince the decision makers. More red tape.

Seriously, when you are faced with that problem (of having too much money), please look around. Just maybe, there might be something that already does what it is that you want to do. You do not have to reinvent the wheel to satisfy your ego by having a foundation with your name on it.

pfedor• 16 years ago

Philip Greenspun did address this in an article on a similar subject: http://philip.greenspun.com/materialism/early-retirement/ (scroll down to section "Non-profits are NOT the Answer" if you don't want to read the whole thing).

nlwhittemore• 16 years ago

Greenspun's piece on nonprofits is a hackjob written by someone who hasn't spent enough time around them to know much other than his own perception. The idea that the nonprofit world is filled with people who just couldn't make it in the corporate sector is a fallacy, plain and simple.

paul5• 16 years ago

That's a pretty difficult topic of its own. Philanthropy is like investing, except much more difficult. The good news is, like investing, you have time to think and learn.

Philip Greenspun has some interesting thoughts: http://philip.greenspun.com/non-profit/ and http://philip.greenspun.com/materialism/early-retirement/

michaelneale• 16 years ago

Very well put. If you find your self with a few spare million, I would think it is good stewardship to apply that advice to selecting charities, with as much care as you would investments. It also helps with the "purpose" aspect paul mentions.

It would be pretty frustrating if you quickly did a sizeable donation (sizable compared to the norm for that charity) and find out a month later about some scandal, or how only a small portion of what you thought was a donation really was a donation etc... you would just get on with life, but it would innoculate you against further causes in future which is a loss for everyone.

So good advice, think of it as an investment (in terms of dilligence, time etc).

That and giving stupendous tips and totally making someones day, that must be a whole lot of fun.

mattm2• 16 years ago

Plus, it is very difficult to tell if charitable giving is actually helping or if it is only helping people to rely on you.

jacquesm• 16 years ago

Why not take that money and instead of tossing it to 'charitable' destinations use it to create an investment fund to help jumpstart people with projects that will create jobs and/or are aimed at sustainable living or 'green' technologies ?

That would be a lot more effective in the long run than it would be to just pass the responsibility for the spending off to some overhead ridden charity.

disposable• 16 years ago

Frequently quoted number is the 80% that are spent by the charities on supporting themselves and 20% reaching the actual people they are helping.

A friend of mine worked for a larger charity and the level of self-indulgement was astounding. Especially around the end of fiscal year when they had to spend the whatever budgeted cash left on something... anything, so not to have the budget cut next year.

rwhitman3• 16 years ago

Ok, but isn't it better that at least 20% goes to charity than 100% towards buying luxury cars or other less constructive ways of using that money?

Also, doesn't a very large percent of the money invested in a business go towards supporting themselves too? To keep things running, people have to be rewarded, just like any other organization. Bills have to be paid, people have to be fed. And its even harder to keep good people on board at a nonprofit when they could be making 3x as much at a for-profit company.

I've worked with dozens of nonprofits and have a bunch of friends that do. They drive me completely insane with disorganization, red tape and horror stories of mismanagement. But I've never met someone who worked in a legitimate nonprofit who's heart wasn't in the right place. At the end of the day, the money is usually doing something good

JMiao2• 16 years ago

"RAID for money"

and i was like, "go on..."

cperciva• 16 years ago

The analogy doesn't quite hold. The key idea behind a Redundant Array of Independent Disks is that under the assumption that disk failures occur independently with known probability, you can compute the probability of the array remaining intact.

In contrast, with a Redundant Array of Insolvent Banks, there is a very high correlation between bank failures -- but you're saved by the FDIC per-bank insurance limit. You're not modelling your risk based on known probability distributions; you're eliminating your risk entirely (at least as long as you trust the FDIC).

tkhoven• 16 years ago

You're not modelling your risk based on known probability distributions; you're eliminating your risk entirely (at least as long as you trust the FDIC).

To (over?)extend the analogy further, there's always the possibility of a controller failure.

sethg• 16 years ago

...and each bank, ideally, guards against insolvency by distributing your deposits among a Redundant Array of Independent Debtors.

riffraff• 16 years ago

or, he was just talking about RAID0

nreece2• 16 years ago

  Go for a walk in the park. Appreciate the trees.

I knew this was coming. You can, and should, do that regardless of whether you have millions or not.

Evgeny• 16 years ago

Maybe this becomes more important in the case when you have millions.

nreece2• 16 years ago

It does. But I think it's even more important on your way to making that first million. It keeps you sane.

hubb• 16 years ago

why would it be more or less important to be happy when you're rich? the simple things that you enjoy in a "regular" life can be just as important to your happiness as in a "rich" life.

_3ex7• 16 years ago

    Appreciate the trees.

One step ahead of you

njl• 16 years ago

The letter from Buffet where he outlines how Wall Street has just turned into a source of friction slowing down "real" industry is gold.

http://money.cnn.com/2006/03/05/news/newsmakers/buffett_fort...

jl• 16 years ago

More words of wisdom from PB! Especially the bit about people still needing a sense of purpose even though they might not have to work anymore.

dcurtis• 16 years ago

With limitless resources, how do you determine what is truly worth your time?

When do you think, "okay, this project is worth a chunk of my life," and then stick with it?

And then, once you do finally stick with something, something better will come along eventually. What do you do then? You're not tied to your job like a normal person, so you can't say, "if only I had the freedom, I would do that better thing..."

I had never realized how much meaning the "institution" gives to life.

paul5• 16 years ago

We rely on the machines as much as they rely on us.

nostrademons• 16 years ago

That applies to anyone with enough savings to sustain a reasonable period of unemployment and enough skills that a variety of organizations would want to have you. In the computer field, that should be most decent programmers that have been out of college for more than 18 months or so.

I don't really understand this idea of being tied to a job. I'm not wealthy, I'm not financially independent. But if something better comes along, I do have the freedom to go do that instead. It doesn't really take all that much - a few years living expenses and a few marketable skills give you all the cushion you need.

And then, of course, you're faced with the "what do I do with my life" question. But I thought all 20-somethings (well, all middle-class 20-somethings in developed nations) faced that.

alexyim• 16 years ago

I wouldn't call it limitless.. Having a few million in the bank just allows you to better utilize the 60-70 years you have on the planet.

fierarul• 16 years ago

Your question resembles what Alan Watts said in a talk about Buddism which was somewhat like: "if you could have everything you want, all the money, all the women -- what would you do then" ?

adrianwaj2• 16 years ago

The original Ask HN post he speaks about is probably a lie anyway. But that doesn't make it a good conversation starter.

"I'm a 20 year old guy who sold his company last month for $5m in cash. I really don't know what to do with the money or how to manage it. I never gave it a thought and now suddenly I have $5m."

You'd think he'd be smart enough, given he's just made $5m at 20. No further comments left by radicaltype either.

fleaflicker• 16 years ago

I doubt it's a lie. what would be the motivation? There's very little trolling on HN. I see no reason to doubt its authenticity.

crystalis• 16 years ago

Do you have showdead on? Do you scroll to the bottom of every post? It seems like every third post has garnered a squadron of useless flip replies that sit at -4 or dead. A troll post of this variety is almost on the level of effort of the one word "yes" and "no" posts that show up when the headline is a question.

adrianwaj2• 16 years ago

lulz.

For argument's sake, what single founder (male, 20) sold their company (assuming it was a website) for $5m last month? Shouldn't that be publicized? Even if it's not, the guy is likely full of it.

tmsh• 16 years ago

i suggest people in a similar circumstance watch LE NOTTI DI CABIRIA. it doesn't seem like it's on topic, but it may be (incidentally, i just saw the film and thought it was pretty good).

anyway, money is such a hard thing for so many people in the world. my biggest advice, if you don't have a lot of ideas for research projects yourself, is probably to put yourself on a path where you can find people who truly need help that you can partly provide. it has to interest you or else it won't be sustainable. but if you can, with patience, find that path, you'll have locally maximized the use of the money just as you've largely maximized making money.

arn• 16 years ago

I know this goes against common sentiment. But I am going to disagree with the notion of going on your own and just investing in index funds.

It's not as easy as it sounds to stay consistent with it over time (years, decades). I did all the research, read a bunch of books, and used up a lot of my time when I was looking into investing. I picked an asset allocation strategy, and planned to contribute regularly and rebalance annually.

That just didn't happen. Rebalancing annually didn't. Contributing in a timely fashion didn't. My income goes up and down, I have to pay quarterly estimates, so I do keep some degree of excess cash. invariably, I forget to invest the difference for long periods of time.

In the end I hired a financial person to just handle it and manage my money. Yes, there is a drag on returns because of it. But the alternative was being out of the market for periods of time, or off balance. Anyway, just another opinion.

paul5• 16 years ago

I'm pretty sure that wasn't my advice though.

faramarz• 16 years ago

Paul, while you're on subject, please explore the 'purpose' finding journey in a blog post. If you think out loud about this, I'd like to read it.

Sthorpe• 16 years ago

I always wonder why more millionaires aren't building the next iphone or a new operating system. Maybe playing with AI theories.

I mean, am I the only hacker who dreams of being a mad scientist, where I can have teams of people working on all the many new idea's I have. I'm frankly pissed, I want my hoverboard. :)

rythie• 16 years ago

Because you need to be a billionaire to successful at those.

orionlogic• 16 years ago

Sometimes, good fortune can also make people feel guilty

Fortune, which comes from Greek goddess Fortuna might actually bring both good and bad luck. Like, always only hearing the lottery winners stories and dismissing millions of losers, we take the good luck notion of Fortuna and leave the bad luck out of her.

c00p3r• 16 years ago

I don't remember exactly what is the name of this bias, but people used to believe that if one is successful in some field, say, programming, he is also authoritative in completely different fields, such as philosophy or finance. =)

Actually, it is exactly the opposite, just because you need to spend almost entire life (at least most of your time) to become a real pro in any field, say a medical doctor or system engineer, or philosopher.

'Start early and evolve' is an universal mantra, which is correct in sports, music, languages, communication skills, etc. So, the idea is very simple - stay near your field and do not try to compete with those, who were spent half of their life on it. Or at least do not try to teach. =)

You wouldn't join the boxing championship just because you're famous computer engineer? Would you? =)

antirez• 16 years ago

("Money can also mess with your identity in bad ways. It's important to remember that we're all made of the same shit, some people are just a little luckier than others")++;

DanielBMarkham• 16 years ago

First, it's important to understand that once you have the basics, happiness comes primarily from healthy social connections and a sense of purpose.

Many people with jobs have a fantasy about all the amazing things they would do if they didn't need to work. In reality, if they had the drive and commitment to do actually do those things, they wouldn't let a job get in the way. Unfortunately, if given a lot of money, they are much more likely to end up addicted to crack, or even worse

I used to watch a lot of cable TV (10-20 hours a week) and from time to time I would hit upon one of those celebrity biographies. As much as they tried to spin it, suddenly becoming rich and famous usually destroyed people's lives.

Meanwhile, some family friends we know who never made a lot of money retired, joined an RV traveling community. Every year the same bunch of people take several months touring the country. It is not very expensive. They are having the time of their life.

The point is this: Paul's advice is good even without the money. Social interactions (I would add travel) and a sense of purpose are foundational to happiness.

Somebody said once that money is a magnifier. It takes whatever character traits you already have and exaggerates them. I'm not an expert or anything, and I'd certainly like to be better off than I am, but I'm willing to bet that giving 5 or 10 million bucks to most people would be about the same in the long run as shooting them in the head.

kirse• 16 years ago

Happiness, by its very nature and definition, is rooted in feeling pleasure about the happenings and circumstances of life. It's fickle and never guaranteed.

Joy and peace (a positive confidence despite the sad or happy circumstances) comes from having a set of principles one adheres to and complete self acceptance.

Paul's advice here is utterly incorrect and sounds ridiculous to even read:

...if you quit your job and move to a new city where you don't know anyone or have a clear purpose, there's a good chance that you'll end up depressed or even suicidal.

Seriously? People should spend less time seeking happiness (a fickle emotion), and spend more time becoming at peace with themselves, because inner peace will carry you through no matter the circumstances.

asdfghjkl1521• 16 years ago

heya. i would like to donate some like to spend some..

jamesseda• 16 years ago

Financial advisers are great for people who currently are invested 90-100% in Gold or a stock they saw on Mad Money last night. But if have enough sense to be diversified and are interested in learning about managing your money you are better managing it on your own.

jister• 16 years ago

If I have Million$, I will:

1. Put it in a bank for my security (living on interest if that how you call it) 2. Quit my job 3. Go some place cheap (probably asian countries) 4. Then just enjoy every minute of my time with my family

surlyadopter• 16 years ago

I yearn for the day when I have this problem.

What To Do With Your Millions

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