The Rise Of The Explainer Video

Editor’s note: Rico Andrade a former executive producer at Transvideo Studios and Picturelab. Follow him on Twitter @andrade_rico.
Two years ago, Jason Kincaid wrote a short but influential post titled “The Underutilized Power Of The Video Demo To Explain What The Hell You Actually Do.” He said:

During my time at TechCrunch I’ve seen thousands of startups and written about hundreds of them. I sure as hell don’t know all the secrets to building a successful company, but there are a few things I’ve seen that seem like surefire ways to ever-so-slightly grease the road to success. Here’s an easy one: make a video demo and prominently promote it somewhere where new visitors can find it. One that shows off the core function of your product without making people think they’re watching an ad or a pitch. And answer, as thoroughly as possible in 2-3 minutes, what it is that you’re bringing to the table.

Jason was spot-on with his assessment. Today, a significant number of startup companies rely on a prominent overview video on their home page (you can browse through this compilation to get a sense of how many), and there is an overabundance of companies dedicated to serving the video needs of the tech community. Just look at how companies like Google and Facebook use overview videos as an integral part of their overall marketing strategy.
Many individual companies do A/B testing of these specific types of videos on their own home pages, but these numbers are not usually disclosed, and I have yet to see industry-wide studies looking at the effects of these specific videos.  However, the effectiveness of product videos in the ecommerce and retail space is well-documented, and the same factors that help these videos sell products seem to apply to promoting websites and apps as well. That was typically our experience at my former employer Transvideo Studios: of the companies that kept track and disclosed the data to us, videos usually improved conversion rates by 15%-75%.
Why Video?
Conversion rates don’t tell the whole story about overview videos.  Other reasons to include video are:
- Increase press coverage. In Jason’s own words:

Here’s a sad truth: a lot of reporters really are quite lazy. Not in the sense that they don’t want to find and cover a cool new company (in which case they should consider a new career path), but in that they don’t like to spend time wading through marketing material trying to figure out what your company actually does. After all, we’ve got inboxes stuffed with pitches from companies vying for coverage. If it takes more than a minute or two to figure out what problem you’re trying to solve, we’re probably more likely to simply skip to the next message than to try to make sense of your feature set.

Not only does it make it more likely you’ll get covered, but also that the coverage won’t simply be the author’s interpretation of your site, but will actually include your video – your own words – to supplement the story.
- Help your fans evangelize your product. Video is an extra standalone tool that can be easily shared on Facebook or Twitter. My favorite example of this is Visual.ly – Visual.ly had over 80,000 signups from a video on its LaunchRock page… months before the company actually went live.
- Improve the SEO of your site.
- Repurpose elsewhere.  Videos can be included in email signatures, start off VC pitches, shared by sales team, etc… well beyond your home page.
- Buy you time. While “nothing kills a bad product better than good marketing”, a video can give users an insight to your product that allows them to both use it more effectively, and understand your larger vision, so that if the product isn’t there yet, they know where it is going and don’t immediately turn you off.  I’m a firm believer that if Color had originally launched with a video that explained its vision a bit better, instead of the employee–made demo they launched with, users might have given them a bit of a chance to improve.
Tips on making videos.
If you are going to make a video, here a few basic rules to keep in mind:
Don’t make a “viral” video.  While there are extremely successful and truly viral videos out there people don’t usually realize the time, effort, and experience required to create something people actually want to share.  And even if they do, virality itself is unpredictable.  Most companies would be better off leveraging the existing organic traffic on their site and focus on turning those users into customers, rather than spending resources they may not have trying to designing to get a mass audience to post their videos on their Facebook page.
This doesn’t mean the video needs to be a PowerPoint pitch deck, or that it can’t be engaging, but that the top priority should be to explain how a product fits into a user’s life, and not shareability.Don’t just make a product walkthrough.  Product walkthroughs have their place, but they are only effective after the user understands what the product is about in the first place. Don’t just do a product demo, starting at the login screen, and walking through all the features.  Answer the question, “How does this product fit into my life?”, or “Why should I use this?”, before answering “How does this work?”.  You want to pique the user’s interest with the video, then let them figure how the product works on their own, by signing up and using it.
Having said that…Prioritize your message and keep it short.  It is tempting to want to present every use case, every benefit, to as many different audiences as possible, as you might in a pitch deck.  However, the sweet spot for these videos tend to be around 45-90 seconds.  Shorter than 45 seconds feels sales-y and incomplete, and viewers don’t hang around videos that are longer than 90 seconds, so putting too much in there hurts you.
That means that you should pick just a few messages to put in the video  Are you targeting your dream user, or are you catering to early adopters (i.e.: “Normals” vs “TechCrunch Readers”)?  Are you trying to differentiate yourselves from an established competitor?  Are you solving a problem that hasn’t been tackled, or is it a new solution to an old problem?  Is there information that all users must know about your product ahead of time to use it effectively?  These are the types of questions that help determine what goes into a final video.  Focus on the three most important things, and then let them move on from the video to your product.Include a call to action at the end.  Videos perform better if the user knows what to do after the video is done. And if you tell a user to download a product, make sure there is a prominent “Download” button next to the video at all times. (See: Flipboard).Prominently feature the video.  The video does little good if it is hidden behind a lot of links.  Put it on your home page, and place a large “play” button on a still of the video for maximum effectiveness. (See: Nextdoor).Quality matters.  While you may now be tempted to grab your camcorder and record a video of your product, the production quality does matter.  A concise script, good design, clear visuals, and good quality audio all make a difference in whether users watch the video, and how they react to it and to your product.  This is especially true if your product has privacy implications, or is business to business – an amateurish production may give the impression that the company is not reputable and is run from a college dorm room.

The illusion of a professional looking site is easily burst by an amateur how-to video card.io—
Philip Kaplan (@pud) June 23, 2011

Remember – the goal is for the user to understand what it is your product does.  If you can show your video to a person in your target audience and they can tell you what your product is after watching your video, you’re probably in good shape.
The harder question to answer is, “How much should we spend on video?”, and that’s for another time.

Rico Andrade is the former Executive Producer at Transvideo Studios and of the founders of the company’s creative and design division, Picturelab. Picturelab specializes in providing high-quality video and animation for tech companies in Silicon Valley. Rico is a Computer Science and Communication major from Stanford, and a former member of the Stanford Men’s Gymnastics team. He is a two-voyage veteran of Semester at Sea, and a big fan of This American Life.
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Jobs’ Rejection Of TV Designs “Isn’t A Huge Deal” Says Former Apple Engineer

Kim-Mai Cutler is a technology journalist who has worked for Bloomberg, VentureBeat and The Wall Street Journal. Before she joined TechCrunch, she led mobile coverage at Inside Network, a six-person media startup that was acquired by WebMediaBrands in 2011 for $14 million in cash and stock. She specializes in covering gaming, distribution and monetization of mobile applications and venture... ? Learn More

It’s a sin I know almost too well as a blogger. It’s slow going for news on a Friday night and the pageview gods send you a reprieve in the form of a tweet.
A former Apple engineer is berating the company’s design ethic in the post-Jobs era in less than 140 characters?
Score! Suddenly one story becomes another story then another story then another story then another story.
Until it’s a crisis! ZOMG! Apple is over! The company is finished!
Interested in the actual story, I talked with former Apple TV engineer Mike Margolis about the tweet that launched a thousand blog posts.
So here’s what he said on Twitter.

@aral Fun fact – those new designs were tossed out 5 years ago because SJ didn’t like them. Now there is nobody to say “no” to bad design.
— Michael Margolis ? (@yipe) March 24, 2012

Here are his thoughts with far more context:

I woke up this morning with hundreds of new followers on Twitter and two dozen text messages from friends – many of them Apple employees past and present. Turns out a few of my tweets were being blogged about. I wouldn’t mind, except many people were misquoting and painting doom and gloom scenarios for Apple and making false claims about the design teams at Apple. I have not been present for any of the Apple TV product discussions for more than four years, so I’m a bit surprised that everyone is all atwitter about what SJ rejected so long ago and what that means today.
Specifically, I stated in a tweet that Steve did not like the grid design five years ago. That is absolutely 100% true. It’s also true that five years ago the iPad didn’t exist, Apple users weren’t in love with app-grid interfaces like they are now, a streaming-only iCloud connected device was a pipe dream, and AppleTV did not have great new third party content like YouTube, Netflix, Vimeo, NBA, NFL, and more. The UI didn’t make much sense back then but it makes much more sense now. If you compare Front Row to AppleTV 1.0,  ”AppleTV Take 2?, and the new AppleTV UI it is clear that the product is continually improving. The new UI is no doubt cleaner, simpler, easier to use, and more in line with the now-popular iPad UI and Lion’s Launchpad.
Timing and context are crucial – both on Twitter and in product design.
Steve rejecting a design five years ago isn’t a huge deal. Steve was well known for rejecting ideas, tweaking them, and turning them into something even better. And that’s a very good thing. One of my favorite parts of working at Apple was knowing that SJ said “no” to most everything initially, even if he later came to like it, advocate for it, and eventually proudly present it on stage. This helped the company stay focused and drove people to constantly improve, iterate, and turn the proverbial knob to 11 on everything.
A quick clarification: many sites are now worried that there is only a single designer in the consumer apps team. That is absolutely not true. I simply stated (in 140 characters) that one designer from the consumer apps team was largely responsible for the Apple TV visual design, not Jonathan Ive.

Margolis adds that he no longer owns any Apple stock and hasn’t been employed by the company since 2008.

IPO: March 25, 1980, NASDAQ:AAPL
Started by Steve Jobs, Steve Wozniak, and Ronald Wayne, Apple has expanded from computers to consumer electronics over the last 30 years, officially changing their name from Apple Computer, Inc. to Apple, Inc. in January 2007. Among the key offerings from Apple’s product line are: Pro line laptops (MacBook Pro) and desktops (Mac Pro), consumer line laptops (MacBook) and desktops (iMac), servers (Xserve), Apple TV, the Mac OS X and Mac OS X Server operating systems, the iPod (offered with...
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You Say “SoLoMo,” I Say, “I Hate My Life”

Anthony Ha is a writer at TechCrunch, where he covers media, advertising, and startups. Previously, he was a staff technology writer at Adweek, worked as a senior editor at the tech blog VentureBeat, and was also a reporter at the Hollister Free Lance, where he won awards from the California Newspaper Publishers Association for breaking news coverage and writing.... ? Learn More

Working in tech does weird things to your vocabulary. Five years ago, if you’d told me that I’d become someone who talks about whether they have the “bandwidth” to get something done or promising to “ping” you later, I would have laughed in your face. Yet here I am, finding the bandwidth to ping people — like it or not, you adopt the language of the people around you.
Still, you’ve got to draw the line somewhere. And for me, the phrase SoLoMo (short for social-local-mobile, if you’re lucky enough to have never heard it) crosses that line and outrages all decency and common sense.
When it first popped up, I assumed it was the latest feeble attempt to make “Socio Loco” take off and would die in a few weeks. But no, it seems to be catching on, and it’s even crept into a couple of TechCrunch headlines.
Why do I hate it so much? For one thing, it just sounds so ridiculous. “Soe-low-moe.” Wait, what? I’m convinced that the only way to say “SoLoMo” with a straight face is to literally stop thinking about the syllables coming out of your mouth or keyboard. Or perhaps you’ve heard it so often that you’ve become desensitized, which is basically the same thing.
I was also going to argue that it doesn’t mean anything, but that’s not entirely true. For example, blogger and analyst Greg Sterling defined it for Mashable as a more “mobile-centric” version of hyperlocal search, with “greater local precision”: “It’s about getting nearby information on demand, wherever you may be.” A little vague, but okay, it’s a definition.
What I object to, really, is the way everyone is seizing on the term as a way to automatically hype up an app as innovative and exciting, in the same way that “cloud” was slapped on everything a couple of years ago. Are you about to release the millionth local deals app? Call it SoLoMo! What about a reviews app? Do the same! An app that lets you find which of your friends are friending the friends of friends around you? Come on baby, do the SoLoMotion!!!
And I’m worried about what could happen if the reign of SoLoMo continues. In a few months, new startups will feel obligated to describe themselves this way, no matter what they actually do. “Oh, you’ve got a mobile social app? That’s so lame, bro. Don’t you know SoLoMo is where it’s at?”
Welcome to the brave new world of buzzword inflation.

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One Screen To Rule Them All

Editor’s note: Jay Fulcher is CEO of video technology company Ooyala. He previously contributed a column about “Fear And Loathing In Online Video.” Follow him on Twitter @jbfulcher.
While hosting this year’s Academy Awards, Billy Crystal cracked, “I prefer the big screen… which is my iPad.” The remark was an ironic counterpoint to the evening’s theme, “Let’s go to the movies,” itself a half-hearted attempt to resuscitate flagging U.S. box office sales. On the heels of a year that saw the lowest movie theater attendance in almost two decades, it’s clear that the silver screen feels threatened by younger, slimmer screens.
Apple’s new iPad is shattering sales records and quickly ushering in the post-PC era. The company sold three million tablets in the first weekend they went on sale and may sell as many as 66 million by year’s end. Like the iPhone and iPod before it, the iPad is reinventing an entire technology category and bringing it to the masses.
It’s not surprising that more people are watching more shows and movies on their tablets than ever before. The iPad’s slim form factor and large, HD screen make the device perfect for kicking back with the latest episode of “Sharktank.” At Ooyala, we’ve seen this new way of watching online video emerge and evolve over the past 18 months. Our data suggests that explosive tablet sales (fueled largely by Apple’s iPad) will increase the share of tablet video viewing by over 500% in the next year alone.
Our data also suggests that people are watching more shows, movies and other videos on their iPads during primetime TV hours: a third of daily video plays occur between 7PM and 11PM – hours that could otherwise be spent in front of cable TV or out at the local movie theater. In fact, Americans are now watching more online movies than DVD content. The key takeaway here is clear:  Networks, studios and other providers of professional TV and film content need to pay attention to this new screen.

Luckily, the rise of tablet video presents significant new opportunities for viewers and publishers. Tablets are personal devices — there’s a one-to-one relationship between the screen and viewer. Content owners and advertisers equipped with the right tools can now make better connections with individual viewers than ever before. As a result, there exist new opportunities to engage viewers by delivering not only personalized video content but meaningful advertising less likely to disengage the audience.
Personalizing a Netflix account that is shared by a family of four and lives on a big-screen TV is tricky. Personalizing content for a tablet owned by a single person is far more impactful. While smartphones also have a more intimate connection with their owners, added screen real estate makes tablets a strong candidate to lead the way in new TV technology and consumption.
Here are just a few examples of how tablets are changing the face of traditional television.
Tablet TV Apps — The Team Coco Tablet App delivers second screen content in real time and offers an “all access” look behind the scenes of the Conan O’Brien show. The Turner App delivers exclusive content to engage fans of the show and encourage appointment viewing.
Tablet TV is Social TV — The rise of social television has had a huge impact on linear broadcasting. While there are plenty of people liking and tweeting from their phone or laptop, tablets will continue to impact trending topics and industry buzz in the coming years. Social TV app GetGlue also functions as a content discovery engine. When media companies leverage the social graph, they increase organic discovery on leading social networks and gain valuable insights into the habits and tastes of their most loyal viewers.
Tablets as Second-Screen Guides — Just as tablets made television content portable and personal, they are also redefining how people discover content. Netflix recently refreshed its iPad app in an effort to make it easier for people to find content. There are a number of established and emerging companies working to resolve the paradox of choice that online video is creating. When nearly everything is available online, how will we decide what to watch? Expect the winners here to offer a visually pleasing, easy to use, data-driven discovery engine.
Tablets as Universal Remotes — Tablets have even revolutionized remotes. Apple offers a free remote app for the iPad that lets users control the action from their tablet. Newer companies like Dijit are combining universal remote tablet technology with social content recommendation to deliver a more personalized viewing experience.
Tablets are bringing about a big shift in personal computing and creating unique opportunities for media companies to connect with their viewers. Those that profit will leverage video analytics and advanced content recommendation algorithms to deliver personalized viewing experiences across all connected devices.
The stakes need not be overstated: By 2015, 100 million Americans will regularly watch premium content on connected devices. While it is true that delivering broadcast-quality tablet video is only a single piece of a larger streaming media puzzle, developing an effective tablet strategy is crucial for content creators and broadcasters as we shift from broadcast to broadband video. The promise of online video lies in its ability to connect viewers with relevant content in ways traditional broadcasting never could. Tablets may not be the biggest screens, but they’ve brought about big innovations in TV tech.

Jay Fulcher became CEO of Ooyala in August 2009. Ooyala has been one of the fastest growing companies in online video technology and has more than 500 customers worldwide. Prior to Ooyala Fulcher was CEO & President of Agile Software, a publicly traded enterprise software company which was acquired by Oracle in 2007. During his tenure, Agile became the fastest growing PLM company in the industry, establishing itself as a market leader with over 11,000 customers and a tremendous...
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Ooyala is a leader in online video management, publishing, analytics and monetization. Its integrated suite of technologies and services give content owners the power to expand audiences, and deep insights that drive increased revenue from video. Ooyala serves hundreds of global media companies and consumer brands including Dell, ESPN, Fremantle Media, News International, Sephora, Telegraph Media Group, Vans, Whole Foods and Yahoo! Japan. Ooyala was founded in Mountain View, California in 2007 by Bismarck Lepe, Sean Knapp, and Belsasar...
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“Screenshots Of Despair” Reveals The New Human Condition

Alexia Tsotsis works for TechCrunch as a writer. She attended the University of Southern California in Los Angeles, CA, majoring in Writing and Art, and moved to New York City shortly after graduation to work in the Media industry. After four years of living in New York and attending courses at New York University, she returned to Los Angeles... ? Learn More

More and more of us are spending more and more of our time staring at screens; And it’s amazing how emotional we’ve started to get about pixels.
I’m pretty sure the last thing I see before I die will be one of those blasted spinning rainbow cursor balls. And I’m not alone (good call on the Morrissey, guys).
The latest paean to the increasing power of online graphics, text and symbols is the fascinating Tumblr “Screenshots of Despair,” a site which catalogues and re-contextualizes the sometimes inadvertently depressing images we see online, along the lines of “No one likes this” or “Are you still there?”
Inspired by New York Times columnist Rob Walker’s “Gallery of Anonymous Internet Avatars”, Screenshots of Despair creator Josh Kimball views the project as an attempt to capture the current state of the human condition, “I think the screenshots inspire pangs of real isolation. To me, the best of these screenshots are supposed to be practical social media interface elements, but they read as inadvertent commentary on one’s entire existence.”
Kimball, who is an executive editor at a trends research firm, thinks the site has caught on because it exemplifies dark nerd humor and creates broader commentary on the meaning of digital connectivity. “Everyone has felt these pangs before,” he says.
YOU HAVE NO FRIENDS.
^ See it sort of hurts, don’t it? So chew on that the next time you’re designing one of these screens … And maybe try to phrase things a bit more empathetically?


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Redpoint eVentures Avoids The “Helicopter VC” Approach In Brazil, Announces New Investment

Anthony Ha is a writer at TechCrunch, where he covers media, advertising, and startups. Previously, he was a staff technology writer at Adweek, worked as a senior editor at the tech blog VentureBeat, and was also a reporter at the Hollister Free Lance, where he won awards from the California Newspaper Publishers Association for breaking news coverage and writing.... ? Learn More

Earlier this month, Redpoint Ventures and BV Capital’s eVentures announced the formation of a new, joint firm in Brazil — called, somewhat predictably, Redpoint eVentures. Managing director Yann de Vries and founding partner Anderson Thees were in the Bay Area this week, so I had a quick talk with them about their plans.
Brazil’s startup ecosystem is taking off, but until now, Thees said VC firms have fallen into two camps. On the one hand, you have small, local firms, and on the other hand, you have “helicopter VCs” who have offices in Silicon Valley or elsewhere, and make their investments from afar. Redpoint eVentures, on the other hand, has the resources of an international firm, but Thees is also “Brazilian born and raised,” and both he and de Devries are based out of Sao Paolo.
“We do have a local presence and dedicated partners, but at the same time we do bring a very integrated and a global network,” Thees said.
International firms will probably find the “high-pedigree Brazilians who studied at Stanford or [Harvard Business School] and know the lingo,” De Vries said, but Redpoint eVentures’ local connections will help it find entrepreneurs outside that circle.
He also touched on one aspect of the global strategy that I wasn’t expecting — in addition to connecting Brazilian startups with international partners and customers, the firm is also looking for ideas that it can bring back to Brazil. So if there’s a new product that seems to be taking off in China, and it seems like it would also work in Brazil, Redpoint eVentures might put together a startup to pursue the idea locally.
The firm has announced four investments — Viajanet, Grupo Xango, Shoes 4 You, and 55Social. Thees and de Vries told me they have since made a fifth investment, in yet-to-be-launched jewelry site Sophie & Juliete.

Redpoint Ventures has helped entrepreneurs build innovative businesses that defy convention, shape the future, and change the world. From early investments in industry pioneers like MySpace, Netflix, TiVo, and Juniper to companies such as RightMedia, Zimbra, LifeSize, Danger, Fortinet, and Solyndra – we stand behind our entrepreneurs helping them go all the way to the top. With our deep experience and focus on quality, we offer entrepreneurs a culture and approach that values mutual respect, meaningful relationships, and...
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BV Capital is an early-stage Venture Capital firm with an investment focus on consumer internet and mobile. With investments within the US, Brazil, Eastern and Western Europe and Asia, BV Capital has a global investment approach, enabling them to leverage their portfolio’s business opportunities internationally. BV Capital traces its history as a team to the early days of the Internet and has occupied a front row seat in the evolution of this dynamic industry ever since. Their US investments include...
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Why Entrepreneurs Should NOT Buy Homes

Editor’s note: James Altucher is an investor, programmer, author, and entrepreneur. He is Managing Director of Formula Capital and has written 6 books on investing. His latest books are I Was Blind But Now I See and FAQ ME. You can follow him @jaltucher.
Many people have said to me in the past few months, “I’m going to buy a home.” Or, “What do you think of the idea of me buying a home?” Everyone thinks: Well the housing crisis is now over so I should buy a home. They think: It’s probably a good investment. They think: Time to put down “roots”. 
I’ve owned a home. A couple of times. I bought a home once after I sold a business. I then lost that home. I then went almost completely insane trying to sell it. Two things: If you are about to do a startup or if you are in the middle of startup-phase then you definitely can’t afford to waste the time or money to buy a house for reasons I explain below. Second, when you sell your startup — everyone wants to buy a house with the proceeds. Don’t. It’s just part of the American mythology. You know the myth: the white picket fence, the yard, the pool, the walls that you can paint, the keeping up with the Jones family. Just don’t. You’ll go broke. At least, if you are as stupid as me. I might be dumber than most though.
The other story I have of owning a home is still too personal. It’s filled with about as much pain as I can fit onto a page. Oh, I have a third one also from when I was growing up. But I don’t want to upset anyone in my family so I’ll leave it out. Oh, I have a fourth story that I just forgot about until this very second. But enough about me. Let’s get right to it.
There are many reasons to not buy a home: [By the way, I also put this in the category of Advice I want to tell my daughters, including my other article: 10 reasons not to send your kids to college.]
Financial:
A)     Cash Gone. You have to write a big fat check for a down payment. “But its an investment,” you might say to me. Historically this isn’t true. According to Robert Shiller from Yale, in Irrational Exuberance, 2nd edition, inflation-adjusted housing returned 0.4% from 1890 – 2004. And that’s just housing prices. It forgets all the other stuff I’m going to mention below. Suffice to say, when you write that check, you’re never going to see that money again. Because even when you sell the house later you’re just going to take that money and put it into another down payment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.”
(you might as well set this cash on fire)
Much better for an entrepreneur is to invest in yourself. Take 1/20th of the down payment amount. Start a business. Your investment might go to zero (which it might also do with a house) but it might also go up 10,000%. Eventually, as an entrepreneur, if you are persistent enough, you will get one of those 10,000% returns. And you will be able to be persistent because you didn’t waste all the money and time that a house would’ve cost you.
B)      Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window.  Lawyers, title insurance, moving costs, antidepressant medicine, therapy. It adds up. Two- to three-percent. Do you like flushing your money down the toilet? But, people say: isn’t that what you are doing with rent money? Absolutely not. See below.
C)      Maintenance. No matter what, you’re going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn’t work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.
When you are an entrepreneur, two things: A) you need every last dime for your business. Not for your dishwasher. And B) you need every last second for your business. Not for your dishwasher.
D)     Taxes. There’s this myth that you can deduct mortgage payment interest from your taxes. Whatever. That’s a microscopic dot on your tax returns. And guess what, that whole thing about how rent will go up with inflation? Well your property taxes will go up even faster than inflation. So you lose.
E)      You’re trapped. Let’s spell out very clearly why the myth of home ownership became religion in the United States. It’s because corporations didn’t want their employees to have many job choices. So they encouraged them to own homes. So they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is low. You can’t argue the reverse, since new adults are always competing with you. That’s one reason for the myth. The other reason is that we have a 15 trillion dollar mortgage industry. That’s a lot of money vested on you believing that owning a home is “the right thing to do”.
And, the benefits of being an entrepreneur is that all choices are open to you. Mobility is not just an option, it’s often a necessity. You aren’t tied down to one factory. The world is your opportunity.
F)      Ugly. Saying “my house is an investment” forgets the fact that a house has all the qualities of the ugliest type of investment:
Illiquidity. You can’t cash out whenever you want.High leverage. You have to borrow a lot of money in most cases.No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be.
Investing in yourself is also illiquid. But it involves less money, and allows you more choice. So do that instead.
Personal reasons to not own a house.
A)     Trapped, part 2. Some people like to have roots. But I like things to change every once in a while. Starting March, 2009 I was renting an apartment directly across the street from the New York Stock Exchange. It was fun. I’d look out the window and see Wall Street. How exciting! Before that I lived in The Chelsea Hotel with Chubb Rock. Last year we decided to relax and move a little north. Now I look out the window and see the Hudson River. And it’s quiet and I can walk along the river in the morning with no noise. It took us two weeks to pick a place and move. No hassles. I like to live a hassle-free life.
I’m constantly involved in other activities that I care about and love. What do I want the hassle of owning a home for? What if, god forbid, I want to focus on my next start-up?
(click image for my favorite Chubb Rock video)
B)      Walls. You can’t change the walls when you rent. A lot of people seem to want to tear down walls. Or paint them. Sometimes when you rent you can’t do these things. Well, make sure you have a landlord that lets you tear down walls. There must be some ancient evolutionary tic that makes us want to tear down walls or put nails in them or paint them. I don’t get it. I like the walls to stay right where they are.
C)      Rent. People will argue that the price of the mortgage, maintenance taxes, etc is all baked into the price of rent. Sometimes this is true. But usually not. And often maintenance and taxes will go up faster than your rent.
D)     Psychology. Look at your personal reasons for wanting to own. Do you feel like you can’t accomplish something in life until you own a house? Do you feel like its part of getting married and “Settling down”, i.e. creating a nest for your future children? For you, is it a part of becoming an adult. Is this what your parents taught you? Examine the real reasons you want to own and make sure they are coming from a good spot in your heart.
E)      Your time. Do you really want to spend all that time working on your house? Is this where your time is best spent towards creating a happy and fulfilled life for yourself?
F)      Choices. I feel when I rent I always have the choice to leave. To live wherever  in the world I want whenever I want. Adventure becomes a possibility even if I never take advantage of it.
G)     Stress. For me (not for everyone) owning a home equals stress. I saw what my parents went through at their worst moments owning a home. I saw what I and others went through in the Internet bust when I first owned a home. I saw what people went through in 2008. People were killing themselves. I don’t like that sort of stress. This is how I deal with stress.
H)     Cash is king. I like cash in the bank. I like having access to it.  I don’t like it all tied up in one illiquid investment. I want to fill a bathtub with all the dollar bills I would’ve used as a down payment on a house. I want to bathe in that bathtub. I’m going to do that later today in fact.
By the way, this is going to sound like a contradiction: but I think housing is a great investment right now. I think housing prices have gone down far enough and I can list the reasons why housing as an abstract investment concept is going to go higher from here. Suffice to say there are many stocks/REITs you can buy, with leverage if you want to take advantage of the rise in housing. But those are liquid investments. You can get your money back.
There’s also probably many companies you can build where you will get 10,000% returns where you can take advantage of the rise in housing that is about to occur.
But I’m never going to buy a home again. And sit there in the middle of the night thinking, “Why the hell did I do this to myself again?”


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