The Few, the Tech-Savvy Few: Option Millionaires

Stories in this Series

  • Series Overview: The Haves and Have-Nots — Over the past generation, the financial gulf between the rich and everyone else has widened. Uri Berliner examines the phenomenon.
  • Part 1: The View from the Top — At the top of our income distribution, life is sweet... sweet enough to send private jet sales up sharply. John Ydstie reports on why inequality is growing again and discusses some of the ideas for restraining it.
  • Part 2: Ivy Tower, Blue Collar — What's it like to be a not-so-rich kid at a private, elite school like Amherst? Jim Zarroli finds out.
  • Part 3: Big Hoops Dreams, Tiny Paychecks — The average NBA player makes more than $5 million a year. One notch below, athletes in the NBA's development league earn as little as $15,000 a year. Tom Goldman reports.
  • Part 4: Fears Overblown? — Some economists aren't all that concerned about a growing income gap. They believe a society that allows the market to reward education and skills is moving in the right direction, and worry about the unintended consequences of government intervention. Adam Davidson reports.
  • Part 5: Married with Money — Part of what's driving income inequality: Men and women in high-paying fields tend to pair off and form high-income families. Chris Arnold reports.
  • Part 6: Lucky Strikes — During the golden stock-option years, some employees struck it rich... but others came too late or just didn't time it right to share the wealth. Wendy Kaufman reports.
  • Part 7: When the Good Jobs Vanish — What happens to factory workers when their well-paid manufacturing jobs move overseas? Jim Zarroli reports.

The high-tech explosion over the last 20 years or so has minted stock-option millionaires by the thousands. Often it was just a matter of being at the right place at the right time.

Grace Stahre is a 31-year-old independent multimedia producer. She's talented, attractive, friendly and tech savvy. A wide smile crosses her face as she recalls being introduced to technology during her sophomore year at the University of Texas.

"A friend asked for my college e-mail," she remembers. "I said I don't have one. I don't have time for that... and he said, 'What? are you insane?'"

He came to her house, and armed with a modem, he set up an e-mail account and hooked her up to the university's computer system.

"And he's like 'get over here.' He makes me sit down. We're going to surf the Web, and he downloads a [James Bond] movie trailer, and that's all it took, watching this movie trailer on my machine. And the next day I added management information systems to all my other majors."

When corporate recruiters came to campus, she was ready. She recalls Microsoft's recruiter telling the students that the company's stock had been rising '25 percent a year.'

"And we're like 25 percent a year," Stahre says, "'I can deal with that... and I get more after a review, oh my gosh.'"

Her first year at Microsoft didn't disappoint financially. Though her salary was modest, the stock options she received were already worth about $150,000, at least on paper. She didn't have access to the money yet. But her prospects were glorious. The year was 1999, which would turn out to be significant.

Stahre's friend Jeff Reifman started his career at Microsoft eight years earlier. A new computer science graduate, he chose the company over a higher-paying — but temporary — job with IBM. He celebrated his 21st birthday his first week on the job.

"At Microsoft, there was a program you could [use to] follow your stock during the day," Reifman says. "It was part of the cult of the company. I remember this very clearly one day... sitting across from my hall mate, when we realized our stock was worth about $100,000, and laughing and saying how unreal that was."

But while he was laughing, others who worked at the company were not.

Richard Pauli worked side-by-side with company employees who wore blue badges. Pauli wore an orange one, signifying a contract worker. Contractors didn't get company benefits, and that meant no stock grants or options.

"I could always say I worked at Microsoft, but could never say I worked for Microsoft," Pauli says. "That was what was kind of tough. People I worked with are probably retired by now."

Microsoft was eventually sued for its employment practices involving contractors like Pauli. As part of a massive settlement, Microsoft paid out $72 million to about 8,500 workers. Pauli says his chunk of money was enough to buy a new car, but it wasn't nearly what it might have been.

While no one knows the exact number of Microsoft millionaires, Seattle economist Richard Conway has estimated that approximately 10,000 were created by the year 2000.

Jeff Reifman was one of them. When he left Microsoft in 1999, he had about $6 million worth of stock. He feels extremely fortunate to have been at the right place at the right time, but he says he was lucky long before that.

"I grew up in an upper-middle-class environment and was well-prepared to take advantage of opportunities I came across," he says. "The truth is, outcomes have a lot more to do with how lucky we are at the beginning than we care to admit."

Today, Reifman volunteers his time as a technology expert. Hoping to foster more independent voices in the media, he recently began a collaborative, news-networking site called Newscloud.

Back at Microsoft, Grace Stahre, who had been lured to the company with stock options, was watching her fortune fade.

"I felt like I kind of came in at the end of the ride," Stahre says.

In the 18 months before she joined the company in mid-1998, the stock price rose from $13 to $21. As an employee, she watched it soar to $30, $40, up to $51 a share. Then, the dot coms imploded, and Microsoft stock plummeted. In a relatively short period of time, the stock lost half its value and languished for years.

Because of the way the stock options worked, Stahre couldn't sell at the high. Instead, she sold most of her stock at $26 a share — just $5 more than it was when she started at the company seven years earlier.

"It wasn't a guarantee," Stahre says,"it's gambling. That's all stocks are — gambling."

Stahre left Microsoft two years ago. She arrived at the company in time to garner a small nest egg: about $30,000. But she was a few years too late to derive enormous wealth.

Looking back, she's reflective and happy to be out of an environment where, as she put it, "You begin to think you need wealth to pursue your goals, your dreams. And that by letting go, it has forced me to be creative, to find community, to look beyond the security that wealth can bring and find it in other places."

Today, she lives frugally, trying to build her multimedia company — which, by the way, has not yet turned a profit.

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