The Year I Lost Sixty Percent

By 1999 I thought I was good at two things: running a telecom company, and investing. I was half right.

The company was real. I had started it in 1991 with nothing, spent months getting escorted out of Toronto office towers by security before the phones rang, and built it into a business making over two hundred thousand dollars a year in profit by the end of the decade. Every year, I took those profits and put them into the stock market. And every year the market went up, which I interpreted as skill.

Until that point I had never thought I needed an investment advisor. I just bought stocks and expected them to keep rising. And they did, until they didn't.

Everything at Once

The dot-com crash took more than sixty percent of my investments. That number is easy to type and was very hard to live. A decade of profits, the entire financial output of the hardest years of my working life, cut by more than half while I watched.

And the timing could not have been crueler, because the crash didn't just hit my portfolio. I had recently started a software company in the dot-com sector, and it needed capital to grow. My plan had been simple: fund it from my investments, or raise from venture capital. Suddenly both doors were closed. My portfolio was wrecked, and every VC in the market was either spooked by anything with dot-com in the pitch or nursing their own losses. Access to cash, everywhere, was gone.

I was not willing to pour my depleted reserves into the software business, so I closed the division and refocused on the telecom company. Two losses in one year: most of my portfolio, and a company I had wanted to build. Both, at the root, from the same mistake. I had confused a bull market for competence, and I had left myself with no liquidity exactly when liquidity was the only thing that mattered.

The Overcorrection

Here's the part of the story I'm least proud of, and the part most people leave out of their crash stories: I overcorrected, hard.

For the next eight years I invested my business profits with almost comical conservatism. Money market funds, GICs, T-bills, certificates of deposit. Two or three percent returns while the market recovered and ran. I told myself it was discipline. Some of it was just fear wearing discipline's clothes. Anyone who has taken a real loss knows the difference is hard to see from the inside.

But buried in the fear was a genuine insight that took me years to articulate. As an entrepreneur, I already had enormous equity exposure: my company. My business was, in effect, the largest and most concentrated stock position I would ever hold, leveraged to the same economy as every share on the exchange. When the economy turned, my portfolio and my business would fall together, and my business might need cash at exactly the moment my portfolio could least provide it. The standard advice, pile your savings into stocks and bonds by age, was built for people with salaries. It was never built for owners.

So the cash pile stopped being fear and became strategy. A third of my wealth in the business, a third heading into real estate, a third liquid and boring. Dry powder, waiting.

When the Powder Mattered

Then 2008 happened. Ka-boom. The biggest financial disaster in decades, credit markets frozen, and this time I watched it from a completely different position. Other business owners were trapped in illiquid securities or facing margin calls on accounts they had borrowed against. I had cash, and everything was suddenly on sale.

That cash bought my first apartment building that November, in the middle of the storm, at a discount, a story I've told in full in The Week the Bank Pulled My Loan. It bought three more buildings in the three years after. The decade of returns those buildings produced traces directly back to the sixty percent I lost in 2000 and what the loss forced me to understand.

The Accounting, Honestly

I want to be careful not to gift-wrap this. The eight conservative years had a real cost; sitting in T-bills through a recovery leaves returns on the table, and mine did. If the crisis had arrived in 2018 instead of 2008, my caution would read as a mistake instead of a masterstroke. Every lesson from a crash is partly a story we tell afterward about luck we survived.

But two things from that year I will defend without hedging. The market can take away a decade of work in months, and it owes you nothing, no matter how smart the last five years made you feel. And for anyone who owns a business, liquidity is not a drag on returns. It is the option on every opportunity the next panic will create, and the insurance on the company that feeds your family. I lost sixty percent learning that. The buildings it eventually bought suggest it was, in the end, tuition.