Rationalizing the Risk. Stop Worrying, Start Living. The $15k Deductible.

Act 1: Inception

Stop Worrying and Start Living

Dale Carnegie has two books that achieved outsized recognition. The one that everyone knows is “How to Win Friends and Influence People” and I think it’s still wildly relevant even today. The other, perhaps less well-known tome is “How to Stop Worrying and Start Living.” I bring it up here because it was directly influential in how I rationalized the risk of leaving my job to start a company.

The basic gist of the book is that most of our worry comes from the unknown. All of the bad stuff that could happen to us starts swirling around in our minds, and as the permutations multiply exponentially, we find ourselves in a panic, unable to control all of the many terrible things that could come to pass. Carnegie simply provides a routine to get that stuff organized and then rationalize the worst case scenario.

Roughly speaking, it goes like this:

First, name one of the things that you are worried about…. Then, ask if it’s the worst outcome. Usually, your frightened mind says “no” and takes it down another level. So you name that one. So on, and so forth, until you realize the actual worst case.

And then you do two things:

  1. Recognize that it’s pretty unlikely, and,
  2. Work out what you’d do in that situation.

For me, it went like this:

Irrational Me: OMG, I’m leaving a high paying job with a successful company. What if I wreck our family’s financial situation and we end up destitute?

Rational Me:Ok, that’s not realistic. I’m a well known VP of Sales in the area. I could easily get a job as a VP again. Laurie is a well connected MSW. She could easily get a job as a social worker again.

Irrational Me: Yeah, but what if we can’t find jobs!

Rational Me: Ok…. If needed, I could start a regional or national job search and open up the opportunities.

Irrational Me: Yea, but what if I still can’t find anything!

Rational Me: Ok… well, that’s pretty unrealistic, but I’m not afraid of hard work, and I could always step back into being an individual contributor, and a skilled sales person can make a lot of money.

Irrational Me: Yeah, but what if you are too old, or too experienced, or too whatever and you can’t even get that job?

Rational Me: Ok… now this is getting silly…. But on the very low chance that I can’t find any job related to sales whatsoever, I’ve never been afraid of hard work. I ran a lawn service in high school. I could easily do manual labor to make ends meet.

Irrational Me: Ok, but what if it’s not enough money!

Rational Me: I’ve saved a bunch of money in my 401k and in my kid’s college funds. In the ultra-low-chance that all of this terrible chain of events did actually somehow occur, we could liquidate that until we get on our feet again.

Irrational Me: Yeah, but what if that runs out!

Rational Me: Dammit! This is silly! Ok, well, I have very little debt, I could use credit cards for awhile to cover my bets and dig out of the hole.

Irrational Me: What if you don’t! What if you go bankrupt and lost the house!

Rational Me: OMG. Won’t happen, but ok. Let’s say that happened. I’m very close with my brother, my mom, my step mom, my wife’s family, and my step-sisters. I also feel very fortunate to have several close friends. If the absolute most catastrophic things came to pass, someone among these many close connections would allow my family to move in for awhile until we got back on our feet.

Rational Me: And if that didn’t happen, Laurie ran a homeless shelter. We would at least know the ropes.

Rational Me: And if that didn’t happen, I camped for two months in my early twenties on a bit of a road trip. I know how to camp and could do that for awhile with my family if this absolute most terrible financial situation played out for us.

This seems like an infinitely silly exercise, but it mattered to me. I really did reconcile myself to the fact that no matter how bad it got, I wasn’t going to die, and I was pretty sure I wouldn’t lose my family. I could figure it out, no matter how far down this ladder of increasingly unlikely events I fell.

Which led me to a very freeing conclusion:

As long as I had my wife, my kids and my dog, everything else was gravy.

Walking around everyday thinking that everything you have above and beyond your immediate family is icing on the cake is a wildly liberating sensation.

It was going to be ok. This wasn’t going to be a risk of survival…. This was going to be a risk of comfort. We might not get to go on expensive vacations for awhile (and we didn’t). We might not have fancy cars (I drove a used Honda Civic for several years). We might drink boxed wine and a lot of beans instead of fancy dinners (yep, did that too). But it was all gravy. And we were going to be fine. And I was free.

Setting Milestones and Trying to Fail Fast

Another part of the rationalization was setting milestones that were weeks or months away, and being committed to shutting down the effort if we didn’t hit those milestones (or have a reasonable path to hitting them). The very first milestone was getting a team to commit to the journey with me. The next milestone was getting a prototype built. The next milestone was getting a single paying client to commit.

In my mind, those first milestones of team formation, incorporation and prototype had to be wrapped up by April, or we’d hang it up and I’d go back and get a “real” job. (Spoiler alert: We hit those milestones).

The $15,000 Deductible on the Catastrophic Insurance Plan

If there was one thing that crystalized the risk the most for me, it was the catastrophic insurance plan that my kids and I were on in those first months. We were pretty healthy as a family, and I needed to just get several months of attempting RFMConnex under my belt. Extending my COBRA insurance from Bronto was a scary amount of money, and joining Laurie’s plan at United Way wasn’t much better. I had money saved in my 401k and my credit cards had high limits and low balances. So I chose a plan with a $15,000 family deductible for Jack, Cora and me, with the assumption that if we were all in a wreck together that I had the money to cover that bet, and that these next months of no salary was all about day to day cash management.

So, we rolled the dice and it worked out (but, yeah… scary!).

Author: wi11iamm

https://www.linkedin.com/in/mattwilliamson/

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