The Rules of Real Estate

Posted on 17 March 2018 by Joseph

A couple years ago, I set out to teach myself about real estate investing. I read some books (this one being my favorite), talked to some smarter and more experienced people, and synthesized that information with my own experience and logic. And then got after it. I bought myself a fixer-upper to live in, rented out my condo, and bought a foreclosure (one of the dreaded $30k properties) to fix up and rent. Ultimately, my girlfriend got into grad school in North Carolina and I ended up liquidating all three, so it wasn't the slow-build, buy-and-hold investing I had set out to do. I ended up with more tax liability than I would have planned for, but in the end I made a tidy bit of money on each property.

I learned a ton along the way, but I think my (modest) success was more a function of distilling the information I absorbed into a set of what Ray Dalio calls principles: broadly applicable concepts that generalize well to a number of situations. By understanding and adhering to these principals, I was able to make money from my properties, even without the long timeline I had originally envisioned.

What follows are what I jokingly referred to as The Rules of Real Estate. When my girlfriend and I began looking at houses to start our journey, she would sometimes become enamored with a property or overly excited. I would slap on a half-smile and refer her to one of the "rules" she was violating. This banter contributed to my success, by helping reinforce these rules in my mind. Because they came about this way, they look a lot like a set of real estate-related cognitive biases: stumbling blocks we set up for ourselves in the evaluation of real estate deals. Following these principles helps you avoid common mental pitfalls so that you have a better chance of making money on any deal you do.

The Rules of Real Estate

Rule 1: Don't make decisions based on emotion

This rule is most often violated when looking at purchasing your own home, and much of the real estate "machine" pushes you toward an emotional decision. You tour properties with your agent. Maybe your agent takes you to to a few beaters first, to show off some of the "other inventory". You plod through each property, finding fault after fault, and despair ever finding a home. Then you go to a property that is well-updated, looks great, and smells like cookies, even if it is 15% above what you wanted to pay. Your agent mentions that they've already got other offers they're considering, or that she's shown this property a lot and there's been a ton of interest. You go home and have a discussion with your partner: there's not much left on the market right now, and someone is sure to scoop this one up! Let's make an offer near asking price to ensure we get it, ahead of the other offers.

You've just made a decision based on emotion, and as a result you're less likely to make money on the deal. Don't feel bad; it's really hard not to, and it requires discipline and diligence on your part. As I said above, many of the steps I just described prey on your human nature. The long day of touring homes results in decision fatigue. The dumpy properties you looked at first activate the contrast effect, making the last property look like a mansion, and the lack of inventory triggers a scarcity response. The sidenote about other offers triggers yet another scarcity heuristic, this one about time: you need to get an offer in quick! All of these factors trigger emotional responses, and put your mind in a state where it is challenging to make the best decisions.

Objectively, these emotional triggers are just that and little else. There are ugly, overpriced, terrible properties in any market. There will always be more inventory if you take your time to find a deal. And your offer should always be an objective reflection of your efforts at valuing the property yourself. So how do we put aside the inbuilt, emotional responses and engage our logical brains?

It turns out that we can't, really. The best we can do is to be informed of our shortcomings, and to insist on structuring our choices in such a way that we have time for logical reflection. The former can be accomplished through books like this one or this one (my personal favorite), or even blog posts like the one you're reading. The latter can be accomplished by carefully breaking each deal down in the same way, financially and logically, while giving oneself some reasonable amount of time for reflection. The time helps avoid the scarcity problems and the methodical deal evaluation engages the logical parts of our mind, helping to ensure we don't make decisions on emotion alone. After evaluating enough deals like this, it becomes easier and we become more resistant to the nefarious (intentional or not) traps laid for our emotional mind.

Rule 2: Don't count your chickens before they hatch

Deals fall through all the time, for all sorts of reasons. As humans, we tend to inordinately weight a loss relative to an equivalent gain. This means that the loss of a deal, particularly a deal in which we've invested ourselves emotionally, loom large. Additionally, for a deal to have even been on the table in the first place, we'd need to have made an investment, and we perceive that investment as a sunk cost. Together, these factors mean that we tend to go to lengths, sometimes inappropriate lengths, to keep a dealt together.

As an example, imagine you have a home inspection on a property. The inspection uncovers some hidden issues, and you ask for changes. The owner refuses to address the changes, and refuses to change the sale price. Often, rather than lose the deal we've already invested time (and maybe some money!) in, we make concessions and accept the property with the uncovered warts to keep the deal together.

The problem comes when these concessions change the parameters of the deal we've evaluated. If it was a good deal with no changes required, and it is no longer a good deal with the changes you'd accept, then you should walk away from the deal. More generally, don't count your chickens before they hatch: assume the deal will fall through until the day you get the title. This is true for both purchases and sales.

By distancing yourself from the deal, and assuming the deal will fall through, it becomes easier to objectively evaluate the situation as it evolves, ultimately resulting in better decisions.

Rule 3: There will always be another opportunity

This rule is a generalization of the two previous rules. It is a mindset we should try to coach ourselves into, one that helps shield us from emotional triggers and loss aversion: no matter what deal we are currently evaluating, no matter how good it seems or how it evolves, it is not the only opportunity out there. One of the implications of this rule is that our mental time scales should reflect the reality of real estate investing; in other words, many deals really only make sense in a time scale measured in years, but we tend to evaluate any given deal as though the inventory and opportunities we've looked at recently are all there is.

The reality is that there will always be another opportunity. Patience, along with an appropriate mindset, means we get the best deals not just for right now, but for the years to come and for our total investment potential. In turn, this translates into a better portfolio, which is a much better goal.

Rule 4: You make your money when you buy, not when you sell

At this point, you've prepared yourself. You've got a great mindset, you've shielded yourself emotionally, and you're aware of your loss aversion. The previous rules have you in a position to objectively evaluate your deals. To do so, however, you need to do do some homework and build your knowledge base.

One critical element is researching and internalizing deal evaluation techniques, including rules of thumb (examples for buy-and-hold rental properties: the 50% rule and the 2% rule). These rules vary considerably depending on what type of deal you're looking for (rentals, flips, etc.). I suggest reading as many books as you can find and finding a mentor who has done the type of investing you're interested in.

Another element is understanding the market you're working in. This means putting the legwork in to get a feel for neighborhoods, prices in your area, the way property values are changing, and more. If you're working with a realtor, they can offer some guidance on these elements, but nothing beats hitting the streets yourself to understand neighborhoods and how they're evolving. This is a time consuming process, but it's critical to being able to objectively evaluate deals.

If you're looking at un-renovated properties (and you probably are), and especially distressed properties, you also need to start learning how to make rough estimates for the costs of rehab. If you plan on doing some of the work yourself, start educating yourself on how to do the types of tasks you want to take on. You should also start getting references and building relationships with local contractors. A good, reliable contractor with a fair price can make the difference between a lucrative deal and a break-even or money losing scenario.

Depending on the type of deal, there are probably also other elements you need to educate yourself on. The point is, until you build your knowledge base, you are not ready to objectively evaluate deals. Why is this so important? Because you make your money when you buy, not when you sell. In other words, the only way to reliably make money is to buy properties that are objectively good deals. Do your homework, put in the legwork, and find the deals that will be good regardless of what happens in the market.

Rule 5: Always do your diligence

To stand the best chance of making your money when you buy, you need to fully understand the property you are buying. This means having all inspections necessary to uncover any hidden issues. The range of inspections can vary from property to property, but at a minimum this would include a home inspection, with follow up on any specific issues uncovered.

As an example, say you had a home inspection and the inspector noted cracks in the foundation. In some cases, these cracks are not an issue, but in others they can imply serious stress or even existing damage to a foundation element. Rather than accepting the inspector report which simply states that there are cracks, follow up with a licensed engineer to get an evaluation of the foundation. At first, follow ups like this can seem expensive, but the are far less expensive than finding out the house needs foundation work after you buy it.

The output of this diligence should be a list of known issues with reasonable estimates on the cost of and urgency of repair. This list then serves as input to the model you build as part of your deal evaluation. If you are planning to do some work on the property yourself, you may want to address many of the issues uncovered yourself. This doesn't mean you shouldn't get a reasonable estimate though: these estimates help you determine the discount on the asking price you should expect, and they provide leverage for your negotiation. In some states, you can include an "inspection contingency" - a way to back out of the contract if the inspection uncovers something you don't like. These contingencies are a great way to apply leverage to the seller of the home. They only work, though, if you're willing to do your diligence every time.

Rule 6: You can change anything about a property except its location

Issues uncovered in your inspection, ugly finishes, bad layouts, weird construction techniques - these are all issues with remedies. A good contractor can solve almost any problem with a property, though it may not be cheap. The one thing no contractor can fix, though, is a problem with the location. As a result, location should be the foremost concern when evaluating a deal.

If you've done your legwork, you should have a good general understanding of the neighborhoods and areas in which you are looking. Does the area have a lot of crime, or is it near such an area? Is there a ton of noise from nearby airports, railroads, or highways? Are busy streets dangerous for children living there? How are the schools in the area, and which are the most sought after? Are there sidewalks connecting the property to grocery stores, restaurants, bars, and other amenities? Is it a reasonable walk? Are there bike lanes? Is there public transit nearby? What service providers (internet, cable, etc.) are available in the area?

You should develop reasonable answers to all these questions as part of your evaluation. The desirability of a property, whether for resale or rental, is intimately tied to these factors, and so you should use them as a way to evaluate a deal. It helps to make a checklist as you do your evaluation to ensure you have good answers and don't overlook any aspect.

Another set of questions, though harder to answer, is about the future of the location. Is there new construction nearby that will change the property value? Is the area around the property being revamped? These sorts of questions are most easily answered by either being or working with an expert in the area. Realtors can fit this bill. Other area investors who have been tapped in for some time are also great sources of information. The future of a location, while not important to the value of the property today, can mean the difference between a solid rate of return and a huge home run.

To summarize, as part of your diligence, make sure you have a great understanding of the location of the property. It is the one thing you won't be able to change.

Rule 7: Break the other rules only when it makes sense

Rigid rules are a great way to minimize risk when starting a new venture. Like a poker player who only plays hands with good mathematical odds, rules prevent you from large downside exposure based on the unknown. However, the best poker players all use bluffing and other nonmathematical elements to maximize their game. Similarly, to get the best deals sometimes requires working outside these rules.

When does it make sense to break a rule? The answer is: when you have enough information to make an informed, confident estimate to the expected value, and the expected value far outstrips the cost. As with all expected value calculations, the risk is inversely proportional to your confidence. As you become more versed in deal evaluation and understanding of the risks and costs associated with common problems, the better your confidence can be in your estimate.

As an example, if you were a licensed contractor, you could more confidently make estimates of issues with the home that would be uncovered by a home inspection. This would make it less risky to forgo some of the diligence others might need to apply. However, because you had not as thoroughly evaluated the home as you would otherwise, the deal would need to be better to make up for the uncertainty. A more extreme example are homes bought at "courthouse steps" auctions - effectively sight unseen. To maximize the chances of making money on such deals, we need to be confident that the price reflects the uncertainty of a property that has not had any diligence performed.

One pitfall here is our own inability to estimate the true confidence of our own opinions. In other words, we as humans tend to overestimate our own competence. Keep this in mind as you look for those fantastic deals: you might not know as much as you thought! In general, developing reliable estimates of expected value isn't a task for beginners. For your first few deals, strive to adhere to the previous rules to develop some intuition and internalize the lessons. Once you're more confident, you can consider breaking the rules, but only when it makes sense.

These rules have served me well over the last years, but they are by no means comprehensive. Instead, they're more like guideposts I use. If you can follow them and ultimately incorporate them into your own thinking, they are an effective way to improve the returns on your real estate investments.

Did I miss any? Leave me a comment with your own rules for real estate investment.

The High Cost of Cheap Food

Posted on 10 February 2018 by Joseph

After nearly a month of self-imposed dietary restriction, I've come to a conclusion. In order to build a healthy relationship with food, we need to recognize it for what it is: beyond being a necessity, food is often an indulgence. By accepting and internalizing that fact, we can rebuild the way we eat to produce the outcomes we really want - fitter appearance and better health.


Every luxury comes with a price tag, whether monetary or not. That price tag is often the only criterion used to evaluate the transaction. You see something you want, you check your bank account, find you can afford it, and buy it. Great right? Unfortunately, with every transaction comes second-order effects, indirect costs that can be difficult to evaluate, even if we already know about them.

That new pair of shoes costs you hours of your life. The shiny new car extends your working years, pushing retirement further into the future. The mortgage on the big house puts you and your family closer to subsistence, making it harder to recover from a loss of your job or any other financial setback. When evaluating these types of transactions, we tend to focus on the outcome (you, behind the wheel of the new car, turning every head in town) and the immediate cost (whew, $40,000 seems pricey, but if i finance it...), while ignoring these second order effects.

I'd argue that this is the definition of an indulgence: something we crave, but that comes at a disproportionate cost to our future selves, or those around us, or the environment, or anything else - again, monetary cost and impact is just an easy example.

Food as indulgence

In the context of this definition, food's inclusion in the category of indulgences is clear. The essence is well captured by the saying "once on the lips, forever on the hips": the second order effect of our lax dietary choices is obesity, metabolic disorder, heart disease, and everything else we already know about.

Food is unique in one way, though, and I think the distinction is what makes unhealthy eating so commonplace in America: food has almost no upfront cost at all. Soda, cookies, candy, fast food - these things are all abundantly available at a price point that boggles. Double Stuf Oreos, one my sweet tooth's favorites, clock in at a whopping 4200 calories per bag, with each bag costing under $3! For what is effectively pocket change, you can eat a phenomenally delicious taste explosion that contains roughly twice a full day's healthy calorie intake. I think this is part of the reason you see Hardee's and other fast food joints crammed with contractors and other laborers: after a morning of physical labor, you want the dopamine rush from eating delicious foods, and they are available at a price even the poorest among us can manage.

Coupled with the gradual onset of the second-order effects of a bad diet, these low prices put any and all food within reach of most Americans. The outcomes we're seeing are stark: adult obesity rates over 65% and increasing, with worsening rates among children as well. Perhaps worse, data suggests that poverty and obesity are closely related. Put another way, the people who will suffer the worst impact from the second-order effects of a bad diet are the most susceptible. For the most impoverished among us, life is largely devoid of luxury and food offers a beacon of comfort, perhaps the only one within reach. This thesis offers some insight into why the relationship between poverty and obesity might be causative; the psychological toll of being poor itself may encourage worse eating habits.

Though they may get the worst of it, it's not only the poor. The phrase "comfort food" perfectly captures the idea. When you're sick, or sad, or generally feel down, food offers a portal back into happiness and luxury. Though the focus thus far has been primarily focused on the way our relationship to food may be tied to widespread obesity, the very same concepts are what make food universally amazing beyond its prosaic position as a requirement to sustain life. This is precisely why we need to become more mindful of the relationship, though. If we let our fast thinking make the decision for us, we end up ignoring the knock-on effects. Beyond combating bad diet habits, an intentional relationship with food can make the joys of food that much better.

What's going to happen to Bitcoin?

Posted on 27 January 2018 by Joseph

Bitcoin as a medium of exchange

The recent rash of announcements of companies withdrawing support for Bitcoin payments is both totally expected, given the dynamics of the cryptocurrency, and in my opinion a harbinger of the end of Bitcoin as a payments system. More broadly, the combination of the validation timeframe for a given payment, the highly volatile BTC-to-fiat price, and the resulting contention for payment validation makes for an environment where it just doesn't make sense to buy things with Bitcoin, particularly if those things are relatively inexpensive.

On the consumer side, you are getting your goods in exchange for not just the traded value of your BTC, but also the opportunity cost you're sacrificing to use them today instead of holding them until tomorrow. For sellers, the trade is even worse - you need fiat currency to run your business and pay your bills, so you need to accept the transfer and convert it as quickly as possible. You therefore want to get it validated immediately, but this means paying more in miner fees. If it doesn't get validated fast enough, however, the price difference between the BTC transferred and the fiat price will be too wide. This situation makes Bitcoin untenable as a medium of exchange. In some ways, it's a victim of its own success: even if there wasn't a speculative surge in price, this issue would likely have still come up as more merchants joined the system, increasing validation times.

Bitcoin as a store of value

Bitcoin as a store of value is much more interesting. It shares many characteristics with gold: scarcity, liquidity, and no counter-party risk. Unlike gold, it has no threat from extraterrestrial mining. Also unlike gold, it is infinitely subdivisible. There is no obvious reason it would be tied to market performance, so it serves as a reasonable hedge. The mind share and brand it commands means that it already has quite a lot of stored value.

Assume Bitcoin fails entirely as a medium of exchange. Where can it go from here? Let's look more closely at gold as a comparison point. This is not a perfect match, because gold has some utility beyond being a store of value, such as jewelry and industrial applications, but it should provide a good order-of-magnitude estimate.

An estimated 187 kilotonnes of gold has been mined. As of today, the gold exchange rate is $43.38/g, or $43,381/kg. That means the world's supply of gold is worth about $8.1T. Of that, roughly 20% is attributed to private investment - that's about $1.6T.

Bitcoin has a fixed supply of 21M BTC. Let's assume that Bitcoin becomes as popular a store of value as gold, and thus has a total supply value of $1.6T. In that case, each BTC would be worth about $77,000. More realistically, it would split that market share with gold and other stores of value. Nevertheless, a price of $50,000 per BTC seems acceptable to me, and even $100,000/BTC doesn't seem wildly outrageous.

One implication is that, even if Bitcoin completely fails as a medium of exchange, it could still have quite a bit of headroom on the price due to its utility as a store of value. In that case, the prices would not be wholly speculative.

Gift Giving

Posted on 20 January 2018 by Joseph

Gift giving is an interesting and emotional topic. People have a strange compulsion-cum-arms race to give gifts, to the point where the gifts given often lose the importance they should have. Who hasn't been guilty of this - in the panicked moments before Christmas, buying some silly bauble because you can't think of anything better? I know I have, and as a quasi-minimalist, it bothers me.

What could we do instead? I've come up with a few things that can improve gift giving, things that I myself am going to try to implement.

1. Decouple gift giving from dates

A prime motivator for buying that unnecessary (and often unwanted!) gift is an impending event. With your partner's birthday in three days, what can you get her?! Better run to Walmart and buy something disposable, wasteful, and unneeded! I think this motivation to give a gift is artificial. Instead of getting them a gift, write them a letter. Open yourself up to them. Give them some of yourself.

Instead, give gifts as the gift presents itself. People are constantly telling us about things they secretly want or need, but won't get for themselves. These are exactly the perfect gifts for someone. When you hear a declaration like that, buy the person the gift! Don't wait!

2. Give intentionally

Closely related to the last point, stop giving people things just to give them something. Instead, only give people things they truly want or need. It's better to not give anything than to give something unwanted. In my opinion, the best gift is something the receiver deeply desires, but is too much of a luxury for them to get for themselves. As an example, I mentioned wanting a small fountain pen to carry with me. I had a Fisher Space Pen when I was younger, and loved it, but didn't love the ball-point. I did a little research and discovered the Kaewaco Liliput in copper. What a beautiful pen! And it's the same size as a Fisher! The price put me off though. What pen is worth $100?

My best friend got me one for christmas. And a Fisher. He was listening, and he found me a perfect gift. You too can give perfect gifts! It's simple - just start listening to your friends talking about things they want. Not everyday things, but things they desperately want but won't get for themselves. I've started keeping a list, for when I inevitably fail to follow rule #1.

3. Give best-in-class presents

Avoid giving throwaway gifts, which are wasteful and exploitive, by instead giving gifts of very high quality. Think about this: of the things you own, how many are the best in the world? Or even the best in their given class? When faced with an opportunity to give someone a gift, give them something they'll give to their children: something best in class. Things in this category tend to last forever, and tend to get used and enjoyed more than more disposable things. They also tend to be more expensive. The price of these gifts can actually serve as a strong reminder not to impulse-buy things, but instead to follow rule #2 and give mindfully.

4. Give consumables

If you find yourself in a situation where rules #1 and #2 can't apply, and you don't have time for finding a best-in-class present that fits, don't reach for disposable stuff like consumer tech, cheap clothes, plastic household items, or otherwise. Instead, grab some consumable luxuries - coffee, cheese, booze, chocolate, or the like. Consumables like these are almost universally appreciated, and don't end up in a thrift store (or worse, landfill). With a bit of thought, you can take this concept wider and give an amazing gift of nothing but consumables.

As an example, my mother built me a "wine party in a box" - 12 bottles of wine, hidden in paper bags, with pairing notes, tasting cards, and the like. It wasn't just 12 bottles of wine, it was an evening of fun with my friends. And the gifts don't need to be nearly as lavish - my sister got me a bottle of champagne, some fresh oranges, and a handmade citrus reamer.

5. Give giving

This doesn't always apply, but a good gift for some people is a donation in their name to a cause they are passionate about. In some ways, this is the anti-gift of the impulse buy Walmart gift: instead of exploiting resources and people, and instead of clogging the landfill with yet another unneeded or broken widget, it serves double purpose, as both meaningful gift and benefit to society.

In 2018, I'm trying to do all these things, for my sake, for the sake of the environment, but also for the sake of the recipients of the gifts themselves. By bringing intention to the gift-giving process, it becomes much more meaningful to everyone involved.

On Authenticity

Posted on 14 February 2017 by Joseph

I've been pondering the idea of authenticity. I started thinking about the concept after listening to Noah Kagan's podcast with Jason Fried. Jason, a lover of cars, was asked about his favorite cars. He answered Aston Martin, and one of the reasons he gave was Aston's dedication to what he called authenticity of materials - if it looks like wood, it is wood; if it looks like metal, it is metal. In contrast, in many cars, even high-end cars, chrome elements are really chrome-plated plastic; woodgrain is veneer. Jason talked briefly about the cost of this authenticity of materials. The cars still need to be largely handmade, and of course are rather expensive.

More generally, this is an example of what I'd call authenticity of design. Authenticity of this type is imbued in a made thing by the creator, and the creator's dedication to authenticity is what prompts it. Therefore, authenticity of design is externalized. Beyond authenticity of materials, skeuomorphs - design elements that evoke other made objects of a different type - are an example of inauthenticity of design; affordances - if it looks like you interact with something, you can - are an example of authenticity of design.

A week or so later, I was listening to another podcast, The Tim Ferriss show with Adam Robinson. Adam and Tim discussed battling depression, and Adam explained that one of the breakthroughs that helped him emerge from depression was also one of authenticity - his authenticity of self-image. In my own words, the idea is that we are often so focused on selling ourselves, on creating an image of ourselves, that we embrace that image regardless of how well it reflects who we really are. This creates an internal conflict, because if we believe in a false image of ourselves - an inauthentic image - we compare our real actions and feelings to it and find ourselves lacking. This discord likely affects people differently, but I imagine one of those ways is depression and self-loathing.

I'd characterize this type of authenticity as authenticity of self. Authenticity of this type is both representative and the creation of the same maker - it is about one's own representation of one's self. In this way, it is internal authenticity, in contrast to the external authenticity of design. I'll discuss some more examples of this type of authenticity below.

One thing I find interesting about both of these types of authenticity is that they are both of intrinsic value, sometimes to the detriment of extrinsic economic interests. By that I mean that often the world around us often rewards inauthenticity. As a result, efforts to remain authentic must be motivated by an intrinsic force, an assignment of value to authenticity itself. As I write this, I feel like there is an almost moral overtone to the entire concept, though I don't feel like authenticity (or its lack) is really related to ethics, which are about our relationship with those around us. Instead, I feel like authenticity is kind of like an inward-facing morality.

Since hearing the discussions above and thinking about them for a while, I've come to see authenticity, and the struggle for authenticity, everywhere, and particularly in business. Companies often market themselves as something they aren't truly. Tech companies in particular often like to pretend that their work is wildly innovative and groundbreaking, and that they are leading the charge in some new direction. In reality, many of those companies, particularly larger companies, do very little innovation. Instead, they provide relatively reliable if somewhat prosaic software with great account involvement and great support. These benefits are super valuable, so why the inauthenticity? In my opinion, it costs these companies quite a lot, both in terms of dollars to maintain this facade, and in terms of a deeper conflict in the organization itself - akin to the internal conflict we feel when we are inauthentic with our image of ourself. This conflict manifests in disjointed strategy and wasted efforts as the business units, products, and employees seek to find relevance within the image the company presents for itself. On the other hand, the benefits are dubious at best - who is being fooled? Surely not the customers, at least the ones you can retain.

I think companies should seek to be authentic in their marketing. If it looks like wood, it is wood; if it looks like metal, it is metal; if you say you're innovative, you are; if you say you support your products rabidly, you do. Instead of presenting your company as something you aren't, present it as what you actually are. If you want to be something else, become it (or a least invest in becoming it) before you start saying it. Incidentally, this is just as true for individuals as it is for companies. Say what you are, and be who you say you are.

Unfortunately, as I said above I think the value of authenticity is first an intrinsic one. This means that companies in particular, but also individuals to some extent, are often incentivized to operate outside of authenticity. Authenticity costs something as well, and that cost combined with the frequent external reward for inauthenticity make it hard to stay the course. However, I think the rewards are much more long-lasting than the external rewards. These rewards are both internal and external.

Externally, authenticity is often reward by rabid enthusiasm from others, as in the case of Aston with Jason Fried. People tend to admire these products, want to talk about them, want to show them to others. I think a lot of the recent popularity in buying higher quality products (selvedge denim, or Darn Tough socks, for example) is a reflection of the market desire for authenticity, and possibly even a backlash against inauthenticity. For companies where metrics like net promoter scores are beginning to take such an important position, this kind of reward can recommend authenticity over the more fleeting reward for inauthenticity.

Beyond external rewards, maintaining an authentic image promotes an inner harmony of sorts. I think this is what Adam Robinson was referring to, and I think it extends beyond just ourselves to our organizations at large. In many companies, a mission statement serves as a good starting point, but I think it's important for the entire company to reflect the authentic value of the company internal as well as externally - from leadership to HR to PR to marketing to sales to engineering to operations. When everyone in the company is aligned, and everyone is saying the same thing, and the thing they are saying is an honest description of what the company is, every action that is taken is on-mission. Without that, a mission statement is as divorced from reality as the marketing. When a company devotes itself to authenticity, nothing is a lie and nothing is pretense.

Copyright © 2018 Joseph Turner