A Brief Bubble Update

When I made the video I didn't realize that Ford was the actual bubble company.

Thirtysomethings: the crash is good for your 401k

The stock market crash is on everyone's minds right now as they watch their retirement savings dwindle by almost half. A lot of folks approaching retirement are really hurting and I don't mean to diminish the seriousness of their situation.

Still, for those of us with a long way until retirement, this crash will help you over the long run. Over a period any problems we have near term will be distant memories. Crash or no crash, the stock market will likely reach the same level in twenty or thirty years.

Let's say this is you:

• 34 years old
• $50,000 worth of stock in your 401k invested in an S&P 500 index account
  
• You continue contributing every year going forward until retirement at the maximum
  

Consider two scenarios:

1. No crash. Stocks increase slowly but steadily (say, ~6% a year) from last year's highs over the twenty six years until your retirement.
   
2. Crash. Your 401k takes a 50% hit this year, and you feel poorer. But after that, you see higher returns (say, ~9% a year) for the next twenty six years.
   

In both scenarios, the price of the S&P 500 index at your retirement is the same.

Here's how your 401k grows over time:


Because of the crash of 2008, you'll have almost 50% more in your account. Look how small the crash looks after twenty six years.

The numbers I've picked for this example are arbitrary, and certainly the rate of growth of the stock market won't be steady over time, but the message is true regardless: you're now going to be investing a lot more money at better values than you would have, and over time, the stock market will achieve the same level regardless of what happens this year.

Disclaimer: The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.

To all of you linking from Kirsten's email

Thanks for coming to take a look at my blog. I'm writing this post to give you an idea of how much viewership this gets...none. About as much as the energy I put into it currently.

However, for those with any interest we do keep a more active "kid blog" here.

Bubble anecdotes

"Here Comes Another Bubble," was a 15 minute period that is now (thankfully) over. Before I forget all this, though, I thought it would be worth recording the lyrics here and some background.

Verse 1

Got me a CS degree, honor roll, MIT
Moved to Palo Alto opportunity knocked

I actually got my CS degree from Washington University in St. Louis. Try and rhyme that.

Thought I had the perfect plan, took a job at Web Van,
Traded in my twenties for a worthless pile of tech stock

My dot com failure of choice was Takira.com, a wonderful manufactured brand created for the bubble-era price of $100,000 by an SF naming firm. (The alternative was "Promeo.com") Our motto was, "Because People are the Best Source." I bought my options for $200 and, improbably, got 50% back in the sale.

Suffered through the market crash, lost a giant wad of cash

I decided to get serious about investing in February of 2000.

(image courtesy of Wikipedia)

Pink slips, burger flips, would you like some fries?

Takira laid me off in 2001, and at that point the only companies hiring in the valley were eBay and Google. To collect unemployment insurance, I needed to attend "job retraining sessions" at the local employment center because, two years out of Stanford, the state of California classified my industry as displaced.

Happy days are here again, Larry Page, Sergey Brin
Time to write a business plan so I can be like those guys!

Larry Page and I were at Stanford's CS department during the same years; we had the same advisor, Terry Winograd. Larry decided to work on Google, while I decided to work on a CD for the Stanford Fleet Street Singers.

Ah, the choices you make.

Microsoft's Mix 08 keynote showcases Vertigo

Video.Show made a brief appearance during the keynote of Microsoft's Mix '08 keynote. Video.Show was my last project at Vertigo, a Silverlight application for community video sharing.

More dramatically, Vertigo debuted a stunning demo of Hard Rock Cafe's Memorabilia Collection. It uses Microsoft's Deep Zoom technology to browse photos of Hard Rock's extensive multimedia collection.


It's absolutely worth the Silverlight install and a lot of fun to play with. Simple and a really wonderful experience.

Nice work, guys.

My last project at Vertigo

Before recently taking a job in product management at PayPal, I worked for five years in various roles at Vertigo Software, a boutique software consulting firm. Four of those years were dedicated to leading Vertigo's largest project, the development of Microsoft's digital locker technology, followed by the website that uses it, Windows Marketplace.

In the developer community, Vertigo has a long reputation of building high quality sample applications that show off a new technology in a real world setting. Vertigo combines well thought through, elegant code with friendly, engaging user experiences. They're a talented group of folks who are passionate about their work.

In my last months at Vertigo, I was privileged to lead the team of designers and developers charged with designing and developing a showcase application for Microsoft Silverlight. I saw on Tim Sneath's blog today that the final version has launched; it's called Video.Show (here's a live preview).

In addition to leading the team, I designed and built the "video wall" component myself. It's pure Silverlight and javascript, and I think it's pretty fun to play with.

Update: Jon Galloway has a great post with a lot more detail on the project. Jon joined Vertigo just before the project started; he built the majority of the site's infrastructure and worked on the player.

We're huge in McMinnville!

After the video was released I was contacted by a reporter in McMinnville, who's paper we used in our video. (I'm still waiting for the owner of those friendship bracelets.)

I'm from Oregon, as is my wife, but images used in the video from there are purely coincidental. Here's the article.

Matt