Intercst Article on 2% SWR

Research on Safe Withdrawal Rates

Moderator: hocus2004

hocus2004
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Post by hocus2004 »

Hocus, can you see the bolding yet? I have noticed that you are using it.

No, I can't see either bold or italic on my screen. I can see the coding and I just try to check that I get the coding right without the benefit of being able to see what it looks like in "Post Preview."

I don't believe that this is an NFB issue. After I realized that the problem is one of seeing bold and italic rather than creating bold and italic, I remembered that I had the same problem the one time I posted at the Prudent Bear board. On the other hand, I do not have the problem at the Early Retirement Forum or at the Motley Fool site. So I now lean towards thinking that it is a problem of my operating system being a little out of date. I plan to switch to the OSX operating system in the not-too-distant future. My hope is that the issue will go away when I do that.
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ben
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Post by ben »

What actually happened to the soapbox idea? Why did it close down? Seems like a brilliant idea to me but maybe some legal aspects involved?

(Ps. and hocus; what is your screen name at fool.com? ;))
Normal; to put on clothes bought for work, go to work in car bought to get to work needed to pay for the clothes, the car and the home left empty all day in order to afford to live in it...
unclemick
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Post by unclemick »

Just came back from the mailbox with my Jan Moneypaper - their annual Dividend and Income Portfolio (since 1987). 19 stocks - yes since dereg. the number of utilities has dropped and now they are asking a minimum yield of 2% - way down from the old days - and slippped in Wriggly at 1.4%. Things are tough. Patience and waiting for better valuations is looking better and better.
hocus2004
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Post by hocus2004 »

What actually happened to the soapbox idea? Why did it close down?

Soapbox.com, for those who don't know, was a web site owned by Motley Fool. The idea was to provide a place where people could offer reports for sale. Motley Fool got 40 percent of the take for setting up the site and bringing people in and the author got 60 percent. The plan down the road was to offer the reports at other sites as well. Under that arrangement, the other site owner would get 50 percent. Then Motley Fool and the author would split the remaining 50 percent according to the 60-40 rule. My report was "Secrets of Retiring Early." It sold for $10. I got $6 on each sale and Motley Fool got $4.

There was another site that was smilar. That was called MightyWords and that shut down too. So the problem does not appear to be Motley Fool's execution. It appears to me that it is just difficult to make money with this concept. The reality is that publishing in general is not a big money-maker. I elected to self-publish my book. Say that instead I had gone for a deal with a big publisher. As a first-time author, the odds are that the best that I could hope for would be an advance of about $20,000 (and that wouldn't come without a lot of work). I would get more only if the book sold in big numbers. And 80 percent of books never earn back their advance. The odds are stacked heavily against you.

So how do publishers stay in business? They stay in business because the books that make money make lots of money. Almost all of the costs are fixed costs. First, there's the cost of the time that he took me to research and write my book. That's a big number. Then there is the thousands that I spent on having it edited and having the layout done and having the cover desgined and so on. Then there is the printing cost. That's a somewhat variable number, but the reality is that that is to some extent fixed too. If you print 500 copies, the price per copy is high. If you print 10,000, it goes way down. Publicity is another important one, probably the most important. It takes a lot of money (or time, if you choose to do low-cost stuff that eats up time instead) to bring a book to the public's attention. Once you have done the job, you don't need to spend more--the sales you achieve bring you word of mouth, and the wheel just keeps on spinning. But getting the wheel going is an expensive proposition.

Most of these costs are one-time things. So once you have covered them, all additional sales come close to being cost-free. This is a business where the odds of making any money at all are very long, but where the odds of making lots of money are good once you manage to break out of the pack. I'll give you an example from Soapbox that amazed me. There was a guy there who did a calculation after the service was up for about a month that the three top-selling reports had more sales than the other 60 or so combined. Those three were money makers and they could have kept making money for a long time. The others didn't pay for the administrative costs associated with keeping the site up.

If you could publish only winners, you would get rich in no time. But no one has ever figured out a way to identify them in advance. When a publisher pays you $20,000, they are just buying a lottery ticket. They put your book out, and, if it catches fire, they promote the heck out of it. If it doesn't catch fire in about two months, they put it on the remainder tables at a loss. It's a "hits" economic model, like the movies.

I think that the idea with Soapbox was that the costs would be less than with traditional publishing because they didn't have to actually print the books (it was all done by electronic download), so they could afford to put lots of stuff out and see what stuck. The problem was a lack of quality control. Anyone could put anything up at Soapbox. The readers were supposed to use customer reviews and sales figures (which were published at the site) to identify the good stuff. But that meant that there wasn't going to be a lot of "good stuff" (stuff that large numbers of people were willing to part with money to obtain). There were not enough hits to give the customer visiting the place a good feeling.

With more hits, it would have worked. There was some wonderful stuff at Soapbox not available anywhere else. My favorite was a report that a guy from the Mechanical Investing board did that told you everything you wanted to know on that approach. There was only 1 person in a thousand interested, but the ones who were interested were very, very interested. His report was a huge hit at a big price (he charged $30). There was a guy who wrote on biotech investing who did real well. Intercst published his SWR study there and that did well. Soapbox is a good concept that needs to be refined to work financially.

What was needed was, first, more quality control, and two, more outreach to bring in authors (which would mean that there would be more hits and the site would come to look more pleasing to new customers). My sense is that Motley Fool was aware of all this and planned to go down this road. The problem was that tech stocks went down big time just as Soapbox was getting off the ground. The fall of tech stocks caused Motley Fool's advertising revenue to dry up and that required that they let go about 80 percent of their workforce. Advertising on the Motley Fool site was pretty much their whole revenue stream in the old days. Lots of things got thrown overboard, and Soapbox had clearly not proven itself yet, so that was one of the things.

I left my corporate job after finishing my Soapbox report. I had planned to stay another year, but I wanted to exploit the Soapbox opportunity to the fullest and I couldn't publish there under my real name if I stayed with the accounting firm. So I decided to resign a year earlier. If Soapbox had stayed in business, I think I would have been set. My one report earned $15,000 in six months. Within a year, I would have had three or four reports up. Then I would be getting small revenue streams from each of them while also getting a larger revenue stream from whatever report was new at the moment.

I could have continued publishing reports at sites that allow for sales of e-reports and e-books. But Soapbox was a little different in that they did a lot of the marketing to pull people to the site (through ads at the Motley Fool site). If I published elsewhere, I would have to pay for all the marketing myself. I decided that, if I was going to pay for the marketing, it was better to be using it to pull people to my own site. To do that, I felt that I needed a book to establish my credibility as an "expert" in the field. So when Soapbox closed, I got to work on my book ("Passion Saving").

It was February 2001 when Soapbox closed. I would have fiinished the book and had it up for sale by the end of 2002 had it not been for The Great SWR Debate. That delayed things by at least two years. It was a big price to pay to delay publication of my book by two years (Ask my wife about this!), but my view is that the question of how to invest for early retirement is an important one and that as a community we need good answers to this question for the whole thing to work, and so I feel that we just have no choice. I knew from the first day I posted (May 1999) that intercst got the number wrong in the REHP study because I did my SWR research back in the mid-90s. But I was hoping that we would get things off the ground and then work our way around to solving the investing problem after we already had a strong community in place. Again, the tech stock drop caused the problem. It was when tech stocks dropped that intercst seemed to lose interest in the topic of early retirement and running off the board anyone who gained any popularity or demonstrated any special insight. I was sufficienty disgusted by January 2001 to go on a long "hiatus" from posting, but I was still hoping at that time that as a community we would evnetually turn things around. Then Wanderer--the most popular and the most effective poster at the board--was driven off the board in February 2002. That said to me that I had to do something to keep posters interested in the topic of early retirement in the community or there wouldn't be any community for too much longer. I thought about it a bit and I decided that the best thing to do was to go ahead and tell people what I knew about SWRs. I did that on May 13, 2002. You know most of the rest of the story.

To bring this back to the starting pont, I think there will be a successful Soapbox-type service someday in the future. To make it work, you need a moat, a way to distinguish one particular site from all the others that could just put up some reports and offer them for sale. I think that the moat will be a reputation for quality. Some company will come to be known as the one that has the best reports for sale, and that will be the one that customers will go to rather than take the time to sort through all the reports at all the sites. I think that the key to making this work is lining up lots of marketing-oriented authors before trying to get the thing off the ground. Also, I think there is a need for more quality control than existed at Soapbox (and that costs money to hire employees, of course).
hocus2004
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Post by hocus2004 »

hocus; what is your screen name at fool.com?

You expect me to give away trade secrets here?

My most recent posting name at Motley Fool is "hocus2004." I expect to go back to just plain old "hocus" somewhere down the road. I'm not posting there under any name for the time-being. I want to see some others take the lead in gaining back control of the board before I commit more time to the project. We do our work as a community, and I don't think it is healthy that one poster (me!) has been so closely identified with this effort. One poster who sticks his neck out stands a good chance of getting his head cut off. That's not so when we act as a community. As a community, we negotiate from a position of strength. So I don't expect to return to that board until we have a number of people committed to doing what they can to advance the ball. (I of course reserve the right to change my mind if changing circumstances call for a change in strategy.)
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