Hamad Dar, Author at Hamad Dar's Blog

The Power of Compounding When Investing

Yesterday, I wrote a bit about importance of investing. I showed the returns of S&P 500 Index for 10 years from Jan 2009, to Jan 2019. I mentioned that your returns would be over 200% in 10 years in USD. I further mentioned, that if you re-invest your dividends, you would have a return of 270% in the same period. See the additional 70%? This is where all the magic happens.

Let me explain this with an example. Suppose you receive a sum of Rs 100,000 at your graduation at the age of 22. You invest this money at an average rate of return of 10% per year and you keep this money invested for 40 years until your retirement at 62. During this investment, you have two options; you can either withdraw your returns every year at Rs 10,000 per year or you could re-invest your profit. Let’s discuss in detail what happens in both cases.

If you withdraw profits every year, after 40 years you would have Rs 400,000 (40 x 10,000) profit and Rs 100,000 principal. Giving you a total of Rs 500,000 after 40 years. Not so interesting, is it?

But if you re-invested Rs 10,000 profit every year, you would have Rs 4,525,925 after 40 years. A bit more interesting, isn’t it?

You invested the same amount of money, your rate of return was identical, and with the first option your capital stood at 5X while with the second option it stands at a whooping 45X. Here’s a compounding calculator for you to test all sorts of cases.

Is Cash Really Trash?

If you’re like me, born and raised in a Pakistani middle class family, you would have to earn your financial freedom. You weren’t born with it and you have to work your way up. Thankfully, unlike the previous generations, it’s easier for us to do so. With access to global markets, and a potential reach of 3.2 billion, you’ll make it even if you get fraction of the market.

But what happens once you achieve your financial goals? You earn a certain amount of money, and you stash your banks with cash and you feel it’s going to last for a certain period of time. But along the way, you also realize its running short faster than you thought.

There are 2 reasons why that could be happening. You may be over-spending and not keeping track of your finances. And that the inflationary financial system is not designed with you in mind. It is eroding your purchasing power, and pushing you two step backwards as you try to take a step forward.

This is especially true for Pakistan where inflation is high as well as the PKR has only weakened against the USD since the inception of the country. But it is also true for US where inflation at average is 2% per year for the last 10 years. Bitcoin on the contrary has only increased purchasing power in its life cycle and hence can be categorized as a deflationary currency, although some disagree.

But how do you solve this crisis? By not keeping the majority of your savings as cash. Cash can be bad, especially if it’s PKR you’re holding onto. Over 50% Americans invest in stocks for the long-term to preserve and grow their wealth while 0.125% Pakistanis do the same in comparison.

If you had held on to S&P 500 index for 10 years starting from Jan 2009 to Jan 2019, you’d have had a return of over 200%. It would have been over 250% if you re-invested dividends and this would be in USD, of course making additional money for you if your base currency was PKR.

Even if you invested in 2007 at the market peak and went through the financial crunch of 2008, you’d still be up over 100%, and 150% if you re-invested dividends.

If stocks isn’t your thing, and it wasn’t my thing too, you could invest your money anywhere you like. But it is absolutely necessary to do so. Because at the very minimum, you have to preserve your purchasing power, even if you’re not trying to increase your wealth with aggressive investing strategies.

It is still a good idea to hold on to some kind of cash. It’s great to have it in emergencies, and it’s what you need to survive. Having access to cash is also great when things are trading at a discount and markets are in turmoil. At the same time cash is the only asset that is guaranteed to lose value, other assets may or may not. And the only point I’m actually trying to make is cash isn’t as safe as I originally thought or as most people probably think.

Disclaimer: The information provided is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs. I do not make any guarantee or other promise as to any results that may be obtained from using my content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, I disclaim any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

Should You Always Have a Co-Founder?

If you’ve read a few posts on this blog before, you’ve probably already heard of my co-founder multiple times. I have worked with him for about a decade now and while sometimes it has been a challenging and bumpy ride, it has been rewarding in the end.

I’ve mentioned him quite a few times here because my stories would be incomplete without mentioning him. Because he had a role to play in every one of those stories and in building each one of those businesses with me.

Startups are hard and exhausting. Sometimes you’re gonna hate yourself for even wanting to try to run one and you’re always going to need someone who can take control while you’re going through the burn-out phase.

Each individual founder also brings unique skills and vision to the company which can be great.

YC funds less than 10% companies with solo-founders. They encourage you to have co-founders and even often offer matchmaking. I believe in the power of co-founders.

That said, there are many successful companies built by solo founders. One of the largest companies in the world, Amazon, was founded by solo founder Jeff Bezos. It’s also how he became the richest man in the world by having higher equity in the business. So going solo can make you really wealthy if you’re smart like Jeff.

But to be Jeff, or any other solo founder like him, you need to have super powers, which if you believe you don’t have, I encourage you to find a co-founder.

Just make sure your co-founder has these three attributes

Intelligence, energy, and integrity. And if they don’t have the last one, don’t even bother with the first two.
Warren Buffett

How Can You Be Good At Internet Marketing

Internet marketing is a blend of two things; social science and technology. I think I do a better job at understanding the technology, but may be not so much at understanding the social science.

Think of SEO; you need to have certain technical knowledge. You need to know about XML sitemaps. You have to focus on reducing time taken to load the site and the techniques used to do so such as caching, CDN, Ajax, SSL, minifying JS and CSS, etc. You may need to learn about link juice, focus keywords and how that works. By the way I’m not the best resource for SEO. So, I recommend you to read the techniques from an actual SEO blog.

For social media, you may need to learn about the techniques used to have a higher reach and distribution in the newsfeed and other areas such as using the right hashtags/location tags. You’ll need to learn about different ways to post such as photos, videos, stories etc. You may have to compare their distribution insights and learn what to post where and when and how many times a day etc. You may have to reverse engineer the exact method by looking at your virals to have your content appear more often in watch tab, newsfeed etc. In other words, this may require time, experience, data and technical knowledge.

The other side of internet marketing is social science, and I can’t stress enough its importance. Point is, no matter how much you get the technology part right, if you’re unable to understand the human behavior and psychology, you’re unlikely to do well. This is especially true for social media. Viral marketers often train themselves in to producing and recognizing content that is going to break all barriers, and is going to spread like wild fire. You’ll find infinite examples of how people have made viral content, repeatedly, without having enough seed views, influence or followers. They also didn’t follow any traditional SEO/SMM strategies. They are able to do that because they get the social science right. Our ISI case study was certainly about getting the social science right. I learnt this from my friend Zeeshan Shafquat who does an incredible job at understanding human behavior and psychology.

So if you’re going to venture in to internet marketing or already do it, I highly recommend that one of the co-founders need to understand human behavior and social science better, while the other focuses more on technology.

Breaking the Internet With Influencer Marketing

Users online on Socialoholic’s content website at one point in time according to Google Analytics

Since 2011, we have driven more revenue from influencer marketing than anything else whether it is for e-commerce, content websites or Ad Breaks (video monetization program of Facebook). Influencer marketing is really rewarding in one regard and that is you can often have a much higher reach compared to paid ads of the same platform for much lower cost. It is one of the best ways to scale your business on social networks with higher margins. I also feel no shame in acknowledging that we’ve been doing influencer marketing before we knew what it was called. That makes us one of the first ones to tap into this industry.

We have served as much as 60 million pageviews in a single day. That’s 700 pageviews per second or 42,000 per minute. We also served 240 million ad impressions per day making our content network one of the largest in the world. I mention these figures to demonstrate the power of influencer marketing.

We are also notorious for breaking the internet because we have crashed cloud servers, not only making our back-ends inaccessible but for hundreds of others as well. Of course the front-ends always stayed unaffected.

Our audience development was led by Musa Mughal who was only 16 at the time of contract. We identified him for his connections in the influencer-sphere when he was very young and that has led to a very rewarding experience for both Socialoholic and him.

Today, while Facebook penalizes content-websites for influencer marketing, it is still a booming industry for Ad Breaks. While Instagram continues to stay the top audience market for e-commerce businesses. I highly encourage you to explore this area of business as personally I haven’t found anything better in the entirety of my career.

I mean, Kylie Jenner became a billionaire by running e-commerce on her instagram, what further proof do you need?

If You Don’t Have a Mentor, You’re Missing Out Big Time!

Shagirdi bohat zaroori hai.

I have spent a lot of time on the internet experimenting hundreds of different ideas and trying to convert them into businesses. During the process, I’ve met and known many people from each one of those areas of experiment. Most experiments didn’t last more than a few days. Some lasted a few weeks and a few in the end became businesses.

I’ve been lucky to have found many mentors in many of those areas and I wanted to thank them publicly as it is because of them I was able to achieve many of my goals. I think chronologically it would be my father who introduced me to tech. Followed by Zeeshan Shafquat, who I believe is one of the greatest internet marketers in this country. Aamir Atta who helped me make my business profitable for the first time and gave me the vision to see through. Ehtisham Khan who introduced me to Viral Marketing and opened endless opportunities. And Saad Bassi who showed me the power of scaling and helped me reach where I stand today. I recommend each one of you to follow these people and learn from them. I also recommend you to look around and find mentors among your peers.

I also feel mentorship is the second best way to learn, after experience. Traditional education, while important, comes way down in the list.

One of the major downsides of Pakistan is lack of mentorship and knowledge-sharing. The very best don’t come out in the limelight making space for fake influencers.

Entrepreneurs Jump Off A Cliff And Assemble A Plane On The Way Down

I didn’t say this. Reid Hoffman did, who is the co-founder of LinkedIn. When I first read it, I thought that he’s totally glamourising entrepreneurs or probably making them sound like super heroes. But over time I’ve learnt to understand the true deep meaning that it meant to convey. And that reminds of a similar story that happened within our company a few years ago.

In December 2012, our company was once presented with a great opportunity by a private ad-network for one of our content websites but there were 2 caveats. They only wanted to roll-out invites to companies or individuals from within UK. And there was a first come first serve sign up that would only last for 24 hours.

Looking at the opportunity, we immediately decided to sign up as promised revenues looked incredible. Soon after that we received the ad codes, ran the campaigns and generated a ton of ad-revenue.

For payments, we spoke to someone and produced documents such as proof of address from within UK, but the ad-network declined to pay. We were told that the payments will only be made to individual name or company name used as part of the on-boarding process, and only to a bank account in UK. At that point, we knew we messed up.

In the next 3 months, I spoke to the banks, prepared my documents to apply for UK visa so I can complete the compliance, set up the company, and eventually by end of March we got PAID!

In hindsight, messing up would have been not signing up because we appeared ineligible. It is what most people do, and they completely miss out on big opportunities. Whats the worst that could have happened? Not getting paid after running campaign? Wouldn’t that be the outcome of not signing up at all as well?

This isn’t just my story. Over the past many years, I’ve met hundreds of freelancers & entrepreneurs who just dive in, arrange PayPal, virtual bank accounts in various countries powered by companies like Payoneer and TransferWise but what they don’t do is miss an opportunity. And so if you ever want to make it big, don’t miss an opportunity. Instead, jump off a cliff and assemble a plane on the way down.

Winning The Passive Wealth Generation Game With Blogs

When I first got involved in the digital space, my family was both supportive and skeptical. My father wanted me to go ahead, experiment and spend my time on this newfound hobby which he thought was productive. At the same time, my mother although also supportive, thought this was at best only a hobby. I was also occasionally reminded that this could be a great way to make an extra buck, but only that.

Over the long term, I have come to realization that internet is way more than extra buck. On the contrary, it is the greatest wealth generation tool ever made in the human history. Let me explain.

Just like any business, an online business also has customers or consumers. It also has some walk-in traffic and some footfall, often more than the physical counterpart. In fact I do not know of any physical business in the world with a potential footfall of 3 billion people. And just like any business, an online business is going to last for at least as long as you’re going to serve your customers, and sometimes even longer.

A few days ago, I posted a story about a failure that made me over $17,000 passively. Today, I wanted to give you another case study. In December of 2013, I published my last post on my music blog Koolmuzone. Over the past 6 years, Koolmuzone has continued to serve views day after day. In fact, yesterday it still served nearly 20% of the views that it served in Nov 2013 exactly 6 years ago. Which means the business could still potentially be earning 20% of the monthly revenue years after it was closed. And since closure, it has served content 15,785,164 times.

I can’t think of a better way of building wealth than years worth of free passive money and if you want to win this game, go ahead and make your first app, blog, Facebook page, vlog or website. Deploy it, fail or win, and let the passive number game be in your favor.

An Unexpected Financial Advice That Changed My Life

In 2011, during my final year at university, I was constantly calculating my options. I was confused about what career am I going to pursue after I graduate. I was graduating with a Computer Science degree, but was also running some profitable online ventures before my graduation.

In hindsight, this was an overly simple decision. I should have simply went ahead with my online ventures. And of course I did. But back then, it was confusing because I was much younger, I was constantly getting wrong advice from all the places, my teachers were telling me to get a job, and my mother had mixed feelings. This happens to pretty much all the Pakistanis and the reason why I’m writing this is because it’s going to happen to many other students when they are faced with similar circumstances.

During this I received a very unconventional advice, that came from an unexpected place. I say that because it was given by one of my teachers, Sir Waqar, and it was very untraditional. I also think it was unexpected and untraditional because it was completely different from what other teachers said. I also liked it more because it was not a generalized advice.

What he said was something like this. He said if you’re able to save Rs 50,000 every month with your job, and you keep doing that month over month for 30 years, you’re going to save in the entirety of your career a total of Rs 18,000,000. This is Rs 1.8 crore or Rs 18 million or on today’s exchange rate $116,000. This figure was $216,000 when he first gave me this advice. It has come down to $116,000 in 8 years due to exchange rate. In another 10 years, it may be $70,000. He added, if you like this number for your retirement and can save Rs 50,000 every month from salary, go ahead and get a job and if not then do what you love to do.

I love it how he kept it real simple. He didn’t add jargons like inflation and other things, because clearly no one at that age has the ability to understand finance like that. He did not give me an absolute advice where I was told what to do. He just explained my options to me with a simple numerical figure.

I’ve kept this advice close to my heart for over 8 years. I have shared it with every student I meet who asks me this question and I hope others find value in it the way I did.

I Love Rejections, And You Should Too!

I’ve been rejected so many times in my life. For a very long time I actually thought that I’m gonna have to struggle with food as soon as my parents stop paying my bills. I thought that because I was constantly getting rejected.

After finishing my high school (FSc in my case), I was rejected twice from joining the military in Pakistan. I’m not even sure today why I applied, and glad that it didn’t work out. I appeared on the NUST Business School merit list, but later turned down by them after the interview. They decided I didn’t deserve to study business in their prestigious school after meeting me in person. My provisional admissions in some other universities were also cancelled after the 2nd year (12th grade) results came in. My parents had even paid the admission fee. Pakistani kids can imagine that I was in real deep shit.

I joined the first university I could after that. I think spending 4 years there was a good experience. It helped me become who I am today. Bahria produced a ton of entrepreneurs from my peers. I got to know many people who are today massively popular musicians, movie stars, film-makers, photographers, bloggers, product creators etc.

If you’re in the digital space chances are you already know about Saad Hamid. Taimur Asad came out to be one of the most popular tech bloggers, not just in Pakistan but pretty much in the world. Ghaus Nakodari, the kick-ass founder of Jumpshare. Adnan Shafi, who recently raised $450,000 for his startup PriceOye. These are just the people I was friends with at college. There could actually be countless more.

I don’t think Bahria was doing anything special with education. I just think they weren’t punishing students hard enough, like other top Pakistani educational institutes. And I think that let the natural talent come out of all these people. Which is everything that matters in the end. So if you’re struggling with university right now, don’t sweat about it, everything can and will work out.

Anyway, back to rejections again. It took me 6 years to make a profit at Koolmuzone. And in the end I had to close that profitable business for very external circumstances. I’ll write about it someday.

When I finally got a break, I was turned down by the most prestigious accelerator in US. Some rejections taught me great lessons about myself and I got great value from them (accelerator rejection). Other rejections helped me learn about the sad state of affairs of so many institutions (Pakistan’s education system in general). And some rejections helped me realize how misfit I was and they were nature’s way of putting me away from the course not intended for me (military).

But none of them let me down, or stopped me from my ultimate destiny. Rejections will either add value in your life, or will be net-neutral, but in the bigger scheme of things, I don’t see rejections ever taking away value from your life. You have to keep trying and never give up. And this is mainly for younger folks, stop sweating about rejections. It all works out in the end. Not just for me, but for everyone. Everyone is someone in the end.