This is the next installment in an ongoing series where I talk about my history in business starting all the way back when I was a child to now in my late forties. Feel free to read parts zero, one, two, three, four, five, six, seven, eight, and nine if you haven’t yet to get some context.
We last left off in the late 90s, when I was 27 years old, when I finally hit my ten-year goal of making six figures…
Mid 1999 – Mid 2001
With my new six-figure income I felt more confident and powerful as a business owner. I decided to expand.
- I moved from a single-room office to a multi-room office in the same building with its own entrance.
- I hired a full-time administrative assistant to handle my office work, or at least most of it.
- I hired my brother full time to help with back-office technical work we needed done for clients. I would still go out and do the on-site work, but he would do the hardware work in our workshop.
- I had an actual sign made up for the outside of the office and had it professionally mounted. It made my inner Alpha Male 1.0 feel proud to see the name of my company on the outside of a building.
- I moved my family out of my small home in an old neighborhood to a brand–new home with four bedrooms in a newer (but still very cheap) neighborhood.
All of this business and personal expansion felt very good. For the first time in my life I felt successful.
The problem was that while I had mastered how to make over $100,000 a year (and my income was barely over this number) I still had absolutely no idea how to manage it. I was still a kid and wasn’t organized at all.
Most of the things I was spending the new money on were things I should not have. My budgeting skills were pretty bad. I was semi-regularly behind 15-45 days on my bills and scrambled every month to cover all the expenses for my family and the office.
I also started going into debt, big time. For example, a client would order $14,000 of new computers from me. I would order the computers from the manufacturer using a line of credit, then deliver the computers, and get a $14,000 check from the client. Instead of paying back the line of credit like I should have, I instead said, “Wow! I have $14,000 extra this month! Cool!” Then I would spend it, leaving me a debt of $14,000 on the credit line. I did this several times, on top of maxing out credit cards and similar debt. Very foolish.
Every time tax time came around, I owed thousands of dollars because I wasn’t paying my taxes correctly. I could never afford it, so I had to call the IRS and local state government every year to come up with a payment plan. This just increased my debt yet again.
On top of all of this, I wasn’t building an Alpha 2.0 business. Instead I was building the typical, location dependent, sell hours for dollars, high overhead, hire a bunch of salaried employees type business that usually ends up enslaving the owner instead of freeing him. I was excited and working hard yet digging my own grave, and I had no idea.
I kept cranking things. The added overhead and employees actually increased my average weekly work hours, since now I had to not only take care of clients, but I had to monitor employees as well. My employees were good people, we got along great, and they did quality work. The problem was they were traditional employees. Traditional employees need to be managed. Moreover, I was not a good manager.
For example, my admin assistant had a bad experience with one of the companies she was working with over the phone. She was furious. The next day, she spent most of the entire day, six hours, crafting a well-worded complaint letter that she wanted to send to the company.
I don’t remember what I was paying her per hour, but whatever it was, it was something I could barely afford. When she proudly told me she had spent most of the day doing this, I realized I had paid her for six hours of her time to write a fucking complaint letter that was completely irrelevant to the day-to-day operation of my business.
This wasn’t her fault. It was mine. I never provided her with a clear vision, agendas, objectives, or limits. I did what I did with all of my employees back then. I said, “I need this and this done. Okay, bye!” Then drove off to work with my clients.
Thinking back on all of this today, it makes me laugh. (I was actually laughing while typing this article.) I was so inexperienced and over my head back then. If that version of me had hired the modern-day me to help him out, I would have screamed at my younger self for being such an idiot and would have had him revamp his entire business from the ground up.
But hey, I was still learning. Business success doesn’t mean you gross a higher income. It means you make a decent amount of money in a low-stress way while not working too hard and managing your money very well. I only had the making money part down (somewhat), but I had no idea how to do the rest of it. I just focused on increasing the income.
Finally, all of this financial mismanagement imploded. At some time around 2001 (I’m not sure which year it was) my car was repossessed. I was embarrassed and extremely angry with myself. I realized that I couldn’t keep up all this financial chaos. If things kept going this way, my family and I would be in serious trouble.
With a heavy heart, I told my wife at the time that I simply could not afford the house payment and lifestyle expenses anymore while servicing all of the debts and back taxes. We sold the house, I used the profits from the sale (of which there was a lot, since it was in the middle of a real estate boom) to pay off a bunch of debt, then the four of us moved into a small but nice apartment. I told the wife that we would have to tough it out in an apartment for about a year, after which we could buy another house, but a shitty house, fix it up, then flip it after living there for a year to take further advantage of the real estate boom.
That year in the apartment was very painful for me. My kids didn’t mind and even my wife didn’t mind very much, but I did. My income even dipped below the $100,000 level for the first time. I felt like a failure.
I resolved to clean up my financial act once and for all.
To be continued…
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Holy christ I had no idea you had your car repo’d, that had to really suck!
And here I am bitching about my piddly student loans and credit card…at least I bought my car with cash.
This is an awesome series and I’m learning a lot from it, keep it up!
Yeah man, I was a fuckin’ idiot. Seriously.
I would guess that partly, it was due to the prevalent attitude that borrowing money is the thing to do. I’m quite far from the US, but from what I hear it seems to me that the concept of spending one’s own money is not very popular there.
That is correct. The entire American culture, government, and economy is based on debt.
I owed big money one time when I screwed up my credit to buy my house….it was the worst year I’ve ever had. Constant headaches and lack of sleep were not uncommon.
Not sure how some people can live entire lives like that.
I like your system and I thought about it in depth.
I’ve read your book, Unchained Man, twice.
And let me say how much I value how genuine your writing is and the rationality of the blog.
A few things came to mind…
I look at the location independence factor and view on it a sliding scale rather than whether your career is or it isn’t for example. Acting, especially these days could be location independent (at least partially) with green screen now. Or teaching English can be done both online and in person and classes are scalable. If you write a book and do videos about the subject you have one product you can make money on again and again. Scalability.
Although you didn’t state it directly doesn’t a business have to be scalable to be Alpa 2.0? For example, a masseuse no matter how good they are will always be tied to hourly pay. If I write and self-publish a fictional Cthulhu Mythos book—or any book for that matter—my income is limitless. Hopefully increasing over time as I consistently release new books. And I can do this as often as time and effort allows.
Also, if you are traveling, as you are, it’s easier to work for a company and let them handle the complications of the visa process. In some countries you need to work with a company in that country to be able to stay beyond 180 days. If this is a part-time gig it gives you the freedom and allows you to work on the things that will help you reach the Alpha 2.0 goals. Many also offer one year contract which is a great way to work and travel (I suppose that’s semi-location independent). If you don’t like it you do your time and leave. If you do like it you can make plans to further your stay or make that city your base of operations.
Many companies also offer a number of benefits. In contrast to making Visa runs every thirty days or what have you.
Given this, I would say that whatever you are doing the process of writing books and making videos is essential to building cash flow and freedom whether one is an economics professor, actor, or economist. That’s the business model now.
Also, I love the seventy thousand dollar goal model. But if you live in a place like Thailand where everything is rather inexpensive you don’t have to earn that much money and you will still have plenty of freedom, time, and women. If you do make that U.S. dollars equivalent goal in another country that’s great as it will go a long way.
I look at the money you are making after you pay the rent and other monthly bills. I think that’s the real indicator of how much freedom, women, and thus happiness you will have. I remember having both a nice car and a huge beautiful home and not being able to afford to go out. Judge me if you will. But we all make mistakes. I have learned and moved on since then (sold both for mobility). Older self looking at younger self and shaking head.
And I am working on my Five Flags Life Style. The next step is getting a second passport. I would love to see more material or a book on this. As it will take at least two years to do this. And it can be a bit complicated. I also think this concept is in its infancy and will become more popular as people see the value.
Ideally it should be but it doesn’t have to be. That masseuse example isn’t a good one since he’s not location independent, but outside of that problem, he could structure his business to make at least $75,000 per year and work less than 30 hours per week if he wanted.
Being an employee is not Alpha 2.0, regardless of the other side-benefits. However, I view the above as a valid stepping stone to use while you’re building your own Alpha 2.0 business so you can get to the point where you never need to work for a company, travel whenever you want, whenever you want, and pay someone to mess with your visa issues if you don’t like doing that kind of work.
There are thousands of fully-self-employed Alpha 2.0s who are living abroad and don’t have an issue with that.
Agree.
Yeah, I had that problem too way back then.
What about working/doing business with a close relative? Does it go against Alpha Male 2.0 principles?
If that person has any power over you whatsoever, like working with your dad in his company or your brother in his company, then yes, that is directly against Alpha 2.0, since you are not free in that case.
If you’re the one in charge then it’s fine. My son works for me and two of my siblings have worked for me in the past. No problem.