jasonfried: You write, "this isn’t a traditional investment. We’re not looking to get out, we’re looking to stay in."
I have to disagree with your choice of words: the investment you guys just made is the truly traditional, old-fashioned kind. Consider what John Maynard Keynes wrote about the difference between the way in which professional investors invest in a business, versus the way in which entrepreneurs since time immemorial have committed capital to business endeavors. Most professional investors, Keynes wrote:
are, in fact, largely concerned, not with making superior long-term forecasts
of the probable yield of an investment over its whole life, but with foreseeing
changes in the conventional basis of valuation a short time ahead of the
general public. They are concerned, not with what an investment is really worth
to a man who buys it "for keeps," but with what the market will value it at,
under the influence of mass psychology, three months or a year hence.[1]
Before the advent of financial markets, all investments were made "for keeps" by people looking to "stay in."
Congratulations on making a traditional investment.
--
PS. FWIW, Keynes accumulated a fortune by investing his own capital during his lifetime.
He was 83% long going into the downturn that resulted in the 1929 crash (p. 21)So how could Keynes be a great investor with such a bad performance? Because Keynes, the evil bastard, along with Bernard Baruch, talked FDR into confiscating the gold owned by all Americans. He then loaded up his portfolio with gold mining stocks and then urged FDR to prop up the price of gold.
...
Bottom line, as far as I'm concerned, Keynes was a terrible investor, as shown by his pre-gold mining stock losses. The only time he made real money in the markets was when he traded on inside information about FDR's plan to drive the gold price up, and loaded up on gold mining stocks. Got that? The man who called gold a "barbarous relic" in his 1924 book, Monetary Reform, had 66% of his portfolio in gold mining stocks in the 1930s.
I ask only because according to the reputable sources I've read, Keynes made a fortune from his investments, and he also made a lot of money for Cambridge University, whose portfolio he managed for a few decades. Here's some reliable information on his track record as an investor:
Previous personal research, mainly. However, a quick check through the LSE paper you linked: However, performance in the late 1920s was disappointing, as we saw in
the previous section. His 83% equity allocation at the end of August 1929 indicates
that he failed to foresee the imminent sharp fall in the London market. This
sobering experience could well have led Keynes to his beauty contest metaphor
and to bemoan the seeming inability of the “serious-minded” investor, frustrated by
the “game-players”, “to purchase investments on the best genuine long-term
expectations he can frame” (Keynes, 1936: 156).
I'd be surprised if the other sources failed to acknowledge that he busted badly in 1929-31.
jpdoctor: it makes no sense to judge his long-term results based on a short stretch of under-performance. According to that same paper, the portfolio he managed for Cambridge University beat the market by 8%/year on average from the early 1920's until his death in 1946. That period includes the Great Crash of 1929 and the Great Depression of the 1930's!
PS. That would be like judging Warren Buffett's impressive long-term investment record based on the sharp decline in Berkshire Hathaway's share price during the financial panic of 2008!
PPS. If you think Buffett's record is explained by luck, check out the subsequent long-term record of the seven investors identified in this article he wrote for Columbia Business School's magazine in 1984: http://www4.gsb.columbia.edu/null?&exclusive=filemgr.dow... -- all materially outperformed the major stock indices after being identified by Buffett -- what are the odds of that?
> it makes no sense to judge his long-term results based on a short stretch of under-performance.
It makes enormous sense: He missed the biggest economic event of three generations. If you can't call the big ones, then there's very little proof his returns were something other than luck.
Look, both Keynes and Buffett (since you mentioned him) have long term positive results when there was a long term positive market. Choose a high-beta portfolio in such an environment, and voila! you beat the market. In order to show you have any actual insight and aren't just playing for luck, you need to show that you beat the market significantly in both up and down environments.
BTW, the entire mutual fund market is based on this approach, and when a fund seriously underperforms, it is conveniently removed from the portfolio of Fidelity/Janus/insert hucksters here.
Thanks for doing that, and thanks for writing the post. We need more people thinking this way, sincerely trying to build businesses and organizations of lasting value :-)
pilsetnieks: before financial markets made it possible for people to exit their investments with relative ease, all investments throughout history were made "for keeps" by people looking to "stay in" essentially forever. The idea of "investing temporarily" (which almost qualifies as an oxymoron in my view) is a more recent development, but has become dominant to the point that it is now considered "traditional."
I think the main difference lies in the end goal of the student. We train people that are looking to become software engineers. People that are looking to dedicate the rest of their life to creating software. The Starter League is more suited for founders looking to build a prototype, or people of other professions looking to gain basic competency in tech.
Their classes are 96 hours, we total over 500. We also have around a minimum of an 1:8 ratio of instructor to student.
I think the last major difference is that we set up an employer day at the end and recruit companies looking to hire junior developers. Two weeks on from the graduation of the current class we've had over 13 students with offers at an average of above $83,000.
We also cost $12,000 versus their $8,000 (for the most comparable course).
I've met Neal, and some of the guys from Starter League and they're amazing. They're going to keep crushing it, now with the power of 37signals! Good job guys.
We're very supportive of Shereef and his team at DevBootcamp. Thankfully we've got the Ruby Dojo http://starterleague.com/dojo (which also sports an 8:1 student/instructor ratio) this quarter which serves a similar audience to DevBootcamp's cohort with training for people aspiring to become software engineers. And class/hours/ratio comparison is a bit different, since it's a full time commitment for our students as they often work in our space at http://1871.com 24/7 and practice around the clock with mentors, fellow students, and the many startups that are looking for development support. While we aren't explicitly jobs/placement focused, our outcomes have been similar to that of DevBootcamp for our students that have aspirations to become software engineers.
I believe Code Academy was around before DevBootcamp, since they've been around for a couple of years now. They teach more than just Ruby, they have a co-working space and are based in Chicago.
DevBootcamp teaches you the full stack for being a Rails developer too, not just Ruby. I'd say they differentiate by getting 80-90% of their students entry level development jobs after and that's a core part of their bootcamps.
"DevBootcamp teaches you the full stack for being a Rails developer too, not just Ruby."
We teach way more than just Ruby. Our Web App Development course covers the same material as the Dev Bootcamp offering. We also have a User Experience course and two HTML/CSS classes. Over the past year our students have wanted us to teach MORE Ruby which is in part why we have finally added an Advanced Ruby offering to our lineup.
Another differentiating factor is that we are not focused on just helping our students get jobs. Students who apply to The Starter League have a lot of different goals in mind. Some want jobs, some have startups that they are looking to grow or get off the ground, and some just want the ability to take what's in their head and make it real through software. Our priority at The Starter League is to create the environment where all these goals can thrive.
For students who want jobs, we have an environment that can helps network with the local community to find those opportunities. For those who want to build companies, we are located in 1871 (http://1871.com) which is the new mecca of Chicago digital entrepreneurship.
We have a lot of respect for what Shereef has been able to do with DevBootcamp, and we wish him continued success! It's great that the software education landscape has grown this much in just a year's time.
I live in Chicago and I'm an experienced developer. I want to start a company but I don't want to go the seed funding route because I want to create a profitable small business, not a startup. Is there a Starter League for me?
Not that the non-existence of such a program would stop me...
We've discussed this, but we don't have a definitive answer right now.
One thing we believe is that it's important for people to make some sacrifices to be here. We want totally committed students. Figuring out how to pay is a great test to see how committed someone is.
You are correct, sacrifices should be made to achieve something meaningful. Could I trade any sort of work for a class? (ie: administrative, janitorial, chef)
That's the wrong way to do this: you're basically asking him to go through your skills, then go through his business and find where they intersect so you can help him. It's take away one of his most important resources, time.
Instead, research everything about 37Signals and Starter League (example: http://charliehoehn.com/2009/01/08/how-to-hack-someones-mind...), come up 3 ideas that benefit them, and pitch them as someone who will get it done and they won't have to manage. When contacting busy people, you'll get far better returns with this approach.
So my uncle has this philosophy that if a school provides scholarship to a student, irrespective of the amount of money, the school is putting some faith in the student and that is very valuable. Some schools provide a no-cosigner loans that are also in the same light. Just a perspective.
Jason looking long term do you see an expansion of the school with satellite campuses. Clearly one of the benefits of the current location is access to the talented resource pool in Chicago. Chicago, Denver and Kansas City are some of the few places in the Midwest that have an ecosystem, though small in comparison to the west coast,to support and encourage budding builders.
No plans to expand outside of Chicago right now. We’re focused on quality and nailing the learning and teaching experience. One location makes that possible. We're interested in quality over growth. Expansion is dilution, not concentration.
People from all over the world are coming to Chicago to attend The Starter League. So far people from 25 states and 12 countries have made the investment in themselves to learn what it is The Starter League teaches.
This focus on quality and keeping it small is the right thing to do. What does the acceptance rate look like though? I think after this affiliation there's going to be a lot more applicants and therefore the acceptance rate is going to go down. Maybe its a question for Neal and Mike, but what's the process for selecting applicants?
The application at http://starterleague.com/apply is the first step. As we review applications we choose people to interview either in person, via skype, or by phone. We are looking for passionate and persistent people that are willing to spend three intense, immersive months in Chicago.
It sounds like they're profitable and I thought 37S was a proponent of slow growth, no hostility intended but I'm confused about the goals of 37S and Starter League with this agreement. Presumably if its an equity investment you expect some kind of liquidation down the road right?
No liquidation, no. Financially we'll participate in the distributions (The Starter League is an LLC) as long as the company is profitable. But this is way more than that - this is an investment in helping other people learn and for us to become better teachers. The returns from that will be far greater than the financial returns.
If you are getting more personally involved. How are you going to make sure that people act on your general advice instead of thinking that they have to do exactly like you?
