The Month We Lived Like We Were Broke

For one month, I made my own family live like we were broke. On purpose.

We'd just moved into a bigger house. My income at Dell was climbing fast, and so was our spending: bigger house, more stuff, more "I wants." I got nervous we weren't watching expenses just because income was going up. So for one month we acted as if we were poor. We ate out of the pantry, skipped impulse buys, took a hard look at every recurring expense.

It didn't stick past the month. But the principle behind it is one I learned at Dell and never stopped believing: opex scaling.

Opex scaling just means operating expenses, salaries, rent, tools, have to grow slower than revenue. Dell was ruthless about this. Hiring stayed slow even as revenue climbed, because margins on computers kept shrinking every year. It was the only way the business stayed profitable.

Most people, and most companies, do the opposite by default. Income goes up, spending quietly rises to meet it, sometimes past it. The top line looks good, so it feels fine. Almost nobody tracks whether the ratio underneath, expense to revenue, is actually improving.

I think about this constantly with founders now. Fast revenue growth right after a raise can mask a business getting less efficient, not more. In my experience, the company that wins isn't the one growing fastest. It's the one whose costs grow slowest relative to that growth.

Same logic held personally, long before Dell. In college I wrote down every expense each week (including $2 burritos). That discipline paid 25% of my own tuition and still left enough to buy a boat.

If you want real freedom, a company staying profitable or a family building savings, opex scaling is the discipline. Simple to say, hard to live... which is exactly why almost nobody does it.

Where is your spending quietly scaling faster than your revenue right now?