The Compound and Friends - Building Personal Equity (Tadas with Dasarte Yarnway)

Starting point is 00:00:00 Hey, Desarte, how are you? Doing so well. Thank you so much for having me on this podcast. That's awesome. I'm on the line with Desarte Yarnway, who's the founder of Birkenell Financial Group, a fee-only financial planning firm headquartered in San Francisco. Desarte is also the host of the Young Money podcast. I asked him on today to talk about his most recent book, Pay Me in Equity.

Starting point is 00:00:22 The book really, to me, has two main messages as I see it. One is the importance of understanding the different types of equity compensation available to you as an employee, especially if you're in the startup space. Second, Desarte looks at the idea of equity in a broader context and how it can help you outside the scope of the office. So, Desarte, you've already written a couple of books. What prompted you to write another one? Well, a couple of things motivated me to write this book. Just this year in the San Francisco Bay Area, we've seen a bunch of IPOs, right? And it would be millennials coming to my office with these massive checks saying that they didn't know what to do and they didn't even know that they had equity. So for a lot of these millennials,

Starting point is 00:01:02 They didn't know what to do and they didn't even know that they had equity. So for a lot of these millennials, primarily millennials of color, it was an education process. Like what is equity and what was I invested in to get these checks? So I thought that with, you know, 10, 20, 30 people coming into my office with the same question, I would write a guide that would allow them to educate themselves on how to properly, you know, execute on the equity options that they had and grow their personal equity. And that's how Pay Me In Equity was born. So it's almost like you had a perfect test case there. You knew there was a built-in audience, and you're kind of trying to solve a problem, as it were.

Starting point is 00:01:40 Absolutely. And I think that not only was that happening at the same time, it were. Absolutely. And I think that not only was that happening at the same time, just popular culture is really rooting for equity in this space, right? So if you read the book, you'll see these examples of artists and business people who really built their wealth and their fortune on owning their equity. And I thought that was something that anybody could relate to. Yeah, one of the things I really liked about the book is that it lays out in, I want to say layman's terms, kind of the different types of equity available to employees. And I thought you did a nice job of kind of explaining all of those. And kind of one of the important, kind of one of the through lines is kind of the importance of taxes,

Starting point is 00:02:24 both for the individual and for the startup when it comes to issuing these different types of equity compensation. Absolutely. So the thing is, when you hear about equity, it's like, what do I have? Like, what do I have in my offer? Right. So I wanted to really outline the four different types. You have ISOs, which are incentive stock options, NSOs, employee stock purchase plans and RSUs, which is really popular here in Silicon Valley. I wanted to make sure that I was giving people the definition and real time examples of what that looked like. And I think that it was really helpful for a lot of the people who read it. the people who read it. Well, and I think the other one of the key points is that, you know, understanding this upfront, especially when, you know, if you're fortunate enough to be comparing two different opportunities, being able to compare those packages, which are likely going to differ

Starting point is 00:03:17 in some form or fashion, being able to compare those on an apples to apples basis is important. Absolutely. As a financial advisor and, you know and working at Ritholtz, you know that the name of the game is how do we mitigate risk while still achieving some growth, right? So when you look at it from a career perspective, you want to make sure that you're putting these things side by side and saying, hey, I'm taking more risk with this deal here, and maybe I feel more comfortable with taking less equity or more equity in another opportunity. So for me, I feel like our job as investment advisors are really being investment counselors.

Starting point is 00:03:55 On one end, we're talking about the financial nitty-gritty stuff, right, the time horizons, the goals in between now and whenever. But on the other end, we're doing a lot of emotional counseling and helping people make very difficult decisions for their lives. Yeah, no, you know, it's a horrible cliche, but personal finance is really personal. And you talk about those trade-offs involved. And one of the things that you mentioned,

Starting point is 00:04:19 which you talk about in the book, is that, you know, when people come to join a startup, they may not realize how long of a process it is to go from, uh, you know, from startup to IPO. And, uh, you know, that's a, that's, that can be a very pretty long path. Yeah, it could be years. And I was, I was, where was I? I was by my office a couple days ago and a guy that I met, um, we went and we had a drink, and he was like, you know, they say that six out of ten startups fail. I've jumped around in the last ten years to seven different startups, and I would say that number is closer to nine out of ten, right? So when you think about that, it's like, this is really an important decision for a lot of these people.

Starting point is 00:05:04 really an important decision for a lot of these people. So I just wanted to make sure that people had the tools and understand what they were going up against as they were, you know, crossing these new terrains. Yeah, it's very much, it's very much a bet on the future. And, you know, that's, you know, as we all know, that that's always a risky proposition. Absolutely. You know, but which is, which is kind of a great segue, because, like I said, part of the first part of the book really kind of gets into the details about the financial and technical aspects of equity. So not really equity in a company, but really the idea of building equity in yourself, both from a professional standpoint and from a personal standpoint. And it sounds like that, I think that was probably an important part of the message for you as well. Absolutely. When I think about personal equity, I define it as your holistic well-being. And holistic is something that just encompasses

Starting point is 00:06:05 every part of you and your value system, right? And when we talk about equity from a financial services perspective, we're only talking about anything that relates to capital markets or real estate, really, right? So I wanted to create something, a guideline or rubric, that really defined each of these pillars that could really add significant joy, happiness, and satisfaction to your life, right? So we summarize those in what we call our seven pillars of personal equity. Yeah, no, I really like those. And one that I particularly, the one that really jumped out to me was ownership. And just kind of the idea of, you know, you know, taking owner, you know, taking ownership of different aspects of your life. And so we're obviously talking about one aspect of it in terms of, you know,

Starting point is 00:06:50 financial and sort of equity compensation. But ownership is really kind of a great watchword for other parts of our lives as well. Absolutely. So if you read that part on personal equity, you see that I say that some non-negotiables as it pertains to the pillars of personal equity would be faith, right? Just having the belief that you can do whatever it is that you want to do, right? Focus, just being so precise that whatever you put your mind to, you stick to that goal until it sticks to you. And then fitness. You can't run a race if you can't run, right? So it's important that we keep ourselves both mentally and physically fit. Now, when you go down to ownership, it's so important that you figure out what it is that you want to own. That could be your family ethics, your values, right? Real estate, capital markets, equity, or any intellectual property that you may create. As you mentioned before, I've written a couple of books. Two of those books were self-published, right? And this is something that I own. So I think that it's so important for people to really

Starting point is 00:07:53 define what it is they want their life to look like, design that vision, right? And then run after that with vigor. And that's what this whole part about personal equity is about. No, I think that's great. And I think you've, you've, this is kind of a topic that you've been touching on with kind of in your podcast with, with other financial advisors and financial planners kind of talking about building out kind of the aspects, engaging with clients on topics that move beyond just kind of the numbers on the screen and get into some of these bigger, broader aspects.

Starting point is 00:08:37 Absolutely. At the end of the day, when I think about ownership, there is a narrative that each and every one of us are writing, right? And we have the power to control that narrative right now with what we do, what we say, and the energy that we put into the atmosphere. Now, when I ask those financial advisors those questions, and as I think about that question by myself, I want the work that I do today to be able to reach people in places and spaces that I may never go, right? I want the plans that we set forth for our clients to be able to reach people in places and spaces that I may never go, right? I want the plans that we set for our clients to be able to impact their great grandkids and people that they may never

Starting point is 00:09:12 meet, right? So I think that as we talk about equity in general, as we talk about personal equity, especially from an ownership standpoint of values, philanthropy, it's important that we think about those things in detail and we really run the race. Well, that's a that's a kind of a perfect summation of not only kind of the ideas in the book, but also kind of what you're building. And so I would let's leave it there. But I appreciate you taking the time to start. And we will point people to the book. And thanks. Thanks very much for your time. Thank you.

The Compound and Friends - Building Personal Equity (Tadas with Dasarte Yarnway)

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