David Choe - he like to gamble.

February 8, 2012 7:37 PM

Fortune favors the bold. In 2005, then Facebook's president Sean Parker asked David Choe, an LA-based graffiti artist, to paint the walls of his Palo Alto office. Choe - who had just finished a prison stint in Japan - says Facebook offered him stock options or $60,000 cash. For some reason, he chose stock options. Seven years later, that stock is said to be worth around $500 million.

Choe's awesome and very NSFW interview on Howard Stern - where he talks about his life as a gambler and as an artist - in six parts.

posted by phaedon (39 comments total)

I don't like him since he became a member of the 0.01%.

Seriously, I do like rgaffiti art so it will be interesting to see if the attention this brings to his work will translate into a perception of him as a Serious Artist within the art world. In theory, his art is now worth more than that of Damien Hirst. Which I feel good about, because I can't stand that fellow.
posted by anigbrowl at 7:42 PM on February 8 [2 favorites]

[grumble]Thanks for bringing back memories of the day I said No to Apple stock.[/grumble]

Cool artwork though. Too bad they start by talking about jerking off, it just turns me off listening to the other parts.
posted by Hardcore Poser at 7:43 PM on February 8 [1 favorite]

I'd take the cash, and statistically I'd come out ahead. :-/
posted by -harlequin- at 7:47 PM on February 8 [4 favorites]

Okay, so here's an excellent example of the Invisible Hand of the Market being totally screwy. In what world does it make sense that a six year investment of capital should return 8,333 to 1? That's nearly a million percent return.

Either Facebook stock is grossly overvalued or our whole market is so out of alignment that we no longer have any real estimation of what anything is worth anymore.
posted by darkstar at 7:48 PM on February 8 [34 favorites]

People love to hear stories like this. It feeds the idea that we can all be millionaires if we just know the right moves to make. Sure.
posted by quadog at 7:50 PM on February 8 [16 favorites]

I have some doodles that I would be willing to trade for options.
posted by arcticseal at 7:50 PM on February 8 [1 favorite]

I'd take the cash, and statistically I'd come out ahead. :-/

There has to be someone out there kicking themself for accepting a share of Friendster instead of cash.
posted by bobo123 at 7:51 PM on February 8 [14 favorites]

I am in the wrong damn business. and I'm not really in any business.
posted by jonmc at 7:52 PM on February 8 [2 favorites]

This is one of those instances where knowledge of others fortunes' is counterproductive. There is no lesson to learn from this, and I now know of one more person who is rich beyond measure for being in the right place at the right time. I'd (we'd) be better off just not hearing about it.

Thanks a bunch phaedon! PTHWWWFFFFt.

posted by leotrotsky at 7:54 PM on February 8 [1 favorite]

I hope he doesn't turn out like most lottery winners.
posted by indubitable at 7:56 PM on February 8 [1 favorite]

See! America is totally a meritocracy!
posted by Pogo_Fuzzybutt at 7:56 PM on February 8 [11 favorites]

Yeah, the lesson of the dot com boom, above all, is TAKE THE CASH.

You never hear about the grafitti artist who was paid in shares which subsequently went to zero.

This is the luckiest guy in the world, in that he made a terrible decision, and it worked.
posted by unSane at 7:57 PM on February 8 [15 favorites]

In what world does it make sense that a six year investment of capital should return 8,333 to 1? That's nearly a million percent return.

Check the average rate of return.

On preview, what unSane said.
posted by eddydamascene at 7:58 PM on February 8

Choe spent the better part of the 90s shoplifting spray cans for his graffiti projects. The irony is outrageous.
posted by achpea at 8:04 PM on February 8

Facebook clearly understood the value of Mr. Choe’s murals. When the company outgrew its first offices in Palo Alto and moved to a larger space, the mural-covered concrete walls were removed from the building and placed on display in the new offices.

Facebook clearly wants to convince investors that the murals were worth the 0.5% dilution. (There's got to be someone a *little* pissed about this, no?)
posted by RobotVoodooPower at 8:14 PM on February 8 [4 favorites]

The guy gambled and won. Good for him.
posted by wuwei at 8:20 PM on February 8

Okay, so here's an excellent example of the Invisible Hand of the Market being totally screwy. In what world does it make sense that a six year investment of capital should return 8,333 to 1?

Maybe you can explain why it doesn't make sense? Even if you pegged Facebook's stock price at a P/E of 10, claiming that was the right valuation, that would still be a heck of a return over six years.

All that means, though, is that in 2011 Facebook made a billion dollars in income, and six years ago it made... a lot less. How quickly can a company's income grow before the market is being "screwy"?
posted by planet at 8:22 PM on February 8 [3 favorites]

In what world does it make sense that a six year investment of capital should return 8,333 to 1?

Facebook's valuation is a bit ambitious but it isn't outlandish by any means. They're sitting on a massive goldmine that they've only begun to monetize. (although agreed on the Invisible Hand sometimes looking a little random and capricious)
posted by downing street memo at 8:22 PM on February 8 [1 favorite]

I doubt anyone is upset about it. Most statup people and investors figure it's worth spending a small bit of the early round capital on things that make people feel good about working at the company (game rooms, free gourmet food, hip murals), and think of it as a bet on success which they know is unlikely to pay off big. Occasionally it does, and the decision to get paid in stock affirms the judgment of other people who threw money into the unknown and hoped for a big payoff.

This IPO looks set to release a major infusion of cash into the Bay Area if past history is anything to go by. I'm rather glad we bought our house just before this was announced, given the way all the real estate agents seem to be salivating.
posted by anigbrowl at 8:27 PM on February 8 [1 favorite]

Either Facebook stock is grossly overvalued or our whole market is so out of alignment that we no longer have any real estimation of what anything is worth anymore.

This doesn't have to be an either/or.
posted by meinvt at 8:28 PM on February 8 [3 favorites]

What was the par value of the stock when they issued it? 1 cent? Offer price of $45? That is not unrealistic. They went from 0 to 600m profit in 2010.
posted by Ad hominem at 8:30 PM on February 8 [1 favorite]

I've hung around David a time or two, and I must say that this sort of fortune in the hands of such a man could easily produce a dazzling spectacle for the rest of us.
posted by broadway bill at 8:34 PM on February 8 [5 favorites]

Does that make his the highest earning single work of art? Does any other work come close to that?
posted by Kraftmatic Adjustable Cheese at 8:42 PM on February 8 [2 favorites]

Does that make his the highest earning single work of art? Does any other work come close to that?

From the article:

"...the payout to Mr. Choe would provide more money from his paintings than Sotheby’s attracted for its record-breaking $200.7 million auction in 2008 for works by Damien Hirst."

This part is key, though:

"...it is unclear how much of the original stock Mr. Choe has left.".
posted by eddydamascene at 8:45 PM on February 8 [1 favorite]

Okay, so here's an excellent example of the Invisible Hand of the Market being totally screwy. In what world does it make sense that a six year investment of capital should return 8,333 to 1? That's nearly a million percent return.

Either Facebook stock is grossly overvalued or our whole market is so out of alignment that we no longer have any real estimation of what anything is worth anymore.

If you take it from the other end, it's more a problem that nobody knew what Facebook was or could be worth. The company is needfully vastly overpriced, rather they vastly underestimated themselves when they offered stock options.
posted by Jehan at 9:13 PM on February 8

Sorry, "the company isn't needfully vastly overpriced".
posted by Jehan at 9:13 PM on February 8

In theory, his art is now worth more than that of Damien Hirst. Leonardo DaVinci.

FTFY.
posted by sexyrobot at 9:33 PM on February 8

Of course, I approach Facebook with a bit of a jaundiced eye, anyway. The idea that my relationships and interests would be so brazenly monetized isn't very appealing, so I dumped my Facebook account a few months ago.
posted by darkstar at 10:15 PM on February 8 [2 favorites]

See! America is totally a meritocracy!

I think you missed the part where they said graffiti artist. One of them being worth half a billion is like Rome getting confused and buying off one lonely Vandal armed with a sharpened stick.
posted by codswallop at 10:56 PM on February 8

I'm really doubting the details. Other articles are quoting $200 million, and no one is able to quote an actual number of shares or equity percentage the guy has. The $500 million number would be based on $100 billion evaluation at IPO and .5% ownership stake. The first number is optimistic but possible, the later is based on. . . seems like nothing. It sounds unlikely. I'm sure the guy made out like a bandit, but this sounds like inflating the numbers to make a good story.
posted by skewed at 11:16 PM on February 8

Me too. Who would give the mural guy 0.5% ownership? At one place I worked, a developer who was in on the ground floor would have gotten that much in options.
posted by Pruitt-Igoe at 12:49 AM on February 9

Who would give the mural guy 0.5% ownership? At one place I worked, a developer who was in on the ground floor would have gotten that much in options.

Yes, and that 0.5% would be for four years' work.

I'm thinking 0.1% is more likely.
posted by zippy at 1:35 AM on February 9

Essentially, this guy is lottery winner. That's all. Sure, he can paint, and some lottery winners can do their own exceptional "thing". For sure, he's not someone that I would recommend emulating. Good luck to him, going forward. One thing: he does seem to perfectly mirror the absolutely over-hyped Facebook phenomenon- in all its crassness, absurdity, and money-driven nutiness. He, and a lot of other people are going to make a lot of money. It's ironic that he thinks social media sucks. I'll give him that.
posted by Vibrissae at 3:08 AM on February 9

There has to be someone out there kicking themself for accepting a share of Friendster instead of cash.

I turned down stock in 3 tech companies that went on to implode. The weird thing about facebook's valuation is the risk; that income stream need not last long. Social network sites can and have evaporated very quickly. Maybe facebook now has enough money to replicate / buy any feature set that a competitor comes up with, but all it takes is some bad PR for people to leave; they offer a weak value proposition to the user and have a small investment in valuable capital and so will always be vulnerable that way.
posted by a robot made out of meat at 5:31 AM on February 9

Facebook tomorrow is MySpace today. Yeah, the company is massively overvalued.

Typical users are only just starting to grok what a massive privacy suck Facebook is. For my part, after the second time I logged in and didn't do anything and I got an email that said "We noticed that you logged in and didn't do anything!" I realized they were recording everything I read and decided I had no use for their service.

The political activists who are using Facebook to organize are in for some nasty surprises IMO.
posted by localroger at 5:40 AM on February 9

I heard a story (sorry, no source, may be a tale) about an artist on the original Star Wars movie that instead of his fee took a couple "points" on the venture. This means he had a .02 or .002 share of whatever the franchise made. Right.

I take the moral of the story to be somewhat different.

Yeah, the lesson of the dot com boom, above all, is TAKE THE CASH.

The thing is that there will always be the chance to take the cash and people usually do. But in cases where they make this kind of choice, it's not always from a misunderstanding of expected value. Often times people understand that the 'safe' play won't significantly change their life, while a gamble will. I'm not always talking about financial gambles here.

This is also the logic behind much of smaller gambling. People who buy scratch tickets often understand the odds. Thing is that the long shot is a better or at least more attractive odd than their regular life.
posted by Reasonably Everything Happens at 5:57 AM on February 9

I guess the guy probably is/was pretty well off already, if he was offered $60k cash for his work at the time, right?
posted by Perplexity at 6:03 AM on February 9

Is there some citation for exactly how much stock Choe was granted? Folks above are throwing around 0.5%; is that sourced? News articles value his stake at between $200m and $500m, which on a $100B valuation would be 0.2% to 0.5%. And that's after dilution, so the initial grant was larger. Anyway, that's a shit ton of stock to offer a short term contractor, even very early in a company. Either he was good at negotiating or maybe Sean Parker did him a favor? Either way, good on Choe, I'm glad his lottery ticket paid off. Tech company IPOs always reward a random set of people unfairly; nice to see an artist get paid.

Breakdown of Facebook ownership. (Does not include Choe's stake).
posted by Nelson at 9:42 AM on February 9

I read about the guy and looked up his work and thought it was pretty mediocre.

His new found fortune reminds me of the Wilde quote about the definition of a cynic: A man who knows the price of everything and the value of nothing.

Listening to the interview on Stern though was an aggravating experience. He certainly didn't seem like the brightest penny in the fountain. I hope he uses his resources to improve his work. Somehow I doubt this will happen though.
posted by Hickeystudio at 1:08 PM on February 9