6 Things We Can Learn From The Facebook Graffiti Artist

David Choe accepted Facebook stock instead of cash as payment for a freelance gig.

David Choe, 36, is an accomplished painter in Los Angeles who has exhibited his work in galleries and museums. But he achieved worldwide fame this week when tweeters and headline writers dubbed him “The Facebook graffiti artist.” The accompanying story was less about his success as an artist, than about his success as an investor.
As you may have already heard (if not, it’s reported here), in 2005 Sean Parker, then Facebook’s president, commissioned Choe to paint graphic sexual murals on the walls of Facebook’s first offices in Palo Alto, Calif. He had a choice of being paid thousands of dollars (we don’t know how many zeros were involved) or receiving shares of Facebook stock worth an equal amount. Choe opted for the stock. When Facebook goes public, that stock will be worth an estimated $200 million.

 

It’s a great anecdote that we can all enjoy vicariously. But Choe’s success is the stuff of dreams. Most of us can’t come close to replicating it, either as freelancers, employees or investors. Those who try could get badly burned in the process.
Instead of chasing the next hot stock, we should look at Choe’s story as a parable. Here are some lessons we can learn from it.
1. Most freelancers need cash, not stock. As I wrote in my post, “How To Make Money Without A Job,” setting a fair fee and paying your expenses while you wait for clients to cough up what they owe, are two huge challenges of being self-employed. Choe’s investment only paid off because he could afford to hold the stock while it appreciated in value. If he had needed money to pay his bills, he would have had to opt for cash instead.
2. Invest in what you know. When you accept stock (or stock options) as compensation, you are making an investment. And to paraphrase Warren Buffett, you shouldn’t buy stock in companies if you don’t understand their business or can’t influence their bottom line.
People lost sight of this fact in the late 1990s when stock-option fever hit. Pay packages for everyone from secretaries to high-level executives were heavily weighted with stock options. Many people got rich on these options, but when the market swooned many others were left holding options that were underwater.
Choe actually made a mistake here: Back in 2005, when he took on the project with Facebook, he reportedly said he thought the whole idea of the company was “ridiculous and pointless.” He invested against his better judgment. And he happened to get lucky.
3. Be prepared to lose your entire investment. Most start-up companies don’t go public. For every dot.com millionaire, there are many more casualties of enterprises that failed. They include former employees whose compensation consisted mostly of stock in companies that went bust; independent contractors like Choe; and venture capitalists.
The stock that Choe received in exchange for his services turned out to be worth a lot of money. But what if Facebook hadn’t succeeded? In that case, he would have essentially painted the murals for nothing, or practically nothing.
4. Don’t put all your eggs in one basket. Chances are, Facebook started out as a miniscule part of Choe’s investment portfolio. Once the company goes public, it will probably comprise most of his net worth. He should think about diversifying.

5. If it sounds too good to be true, it probably is. The Facebook story is making us collectively giddy and euphoric. That could lead us to be more susceptible than usual to scams and get-rich-quick plans. When considering new investments, don’t slack off on your due diligence.

6. Do what you love. When he took on the Facebook assignment, Choe probably wasn’t thinking about getting rich. He was doing work that he enjoyed, which is always a good policy. That career strategy might not make you a millionaire. But one way or another, you’ll be richer for it.