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Excerpts from Liquidity & You

My Personal Story

You should be proud of your achievements. Whether you own a medical practice or you helped develop an app for a company approaching an IPO, starting and growing your business has never been easy. You have overcome obstacles, transcended personal doubt and created possibilities for yourself and your company when others told you repeatedly it couldn’t be done. You’re a motivator and a creator.


Despite your accomplishments, you know you’ve still got more to achieve. You need to ensure that you do whatever it takes to preserve, protect and maintain the wealth that you have worked so hard to build. Going forward, you’ll be met with new challenges, new transitions and new opportunities—many of which may feel unpredictable. The decisions you make during these key moments will have a huge impact on your quality of life and the lives of those you care about. Your goal? Maximize what you’ve created so that you can make your dent in the universe.


Making smart choices about your money is vital to accomplishing what you want in life, now and in the future. To make that happen, you need a comprehensive strategy. You need to manage all aspects of your wealth with a strategy that takes into account each piece of your financial life. You need a coordinated plan ensuring that your financial life is aligned with your core values and most meaningful goals.


That is what this book is all about. It is designed to give you—a successful business owner or tech entrepreneur approaching a liquidity event—the tools you need to thrive in the next chapter of your life. These tools will help you identify your goals and position your wealth to turn your vision into reality—for yourself, for your family, for your community and for the causes you deeply care about.


My path to helping entrepreneurs


As many of you know, I am an entrepreneur and have several close relatives who are successful entrepreneurs. Like some of you, I had a modest upbringing and had tremendous fear about money as a kid. My dad never had much job security. He was an engineer at a naval base that was constantly under the threat of closure—a common occurrence in the 1980s and 1990s—and my mom had ongoing heart issues that prevented her from working.

The early messaging I got from my mother was: “We are in trouble; there is not enough money. You may not be able to go back to school. Your father could lose his job and we can’t afford to buy a new car.” As it turned out, my parents weren’t paranoid. The naval base where my dad worked was ultimately closed. Luckily a publicly traded company (GM Hughes) came along and acquired the base. My dad kept his job, but he lost more than half of his pension. As a result, the fear of scarcity always loomed large in our house. I responded in two ways: (1) I went out and made money, and (2) I learned as much as I possibly could about preserving the money I made. I never ever wanted to feel that sense of scarcity again.

Life can throw a lot of struggle and hardship our way. While a healthy financial picture won’t solve all your concerns, it can certainly help you navigate those difficult moments.


A buddy of mine who has an MBA from an Ivy League school was embarrassed to ask for help with his portfolio. Don’t feel bad about not knowing what you weren’t taught. Our school systems have failed us.

My own journey to helping self-made people make smart choices about their money began during my childhood in Indianapolis. At age 11, I started mowing lawns and cleaning gutters. I also bought candy in bulk and then sold individual pieces at my school for a profit. I did whatever I could do to make a buck. Simultaneously, I wanted to learn everything I could about personal finance, a topic that is rarely addressed within our school systems. I wanted to make that feeling of scarcity go away, not just for me, but among my peers. We all deserve access to the tools required for creating security for ourselves.

Fortunately, I had some good role models. My grandfather owned two full-service gas stations. I remember that he always greeted customers by name, filled their tank and cleaned their windows without thinking twice about it. He owned and operated a “service station” with an emphasis on the word “service.” Those establishments provided a nice life for my mom’s family and made them respected within the community. 


In terms of self-education, I’ve always been curious about how things work. My father’s engineering background must have rubbed off on me, as some of my earliest childhood memories are of taking apart old black-and-white televisions (color was too expensive) and attaching speakers from a Sony boom box to make “stereo TV.” I always wanted to see what was on the inside of things, and how all the mechanical innards fit together.

This inquisitiveness was especially helpful when relying on 10-year-old cars—batteries, alternators, starters, etc. I wasn’t a great student growing up, but I was smart in a practical way. My high school guidance counselor, Mrs. Hannigan, didn’t think I was college material. She called me into her office one day and urged me to think about becoming an electrician or a plumber because she knew I enjoyed working with my hands. Once again, I felt that fear of scarcity. What I heard her telling me was “you will always be poor,” and I felt a lot of guilt because my parents had taken a loan to send me to a college prep school.


What Mrs. Hannigan didn’t know was that I had been working up to 30 hours every week at a Subway sandwich shop since the age of 14. Instead of spending time studying, I was learning firsthand what it was like to run a business (in this case a franchise, since the owner had three Subway shops). Still, that meeting with Mrs. Hannigan was a big turning point for me. The fear of that scarcity motivated me to buckle down and focus on school so I could get into college.

I worked hard, and it paid off. I was accepted to Xavier University in Cincinnati. I started out in pre-med because my dad wanted me to be a doctor or a teacher—i.e., someone who could help people. He didn’t want me to be a “greedy capitalist.” But I took some business classes and discovered that they seemed much easier for me than pre-med. I felt like accounting was the science behind business, and I’d always be able to get a job. Since Xavier is a private Jesuit university, all students (including the business majors) were required to take philosophy, ethics and other mind-opening courses to help us understand the importance of service in the world. That made my dad happy and helped him live with my decision not to become a doctor or a teacher. However, my mom’s philosophy was that you should always follow the entrepreneurial path. So I had some work to do if I was going to keep both of my parents happy—and myself.


From accounting firm to trading pit

In the end, I graduated from Xavier with honors and got a job as an accountant in the Chicago office of one of biggest accounting firms in the world. At age 22, I was working with both public and privately held companies, and had the opportunity to interface with CFOs and CEOs right out of the gate. Not bad for a kid whose guidance counselor didn’t think he should go to college. As you’ll see later in this book, the CFO’s role as the “financial quarterback” of an organization is something that has stayed with me to this day.

I was young and healthy. I had a great job and a great career in a great city. Yet I still felt a void in my life. The only part of my job that I really liked was looking into the investment side of the balance sheets of the companies I was auditing. I enjoyed working with the CFOs of our client companies, but as I looked at my elder peers at my accounting firm, I realized the life of a Big Four partner was not for me. I sensed there could be something more to my life than long hours doing audits six or seven days a week.


A friend of mine likes to say, “If you hang out in a barber shop long enough, sooner or later you will end up getting a haircut.” Eventually, I ended up on an assignment for my accounting firm that was directly across from the Chicago Board of Trade (CBOT). During my lunch hour (or half hour), I’d go to the CBOT’s observation deck and watch the traders in action. It was mesmerizing. I decided that no matter what, I was going to find a way to work down in “the pit” and be at the epicenter of the financial markets.


Eventually I landed a job on the trading floor at the Chicago Board of Options Exchange (CBOE). I was surrounded by an amazing group of highly intelligent misfits who spent their days yelling and screaming at each other. What’s interesting about the culture of the pit is that it tends to be populated by very smart people who have a math orientation—physicists, mathematicians, doctors, lawyers—but who just didn’t want to work (or who can’t work) in the mainstream corporate world. The pit was controlled, calculated chaos—and I loved it.

I was recruited to the CBOE by a couple of brilliant guys, one of whom was a CPA and Harvard MBA. I quickly discovered that successful options traders made significantly more money than partners at accounting firms. Success was contingent primarily on controlling risk and costs. If they meditated (and many did), their mantra would be “preserve your wealth.” Discipline, drive and a relentless focus on preserving wealth afforded these guys a great lifestyle. While some believe options trading is essentially gambling, it’s actually very far from gambling. In reality, the successful traders were the “house,” while everyone else was gambling. The traders I knew had children and families—they couldn’t risk their livelihood by placing reckless bets. The lessons I learned in the pit would stick with me throughout my career.


My introduction to tech

In the late 1990s, the fear in the trading industry was that the human trading floor would be replaced by computers. So the firm’s ultimate hedge was to go to Europe and open an office on a continent where trading had always been electronic. The idea was to develop software that would be the quickest on the market. It had to be fast because in trading, the first one in wins.

The firm assigned me to its overseas operations to work with its accountants and lawyers in Switzerland, London and Frankfurt. Our head trader was a chemical engineer from Princeton with a Harvard MBA. We brought in Romanian programmers to develop high-speed software—measured down to the nanosecond—that was specifically designed for European options markets specializing in electronic trading. This was my formal introduction to the world of tech and a self-funded startup. At the time of the Daimler-Chrysler merger, there was a trade deal that flipped on a machine and made $1 million in one day. Amazing, I thought to myself. But, even then, I knew that the world of trading was on its way to being “disrupted.” I had to pivot before getting crushed by the wave of change.


I always wanted to live in California, and I jumped at the first opportunity. I went to work for a proprietary trading firm there that traded exclusively off the floor. It was there that I met Brian Thomas, who, little did I know, would one day become my business partner and confidant—the way Charlie Munger is Warren Buffett’s. Brian and I continue to work together closely to this day.


My true calling


Through most of the 2000s, I enjoyed living and working around the West Coast technology scene. But in 2001, when my mother passed away, my life changed. It became even more important for me to give back to society and to work on things that were meaningful. For example, I started counseling and advising people about their money issues. At first I did it just for fun, and for free. I loved helping people. And as bad as the tech crash of 2000 was, the 2008-2009 recession was even worse. It caused true financial devastation for many people, but it triggered something inside me. All the fears of scarcity I had as a kid came boiling to the surface. I saw people’s lives change before my eyes.


I knew then that I had to help people. This was my call to action, and what I believe to be my calling in life. This was the catalyst that drove us to found our firm.

During the financial crisis, it was painful to see my friends’ parents lose so much money. What made it especially sad was that they (and their “financial advisors”) weren’t following some very basic investment principles that could have significantly lessened their losses. Often, their advisors didn’t really take the time to get to know them or any other clients, and so they didn’t understand what their clients really wanted out of life.


In some cases, people were overconcentrated in single-name stocks like Lehman Brothers or Bear Stearns—companies that went away. This was a huge realized loss.


I wanted to prevent those outcomes, even though I’ve been surrounded by individuals at both tech companies and privately owned businesses whose wealth eggs were often highly concentrated in a single basket. While that seems to violate the laws of diversification, Andrew Carnegie actually encouraged people to keep all their eggs in one basket—and to watch the basket very carefully.

Having worked with individuals at both tech companies and privately owned businesses who have followed Carnegie’s advice—and having seen the tremendous success that can come of it—I know that sometimes in life, you have to take calculated risks. But when it comes to your financial health, you want to preserve as much of your hard-earned wealth as you possibly can.


I have always been very conservative when it comes to taking risks. Perhaps it stems from my early career as an accountant or from my childhood immersed in a sense of scarcity, but at age 25 I got some highly valuable advice about wealth preservation. I was working as a convertible arbitrage trader in San Francisco, and my mentor told me: “Get a nest egg, preserve your wealth, live cheaply and stay in the game.”

I was surrounded by people making tons of money in their 20s who were buying houses, cars and other big-ticket items. Then, suddenly, there would be a change in the market—namely, a thing called “algorithms”—and suddenly they would lose their ability to make money. Having spent much of their cash, they didn’t have enough dry powder to stay in the game. My mentor’s advice was so simplistic, yet so powerful. I saved and saved whatever money I earned, which in turn allowed me to grow.

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