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Liberty, Security, Responsibility

Michele McGeoy, Founder and CEO, RH Solutions

Although I've founded two software companies, Tailored Solutions and RH Solutions, and continue to work, I could have become a lady of leisure. My first company was sold in 1993, right before the boom started in the technology industry. I sold it for enough money so I'd never have to work again—not at the crazy rates people are getting these days, but enough to guarantee that I'd have the luxury, for the rest of my life, of selecting occupations that spoke to my heart.

For me, the greatest benefit of having this wealth was security, and I felt very fortunate to have it. Tailored Solutions was built before the boom in venture capital, so I had done it without any funding whatsoever, on credit cards, the old-fashioned way. At one point I was carrying payroll on credit cards at 22 percent. There is a system called "invoice factoring" that allows you to sell your invoices if you're short on cash. Let's say I had a 30-day, $10,000 invoice to Harvard. Factoring companies would pay your invoice and take 8 percent for a 30-day loan. If you do the math and annualize that, you can see why I didn't want to get into any more debt.

To fulfill my contract with the new parent company of my business, I had to stay on for a couple of years, but one of the things I wanted to do right away was to give something back to the community. Long before the "digital divide" was hip, or anyone even thought of it as an issue, I realized there were very few women and very few people of color in computer science. I wanted to address that situation. The City of Berkeley had given me a redevelopment loan, contingent on moving into an office in the "bad" part of town and interviewing candidates for any new positions through a city program for women who were working their way out of welfare. That experience helped mold Access to Software for All People (ASAP), the organization I founded with some of the proceeds from the sale of my company.

Use Money for Empowerment

ASAP is a nonprofit that runs a business, providing data-management services from data entry to Web page development. Our clients include the California family courts, the Berkeley YMCA and other nonprofits in the area. It's inspiring to see our young employees, all of whom aren't necessarily doing well in school, taking on responsibility and doing real-world work, building Web sites for other organizations.

Motivation has a lot to do with their achievements. In the fundraising world, administrators use language like "How many clients have you served?" and "What's your at-risk population?" That terminology is very disempowering for the people we're supposed to be helping. When I was growing up, I was not a very good student, but when I was given a job and paid for it, all of a sudden my motivation increased tenfold. From that experience I concluded that if you really want to give people an opportunity to improve their situation, "teach them to fish" as opposed to giving them a handout.

As ASAP's board chair, my job is to convince potential donors that the model of paying people from Day One makes a lot of sense. I try to communicate that we can best contribute by empowering the participants, by giving them the chance to earn a paycheck. When you give young people an opportunity that's going to carry them for the rest of their lives, you're making a difference with your money that's exponential.

You do have to be careful with money in the nonprofit world, making it grow at a safe pace in safe investments. I put $300,000 into ASAP, enough for it to survive for a couple of years while we did research. The goal was to preserve it as long as we could, without having to focus on fundraising, while building a program that was fundable. That seed money was enough to keep us going so the first executive director could start building the program and begin fundraising efforts.

Use Privilege for Leverage

After starting the nonprofit and getting knee-deep in the needs of the community, I realized that I could give away all my money in a day and it wouldn't make a difference. It was quite discouraging to feel that here I had all this wealth and yet, as I looked at the poverty and the issues that were facing the community, that any check I could write never felt big enough.

To deal with that, I got involved with Responsible Wealth, a membership organization of people whose wealth puts them in the top 5 percent of the population and who believe that although the economic rules are set up in our favor, it's not healthy for society. Responsible Wealth looks at how to take your money and turn it into clout, in terms of being heard. Most of the members are involved in philanthropy, but the focus is around using our voice to create systemic change. We're using our influence to send a message to society that we need to have rules that benefit everyone.

One thing we do is shareholder initiatives. As a stockholder in a company, you can file a resolution to be voted on at corporate meetings. We use the shareholder resolution as a means of getting heard. Even though these resolutions are almost never passed, they do sometimes get discussed. I just filed a shareholder initiative with a big corporation concerning the imbalance in compensation between executive salaries and those of most of their workers. Another tactic is nominating people to serve on a board of directors. It's also important to vote your shares on every issue, because if people don't fill out their proxies, management automatically gets those votes.

Get Good Advice—It's Golden

In addition to empowering others and working toward economic justice, I also have a responsibility toward my family. When I sold the company, I didn't have children, but now we're the parents of a preschool-age daughter. My primary concern is that she's guaranteed an education. I want to make sure that she has the tools to care for herself.

At first, I relinquished control of my fortune—I wanted to do what I did best and not stress out about the financial side. My goal was to have some free mind-space to do what I liked doing. I felt it was important to just let go of the money, so I hired a financial manager to make sure it was safely invested. I didn't even know what instruments she set up—I just went to my financial advisor and said, "What do you recommend?"

Now I realize I need to understand the financial markets, just as I follow the market for software as an entrepreneur who starts software companies. My next step will be to learn why my advisor made the choices she did and what financial instruments she's using to make sure my money will be available when and where I'm going to need it. I also need to think about how we should revise our investment strategy as my daughter gets older and our family's needs and financial goals change.

Having wealth doesn't necessarily solve an entrepreneur's problems. Businesses still have to succeed on their merits, or fold if they can't. However, wealth does give you certain choices that can change the rest of your life.

  • Liberty: Now that you have the freedom to do whatever feeds your soul, do it. It's so easy to fall into the trap of just doing more of what you are good at. Take the time to figure out what really speaks to your heart.
  • Security: Now that you have it, enjoy it. We have been taught that no matter what we have, we should always strive for more. Fight that urge and find peace in knowing that your money, properly managed, can enable your needs to be met.
  • Responsibility: Sure, you've sweated and worked hard for your success, but no matter how hard you worked, there were other factors that helped you along. Now it's time to give back to the community that sustains you – and it feels good, too.

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