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From TFA: > The 43-year-old’s remaining stake in the ride-hailing company now constitutes about a fifth of his $3 billion fortune, according to the Bloomberg B

• fastball 7y ago
  Although you make a good point about general portfolio diversification, the difference between a "normal" employee and a co-founder is fairly large in this instance. Co-founders are supposed to have confidence in the business they built - if they don't, why should other investors?
  • mason55 7y ago
    Travis should have confidence in the business he built while he’s running it. He’s not in charge any more so why should he have unwavering confidence?
    • bblpeter 7y ago
      If Uber can only succeed with him in charge, and nobody else, then it’s not a very good let alone realistic business is it?
  • alehul 7y ago
    > Co-founders are supposed to have confidence in the business they built The business they built and still either run or largely preside over, however Travis was ousted— I'm not sure he'd agree with their current direction as a result.
    • cdmcmahon 7y ago
      He's still on the board...
      • toomuchtodo 7y ago
        You can still want to maintain influence without having personal/financial exposure to the consequences.
        • frandroid 7y ago
          But that sends a wickedly powerful statement to the market that you as a remaining board member would not hold the shares of the company you oversee... That's the discussion here.
          • toomuchtodo 7y ago
            Of all the negative signals Uber sends, this is the one the market is going to take issue with?
            • frandroid 7y ago
              Touché! But cult-like stocks have a stronger relation than usual to their founder(s)' actions.
              • toomuchtodo 7y ago
                Stock price doesn't seem to notice FWIW: https://i.imgur.com/Z8XaO2P.png https://i.imgur.com/Z8XaO2P.png
          • wayoutthere 7y ago
            There are a lot of reasons a board member might reduce their stake in the company. Lack of belief in the company's strategy is a common reason, especially when boardroom drama is involved. I don't think investors will read anything into it other than Kalanick is rebalancing the risk profile of his portfolio now that he no longer has control of Uber. Activist investors play this game all the time so it says nothing about the strategy one way or another, just that the appetite for risk is higher the more control you have.
  • denimnerd42 7y ago
    he's no longer involved in uber as CEO, why would he want to tie his wealth to something he's no longer steering? there's not even an argument for Optics here.
    • mattrp 7y ago
      I agree. Although there are norms for the practice of selling large personal stakes, generally someone who is/has been a founder would announce their intent to diversify with a schedule — ie I’m going to sell x% over the next 3 years regardless of the price for purposes of diversification. Most investors accept that. I think in this case, his image is so tarnished that pretty much anything he does will be greeted with scorn.
    • bblpeter 7y ago
      So it can only succeed if he’s steering it? Doesn’t sound like a good business
      • denimnerd42 7y ago
        ? Would you want a majority of your wealth tied to a business you used to work at? Or would you rather use it towards things you are actively working on?
        • bblpeter 7y ago
          I want it tied to a good business. I’d tie my wealth to Google (when they were the same age as Uber), whether I’m the CEO there or not. It doesn’t matter because it’s a great business. If Travis is selling then he agrees it’s a bad business.
  • dweekly 7y ago
    Generally true but when you're no longer running the show, these rules are less true; it's no longer about your own confidence in your ability to navigate to better outcomes.
  • est31 7y ago
    > Co-founders are supposed to have confidence in the business they built - if they don't, why should other investors? But what's in it for the co-founder? Usually it's that they have lots of power over the company, e.g. being a CEO, and have more freedom than someone who still has to prove that they deserve that power. Jeff Bezos for example "only" owns 100 billion USD but controls a 800 billion USD company, with the freedom and power of a cofounder. After a certain amount of money, say 10 million, you can fulfill most of your dreams. And there are plenty of people who have that amount. But few can say they are in control of a 0.8 trillion dollar company. As the other comments point out, Travis was kicked out though so he lost his power. So it's only understandable that he diversifies his portfolio.
    • Retric 7y ago
      There are realms of wealth. Even 100m is not enough to comfortably afford a private jet. Several ultra wealthy like Bill Gates diversified a billion dollars from their company which seems to be about the limit where more money mostly becomes an abstraction. One example is people who actually own mansions generally live in a relatively small space inside. You can only really use one room at a time and walking around takes time.
      • tjchear 7y ago
        This comment reminds me of another comment [0] on Reddit that talks about the different levels of wealth. An eye-opener for the rest of us for sure. [0]. https://www.reddit.com/r/AskReddit/comments/2s9u0s/what_do_insanely_wealthy_people_buy_that_ordinary/cnnmca8/ https://www.reddit.com/r/AskReddit/comments/2s9u0s/what_do_i...
        • moneywoes 7y ago
          Insane. I'm not sure if it's real or not based on the users post history but it's just hard to think about.
        • febeling 7y ago
          This is an amazing discussion of wealth in the linked reddit comment. Shows how easy it is to underestimate how different lives we all live, depending on our experiences and outlook - even in the same country. Money is probably just one big parameter, but there are surely many others.
  • onetimemanytime 7y ago
    Yeah but he's not running Uber anymore. Also, clouds have gathered...
  • deleted 7y ago
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  • williamdclt 7y ago
    I don't agree with this logic: you can be confident but prudent. Self-confidence leads to bias, I wouldn't consider it a bad sign that the co-founder stays prudent. However, going from 75% to 20% means that something changed, and that's not a good sign
    • DuskStar 7y ago
      I'm pretty sure the thing that changed was that he was allowed to sell...
    • thisisnico 7y ago
      When most of your net worth is tied to a stock of a single potentially volatile company like UBER, you sure as hell want to sell that off and diversify your portfolio. He's not involved with the company any-longer, he has no reason to keep his stock. If he was still in-charge I get that you want to display confidence in the business and keep the stock. TLDR: Most of your net worth in a single stock is insane.
    • kjs3 7y ago
      What do you think changed for the worse beyond he's no longer part of the company, no longer party to the 'inner circle' decision making, and no longer has a vested interest in maintaining the perception everything is perfect?
      • OnlineGladiator 7y ago
        Uber's stock price has been steadily falling since it went public. There are many people who believe it still has a long way to fall.
  • tdurden 7y ago
    That kind of changes when one is forced out of the company.
    • usrusr 7y ago
      Might even get a kick out of devaluing the stakes of those who forced him out. And I don't even write this in the tradition of "mean things Travis Kalanick would do", I believe that that the desire to do so would be there even for the best of us. I do hope that vengeful behavior like that would subsequently hurt one's ability to find investors for future projects. Unfortunately there is also a lot of that "this only shows that he is ruthless, we like ruthless" attitude in the world so I'm not sure that it would actually be taken as a negative signal. But that surely won't be an issue for someone with a reputation so firmly dialled in already as Kalanick. On top of that, the idea of him going back to square one doesn't fit too well with the mental model I formed back when he was constantly on the news, I'd rather type him as the rare exception amongst founders who can easily leave it all behind and indulge in the spoils - but that's just a gut feeling of course, I know less about that guy than I know about some people who have been dead for more than a thousand years.
  • paulcole 7y ago
    How much confidence should anyone be expected to have in a company that canned them?
  • deleted 7y ago
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  • bryanrasmussen 7y ago
    Aside from the point that he has been ousted at which point does a co-founder's requirement to hold a major stake in a company disappear. As a co-founder are you condemned to never diversify your portfolio?
  • 6gvONxR4sf7o 7y ago
    That doesn't make any sense. You can be more confident in one asset than another, yet you should still diversify. In investing, you don't look for that one asset you're most confident in and put all your money into it. If I were a founder, I'd try to convince you to invest in my company, but I wouldn't try to convince you to put all of your money into it. Not putting all of his assets into uber doesn't mean other investors shouldn't put any of their assets into it. After all, it's still 20% of his portfolio, much higher than most of the shareholders, I'd bet.
  • Akababa 7y ago
    That's true, but I don't think that makes it any less rational for them to diversify. 20% of your net worth is still a lot of risk to trade off just for a bit of investor confidence.
• burtonator 7y ago
  1/5 of your net worth isn't much to centralize especially if you have insider information in that asset. Further, a lot of high net worth individuals that hold a large % of stock will announce their intention to diversity 6-12 months ahead of time to avoid this type of issue. A rush liquidation usually isn't a good thing.
• cVwEq 7y ago
  As an aside to the parent poster, an often-stated guideline for the maximum amount you should own in the companies you work for is 10% of your portfolio value [1][2]. Modern portfolio theory (Markowitz, et. al.) calculations for a bundle of assets probably would bear out that 20% in a single stock is not on the efficient frontier [3]. [1] https://www.marketwatch.com/story/dont-invest-in-your-companys-stock-2013-08-24 https://www.marketwatch.com/story/dont-invest-in-your-compan... [2] https://www.forbes.com/sites/maggiemcgrath/2013/10/22/how-much-of-your-companys-stock-is-too-much/ https://www.forbes.com/sites/maggiemcgrath/2013/10/22/how-mu... [3] https://en.wikipedia.org/wiki/Efficient_frontier https://en.wikipedia.org/wiki/Efficient_frontier
  • gwd 7y ago
    Thanks for that! Just to be clear, what I meant was, "I wouldn't consider 20% as a target to be indicating he thought the stock was going to crash / was a bad value." I had thought of adding that even 10% or 5% would be reasonable, but I didn't really have any good grounds for saying so other than my totally untrained, amateur intuition. So thanks for the supplement. :-)
  • C1sc0cat 7y ago
    That not really applicable for "Directors" who are quite different to "employees /workers"
  • pmart123 7y ago
    I’m not a big believer in MPT as correlations are unstable, but a simple rule of thumb would be anything over 10% as having significant exposure. With some big tech, there’s some diversification due to different business segments, ex: Amazon ecom/AWS vs recent IPOs where the stock might function more like an option.
  • nostrademons 7y ago
    Depends how the company is doing. Depending on the internal transparency of the company, as an employee you're often privy to a lot of information that Wall Street does not have access to, eg. you'll oftentimes know their upcoming product pipeline, employee morale, culture, and key metrics for the success of the business that are not published in their financials. If those are doing well but Wall Street is treating the stock poorly, it makes sense to max out your stock compensation and never sell, at least until the metrics turn or you leave the company. (Yes, technically this constitutes insider trading, but it's virtually impossible to prove that inaction was because of inside information vs. because of lazyness or inattention, unless there's a pattern of action.)
• bblpeter 7y ago
  You can’t diversify radically from your own company and at the same time tell investors it’s the future and it’s going to be trillion dollar business etc. If he really believed that he wouldn’t diversify. Look at Larry Ellison or the Google founders if you want examples of someone who believes financially in their stakes in their own companies.
  • ptero 7y ago
    > You can’t diversify radically from your own company and at the same time tell investors it’s the future and it’s going to be trillion dollar business etc. Sure you can; in fact in many cases you should. Say, one knows (to keep things scientific; replace "knows" with "honestly believes" to somewhat reflect real life) his $100M invested in a company to have a 50% chance of being worth $1B in 5 years and 50% chance of being worthless. This means expected 500% return in 5 years, which should make (diversified) investors pour money in. But as a real person with $100M net worth, I do not want a 50% chance of zero net worth at any expected return rate. I would rather get $80-90M today, which will give my family 100% chance of financial independence, and leave $10-20M in as a riskier bet. My 2c.
    • bblpeter 7y ago
      Not really. He already has enough money to live for a million lifetimes in luxury. There would be no reason to diversify at this point, unless of course he thinks Uber is doomed.
• tempsy 7y ago
  Ironically Uber is over $30 for the first time in awhile...hasn't been over $30 since even before lockup expiration. There were fears that the huge number of shares would depress the price even further. Seems like that hasn't happened.
• ticmasta 7y ago
  >> To be fair, if I had 75% of my net worth in a single asset, to be more fair, balanced portfolio theory generally doesn't account for creating 2+ billion dollars out of thin air which you then need to diversify. I think it's appropriate to include the singalling impact that his massive position changes have on over-all value. So yes, he's making the locally maximizing correct decisions because let's face it, that's what the individual cares about; You could argue that the overall maximizing decision is for the founders to keep huge volumes of equity and bare the exposure that comes with this because, hey - they really believe they are changing the world for the better!
• martin_bech 7y ago
  Just as a sidenote, here in Denmark, our Version of the 401k, its illegal to have more than 20% in a single stock, for your own safety.
  • jacquesm 7y ago
    I love to make my own decisions about my safety. That's a ridiculous. Does the state compensate those who 'for their own safety' were disadvantaged?
    • thatfrenchguy 7y ago
      You can loose your money outside of your retirement account too though.
      • jacquesm 7y ago
        And if I cross the street I could get hit by a car. I'm all for countries teaching their citizens about financial responsibility, right in school with the rest of the curriculum. But I would not want the state to tell me how I can invest, they are protecting their own interests as much or more than mine.
        • thatfrenchguy 7y ago
          Except you get tax advantages in exchange from the restrictions on your retirement account. You can use a non retirement account if you’re not happy with them.
        • Barrin92 7y ago
          > But I would not want the state to tell me how to... well then I would advise you to stay far away from Denmark. I personally don't feel like I have to rebel against the man every minute of the day and safeguarding people from engaging in hazardous financial behaviour is about as reasonable as forcing them to put a seatbelt on
    • dangoldin 7y ago
• ChuckMcM 7y ago
  Pretty much. I learned this lesson the hard way in the dot.com crash, diversification is good.
• mathattack 7y ago
  Especially if you’ve been kicked out and think the company is going the wrong direction.
• rolltiide 7y ago
  people that can't trade with conviction should not be in the market, whoever derives confidence in a company based on the founder's holdings deserves to get taken to the cleaners and yes, that includes employees who are also married to their consolidated, vested, and liquid positions. they too should be treating it as a trade.