How I made, and lost, a million dollars before my 25th birthday, at Microsoft
The demise of the stock options changed the company
Holding my breath, I hit Refresh to get the latest MSFT stock price. $21.88. I cringed. It was official. I had just watched a million dollars of Microsoft stock options evaporate in a matter of months. In another browser tab, the news. Grim articles about the war on terror, the antitrust case, and yet one more hot software startup going under today. 2001 was the end of an era. 10,000 Microsoft employees became millionaires in the nineties. I was there early enough to feel the tail end of that.
When I was hired in 1997, Microsoft was a vibrant place, full of some of the smartest software engineers in the world. The energy was everywhere. We worked 60–80 hours per week and loved it. I often slept in the office. Windows and Office were in the top of the world. I wrote several nostalgic stories in my blog about the good old days at Microsoft, like “Memories from working at Microsoft in the nineties”, “The night I pulled an all-nighter for Bill Gates” and “Bunnies and Bees, Patenting at Microsoft.”
I was a kid, fresh out of school, just an entry level engineer (level 59). Nothing special about me. Yet in my first 18 months at Microsoft, I saw my initial grants of stock options rise over a million dollars, stock splitting twice (in 1998 and 1999), giving me just a little taste of what the previous generation of microsofties had. It was intoxicating. I had spent my entire life under the poverty line. Yet all of a sudden I was a millionaire on paper before my 23rd birthday. Heck, we were all millionaires on paper — anybody that had been hired before 1998 was a millionaire by 2000. That made it very easy to work intense hours with a smile. I bought myself a new convertible Porsche in cash, midnight blue with tan interior, drove it really fast, and got lots of speeding tickets. Life in the fast line.
There was a fundamental piece of advice that I could have used when I joined Microsoft in the nineties. Unfortunately, that piece of advice wouldn’t come to me until a decade later, where, at an Amazon company meeting, I would hear Jeff Bezos say, “Look, when the stock is up 30 percent in a month, don’t feel 30 percent smarter. Because when the stock is down 30 percent in a month, it’s not going to feel so good to feel 30 percent dumber.” We could have used that mentoring back at Microsoft in the nineties, because we all let the stock price get to our heads.
Three things happened in rapid succession that changed everything.
First, Microsoft was sued by the government for being a monopoly. The trial was long, painful and detrimental to both the reputation of the company and our pride to be a part of it. We followed each embarrassing deposition cringing. In 2000, the court ordered Microsoft to be broken up. (After that though, in 2001, the DOJ dropped the lawsuit, so the entire ordeal amounted to a slap in the wrist). But the uncertainty hit the stock (and morale) hard. Second, the dot com bubble bust caused Microsoft to tighten up the belt, and the stock again was hit hard. All of a sudden, tech companies around us were going under, left and right, and investors were skittish. And thirdly, the 9/11/01 attacks created yet more uncertainty in the entire world. 2001 was a grim year.
What the combination of those 3 things amounted to in terms of Microsoft was a complete stasis of the stock price — which would continue for a decade.
I watched in horror as more than a million dollars of stock evaporated in a matter of months. Between the antitrust case, the dot com bust and 9/11, the stock ended up back to the exact same price that it was on my very first day at work. These weren’t RSUs, they were stock options. So once they went back to their strike price, they were worthless.
I had “made” and “lost” a million dollars, in the course of three years.
I had my base salary left. Microsoft was surprisingly stingy with base compensation in the nineties. They could get away with it because of their stock options. At level 59, I was making $50k/yr base, which, adjusted for inflation, maps to about $85k/yr today. According to levels.fyi, Microsoft pays $110k/yr base to a level 59 now so they’ve clearly upped their game (plus their yearly bonuses are 2x what they were in the nineties). But back then the stock options were so glorious that nobody cared what their salary was. When I received my offer from Microsoft, I didn’t negotiate salary, I negotiated stock. Base salary paid for food and rent, but stock options were there so that you could retire in your thirties. The software industry in the nineties was a crazy world.
After its fall from grace in 2001, for the next decade, that stock would oscillate around twenty dollars per share, without gains. All of a sudden, when your income is a fraction of what it was the year before, your excitement to work 80-hour weeks diminishes a bit. You’re demoralized. The energy level went down significantly in the hallways of Redmond. Scarcity creates wars. Exhibit A: During the beginning of the covid19 pandemic in 2020, for some odd-reason, law-abiding Americans ended up in fist fights in supermarkets over toilet paper. Exhibit B: In 2001, at Microsoft, the new scarcity meant you found yourself competing ruthlessly against your peers for just a couple more thousand dollars in yearly bonuses. Budget was limited and if a colleague failed, there was more money for you. This attitude created turf wars, fiefdoms, and a culture of hoping your next-door neighbor failed, sometimes actively sabotaging their work. I literally had the guy that sat 3 doors down from me once tell me, “you’re my same level and at performance time, you’re my competition, I don’t want to collaborate with you because I need to beat you”. He was a horrible human being, but he wasn’t the only one that felt that way.
In all fairness, a lot of this behavior was always present at Microsoft in the early days. But I think it was more dormant (or maybe I was just more naive), and the demise of the stock options was a trigger that made it surface in everyday life.
A lot of the star engineers realized they could make a lot more money elsewhere, and they started to leave in droves. Microsoft did a few things to stop the brain drain. They bumped everybody’s base salary in one fell swoop one day (I think by 20%?). They adjusted the strike price of a lot of options that were underwater. Eventually they switched from stock options to RSUs. None of these things made a significant impact. The crazy days of the Microsoft stock options were gone.
I continued to work with extremely smart and dedicated people. But the motivation, the energy, were not the same. And the culture became more toxic every day (this isn’t just me talking, even Microsoft’s current CEO, Satya, talks about this extensively in his book). It also showed in the mediocrity of the products that came up during that time. Windows Vista was an atrocity. Microsoft, the Goliath, entirely missed the Search revolution that Google, then the tiny David, seized.
I stayed at Microsoft until 2009. How and why I finally left is a different story.
I never did become an actual millionaire at Microsoft. I’m 45 and I’m still (happily) working (but at Google now), so nowhere near “retired in my thirties.” I did get a lot from my 11 years at Microsoft: I learned how to be an effective software engineer and how to work in large professional settings. I shipped products that millions of people used. And, I also met my wife at Microsoft. So, I’m thankful for the time I was there.
My last day as a Microsoft employee, in March of 2009, I had one last act of defiance: I sold every single share of Microsoft stock I owned, as a vote of no-confidence for Steve Ballmer. Microsoft stock was $20 that day, exactly the same price it was on my hire date in 1997.
Microsoft stock is $300 today (a 15x growth in a decade). Microsoft is one of the most valuable companies in the world with a 2.25 trillion market cap. Clearly do not seek advice from me when it comes to buying and selling stocks.
I must say, I am delighted to see how Satya Nadella has turned Microsoft around. I did not think that was possible. I didn’t think anybody, let alone an insider, could turn the company around. Yet Microsoft today is an extremely dynamic, progressive company, with refreshing innovation. Kuddos to Satya for achieving the seemingly impossible.
After I left Microsoft in 2009, I went on to work at Amazon until 2020 and loved it. In 2020, as I decided to leave Amazon, I did send my resume to Microsoft, and I went through a full loop (even got an offer!). I had to admit what prompted me to apply was morbid curiosity. In my head, Microsoft was still the dysfunctional place I left in 2009. But I had to at least give it a shot, because I loved the Microsoft of the nineties — lots of fond memories. Instead, when I came to Redmond in January of 2020 for an onsite, I found an entirely different culture. Not Bill’s Microsoft. Not Steve’s Microsoft. Satya’s Microsoft.
I came to the Microsoft campus about two hours before my onsite. It was a frigid January morning in 2020. I grabbed a double tall latte to warm me up, and walked around the old places. I had spent 11 years there… I had lots of memories. Building 9, where my adventure had started in 1997, was gone. As was Building 4, where my adventure had ended in 2009. Microsoft was building much higher buildings to replace the humble 2-story original ones from the eighties, where I had personally seen Bill Gates’ helicopter land so many mornings, or park his Porsche. The parking lots weren’t full of Ferraris and Lamborghinis like in the nineties, but they did have some nice BMWs and Mercedes. I interviewed in Building 16, a building where I had worked for years. Having to wear a Visitor badge felt weird. I had so many mixed feelings that morning.
I was open-minded and I had a surprisingly positive interview loop that day. The people I spoke to were fantastic. I could see myself working with them. It really did feel like an entirely different world. I was so intrigued that I ordered Satya Nadella’s book, “Hit Refresh: The Quest to Rediscover Microsoft’s Soul” (You may have noticed I started my story today with an anecdote of me hitting the Refresh button; that was a playful little secret nod to Satya’s book). I devoured it front-to-back. I cannot highlight enough how much of an accomplishment it was to change the culture of a 45-yr old company with hundreds of thousands of employees. I did end up getting an offer, and I strongly considered it, but working at Google was just too exciting to pass up, so that’s the direction I went.
As I walked around Microsoft campus that frigid January 2020 morning taking small sips of my piping hot latte to warm me up, I felt nostalgic for a world I knew that no longer was. I am thankful to Microsoft for shaping me into being the person I am today, in so many ways. I reflected long and hard on how companies change over time, and the events, small or big, that cause culture to shift. Microsoft had a golden era, a dark era, and a rebirth. Nothing stays the same, but how you evolve matters.