Save Time, Cash, and Carbon with Amazon Prime

I have been a heavy user of Amazon prime for years, and it baffles me why anyone shops offline for anything but perishable grocery items. If shopping is something you enjoy as a recreational pastime, you can stop reading now, but for all the rest of us, read on to see why Amazon Prime is not just good for your budget, time, or carbon footprint.

Assumptions

Let's start by making some assumptions. First, I will assume that you earn exactly the national median for a fully employed person in the US: $32,140 which is approximately $15/hour [1].  I assume you spend money like a typical American as well, meaning that you spend approximately $7,423 per year on personal care, misc, alcohol and tobacco, apparel, and entertainment [2]. I assume you have access to a car [3] that gets the national average of 24.1 mpg [4]. Further, I'm going to assume that you are like 90% of Americans and live within 15 minutes of a Wal-Mart [5] which represents an 8 mile distance [6]. I will make the further simplifying assumption that you purchase all your goods at Wal-Mart. You value your free time at $10/hr or a 2/3 of your working wage. Your primary shopping objective is to save money on the goods you want and need.

I will assume that most of your shopping is done for relatively common goods, which is just to say that you are not trying to find a new Tiffany diamond necklace, you're shopping for things like shoe laces, t-shirts, and garbage bags. I will assume you shop about as much as the average American, or .75 hours/day [7], and that a typical shopping trip requires 2.16 hours for a total of approximately 127 shopping trips per year.

The Cost of Offline Shopping

Let's start by calculating the costs associated with your current shopping habits. 127 shopping trips per year means your car is being driven 127 * 8 = 1016 miles per year getting you to and from the store. The IRS mileage rate is $.56/mi [8], which means you are spending $569 in car depreciation every year to shop. Further, at 24.1 mpg, and an expected fuel cost in 2013 of $2.04/gal (so cheap!) [9], you're spending $83 on gas for those trips. The total cost to you in terms of automotive expenses is therefore $652/year.

Then there's the time cost. Shopping takes time away from doing other enjoyable things, like watching movies, taking walks, and eating with friends. In the above assumptions, we put the cost of your time at approximately 2/3 of your working wage, $10/hr, which means that you are paying yourself 274 hours * 10 = $2,740 to go shopping. So far, the total cost of shopping offline is $3,392 per year and that doesn't count any of the unpleasantness of fighting through weekend traffic, having to visit multiple stores (because remember, in this hypothetical example you only ever have to shop at one store), and finding a parking spot at an already overcrowded mall.

The Cost of Shopping on Amazon Prime

Save Time

With Prime, goods are delivered right to your door and the actual finding and purchasing of goods requires significantly less of your time. Consider a simple example to demonstrate the point: it would likely take you less than 15 minutes to find a common item like a serving ladle (not an affiliate link) on Amazon which is less than the one-way time required to get to a store. If you were able to avoid only 25% of your shopping runs over the course of the year, that would be 68.5  hours of your life back. We're talking about a 2.8 day's worth of time you can could spend playing fetch with your dog, socializing with friends, or reading interesting blog posts like this one. That's 8 days of vacation time from work. If you are aggressive about shopping online, you could easily avoid far more than 25% of your shopping trips.

Save Money

Prime costs $79/year (soon to be $99), restricts buyer choice, and recent studies have shown that Amazon can cost as much as 20% more than Wal-Mart [10]. But it's still a money saver. The average American is spending $7,423 on non-grocery non-medical purchases per year (see the CNN money link in the footnotes below). $7,423 * .2 = $1,484, add the $79 subscription fee, and it costs $1,563  more on average to shop on Amazon compared to Wal-Mart. If you shop at Target, Macys, or any other more expensive retailer, the cost savings is likely to be much smaller. Compared to the cost of offline shopping calculated above ($3,392), however, Amazon will save you approximately $1,829 ($3,392 - $1,563) per year in automotive upkeep, gas, and time.

In addition, the estimated 20% premium is an estimate based upon a relatively small sample size for non-Prime customers. So the above estimate is likely understates the actual savings.

Shrink Your Carbon Footprint

Finally, shopping online is better for the planet because it significantly reduces the energy cost of shipping goods to consumers [11]. The most efficient way to deliver goods to end users is on big trucks, planes, and delivery vehicles like that UPS truck with all the Amazon packages in it. True, such trucks get poor mileage per gallon, but they deliver hundreds of packages per run, and unlike your personal vehicle, UPS and other shippers are spending big money on reducing their fleet mpg [12].

Conclusion

Amazon Prime saves time, money, and helps me be a reduce my carbon footprint. The $79 might sound like a lot, but it's a drop in the bucket compared to the improvements in quality of life. And if you are like me and dislike shopping in the first place, all of these calculations are meaningless. I would actually be willing to pay more to avoid the mall, but Prime has conveniently given me a better option. You can check it out here (non-affiliate link): http://www.amazon.com/gp/prime

 

[1] Personal income in the US: http://en.wikipedia.org/wiki/Personal_income_in_the_United_States

[2] This comes from the CNN money breakdown of American expenses: http://money.cnn.com/interactive/news/economy/us-spending/

[3] For every car in the US, there is 1.3 people, so this seems pretty reasonable. http://en.wikipedia.org/wiki/Motor_vehicle

[4] Presumably if it is newer, you'd be more likely to get good gas mileage, but I'm working with averages here. http://en.wikipedia.org/wiki/Fuel_efficiency

[5] It's actually pretty shocking that we all live so close to Wal-Marts, http://www.statisticbrain.com/wal-mart-company-statistics/

[6] This is an extrapolation from the statistic about living 15 minutes from a Wal-Mart. I do not have a statistical source to back up the conversion from 15 minutes to 8 miles, I'm just guessing you can't go 60 mph on the way to the average Wal-Mart from the average home.

[7] Yes, that means that the average American spends 274.13 hours shopping every year: http://www.bls.gov/news.release/pdf/atus.pdf

[8] 2014 IRS mileage compensation rate: http://www.irs.gov/2014-Standard-Mileage-Rates-for-Business,-Medical-and-Moving-Announced

[9] Expected cost of gasoline: http://www.nytimes.com/2015/01/28/business/energy-environment/after-steadily-falling-price-for-gas-notches-an-increase.html

[10] The study was conducted by Kantar Retail. Their sample size is pitifully small (36 goods) and doesn't take into account the fact that Amazon doesn't cover all goods with Prime shipping: http://www.bloomberg.com/news/2012-06-22/wal-mart-beats-amazon-prices-including-glee-dvd-set.html

[11] The study is actually focused on Buy.com, which presumably has a less efficient distribution network than Amazon: http://campustechnology.com/articles/2009/03/16/shopping-online-more-energy-efficient-say-carnegie-mellon-researchers.aspx

[12] http://compass.ups.com/ups-lightens-up-with-fuel-efficient-plastic-trucks/

Why You Shouldn't Follow Your Dreams

Back when I was in 9th grade, I purchased my first desktop computer. I did extra chores, mowed lawns, and shoveled snow to afford my dream machine. It came tricked out with a 900Mhz AMD Athlon Thunderbird CPU, 128MB of RAM, a GeForce 2 GPU, and a Plexdor CD burner. Housed in a bleak grey metal box, it was my pride and joy. Countless hours of Counter Strike, Total Annihilation, and Starcraft were played on that computer.

Despite my fond memories of that first computer, it was never the perfect performance machine. I had made many compromises to meet my meager budget, and the hardware was out of date less than 60 days after it arrived. So around that time, I vowed that someday I would buy myself the most ridiculous performance-intensive machine that could be had.

A while back I realized all of a sudden that I had more than enough cash to buy that no-holds-barred gaming machine. But desktop computers are no longer terribly practical. And I don't play Counter Strike in the evenings anymore. And my middling laptop runs the Adobe Creative Suite just fine. In fact, I spend most of my time in front of productivity and office applications at work, and in the evenings, I try to spend time away from the computer for the sake of variety. I have the cash, but I longer want that beast computer, and it's sad. When I explained my disappointment to a friend over lunch, he shrugged and said, "of course you wanted that computer, but dreams expire."

He was right. Since making my vow to buy an uber gaming machine, the dream had lost meaning for me, and like a mesofact, I had not updated my list of dreams.

This caused me to not only go through that list, but to re-evaluate how I pursue and value dreams. I have kept a bucket list for several years, but I here propose a short list of reasons why you shouldn't have one. Maybe you shouldn't even follow your dreams.

Destinations are boring.

As a society, we praise big dreams and tell kids to aspire to be astronauts. But as a society, we focus our dreams on destinations, not on the journeys that make them meaningful. I fell prey to this exact problem when we were founding my first startup. I wanted to build a successful startup. For three years, we worked hard, we got some lucky breaks, and these days Skritter is pretty darn successful. I have become an astronaut. And you know what? It's an empty victory, because as it turns out, what I really want is not to have a successful startup. What I want is to work hard on difficult problems with people I like. Notice the difference there: the first dream is a state, "success," the second dream is a process "work hard."

For all the glib discussion of life being a journey, not a destination, we overlook that fact when forming our deepest and most personal goals. Maybe you want to be a famous rapper, a skydiving instructor, or a polyglot. All of these are noble ambitions, but thinking about those dreams in terms of continuing actions rather than destinations makes them more meaningful. You don't want to be a rapper, you want to spend most of your time rapping in a studio. You don't want to be a skydiving instructor, you want to teach newbies how to enjoy their first jump. You don't want to be a polyglot, you want to spend time learning the nuances of dozens of languages.

Destinations are boring, and dreams that rely on them are hollow.

The exotic is kinda meh.

You know what sounds cool? Getting out of a Cleveland winter and working from Costa Rica for 2 months. The problem is that if you value a degree of consistency, recurring familial interaction, predictable diets, stable electricity and internet, reliable transportation, and a hundred other factors you probably take for granted, then it's actually not that cool. That was the story of my 2 months in Costa Rica.

Yet despite the disconnect, whenever I tell people about going to Costa Rica, most people said "I wish I could do that."

Daily life constrains choice sets to the degree that most people can't up and move to Costa Rica for 2 months. And for most people, that's a good thing. Dreams often take the form of overcoming the inertial forces that keep us grounded to the status quo. But it is precisely these forces that often make us happy. Many dreams are predicated on circumstances that by their very nature would make us unhappy.

Dreams made in a vacuum are meaningless.

I drive an extremely economical car and I've always dreamed of having a performance sports car. Recently I got the chance to test drive some exceptionally cool sports cars, and coming back to my little Suzuki Aerio was a relief. Why, you might ask, would I prefer my 1600cc putsy hatchback to a Mercedes Benz E55? I won't go into details, but in forming my dream about owning a sports car, I ignored all of my previous preferences. A Porsche looked cool, but in my daily life I prefer gas economy, reliability, and low insurance bills.

Dreamers are encouraged to think big, and that often implies "outside of our experience." This gets back to something Paul Graham suggests about finding what you love to do: if you aren't tinkering with computers in your free time, do you really want to be a programmer? If you didn't sacrifice to buy a sports car when you were 17, are you really invested in performance automobiles?

We often classify our unqualified aspirations as "dreams" and then foolishly work towards them. Daily experience is often a far better judge of what you will enjoy than a groundless idea of you got from society.

Summary

All of this might lead you to conclude that I think dreams are meaningless, but that's not the case. I think dreams are extremely important, but they often grossly misrepresent what people actually want from their life experience. I am still struggling to find a good way to pursue my own aspirations and would be interested to hear if anyone else has had luck better forming and achieving meaningful dreams.

Magic Tricks

Back in my junior year of college, I switched my major from Cinema Studies to Economics. I was sitting in the office of my favorite professor and adviser, a man who had his Economics degree from Harvard. I was asking about post-graduate options.

"I was thinking about maybe getting an MBA one day. Do Oberlin graduates stand a chance of getting into the Harvard MBA program?"

My adviser smiled in a good-humored way. "Honestly George, I don't know how anyone gets into the Harvard MBA program. I think you have to be magic to pull it off."

When I heard those words, my heart sank, but I took the advice to heart. Seven years and two startups later, I still vividly remember that conversation because it crystallized my understanding of how to pull off a seemingly impossible accomplishment: it's a magic trick.

Getting into the Harvard MBA program might embody a magic trick for most people, but magic tricks encompass anything that appears to be impossible on the surface. Retiring at the age of 30, traveling full time while working remotely, being a C-level executive at a Fortune 500 company, or knowing people of repute. All of these accomplishments work to confound explanation and increase the perceived importance of the speaker. After all, only 1 in a million spend our evenings rubbing shoulders with A-list celebrities and our days on the cover of a business magazine. It's unique, it's interesting, and it defies simple explanation.

But it's a mistake to write off such accomplishments as impossible. It's an even bigger mistake to write them off as unimportant or shallow.

I've learned the hard way that when you are an entrepreneur, it is extremely important to quickly impress people you meet. When all you have is a one-month-old company and a smile, people write you off unless you can quickly portray success. Maybe you didn't go to Harvard or MIT, but the more magic tricks you have under your belt, the more investors, customers, and peers will assume you can accomplish your next audacious goal. This is the first step in actually living your life like you want.

Which bring me to choosing magic tricks. I've used common examples above, but your achievements will be most impressive if they are your own. Maybe you want to start a nonprofit mentoring program and positively impact 1,000,000 kids. Maybe you want to make the next greatest search engine. Maybe you want to replace Netflix and bring the world a decent selection of on-demand movies. You need to define what you want to achieve, and then do it. The coolest thing about magic tricks is that they are cumulative: the more you've already done, the more people will believe you can accomplish the next one.

After all, if you've already started the first commercial space program or played basketball with president Obama, or even been accepted to YCombinator on stage, then you can probably do whatever you want.

It's Sad to See Your Startup Turn into a Business

This post was originally published on 2/1/2013.

When I founded Skritter in 2008 with Nick and Scott, we called it a startup. We raised three rounds of funding, hired developers to help scale our team, and attended startup summits, venture capital panels, and meetups filled with aspiring entrepreneurs working on the next big thing. As with all young startups seeking capital, our business plan growth model had us making 30M in profit in 3-5 years as we took the language learning world by storm.

Four and a half years later, Skritter has become a viable, successful, growing company. We have three employees in addition to the founding team, and have provided employment for twice that many along the way. We've proven that our business model generates profit, that it adds value to customer's lives, and that we can achieve product-market fit.

But somewhere along the line, Skritter stopped being a startup and became a business. And while I am deeply proud of our achievements, the change makes me sad.

When you run a startup, you dream big, you think in terms of conquering entire new markets, challenging entrenched competitors, and changing the world in a big way. You work hard, play harder, and forge lifelong relationships with your co-founders.

Businesses, by comparison, are more modest and mundane. Businesses tend to know whom their customers are, they have a good sense of what makes money and what doesn't, and they don't make a habit of re-investing every penny to try and shoot the moon with a new product. Businesses are like middle aged fathers who just want things to run smoothly without too much fuss. Startups are their star-struck sons spouting poetry to their lovers in moonlit gardens.

Startups are just more exciting, vibrant, and entertaining.

But they also have this frustrating tendency to fizzle out, fail, or explode catastrophically. Founders lose their shirts, relationships are ruined, investors are burned, and once stable, gainfully employed founders end up in their parent's basements applying for jobs to cover their credit card debt.

I'm proud of what Nick, Scott, and I have built at Skritter. I'm proud we achieved the dream of building a profitable company. But if you've ever been there for the startup part, the irrational giddiness you get from building something new, you'll know instinctively what I mean when I say it's sad to see your startup turn into a business.

Why You Should Bootstrap Your First Company

A while back I read Daniel Tenner's excellent article entitled Taking the Leap. Having run my own modestly successful startup for going on 7 years now, I can say with some authority that he makes excellent points. But one thing about the post bothered me: his advice is most applicable to your first startup. That distinction is critical.

Hacker News idolizes people like Steve Jobs, Elon Musk, and other visionaries who take incredible risks in the face of absurd odds. Their stories are dramatic, and it's delicious to read stories of people who buck the system and succeed. But it is a disservice to the less experienced to omit the beginning to every success story: the small successes they had early in life.

The men who mine asteroids and build electric sports cars don't start with those ventures. To illustrate my point, I'd like to tell a quick story.

Back in 2008, my cofounders and I were going door to door trying to raise a minuscule amount of funding. One of our business advisers gave us an introduction to a successful founder turned angel investor who had just sold his company. Everyone was talking about how successful he was, but over the course of developing a mentorship relationship, we heard about how he  got his humble entrepreneurial start. He did it by selling asbestos file folders to legal consultancies at a time when everyone was going digital. The business model was in it's death throes, but he was able to generate enough profit to reinvest it on his next company.

Read that again if you missed it: our visionary angel investor got started selling fireproof file protectors to lawyers who wouldn't need them in a few years.

This sort of story is far from isolated. Success begets success. Elon Musk didn't start with Tesla, he started by selling a $500 computer game called Blastar at the age of 12.

Don't try and shoot the moon on your first startup. Bootstrapping reduces the upside of your ventures, but it also reduces the risk that you'll fail. Daniel Tenner has it right: keep your head down, reduce your burn rate, and if you succeed doing that a few times, Mars, cold fusion, and hover bikes will still be waiting.