The Year I Lost Sixty Percent

By 1999 I thought I was good at two things: running a telecom company, and investing. It took the market about six months to tell me I was half right.

The company was real, 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. 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 Father in the Driveway

But the loss was not frightening simply because of the money. By then, I was no longer just the president of a small telecom company.

I was a father.

Those are very different jobs.

There is life before a child and life after one, and the change is more complete than anyone can explain to you beforehand. Before my son was born, a bad decision belonged mostly to me. I could recover from it, work harder, start again. After he was born, every decision seemed to carry another person inside it.

My son was only two. He was far too young to know that the stock market was collapsing, that the software company I had started was running out of options, or that a decade of business profits was disappearing from my investment account. He did not know that his father felt like a failure.

And I was determined that he would not.

My wife knew, the way she always knew. The determination was for him.

On the drive home from work, I would try to process whatever had happened that day. The falling markets. The shrinking accounts. The company problems. The fear. I used those few minutes in the car to put everything somewhere before I opened the front door. Then I walked inside and became a husband and a father. The problems stayed in the driveway.

At least that was the idea.

From the outside, everything looked fine. The company was profitable. We had a home. My wife and son were safe. Nothing had been taken from them. Objectively, we were doing well. Privately, I felt as though I had failed them.

That is one of the strange things about financial loss. The numbers can remain entirely invisible to the people around you while changing the way you experience almost everything. Nobody at the dinner table can see the thought running beneath the conversation: I could be one bad decision away from not being able to take care of my family.

That thought was not rational. Even after the crash, we were not close to missing a meal or losing our home. But fear does not perform an audit before it enters the room. It simply arrives.

And once it did, I changed.

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 put the profits from the business into GICs, money-market funds and treasury bills. Two percent. Three percent. Safe, dull, almost aggressively uneventful. 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.

At dinner parties, friends would talk about stocks. They were making money again. Technology was recovering. Someone would inevitably say, "You have to own tech." I would smile. Sometimes I would nod. Inside, I was thinking: You have no idea what losing feels like.

But buried in the fear was a genuine insight. 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.

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.