How to stay happy when you have lost a fortune
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For a man who lost nearly $2bn, at least on paper, John Foley sounds remarkably cheerful. The co-founder of the home fitness company Peloton told the New York Post this week that “I’ve lost all my money. I’ve had to sell almost everything in my life.” Undaunted, he concluded that “potentially, the best days of John Foley are ahead of me”.
I worry about people who speak of themselves in the third person, but that is not the most striking thing about his attitude. Foley appears to be unnaturally calm about having plunged Icarus-like from billionaire status to being forced to sell multimillion homes in the Hamptons and New York City. He fought to stay solvent while Peloton’s value fell to less than 4 per cent of its pandemic peak.
That has got to hurt, and yet he has picked himself up from his personal financial crisis and public humiliation. Foley has ridden out what he earlier called “not a fun personal balance-sheet reset” as Goldman Sachs made repeated margin calls on his personal loans secured by Peloton shares. He left Peloton in 2022 and is now back in business with a New York custom-fitted rug company called Ernesta.
He even appreciates the upside. His city is a cauldron of wealth and status anxiety, and owning a $55mn waterfront home on Further Lane, East Hampton is the most solid signal of parity with the hedge fund billionaire set. But his family sold it at a $4mn discount and he has not looked back: “My kids are probably better for it, if we’re keeping it real”. What is going on?
I cannot look into Foley’s head, beyond observing that he is demonstrating salutary mental resilience. But his insouciance tells a wider story about the way that financial failure does not equate to defeat among a certain privileged group of technology and business entrepreneurs. Whatever outsiders might think of them, they do not feel disgraced themselves.
This is not the common experience. The loss of financial and social status is a heavy blow for most people. Daniel Kahneman, the Nobel Prize-winning psychologist, explained that humans are averse to loss: they weigh losing a sum of money — be it a dollar or a billion dollars — more heavily than gaining it.
It is very hard for most of us to get over a serious financial crisis, particularly in middle age. One study found that about 30 per cent of those who lost their life savings in a bank fraud had major depression in the following two years. Another concluded that a “negative wealth shock” increased long-term mortality risk for US adults aged 51 and over (Foley is 53).
Foley’s position is materially different from the average, of course. While he joked of losing all his money, he still has more than many: his remaining stake in Peloton was worth $22mn this week, according to Bloomberg (the stake peaked in value at about $1.9bn in early 2021). He is not on the breadline.
The loss of a fortune historically carried a stigma, even when the loser was solvent. Samuel Insull, the utilities magnate whose empire collapsed in the 1930s, was denounced by Franklin D Roosevelt as a worrying exemplar of “the lone wolf, the unethical competitor, the reckless promoter”. Insull was later tried three times for fraud but acquitted on each occasion.
The worst of which Foley could be accused at Peloton is over-enthusiastic promotion. He told its board, “I see clear as day, it’s going to be one of the few trillion-dollar companies in 15 years”. The fact that it came nowhere near that figure (it is now valued at about $1.7bn) has not shamed him, nor dulled his grand ambitions for Ernesta over the next few years.
Some of his strain of boundless optimism always ran through US business. Alexis de Tocqueville wrote in the early 19th century that “boldness of enterprise is the foremost cause of [America’s] rapid progress”, Theodore Roosevelt’s 1910 speech about “the man in the arena” who “at the worst, if he fails, at least fails while daring greatly” is often cited by executives.
But today’s strain is the purest. This owes a lot to the venture capital funding behind many start-up ventures, including Ernesta, and the belief that you must keep on placing bets until one pays off sufficiently to compensate for all the losses. The fact that a founder once had equity worth more than a billion dollars and now has little is nothing to worry about per se.
Marc Andreessen, co-founder of the venture capital firm Andreessen Horowitz, once argued that early-stage investors and serial entrepreneurs should not be too influenced by disappointments. “The right thing to do . . . is to play the next hand of poker the exact same way you played the previous hand.” Failure is more “the result of randomness” than human error.
This is an easier philosophy for investors who can make repeated bets than for entrepreneurs who get a few chances in a lifetime. But Foley is backed at Ernesta by some of Peloton’s early investors, so he is surrounded by natural, if calculating, optimists. In this world, it is logical to remain happy even if you have to downsize severely. Despair is not a rational choice.