Taking Money Off The Table

With markets high and interest rates creeping up, some people might be thinking about selling portions of their holdings.

I’ve had the opportunity to “cash out” on more than one occasion. Looking back, I completely missed how freakishly lucky I was to have the opportunity to choose.

One time I didn’t take the money, the other time I did. Both decisions worked out OK so I’ll share my process.


First, when I make a buy/sell decision I try to value the asset independently as well as consider what the situation is worth to me.

For example, my current business (consulting) is worth far more to me than it would be to a third party. Unique benefits are: gives me a voice, allows me to get paid for what I like to do, allowances for vehicles/home office, gives me an opportunity to help my local community, brings me close to my friends.

Always consider the non-financial benefits of your current situation – these are hidden to third parties, who rarely give you value for them.


The biggest decision financial decision of my life was when I chose to hand back a partnership in a private equity firm. I was 31 years old and, while the opportunity cost was huge, I figured that I could get back to my old situation if I was willing to take a pay cut.

Again, I completely missed my extreme good fortune to be able to choose. Not surprisingly, my peers and family thought I was nuts.

Take Home Point: my downside position was my old life back with less money coming in.

Take Home Point: once you get five years living expenses off the table, it gives you flexibility in an uncertain world. I achieved that goal early in my first career and it gave me freedom to take risks. With this goal, the toughest part is lifestyle humility. I was lucky to start my career working for a very humble man.

Implications of Failure/Black Swans: Getting things wrong at 31 wouldn’t have been that big a deal as my fall back plan was asking for my old job back. Consider your fallback plan.


Roll forward five years:

I was out of the PE business for five years, recently married and co-founder of a company that did property development. In the intervening five years, I co-founded a fund management business that was doing well.

Age – 36 years old, still young but now with a wife and new life that wouldn’t make it easy to return to Private Equity.

Net Worth – illiquid with a personal g’tee into the General Partner of the fund management company. I had placed myself in a position where I could lose more than my total net worth. Not smart!

Implications of failure/black swans – personal bankruptcy, loss of personal freedom, starting from scratch, return to big city living – highly unattractive, especially given my love of inexpensive living (cycling, forests, reading, writing).

I told my business partner that I wanted to sell out and would accept any terms that worked for him. He bought me out over three years at a 50% discount to third party offers we received. He wanted control and the price was good enough.

In this case the intangibles (control) made the deal highly attractive to the buyer. I didn’t get wrapped up in fair value, what I needed was a deal that was “good enough.” When you are selling to the operating management, you are very likely to take a discount on fair value.


From twenty-five years of spending time with the 0.001%, here is what I’ve noticed about money and wealth.

A – having 5 years living expenses, in cash, gives tremendous flexibility. Whatever that # is for you, it represents the highest utility aspect of your financial life. Nobody can make you do something you don’t want to do when you are able to hit the road and know that you’re OK for a long while. This is huge.

B – if you’ve built a successful business then you’ll never be out of work unless you are permanently disabled (insure that risk now). That said, consider if you are comfortable with the worst case scenario. Reading Taleb saved me from personal bankruptcy.

C – depending on your age, there is a magic number where you will be able to survive without working for the rest of your life. Most the wealthy folks that I know (call them the 2%) scale their lifestyle so they never get there. They don’t even get to the enviable position of being able to work at what they love.

Keep it real. Spending time with people that have 5-10% of your net worth is a smart use of your time.

With fitness, and finances, most people aspire to spend time with people that have FAR MORE than them. This screws you up.

If you want to feel good about your life then teach people that have less.

A couple weeks each year I live like I did when I was a student – I look forward to these weeks as they keep me grounded and get me OK with personal downside scenarios.

Small businesses have limited exit windows. Part of what pushed me to sell was a funding environment that seemed crazy to me. Separate from my views on valuation, I knew that the easy money wouldn’t last. I got the timing wrong on the contraction but it came eventually.