Note from the Business Journal’s Executive Editor Peter J. Brennan: I first met Cynthia and Tom Coad in the late 1990s when she was an Orange County supervisor, and I covered her role in the controversial El Toro airport plan for the Business Journal.
I became curious about how the Coads came to invest in Qualcomm (Nasdaq: QCOM). Tom once told me he thought he and Cynthia during the 1980s might have been the largest private investor in the San Diego wireless giant, now valued at around $150 billion. I estimate their split adjusted cost basis was around 25 cents a share for what is now a $128 stock.
What follows is their story that I wrote in 2014 as the final chapter for my book, “A Simple Guide to Wealth; 7 Steps to Become Rich(er),” which is available on Amazon.com.
Tom Coad died on May 29 at the age of 90. A memorial service is scheduled at Christ Cathedral in Garden Grove on July 28.
Making the right decision isn’t easy. We all must decide where to invest our money.
We’re inundated with pleas from legitimate investors and sweet-talking scamsters. How do we make great choices?
Meet the Coads.
Now married for more than 60 years, they made some excellent choices that turned them into millionaires many times over, particularly from an early investment in a company that dominates cellular phones. And they are living rebuke to articles that claim having many children makes you poorer.
Tom and Cynthia met in Des Moines, Iowa, when he was a paperboy and Cynthia’s parents were one of his customers. After marrying, he went to dental school while she worked as an occupational therapist to support the family.
“She was one of my best investments! She worked while I went to school,” Tom said.
“We did pinch pennies,” Cynthia said. “We were poor, but you know what? We never said we were poor. We just didn’t have any money. There is a difference in your mind.”
He joined the Navy for a two-year hitch and was stationed at a U.S. Marine Corps air station at El Toro. Tom got out of the Navy in the early 1960s and they decided to stay in the area.
They raised seven children in a Catholic household. Many articles on successful people ignore the role of religion in their lives. Tom and Cynthia believe a Catholic education helped their children learn better moral and ethical standards, which in turn created the integrity needed for success.
While Tom enjoyed his career as a dentist, as with any profession, there were problems. Tom foresaw the day when his hands wouldn’t work smoothly, or he couldn’t see as well.
He was frustrated when insurance companies denied dental care needed by his patients. Tom saw other doctors being taken advantage of financially with wild schemes to get rich or avoid taxes. For all their lives, doctors are told how smart they are, which leads them to believe they can spot the scam.
“I had very little experience in business or investing,” Tom recalled. “All these people came around trying to sell something and you had no idea what they were talking about. You were too embarrassed to show your stupidity; they would take advantage of that. Good salespeople know where your weaknesses are.”
In his 50s, Tom decided to earn a certificate as a certified financial planner. Cynthia also went back to school, earning a doctorate in education. Including their seven children, at one time all nine members of the family were attending college. All of their children earned college degrees.
At school, Tom met a fellow student named Rick Keller. The pair started a financial advisory company that has morphed into First Foundation that includes banking, trusts, loans, consulting and investing; Tom still owns part of the company (it currently sports a $1.1 billion market cap).
The couple sent their sons to the University of California at San Diego. The oldest son, Christopher, then 18, suggested buying a condominium on the beach where he could live. Such an idea from a college freshman would bring howls of laughter in many families. Instead of merely brushing off the idea, Tom and Cynthia listened carefully to their son’s reasoning.
“Seldom if ever do beachfront condos depreciate,” the son told them. He said he’d get roommates to help pay the mortgage. The Coads bought a condo in a gated community in Solano Beach north of San Diego, and all four of their sons eventually lived in it.
“By the time all of them went through school, the condo had appreciated enough that it paid for the costs of their under-graduate schooling!” Tom grinned.
Son Mike had a professor named Irwin Jacobs, who along with six others went on to start Qualcomm, then a little-known company in San Diego. They invited Mike to become an employee and eventually offered him a chance to invest. Mike asked his parents what they thought. Tom was so intrigued that he invested.
It turned out fabulously well as the Coads’ wealth ballooned into the tens of millions of dollars when Qualcomm became the world leader in making semiconductor chips for cellular phones.
A central idea in American life is we must invest on the ground floor to become rich. Many books purport to say how. The problem is where? How can we avoid the scamsters and find the true gem? When does an investment become too risky?
Wall Street has reams of data on where to invest. Analysts build elaborate financial models to show future profit, studies on market share, predictions of hot industries and non-stop TV commentary.
Years after the Coads made their initial investment, I covered Qualcomm for Bloomberg. I was intrigued by how the Coads came to pick this company before it was well known. Tom gave me three keys:
• The first was co-founder Irwin Jacobs wasn’t looking for them. The Coads had just half of the $100,000 required for a minimum investment so Tom had to convince Jacobs to let him sign up. This is important. People who pursue our money—whether financial advisors hosting seminars with free meals or real estate agents who leave fliers on our doorsteps—have one common theme: they want our money.
• The biggest key was the management’s track record. Jacobs and co-founder Andrew Viterbi had both earned postgraduate degrees in engineering from the Massachusetts Institute of Technology, Tom noted. This is a quick way of verifying their expertise—a major university had vetted their scientific skills.
The pair had shown their business acumen when their prior company, Linkabit, was successfully sold. By the time the Coads invested in the mid-1980s, Jacobs and Viterbi had proved both their scientific and business skills.
“They had a record of success,” Tom said.
• The final issue was deciding whether they could lose their entire investment. Tom had a plan: he would work longer hours or more years than he planned. Plus, the couple didn’t invest all their life’s savings.
“High risk is relative,” Tom said. “When most people say high risk that means [risking] your standard of living if you failed. I never really felt that.”
By making the correct choices, the Coads have been able to enjoy their lives—which includes donating to the charities they like. So, they have one more piece of advice: be happy and generous with wealth.
“Wealth is a product of hard work and study,” Tom said. “Happiness is the product of giving and helping. Wealth and happiness are cousins.”
