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

[Liberty]

I was thinking of Heico.

 

But you're right, he's a terrible investor, he probably only has a 7.4% CAGR or worse, that's why every entrepreneur who made a few millions a year is a twice-billionaire in their 70s with multiple hundred-bagger stakes in their portfolios, whatever.

[Cardboard]

Surprised Liberty keeps defending this guy:

 

“We’re going to move to a hydrogen economy.”

 

I was pretty much called an idiot when I made a statement that hydrogen held a lot of promise. LOL!

 

Cardboard

[Liberty]

Surprised Liberty keeps defending this guy:

 

“We’re going to move to a hydrogen economy.”

 

I was pretty much called an idiot when I made a statement that hydrogen held a lot of promise. LOL!

 

Cardboard

 

I'm not surprised you're surprised.

[stahleyp]

I was thinking of Heico.

 

But you're right, he's a terrible investor, he probably only has a 7.4% CAGR or worse, that's why every entrepreneur who made a few millions a year is a twice-billionaire in their 70s, whatever.

 

I didn't say terrible investor either.  :-X

 

His wealth came from compounding the $50 million in a bull market. The $50 million in his early 40s in 1981 no less is quite impressive. Under performing a simple index fund (while taking on more risk) does not make one an impressive investor.

[Liberty]

I was thinking of Heico.

 

But you're right, he's a terrible investor, he probably only has a 7.4% CAGR or worse, that's why every entrepreneur who made a few millions a year is a twice-billionaire in their 70s, whatever.

 

I didn't say terrible investor either.  :-X

 

His wealth came from compounding the $50 million in a bull market. The $50 million in his early 40s in 1981 no less is quite impressive. Under performing a simple index fund (while taking on more risk) does not make one an impressive investor.

 

I'll repeat: You don't know. You don't know how much cash he holds, how many bonds he has, how much in real estate. What his expenses are, what his donations are, how much he's reinvested in his companies or private investments. The article mentions a 100m donation, but I doubt that's the only one. When big withdrawals were made also matters (if you take out 100m back when the whole porfolio was worth 200m, that makes a bigger difference than if you take it out when it's worth 2bn). For all we know, the public equity portion of his portfolio has a 20% CAGR. We don't know.

 

What we know is starting point and outcome, as well as process, and that's a pretty rare combo that is worth some admiration.

[Gregmal]

Anyone else find it amusing how the same people(generally speaking) who refuse to be fully invested, or who hold huge portions of cash, are the first ones to quip about how easy everything would have been to just take all ones money and "buy the index"?

[stahleyp]

I was thinking of Heico.

 

But you're right, he's a terrible investor, he probably only has a 7.4% CAGR or worse, that's why every entrepreneur who made a few millions a year is a twice-billionaire in their 70s, whatever.

 

I didn't say terrible investor either.  :-X

 

His wealth came from compounding the $50 million in a bull market. The $50 million in his early 40s in 1981 no less is quite impressive. Under performing a simple index fund (while taking on more risk) does not make one an impressive investor.

 

I'll repeat: You don't know. You don't know how much cash he holds, how many bonds he has, how much in real estate. What his expenses are, what his donations are, how much he's reinvested in his companies or private investments. The article mentions a 100m donation, but I doubt that's the only one. When big withdrawals were made also matters (if you take out 100m back when the whole porfolio was worth 200m, that makes a bigger difference than if you take it out when it's worth 2bn). For all we know, the public equity portion of his portfolio has a 20% CAGR. We don't know.

 

What we know is starting point and outcome, as well as process, and that's a pretty rare combo that is worth some admiration.

 

I agree. Wouldn't you also agree that people shouldn't be called  "great investors" without knowing what the actual record is?

[Liberty]

I agree. Wouldn't you also agree that people shouldn't be called  "great investors" without knowing what the actual record is?

 

I don't think there's a single clear definition of what "great investor" means. I can mean something different to you than it does to me, that's fine.

[Rod]

Obviously, on a site like this, when people are told about a great investor, they are going to want to know what percentage return he averaged and how he did it. In this case there is some doubt that the percentage returns were that good. It seems to be more a story of starting early with a large amount of money and having the good sense to keep the compounding going. I'm grateful to those who dug into the math, otherwise we would be placing the credit for this man's success in the wrong place and we wouldn't have learned as much from his experience.

[Cardboard]

Thank you Rod, excellent post!

 

It is called critical thinking and should be saluted instead of being called jackasses for asking tough questions and trying to figure out if it makes sense for any of us to improve our lot?

 

Obviously, he is living a lavish lifestyle which must cost a fortune. We don't know when this started and at what level.

 

It is also surprising to see such calculated low returns over time considering the S&P performance, that he had an enormous return on Heiko, participated in the IPO's of both MSFT and AAPL.

 

I asked a related question about universally accepted definition of "great investor" on another thread and got no answer: Did anyone calculate Berkshire Hathaway's overall rate of return on its stock investments over the last 20 years?

 

Cardboard

[mcliu]

member this guy. pretty impressive for janitor and gas attendant

 

https://www.boston.com/news/local-news/2015/02/12/after-life-of-frugality-vermont-janitor-bestows-6-million-to-local-hospital-library

 

see another remembers him and also the irs lady who bequeathed I believe $28M to a woman's college.  she tracked what well off people did on their returns.  could not find any thing on her.

 

Also this guy: https://globalnews.ca/news/4798689/thrifty-social-worker-11-million-childrens-charities/

[Liberty]

Obviously, on a site like this, when people are told about a great investor, they are going to want to know what percentage return he averaged and how he did it. In this case there is some doubt that the percentage returns were that good. It seems to be more a story of starting early with a large amount of money and having the good sense to keep the compounding going. I'm grateful to those who dug into the math, otherwise we would be placing the credit for this man's success in the wrong place and we wouldn't have learned as much from his experience.

 

We still don't know what the CAGR is. The information wasn't known at first, and it's still unknown. Good thing I raised issues with the shallow napkin estimates, though, because otherwise they might have been taken as fact when they clearly aren't.

 

Doesn't mean we can't learn anything from his biographical experience, or find things to admire. Not everything in life is a competition or a tutorial. And it's not as simple as "starting early with large amounts of money". It's starting early with nothing (and an abusive father and dyslexia), earning millions through hard work and smarts, and then finding and holding multi-hundred-baggers for decades, and then pledging to leave probably over a billion (at least) to charity.

[John Hjorth]

... I asked a related question about universally accepted definition of "great investor" on another thread and got no answer: Did anyone calculate Berkshire Hathaway's overall rate of return on its stock investments over the last 20 years?

 

Cardboard

 

I may have missed that post of yours, Cardboard,

 

I feel pretty confident, that Berkshire's portfolio returns over the last 20 years aren't that impressive, without having made any calculations. [it's the financing by float, that has done the trick, I think.]

[stahleyp]

Obviously, on a site like this, when people are told about a great investor, they are going to want to know what percentage return he averaged and how he did it. In this case there is some doubt that the percentage returns were that good. It seems to be more a story of starting early with a large amount of money and having the good sense to keep the compounding going. I'm grateful to those who dug into the math, otherwise we would be placing the credit for this man's success in the wrong place and we wouldn't have learned as much from his experience.

 

We still don't know what the CAGR is. The information wasn't known at first, and it's still unknown. Good thing I raised issues with the shallow napkin estimates, though, because otherwise they might have been taken as fact when they clearly aren't.

 

Doesn't mean we can't learn anything from his biographical experience, or find things to admire. Not everything in life is a competition or a tutorial. And it's not as simple as "starting early with large amounts of money". It's starting early with nothing (and an abusive father and dyslexia), earning millions through hard work and smarts, and then finding and holding multi-hundred-baggers for decades, and then pledging to leave probably over a billion (at least) to charity.

 

The "shallow napkin" estimates certainly seem to point at a lack of investment ability instead of confirming it, doesn't it? No one has declared any of these results as "fact". We're simply skeptical. I don't see the harm in that. 

 

I'll also say that it's not hard to hold a multi-hundred bagger stock once you're a) comfortable with it and b) have a large amount to taxes to pay.  Though I'm only speaking from experience with multi bagger and not multi hundred bagger stocks.

[Liberty]

The "shallow napkin" estimates certainly seem to point at a lack of investment ability instead of confirming it, doesn't it? No one has declared any of these results as "fact". We're simply skeptical. I don't see the harm in that. 

 

I'll also say that it's not hard to hold a multi-hundred bagger stock once you're a) comfortable with it and b) have a large amount to taxes to pay.  Though I'm only speaking from experience with multi bagger and not multi hundred bagger stocks.

 

Where are all the other self-made multi-billionaires who made most of their money from the stock market rather than their companies or from taking fees on OPM? The base rate says that it's very hard and very rare.

 

It's not like there wasn't a cohort of millionaires in the 70s and 80s who invested in the stock market. Yet it seems very rare to hear about some who became billionaires (not from their companies doing really well or from gathering lots of AUM and taking fees) and held on to multi-hundred-baggers. Not saying there aren't others, but to downplay it as something "not hard" is delusional.

[rkbabang]

The "shallow napkin" estimates certainly seem to point at a lack of investment ability instead of confirming it, doesn't it? No one has declared any of these results as "fact". We're simply skeptical. I don't see the harm in that. 

 

I'll also say that it's not hard to hold a multi-hundred bagger stock once you're a) comfortable with it and b) have a large amount to taxes to pay.  Though I'm only speaking from experience with multi bagger and not multi hundred bagger stocks.

 

Where are all the other self-made multi-billionaires who made most of their money from the stock market rather than their companies or from taking fees on OPM? The base rate says that it's very hard and very rare.

 

It's not like there wasn't a cohort of millionaires in the 70s and 80s who invested in the stock market. Yet it seems very rare to hear about some who became billionaires (not from their companies doing really well or from gathering lots of AUM and taking fees) and held on to multi-hundred-baggers. Not saying there aren't others, but to downplay it as something "not hard" is delusional.

 

The only thing I took issue with it is the click-bate headline.  He was a multi-millionaire inventor and successful entrepreneur that became a billionaire through investing.  That is admirable and not easy to do (based on the obvious fact that not many multi-millionaires are able to do it).  The title makes it sound like a middle class guy became a billionaire through investing the stock market, but that just isn't what happened.  It's a good story, it is unfortunate that the author chose to embellish it unnecessarily.

 

[Cardboard]

Multi-millionaire inventor?

 

"“I didn’t want to have a big business,” he says. “But today, I have a 5 or a 6 or an 8 billion-dollar corporation, each of which I own 10% of.”

 

That is worth something between $500 and $800 million giving him $10 million/year in dividends? If we can discern what is truly being said here. Poor journalism...

 

If true, maybe the lesson is to keep holding on to your own business and be richer than diworsifieing in the stock market?

[Liberty]

 

The only thing I took issue with it is the click-bate headline.  He was a multi-millionaire inventor and successful entrepreneur that became a billionaire through investing.  That is admirable and not easy to do (based on the obvious fact that not many multi-millionaires are able to do it).  The title makes it sound like a middle class guy became a billionaire through investing the stock market, but that just isn't what happened.  It's a good story, it is unfortunate that the author chose to embellish it unnecessarily.

 

That's why I said that you have to differentiate between how the journalist spins things and the important/interesting parts. The guy can't be blamed for clickbait headlines or whatever, and readers here should be able to not be sidetracked this easily.

[stahleyp]

The "shallow napkin" estimates certainly seem to point at a lack of investment ability instead of confirming it, doesn't it? No one has declared any of these results as "fact". We're simply skeptical. I don't see the harm in that. 

 

I'll also say that it's not hard to hold a multi-hundred bagger stock once you're a) comfortable with it and b) have a large amount to taxes to pay.  Though I'm only speaking from experience with multi bagger and not multi hundred bagger stocks.

 

Where are all the other self-made multi-billionaires who made most of their money from the stock market rather than their companies or from taking fees on OPM? The base rate says that it's very hard and very rare.

 

It's not like there wasn't a cohort of millionaires in the 70s and 80s who invested in the stock market. Yet it seems very rare to hear about some who became billionaires (not from their companies doing really well or from gathering lots of AUM and taking fees) and held on to multi-hundred-baggers. Not saying there aren't others, but to downplay it as something "not hard" is delusional.

 

His story is great, especially given his adverse back ground. All I'm saying is that it wouldn't have been difficult to turn $50 million (or $100 million) into his $2.3 billion. The first $50 million is much more difficult.

 

Well, let's look at some things. First, the article said he lost $50 million in 1982. It's not unreasonable to say he had more than that in 1981. From the high point in 1981 to the low in 1982 the market was down about 16.5% (these are weekly numbers so daily could be more). It's not unreasonable to assume he had $100 million if he lost $50 million when you factor in margin and whatnot. If we assume $100 million and did not contribute a cent then he would have averaged about 8.84%. Again not bad, but well below the market.

 

Now you say well maybe he had real estate or something else. that's true. According to the article again he lost $50 million in the stock market. We are starting his net worth at a "low" level and are very conservative about it. I'm also assuming no additional savings. These are two very, very conservative numbers to arrive at his less than stellar market returns.

 

Again, keep in mind, he was bailed out by 3 huge winners (Apple, Microsoft and Heico). Even with those, his net worth is lower than what one would expect for a fellow so enamored with the stock market.

 

His story is great. The image of him being "the best investor you've never heard of" is big stretch. I see no evidence to believe it.

 

[Liberty]

You made no new points, so see my previous responses.

[stahleyp]

You made no new points, so see my previous responses.

 

What's so valuable about this article then? The basic premise is that he's some great investor. It doesn't even go into his background much or his original company.

[Guest cherzeca]

if not already wealthy, the temptation to sell IPO msft and apple shares would have been too great for most holders.  the reason he did so well is that he was already wealthy and didn't need to take profits.  reminds me of why NYC real estate families do so well...because real estate is hard to sell

[wachtwoord]

Thanks to everyone doing the math. I find numbers really interesting.

 

Of course that doesn't take anything away from the guy's (amazing) accomplishments but without facts the whole article is moot (as most journalism these days).

[Liberty]

You made no new points, so see my previous responses.

 

What's so valuable about this article then? The basic premise is that he's some great investor. It doesn't even go into his background much or his original company.

 

Nobody's forcing you to read it.

[Liberty]

if not already wealthy, the temptation to sell IPO msft and apple shares would have been too great for most holders.  the reason he did so well is that he was already wealthy and didn't need to take profits.  reminds me of why NYC real estate families do so well...because real estate is hard to sell

 

Lots of wealthy people try their hand at investing, and they tend to suffer from all the same failings as the rest of us. I don't think this explains it, or at least, only very partially.

 

I think he truly had a long-term orientation, which is rare, and he did a lot of work before buying things, so he had a high level of familiarity and confidence in what he owned, which probably allowed him to hold through all the crashes and corrections and negative headlines over the years.