9 ms·

Hotshot Tech Founders Face a Dilemma: Lie Low or Live Large

78 points by jkuria 9y ago

ashark 9y ago
Taking Fussell’s Class as a guide, this seems normal. New money will act like middle or upper-middle folks, but their kids or kids’ kids will be lower-key, fully upper-class. If they keep money in the family long enough they may enter Fussell’s “top out-of-sight” class, largely leaving public life and retreating to secluded country estates and various havens for the ultra-rich.
Anticapitalist 9y ago
A 4 bedroom house in South palo alto is at least a $1 million property. Not exactly modest.
- rconti 9y ago
  If by "4 bedroom" you mean "2 bedroom" and by "1 million" you mean "2.1 million". https://www.zillow.com/homes/for_sale/19469270_zpid/globalrelevanceex_sort/37.44832,-122.12313,37.445172,-122.127808_rect/17_zm/ https://www.zillow.com/homes/for_sale/19469270_zpid/globalre...
personjerry 9y ago
So people either spend their money, or they don’t?
- anothertraveler 9y ago
  There are platitudes that money doesn't really matter. Money doesn't buy happiness, etc... But in the US, money is very important. If you have to go to work every day to survive, you are working class. If you get laid off, and you have to find a new job to make a mortgage payment, you are working class. Having money is simply a means to an end. For some people, that end is the freedom to not have to go to work every day. To focus on things they care about. To have new experiences that don't involve sitting at a desk for 14 hours straight, 5 days a week. But there are many ends. For me, I respect those who don't have to work to survive as having made it, because I know the guy driving the BMW probably financed it and is driving to work.
cyberferret 9y ago
Many startup founders go through months, and years of living on beans, struggling to pay bills and making do on a shoestring budget. Why should they not enjoy the benefits of their spoils if they do make it? I recall a chapter that struck me from Bob Taylor's book (of Taylor Guitars). The first half of the book was all about him building guitars in a shed, then loading them in a car and visiting guitar shops one by one, trying to convince them to buy his guitars and display them next to the Martins and Gibsons etc. that had a lion's share of the market. Many years later, when he became one of the most successful guitar companies in the US, he built himself a nice house, and he used to invite his staff around for an annual BBQ to show his appreciation of them. Then one day, at the BBQ, he overheard some senior management pointing at his new pool rockery and saying "So THAT's where my bonus went this year...". He stopped inviting staff to his house after that incident. "Tall poppy syndrome" exists in all industries and cultures. Personally, I don't see why people who have sacrificed a lot in order to make money in the early days cannot enjoy it later when they _do_ make it. As long as they maintained a high standard of ethics and principles doing so, of course.
- mquander 9y ago
  It would be nice if our culture taught people how to be happy with less expensive things, since it's kind of a waste from a utilitarian point of view if a multi-millionaire is spending all of their money on giant houses they live in one week a year and so on and only getting a small amount of utility. Better if they didn't have a taste for giant houses, and gave the money to someone who needed it, or invested in something doing more useful things.
  - cyberferret 9y ago
    I can see how people may consider some of these things a 'waste', but a lot of the time, they fail to see the 'down river' consequences of the spending. I remember there was a great deal made in the press a few years back about a famous Indian movie star spending several million dollars on his wedding in a poor city that he grew up in. He was criticised for his 'wastefulness'. However, a follow up report on the event a few months later pointed out that his one wedding actually was massively beneficial for the entire city's economy. Catering and hire companies made several year's profits in one day, and were able to hire more people and take them off the streets. Similarly, we may criticise the extravagant marble entrance stairway in a startup founder's mansion, but that stairway may have probably put the stonemason's kids through college or helped to extend that dying artform for another generation. If they have an empty house, they still contribute to the local government's activities via land tax or rates bills, and they probably also employe local cleaners, garden maintainers etc. Far better than just snorting it all away in cocaine and other heavy drugs.
austenallred 9y ago
I find it funny that an $8 million, 3,500 square foot house in downtown SF for a single person is “laying low.” I mean I get that they could have much more, but most wealthy people I know would actually prefer 3,500 sq feet over 30,000. I don’t think it’s all an image thing, it’s just knowing that adding n square feet to your home doesn’t do much for you.
- javajosh 9y ago
  More than that, every extra square foot is an added ongoing maintenance hassle and expense. It would be interesting to study where the "status = big house" thing arose in our cultural history. There are other measures of status, like staff, participation in civic events, charitable giving, etc.
  - sliverstorm 9y ago
    Big houses are a display of wealth, plain and simple, and precisely because of that maintenance expense. Think back two or three hundred years ago when land was cheap or free. Who had gigantic houses? Only people who could retain enough slaves or staff to keep it for them.
    - thaumasiotes 9y ago
      > Think back two or three hundred years ago when land was cheap or free. That's a very odd perspective. It applies to the United States, but the United States is at best 500 years old. In the Old World land hasn't been cheap at any time in recorded history.
      - barry-cotter 9y ago
        I suggest you look up the Drang nach Osten and the expansion of Russia or the history of the Cossacks. There’s land in Western Europe that was cultivated before the Black Death that hasn’t been since. Europe has absolutely had frontier in the past 500 years. Manchuria, both what’s now Russian and what’s now Chinese also had abundant freeish land when the Qing dynasty opened it up for Han settlement. You’re wrong.
closeparen 9y ago
They’re talking about buying a house like it’s some kind of baseline. The baseline six-figure software engineer lifestyle is a room in a shared apartment in Oakland or the deep East Bay. Living in San Francisco, having your own place, and (gasp) buying a tiny condo are the various degrees of living an exorbitant lifestyle. Buying any sort of freestanding structure is approaching a pinnacle of decadence that’s an extreme stretch to even the most elite tech employees. But oh, they’re “lying low” because they’re buying houses where the qualifying income is $300k instead of $500k. Give me a break.
- derenrich 9y ago
  you can easily live on the peninsula with 6-figures (in a shared apartment). No need to go deep-east bay.
  - closeparen 9y ago
    For a downtown SF office, anything on BART is probably going to be a faster commute than anything on the Peninsula.
- eldavido 9y ago
  Sorry but this is just wrong. I rent in Lake Merritt just off the 17th St BART stop for 2200/month. I split it with my wife. If you can't make a 2k/month rent payment on 100k/year of income, you're not managing your money well.
  - austenallred 9y ago
    Ya I have a two bedroom townhome in the east bay, have kids and my wife doesn’t work. When I made $120k I saved over $2,000/month. It’s expensive, but it’s not that bad.
    - closeparen 9y ago
      When did you buy? Ownership was much more attainable even 5 years ago.
seibelj 9y ago
Some people feel like shit all day for succeeding. I choose to feel great. Cest la vie
osrec 9y ago
There is something endearing to me about the ones who choose to lie low despite their new found wealth. I think it displays a sense of contentment that existed even before they "made it". People like that are rare in my experience; individuals who have an inner stillness that is unruffled by the elevating or depleting circumstances they find themselves in. I have met a few in my time, and have often enjoyed their company, not least because they seem to live life with a more meaningful purpose, rather than with a drive to "make lots of money".
- AznHisoka 9y ago
  a lot of rich people in China are like this. They live modestly even though they have millions. But the main reason is because they are afraid if they show their wealth, people will attempt to kidnap their children and hold them for ransom. Apparently that is a popular thing in China.
NelsonMinar 9y ago
Consider the struggle for the poor startup founder who is living in a house he owns outright that's only worth $4M. It's practically a vow of poverty.
anothertraveler 9y ago
I think the key point here is that - if a founder is raising money for a company from investors, and the founder simultaneously buys a mansion - the founder is implicitly communicating that s/he doesn't believe that investing that capital in the company is as valuable as a real-estate investment in the mansion. Founders have a very specific job to investors: to return their money with a hefty return on investment. If the expected ROI is higher buying a mansion, then maybe the investors should invest in mansions rather than the tech start ups.
- smileysteve 9y ago
  Investors also have a fairly specific job to founders and employees taking equity vs salary: allow enough needs to be met such that seeking employment elsewhere isn't a temptation/need. A C suite (and often to developers and pos) position at a startup that has raised funding is likely to experience 1) offers at or above market rate in leadership positions 2) A professional network of people able to afford a certain comfort 3) a stressful or dismal looking event at work.
  - anothertraveler 9y ago
    Great points.
ChuckMcM 9y ago
There were many examples in the dot com boom where people who sold stock and bought real estate did better than people that held stock (the stock later crashed). However, buying 'too much' house just increases your burn rate unnecessarily.
- whb07 9y ago
  Counter point to you is the well known case of Mark Cuban, who as soon as he got his $X billion in Yahoo shares pre-bubble-pop he hedged his shares against Yahoo indirectly by shorting the indexes holding tech shares to include Yahoo. Of course everyone called him crazy and when the bubble popped he had insurance for that. Friends of his and coworkers who didnt listen to his advice lost most if not all their paper net worth.
trhway 9y ago
why only these 2 alternatives? I don't understand (may be i'll understand when i make $1B myself :) why so few Elon Musk-s around - i mean the guy made it long time ago back then at PayPal and instead of either - lying low or living large - he went ahead to move our civilization forward. Of course many others do continue to invest after making it, yet they do it primary to make even more money.
- greglindahl 9y ago
  Most entrepreneurs are "one hit wonders".
wcr3 9y ago
gasp oh noes that sounds so scawy :O! i hope all those Hotshot Tech Founders are okay X3!! thankees wsj.com for spweading teh w0rdz! suck my fuckin dick, dude.
deleted 9y ago
[deleted]
Kyragem 9y ago
Founders cashing out early with investors like Goldman Sachs left holding the bag? Not a bad proposition.
manigandham 9y ago
Bad signaling due to spending large when a company is still shaky or raising money is one thing - but the scrutiny over how other people spend their money always seems rather strange. On one hand, starting a business and being successful (at least financially) is highly encouraged, however as soon as someone makes it, then it's all about how they dare to spend what they've earned instead of considering the billions of other people on the planet with every decision. Perhaps it's best to just let people do what they want with what they have.

78 points by jkuria 9y ago

Taking Fussell’s Class as a guide, this seems normal. New money will act like middle or upper-middle folks, but their kids or kids’ kids will be lower-key, fully upper-class. If they keep money in the family long enough they may enter Fussell’s “top out-of-sight” class, largely leaving public life and retreating to secluded country estates and various havens for the ultra-rich.

Anticapitalist 9y ago

A 4 bedroom house in South palo alto is at least a $1 million property. Not exactly modest.

rconti 9y ago
If by "4 bedroom" you mean "2 bedroom" and by "1 million" you mean "2.1 million". https://www.zillow.com/homes/for_sale/19469270_zpid/globalrelevanceex_sort/37.44832,-122.12313,37.445172,-122.127808_rect/17_zm/ https://www.zillow.com/homes/for_sale/19469270_zpid/globalre...

personjerry 9y ago

So people either spend their money, or they don’t?

anothertraveler 9y ago
There are platitudes that money doesn't really matter. Money doesn't buy happiness, etc... But in the US, money is very important. If you have to go to work every day to survive, you are working class. If you get laid off, and you have to find a new job to make a mortgage payment, you are working class. Having money is simply a means to an end. For some people, that end is the freedom to not have to go to work every day. To focus on things they care about. To have new experiences that don't involve sitting at a desk for 14 hours straight, 5 days a week. But there are many ends. For me, I respect those who don't have to work to survive as having made it, because I know the guy driving the BMW probably financed it and is driving to work.

cyberferret 9y ago

Many startup founders go through months, and years of living on beans, struggling to pay bills and making do on a shoestring budget. Why should they not enjoy the benefits of their spoils if they do make it? I recall a chapter that struck me from Bob Taylor's book (of Taylor Guitars). The first half of the book was all about him building guitars in a shed, then loading them in a car and visiting guitar shops one by one, trying to convince them to buy his guitars and display them next to the Martins and Gibsons etc. that had a lion's share of the market. Many years later, when he became one of the most successful guitar companies in the US, he built himself a nice house, and he used to invite his staff around for an annual BBQ to show his appreciation of them. Then one day, at the BBQ, he overheard some senior management pointing at his new pool rockery and saying "So THAT's where my bonus went this year...". He stopped inviting staff to his house after that incident. "Tall poppy syndrome" exists in all industries and cultures. Personally, I don't see why people who have sacrificed a lot in order to make money in the early days cannot enjoy it later when they _do_ make it. As long as they maintained a high standard of ethics and principles doing so, of course.

mquander 9y ago
It would be nice if our culture taught people how to be happy with less expensive things, since it's kind of a waste from a utilitarian point of view if a multi-millionaire is spending all of their money on giant houses they live in one week a year and so on and only getting a small amount of utility. Better if they didn't have a taste for giant houses, and gave the money to someone who needed it, or invested in something doing more useful things.
- cyberferret 9y ago
  I can see how people may consider some of these things a 'waste', but a lot of the time, they fail to see the 'down river' consequences of the spending. I remember there was a great deal made in the press a few years back about a famous Indian movie star spending several million dollars on his wedding in a poor city that he grew up in. He was criticised for his 'wastefulness'. However, a follow up report on the event a few months later pointed out that his one wedding actually was massively beneficial for the entire city's economy. Catering and hire companies made several year's profits in one day, and were able to hire more people and take them off the streets. Similarly, we may criticise the extravagant marble entrance stairway in a startup founder's mansion, but that stairway may have probably put the stonemason's kids through college or helped to extend that dying artform for another generation. If they have an empty house, they still contribute to the local government's activities via land tax or rates bills, and they probably also employe local cleaners, garden maintainers etc. Far better than just snorting it all away in cocaine and other heavy drugs.

austenallred 9y ago

I find it funny that an $8 million, 3,500 square foot house in downtown SF for a single person is “laying low.” I mean I get that they could have much more, but most wealthy people I know would actually prefer 3,500 sq feet over 30,000. I don’t think it’s all an image thing, it’s just knowing that adding n square feet to your home doesn’t do much for you.

javajosh 9y ago
More than that, every extra square foot is an added ongoing maintenance hassle and expense. It would be interesting to study where the "status = big house" thing arose in our cultural history. There are other measures of status, like staff, participation in civic events, charitable giving, etc.
- sliverstorm 9y ago
  Big houses are a display of wealth, plain and simple, and precisely because of that maintenance expense. Think back two or three hundred years ago when land was cheap or free. Who had gigantic houses? Only people who could retain enough slaves or staff to keep it for them.
  - thaumasiotes 9y ago
    > Think back two or three hundred years ago when land was cheap or free. That's a very odd perspective. It applies to the United States, but the United States is at best 500 years old. In the Old World land hasn't been cheap at any time in recorded history.
    - barry-cotter 9y ago
      I suggest you look up the Drang nach Osten and the expansion of Russia or the history of the Cossacks. There’s land in Western Europe that was cultivated before the Black Death that hasn’t been since. Europe has absolutely had frontier in the past 500 years. Manchuria, both what’s now Russian and what’s now Chinese also had abundant freeish land when the Qing dynasty opened it up for Han settlement. You’re wrong.

closeparen 9y ago

They’re talking about buying a house like it’s some kind of baseline. The baseline six-figure software engineer lifestyle is a room in a shared apartment in Oakland or the deep East Bay. Living in San Francisco, having your own place, and (gasp) buying a tiny condo are the various degrees of living an exorbitant lifestyle. Buying any sort of freestanding structure is approaching a pinnacle of decadence that’s an extreme stretch to even the most elite tech employees. But oh, they’re “lying low” because they’re buying houses where the qualifying income is $300k instead of $500k. Give me a break.

derenrich 9y ago
you can easily live on the peninsula with 6-figures (in a shared apartment). No need to go deep-east bay.
- closeparen 9y ago
  For a downtown SF office, anything on BART is probably going to be a faster commute than anything on the Peninsula.
eldavido 9y ago
Sorry but this is just wrong. I rent in Lake Merritt just off the 17th St BART stop for 2200/month. I split it with my wife. If you can't make a 2k/month rent payment on 100k/year of income, you're not managing your money well.
- austenallred 9y ago
  Ya I have a two bedroom townhome in the east bay, have kids and my wife doesn’t work. When I made $120k I saved over $2,000/month. It’s expensive, but it’s not that bad.
  - closeparen 9y ago
    When did you buy? Ownership was much more attainable even 5 years ago.

seibelj 9y ago

Some people feel like shit all day for succeeding. I choose to feel great. Cest la vie

osrec 9y ago

There is something endearing to me about the ones who choose to lie low despite their new found wealth. I think it displays a sense of contentment that existed even before they "made it". People like that are rare in my experience; individuals who have an inner stillness that is unruffled by the elevating or depleting circumstances they find themselves in. I have met a few in my time, and have often enjoyed their company, not least because they seem to live life with a more meaningful purpose, rather than with a drive to "make lots of money".

AznHisoka 9y ago
a lot of rich people in China are like this. They live modestly even though they have millions. But the main reason is because they are afraid if they show their wealth, people will attempt to kidnap their children and hold them for ransom. Apparently that is a popular thing in China.

NelsonMinar 9y ago

Consider the struggle for the poor startup founder who is living in a house he owns outright that's only worth $4M. It's practically a vow of poverty.

anothertraveler 9y ago

I think the key point here is that - if a founder is raising money for a company from investors, and the founder simultaneously buys a mansion - the founder is implicitly communicating that s/he doesn't believe that investing that capital in the company is as valuable as a real-estate investment in the mansion. Founders have a very specific job to investors: to return their money with a hefty return on investment. If the expected ROI is higher buying a mansion, then maybe the investors should invest in mansions rather than the tech start ups.

smileysteve 9y ago
Investors also have a fairly specific job to founders and employees taking equity vs salary: allow enough needs to be met such that seeking employment elsewhere isn't a temptation/need. A C suite (and often to developers and pos) position at a startup that has raised funding is likely to experience 1) offers at or above market rate in leadership positions 2) A professional network of people able to afford a certain comfort 3) a stressful or dismal looking event at work.
- anothertraveler 9y ago
  Great points.

ChuckMcM 9y ago

There were many examples in the dot com boom where people who sold stock and bought real estate did better than people that held stock (the stock later crashed). However, buying 'too much' house just increases your burn rate unnecessarily.

whb07 9y ago
Counter point to you is the well known case of Mark Cuban, who as soon as he got his $X billion in Yahoo shares pre-bubble-pop he hedged his shares against Yahoo indirectly by shorting the indexes holding tech shares to include Yahoo. Of course everyone called him crazy and when the bubble popped he had insurance for that. Friends of his and coworkers who didnt listen to his advice lost most if not all their paper net worth.

trhway 9y ago

why only these 2 alternatives? I don't understand (may be i'll understand when i make $1B myself :) why so few Elon Musk-s around - i mean the guy made it long time ago back then at PayPal and instead of either - lying low or living large - he went ahead to move our civilization forward. Of course many others do continue to invest after making it, yet they do it primary to make even more money.

greglindahl 9y ago
Most entrepreneurs are "one hit wonders".

wcr3 9y ago

gasp oh noes that sounds so scawy :O! i hope all those Hotshot Tech Founders are okay X3!! thankees wsj.com for spweading teh w0rdz! suck my fuckin dick, dude.

deleted 9y ago

[deleted]

Kyragem 9y ago

Founders cashing out early with investors like Goldman Sachs left holding the bag? Not a bad proposition.

manigandham 9y ago

Bad signaling due to spending large when a company is still shaky or raising money is one thing - but the scrutiny over how other people spend their money always seems rather strange. On one hand, starting a business and being successful (at least financially) is highly encouraged, however as soon as someone makes it, then it's all about how they dare to spend what they've earned instead of considering the billions of other people on the planet with every decision. Perhaps it's best to just let people do what they want with what they have.