Lost Fortunes Part 2

Last month I wrote about people who lost fortunes in history.  While I was brainstorming that article I left a few out that certainly deserve mention:

Dong Nguyen: Dong Nguyen invented the App Flappy Birds in 2012 and had limited expectations, after all, millions of simple game apps are made every year. Within 6 months Flappy Birds became extremely popular and by January of 2014 was earning over $50,000 A DAY between sales of the app and in app advertising. He stopped selling the App on Feb 10th 2014 stating that he was uncomfortable with how addictive of a game it was.  In August of 2014 an updated version was released in the Google app store that had new features and wasn’t as addictive.  In the time Flappy Birds was pulled, hundreds of imitations filled the void. Assuming that between February and August sales would not have increased any, he lost out on about 180 days of sales, or around $9,000,000

Alexey Pajitnov: Think losing out on 6 months of video game income was bad? Try a decade. Tetris has sold over 170 million copies over the years. invented in 1984 by Alexey Pajitnov in the Soviet Union during communist rule. He granted the rights to Tetris to the Soviet government for 10 years.  In 1991 he moved to the US after the fall of communism and in 1996 he started “The Tetris Company”, creating puzzle games for multiple platforms, while going after copyright infringement of Tetris clones.  Since 1991 he has become a multi-millionaire, but he lost all of the revenue from the initial popularity of Tetris.  At a royalty of even $1 per game, he potentially lost out on over $100 million.

Mikhail Kalashnikov: Another man who received nothing but a thank you from mother Russia was Mikhail Kalashnikov, he invented the AK-47 in 1947 which has become the most widespread firearm in human history, with an estimated 100 million made.  Assuming he had lived in the US, at a minimum I would expect him to have received a 2% royalty (the same royalty that Lonnie Johnson gets from Super Soakers). IF on average each AK-47 sold new for $100, then off of the $10 Billion in sales, he would have received $200 Million between the development of the gun and his death in 2013.

Nolan Bushnell: 1976 was a year of bad decisions for Nolan Bushnell.  He sold his company Atari to Warner communications for around $30 Million and stayed on as an employee for 2 more years until he was forced out.  It wasn’t long after that Atari become a $1 Billion a year company.  With $30 million in his pocket, a former employee by the name of Steve Jobs asked him for $50,000 to be a third partner in his start up company, he declined.  If he sold no shares along the way he would be worth over $200 Billion today.  (Of course so would Steve Wozniak and Steve Jobs, but they sold along the way as well.)

To be fair, an abrasive college drop out former employee was asking him for the equivalent of $200,000 today, for a third of his computer company that was operating in his mom’s garage, that had no sales, and a vision to sell build it yourself computer kits to consumers for an inflation adjusted $2,700. At the time $50,000 was only 1/6 of 1% of his proceeds from the sale of Atari. I said it was a bad year for him, but from another perspective, it was an excellent year for him too. He sold his company and pocketed more money that most of us will see in a lifetime.

Mike Tyson: Of course this list wouldn’t be complete without a professional athlete on the board.  Professional athletes become broke so often it’s a cliche.  Many of these athletes are young men from humble beginnings.  They come into large sums of money very quickly in their adult life and have no idea of how to manage it.  They either piss it away on their own living an opulent life, or even worse trust someone to manage their money who steals from them.  Once a sports star hits it big, people come out of the woodwork to ask for help, to ask for a job, to mooch.  $50K here and $50K there don’t seem like a lot of money when you are making tens of millions a year, but it all adds up.  Another factor that helps these stars go broke is that they have short careers.  On average football players have 4 good years.  Players need to adapt and have a plan for how to transition from playing the game into another career, whether it is advertising, commentating, book writing, managing a restaurant, or any other random thing they can think of.  The most famous lost fortune of a professional athlete is that of Mike Tyson.

Mike Tyson was the Floyd Mayweather of the 1980s and 1990s.  He earned hundreds of millions of dollars.  It is estimated he lost over $350 million through mismanagement, in his peak his monthly expenses were over $400,000.  Tyson was also an abrasive personality which hampered endorsement deals.  He may have lost tens of millions of dollars, just by being unfriendly to people. He had all the elements of a financial disaster: A promoter taking in millions from him, a hefty divorce settlement and child support payments,  large tax liabilities, and extreme legal costs mixed with jail time.

What lessons can we glean from these guys?  

• When you have something good going, don’t throw on the breaks.
• Protect your intellectual property
• Think as forward as you can about potential business investments.
• Become a student of shrewd fiscal planning, ESPECIALLY if it doesn’t come naturally to you.
• Don’t get divorced (yeah, I know, easier said than done, but these can be insanely costly)

Any other major lost fortunes you find interesting?