Book Review: The 4-Hour Work Week, by Timothy Ferriss

When I picked up The 4-Hour Workweek, I was worried it was some sort of “get rich quick” book. The first few pages didn’t do much to change my mind. The author, Timothy Ferriss, makes a lot of bold claims, such as: “How do you create a hands-off business that generates $80,000 per month with no management? It’s all here.”

But something happened during the first few chapters. When I read a book, I use small sticky notes to mark interesting passages. After the first 100 pages of The 4-Hour Workweek, the book was thick with stickies. By the time I was finished, I had used an entire pad!

Ferriss does make a lot of bold promises, and some of the details along the way do read like the confessions of a get-rich-quick scammer. But I believe that an intelligent reader can easily extract a wealth of useful ideas from the book. For me, it’s a keeper. I’ve read it three times already, and will probably read it again before the end of the year.

Let’s Make a Deal
After college, Ferriss took a soul-sucking sales job at a tech firm. He left to start a soul-sucking business of his own. He went from working 40 hours a week for somebody else to working 80 hours a week for himself. He hated it. The pay was good, but the business left him drained.

After learning about the Pareto Principle (more commonly known as the 80-20 Principle), Ferriss had a revelation: he streamlined his business, eliminating distractions and automating systems until it was not only more profitable, but also took less of his time. Much less. He took a “mini-retirement”, and then decided to write a book about “lifestyle design”, about creating a life that balances work and play, maximizing the positives of both.

The 4-Hour Workweek is divided into four sections, each of which explores one of the components to lifestyle design:

• Define your objectives. Decide what’s important. Set goals. Ask yourself, “What do I really want?”
• Eliminate distractions to free up time. Learn to be effective, not efficient. Focus on the 20% of stuff that’s important and ignore the 80% that isn’t. Put yourself on a low-information diet. Learn to shunt aside interruptions, and learn to say “no”.
• Automate your cash flow to increase income. Outsource your life — hire a virtual assistant to handle menial tasks. Develop a business that can run on auto-pilot. (This is the weakest section of the book.)
• Liberate yourself from traditional expectations. Design your job to increase mobility. This could mean working from home, or it could mean using geographic arbitrage to take mini-retirements in countries with favorable exchange rates.

The 4-Hour Workweek, Expanded and Updated: Expanded and Updated, With Over 100 New Pages of Cutting-Edge Content.

The 4-Hour Workweek describes the specific actions Ferriss took to implement these steps. Sometimes these specifics aren’t particularly useful. However, I think it’s a mistake to let the details get in the way of his broader message. If you’re able to look past the details, to look at their meaning, you may discover principles that can change your life. For example, I don’t like much of what Ferriss has to say about automation. I question the virtue of virtual assistants, and I think that his business model works for his business but probably isn’t applicable to most others.
However, it was while re-reading this section the other night that I began to think about automating my personal finances, about making them paperless. By absorbing Ferriss’ ideas and not his specific details, I was able to apply this to my life.
A Kick in the Head
Most of the time, The 4-Hour Workweek is like a kick in the head. The flow of ideas is relentless. Here’s one of my favorites:

Emphasize strengths, don’t fix weaknesses. Most people are good at a handful of things and utterly miserable at most. [...] It is far more lucrative and fun to leverage your strengths instead of attempting to fix all the chinks in your armor. The choice is between multiplication of results using strengths or incremental improvement fixing weaknesses that will, at best, become mediocre. Focus on better use of your best weapons instead of constant repair.

Maybe this is obvious to most of you, but it’s a revelation to me. I spend a lot of time worrying about my weaknesses. Yet when I look at my life, it’s clear that everything rewarding and profitable comes from enhancing my strengths. Here’s another example:

Relative income is more important than absolute income. Absolute income is measured using one holy and inalterable variable: the raw and almighty dollar. Jane Doe makes $100,000 per year and is thus twice as rich as John Doe, who makes $50,000 per year.
Relative income uses two variables: the dollar and time, usually hours. The whole “per year” concept is arbitrary and makes it easy to trick yourself. Let’s look at the real trade. Jane Doe makes $100,000 per year, $2,000 for each of 50 weeks per year, and works 80 hours per week. Jane Doe thus makes $25 per hour. John Doe makes $50,000 per year, $1,000 for each of 50 weeks per year, but works 10 hours per week and hence makes $100 per hour. In relative income, John is four times richer.
Of course, relative income has to add up to the minimum amount necessary to actualize your goals…

I want to believe that if I had to choose between $70,000 per year earned with 70 hard hours per week, or $42,000 per year earned with 37 easy hours per week, I’d choose the latter. I’m not there yet.
A Garden of Tips
I don’t buy into everything that Ferriss writes, but I love how he shatters conventional wisdom. I love that he makes me think. Even if you reject his central thesis, there are dozens of tips and tricks here that can be extracted and used to optimize your life. Here are a few:

• Ask yourself, “If this is the only thing I accomplish today, will I be satisfied with my day?”
• How to double your reading speed in ten minutes.
• Why it’s more productive to carry around a written to-do list than to keep one on your computer.
• Learn the art of non-finishing. This is all about the sunk cost fallacy: just because you paid $10 to see Pirates of the Caribbean 3 doesn’t mean it’s a good idea to watch the entire thing.
• How to be more efficient with e-mail.
• How to reduce clutter from your life.
• If you can’t define it or act upon it, forget it.
• Life exists to be enjoyed — the most important thing is to feel good about yourself.
• Why geographic arbitrage is a great way to enhance your relative income.
• The value of a virtual assistant.

My Recommendation
Despite its flaws, The 4-Hour Workweek is a great book. I think that most people can draw something useful from it. Borrow it from your public library. If you like it and think you’ll re-read it, then wait for it to come out in paperback. I’ve already read my copy three times, but that’s because it’s perfect for when I am in life; I’m not convinced that others will extract the same value.

Consider these five business goals as you embark on a new year.

Financial Resolutions for 2011

By Eileen P. Gunn   |   December 27, 2010

No matter how healthy your business is, chances are good that there are some financial issues you could have managed better in the past year. So when you start anew and set New Year’s resolutions, make sure to include some that relate to your financial future. Here are a five to consider for 2011 based on suggestions from Phil Leibowitz, a partner of San Francisco accounting firm Burr Pilger & Mayer, whose clients includes entrepreneurs.
No. 1: Set personal financial goals.
If you’re a 30-year-old who is just starting out in business, your personal goals and a timeline are likely to be different from those of a 60-year-old who may be eyeing retirement. And these plans may have an impact on the decisions you’ll be making for your business in the coming year. So it’s worth taking time to consider where you want to be personally in three to five years -- and discuss what that means for your company with your tax professional.

“I would have the 30-year-old think about his risk orientation and talk with him about how much money he wants to invest in his company and leave there for future growth,” says Leibowitz. “With the 60-year-old, I would be talking about succession planning and starting to diversify his money out of the business.”
No. 2: Make a budget.
Only a fraction of entrepreneurs write a budget, according to Leibowitz. While business owners may think they can keep track of their company in their heads, he doesn’t recommend it. “It’s like driving at night without the lights on. You know there’s a road there, but you don’t know exactly where it goes.”
The process of creating a budget is critical for planning a company’s future, instead of just reacting to it. Leibowitz suggests starting with such questions as:
-- Will you need extra cash at a certain part of the year?
-- Will sales slow down or pick up seasonally in your industry? If so, will you need to cut costs or hire extra help?
-- Will you need to increase your line of credit for some short-term need?
No. 3: Talk about the company’s priorities with your team.
It’s important to share your goals for the next year with employees, especially if your plans reflect shifting priorities. “Maybe your goal this year is to increase market share, and you’re willing to give up some profits to do it,” Leibowitz says. “If your employees don’t know that, they might be price sensitive when making sales and lose business. So you want to make sure they’re on the same page.”
You also want to be clear about the role each employee will have in meeting business goals. Mapping out specific responsibilities can be especially helpful when evaluating employee performance for raises or bonuses.
“If you have five employees, this doesn’t have to be formal. If you have 40 or 50 or 200 employees, you need a process,” Leibowitz says.
No. 4: Lock in fixed costs.
Leibowitz expects that as the economy improves, your vendors, just like you, are likely to want to increase prices and cushion their margins. Therefore, he suggests staying one step ahead and negotiating terms now.
“With rent and other business specific fixed costs, you want to negotiate two-, three- or five-year agreements where you lock in the current price or agree to only inflationary increases,” Leibowitz says.
No. 5: Revisit postponed expansion plans.
If you’ve put off plans because you couldn’t secure capital, it might be time to revisit them in the coming year. Leibowitz expects the lending environment to improve in 2011, at least for businesses whose cash flow and balance sheet are in good shape.
“In 2008 and 2009, banks were reticent to do anything unless it was riskless to them,” he says. “They would only lend to companies with ultra strong balance sheets.” Now he’s beginning to see companies that are profitable with merely solid -- not extraordinary --balance sheets qualify for loans.
“The cost of capital only goes up over time, so this is a good time to establish a good banking relationship, before that starts happening again,” Leibowitz says.