For me, the most interesting ideas were on 'constructing value' for a previously unknown product. First, you need to have a compelling free offering so there is minimal risk to customers trying your new product. Secondly, you should take the lead in setting the perceived value of your new product by using an 'anchor' of premium pricing even if you end up selling at a discount to it.
"We really enjoy the work that we’re doing and we don’t want to cheapen it. Consciously or unconsciously — probably both — we’re trying to create a manageable way to earn a living and still maintain our sanity. We value time as much, if not more so, than money."
"The basic pattern of openness is that better access to information and better systems lead to better decisions and better living. This general principal is broadly accepted, but we're just now discovering that it also applies to the minutiae of our lives."


While theoretically possible, I believe modeling the impact of these two factors is a practical impossibility because they are so intertwined — de-leveraging sparked the recession and the recession is driving further de-leveraging. You could also do a technical analysis where you try to match current market behavior to past patterns and extrapolate what happens next based on what happened before. But that method requires making a bet on which past patterns to match against, i.e. is our current situation more similar to the Great Depression or all the recessions since. And that’s a big bet.
So, I propose a different (and much simpler) approach: assume a realistically sustainable growth rate over a long enough period and figure out where we would be if the market had grown at that pace. I picked 20 years as the period and charted the monthly percent change of the Dow Jones Industrial Average (DJIA) from 2,342.32 at the end of January 1989 to 8,131.33 at Friday’s close. The actual percent change is the blue line, and I plotted 3 other lines against it: 10% annualized growth in green; 6% annualized growth in orange; and 2% annualized growth in red.
Here’s what that period looks like in annual percent change for the DJIA and S&P 500:
And here’s the annualized rate of return for both the S&P 500 and the DJIA since 1989:
Over the course of this 20 year period, there were only 6 years in which the market declined *at all* (one of which, 2005, was basically break-even) and there were 10 years in which the market gained *more than 10%* and in 7 of those it gained *more than 20%*. Even after the tech bubble “burst” taking the market from 11,497.12 at the end of 1999 to 8,341.63 at the end of 2002 (a 27.4% decline in 3 years), the market would still have delivered a *10.1%* annualized rate of return over the prior 12 years. From where we sit today, it’s no wonder the DJIA declined 33.85% in 2008 (taking us to a still very respectable annualized rate of return since 1989 of 7.24%). But that doesn’t answer the question of how much further down it needs to go before we can consider the value of the equity markets stable.Â
That’s where the annual growth rate analysis comes in. It is still highly subjective — depending on what one believes to be a representative sample period and sustainable annualized growth over that period. But I like it because it helps me think about the broader market in terms I feel more comfortable making assumptions about, like what do I think is a reasonable rate of value creation for the economy as a whole over a given period. In the case of the 20 years since 1989, do I believe there’s a reason that the equity markets should have averaged ~10% annual growth while our Real GNP achieved only 2.76% annual growth over the same period? No, and obviously neither does the market at this point.
So, what is a reasonable expectation for a bottom? Your guess on the underlying assumptions is as good as mine. But if one believes technical advancements over the last 20 year period enabled us to double efficiency (i.e. extract twice as much profit from the same revenues), then the markets *should* have grown at around twice the rate of Real GNP. In that case, we would be expecting 5.51% annualized growth in the markets since 1989 as of the end of 2008. Starting from 1989 closing prices of 2,753 on the DJIA and 353.4 on the S&P 500, 19 years of organic equity growth pegged at 2x GNP growth should have closed 2008 at 7,634.38 and 979.95, respectively (actuals were 8,766.39 and 903.25).
Update: Dad accurately points out that GNP is a trailing indicator and equity prices are leading indicators. So, this analysis shouldn’t be considered anything other than directional. I find it helpful as one factor in my overall assessment of the current situation, but as Howard reminds us no one really has all the answers.
This final chart shows the actual level of the DJIA (blue) compared to what it would be if it was pegged at 1x GNP Growth (red), 2x GNP Growth (orange), and 3x GNP Growth (green). It is essentially the same as the chart at the top but now instead of arbitrarily picking annual growth rates, we have pegged them as multiples of Real GNP (i.e. ratios of business efficiency). As you can see, for most of the last 20 years the markets were assuming >300% improvements in business efficiency.
All the above charts and underlying analysis can be found in this spreadsheet.
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(Un)classes are to continuing education what BarCamps are to conferences — a lightweight, low-pressure, and most of all fun way to explore topics that interest you without having to make a big up-front commitment.Â
Rahmin is one of those guys with a million ideas, and there’s something to almost all of them, but this one struck a chord with me. It was a product *I* really wanted, which is always a good sign. So, I started to think about why I wanted it and I came up with two fundamental themes that I think are resonant with a growing number of people.
Diversified Living
When I left Yahoo! a little over a year ago, I had spent nearly 4 years as close to singularly focused on work as humanly possible. Over those four years, I invested all of my life capital (i.e. time) in my career, which I thought was a sure-fire investment that would have a much higher rate of return than conventional instruments like hobbies and relationships — those only paid incremental quotidian returns, this could pay exponential life-changing ones. But then I was hit by a Black Swan in the form of Yahoo!’s well-documented struggles. And all of a sudden, a good portion of the capital I had accrued from my investment was in the form of influence within a company at which I was no longer interested in working.
So when I left, I vowed not to make that mistake again. I was not going to put all my capital into one life investment vehicle that could unexpectedly lose its value, I was going to diversify. I realized that life experience (i.e. travel, hobbies, etc) may not have a sexy upside, but it’s safe and pays a solid dividend. Whatever was to come next career-wise would never be a singular focus at the absolute expense of life experience.
However, I’m more than a little OCD (in the annoying perfectionist way, not the need to lock the door 7 times and spin around way) and I throw myself fully into what I do because I don’t know any other way. So, this new goal of life diversification would have to take forms that didn’t require an abundance of free time. But, there aren’t too many meaningful things you can do with a relatively small amount of sporadic spare time beyond read a novel or paint. You definitely can’t learn a new skill or study a subject that interests you, at least not through any conventional educational offerings of which I’m aware. And that’s where (un)classes fills a market void for me, it’s micro-education (Rahmin’s term) — a learning format with smaller basic units that fit my crazy lifestyle.
Weaponization of Hobbies
(First of all, credit to Raza for the term.) If micro-education is a format, then casual learning is a category within that format. What sets casual learning apart from other potential categories of micro-education is the inherent lack of competition, which appeals to my desire for my extra-curricular activities to be enjoyable and stress-free.
Don’t get me wrong, I’m a competitive guy. But, I think it’s somewhat ridiculous that you can go pro and/or compete in pretty much anything nowadays. Stuff that was meant to be fun has now been turned competitive at the highest levels, and I would argue that has trickled down to permeate every level of a given hobby to some degree. There is a certain expectation that by taking classes you are (at least in theory) fully committed to one day becoming an expert in that subject. And by not pursuing the next level once you get there, you are quitting. This implicit expectation can be very daunting for novices or dabblers and serves to keep people from even trying. What if I just care enough to only ever be a beginner?
And then there are the other students. Haven’t we all been there in the beginners’ sailing class with the guy who brought his own life-vest and keeps trying to complete the instructor’s sentences or in the introductory rock-climbing class with the guy who keeps volunteering how he’s only trying to get back in the swing of things after taking a few years off? I don’t want to spend my precious free time dealing with these people! Like I said, I’m competitive. So even if I’m not there to compete, I’ll end up taking it seriously just to shut that douchebag up.
Casual Learning FTW!
I believe both these themes, diversified living and a rebellion against the weaponization of hobbies, appeal to a lot of people who may not even know it yet or are just beginning to realize it.
The current recession has made diversified living not just something the growing ranks of the white-collar unemployed may see as a silver-lining until they find their next job, but a core value that will stay with them for the rest of their lives. The macro-economic Black Swan of the credit crisis is trickling down to become millions of personal Black Swans just like mine. Our generation that was trained to sacrifice everything short-term for our careers and the long-term benefits of professional success is seeing the foundational assumptions of that philosophy spectacularly undermined before our eyes. If all of a sudden I don’t reasonably believe that I’ll be able to make $10M by the age of 40, is the way I’ve been living my life worth the opportunity costs?
As for the weaponization of hobbies, everyone hates douchebags. ‘Nuff said. 
Casual learning is unique in that it is purely learning for fun. By its very nature it can’t help you with professional training or becoming an expert at anything. And so, you end up with a self-selecting group of participants who are all there for the same reasons. What makes casual learning special is the community of intellectually curious individuals who want to pursue the joy of learning without having to make a substantive commitment to do so. (Un)classes fill the gap between nothing and full commitment to a subject matter and do so within a supportive and non-competitive group of like-minded individuals.Â
(un)classes.com
We’re trying to launch the first version of (un)classes.com in time for LaidOffCamp this Tuesday. Rahmin and I are working on product and marketing, Marcus is helping out with design, the fantastic guys at Cloudspace — Corey, Michael, and Tim (who also happen to be the guys behind awe.sm) — are doing the development heavy lifting, and Todd has even offered to chip in on some CSS work. It’s a side-project for everyone involved that basically kicked off Thursday night, and it will be nothing short of a miracle if we pull it off (and I promise to write about the process if we do). But we’re all really passionate about the possibilities of the idea and the community it can create, and we want to start using this product ourselves. 
If you made it this far, there’s a high likelihood you’re digging on the idea of (un)classes as much as we are, and you’re wishing there was a way to get involved right now. Well, today is your lucky day! Even though the site isn’t up yet, Rahmin setup a way for you to submit ideas for things you wanna learn and things you wanna teach. When the site goes live, your submissions will be the first classes in there and you will get an email with your account info. Of course, you can also follow (un)classes on Twitter and/or subscribe to the (un)classes blog.
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