The Missing Billionaires - Victor Haghani & James White

[wolverine890]

Saw this book review in the economist last week and picked it up. It's pretty good. The authors begin with Andrew Carnegie's net work at the time of death: $317M. He then explains that if each of his descendance and their descendance on down the line; would have taken their inheritance, invest in the US markets and only spent 2% year then they would each have a net worth of $5B. However, as far as we can tell no living member of the Carnegie fortune is worth anything close to this number. So he ask the question where are the missing billionaires?

 

The book is a pretty good rundown of risk management explains that humans are terrible at it. highlighted in the first couple charter by an experiment the authors ran where they had students participate in a coin flipping game where the odds of heads were 60% and tails were 40%. Each student was given $25 and allowed to make a 1:1 bet for 30 mins with the goal of maximizing their wealth. The crazy thing that happened was 28% went bust and I believe it was 40% ended with less money than they started. The authors highline that the solution to approaching this game is not intuitive for most people. You can play the game yourself on their website: https://elmwealth.com/coin-flip/

 

 

[wolverine890]

https://www.economist.com/finance-and-economics/2023/09/21/how-to-avoid-a-common-investment-mistake

[KCLarkin]

Clearly I am missing something with this premise. Isn't Carnegie famous for giving away his fortune?

 

Oh wait, I think you meant the Vanderbilt's. That makes more sense.

 

 

[gfp]

I am waiting around for something so I played the coin flip game linked above for 10 minutes and bet strict 20% of my bankroll on heads on each flip and still ended up with $21.13.  Disappointing.  I guess I didn't have a large enough sample size...  

[UK]

On 9/27/2023 at 11:29 PM, wolverine890 said:

https://www.economist.com/finance-and-economics/2023/09/21/how-to-avoid-a-common-investment-mistake

 

In practical terms, the book’s crowning achievement is its explanation of the “Merton share”. This is a simple rule of thumb for determining asset allocation, which says that allocations should rise in proportion to expected returns, fall in proportion to the investor’s risk aversion and fall a lot in proportion to volatility (specifically, to its square). This is not to suggest the book makes for light reading. The authors prescribe calculations that will appeal to only the most dogged investors, ideally with access to a Bloomberg terminal. Most will conclude that they need a wealth-management firm to help them; conveniently enough, Messrs Haghani and White run one.

 

 

 

[wolverine890]

On 9/28/2023 at 11:08 AM, KCLarkin said:

Clearly I am missing something with this premise. Isn't Carnegie famous for giving away his fortune?

 

Oh wait, I think you meant the Vanderbilt's. That makes more sense.

 

 

Ya, my bad @KCLarkin I didn't have the book in front of me. but you are correct. 

[wolverine890]

23 hours ago, gfp said:

I am waiting around for something so I played the coin flip game linked above for 10 minutes and bet strict 20% of my bankroll on heads on each flip and still ended up with $21.13.  Disappointing.  I guess I didn't have a large enough sample size...  

Luck is a funny thing. I played twice with the same strategy. first time ~$400 and second time >$700. 

[wolverine890]

4 hours ago, UK said:

 

In practical terms, the book’s crowning achievement is its explanation of the “Merton share”. This is a simple rule of thumb for determining asset allocation, which says that allocations should rise in proportion to expected returns, fall in proportion to the investor’s risk aversion and fall a lot in proportion to volatility (specifically, to its square). This is not to suggest the book makes for light reading. The authors prescribe calculations that will appeal to only the most dogged investors, ideally with access to a Bloomberg terminal. Most will conclude that they need a wealth-management firm to help them; conveniently enough, Messrs Haghani and White run one.

 

 

 

That is true. Many of the chapters can be dull. However, they bring up a couple of interesting ideas regrading personal capital and risk taking strategies via haghani's experience with this wealth and investment in LTCM. after almost a week of reflecting on the book to I think its worth reading? Maybe a couple of chapters. But I wouldn't waste my time reading it, in it entirety, again. 

[aatrox919]

Would anyone mind posting a pdf version of the economist article so that I can read fully?
Thank you,

AT

[linus_md]

You can read it here: https://archive.ph/eJccU.

[aatrox919]

On 9/29/2023 at 11:42 AM, linus_md said:

You can read it here: https://archive.ph/eJccU.

Thank you.

[CorpRaider]

Hagani and his partner/co-author did a podcast about this book recently.