Fuck you, Money

Startup founders are in the unique position of having to seriously ask themselves the following cocktail party question: how much money would you need to live comfortably on for the rest of your life?

That amount, whatever it might be, is known in the trade as ‘fuck-you money,’ i.e., the amount of money needed to be able to say ‘fuck you’ to everybody¹. It’s a fascinating concept, for if you think of the astronomical economic gap between, say, a Malian subsistence farmer and a one-man economy like Rupert Murdoch, it’s really the only binary phase-change there on the sweep from $0 to $6.3 billion. Before that point, you’re just adding frosting on the lifestyle cake of your wage-slave existence. Beyond that point, you can forget  about aspirational consumer buying of 48-inch flat-panel TVs. You suddenly confront the most existential questions in human life: what do I do with my life? What’s a good life? No one’s forcing me to do anything, so what do I do now?

The reason why startup founders toy with this question, even in the earliest stages when such thoughts are almost purely masturbatory, has to do with the pre-startup soul-searching, which resembles almost pre-marriage counseling, foisted upon you by mentors². The way they couch it, of course, is more a suggestion to make sure all the founders in the startup have the same idealized exit fantasy, otherwise trouble is brewing down the road.

Just this week the question became a little more real for us: an angel investor agreed verbally  to invest in us³. He immediately followed that up with the question: if Microsoft offered you $15 million for the company right now, would you sell? I rebutted that the two other founders together have more equity than me, so it’s not just up to me. He wouldn’t let up: yeah, but would you want to do it? He was clearly fishing to see if I would sell out early, quashing whatever investment thesis he had in us. I asked him if it would piss him off if we sold, and he said yes. To his credit, the angel immediately said that he would support whatever decision the founders took.

As an aside, I find this investor behavior baffling. The company valuation he’d get in on would mean that such an acquisition would represent  a 5x return, over something like three months. That’s a gargantuan return on an annualized basis. But he doesn’t want to put in $100,000 and get out $500,000, he wants to pull out millions and feel the cocksure validation the original Google investors must feel. It seems so beautifully irrational⁴.

Back to the money: the issue made me re-visit the question more seriously. Before anything else, let’s do the numbers: money market funds yield around 4%. That’s $400K interest on $10MM, which is certainly a living wage, leaving aside inflation. Of course, it doesn’t have to last forever: human life is sadly finite. Crunching more realistic numbers, ‘fuck-you money’ is about $4.2MM for a 30 year old guy who plans on dying at 70 and wants to make $200K/year. Well within the payout picture of a fortunate startup founder whose company is acquired.

Of course, the reality is you’re doomed if you’re even asking yourself the question. You know what I think? I think people who tell themselves ‘if I make $X million, then I’ll stop working and do what I want’ never make that $X million. They just don’t possess the relentlessness that makes it possible.

I haven’t known that many hyper-wealthy people in my life, but at Goldman I used to sit 12 hours a day next to people whose annual incomes were greater than the capitalizations of many startups, and they possessed a rapacious greed breathtaking in scale. If they got paid $2MM that year, they’d want $4MM. Pay them $10MM, and they’d hanker for $50MM. Half a billion? They’d want to catch up to the Bill Gates of the world, and make several billion. Successful startup founders I’ve met seem no less ferocious.⁵

So, will you sell out for fuck-you money?

Evidently, the people who really face that question have already answered ‘no’ in their minds, in the insatiable hopes of yet greater scores. And those who would answer ‘yes’? Their ready willingness to join that club teasingly precludes their membership.

1. A related concept is FYIFV: ‘fuck you, I’m fully vested.’ This is what pre-IPO employees at companies like Microsoft and Google supposedly tell you when you ask them to change the bottle on the water cooler [↩]
2. The comparisons between startups and marriage are legion. To quote a brilliant essay from Paul Graham (he himself is quoting an unnamed startup founder): “One thing that surprised me is how the relationship of startup founders goes from a friendship to a marriage. My relationship with my cofounder went from just being friends to seeing each other all the time, fretting over the finances and cleaning up shit. And the startup was our baby. I summed it up once like this: ‘It’s like we’re married, but we’re not fucking.’” [↩]
3. In the immortal words of Samuel Goldwyn, that verbal contract isn’t worth the paper it’s written on. But it’s the first ‘yes’ we’ve gotten, so we’re taking it seriously, like a 7th grader and his first kiss. [↩]
4. Even the most calculating economic agents get this wrong. Allow me to put my Goldman gossip hat back on very quickly, and recount another juicy tidbit from my Wall Street past that I only mentioned in passing in my previous piece. On Fridays, the entire desk would often play an interesting game. Everybody chucked their corporate ID in a sack, and anted up something like $20-$100 (depending on rank). Then, the head trader would remove the IDs one by one from the sack, reading out the names loudly across the entire floor. The last ID in the sack got the entire pot. It was winner take all and no splitting the pot at the end. When there were only 20 or so IDs left, things got interesting: a mob formed, and trading started. People with IDs left in the sack sold their IDs to the highest bidder, selling out early and monetizing rather than risking elimination. Fair value for an ID is a simple calculation: if the pot is $2,000 and there are 10 IDs left, then the option on one ID is just $2,000/10 = $200. That’s not the way the market traded though: IDs would inevitably sell for a premium, and the closer the process was to a close (i.e. the smaller the number of IDs left) the higher the premium got on a percentage basis.  Mentally, it seemed people were irrationally willing to overbid for a large payout, and the likelier the payout, the more they’d overpay. Also, there were structural forces at work: it was Friday afternoon in New York, and people wanted the cash to blow on the weekend. I bet that steak at Peter Luger’s tastes even better if it was bought with the trading floor’s money. [↩]
5. To those employees at hugely successful companies like Google who managed to get to fuck-you money while holding down relatively junior jobs, I salute your sagacity at picking the right corporate wave to ride. That said, I wonder if you can take any more credit for your financial success than a trust-fund kid who won the ovarian lottery. [↩]