Scott H Young

Could You Walk Away From $8 Million in Easy Money?


One of my favorite stories comes from Zappos CEO, Tony Hsieh.

Tony sold his first company to Microsoft shortly after graduating from college. One of the conditions was that he stay for another 12 months. In exchange, he would walk away an extra $8 million richer.

The work conditions weren’t strenuous, as Tony himself recounts, “I just had to do the bare minimum amount of work so that I wouldn’t get fired.”

He quit after three months.

Could You Turn Down $8 Million?

The story has an interesting ending. After leaving behind $8 million, Tony spend the next ten years building Zappos, finally being sold for over $1 billion to Amazon.

That means Tony generated roughly $100 million in value per year. Even if you ignore the shares of other investors, that still dwarfs the $8 million paycheck he gave up.

I feel there’s an important lesson of this story. Not so much about the financial wisdom of ignoring $8 million, but in how we think about money itself.

Two Ways to Think About Money

There are two major views people take when talking about money.

The first is money as a means of buying things. Depending on your situation and appetite for material things, this sets a level of money you need to be comfortable.

The problem with this perspective is that it quickly becomes ridiculous. Research shows that happiness stops increasing once income crosses a threshold. Making $6,000,000 is hardly more satisfying than $60,000.

To paraphrase one analogy, money is the gasoline of the road trip of life. You don’t want to run out, but having extra won’t make the trip any better.

But if this is the case, why does anyone try to be rich? It’s too simplistic to just claim people are materially obsessed. Could there be another perspective?

That second perspective of money is using it as a proxy for career ambitions.

Money as a Yardstick of Impact

This second perspective is that money isn’t only to purchase things. It’s also a way of measuring your level of career success.

A programmer who has a $100 hourly rate has some sense that his work is more valuable than a programmer who can only charge $20 per hour. Even if she could be comfortable on the second amount, she might want to earn more as a way of measuring her success as a programmer.

Because judging actual impact is domain-specific, money becomes a proxy. It may be hard for a doctor to judge the impact of a mechanical engineer, but they could easily see differences in their income.

Money is both easy to measure and spans every career. That’s why it tends to be the default yardstick for how successful you are. And since aspirations aren’t about necessity, this explains why people want more money than they need to spend.

My income is modest, but I earn more than I strictly need. Despite this, I want to grow my business for the sole reason that it’s one way to measure the impact I have on the world.

How Good a Yardstick is Money?

In industrialized countries, I would argue this second perspective on money is the dominant one. We want more, not because we need it, but because it’s a proxy for success.

But in realizing that we’re not often chasing money for money’s sake, but as a way of measuring something else, sometimes you can see where the two diverge.

This is why I enjoy Tony’s story. Most of us wouldn’t have hesitated—stick it out for another nine months and keep the eight million dollars.

But Tony could recognize that he didn’t need more money, but he wanted to have a greater impact. Sometimes, like growing Zappos, money paralleled that intangible ambition. Other times, they did not. He chose to walk away because money itself wasn’t driving him.

Walking Away from the Easy Dollars

A few years ago I had a freelance writing arrangement worth roughly $50 per hour, at a time when my annual income was under $20,000.

Ultimately, I stopped freelance writing, even though it was “easy” money. At the time, I was well-fed and materially comfortable. I didn’t need the money.

I realized that money itself was only a proxy for what I really wanted—to grow my business. Even if the money was easy, it wasn’t a good yardstick for my less tangible goals.

Could I have done the same as Tony, and walked away from $8 million? I’m not sure. But it’s good to remind yourself why you’re working so hard. Otherwise you might discover one day that you were chasing after the wrong things all along.


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21 Responses to “Could You Walk Away From $8 Million in Easy Money?”

  1. Stefan says:

    Scott, impressive post!

    I see a lot of people in my life (basically because I hang around with nice people) who support themselves and because that is enough, they can work on awesome projects. I think there is a really interesting idea in this for students specific.

    Students don’t need that much money to support themselves, so the threshold should be really low. This means a student like us can do awesome stuff with less of an income than a ‘grown-up’ and enjoy our activities early on. And when you enjoy something yo do without even get paid for it, it will probably turn out in a profitable way. It did for you didn’t it ;)

  2. Michael says:

    Scott, this is a great reminder that we can’t blindly chase money without considering greater pursuits such as making an “impact”.

    I have to disagree with one point though

    “Making $6,000,000 is hardly more satisfying than $60,000.”

    This is a ludicrous understatement and I think most people would agree. Having a disposable income that is 100 times more would be immense!

    I do agree though that there is some point where the satisfaction tapers off. I just find it hard to believe that this figure is 60k.

  3. Nicky Spur says:

    Appreciated the post but I’m not sure I agree. $6,000,000 vs $60,000 makes a difference to me. Material wealth as a means of exchange grants you the ability to buy things you want and/or need, to invest in businesses, to move faster and allows you more room to mess up without agonizing over your financial projections. I understand the sentiment of growing a business for a non-monetary aspect for personal ambition and other reasons but I’d argue to say that having financial means can provide some extra leverage power. What if Tony had failed in his creation of Zappos initially and needed cash to continue a project he knew was going to be a a success? In that case I think having the $8,000,000 could be very, very beneficial.

  4. Hektor Karl says:

    This is an interesting example, though I’d also like to hear from those who turned away good money and then struggled.

    Was it still worth it? (I’d like to believe that it might be, since I agree with your larger point.)

    But we all look smart when the gambles pay off.

  5. Scott Young says:

    Michael and Nicky,

    I didn’t pull $60,000 from the top of my head. It’s actually a researched number that Kahnmann discusses in his TED Talk that I linked to in the supporting citation. In it he goes on to say that beyond $60,000 experiential happiness doesn’t increase (adding, “you never see graphs this flat”)

    So yes–the intuition that $6M differs dramatically from $60k is there. However the research suggests its impact on happiness is negligible.

    There have even been studies showing the effects of wealth that being richer, in fact, makes you feel *worse* about your finances. People who earn over $100k/year have a lower self-assessed rating of satisfaction about their financial health than people who earn less than $100k. Difficult to believe, I know, but I trust data more than anecdote.

    Hektor,

    My point isn’t that Tony’s decision was fiscally wise (it was a crazy bet that just happened to pay off). My argument was that he didn’t need the money materially, so it didn’t matter whether it was the correct “financial” decision, but it was the correct decision to allow him to pursue his career ambitions.

    Just as my giving up freelance writing wasn’t necessarily fiscally wise (I ended up making less money, as a result, in the short term), it was the correct decision since it allowed me to align my income with my true passions and vision for my work–not just the paycheck.

    -Scott

  6. Subramani says:

    Lovely article Scott. The point of reference, as you rightly point out, in such cases ( walking away…) is not financial loss. It is the “other” gains . It could be a proxy for success, it could be a trade off for a more peaceful life, more time for non-material pursuits, more family time etc. There can be so many reasons and invariably they point to a better life and not at a better living ( which may anyway happen as a by-product). Once we sort out the difference between living a life & making a living to live, rest should be easy.

  7. Pete Michaud says:

    I just walked away from a job that was great on paper and would pay me $250,000, plus I was in a position to really make my equity explode. Maybe not $8,000,000, but it was a similar situation.

    The job just wasn’t worth it, it’s in an industry that bores me, and I want to make a lasting impact on people on an emotional and spiritual level. That job wasn’t going to cut it.

    I totally get it.

  8. Mike says:

    I really like your website and think you have given lots of good advice over the years. However I think you’re drawing the wrong lessons here. To take Tony, he knew he had other great ideas (or at least expected he could develop them). For him, waiting a year just wasn’t worth it in consideration of what they call in economics his “opportunity cost”. And Tony was hardly walking away empty-handed; I bet if his deal with Microsoft was zero price for his firm unless he stayed 1 year he would have made a different decision.

    In your case, I think that you (like all of us) come into decisions with preconceived ideas and notions. Most importantly, since they are not conscious we are not aware of their influence. In your case, its age. You have a whole life ahead of you. People in their early 20’s can freely give up the pursuit of material comfort not just because they have special insight that they can live without the material goods society tries to foist on everyone, but because they have so much time to change their course if they are wrong! Your 20’s are a GREAT time to experiment and find out what works for you; if you’re lucky you go down a good path right away, if not perhaps it takes a few years of trial and error. But to tell the general public, not just those in their youth, that they can easily walk away from fortunes and not regret it — I think that is what might be termed “the arrogance of youth” talking, IMHO.

  9. Scott Young says:

    Mike,

    I think you’re missing my point. I’m not arguing that money doesn’t matter, or that you should give up material pursuits. Instead, it’s about recognizing that there’s different kinds of material advancement–ones which align with our broader professional passions and ambitions (as was the case when Tony founded Zappos) and those that don’t (such as staying on an extra year at Microsoft).

    Reasoning from the first point (a) that beyond about $60k/year more money doesn’t make people happier (and therefore isn’t pursued out of necessity, but as a proxy for other ambitions) and (b) that money as a proxy can occasionally fail, it’s about recognizing those inherently difficult decisions about rejecting an unnecessary short-term increase if it doesn’t match the life we want to live.

    As I conclude in the article, I’m not sure I could have followed Tony’s footsteps–even after explaining my logic, I sympathize with how difficult it is to walk away from more money you don’t technically need.

    -Scott

  10. I have a rule to always calculate my income/hour rate. Sure sometimes you are working on long term projects that will give you a sizable income down the line, those I do, since I don’t get paid now I need to do them anyway.

    But when looking at a job I need to make enough to survive and then I need to make enough to keep me motivated. If I get paid less than my 45 dollars/hour minimum wage I walk away.

    But I don’t work more than I need, I make the money I need on short term projects. The rest of my time I work on long term projects that will make me a lot of money down the line.

  11. I think an important part of the story here, though, is that he’d already sold his company to Microsoft, so he’d probably received many, many millions already. He turned down additional money, but he didn’t walk away a poor man.

    Are there things that are more important than money? Of course. Is it worth it to take risks? Absolutely.

    But there’s something to be said for the role that financial security plays in being able to take risks and pursue your dreams as well.

  12. Hun Boon says:

    Hi,

    Have you considered the possibility that the $8m was contigent on Tony hitting certain performance targets, and that he left because he knew he wouldn’t be able to achieve them?

    LinkExchange didn’t last for too long; banner ads was a short-lived technology. It’s a smart move by Tony to leave before the company’s fortunes started dipping. Plus, he would have that fantastic story to brag about for the rest of his life. :)

  13. Scott Young says:

    Hun,

    I don’t know the details of his contract, but as he writes about the lack of difficulty in order to stay at work.

    Mandi,

    You’re right–the $8M was on top of another $32M for the company.

    -Scott

  14. TerraByte says:

    I think the example of Tony gets in the way of seeing a larger point. Society judges a person’s “success” or “value” in terms of their wealth. Snooki (Nicole Polizzi from “Jersey Shore”) earns more salary in a year than President Obama and her Congressional representatives combined. Is she more valuable to society? Is Charlie Sheen more successful than the country’s best cardiac surgeon? He makes a lot more money. How about all those bankers and hedge fund managers. Are they more successful than teachers and firemen?

    Money is like oxygen. You need 21% oxygen in the air you breathe or you’ll die, but too much oxygen can have harmful consequences as well.

  15. Hey Scott,
    I have become jaded with material things in my life unless they are of practical use to me. Money as a means of measuring impact sounds to be more in alignment with what money means.

    An abundance of money to me means more time and more variety in life. Think of how much time people spend in jobs that they don’t even like.

  16. [...] H. Young starts us off with a very interesting story about Zappos CEO Tony Hsieh. Could you have walked away from $8 million in easy money? Because that’s exactly what Hsieh did after selling his first company to [...]

  17. Dave says:

    Hi ,

    the decision wasnt really a financial one.
    It was more along the line will i deal with having to do something i disdain and am required to or will i follow my dreams. It just so happened following your dream in this case equalled 1 Billion dollars ;) .
    But he didnt know that… ! So following dreams doing what you love equals success. (more or less ;) )

    Greetings from germany
    Dave

  18. Sibyl says:

    Scott: What a great story and message. I am definitely in agreement with you that you have to make certain you aren’t chasing after the wrong thing. I think if you are sincere and doing what you are passionate about, the money will always follow. I know we hear this time and time again, but it really is true and this post serves as confirmation of that reality. Thanks for the inspiration this morning. I loved this post.

  19. ahmed says:

    The post is completely off mark and fails to understand what risk actually means without understanding the proverbial graveyard of failure (quote:nassim taleb). This post somehow is advertising risk, and is underestimating the importance of luck. As taleb points out, you can become a professor or own a BMW by hardwork, but to win the noble prize or to own a jet requires enormous amounts of luck. So giving examples of lucky people to support your argument is misguiding. Here’s a post on the graveyard of failures and the types of risks that people should preferably take, avoid careers which produce superstars like tony.

    http://amaurosis-fugax.blogspot.com/2011/04/dreams-and-careers.html

  20. Scott Young says:

    Ahmed,

    Entirely not my point. I was not arguing that Tony’s decision was fiscally wise (I’m a fan of Taleb’s epistomology). I’m arguing that, in already having enough money, sometimes it makes sense to forfeit extra “easy” money in the pursuit of other ambitions. Sometimes that decision pays off financially, many times it doesn’t.

  21. David says:

    I have heard of the $60K study a few times, and laugh at it each time I see it. As someone who has made $60K, $600K, and $1.3MM in annual income I can tell you that the resultant success and satisfaction isn’t minor in any way. I felt far more confident in my ability to secure my family and help others once I reached $600K than I ever would at $60K. At $60K I felt quite poor. While the fellow in this story was blessed to be successful later on a larger venture, there is never a likelihood of that happening. It would be a bad decision 95% of the time. You don’t always get to do the work you want to do, and the “follow your dreams” BS doesn’t pay the bills. I don’t love construction but I sacrifice today to be able to do what I want in the future with no constraints on my time. Retiring at age 35 is well worth not getting to do what I love today. When you sacrifice to achieve future goals, then you do get to own a luxury car dealership (or whatever your passion may be) just for the heck of it and “not for the money.” So walking away from $8MM can only be classified as a poor decision for 95% of folks. Even if you did not need the money yourself, you can impact that many more lives. I can setup numerous animal shelters, homeless shelters, soup kitchens, etc with $8MM.

Debate is fine, flaming is not. Pretend that this comment form is a discussion taking place in my house. That means I enjoy constructive criticism and polite suggestions. Personal attacks, insults and all-purpose nastiness will be removed especially if it is directed at other readers.

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