How I went from rich to completely broke

This is a guest blog post by Dennis Yu.

The other day, a consultant I hired was whining about how I pay him only $260,000 a year. I’m sitting in a Motel6 eating McDonalds, wearing pants I got for $19 at TJ Maxx, on my old Droid phone.

I’m trying to display empathy at his argument about there are so many other programmers who make more than that.

On Wall Street, the clients are chauffeured to work, while the partners take the subway. Mayor Bloomberg takes the subway. David Filo, Yahoo! founder and billionaire, takes the train to work and lives in a normal apartment.  Warren Buffett lives in his old house in Omaha, Nebraska.  Insert your own examples.

A year ago an ex-employee stole the most valuable things I owned and sold them on Craigslist. That’s why he’s an ex-employee. If you’re a cycling nut, you know how much two full carbon racing bikes with Dura-Ace cost. It’s funny that his last name was Larsen and that the guy he sold them to stiffed him on one of the bikes. Larsen complained about how he got ripped off.

And some other folks ran off with all the electronics I had– a $20,000 Pinifarina projector, theater quality sound system, 30″ monitors, and other stuff. Not stuff you can get at Best Buy. Anyway.

I gave my car away to my maid, since I wasn’t even using it, as I travel so much. So I don’t own a car.

Two weeks ago, I forgot to lock my stuff up at the 24 Hour Fitness, so my MacBook Air was stolen. My fault, of course. That $2,600 machine was the last valuable possession I had.

So I bought a $249 Chromebook. Guess what? It works just fine.

And now I’m down to nearly nothing. No car, no place, no fancy things. I suppose if you really wanted it, you could steal my old iPad that’s beat up.

There’s nothing you can steal from me. How liberating is that?

And yet, the most valuable thing I have is my knowledge of online marketing, which I will freely give if you ask.

Back in 2009, you may have remembers the article I wrote on TechCrunch– “How to Spam Facebook Like a Pro“. It angered a lot of spammers in the affiliate space, though the honest folks among us loved it. The king of spammers wrote a blog post attacking me. Of course, it was untrue, but hey– this is the Internet. The Paparrazzi say whatever it takes to generate attention, moving from one trend to the next, posturing success.

You know how the game works. The most successful people don’t need to beat their chests. They’re humble, like Wes Mahler. If you’re launching a new product every week, that probably means all the others ones have lost their steam.

I was tired of pretending– going to Ad-Tech parties I didn’t really care for, buying overpriced booze for people who weren’t really friends.

Did I impress you?

How dumb is that– to pay money to torture yourself.

But back to the consultant who I’ve been paying $1,000 a day to work on our software. I was like that 15 years ago.  Easy come, easy go. Hit me up in person and we’ll swap stories about how stupidly we spent money.

There are studies that show that happiness increases up until about $80,000 a year. Then it goes down from there. Most of the wealthy people I know are miserable. Do you know a few of these folks, too?

I got my mind on my money and my money on my mind

I heard someone say that thinking you’ll be happy when you’re rich is like taping sandwiches to your body to solve your hunger problem.

One rich friend of mine is a billionaire who built another50,000 square foot house and started a foundation for his second wife to manage. He’s estranged from his son and now has nothing left but a lot of money and property across the globe. His ex-wife got one of the largest divorce settlements in United States history. And I’m sure his unhappiness level matches that.

So a few years ago, I decided that what made me happy was going on adventures, teaching,  and creating jobs.

And why not start a company that could enable me to do all of that?

I decided that I didn’t need to make a lot of money– or spend a lot of money to pretend I had a lot of money.  Or even change my name to be YuMoney.

The affiliate world had taught me that if you work super hard, you could make a lot of money. If you’re not there yet– keep at it. It will come.

I had met a lot of good people, but there were a few bad people that poison the industry.  They further the notion of scarcity– the zero sum game that means my gain can come only at your loss. So I need to barricade myself in my hut from the wolves outside.

But the reality is that they are Neaderthals in a cave, while it’s sunny and tropical outside. It’s self-imprisonment. Don’t listen to them.

If everyone is doing the same thing and pushing the same products, then perhaps others can rip you off. And if whatever you’ve done is so simple that you can be ripped off in a heartbeat, then it really wasn’t unique enough, was it?

If you create your own product of sufficient value, you don’t have this issue. Wes created Tracking202 and now Follow. And I created BlitzMetrics.

And in our products, ironically, the more we share our techniques openly, the more demand we generate for our stuff.   The more broadly you teach your best stuff, the more people are attracted to what you’ve built.

It’s no longer about stuff that is easily copied– some keyword list, landing page design, special affiliate payout, or whatever.

It’s unlikely anyone will try to copy our product.  We’ve worked super hard, so anyone who follows must work just as hard and write content that is just as fresh.  Heck, if anyone can build a stronger analytics system to measure Facebook traffic, they deserve to win. In fact, I’d want to partner with them.

When I first started doing affiliate marketing back in 2005, I ran Google AdWords to True.com on Neverblue and CPX.  I already knew something about PPC, since I ran it for Yahoo! Personals.

After a week of messing around, I was breaking even. Two weeks in, I was making $100 a day in margin on super long tail keywords at 4 cents a click. A month later, sitting in front of the computer in my pajamas day and night eating Hot Pockets and drinking Gatorade, I was making $700 a day in profit on $1,500 in spend.

The FedEx guy would come every few days to deliver my check, which I didn’t believe was even real. Some weeks, it was $20-30,000. I’m sure the teller at US Bank thought I sold drugs or something. They’d see a guy who looked like a bum– hadn’t shaved, clothes wrinkled, making deposits in the middle of the day, coming in on his bicycle.

But that was necessary training to build the software we’re building now. Had I not spent those years learning how to hands-on optimize campaigns 24×7, I wouldn’t be able to write the logic for our Facebook ads tool.

Okay, I’ll admit that probably 60% of that time was just logging in to click refresh on my revenues and expenses every two minutes. It’s as if the act of clicking refresh somehow helped support the campaign, like a baseball player’s lucky underwear or something. I’ll bet you’re superstitious like that, too.

It’s the knowledge that you gain from working hard that is your true value. I saw Warren Buffett say that Uncle Sam can tax you on the things you own, but not on the knowledge you have. So the best investment is that of yourself.

We give away our software totally free to schools and non-profits. We have training materials on Facebook ads– free, too.  Some people say it’s good enough to publish. But all I really care is that people get some value. And if they see these techniques to be valuable, they can either manually implement it themselves or use our software to automate them.

If you build a really solid product, your training guides and software usage manual are the same thing.

It’s the know-how you’ve accumulated that you can turn into rules that a machine can follow. And that’s what software is.

So I’ve started years ago as a dot-com millionaire who sold his Yahoo stock and bought fancy things. To now, I’m a guy who probably owns less than you do. I’m not some Buddhist monk who lives an ascetic lifestyle. But I’ve not let things get in the way of doing what I enjoy.

What is it that you really want to do?