Editor’s note: The opinions expressed in this commentary are the author’s alone. Zach and Andrew are both financial tech professionals at blooom.
If you watch any financial news or follow anyone besides the Kardashians on Twitter, you probably heard that the U.K. faced its own version of armageddon when it recently voted itself out of the European Union.
It’s a complicated mess, but the short version is this: The people of the United Kingdom have decided to leave the European Union. This is basically the equivalent of a state like Texas deciding to secede from the United States … kind of. The point is, it’s a big deal.
The thing is, “big deal” events happen all the time in the markets and in the lives of startup founders and employees. Working for a financial tech startup like blooom means we’re constantly reassuring clients that, “these things happen regularly, the world is not actually ending, and that focusing on the long-term is the only way to truly succeed.” As much as we repeat this to our clients when the market is freaking out, we have to repeat the same thing to ourselves every single day.
Every time the market faces any real uncertainty, it plunges, as witnessed with the Brexit vote. But already, just a little over a week later, the market has recovered completely. For days, weeks, or even months it can seem like there is no hope as investors panic over the uncertainty, until the dust finally settles and things stabilize. It’s the nature of the beast.
So what can the Brexit and stock market volatility teach you about startup life?
1) (Mentally) prepare for the worst
“Prepare for the worst, hope for the best. Always ask yourself, what’s the worst thing that could happen … and prepare for it.” – Danny O’Neill, Bean Baron at The Roasterie
Working at a fledgling startup can be a brutal experience at times. The clichés are true: long hours, near-death experiences and a new problem every single day.
That being said, being a founder or early employee at a startup hoping to “make the world a better place” is one of the most rewarding and exhilarating things you’ll experience in your entire life. You, as a founder or early employee, have to be mentally prepared for the peaks AND the valleys — no matter how wild the ride may be.
In the world of investing, understanding that the market moves up AND down all the time and there is no way to accurately predict exactly WHEN, is absolutely vital. If you don’t know when the next crisis may strike, then you need be constantly prepared for said crisis. That can manifest as a paranoid obsession with what may go wrong or a laid back attitude of knowing it’ll all work out. That’s up to you. But without the focus on the long-term, insanity may strike sooner than later.
2) Don’t pay too much attention to your press clippings
Headlines and awards don’t make your startup successful. Users and revenue make your startup successful. All too often, startup founders and employees get caught up in the glory despite its utter lack of impact on the bottom line. Conversely, external negativity or doubt from the press get in the way of your mission. Think of the way Dick Costolo must’ve felt recently, seeing, “Twitter is dead” as a headline whilst scrolling through Twitter. Headlines fade and opinions are just that. You know more than any reporter or pundit about your company, so prove it to everyone else. Use negativity as fuel to work even harder to prove the potential of your concept or product.
In the same vein, the financial media is the enemy of any long-term investor. Hype is a deadly thing, but it’s the lifeblood of any major news network. One of the best pieces of advice we give our clients at blooom is to tune out the media when it comes to your retirement account(s). No good can come from making a drastic change to how you’re investing based on the latest overly-hyped negative event threatening to crash the market. Crashes happen. And luckily, so do recoveries. Well, actually, it’s not luck, it’s the way the markets work. If they constantly went up, then everyone would be a millionaire.
3) Be a cockroach
A cockroach never dies. It can survive a nuclear blast, can live for a week without its head, and can hold its breath for 40 minutes. Granted, no one likes cockroaches, but a startup requires you to become one. Paul Graham, Co-Founder of Y Combinator, explained it best in a 2008 TechCrunch article discussing the 2008 recession:
“For years I’ve been telling founders that the surest route to success is to be the cockroaches of the corporate world. The immediate cause of death in a startup is always running out of money. The cheaper your company is to operate, the harder it is to kill.”
As an investor, this metaphor is two pronged: frame of mind and fees. Frame-of-mind -wise, you need to be able to withstand significant blasts from the market and not freak out. To put it hyperbolically, you may have to live for a week without your head.
As far as fees go, John Oliver did a piece exposing part of this sham recently. Highly recommend watching that here. He describes fees as termites. The same way termites eat away at the foundation of your house without you knowing it, fees eat away at the foundation of your portfolio and you may never even know you’re being charged. Just as investors have to be resilient and persevere through the tough times in order to be successful, entrepreneurs have to have the mental capacity to continuously re-focus on the big picture and survive at all costs.
Zach Anderson Pettet was an early hire at blooom, named as the #1 startup to watch in KC by Startland News. A recent graduatefrom UMKC’s Bloch School of Business, he also works as a community organizer for 1 Million Cups Kansas City. In his formative UMKC days he co-founded #OneDayKC and in 2014 was named UMKC Student Entrepreneur of the Year.
Andrew Thomas is a registered paraplanner and investment advisor at blooom. Andrew has spent more than 5 years offering personalized investment advice to retirement plan participants and helping middle class investors navigate the complex world of personal finance.