"New car, no new car; new house, no new house." My friend and colleague, Nat Brown, often gave us this take on the volatility of Microsoft's stock price.
Nearly every Microsoft employee hung on the latest real-time market quote of the MSFT ticker symbol. You could usually tell whether the stock was up or down by the general mood in the corporate hallways: buoyantly cheerful or heavy and sour. Imagine the effect of a $10 move in either direction!
Our reactions were partly due to Microsoft's generous can't-lose Employee Stock Purchase Program (ESPP) into which employees are allowed to set aside up to 10% of their paycheck. At the end of each six-month period those funds are used to buy company stock at a discount—specifically a 15% discount off either the stock price at the beginning or the end of the period, whichever is lower. At that time, we were allowed to sell ESPP shares as soon as they were deposited in one's brokerage account (instead of waiting a year), so you came out ahead even if the stock tanked. Little surprise that most of us set aside the full 10% throughout our entire careers.
ESPP shares were only a small part of our concern over Microsoft's stock price, however. By and large, the vast majority of employee interest came through what we called the "Golden Handcuffs": Microsoft stock options.
A stock option, in case you aren't familiar with the details, is the right to buy a share of stock at some future date for a predetermined "strike" price—usually the market price on the day the options are bought or issued. People purchase options speculating that the stock will go up by the time the option can be exercised. If they're right, they can then purchase shares at the lower price and realize an immediate and often substantial gain. So why not just buy the stock itself? One word: leverage. The cost of an option is usually well below the cost of an actual share. With the same amount of capital, you can acquire many more options than outright shares while still realizing the same per-share gain, making options a simple way to get rich quick, so to speak. The downside is you can quickly go poor as well! If the market price is below the strike price when the options expire, those options become absolutely and irrevocably worthless.
Microsoft was, at least until the year 2000, something of a legend in the stock market. My father still kicks himself for an investment he made in 1987 when he wanted to put $2,500 into a technology company with good growth potential. He whittled his choices down to a well-established computer manufacturer named Kaypro and this young upstart software house called Microsoft. Need I say more?[*]
With its track record in the market, Microsoft effectively used stock options over the years to motivate and reward its employees. Depending on your position, the relative importance of your work, and your personal performance, you might have received a grant (that is, an outright gift) of stock options every six to twelve months. Those options, however, had no initial value for two reasons: one, the strike price was the same as the current stock price and two, the options were not yet "vested"—another way of saying "you can look but you can't touch." The first quarter of an option grant became available to exercise after eighteen months; another eighth vested every six months thereafter. This meant it took four-and-a-half years to gain the full benefit of any given grant.
Of course, by the time the vesting period was over the market price had usually gone up significantly and the stock had probably split a couple of times to boot. A typical grant of 1,000 options with a strike price of $50 could easily become 16,000 options with a strike price of $3 and change. And with the stock itself generally hanging (in the 1990's, at least) between $70 and $150 a share—well, you do the math!
"Are you satisfied with your base salary?" asked one of the questions on the annual company survey. "Somewhat," was our perpetual reply. "Are you satisfied with your overall compensation?" asked the next. "Oh, YES!" No one could doubt that stock options were definitely "golden." They were a constant reminder for us to put forth our very best effort regardless of the challenges, setbacks, and long hours that were simply part and parcel of the Microsoft culture.
Of course, the stock option program wasn't designed merely to inspire employees to new heights of dedication, commitment, and occasional martyrdom: it was also designed to keep capable employees in the company for the long haul. That's the part about the handcuffs.
You see, upon leaving Microsoft you flat-out sacrificed any and all unvested options. Gone. Poof! And even those that were vested had to be exercised within ninety days or they too dissolved into the Great Void. What's more, we weren't allowed to exercise the options to acquire actual shares of stock; options had to be sold for cash. So if you had any inkling whatsoever to walk out—because of stress, boredom, or the simple desire for a change of pace—you couldn't possibly do so without peeking at your personal stock option spreadsheet and your next bite of financial candy. Upon doing so, you couldn't help but think, "Gee, if I just stick it out a couple more months and finish the next vesting cycle—and with the stock still rising…." Yep—a few more fortnights and you could easily pad your net worth with another quarter million dollars, if not a fresh option grant altogether!
Suffice it to say that the scheme worked. The promise of easy wealth, so close and so tangible, was difficult to give up on a whim or even under duress. And if you found a reason to stay on for one more vesting period you could probably find reason to hang out for a few more. After all, the system produced millionaires by the cartload. Why fight it? We donned the handcuffs quite cheerfully.[†]
Now let us pause for a moment and consider an ordinary middle-class person who was raised in an ordinary middle-class family—you know, the ones who fill in the "Annual Income $40,000-$70,000 per year" bubble on surveys and who mostly dream of sending the kids to a decent college and having a reasonably comfortable retirement. Now plunk a few million dollars in their laps—or even just a few hundred thousand—and suddenly, like lottery winners, they lose any and all sense of proportion. What's blowing $50,000 on some flashy toy when it means only changing a number like $3,487,922 to $3,437,922.
What indeed? Around Microsoft, paying cash for a Ferrari, a Lamborghini, or even a million-dollar house was not unheard of. Shelling out twenty grand for membership in an exclusive country-club hardly raised an eyebrow. Forking over four hundred bucks an hour for personal hands-on fighter-jet training was considered "quite cool." And going on extravagant and exotic vacations to places like Micronesia or Madagascar was almost a social expectation.
One of my associates, who will remain anonymous, was perhaps a quintessential example in this regard. Being a fifteen-year veteran of the options game, he once went out and bought a 31-foot motor home—with cash—just because he "wanted to know what it was like to drive one." He wore a Rolex on the singular justification that it "kept good time." And he invariably upgraded his airline tickets on every business trip if only for the sheer privilege of asking the rest of us how we liked "cattle class." He even once considered signing up for a record-setting 23-hour round-the-world flight on the Concorde to the tune of $25,000. To his mind, it was perhaps a reasonably inexpensive way to earn a small place in history.
At least I derived some free amusement from his flamboyance—on a number of business trips together when we had nothing better to do than totter around whatever city we were visiting, I'd try to get him to spend as much as possible on something he absolutely didn't need. My top score was $2,300—we had paused outside a camera shop in Munich where I admiringly praised a beautiful Leica R4 as "one of the best SLR's ever built." He bought it on that principle alone. To his credit, I think he did actually use it—once!
All of this is to say that the whole stock options business engendered a certain direction to the development of one's lifestyle. I say this from experience. Having received various option grants over the years and watching their value grow by leaps and bounds, my wife and I found ourselves more willing to express our abundance outwardly. First we bought a brand-new 2800 square-foot home in a fairly upscale suburb north of Seattle. Then we populated it with not just a brand-new car but with the latest appliances, stately teak bookshelves for my den, a big screen-TV and hi-fi VCR (no DVDs yet), an elegant set of bedroom furniture, and—something I had wanted for years—a very new and very black grand piano. In addition to all this, we were already planning for a good assortment of additional luxuries. There would be new furniture for the rest of the house. There would be the automatic sprinkler system for the front lawn and ornate landscaping for the back. There would be the fine lattice-covering for our large deck and another new car. And if Microsoft stock continued to cooperate we could not only hire some professional help to take care of it all, but perhaps start the whole act over again with some ocean-side retreat. Someday we might even be able to expand into the likes of Micronesia, Royal Coachman, and Rolex!
New car, April 1995
New house (Bothell, WA), September 1995
New piano, late 1995, showing that our living and dining rooms contained nothing else.
Yes, who could doubt that happiness was and would continue to be ours? We, like many other Microsoft families, had the means to immediately and rather painlessly fulfill each and every material desire, and were making a plucky attempt at doing so! It was the normal and even the expected thing to do for those in our position. Being surrounded by other such people on all sides, why should we ever stop to question? All our money and possessions were, as far as everyone was concerned, giving us happy, fulfilling lives, free from the cares and worries that normally plague the bulk of humanity.
But when we shifted the focus of our lives from worldly to spiritual aspirations we became exposed to another reality. In particular, we got to know a good number of people whose lives were based on a fundamentally different assumption: they lived for God, not gold. Wealth, to them, meant inner joy, not possessions; fulfillment was defined in terms of desires transcended, not desires satisfied; and security was a matter of contentment and proven faith rather than diversified investments.
As a result, the direction of their lifestyles departed quite radically from that of the stock-option circus. For example, many folks at the spiritual community near Seattle (which we were now visiting regularly) were happily living in homes or apartments that were barely larger than the hallways of our house, and were nowhere near as new. Their cars were humble, their furniture functional, and any electronics they owned were usually of the basic sort. And although some people owned various kinds of decent musical instruments, there were certainly no grand pianos among them. Indeed, few could really afford such luxuries: in comparison to our combined six-digit income plus stock options, these individuals got along fine with about $20,000 a year.
According to all outward measures and standards, then, a good portion of this new spiritual family into which we had come essentially lived in so-called "poverty." Yet what they lacked in the material realms they more than made up in the spiritual. They were all so happy, even joyful—far more so than everyone else we knew! In their lives of meditation, service, and devotion, they simply didn't need luxuries: they were content with having enough. Many were also quite generous with what monies they did acquire, and they were equally content to let go of everything if it ever became necessary to do so.
In contrast, how free were we? When we took a long, honest look at our lifestyle, we came to the uncomfortable realization that its increasing opulence was far more binding than the "golden handcuffs" that made it all possible. It's one thing to have money; it's something altogether different to depend on it as the very source of happiness. To do so only enslaves you to perpetual discontent, forcing you to seek your fulfillment in ever-more extravagant ways. We thus came to realize that this dependence, more than anything else, would keep us chained to the grindstone for a very long time, options or no options!
In our honest self-examination we also realized that our so-called riches weren't actually making us all that happy. As a matter of fact, a number of them seemed intent on making us downright miserable. I mentioned our 2800 square-foot house. Impressive, yes? The envy of our less fortunate friends, right? Well, little did I realize the kinds of demands it would make of me. The front lawn, for instance, installed as it was on top of solid clay, insisted on wilting no matter how much I pampered it. The Swedish finish wood floor—all 600 square feet of it—demanded (according to the instructions we were given) that we clean it every other week on our hands and knees. The air-circulation filters had to be hosed off every month. It took us a good hour-and-a-half to vacuum the oceans of carpet.
Then paint began peeling off the façade of our entry way. The back lawn succumbed to the guerilla forces of clover, dandelion, and chickweed. The lovely sun deck became parched and gray—demanding many hours of scrubbing, sanding, and re-staining. And the siding—which was discovered to be partly defective—brought with it the joys of a class-action lawsuit.
Need I go on? Need I mention dusting? Need I mention washing a dozen windows 15 to 20 feet above ground? Need I mention the wonderful capacity of kitchen tile grout to absorb beet juice? And all this was just the beginning: our new car, our fancy furniture—and yes, that big, black, grand piano—all made respectable contributions of their own to the increasing complexity of our lives. In fact, the more we looked the more we realized just how enslaved we truly were: possessed by our possessions. Wasn't wealth supposed to simplify matters?
Now let us recall for a moment the state of affairs at this point in the story. I had just been through a month at Microsoft that was, by my reckoning, sheer hell. My hopes and dreams for the OLE technology had been usurped by the Internet frenzy. What's more, my work in OLE Program Management—which I had entered with high hopes of helping the technology fulfill its great potential—turned out to be little more than playing mediator between groups of people who generally nursed a clear distaste for compromise.
My professional aspirations, in short, were pretty much in the gutter. At the same time, my spiritual aspirations were soaring higher and higher, as if to compensate for my technological disillusionment. Expansive vistas were opening before my eyes: new ways to live, new ways to serve, new ways to love. This, I knew, was where my future lay.
At the dawn of 1996, then, I was wholly ready to just walk away from it all: away from my career, away from all our possessions, and away from all the expectations that I'd been surrounded with my whole life. I even hoped that God would expedite the process—perhaps when Kristi and I returned from our retreat in California we'dfind that our house had burned to the ground and that a pink slip awaited me at Microsoft! No such luck. The house was still there with all its stuff and I still had my job, same as ever. I thus had to accept that however things were going to resolve themselves, it would all happen one step at a time, with our conscious cooperation. God never forces you down a path—he simply invites you to take each step by your own free will. In our case this meant consciously choosing to re-create our entire lifestyle to more clearly express our new ideals and priorities.
This is actually what true simplicity or "simple living" is all about. Just as many people believe that possessions and wealth defines the "good life," others believe that simplicity means a complete rejection of technology and material comforts. To live simply, they say, one should follow Thoreau and head off to some cabin in the woods, or, if that's too extreme, to get all into things like solar power, composting toilets, self-sustaining organic farms, and home-spun textiles, preferably in some remote rural area well away from the wretchedness of big cities. The truth, however, is that merely changing the outer forms of one's lifestyle will not automatically bring joy, happiness, or inner peace any more than wealth. In fact, "simple country living" can be as much if not more demanding than life in a metropolis. If you don't believe it, arrange to operate a rural farm on your own for a couple of months, or simply try growing, harvesting, threshing, and grinding your own wheat for bread! Then ask yourself, "Is this how I really want to spend the precious hours of my life?" Thoreau went to Walden Pond not to live in the woods but to live, as he wrote, deliberately.
Simplicity means first being clear about your priorities—that is, knowing what you really want to experience in life.[‡] It doesn't matter whether your priorities match up with anyone else's: what matters is that you are clear about what you want. With this clarity you can then focus all of your life's energies in that singular unified direction and surround yourself with an appropriate environment—what you own, where you live and work, who you associate with, and even how you think. This focus becomes the yardstick against which you measure every decision. Does this or that choice serve the fulfillment of your priorities? If it does, then it's a valid choice regardless of all other considerations; if it doesn't, then it's nothing but a waste of time and energy for you no matter how many good reasons there are to the contrary.
Wealth is not a matter of money: it's simply having what you want. Simplicity is not a matter of any outward form: it's wanting only what you truly need and truly needing only that which is in line with your life's priorities. So many people feel enslaved by their jobs; in reality, one's desires, habits, and attachments are the real taskmasters. It is to serve them that our jobs, and the income from those jobs, seem so necessary. When desires are expanding, one's income never seems enough.[§]
Again, the more you can define your true needs in terms of inner experiences—joy, love, peace, wisdom, etc.—the less you need depend on specific forms of fulfillment. Although that exotic vacation, that new car, that fancy house, and that big, black grand piano might offer some fulfillment, there are probably hundreds of equally effective and far more economical means to the same end. Sure, they might not impress others to the same extent, but they also won't keep you bound to the grindstone—or stock option vesting cycles—for years to come! In simplicity and contentment there is real freedom.
As you already know from the Prologue, this shift in our life's priorities led me within a year to part ways with the world's greatest software company. I'll save that story for the next chapter; here it remains for me to explain how my wife and I parted ways with everything else.
First came a basic change in our attitude toward money. For the longest time, the numbers in my stock option spreadsheet (which I seldom failed to update with the latest price quote) were just numbers; all I knew was that they represented a pretty big pile of dough. But as I was now beginning to contemplate leaving Microsoft, I had to look at it all with a new perspective: what would I actually do with it? What did it mean to have stock options worth a half-million dollars or more? What, indeed, is this mysterious thing we call "money" good for, anyway?
Then I once again remembered that long-forgotten dream. Years ago (as you will again recall from Chapter Five) I had planned to someday leave the high-tech industry for more artistic, scholarly, or spiritual pursuits. Back then I wanted to save two or three years' worth of living expenses to support the change—sufficient money was just a tool to make it possible. Now, even with a big house and its matching mortgage, I found I had enough for a whole decade! I already had, in other words, what I needed to have: anything beyond it was just an added bonus.
With this in mind, and with my career in a lull, it seemed prudent to begin diversifying our resources into something a little less volatile than Microsoft stock. This was a huge step. Forsaking the promise of future gains was an affirmation that I already had enough and didn't need to wait any longer to start making changes. It was the first yet most crucial step off the treadmill.
I started by exercising about ten percent of my options in early February 1996 without even knowing where I would invest the proceeds. But no sooner did the exercise go through than God presented us with a unique opportunity: we learned that the community where many of our new friends lived—and situated only a few miles from our house—was in need of new investors. Inspired by the ideals upon which the community was founded, we both felt to offer our financial support.
When we made this initial investment we weren't at all thinking of moving out of our house: we just wanted to help. But God had other things in mind and responded quickly to our openness! In particular, we both began to feel that we should do some estate planning. Our assets had grown considerably in the past year alone and with the house, the new car, the piano, and everything else, common sense dictated that we assemble our wills.
For a while we were wholly occupied with nothing more than the testamental legalities. But you can't work through the process of writing your will without thinking about that little thing called death. Then it all becomes very personal.
"What would you do," Kristi asked me one evening in April, "if I suddenly died?"
"Well," I replied, "the first thing would be to move into the community, so I'd be surrounded by supportive friends."
We paused for a moment, deep in our respective thoughts.
"And what would you do," I continued, "if I died?"
"Well," she said, "I'd move into the community myself!"
We looked at each other with a smile then burst out laughing. "So why are we waiting for one of us to die? Why don't we just move in together?"
Shortly thereafter the unit to which we'd felt most attracted opened up. I had specifically noticed it when we first drove into the community back in December. Looking up into its warmly-lit living room, I remember thinking to myself, "that's home." The only problem was that we couldn't possibly fit everything from our house into a mere 800 square feet! A bunch of it would simply have to go.
The front of our apartment in the Ananda community, Lynnwood, WA, 1996.
The living room of our apartment, December 2003.
Under normal circumstances, shedding the majority of one's possessions is a painful—if not traumatic—experience, even if those things have proven themselves a complete burden. But for us it was nothing short of joyful. Honestly! We found great inspiration in a wonderful book called Your Money or Your Life,[**] which outlines a program through which anyone of any means can achieve financial independence, with or without stock options. Using this book as our guide, we spent the next few months gleefully exploring how little we could really live with. The key was learning to see everything we owned as an investment of life energy. To own a thing means to freeze some portion of your life into a static object—so that thing had better be worth the investment! I also realized that everything we owned had a cost of ownership (needing somewhere to put it), and also defined, in a very real way, our future. Owning a thing presupposes that you'll eventually use it. So imagine yourself actually using that thing and ask whether such activity fits with your life's priorities. If not, let it go!
Thus we found it easy to throw out all kinds of dead-weight, like the boxes of my old schoolwork dating back to kindergarten. We also took part in our neighborhood's mega-garage sale, letting go all kinds of stuff that our future didn't need, like board games, extra stuffed animals, old records, and aging electronics. For the larger pieces—like most of our virtually new furniture and the big-screen TV—I took advantage of the semi-classified ads in the Microsoft company newsletter. Whatever remained I dropped off at the doors of Goodwill, the Salvation Army, and St. Vincent de Paul's thrift shop.
Finally, it came down to the last two big-ticket items: my precious grand piano and the house itself. To be honest, I didn't really want to relinquish the piano. Secretly I believed that it could somehow fit into an apartment and not be a nuisance to our neighbors. I even thought it might contribute to our overall simplicity—by taking up the entire living room it would eliminate the need for any other furniture!
Well, let's just say that reason prevailed. If I really wanted a piano there were plenty of electronic alternatives that would take up far less space, require little or no polishing, need no routine (and expensive) tuning, and include—much to the pleasure of our neighbors—a headphone jack. So with a little sigh, I gave it up.
Then I had a good laugh at myself—I suddenly realized that the piano had been the sole reason for my even wanting a house in the first place! I remembered how I had once gotten upset at Kristi for not—in my mind—trying hard enough to find a job after she got her Master's degree in late 1992. We had agreed that we would start looking for a home as soon as we knew what we could afford. But it wasn't the lack of a house that upset me—it was the fact that not having a house kept me from having a piano!
I laughed even harder when I clearly saw how many other so-called "necessities" had come from that one desire: the lawn-care equipment, the furniture, the extension-arm dusters, the bookshelves, the fireplace insert, the new towels to match the bathroom colors—you name it! All for the piano!
After a laborious process we finally sold the piano and the house—both, I might add, at significant losses. But in my mind the lessons we had learned were far more valuable. God had taught us what it truly meant to own a thing and the trouble you can get into (debt or no debt) with even the most innocent of material desires.
With fitting serendipity, we moved into the community on July 4th, 1996, declaring our independence from excessive possessions, from discontentment, and from the fleeting fulfillments of the "good life." No longer would we feel compelled to seek happiness in things. No longer would we be mindless disciples of the Microsoft Lifestyle. No longer would we be bound by Microsoft Stock Options. We were free to dedicate our life energies in service to our highest aspirations.
And when I eventually cashed out of Microsoft in October and put the proceeds in various income-bearing investments, we also found ourselves in the position of financial independence: the interest income was more than enough to cover the reduced expenses of our downsized lifestyle—not just for five or ten years, but for decades to come. Our focused simplicity had given us both a spiritual and financial freedom that we'dnever imagined.
It had melted the handcuffs, leaving us with only the gold.
[*] Kaypro eventually went bankrupt. At Christmas some years ago, after I had achieved some success at Microsoft, my father gave me the now-worthless Kaypro stock certificate as a gift, framed up alongside the check with which he bought my first computer. I think he titled it something like "Study in Contrasting Investments," proof that the best investments are made in people rather than paper. [Return to text]
[†] Due to the long bear market in tech stocks, Microsoft shareholders voted to end the program in 2003 and replace it with one based on actual shares. The Golden Handcuffs had finally lost their luster. [Return to text]
[§] Thwarted desires, too, lead to anger, which is why the comment "we live in challenging times" has been heard for centuries, regardless of what's actually going on. Such a statement is really a statement about one's desires and not the state of the world at large. [Return to text]