The Things to learn from the Facebook artist – Part 1

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, 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.

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.

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Posted by Usman Khalid on Feb 4 2012. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.