'An Optometrist Who Beat The Odds To Become A Billionaire'

[Liberty]

Thanks for implicitely conceding that you have no answer to my points. You're still trying to conflate his net worth (which you're guessing at for that arbitrary period -- what if you started 10 years earlier?) with investment performance. That's not a good way to do things, it doesn't make sense.

 

You're like the drunk who's looking for his car keys under the streetlight. Why are you looking there, did you lose your keys there? No, it's because that's where the light it...

 

You don't have enough data, so rather than admit that you don't know, you're making stuff up with the little data you have even if it's not enough to get the info you want.

[Guest]

Thanks for implicitely conceding that you have no answer to my points. You're still trying to conflate his net worth (which you're guessing at for that arbitrary period -- what if you started 10 years earlier?) with investment performance. That's not a good way to do things, it doesn't make sense.

 

You're like the drunk who's looking for his car keys under the streetlight. Why are you looking there, did you lose your keys there? No, it's because that's where the light it...

 

You don't have enough data, so rather than admit that you don't know, you're making stuff up with the little data you have even if it's not enough to get the info you want.

 

Attacking me rather than the arguments. Nice. I'm not the one claiming he's a great investor!

[Liberty]

Thanks for implicitely conceding that you have no answer to my points. You're still trying to conflate his net worth (which you're guessing at for that arbitrary period -- what if you started 10 years earlier?) with investment performance. That's not a good way to do things, it doesn't make sense.

 

You're like the drunk who's looking for his car keys under the streetlight. Why are you looking there, did you lose your keys there? No, it's because that's where the light it...

 

You don't have enough data, so rather than admit that you don't know, you're making stuff up with the little data you have even if it's not enough to get the info you want.

 

Attacking me rather than the arguments. Nice. I'm not the one claiming he's a great investor!

 

How am I attacking you?

 

Have you never heard of the availability bias? The drunk under the streetlight is a classic example, and in no way an attack:

 

http://www.rightattitudes.com/2016/02/26/drunkard-search-streetlight-effect/

 

http://discovermagazine.com/2010/jul-aug/29-why-scientific-studies-often-wrong-streetlight-effect

 

https://www.bounteous.com/insights/2013/03/04/compensating-streetlight-effect-observational-bias-google-analytics/

 

http://www.rightattitudes.com/blogincludes/images/Streetlight_Effect_or_Drunkard's_Search.jpg

[Guest]

Thanks for implicitely conceding that you have no answer to my points. You're still trying to conflate his net worth (which you're guessing at for that arbitrary period -- what if you started 10 years earlier?) with investment performance. That's not a good way to do things, it doesn't make sense.

 

You're like the drunk who's looking for his car keys under the streetlight. Why are you looking there, did you lose your keys there? No, it's because that's where the light it...

 

You don't have enough data, so rather than admit that you don't know, you're making stuff up with the little data you have even if it's not enough to get the info you want.

 

Attacking me rather than the arguments. Nice. I'm not the one claiming he's a great investor!

 

How am I attacking you?

 

Have you never heard of the availability bias? The drunk under the streetlight is a classic example, and in no way an attack:

 

http://www.rightattitudes.com/2016/02/26/drunkard-search-streetlight-effect/

 

http://discovermagazine.com/2010/jul-aug/29-why-scientific-studies-often-wrong-streetlight-effect

 

https://www.bounteous.com/insights/2013/03/04/compensating-streetlight-effect-observational-bias-google-analytics/

 

http://www.rightattitudes.com/blogincludes/images/Streetlight_Effect_or_Drunkard's_Search.jpg

 

Implying I'm "the drunk under the streetlight" is basically implying that I have a cognitive bias in my assessment. I don't think I do (and a number of members here seem to agree that he may not be the great investor the story implies). Further, why does he have to be drunk? Is that a positive? You could have easily said the streetlight effect (again, I don't see how that applies here) but you chose to say "the drunk" implying that my reasoning is invalid.

 

I fail to see the evidence that he's an outstanding investor. Do you have any?

[Liberty]

 

Implying I'm "the drunk under the streetlight" is basically implying that I have a cognitive bias in my assessment. I don't think I do (and a number of members here seem to agree that he may not be the great investor the story implies). Further, why does he have to be drunk? Is that a positive? You could have easily said the streetlight effect (again, I don't see how that applies here) but you chose to say "the drunk" implying that my reasoning is invalid.

 

I fail to see the evidence that he's an outstanding investor. Do you have any?

 

Ok, this is getting deep into facepalm territory. Now I remember our past conversations.. it had been long enough that I had forgotten how you were.

 

TTYL

[Guest]

 

Implying I'm "the drunk under the streetlight" is basically implying that I have a cognitive bias in my assessment. I don't think I do (and a number of members here seem to agree that he may not be the great investor the story implies). Further, why does he have to be drunk? Is that a positive? You could have easily said the streetlight effect (again, I don't see how that applies here) but you chose to say "the drunk" implying that my reasoning is invalid.

 

I fail to see the evidence that he's an outstanding investor. Do you have any?

 

Ok, this is getting deep into facepalm territory. Now I remember our past conversations.. it had been long enough that I had forgotten how you were.

 

TTYL

 

Still waiting on the evidence of his superior investment ability. ;)

[Cardboard]

This is so funny Stahleyp!

 

"Ok, this is getting deep into facepalm territory. Now I remember our past conversations.. it had been long enough that I had forgotten how you were."

 

Good luck having the last word on this! This guy is right on everything, will never accept any feedback, will switch topic... Can't even see how he is but, you are the one arguing endlessly!

 

Priceless!

 

Cardboard

 

[Guest]

haha thanks. yes probably not the best use of time but I enjoyed.

 

Liberty, no hard feelings!

[meiroy]

 

After reading the article, I have now decided to quit my full time investing and become an optometrist.

 

 

 

 

[Guest ajc]

 

 

ajc, thanks for the kind words! I wish my wife thought the same. :P

 

Liberty, the article says "But in 1982 Wertheim got caught in a margin call after Federal Reserve Chairman Paul Volcker raised the federal funds rate from 12% to 20% and the market sank 20%. The episode cost him $50 million and taught Wertheim a valuable lesson about the dangers of leverage and mark-to-market accounting."

 

That seems to indicate he had at least $50 million (a $100 million is not out of the ballpark when you factor in margin) in 1981 in the stock market. If his net worth is higher than that it just makes his investment prowess worse. The $50 million loss was not his total net worth - simply the amount he lost in the stock market.

 

Yes, he could have taken it out and bought property or art or something...but I don't see any reason to think that's the case. This is especially true since it says he saved part of his income to invest. Usually, people would fund new expenses from current income than take it out of stocks. If he's using margin to buy stocks, it's safe to say that if he would probably use leverage for real estate purposes too (especially with the tax benefits!). But perhaps with the margin call he swore off debt of any kind. I find that doubtful especially when purchasing property.

 

 

 

Ha, happy to give credit where it's due. On the other hand, if I could figure out the answer to your other issue I'd be rich like Herbie and wouldn't be wasting my time here!

 

Just to keep on bashing Wertheim for another second (clearly, my jealousy and resentments are on the boil), there are a couple more things that're maybe worth asking:

 

If you're a GOAT investor, and you start investing at age 18, how does it take you until the age of 43 to learn "about the dangers of leverage and mark-to-market accounting?"

 

Also, in the 70s and 80s weren't collateral requirements far higher? I mean we're talking about an era where the people running most major firms at the time had been raised in the Great Depression. I'm not sure when the current rules were instituted, but I'd think the odds are that less leverage was permissible back then. Said differently, maybe it's not at all a stretch to think his portfolio was a $100M one back in 1982.

 

Related to that is another question. You're Wertheim and you've got $50M left after 1982. At the same time, you just lived through 17 years where the DJIA slowly lost 73% of its value. Basically, it's the worst multi-decade performance since the Great Depression. Truly tough times for investors. Now though you have Reaganomics. Tax cuts across the board and corporations plus capital get the biggest breaks. You're a GOAT investor... do you at this point pour more of your annual income into your investment portfolio, or do you start buying paintings, wine, and so on while heavily drawing down your account?

 

Okay, I think the guy has done amazingly for himself and others, but can he really be a GOAT investor if he's selling stocks in 1982 when I believe the market P/E had gone down to 7 or something crazy and continues selling a ton of shares to buy art, wine, and real estate (each of which was way cheaper back then), all through the nearly 8x DJIA rise from 1982 until 2000?

 

Also, some further stuff. Looks like he currently has "dozens of other holdings" besides MSFT, APPL, and HEI. The article also says "not all of the hundreds of stocks he has owned have fared so well." 300? 400? 600? Who knows?

I did the math yesterday and if he had a $50M portfolio in 1986, then his MSFT holding bought at the IPO would've been $150 000 worth or a 0.003% position. I think that's what it came out to.

 

Elsewhere in the article it mentions "a lifetime of prudent do-it-yourself buy-and-hold investing." Speaks of his "near-religious devotion to tithing his wages into the stock market." And says with "BPI cash flowing into Wertheim’s brokerage account, he went to work buying stocks."

Wertheim also says "my goal is to buy and almost never sell" and the piece confirms that "Wertheim, like the Oracle of Omaha, seldom reinvests dividends but instead uses the cash flow from his portfolio to either fund his lifestyle or make new investments".

In other words, the quotes point to him constantly adding to his portfolio from BPI cash earnings, holding long-term, not selling down his portfolio, and living off dividends.

 

Anyway, Herbie's a total mensch but calling him the GOAT of any alpha-generating kind seems to require some serious imaginative leaps. I'm now going off to stick pins into a special voodoo doll of Wertheim that I've had made, in order to try soothe my undying rage and envy towards him. Damn you Herbie! Damn you to hell!

 

*shakes fist at cloud*

 

 

 

[Jurgis]

ajc has makings of good John Oliver replacement.

[Spekulatius]

Take 1000 people with $10M in annual income and come back in 30 years and see how many of them are worth over $2B in 2019 dollars that is not due to the growth of their own business.  My guess is 0-1 of them.  This guy is extraordinary any way you look at it, even if the author of the article isn't.

 

 

Take a few zero's off, it is like someone who makes $100K/year ending up with over $20M.  How often does that happen?

 

It’s harder to go from 100k income to $20M in assets than from $10M in income to $2B in, because with $100k, you living expenses will eat up most income and your investible free cash flow will be a much smaller part of your gross than with $10M in income. Well for some people, the expenses just rise with income admittedly, but for most of us, it would be easier to save $5M out of $10M income than $50k out of $100k.

 

I agree that Wertheim’s track record is quite extraordinary, as he has probably beaten 99%+ of his peer group in wealth creation, even from his $10M income point in the early 80’s. Weather he beat the index or not doesn’t really matter - he kept compounding his wealth at a pretty good clip, while most investors either underperform or blow up (when concentrated) over the course of 40 years.

[Cardboard]

What is a good investor?

 

In my book, you need to make 15% a year or double your portfolio every 5 years.

 

What is a great investor? 20%+/year

 

If you are not in these ranges, you are basically a very average investor. This is the cold hard truth.

 

If you are beating the indexes by only 1 or 2% you are wasting your time investing unless that is your hobby. Some will respond that beating the index by 1 or 2% over long periods of time amounts to a lot more wealth. Sure. But, you are so close to the average that we can't tell if you are truly outperforming. Only 1 bad year is enough to wipe out any advantage. Moreover you have to deal with taxes as any investor delivering these returns will have the odd sale.

 

This article tries to paint a great investor who bought MSFT and AAPL at IPO and made an enormous return on Heiko. So seriously I would imagine that this guy would deliver at least 15%/year.

 

Assuming what Stahleyp said about a $50 million starting point in 1982, which is very conservative based on that margin call comment, we would be looking at close to 250 times that money by now. IF he is a good investor. That is $12.5 billion!

 

Today the guy has $2.3 billion minus a stake of $500 to $800 million. So what should be $12.5 billion is only $1.5 to $1.8 billion. Where did all the money go? $10 million/year in dividends from 1 business. Not sufficient to cover living expenses? Then what about all these dividends and income from the portfolio? Even if all spent, we should not be looking at what looks like a guy that made sub 10%/year over the last 38 and call this some great investor!

 

Is 15% a year a crazy assumption? I don't think so. From a near depression level start where anyone could have produced massive returns in stocks AND long term bonds, 15% a year was easy to achieve in the 80's and 90's. Then we have massive gains on MSFT, AAPL and Heiko on top of that???

 

Great investor come on! What I can tell is that he is a big spender and based on this a terrible capital allocator.

 

Cardboard

[rukawa]

Do not indulge in drama and become proud of admitting errors.  It is surely superior to get it right the first time.  But if you do make an error, better by far to see it all at once.  Even hedonically, it is better to take one large loss than many small ones.  The alternative is stretching out the battle with yourself over years.  The alternative is Enron.

 

Since then I have watched others making their own series of minimal concessions, grudgingly conceding each millimeter of ground; never confessing a global mistake where a local one will do; always learning as little as possible from each error.  What they could fix in one fell swoop voluntarily, they transform into tiny local patches they must be argued into.  Never do they say, after confessing one mistake, I've been a fool.  They do their best to minimize their embarrassment by saying I was right in principle, or It could have worked, or I still want to embrace the true essence of whatever-I'm-attached-to. Defending their pride in this passing moment, they ensure they will again make the same mistake, and again need to defend their pride.

That's totally not something that is happening in this topic. :P

 

Never seen this essay. Its really nice. I have had a few instances which were big oops type ones where I completely changed what I was doing. One question I have though is what you do if:

 

1) You are sure what you are doing is failing

2) You have no idea of a better alternative.

 

Here I'm not talking about investing because the obvious alternative is to index invest. I more thinking about big problems like a failing career or a lack of passion in life. I am thinking of rut like patterns in life that people don't know how to break. I can think of a few answers:

 

1) Try anything new and different...experiment with a lot with different things

2) Meet different people

3) Look for the person who is succeeding while you are failing. Especially if that person fall into the psychological category of someone you dismiss because they had some unfair reason for succeeding or because you don't believe in what they are doing.

4) Take LSD or some psychedelic.

 

I don't really think I have a good answer since I am having problems like this and I don't really have a good solution.

[rkbabang]

Do not indulge in drama and become proud of admitting errors.  It is surely superior to get it right the first time.  But if you do make an error, better by far to see it all at once.  Even hedonically, it is better to take one large loss than many small ones.  The alternative is stretching out the battle with yourself over years.  The alternative is Enron.

 

Since then I have watched others making their own series of minimal concessions, grudgingly conceding each millimeter of ground; never confessing a global mistake where a local one will do; always learning as little as possible from each error.  What they could fix in one fell swoop voluntarily, they transform into tiny local patches they must be argued into.  Never do they say, after confessing one mistake, I've been a fool.  They do their best to minimize their embarrassment by saying I was right in principle, or It could have worked, or I still want to embrace the true essence of whatever-I'm-attached-to. Defending their pride in this passing moment, they ensure they will again make the same mistake, and again need to defend their pride.

That's totally not something that is happening in this topic. :P

 

Never seen this essay. Its really nice. I have had a few instances which were big oops type ones where I completely changed what I was doing. One question I have though is what you do if:

 

1) You are sure what you are doing is failing

2) You have no idea of a better alternative.

 

Here I'm not talking about investing because the obvious alternative is to index invest. I more thinking about big problems like a failing career or a lack of passion in life. I am thinking of rut like patterns in life that people don't know how to break. I can think of a few answers:

 

1) Try anything new and different...experiment with a lot with different things

2) Meet different people

3) Look for the person who is succeeding while you are failing. Especially if that person fall into the psychological category of someone you dismiss because they had some unfair reason for succeeding or because you don't believe in what they are doing.

4) Take LSD or some psychedelic.

 

I don't really think I have a good answer since I am having problems like this and I don't really have a good solution.

 

1 in combination with 2 is a huge problem. I'm reminded of the saying "When you find yourself in a hole ... stop digging".    The first thing to do is stop doing whatever it is that is failing.  Even if it means doing nothing at all until you figure out how you want to try to proceed.

 

[Liberty]

Do not indulge in drama and become proud of admitting errors.  It is surely superior to get it right the first time.  But if you do make an error, better by far to see it all at once.  Even hedonically, it is better to take one large loss than many small ones.  The alternative is stretching out the battle with yourself over years.  The alternative is Enron.

 

Since then I have watched others making their own series of minimal concessions, grudgingly conceding each millimeter of ground; never confessing a global mistake where a local one will do; always learning as little as possible from each error.  What they could fix in one fell swoop voluntarily, they transform into tiny local patches they must be argued into.  Never do they say, after confessing one mistake, I've been a fool.  They do their best to minimize their embarrassment by saying I was right in principle, or It could have worked, or I still want to embrace the true essence of whatever-I'm-attached-to. Defending their pride in this passing moment, they ensure they will again make the same mistake, and again need to defend their pride.

That's totally not something that is happening in this topic. :P

 

Never seen this essay. Its really nice. I have had a few instances which were big oops type ones where I completely changed what I was doing. One question I have though is what you do if:

 

1) You are sure what you are doing is failing

2) You have no idea of a better alternative.

 

Here I'm not talking about investing because the obvious alternative is to index invest. I more thinking about big problems like a failing career or a lack of passion in life. I am thinking of rut like patterns in life that people don't know how to break. I can think of a few answers:

 

1) Try anything new and different...experiment with a lot with different things

2) Meet different people

3) Look for the person who is succeeding while you are failing. Especially if that person fall into the psychological category of someone you dismiss because they had some unfair reason for succeeding or because you don't believe in what they are doing.

4) Take LSD or some psychedelic.

 

I don't really think I have a good answer since I am having problems like this and I don't really have a good solution.

 

1 in combination with 2 is a huge problem. I'm reminded of the saying "When you find yourself in a hole ... stop digging".    The first thing to do is stop doing whatever it is that is failing.  Even if it means doing nothing at all until you figure out how you want to try to proceed.

 

The bias towards action certainly is the cause of a lot of life's problems.

 

It's the old: "All of humanity’s problems stem from man’s inability to sit quietly in a room alone." -Blaise Pascal

 

I think the first thing to do is to look inside before you look outside. Everything you do, think, feel, contribute to others, ultimately goes through or comes out of your mind. Often if you end up somewhere, it's not just because life took you there, but because you took decisions - consciously or unthinkingly - that steered you that way. Sometimes when it's a bad place, it's because you had a misunderstanding about what you actually want/need, or just followed paths established by others. I'd suggest some real introspection and exploration to figure that out (I know it's a vague recommendation, but it's something that everybody has to do for themselves, there's not a specific prescription)...

 

I remember that years ago I found the book Stumbling on Happiness by Dan Gilbert helpful to create a framework for life choices.

[nickenumbers]

Master Oogway-

 

You must give up the illusion of control.

 

When the path you walk always leads back to yourself, you never get anywhere.

 

 

Life is a struggle, and it was not designed to be easy.  Libery, Rkbabang, Rukawa and Writser offer good counsel.

[LC]

Master Oogway-

 

You must give up the illusion of control.

 

Let go of your earthly tether

Enter the void

Become wind

 

https://i.kym-cdn.com/photos/images/original/000/975/870/ebc.gif

[nickenumbers]

Master Oogway-

 

You must give up the illusion of control.

 

Let go of your earthly tether

Enter the void

Become wind

 

https://i.kym-cdn.com/photos/images/original/000/975/870/ebc.gif

 

LC, you crack me up.  And that GIF was freaking funny!!  Grasshoppa, can you snatch the pebble from my hand?

 

[Chris]

I'm happy that a lot of smart guys here call out the bullshit of "great investor" if you underperform the index for decades.

He may be a great entrepreneur, but not a great investor.

It is just astonishing to me that, as some pointed out, most rich people with 50 or 100m did NOT compound that at even below market returns over decades.

Problem for me will only be to reach the first 50m, after that I have no doubt I can do better than index returns  ;D

 

 

[Guest cherzeca]

@liberty

 

I have a t-shirt that says "if nothing works, do nothing"

 

I should wear it more often

[Liberty]

I'm happy that a lot of smart guys here call out the bullshit of "great investor" if you underperform the index for decades.

He may be a great entrepreneur, but not a great investor.

It is just astonishing to me that, as some pointed out, most rich people with 50 or 100m did NOT compound that at even below market returns over decades.

Problem for me will only be to reach the first 50m, after that I have no doubt I can do better than index returns  ;D

 

Did you read the part where bullshit is called on that napkin math? Making assumptions like "guessed net worth from arbitrary point is good proxy for equity returns and let's assume there were no large withdrawals or exposure changes over time" don't sound very realistic to me. Not everybody is Buffett, living in the same house he bought in the 50s, driving hail-damaged cars, not giving money to family, and keeping equity exposure at 99.99% of net worth his whole life...

[Liberty]

@liberty

 

I have a t-shirt that says "if nothing works, do nothing"

 

I should wear it more often

 

I also like: "Don't just do something, stand there!"

[Guest]

I'm happy that a lot of smart guys here call out the bullshit of "great investor" if you underperform the index for decades.

He may be a great entrepreneur, but not a great investor.

It is just astonishing to me that, as some pointed out, most rich people with 50 or 100m did NOT compound that at even below market returns over decades.

Problem for me will only be to reach the first 50m, after that I have no doubt I can do better than index returns  ;D

 

Did you read the part where bullshit is called on that napkin math? Making assumptions like "guessed net worth from arbitrary point is good proxy for equity returns and let's assume there were no large withdrawals or exposure changes over time" don't sound very realistic to me. Not everybody is Buffett, living in the same house he bought in the 50s, driving hail-damaged cars, not giving money to family, and keeping equity exposure at 99.99% of net worth his whole life...

 

Yes, I think most of us did read the "napkin math". You had a link to the article, after all! ;)

 

Great investor (best we've never heard of!)..with no evidence. The evidence we do have leads us to reasonable doubt.

[tede02]

What is a good investor?

 

In my book, you need to make 15% a year or double your portfolio every 5 years.

 

What is a great investor? 20%+/year

 

If you are not in these ranges, you are basically a very average investor. This is the cold hard truth.

 

If you are beating the indexes by only 1 or 2% you are wasting your time investing unless that is your hobby. Some will respond that beating the index by 1 or 2% over long periods of time amounts to a lot more wealth. Sure. But, you are so close to the average that we can't tell if you are truly outperforming. Only 1 bad year is enough to wipe out any advantage. Moreover you have to deal with taxes as any investor delivering these returns will have the odd sale.

 

 

Cardboard

 

It is amazing how much effort is spent trying to generate a 1-2% above the averages. Armies of reseachers are at work and yet few can do it. It's perplexing in some ways and understandable in others.