I have a very successful friend who learned some very useful wealth and success tips/strategies from an older multimillionaire mentor. My friend was contemplating his career path as he’s going to college and trying to figure out what kind company he was going to go to work for, how much he should make, etc. His mentor told him that if he wanted to maximize and leverage his time, income and career, the proper way to do it is to go work for a young company that’s experiencing success. Be willing to take a smaller salary in return for company stock.
So my friend finished college and graduated with a technology degree. This was in the mid-1990s. My friend believed in himself and his ability to convince somebody to give him a job based on his terms, and what he learned from his multimillionaire mentor. So he set about the task of identifying companies that he could go work for. Technology companies that are up and coming, and had either gone public, or were on the verge of going public. He set his sites on a company called America On Line. Better known as AOL.
When he first started interviewing with AOL, they initially told him that they were no longer offering compensation plans to new employees that included company stock or stock options as part of their compensation. He wasn’t deterred. He stuck to his guns and basically wasn’t willing to give up what he really wanted just to get a job at AOL. He also knew that if he took the job hoping later to get a package with stock options, that the chances of them actually offering that or those kinds of packages again was almost non-existent. So in the end, AOL relented and gave my friend a $35,000 a year salary, along with company stock in their employment offer.
He did several things when he went to work for them. This was back in the mid-1990s when search engines and search technology was in its infancy. He was studying the characters that make up the Japanese language. So he wrote down on a piece of paper a search algorithm he had an idea for. That was basically an 8 1/2 x 11 sheet of paper. It was just a theory of how a program could be written, or an algorithm could be written, to search the Japanese language’s characters. It could be used in a future search engine for the Japanese version of AOL. He offered to give this to his employers. I guess the way he looked at it was, he was already getting stock as part of his compensation package, so he was in essence, a company owner and this was his investment in AOL.
Not only would they not let him just give the algorithm to the company, they said “we want to pay for it.” They offered him $100,000 and a couple hundred thousand more shares of AOL stock. How could he turn that down? Think about it, $100,000 cash, and a couple hundred thousand shares of stock for a piece of paper. A theory, an idea that’s pretty awesome, but something he probably scribbled down on a Saturday afternoon. Maybe he thought about for a while, but he came up with an idea he had postulated. He gets all this compensation, money and more stock. Then the algorithm is given to the AOL programmers. The programmers wrote the code for it and figured out how to make it work. It became part of AOL’s search technology.
That was pretty amazing to me when he told me all of this. I couldn’t get over how he got 100,000 cash and all of this stock, but then again from AOL’s perspective, that was an idea they could really use. A way to create a search engine for the Japanese using his search technology idea that would be specific to their their language.
My friend starts working there in the mid-1990s. The company goes public, and AOL’s stock price and my friends net worth continue to rise. Towards the late 1990s, AOL announced the biggest merger in corporate history (at that time). The merger of AOL and Time Warner was a multibillion-dollar merger. By the time the merger was announced, my friend was starting to see the writing on the wall at the company. You had a bunch of young, very successful, and newly rich tech savvy entrepreneurs who are starting to believe their own publicity. They had become arrogant, full of themselves and were buying out companies and doing mergers just for the thrill of the deal.
My friend watched as they bought out smaller companies; the deal makers would laugh about negotiating lousy deals for the seller. They were very unfair and one-sided in favor of AOL. They used intimidation tactics to get what they wanted. They started to get away from what made them successful. People that worked there were buying as much stock as they could. Taking equity out of their homes, their 401(k)s, their savings accounts, etc. and putting it all into AOL stock.
My friend had a clause in his employment contract that would not allow him to sell his shares of stock for several years; with one very important exception. If AOL merged with another company, and the merger would dilute his stock by a certain percentage he could then sell his stock. Once the merger with Time Warner was announced, it triggered the sale clause of his contract. This allowed him to completely sell every single share he owned of AOL stock. When he sold it, AOL’s stock price was within $2-$3 of its all-time high of $98. He had accumulated over 400,000 shares of stock in under five years. He resigned from the company and walked away with over $40 million pretax. So he netted approximately US$26-US$28 million. That’s a lot of Jack, Jack!
Sadly, many of his friends stayed on and rode their personal net worth all the way to the bottom as AOL’s stock price made a steady decline after the merger was completed. Many of them lost everything because they became emotionally invested in their stock ownership.
My friend graduated college. Worked for AOL for about five years, and now he invests half of his money on his own. His personal investment advisor invests the other half of his money. He spends his time traveling the world and writing music. That’s his life. I know it’s tough, but somebody’s gotta live it 🙂 My friend is just a regular average guy. You’d never know he was a multimillionaire by just looking at him. He’s very calm and laid back. He’s very peaceful. He doesn’t stress about things. He lives his life according to his terms. The reason he got compensated so much at AOL, was by using a strategy that somebody else had taught him and perfected long ago. You don’t get what you deserve in life, you only get what you negotiate. If you’re not making the kind of money you want or feel you deserve, read my article “Making Money Is 80% Psychology, 20% Mechanics”.
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