Beware of Ballers on a Budget

Posted on Feb 9, 2013 | 80 comments


The other day I was at a Mercedes dealership.

trevor owens ballerUnfortunately my wife was hit head on in December by a woman who lost control of her car. It was time to get a new car and my wife’s requirements were:

  • The safest thing on the road
  • As many air bags as possible

I researched the pricing of the car at TrueCar – not because we’re an investor – but because it gives you complete price transparency over what other people in your area paid for a car. It surprises me that anybody would buy a car without this data because as most people know MSRP on cars is mostly an irrelevant data point used for marketing purposes. “Invoice price” is an equally meaningless marketing tool.

But I digress.

I was sitting with the financing guy who was trying to upsell me everything from pre-paying service to prepaying dent repair coverage, etc. My partner Steven Dietz is an expert on cars (and auto startups having funded DealerTrack, TrueCar, Digital Airstrike, Uparts and others) and I called him and he said, “Decline everything. That’s where the dealer makes all their margin – upselling you at close.”

Anyway.

I was chatting with the finance guy and he was cycling through all the things he wanted to bait-and-switch me to and he asked if I wanted a lease in stead of a purchase. I told him I didn’t because we planned to keep the car for more than 3 years so it was more advantageous to buy. I still drive the same car I bought for cash in 2005.

I asked him what percentage of cars on his lot were done as leases. He told me that more than 50% of the cars that moved off his lot were leases.

Whoa. Why so many on leases?

“This is LA. Many people who buy here can’t afford the cars they want but with a lease they can have a nicer car. They want to be ballers. But they’re ballers on a budget.”

We laughed.

Ballers on a budget!

It got me thinking about the tech industry. I think the last few years have produced a few too many with “ballers on a budget” and I think some “aspiring ballers” draw the wrong conclusion.

I have written about this before in my post on Conference Hos. These are people at every conference. Always on stage. Back stage. At the parties. Instagramming their pictures from London. Dublin. Korea. Mexico. Panels. Talking about changing the world. But they haven’t actually done it.

The problem I have always had with this is that it is very ego centric. It’s taking company resources – usually funded by angels or VCs – for personal gain. While back at the office the other 98% of the staff actually have to build stuff. Sell stuff. Work on  budgets, submit RFPs, answer customers support calls, work the bug-tracking software, and trying to meet the next sprint release schedule.

The feeling it engenders back at the office can be corrosive. Because often these Conference Hos bring back their latest idea from the hot tub cocktail session with their favorite tech superstar. And the stay-at-home staff is left trying to implement the idea while the CEO is off at the next big conference.

But they haven’t made it yet. Their businesses may be bleeding cash. Struggling to be relevant. They’re not ballers. They are posers. Pretending they have had a big breakthrough but their actions and statements belie the truth.

Not ballers. Ballers on a budget. The ones who lease expensive cars to look like they have made it while they rack up credit card bills.

I never lived beyond my means and it’s always a warning sign for me when evaluating companies and entrepreneurs. I like more understated types. Who are out to prove things rather than be showy.

And beneath it all I worry more about the perception that ballers on a budget set for others. The people who really are working hard at their startups with no money to pay real salaries and sharing a cramped office. And as they look at their Twitter or Instagram feed imagining that they should have “made it” like the people they see popping champagne at the parties.

Note to said entrepreneurs – you’re not missing anything. Your 8-year-old Toyota is just fine. Your 2am coding session is more important than their 2am cocktails on the redeye back from Japan where they have no customers.

In LA we have a culture where people drive fancy cars but live in small apartments and where credit card balances are larger than bank balances. That makes no sense. In the tech world we are breeding a bit of a culture where we have entrepreneurs who are “conference famous” but have small revenues and red ink.

And neither of these cultures is a good thing.

**************

Back story on photo. A few years ago I headed out to China for a few weeks on a tech tour. I timed it to be there with my pals Dave McClure and Christine Lu. I came across this kick-starter page from baller-in-training Trevor Owens. It really made me laugh and I loved his hustle.

For me this is the antithesis of baller on a budget. He was being open and saying, “I really want to go on this trip but due to my age and lack of resources I could use some help. I don’t want to run up a big credit card bill I can’t afford.”

Trevor made it on the trip as you can see from this KickStarter page where he raised his money.

We spent a lot of time together on the trip. In conferences, in bars, at late-night food, touring the sites in China. We had lots of debates about the tech world and about career development. Trevor for those who know his is an intense and focused dude. And he has an edge. And I like it.

I’ll bet that Trevor is on the right track in life. No glam. Hard work. Cost focused. Kind of like Dave McClure.

Ballers. Both.

p.s. next time you see Dave McClure make sure to ask him about his male foot massage in China. I can’t remember laughing that hard in a long, long time. Thanks, Mike Su, for reminding me!

dave mcclure's lackey

  • http://www.facebook.com/christineismyfriend Christine Lu

    GeeksOnAPlane Asia 2010 trip :)

  • Ismail Elshareef

    What happened to “fake it till you make it”? Ha! j/k.

    I don’t know of many conferences that give free passes to folks that haven’t “done it.” In the few I spoke at, I had to be recommended and prove that I did first hand everything I was going to talk about. There was no theory. There was, “this is why it’s good and here’s how we did it.”

    What bothers me is the C-level folks that are hands-off yet speak about what went down like they’ve done it themselves. Would those be posers or tools?

  • http://giacomoballi.com/ Giacomo Balli

    It’s a matter of priorities, for some people not having that car would make their life miserable. I think it’s ok as long as it doesn’t screw up the other aspects of life.

  • http://theleanstartupmachine.com Trevor Owens

    Couldn’t have raised the $$ without your help buddy. You’re a great writer and friend.

  • http://simplifilm.com/ Chris Johnson

    Thanks for this post. For sure. I’m a bootstrapper on a budget, and I have had successful conferences. But some part of me wishes I’d saved my $2500 and stayed in and pounded the phone. That’s why I don’t do more than 3-5 a year. They are an onanism after a while.

  • http://simplifilm.com/ Chris Johnson

    You *should* say that. Because it’s true. Because you can spot them in a second and because the SVN ratio is screwed by these people. You get branded a jerk, but it’s worse to be a slave to the approbation of mediocrities.

  • http://twitter.com/ayemoah ayemoah

    Thanks for writing this, Mark! great timing too. I was just having to remind myself out aloud “Listen to Nick Saban! Focus on the process. Focus on the process.” http://thequad.blogs.nytimes.com/2013/01/05/saban-is-keen-to-explain-process/

    “the process is really what you have to do day in and day out to be successful… Eliminate the clutter and all the things that are going on outside and focus on the things that you can control with how you sort of go about and take care of your business.”

  • Guest

    A former colleague sent me a link to your post and after reading it one part of my brain said “leave it alone, not your business, not your problem” and I went to bed. That was hours ago, but I can’t sleep. So I am up at 3AM writing this because I fear this post may be unwittingly creating an undercurrent to the wave that has recently engulfed some in the community who feel so despondent that they don’t measure up to being a “baller” that they might, as one commenter suggests, take their own lives.

    Your original message “In LA we have a culture where people drive fancy cars but live in small apartments and where credit card balances are larger than bank balances. That makes no sense. In the tech world we are breeding a bit of a culture where we have entrepreneurs who are “conference famous” but have small revenues and red ink.” is a really good one, and one a person of your influence can potentially make a meaningful impact by saying – maybe even more loudly than you do here.

    But then you went down a rat hole – the facade of Trevor Owens. He is exactly the kind of poser you describe. Though he does enjoy a certain “status” his road is littered with those he has stepped on to get there and his balance sheet (both spiritually and monetarily) is definitely red. Don’t get me wrong, I get that nobody makes it completely “on their own” and I know that making sausage is not pretty but Trevor, specifically, is disingenuous, opportunistic and way overrated.

    I speak from experience but my experience aside, it is clear that even the campaign that you laud him for was not his work, Matt Mireles wrote it. I am not saying Trevor has not done anything to get where he is. He has very effectively ridden the coattails of Eric, Brant, Patrick and a litany of others who actually do the work and certainly association with them is a “stamp of credibility”. But Trevor has not done the work…well, except maybe that time he advanced the slides for Christine. In fact, he has solicited people to write blogs for his website in support of LSM, and then takes the byline. Even his “How Trevor saved $10,000 and 6 months with the Validation Board” is almost a complete fabrication. There are nuggets of truth in the story – but even the “truth” part was definitely not work he did. It was work done by Kyle Kelly, Tina Yip, Vivek Patel, Ben Tider and me.

    I feel strongly that I have to speak out because of the impact of this “baller” trend. I hope you let this comment stand as a testament to many peoples reality even though it may not be yours. At least in this case, the one you hold up as a “baller” is not anyone to emulate. He is certainly not “awesome”.

    For any of you reading this that can identify with feeling “less than” in this culture, I recommend reading People of the Lie. It is helpful to understand the psyche of a narcissist and very helpful to healing the wounds they inflict. The world is full of them.

  • http://www.bloovue.com/ Seyi Taylor

    You sound like a very solid guy. Wishing you all the best in the future. :)

  • petermengo

    Even in our small town of 100k, there are those guys at every event. Annoying. Especially the ones “crushing it” with Mom and Dad’s money.

    My co-founder (not having read your post yet) just sent me the following inspiring and, at least for us, hyper-accurate infographic: How To Never Give-Up”. “Don’t compare” gets rightful billing.

    http://fundersandfounders.com/wp-content/uploads/2013/01/how-to-never-give-up.png

    BTW the rocks at the bottom of the dip are us…

  • http://dhirajkacker.wordpress.com Dhiraj Kacker

    The big issue really is that the lowered barriers to call yourself an entrepreneur has brought in too many of these “ballers on a budget”. As someone once said, “entrepreneur” is the new “artist” … I was standing in line at Whole Foods in SF a few months ago and right behind me “founders” were discussing a Y-Combinator financing!! Its that commonplace … Call me old-fashioned, but building a great company can’t be (and should not be) that easy.

    Many a times I read the popular tech blogs talking about topics such as “Series A crunch” or tactical advice for entrepreneurs to “avoid common mistakes” I tend to think of the 5-7 people (some founders, some seasoned executives, some senior managers) I personally know who are quietly doing their thing, building teams and solid companies, never reading these blogs, never seeing their names in the press, going to conferences that are meaningful to their business etc and I feel that the lowered barriers to call yourself an entrepreneur has brought in too many posers. I get the feeling that most of the tech media is focused on a small narrow echo chambers of “founders” who are more visible (for whatever reasons). And that there is a whole class of founders and executives who are too seasoned to have any use of this advice. Some may build big hits – most will not, but all are building meaningful companies.

    I personally find that there is just too much noise right now and a solid downturn like 2001/02/03 will be required to separate the boys/girls from the men/women when real companies get built. For tech investments the 2009 downturn just seemed too shallow for a proper correction to weed out this culture and behavior.

  • http://www.justanentrepreneur.com Philip Sugar

    Great post. I have found it strange that there is an inverse correlation for how much money people spend versus how much they should spend. BTW: I would say this applies to angels as well. Yes you can spend $50k but can you afford it? Seriously you need to have no debts whatsoever, a broad range of regular investments, money to follow on and then if you can spend that great!

    Before you are successful it really can sting. Gosh they have really nice offices with fancy titles, boy they drive a nice car. I have always said a monkey can spend money.

    Until you have either cashed out your investors or put them in a position where they could have made that decision, or are making money hand over fist every dime you spend is one that you have to pay back with a ton of interest. So it better be going to making your product better or getting new customers.

    The luxury car thing is a great example. I have never bought a new car. I buy them off of the second lease. The first lease is for those that can’t afford them, the second is for those that can’t even afford that but want to look like they can. Six year old Audi A8L cost less than a Civic, because now you need to pay cash. Only caveat is you need a good mechanic for pre-purchase and maintenance, get a 90 day warranty.

    It used to really bother me. How can you possibly buy a $100k car and not have any money in the bank? Seriously, a nice Honda is what you should buy. Now I just think about how I can make money off of them.

  • http://twitter.com/TimCapes Tim Capes

    I think it really depends on what the business case for the conference is. As someone staying home to build while co-founders are going to both everywhereelse and SXSW, I can say honestly I don’t feel resentment: we have a very good business case to be at both conferences and we needed only two people there not three. If someone is doing so many conferences it becomes their entire job then it can become a problem; but, as long as you’re picking a few with strong targeted objectives and spending more time on leveraging connections and introductions from the conferences than you are on planning and going to them, then you’re in a good spot. You also want people you can trust to promote the business more than themselves — I have that, so it works.

  • http://www.facebook.com/agalkin1 Alex Galkin

    Please! Don’t mean to interrupt, but the entire tech scene with the exception of Amazon, Google, Ebay and a few others (NOT Facebook or Twitter) are SMOKING funny grass, thinking they add value, and that the world will believe it forever. They may be driving the baller–on–budget BMWs, or 10 year old Corollas, but the whole damn thing is rigged! It is one incestuous happy-go-techie CA scene that is starting to resemble a Ponzi scheme. Short term. Get in, get out. Hot air traders. I am not negative, I am from NYC.

  • http://www.linkedin.com/profile/view?id=18847600&trk=tab_pro BillMcNeely

    After 13 month of fruitlessly trying to get into the startup scene I started selling used cars. I can tell you as a car salesman used cars are far more profitable than new. (I’ve done both) In new cars you can work 4-6 hours on one deal and you might make $125 in commission for your efforts in used you might work 2 hours and make $600-$1000.

  • Zaid

    Think about the last 5 decks/pitches that you funded. Would you say they were pretty realistic in disclosing the challenges/assumptions or their use of facts in the story they told you?

    I am really curious because entrepreneurs who have raised funding from very notable VCs uniformly tell me the most important thing is NOT to be blunt, to not talk about your challenges but like a salesman, to tell a COMPELLING story that ends well. The challenges, I am told, are things you slide under the carpet as much as possible not to be deceptive but because VCs assume challenges exist–they don’t need to be highlighted out of full disclosure and doing so reduces your chances of getting funded because it makes the story weaker.

    Now funded entrepreneurs can be lying but I see little motivation for them to lie. I see this topic as the elephant in the room that no VC really wants to touch. Your contents of this particular post make good logical sense until you look around and see that so many early stage founders of funded companies look precisely like the ballers on budgets that you mock.

    It’d be great if you wrote about how you make the distinction.

  • http://twitter.com/entrepreneurdan Daniel Aaron Bernal

    Reminds me of the movie August

  • Roman Giverts

    Chris, thanks for the comment. Just checked out your company and we’ve actually been searching around for someone to make a video! I submitted my info on the site, let me know if I need to do anything else.

  • betts recruiting

    What is equity? This is a great networking event to attend in San Francisco if you’re interested in learning about the topic and how it affects you! http://www.eventbrite.com/event/5059553260

  • http://twitter.com/Deanysus Dean Cassidy

    I must admit, I have done the “baller on a budget” thing myself a few times, many years ago. Then again, LA is a crazy city and this is pretty regular stuff for it.

    On the other news: research of ANYTHING should become a necessity and part of common sense. Also, people offering services and products should be aware that research is part of common sense and not hold customers for idiots.

  • http://TeachtoRun.com/ Mark Eichenlaub

    Great tale. “Ballers” Ha!

  • http://www.facebook.com/joshuajordison Joshua Jordison

    People overextend themselves and purchase flashy cars for the same reason they wear a suit and tie to a business meeting: It improves their status and increases their chance of getting whatever it is they’re after. What’s the difference, really? Think about it… a suit costs more than a t-shirt, in the same way that a Porsche costs more than a Toyota. Both the suit and the Porsche raise your perceived status.

    Now, I don’t wear a tie or suit; and, I’m not interested in impressing anyone that I meet with. I think it’s better to be understated and show your value through your actual knowledge, skill and experience. I’ve always handled business meetings this way; and, I’ve found that it’s far more effective than wearing a suit, tie and trying to impress. I don’t care if the meeting is with a startup or the EVP of a major record label. I’m typically in a t-shirt, jeans and will greet the person with a “hey dude” or “how’s it going”?

    I’ve always lived within my means and never purchased a “nice” car until I could afford it; but, I see why a lot of people (especially in Los Angeles) choose to do otherwise.

    Bottom line is… you have to be able to see through people’s fancy exteriors and into the reality of who they are and what they bring to the table. Believe none of what you see and only half of what you hear. This is a learned skill; and, they more people you meet with, the better you will get at it. Happy President’s Day everyone.

    -JJ

  • http://smitpatel.com/ Smit Patel

    Ha! Right on.

  • Jaime

    Roman, great comment.

  • http://www.swordandthescript.com/ Frank Strong

    There’s a subset to this too, Mark in marketing. It’s the difference between the those that did things once and now don’t, and those that still do. It’s the magic middle. The people that get things done that are influential. And they may not have a lot of followers, but they influence the guy with the budget.

    That said, I’ve never been to a Mercedes dealer. I’ve bought a Toyota and the finance guy kept on the upsell even after I called him out on it and asked him to stop. I don’t want his loan, it’s not better than my bank’s and I’ll take my chances on the maintenance. There’s something to be said for a person that can change their own oil. They are a doer.

  • Mr. Majani

    That Nissan is probably unsafe and a hazard to your health. You’re irresponsible by the looks of it.

  • http://www.facebook.com/profile.php?id=689987025 Jebb Dykstra

    This is the most confusing blog post you have written.

  • Stephen Alfris

    Nice post. People who buy/rent/attend things to represent a lifestyle they do not lead always concern me. It seems more often than not that it points to an underlying insecurity of some sort (but of course sometimes this behaviour can drive good outcomes so it can be difficult to judge in a business context)

  • Noman Ahmad

    Mark,

    Very good post. I was just asking my friends if they know anyone in the auto startup area. I don’t know if you could share my contact with Steven Dietz or vice versa. I have a good lead on a customer for a company/product in the automotive fleet management product/software area.

    I would love to connect.

    Many Thanks!

  • DavidSandrowitz

    Is it really baller to ask people to pay for your trip? I guess its interesting and impressive that someone can be successful doing that, but that just sounds like high tech panhandling to me. Really…he didn’t even bother to make something of legit value to give to his backers, man.

    Maybe I’m old school here, but if I really wanted to be part of a trip like this, I’d take responsibility for it and make the conscious decision to accept the cost. In other words, figure out how to do it out of my own pocket, period.