Over the past century, if the wealthiest families had spent a reasonable
fraction of their wealth, paid taxes, invested in the stock market, and
passed their wealth down to the next generation, there would be tens of
thousands of billionaire heirs to generations-old fortunes today. The
puzzle of The Missing Billionaires is why you cannot find one such
billionaire on any current rich list. There are a number of
explanations, but this book is focused on one mistake which is of
profound importance to all investors: poor risk decisions, both in
investing and spending. Many of these families didn't choose bad
investments- they sized them incorrectly- and allowed their spending
decisions to amplify this mistake.
The Missing Billionaires book offers a simple yet powerful framework
for making important lifetime financial decisions in a systematic and
rational way. It's for readers with a baseline level of financial
literacy, but doesn't require a PhD. It fills the gap between personal
finance books and the academic literature, bringing the valuable
insights of academic finance to non-specialists.
Part One builds the theory of optimal investment sizing from first
principles, starting with betting on biased coins. Part Two covers
lifetime financial decision-making, with emphasis on the integration of
investment, saving and spending decisions. Part Three covers practical
implementation details, including how to calibrate your personal level
of risk-aversion, and how to estimate the expected return and risk on a
broad spectrum of investments.
The book is packed with case studies and anecdotes, including one about
Victor's investment with LTCM as a partner, and a bonus chapter on
Liar's Poker. The authors draw extensively on their own experiences as
principals of Elm Wealth, a multi-billion-dollar wealth management
practice, and prior to that on their years as arbitrage traders- Victor
at Salomon Brothers and LTCM, and James at Nationsbank/CRT and Citadel.
Whether you are young and building wealth, an entrepreneur invested
heavily in your own business, or at a stage where your primary focus is
investing and spending, The Missing Billionaires: A Guide to Better
Financial Decisions is your must-have resource for thoughtful financial
decision-making.
