Non-linear relationship between cash & life outlook
October 19, 2009
Many entrepreneurs have blogged about a liquidity event and the impact it has on their life. But Jason Cohen has created perhaps the best visual representation I’ve seen of the non-linear relationship between how much money an exit puts in an entrepreneur’s pocket and their outlook on life. This graphic appears in his blog post which goes into some detail about why he sold his company.
He uses the word “lifestyle” in the graph’s title, but I actually think a more accurate wording is outlook on life in part because the definition of “freedom” varies by person. Someone who has “freedom” money may not change their lifestyle dramatically, but going from not having “freedom” money to having it certainly changes their outlook on life. For someone who’s definition of freedom is renting a shack on the beach in Costa Rica and surfing for the remainder of their life, the amount might only be $1-2M. For someone who already lives a pretty expensive lifestyle in Manhattan or London, the number might be $20M+. For a large swath of folks it’s probably close to $10M give or take.
But the point isn’t really what that amount is for any given person. The point, which the graphic illustrates very well, is the non-linear relationship which exists for pretty much everybody. Having “freedom” money isn’t twice as good as having the 50% of “freedom” amount, just as having 10x the amount isn’t 10x better.