Introduction

Why You Need This Book

I met Damocles about ten years ago. He was a vigorous seventy at the time, and I happened to be seated next to him at a venture capital conference held in a downtown high-rise.

Maybe you’ve been to one of these conferences, where established businesspeople with money to invest—mostly older men—come to mix with eager young people pitching nifty ideas.

I’d accepted the invitation more out of curiosity than a desire to jump into a new business, but I sat with the group of potential investors. Before the show started, I started exchanging pleasantries with this remarkable man.

I was immediately impressed. Damocles had built up a line of minicomputers back in the 1980s and then successfully sold his business to IBM when he was in his fifties, just before minicomputers became obsolete. IBM had paid him tens of millions of dollars, equivalent to much more in today’s money.

He’d been retired for nearly two decades, and he had that wonderful look—the relaxed smile of a wealthy, accomplished man. I learned that he lived in a fabulous neighborhood, right next to the Congressional Country Club. He and I enjoyed the show together, laughing at the questionable pitches and comparing notes on the best ideas.

We exchanged cards, and a few days later, I gave my new friend a call. I’m on the board of a nonprofit that provides social support to kids with cancer and their families. Our annual gala was coming up, and I was expected to invite as many wealthy people as I could—folks who could afford the $250-a-plate ticket. Because he lived nearby, Damocles seemed like a sure bet.

When I called, we again chatted agreeably, but when I asked if he’d attend the gala, he hesitated. I began to explain how meaningful I found the work of this nonprofit, but he didn’t let me go on too long before he interrupted.

“Michael, it’s not that I don’t want to help. It’s that I don’t have the money.”

I laughed because I honestly thought he was joking. “No way! Didn’t you make tens of millions of dollars when you sold your company?”

“Yes,” said Damocles, “but I’ve made a few financial mistakes since I retired. You might call them big mistakes. I’m now down to my last $200,000.”

I still thought he was kidding. “Come on! Just the other day, we met at a venture capital event. Weren’t you there looking for new ideas to invest in?”

“No, Michael. I wasn’t there looking to invest. I was looking for a job. I’m pretty desperate, and I thought maybe one of these startups needed a CEO. That’s the only job I know how to do—be a great CEO. Unfortunately, nobody wants a seventy-year-old CEO.”

Damocles is not my friend’s real name, of course, and I won’t burden you with all the mistakes he made with his money over the years. I will only mention the dot-com bubble at the turn of the new century and the fact that Damocles had a stockbroker for a son.

The Sword above the Throne

In the ancient Greek tale, Damocles lived in the court of Dionysius II of Syracuse. One day, when he was praising the power and wealth of Dionysius, extolling the king’s great fortune and magnificence, Dionysius made Damocles an offer. The king suggested that his courtier switch places with him for one day so Damocles could really understand what it felt like to be so fortunate and magnificent.

Naturally, Damocles accepted. The next day, he seated himself eagerly on the king’s throne, surrounded by gold and silver and attendants. But to ensure that Damocles got a full understanding of a great fortune, Dionysius arranged that a gigantic sword be hung right above the throne, suspended by a single hair from a horse’s tail.

All day long, Damocles stared nervously up at that sword, until he finally begged the king to release him from the throne, realizing that with great fortune and power always comes great danger.

When he related this tale, the philosopher Cicero asked, “Does not Dionysius seem to have made it sufficiently clear that there can be nothing happy for the person over whom some fear always looms?”

Seeing the Sword

As a financial advisor who works with many wealthy individuals, the conversation with my own Damocles really shook me. I asked myself, “How could a person so successful in business—a former CEO—make so many mistakes and do such bad planning with their own money?”

I began to think about the successful entrepreneurs I knew in my advisory and quickly realized that the mistakes of this particular Damocles were not at all unusual. When I did a little research, I found his situation quite common.

In fact, I found examples right in my own family.

I have a group of relatives who were natural entrepreneurs. For a time, they were extremely wealthy and were the envy of everyone I knew when I was growing up. These relatives started in the garment industry back in China and then moved into large-scale recycling when they came to the United States. They figured out how to collect massive quantities of copper wiring and electrical components—even whole ships—and send them over to China for separation and processing.

As their wealth expanded, so did their businesses. They moved into power generation in China. Then tourism to China. Unlike most people, they not only saw brilliant opportunities but also made the most of those opportunities and had the much-celebrated entrepreneurial courage to take risks. Eventually, they worked out of an office in a Manhattan skyscraper, threw enormous parties, and bought spectacular homes.

But all along, these very smart people failed to notice the sword hanging above their heads. It was a sword that hung by a single thread: the trade policies of the Chinese governing imports, tourism, and joint ventures. When one day, lo and behold, government officials made changes to these policies, all the family enterprises came tumbling down in the space of just two years.

To the shock of my extended clan, these once-awesome relatives went bankrupt.

When that occurred, the great patriarch of the businesses was in his eighties, and he lived to see all three of his sons go bankrupt with him. One son even went to jail. Can you imagine falling from that height when you are in your eighties? Can you imagine seeing your family go down with you? Fortunately, the bankruptcy judge allowed him to keep his Manhattan condo so he would not become homeless.

Throughout this book, you will hear more stories from my clients and from my own life about the ways in which the entrepreneurial personality often destroys the very wealth it creates.

Escaping Fear

This is a book for successful entrepreneurs who may or may not see the sword of Damocles hanging above their own heads. People who have the entrepreneurial instinct but need to make sure that instinct brings them happiness instead of pain. People who love to take risks but need to control those risks when it comes to their personal lives.

Unlike most books for entrepreneurs, this is not a business book; it’s a wealth management book. Indeed, one of my key goals will be to get you to move your wealth, little by little, out of your dangerous throne room and into a safer place.

Most of my readers will be in their forties, fifties, or sixties. You may be in the midst of your business growth, not yet thinking about your exit from your business. You may have begun trying to plan your exit. Or you may think you love the company you built so much that you will never wish to leave.

For younger readers, this book will not just help you plan ahead but also make sure that as my subtitle promises, you learn how to develop wealth beyond business and life beyond work.

Along the way, I will urge you, no matter your age, to move toward what I call a work-optional lifestyle, in which you continue to pursue your entrepreneurial passions while expanding your horizons.

Without fear.

For Retirees Too

Entrepreneurs who have already exited and retired may not think this book will have anything unique to offer them.

But I have found that my clients who are retired entrepreneurs face special challenges, both psychological and financial. Often, they struggle with the loss of identity that follows retirement from leadership roles. Often, they have to overcome financially risky habits acquired in a lifetime of risk.

Successful entrepreneurs have often established an expensive lifestyle, and when they retire, they will find themselves facing financial stresses they never believed they would encounter when they left the head office behind.

In chapter 2, I discuss the six pillars of wealth management, most of which still apply in retirement—sometimes even more so. Subjects such as wealth preservation, heir protection, and the right way to handle charitable giving are often more important at seventy than...