How did you do it? Financial Success Thread

[RJT]

Yes, it was a good story SM, but just a few thoughts – maybe the post left things out that are assumed by those in the industry. For those of us not in the know:


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Salary - $30k.

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It was $7m … I spend halftime my second year going up 50% in the fund (no fault of my own...it was lucky, I had no idea what I was doing. I am not a modest person, this is just how it was).

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My 50% year generates $750k for the partnership

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They give me $15k.

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They screwed me, and I don't think they even realized it.

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(they kept me on as a consultant during HBS to help defer my expenses).

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They screwed me, and I don't think they even realized it.

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From Howard Treesong: I would have made an argument for 20% of the realized gain and been entirely satisfied with 10%. Had I been on the other side from OP, I probably would have offered 50 and let myself get talked up to 75.


I know this is probably how big business works. But, if we take a step back and look at this - how is this any different than the union worker wanting more money when “he” makes the big corporation so much money?

How much would be fair for the OP to pay the company had he lost $750k.

[Taylor Caby]

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The easiest way to financial success is just saving as much as you can every year, putting it in an index mutual and leaving it alone. It's not sexy or exciting. It just works.

MM MD

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This is what they taught us in college and I always disagreed with it. This is the easiest way to living a comfortable life when you are retired.

I think young people should be more concerned with busting their asses to do something your peers are not than simply saying "i'll put 20% of my pay into an index fund and then 40 years later I'll be able to afford to retire."

Maybe I'm just weird, but the thought of waiting 40 years to retire/become wealthy just doesn't appeal to me. I think Scorpion Man's post was very representative of what it takes for success; someone smart who is both willing to work harder and take more (calculated) risks than everyone else. I really enjoyed reading that post.

One other thing it got me thinking about is you can't just blindly follow the trends. I can't tell you how many people I know tell me "I plan on making a little money and then getting into real estate because that's where the money is." Yeah, you could still make a lot of money if you are really good at it but the market is filled with millions trying to do the same. Find a new market that is just getting started (BEFORE it is getting hot) and learn everything there is to know about it if you really want to give yourself a chance for financial riches.

tc

[ArturiusX]

Putting money into an index fund doesn't somehow lock it in, though. The power of a compounding investment early in life pays dividends later when you will find business ventures. Having an extra 100k because you were smart at age 21 is invaluable.

[Taylor Caby]

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Putting money into an index fund doesn't somehow lock it in, though. The power of a compounding investment early in life pays dividends later when you will find business ventures. Having an extra 100k because you were smart at age 21 is invaluable.

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seriously though, is there anyone that doesn't know this? anyone that is smart enough to make 6 figures when they are 20 years old has invariably been told to stick it in an index fund. this to me doesn't take a ton of brains and is pretty standard. being smart is taking that X dollars you made and putting it in something that is going to make you abnormal returns over time, the index fund simply seems like a safe bet to me.

i agree, having an extra 100k because you chose to put your money in an index fund rather than leaving it in your checking account is great. i guess i am hoping that in 30 years that extra 100k will be insignificant compared to the money i have made by working harder and taking more risks than everyone else along the way.

[Scorpion Man]

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From Howard Treesong: I would have made an argument for 20% of the realized gain and been entirely satisfied with 10%. Had I been on the other side from OP, I probably would have offered 50 and let myself get talked up to 75.


I know this is probably how big business works. But, if we take a step back and look at this - how is this any different than the union worker wanting more money when “he” makes the big corporation so much money?

How much would be fair for the OP to pay the company had he lost $750k.

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So just to be clear, I made the fund over $3.5m, in addition to making them look good. I did this 100% on my own. The firm gets 20% of that...call it $750k. I did not have a high salary. It was a tiny little firm in terms of # of employees, and all the other guys were pretty rich. I showed a tremendous amount of initiative to get this done. Most importantly, I specifically sat down with 2 of the top partners before I agreed to accept this role and asked about the compensation arrangement. This is money very directly generated by me...it's more akin to sales or some other performance based job than working on an assembly line. But what it really comes down to is this-- had they said "tough [censored], you should just be glad for the experience (which would have been worth it)" then I would not have much problem with it (some, but not much). They gave me the old hard stare in the eye, we are men of our workds, "trust me, if we make money, you will make money".

That bonus was a trivial amount, even back in 1990.

BUT -- it was wholly irrelevant, it had no effect on my life other than to teach me that key lesson. That ultimately was a wildly valuable lesson because it taught me what to focus on when I ultimately ended up in a spot where the money mattered.

The other interesting takeaway is that if you were married to one of these guys and he came home and you said "honey, did you screw SM today"? He would have said or course not we were very generous. It is an important lesson that fairness is in the eyes of the beholder, that unspoken understandings can be wildly different on the two sides, and that he who has the gold gets to decide what is fair and usually feels he is totally justified in that decision. If you disagree, you are just a greedy malcontent.

Happily, my hedge fund experience was very different than this and I have no complaints.

[El Diablo]

All,

OK, I'll take a shot.

Interned as an engineer in college, realized that I didn't want to do that. Considered i-banking and consulting. I-banking didn't sound like much fun to me (my friends were working 100-plus hours), plus I've always had a thing for "building/creating" stuff, which didn't seem to come into play much in banking, so consulting seemed the natural course for someone with no clue what to do.

Got a job making something like $45k total w/ bonus (1993). Did that for a year. Was 100% staffed at billing rates of $150+/hr. Hmmmmm... Also hated having people above me in the company that were idiots.

I quit and got a consulting job making about $70/hr. Did that for a year, then realized I didn't like it all that much more. Had some money saved up at this point.

'95 now. Started a web development tool software company with a couple of friends. Didn't have any clue what we were doing, really, no idea about market/competitive analysis. Moved to Bay Area. Burned most of my money on this, didn't really go anywhere, but was great experience and met tons of people in the startup and finance worlds.

Did some more consulting to make a few bucks (now making $100/hr) and came up with some enterprise software ideas that seemed good. Again, devoted all the money I had to getting this company going. I had worked on large natural gas trading systems in consulting and developed some related stuff for the web. Sold a couple of $50k+ customers while still bootstrapped, then raised some venture money.

Grew this company for the next few years, raising and spending a ton of money (total VC money raised in the ~$50M range). Biggest mistake throughout this process was hiring various execs simply based on the fact that they "had experience" and not firing the ones who didn't perform quickly enough. It's really great to bring on top-notch performers with great experience. But it can be devastating to bring on people who have just slowly moved up the corporate ladder over 15-20 years of uninspired performance. Their resumes often look great, but their ability to perform in a super-competitve world sucks. Anyway, at the point where we had raised ~15M, had revenues of a few million, and staff of about 150, we were offered $300M+ for the company. Investors vetoed the deal, looking forward to a big IPO. This was late '99, my share of that deal would have turned out to be worth about $50M when the lockup expired and I could sell.

Instead, we pushed forward to an IPO, but in early 2000 the whole tech sector crashed, so instead of doing that I spent the next year firing about two-thirds of the company and getting to profitability. We did that and sold the company for a fraction of the earlier offered price. I had a few bucks in my pocket, not enough to retire, but enough to not worry about work for a few years and not be stressed about the next thing.

I took a couple years off, travelling and helping other friends with startups, doing a little investing from time to time. A few of these startups ended up putting a few more bucks in my pocket.

Then decided to start another software company. All the initial R&D was bootstrapped by me and my business partner. Once we started having some sales, we raised a small amount of seed money from a group of friends to ramp up staffing and marketing, but have so far passed up all offers of professional outside investment, instead trying to scale this via revenues. In a year or two, this will either look like a genius move or an idiotic one, we'll see.

I could have gone down multiple paths that would have made me a ton more money (after my last company I had numerous offers to work at VC firms making a ton of money or joining high-flying startups as CEO or senior management), but I've pretty much focused just on being my own boss and keeping as much control as possible on what I do on a day-to-day basis. This has involved me at multiple times putting just about everything I have into the next business idea (and in the early attempts, putting on sizable credit card debt as well) rather than put the money into more conservative investments. But the way I figure it, there's always a way to make money and always time to go get a high-paying job working for someone else. I have no regrets sacrificing those types of opportunities numerous times and I can't overemphasize the value of actually doing stuff - fundrasiing, selling, managing people, delivering product, negotiating deals, whatever. That type of experience is not only valuable, but also really fun and fulfilling to accomplish.

I plan to stay in this field, working with my current company and a few others I'm involved with, for a few more years. Then I think the most likely next thing for me is starting a small boutique investment bank with a couple of guys I've worked with on various projects for 10+ years.

[hanster]

Yes first to respond to ED's post!

Anyways, couple of things I'm curious about.

-Consulting really seems to be the norm for my peers nowadays still that have no idea what they want to do besides knowing that accounting and ibanxking aren't for them. Has been a consultant been a big part of your success so far?
-You stated you have no regrets, but does that mean you wouldn't go back and change anything at all? Seems like I'd be pretty bummed about the investors' decision to veto the sell. Could you have done anything differently then? Would you? Also, the hiring personnel part of the story seems fairly interesting. From all your business-related posts it seems as if you work with a close-knitted but a moderate size team. I assume this was from that experience? Have you considered much harder for someone to be a part of your company since?
-T-shirt company still in the works?

I really enjoyed reading everyone's stories. There are Ivy grads to dropouts. The stories certainly serve as great motivation to not study as much for my midterm in 3 hours.

[Lurker.]

El Diablo,
at what point were you playing in the big ub games? How did you fare in these games? Your story is interesting.

[ArturiusX]

Cool story El D.

Keep em coming guys! [img]/images/graemlins/smile.gif[/img]

[king_of_drafts]

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While there are outliers, careers are continual processes of closing off options in my opinion. I did everything in my power to leave all options open to me for as long as possible. This is my main argument with online poker...it starts to close off options

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I feel like this is so important, but it is difficult to convey to my friends both inside the poker world and outside of it. There is the obvious chance that the floor will drop out from under all these young grinders, and they are going to have no idea what to do when the endless stream of money dries up and they are stuck with no job, no degree, and a skewed sense of money's worth. Besides, the money is so much more rewarding if you are living a balanced life, and playing poker all the time leads to intellectual and social atrophy.

Edit: I shouldn't generalize like this because most of the highest stakes players are probably tough and smart enough to adapt to whatever life throws at them, but guys that drop out to play midstakes for 80-100k/yr would likely falter I think (if poker crashed completely).

Double Edit: While I'm still a teenager and not really financially successful for the long term, I have done well at poker, and I think most of the things that have been said here can apply to that as well. Integrity, persistence, self-confidence, and ability to take risks (and fail) can never be stressed enough. Unfortunately, these are traits that all must be garnered from experience rather than reading an Internet post (and I say that because, while I know all of these are necessary, I have not really attained any of them to the degree that I desire).