The missing billionaires

[zakthor]

Just worked through this book and i thought it was really excellent.

Title asks, given the investment gains iof the past 150 years, why the descendants of the families from vanderbilt through the gatsby era arent themselves all billionaires.

Is a mathematical look at the importance of sizing bets.

Ive had a lot of probability but apparently never studied this real life stuff. Explains why a risk utility model is needed to deal with real life, expected value isnt sufficient.

I ended up writing programs to explore the games in the book and theyre right. It was not an easy read for me but it changed my mind about a lot of stuff.

Book convinced me i should be at just 60/40, feels better than just listening to experts.

Good book if youre interested in the math of betting and investing.

[Seahawk]

Excellent...thank you for the recommendation: Right in my wheel house.

https://www.google.com/books/edition/The_Missing_Billionaires/tZ7TEAAAQBAJ?hl=en&gbpv=1&pg=RA1-PA3&printsec=frontcover

I was able to scroll up and read the preface and forward and noodle around in the link above. Just ordered!

[Paul T]

Just ordered as well, sounds interesting! Thanks

[LWJ]

As I won't be reading this, and I am interested in creating long term wealth (if possible!). Can someone give a readers digest summary?

[Seahawk]

The link I posted has a good overview. The Intro Section is really excellent.

[HardDrive]

What do you mean 60/40?

Originally Posted by zakthor

Just worked through this book and i thought it was really excellent.

Title asks, given the investment gains iof the past 150 years, why the descendants of the families from vanderbilt through the gatsby era arent themselves all billionaires.

Is a mathematical look at the importance of sizing bets.

Ive had a lot of probability but apparently never studied this real life stuff. Explains why a risk utility model is needed to deal with real life, expected value isnt sufficient.

I ended up writing programs to explore the games in the book and theyre right. It was not an easy read for me but it changed my mind about a lot of stuff.

Book convinced me i should be at just 60/40, feels better than just listening to experts.

Good book if youre interested in the math of betting and investing.

[Paul T]

Originally Posted by HardDrive

What do you mean 60/40?

60% equities, 40% fixed income. It’s long been considered a standard asset mix for most folks. Personally, I skew much higher on equities and other investments, but that’s me….

[zakthor]

Originally Posted by Paul T

60% equities, 40% fixed income. It’s long been considered a standard asset mix for most folks. Personally, I skew much higher on equities and other investments, but that’s me….

Me too and im now adjusting it. Book helped me connect my risk aversion to my allocation. I thought i was a 1 but im actually a 2.

I love it when a book changes my mind.

[brainz01]

Cool book. Thanks for sharing. I'll give it a read.

I've had the opportunity to work with a lot of billionaires (and former billionaires) and in general they have the following traits:

1) Willing to take large risks including "bet the farm" positions

2) Smart, but not the smartest. They often fail to see/acknowledge the risks inherent in their chosen gamble.

3) Generally good at promoting their interest. They sell their vision to others (investors, partners, employees and regulators) and attract debt and equity investors (Other People's Money)

4) Lucky - And over time, become convinced that their luck is actually talent. I can't overstate this. People don't talk about all of those that failed doing similar things, but rather celebrate the winners as somehow special and more gifted. Winners write history.

5) Often have children that don't share the above characteristics, talents, or opportunity set.

I'm not surprised that the book seems to suggest (having only read the summary) that investment concentration which was so successful on the way up becomes the downfall as economic seasons change. Such is the shifting sands of the economy. A dismal science indeed...

If there was a group that might be positioned to better preserve wealth, it could be the PE and Hedgefund guys that essentially create professionally managed family offices. In theory, these could be structured to have diversified and balanced portfolio allocations as well as risk exposure limits that would allow for long term defensible performance. I won't be around in 100 years to measure.

But as the expression goes: From shirtsleeves to shirtsleeves in 3 generations....



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[Paul T]

Generational wealth is hard to pull off, often due to #5 above ^^. Those that have family offices with professional management have the highest chances of success, but often second and subsequent generations just spend, spend and spend their way into financial disaster. Personally, I don’t believe in large generational wealth transfers - I have no kids and most of my wealth will go directly to charities of my choosing, but even if I did, I would leave very little - definitely not an amount that would be life changing. It never (rarely) ends well for those that inherit a lot of $$ such that they don’t need to work.