I Have Watched People Get Rich in a Single Morning.

It happens in one morning. The company goes public, and a number someone has spent ten years chasing is suddenly just sitting there, bigger than anything they have ever seen in one place.

And the first thing I have to do, every time, is talk them out of believing it.

Not because it is fake. Because it is not what it looks like yet, and they are already making real decisions on top of it.

Say the number is four million. On the morning it lands, here is what it actually is.

Most of it is not money. It is stock, and in most deals you cannot sell it for months. How long depends on the lockup you agreed to and the rules your own company sets after that. The price does not wait for you.

And part of that number is already spoken for, though how much depends on what kind of equity you hold. If yours are the restricted units that turn into shares when the company goes public, that was the day the value counted as income. Taxed like wages. Set right then, whether you ever sell a single share or not. If you hold options instead, the tax works nothing like that. Most people assume it does.

Here is where people relax, and it is the wrong place to relax. Your company holds back a pile of your shares to cover the tax. It looks handled. It is not handled. That withholding comes out at a flat rate the government sets for this kind of pay, the same rate they use on your bonus, and it has nothing to do with what you actually owe. It is 22%. If your real rate is 35%, nobody forgave the other 13. It is late, not gone, and it is yours. Once this income crosses a million dollars they have to withhold at 37%, which finally catches the top federal rate and still ignores whatever your state intends to take.

Now put that next to the other thing, because almost nobody does. The tax was set on what the shares were worth the morning you got them. The stock can fall for every one of the months you are locked out of selling it. The tax bill does not fall with it.

Most people cannot tell me which kind of equity they have. They know the number. They do not know what it is made of.

So what is actually yours to use that week, free and clear, is a fraction of what you are looking at.

That part people can hear. What I have never talked anybody out of is what the number does while they wait.

It starts spending itself.

The questions I get in those first weeks are about the house. About the date they are going to walk in and quit. Almost nobody asks me what they actually have. They are already living as the person that number would make them, and the number is not real yet.

The ones who get hurt are rarely the ones who owed the most tax. They are the ones who committed to something before anybody could tell them what they were working with.

I have sat with the other kind. They made the decisions months earlier, back when it was all still hypothetical and nobody in the room was excited. So when the morning came, they did not have to be careful under the weight of it. The deciding was done. There was nothing left for that number to talk them into.

The morning the money is real feels like the day everything gets decided. It is really the day you find out whether you decided already.

On Tuesday I will lay out the actual decisions. Starting with the one nobody makes because it sounds too basic to matter, which is finding out exactly what you own before it is worth anything.

Talk Tuesday.

— Mateo