By Dr. James M. Dahle, WCI Founder
We had a bit of a financial crisis recently. As you know, putting on conferences is really expensive. It also induces some serious cash flow issues, where you get most of the income for the conference very early in the process but all of the bills come due late in the process.
Well, it just so happened that we ended up spending too much of that money on fancy trips to Europe and heli-skiing, and then, all of those bills came due at the same time. We needed to make payroll for all the folks working at WCI, and the money wasn't there.
So, we had to get creative. There were a number of options available.
The first was to put the cars up on Turo, basically the VRBO for cars. Our lousy cars weren't going to rent for much, though. But since I wired the garage with electric car chargers when we did the home renovation, we thought we could lease three Teslas. However, it was going to take too long, and it would not make us enough money to make payroll.
The second option was to sell off a chunk of the company to a ready buyer. We asked around and found a large insurance company that was willing to be a minority investor. We'll call them SouthEastern Mutual to preserve its anonymity. We got a pretty good offer, but in the end, it turned out that SEM wanted to shut the site down completely (or at least delete 5-10 specific posts about whole life insurance), so we turned it down.
Our CTO came up with another great option. We were going to start a WCI Crypto Coin, talk it up for our audience, and then cash out as much of it as we could. It would be a truly functional coin, and it would also serve as a novelty collector's item for true WCI fans.
But it just didn't feel right to run a pump-and-dump scheme on our audience, even if it was for a good cause.
In the end, we settled on a more practical option.
We took out a short-term HELOC on the house and used it to short Ethereum. At the time, Ethereum had been going to the moon. It was pretty obvious that the bubble was about to burst. In fact, it had already started down by the time we “sold” it. Remember: when you short, you first sell an asset (that you borrowed from someone else) and then you buy it back after it drops in price.
How did the numbers work out? Well, we sold at about $4,300 a coin and bought at about $2,600 a coin for a gross profit of about $1,700 a coin. Given our 42% marginal tax rate on short-term gains, our net profit was $986 a coin. That doesn't seem like much, but it was a pretty big HELOC—close to $800,000.
We ended up selling/buying 300 coins, making us close to $300,000 in profit. That was enough to make payroll, pay a little bonus, and still have something left for ourselves. Pretty easy, too, given how clear our crystal ball was on this particular decline. It was the least we could do for our beloved employees.
If you run into a cash flow crunch for your small business or even just your family, consider getting into the crypto markets. There's so much volatility there that it should be easy to make a killing by getting in and out at just the right time.
If all the employees at work are talking about it, short it. If even the Crypto Bros on Twitter have gone quiet, then it's time to buy.
What do you think? Which of those options would you have chosen to make payroll? Should we have bought the Teslas? How else are you planning to celebrate April 1? Comment below!