Leadership in America

This is a crazy time right now in America. Between a global pandemic and the widespread protests against racism, there is no shortage of news to catch-up on.

While I don’t condone violence or looting of stores, it’s a time in America for the people to step up against oppression and racism. We cannot ignore systematic racism in this country any longer. There needs to be police reform. There needs to be a changing of perceptions that this does not fly in America.

We have a blatantly racist President who is tweeting calls for violence against protesters. Everything starts with leadership in the White House. Change starts this November when we vote to get rid of the orange man.

What is culture?

I’ve done a terrible job reading during quarantine as most of my time and energy has been devoted to work and I plan on changing that starting in June. I’m currently reading What You Do is Who You Are by Ben Horowitz and it’s a fantastic read.

The big takeaway from the book is that talk is cheap. Culture is what you do. You can measure your company’s culture by watching what a new hire does to stay afloat at your company. That’s your company’s culture — not what you put on the wall or say.

I took this to heart and really took a hard look at Secfi’s SF office culture right now. What I realized was pretty astonishing but should be no surprise to people like Ben Horowitz who are “culture experts”.

I had always wanted to create a culture that prioritized development and learning. What I found was that we were creating a culture that prioritized closing deals and moving fast at all cost. Here are some things I noticed (purposely vague to protect details):

• Prioritizing getting a deliverable out the door rather than getting it done at a high level.

• Sending materials to clients without asking for a second pair of eyes to review.

• Winging conversations with partners and clients.

This was mostly perpetrated by me. Sure I implemented feedback sessions and debrief meetings. Yes, I tried to make myself and others available to teach. But at the end of the day, what always stood out most is driving deals and growing revenue. That’s what I celebrated. I didn’t celebrate a successful feedback succession or someone learning something new to help close a deal. I celebrated the actual deal closure.

This of course is an important revelation that I’m fortunate to have realized thanks to my reading. Luckily, we’re small and nimble and this is as great as a time ever to start changing our culture. There’ll be more changes, but this change starts today.

When things get tough, your culture will define your actions. It’s my job to make sure we have a strong culture and that starts with me.

Stock option are not a "future bonus"

One of the worst takes I hear from both executives and employees at startups is that stock options are an additional future bonus to your compensation. That is wrong. Stock options are your compensation, not a potential addition in the future.

Startups and growth private companies issue stock options as a way to compensate employees for the lack of cash compensation they may be willing to pay. If you are worth $100k at a larger company, but the startup can only afford to pay you $80k, they may decide to pay you the additional $20k with equity. This equity is granted as part of your compensation package.

Employees and executives who plan around their equity as a potential future bonus are missing the mark. If you view your equity as a future bonus, you are going to treat it as a future event and lose out on the upside. This is the answer many at startups default to because, well it’s the easiest route. It’s a future event, so I’ll deal with it in the future.

In reality, equity is granted to you today. There may be restrictions on what you can do with it so the benefits are not as readily apparent, but once you exercised your vested options, they are yours to keep. Yes, there’s always the chance that they make not be worth anything in the future, but you better believe that it is part of your net worth today. Start planning accordingly.

Rejuvenated

I took Friday off and made my MDW a 4-day weekend. I ended up just doing a staycation here in SF where I enjoyed the weather and ate some great food. I’ve written quite a bit about the long few months to start the year which fed right into quarantine.

Needless to say, it’s been a long first half of the year. My mind and body has been trying to tell me to take some time off and get away from work for a bit. I could sense that I was much more easily irritable, less motivated, and all around just sluggish. It wasn’t fair to myself nor any of my coworkers that had to deal with me.

It’s quite amazing what a few days off can do. I feel refreshed and rejuvenated. My motivation is back and I am ready to do my best to close out Q2 strong in June.

I know this is all temporary though and I can slip back into crazy quarantine work mode at any time so I’m looking to take precautions this time. It all starts with limiting my hours and ensuring I’m being more much efficient with my time. I also plan on taking quite a few vacations this summer even though it may be staying put or only doing a close road trip.

I owe it to myself and the rest of the team.

Once taboo, now normal

I hosted my third webinar today and I’m happy to say it was the best one yet. I had a lot of fun doing this one and interacting with the amount of questions that came through. We decided to be a little more loose and it made it much more fun and interactive.

One thing I wanted to do was encourage more interaction from the audience and asked people to tweet me after the webinar if they had any follow-up questions. I’ve interacted with a few people and had a laugh when I realized that I’m meeting strangers on the internet.

I grew up in the era where the internet was still new and meeting people on the internet was seen as taboo, if not outright creepy. Nowadays in the day of social media and openness, people meet business connections, friends, and life partners online all the time.

Clients like to tell us all the time that they think it’s taboo to talk about finances or their equity with their companies. In a few years, companies like Secfi will make it normal place to talk about your options and planning around your financial future.

People who don’t plan around their options are losing out on a big piece of their equity pie. The crafty companies and individuals will figure this out and use it to their advantage for recruiting and retention. The future looks bright and today’s webinar was a step in the right direction.

The Three Sides of Risk

I loved this post by Morgan Housel titled The Three Sides of Risk.

It’s a crazy story turned into a great lesson of risk and tied back into investing. I won’t ruin the article as it’s a fascinating piece that everyone should read so I’ll just end it with a summary quote.

But it opened my eyes to the idea that there are three distinct sides of risk:

The odds you will get hit.

The average consequences of getting hit.

The tail-end consequences of getting hit.

The first two are easy to grasp. It’s the third that’s hardest to learn, and can often only be learned through experience.

No matter what you do for a living or where you are in life, the three sides of risk applies to everything you do.

Coolers, closers, and cleaners

I bought a hat online and when I opened the package today, the receipt said “Dad Hat - SF Seals”. Apparently once you turn 30, your style starts shifting as well.

On to the next…

I listened to Pardon My Take last week with Tim Grover who is famously known for training Michael Jordan and Kobe Bryant. For those that don’t know, both MJ and Kobe are known as some of the most relentless competitors, not just in basketball, but in nearly everything they do.

It was fascinating insights to hear Tim speak about training them both. Tim’s job was to document and chart nearly everything MJ and Kobe did so he could create a specialized training program so they could perform at peak levels as long as possible. As you can imagine, he accumulated a significant amount of data and perspective learning from some of the world’s greatest athletes.

One part that Tim discussed on the podcast that I was really interested in was his description of competitors into 3 categories: coolers, closers, and cleaners. In short, this is the spectrum of successful people.

Coolers are those that can succeed if told what to do. They follow directions, avoid pressure and controversy, but are good at what they do. They are satisfied team players.

Closers get the job done if there are not that many variables thrown at them. They are one of the best (not THE best) and deal with pressure well. They love success but would choose security over winning.

Cleaners get the end result over and over again. They are consistently successful but never satisfied. MJ and Kobe are your stereotypical definition of cleaners. They want to be the best at all cost.

You can apply Tim’s categorization to the business world very easily.

I would imagine most highly successful people are somewhere between coolers and closers. These people are highly motivated and successful, but draw the line somewhere. There are few true closers in the world as they value success and winning over everything else in the world. Those types of people are extremely rare. Then there are coolers. These are great coworkers and teammates, but content. The majority of successful people are coolers.

At an early stage startup, you want to be looking for closers and cleaners. These are the type of people who take ownership and responsibility over building the company. They are not satisfied with doing well, but succeeding over and over again.

As companies grow bigger and more mature, you’ll get more coolers. There’s nothing wrong with that. Bigger companies have more defined processes that need smart and successful people to run. There’s nothing wrong with being a cooler — you just simply view life and work differently and that’s okay. Coolers meet expectations and are great teammates overall.

At Secfi, we’re a small team that’s nimble and growing. We’re looking to recruit closers and cleaners who are hungry to take on multiple responsibilities and win. I suspect this will change in the next few years as we hit more mature stages of the company.

Leadership by MJ

Like many, my Sunday nights consist of watching The Last Dance. Sad that tonight will be the last two episodes of the series as it’s been a real nice distraction from the COVID-19 situation. It’s been an amazing series so far and last week’s episodes were just fantastic.

It’s been thrilling to watch Michael Jordan’s viewpoints on the controversies and life in general. The end of episode 7 when MJ gets emotional discussing his leadership style was probably the best two minutes of TV I’ve watched in recent memory.

It’s been well documented that MJ was an “asshole”. He berated teammates and would often even get in physical altercations.

“Look, winning has a price and leadership has a price. So I pulled people along when they didn’t want to be pulled. I challenged people when they didn’t want to be challenged. … When people see this, they are going to say: ‘Well, he wasn’t really a nice guy. He may have been a tyrant.’ Well, that’s you. Because you never won anything.”

Many may not agree with MJ’s leadership style, but you can’t deny the six championships that he won. The real question is was it all necessary? Could MJ have lightened up a bit and still won as he did. Perhaps his teammates could have been even better and maybe they would have won more.

Leadership comes in many different shapes, ways and form. Whether it’s sports, business, or anything else in life, I truly believe that there are many leadership styles that can lead to success. I’ve been fortunate to be around many great leaders in my life.

The one common thing that I have always noticed despite many differing personalities and styles is that the best leaders adapt to differing situations and always lead by example.

The ability to tackle adversity and adapt to a wide range of personality types is crucial to leadership. The good leaders tackle problems head on with the cards they are dealt. They can relate to the different styles of their team.

Leaders also must lead by example. Living and breathing what you are preaching is how you get people to follow you. A leader who doesn’t live by what they are preaching is no leader at all. Michael Jordan probably said it best.

"You ask all my teammates, the one thing about Michael Jordan was, 'He never asked me to do something that he didn't f---ing do,'"

Vieje Day

I had initially thought I was going to take the entire day off, but instead decided to just block off my calendar of meetings. It’s been a great way to clear my head and end a long week.

I woke up without an alarm clock. Caught up on the markets and bought some stocks while eating breakfast. Did a bit of emails and some work on the fun stuff for Secfi that I’ve been too busy to get to. Overall, it’s been a great morning.

I’m going to log off for a bit, go on a walk, find some lunch somewhere and enjoy the sun. May call a few friends to catch-up and see how they’re doing. The quarantine has taken a toll on everyone. And while I can’t complain too much given everything else happening, a day like today is exactly what I needed.

Trending out of cities

For many decades, we’ve seen a migration to cities and urban areas. The rising cost of living in cities such as San Francisco and New York started a trend of people moving out of the cities in search for cheaper alternatives. Alongside the advent of remote work tools such as Zoom, we’ve seen people more and more moving out of big cities.

The big question is whether COVID-19 is going to accelerate this trend. Millennials flocked to cities in search of talent, excitement, and opportunity. Now with the everyone seemingly realizing that working remotely may be seamless, will this be the end of the mass migration to cities?

My hunch is that we’ll see a decline in growth of cities and the trends of moving to the suburbs/lower cost cities will continue. It may not be as drastic as people make it seem. For every person touting on Twitter that they are moving their family out of SF/NY along with all their friends, there’s thousands who are staying put, myself included.

With that said, it’s hard to ignore the trends among the younger generation.

Going to the park with your friends has turned into logging on and playing video games with friends.

Meeting other singles at a bar has turned into dating via apps.

Social gatherings have gone digital in recent times. Nothing replaces in person get togethers, but Zoom parties are the next best thing.

Technology has created connectivity once not possible. Given all the availability of all these options that were once unavailable, I don’t see what’s stopping someone in their 20s perhaps deciding to live in a lower cost suburb. Someone can be making a San Francisco salary living on a gorgeous house by the beach/lake for much cheaper outside of major cities. What’s stopping them?

Of course, there’s the other side of the equation. Nothing replaces the excitement of a city like New York and to a lesser extent, San Francisco. Sophia and I are city people. I grew up in San Francisco and I’d like to raise my family in San Francisco. Whether that’s going to be possible is yet to be seen, but I’m not on the bandwagon to abandon ship just yet.

Dead equity

Someone sent me this a16z article by Scott Kupor titled The Lack of Options for (Startup Employees’) Options. Scott makes a lot of good points.

Simple solutions to complex problems don’t work. They have unintended consequences that sometimes harm the very principles people are trying to protect in the first place. And other solutions (like handcuffing employees for the long term) may result in other problems, such as adverse selection; there’s still a balance that needs to be struck with supporting mobility of employees while also building value for the long term. The bottom line is that if companies are going to continue to stay private longer, we need to fundamentally re-think the stock option compensation model. We need better, careful, and more thoughtful solutions.

The big argument that Scott makes and that I agree with is that there’s no simple solution to the complex problem of stock options.

Many employees thinks that the solution is to extend the exercise window for all employees past the typical 90 day window. While this may help the departing employee by preventing them from losing their options, it creates the “dead equity” problem. That is, the employees who are at the company building it and getting it to the exit are the ones technically paying for the “dead equity” of the departing employees.

My biggest issue with Scott’s argument is that it’s not always “dead equity”. Companies offer equity compensation to employees so they can share in the growth of the company and to make up for the lack of cash compensation that startups can offer.

An employee who works at a startup, helps build it, and decides to take a job elsewhere should not automatically be deemed to own “dead equity”. In fact, it’s part of their compensation package and their vested options are and should be theirs to keep.

The fundamental problem here is education around an employee’s equity. Employees need to understand that stock options are an investment and likely a very risky one. Options are a right to invest in a company at a certain price for the future upside. It is part of your compensation package, albeit one that is a long-term investment.

Employers need to be helping their employees become shareholders in the company and exercise their right to participate in the upside. Unfortunately, the opposite of that is happening right now as employers are using equity the wrong way such as a retention tool or as a bargaining chip. If companies helped employees exercise, we wouldn’t have this discussion with extensions to begin with.

Employers set-up 401Ks so employees can contribute cash to retirement accounts. It’s no secret that tech employees command large salaries even at the entry level. The average tech employee can find a way to exercise their options throughout the course of vesting if they wanted to take that risk. For most employees, it’s not a matter of liquidity when these options vest — they just run into a liquidity issue because they wait the 4+ years until their stock has fully vested and appreciated greatly to decide to exercise.

Employees earn the right to their options by contributing years of service to their company. They should be armed with all tools and help to exercise and become a shareholder prior to becoming “dead equity”.

Time for a personal day

It was a rainy and gloomy Monday in San Francisco and my mood aptly reflected the weather. Mondays are hard for most people, myself included, but the quarantine has made it much harder. I ended the day relatively productive but it was a struggle.

While we’re not forcing anyone to take vacation days at Secfi, we’re all encouraging each other to use vacation days to unplug from our online lives. I think it’s time for me to do just that.

I’ve realized that I have not taken an extended vacation since summer of 2018. It was truly one of the last times I was able to fully unwind for more than a week and travel. I had a trip planned to Korea and Japan for the end of March, but well COVID-19.

Like many out there, I’m feeling tired and on edge being in quarantine. I’ve been fortunate to be able to get out for a bit, but I can’t remember the last day when I had some alone time to be with my own thoughts and enjoy the things that I love doing.

For some much needed time off, I decided to take Friday off. I’m going to start planning some activities for myself. Likely it’ll be a lot of walking, relaxing in parks, reading, and eating takeout.

While travel for vacations may not resume anytime soon, a staycation sounds like exactly what I need to recharge my batteries.

Mother's Day

Mother’s Day has always been an interesting day for me. My mom passed away from cancer when I was 7 years old. That was nearly 23 years ago at this point.

I am always grateful that I was old enough to remember my mom but perhaps still naive enough to understand the impact on my life.

My mom had two loves in her life: her children and shopping. She was tough but always nurturing like a mother should be. And boy did she love Nordstrom.

I sometimes wonder how different my life would have been if I grew up with mom still around. Unfortunately her life was cut too short for me to find out. I do know however that I grew up to be someone that my mom would be proud of and that was because I carried on my mom’s values and lessons throughout my life.

Bull or bear?

I’ve been trying to follow the markets more recently, but work has been taking up a lot of my time. I made sure to carve out some time today to catch-up and do some reading about this recent tech rally and the “bull market”.

It’s been interesting to say the least. I can’t imagine there has been a more confusion market ever in our history. Longest bull market in history runs right into a global pandemic which created the fastest drop in history which led to the fastest rebound in history which led to this bull market.

There’s so many sitting on the sidelines right now kicking themselves for not dabbling more. Myself included. But with record unemployment and the economy still largely shut down, it’s hard not to be a bearish.

Right now, we’re seeing a V-shaped recovery. I don’t know if that turns into a W or not. My bet, like many, is that we’ll likely see another spike in COVID-19 cases/deaths and likely another shutdown to contain everything.

It’ll be an interesting few months ahead.

Life is exponential not linear

I always find it fun to reflect back on my younger days and compare my thought process then and now. The things that were once insurmountable are usually much more trivial at this point in life. This is usually true in most of life as we conquer more in life.

The 3 mile run that once was a struggle is your minimum.

That job title that were once held by people so high up you couldn’t see yourself in is now your job title.

That dollar amount that you once thought was a lot of money is now sitting in your account.

Most of this is obvious as you grow as an individual and with more time have the ability to improve. Most people know they improve with time, but few understand that growth is exponential, not linear. It’s our natural instinct to think things in life are linear. One step at a time to get you one step ahead… not really though.

You run your first mile. Next time maybe you can run a little more than a mile. In reality, your next run may be a little more than a mile at a faster time.

You work hard at a job for a couple years and you get promoted. In reality, you can take steps to accelerate growth such as learning new skills or taking a job at a riskier company.

You save a dollar, your bank account grows a dollar. In reality, you save a dollar, your bank account grows a dollar, and you earn interest on that new dollar.

Life compound interest, the more time you spend developing yourself and your skills, the higher the return down the road in life.

Mid-day resets

I never really had the opportunity to work on my own schedule or time until I left to join the startup world. The old school big firm life always had the expectation that you were in the office or logged on during certain times and available. While my previous employer was relatively flexible in terms of working from home and whatnot, it’s still the old school mentality driving the guilt of taking an afternoon mid-day break.

Ever since I started working at Secfi, I always really enjoyed these mid-day or afternoon breaks. Most times I would run over to the gym and take a quick workout class to get my mind off of work. Nowadays, I’ve been going on runs, doing yoga on my roof, or just sitting outside enjoying the sun.

Of course, this means that I’ll work into the evening and night… sometimes right up to bed time, but this is a trade-off I’ll take any day. On top of all this, I’m much more productive in the evening anyhow. I seem to get most of my work done between 6-9pm.

My mid-day reset gives me some time to break up my workday. When I’m going through a stressful time, it helps calm my mind and reset for the tasks ahead.

How to not hate writing

I hated writing as a kid in school. I was much more of a math and science guy and english was easily my worst subject. Throughout my entire collegiate career, writing an essay was the worst of all homework assignments — I never understood kids who liked writing. It wasn’t until my upper level business classes when I started to somewhat tolerate writing. I always attributed that to the fact that business writing is succinct and to the point rather than the use of fluff words to make things sound better for an essay.

I started this blog last year partly so I could improve my writing and document my thoughts. It’s been a largely mixed bag of pleasure. Some days I feel like writing flows naturally and I’m enjoying putting my thoughts to paper. Other days I feel like I’m just reaching to get to the end of this post so I can move onto my next task. I guess I never really thought too much about what drove those emotions, good or bad, whenever I was writing.

I’m not sure if I should feel embarrassed that I’m finally realizing this now or relieved, but after 30 years of learning about myself, I finally realized the secret formula on how to not hate writing. Write about things you want to write about.

I never truly hated writing. I just hated writing about shit I don’t care about like random essay prompts given to me in high school.

I don’t like business writing because it’s succinct. I like business writing because I like writing about business.

Writing on my blog is a mixed bag of pleasure and pain because I force myself to write about something I have no interest in. It’s those times where I get excited to talk about something where things flow naturally.

With my new found revelation, perhaps I can finally say I truly love writing sooner than later. More on that soon.

To reopen or not

I took a 2 hour nap today at noon. It felt amazing and probably my body telling me that it’s tired. It’s been a long few weeks and I’ve been feeling a lot of fatigue lately. It’s going to be important to listen to my body and get more rest in these next few weeks.

On to the next…

The big debate right now is to reopen the economy or not. Shelter in place orders have gone a long way to helping flatten the curve, but people are getting restless and unemployment is skyrocketing. As much as people don’t want to say it, there will be a point where this cannot go on and we have to get going.

We’re slated for the economy to start opening in waves starting now through the summer. I’m not a medical or pandemic expert, but it appears that this will lead to another wave of outbreaks. The big question is whether this next wave of outbreaks will be an acceptable outbreak or not.

The most important item here is to protect medical and emergency workers. This next outbreak cannot overwhelm our healthcare system. If we can open the economy and not max out our healthcare system, then we should consider opening the economy. Until then, we cannot risk another outbreak where there are not enough hospital beds for patients who need it.

Financial education

We finished our second webinar today and like last time, I had a lot of fun doing it. There’s a lot to improve on and we’ve learned a lot in the last few weeks, but we’ll take it.

The best part about hosting one of these webinars or educational sessions is the feedback we get afterwards. I admit that sometimes living and breathing stock options every day does create a bit of a fatigue. Hearing from a few attendees that they learned a lot has meant a lot to me and validates my work.

At Secfi, we help people achieve their dreams and goals by helping them get the most out of their equity. A lot of what we do is simply just education in regards to their options and how they work. We’re in the business of financial education.

I love learning about companies in the financial education space for the simple fact that the American school system has failed us in providing us with the most basic financial education.

Kids turning 18 can start getting credit cards and ruining their credit scores without know what it means. Adults do not know the basics of filing their taxes and why it matters. The majority of Americans do not a savings. Not everyone needs to be a financial expert, but every American has the right to have basic financial knowledge.

We have seen a new age of finance that have democratized investing to everyone with apps like Robinhood. Challenger banks such as Chime have provided a new age of banking for the under served.

People now have access — the next step is creating better behavior through education. I expect to see some major names start to emerge in this space in the next few years. My prediction is that an app that can “gamify” financial education will start to spread among the younger generation.

When I grew up, we had Pokemon cards and sneakers to show off to our friends. The younger generation live on games like Fortnite and show off in-game purchases. The new cool will be trophies and awards in apps.

The gamification of education, specifically financial education will be a trend that’s going to be fun to watch over the next few years. I hope for the day that my kid is excited to show me his reward for learning compound interest.

Sticking to your guns

We have a team slack channel for those who want to discuss the markets and investing. I feel like every day someone is posting some ridiculous fact about something unprecedented in the market. I’m happy I started nibbling last month and bought some $GOOGL. It’s been a nice return so far.

I can only imagine what it must feel like right now to be that person proclaimed that the world is falling apart and sold everything in March. I already have major FOMO from not buying more earlier this month.

There’s a lot of chart porn out there on Fintwit right now, but my favorite chart of a company in my portfolio is $RH.

Restoration Hardware $RH 1Y Chart

I bought $RH last March when Rob from Koyfin.com sent out a newsletter. I bought in at right around $105 and saw the stock drop to $85 in the following few months. The stock price peaked at about $250 in mid-February. After the crash, there’s been a great rally and I’m back to a nice return on my one-year position.

Of course, we all wish we could’ve bought at $85 and sold at $250 but the markets don’t work that way. Investing is an emotional rollercoaster. There’s lots of ups and lots of downs, but you need to stick to your guns during the good and bad.