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

[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

 

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.

 

likewise, my other thought is that as an inventor/entrepreneur, he was able to understand the notion that he was a part owner of a great company, and not just a holder of some shares (trading mentality).  that orientation might have led him to not look at the share price trajectory as much as the company prospects trajectory, where in the case of msft and aapl it was rational to think that the best was yet to come...that and avoiding recognition of gain through sale. but I am sure that there are very few holders of IPO shares from the 80s still holding.

[Liberty]

likewise, my other thought is that as an inventor/entrepreneur, he was able to understand the notion that he was a part owner of a great company, and not just a holder of some shares (trading mentality).  that orientation might have led him to not look at the share price trajectory as much as the company prospects trajectory, where in the case of msft and aapl it was rational to think that the best was yet to come...that and avoiding recognition of gain through sale. but I am sure that there are very few holders of IPO shares from the 80s still holding.

 

Yeah, it's Buffett's whole "I'm a better investor because I'm a businessman, and vice versa" concept.

 

It's worth noting that today, everybody's talking about Buffett and value investing and all the info is easy to find on the internet on all you need to know.

 

Back 30 and 40 and 50 years ago, all of this was a lot less well-known and accessible.

[Guest cherzeca]

likewise, my other thought is that as an inventor/entrepreneur, he was able to understand the notion that he was a part owner of a great company, and not just a holder of some shares (trading mentality).  that orientation might have led him to not look at the share price trajectory as much as the company prospects trajectory, where in the case of msft and aapl it was rational to think that the best was yet to come...that and avoiding recognition of gain through sale. but I am sure that there are very few holders of IPO shares from the 80s still holding.

 

Yeah, it's Buffett's whole "I'm a better investor because I'm a businessman, and vice versa" concept.

 

It's worth noting that today, everybody's talking about Buffett and value investing and all the info is easy to find on the internet on all you need to know.

 

Back 30 and 40 and 50 years ago, all of this was a lot less well-known and accessible.

 

to my mind, this "optometrist" is an even better example of what value investing has become than Buffett. I never considered buffett to be a businessman.  he is a great investor who can think like a businessman, but tell me what business he ever ran.  what Buffett was good at was applying the old value investing analysis of searching out cigar butts and undervalued stocks in an age of information scarcity.  this requires a tenacity and emotional stability that few have.  maybe folks on the spectrum like burry can match this. that age has passed.  now, if you want to do value investing, your edge is knowing enough about businesses to see the business through the ceo/businessman's eyes.  calculating intrinsic value is not a financial exercise as much as it is using a businessman's insight.  insofar as Buffett has not really beat the market the last 10 years or so, I dont think this businessman's orientation is Buffett's wheelhouse.  I think this "optometrist" is probably more suited than Buffett for what value investing has become.

[Liberty]

to my mind, this "optometrist" is an even better example of what value investing has become than Buffett. I never considered buffett to be a businessman.  he is a great investor who can think like a businessman, but tell me what business he ever ran.  what Buffett was good at was applying the old value investing analysis of searching out cigar butts and undervalued stocks in an age of information scarcity.  this requires a tenacity and emotional stability that few have.  maybe folks on the spectrum like burry can match this. that age has passed.  now, if you want to do value investing, your edge is knowing enough about businesses to see the business through the ceo/businessman's eyes.  calculating intrinsic value is not a financial exercise as much as it is using a businessman's insight.  insofar as Buffett has not really beat the market the last 10 years or so, I dont think this businessman's orientation is Buffett's wheelhouse.  I think this "optometrist" is probably more suited than Buffett for what value investing has become.

 

I tend to agree with most of this, but I would caveat the whole "Buffett has not beat the market lately" with the fact that he's a victim of his own success, kind of like the iPhone. Once you've had all the success in the world, it's hard to keep repeating that forever. Very different to invest a few millions than to invest tens and hundreds of billions and to try to move the needle on a company with over half a trillion in market cap. I certainly think Buffett has done well on a risk-adjusted basis, since I think BRK has always been safer than the market (and certainly more counter-cyclical).

 

Anyway, it's just a nitpick, but I think it's worth saying because it's important context.

[Jurgis]

So a person who had great long-term orientation, good business experience, picked and held at least 3 great companies and great stocks that everyone would have loved to pick from their IPOs, still possibly (likely) underperformed SP500.

 

I'm sure there's a lesson in this. But probably not for CoBF crowd.  8)

[Rod]

So a person who had great long-term orientation, good business experience, picked and held at least 3 great companies and great stocks that everyone would have loved to pick from their IPOs, still possibly (likely) underperformed SP500.

 

I'm sure there's a lesson in this. But probably not for CoBF crowd.  8)

 

He must have diversified very widely from the beginning.

[Guest ajc]

 

 

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.

 

 

 

Yours is the most balanced representation of the story. He's a good guy, smart, generous (as you've noted), but the article seemingly attributes a major chunk of his success to his stock investment returns and method. Based on your rough math, it appears reports of his alpha generation are greatly exaggerated.

 

In his opening post, Liberty did pull quotes focused mostly on the guy's investments and method. It's therefore sort of unreasonable for him to later say "you have to differentiate between how the journalist spins things and the important/interesting parts" and that "readers here should be able to not be sidetracked this easily". To accept that, it seems fair to say Liberty should've probably focused more on those aspects to start with.

 

After that, some posters used critical, reasoned feedback to point out possible inconsistencies. The smart response is to welcome those sensible, alternative perspectives. I'm sure he's an intelligent guy, so no doubt he'll come round to the fact that people who've been helpful enough to apply a critical eye to the overall issue deserve praise not dismissal.

 

Rod's comment is on point. This is a value investing board. One of the most important things we can do is separate the facts as they are, from the story we're told. That's true for day-to-day intellectual honesty as well. StahleyP, Munger Disciple, etc, are engaging critically and questioning the assumptions being made by Forbes. COBF and value investing would be a dumpster fire without people like them, so credit where it's due. I wish I'd read it through the way they did from the beginning. Very nice.

 

I think Wertheim has an admirable story, a great innovative sense, and a healthy outlook. Nowhere does he call himself a great investor. It's definitely possible Forbes pushed that for effect and painted a really inaccurate investment picture. It's sad considering his life is so interesting anyway. StahleyP, Munger Disciple, etc, didn't criticize Wertheim though, they simply tried dividing his life from his investing record as best they could. If we didn't focus on the weaknesses of narrative or inconsistencies of fact before anything else, very few of us would preserve our own capital. The critics here should be fully encouraged. They're voicing their thoughts in a fair and even-keeled way.

 

Going back to his investment record and method, I'll throw another spanner in. Based on their split-adjusted IPO prices, MSFT has been a 1000-bagger plus and APPL a 350-bagger plus. From StahleyP's estimates of his portfolio value at the time, MSFT wasn't even close to a 1% position when he bought it. Yet, the Forbes article makes it sound like he was very prescient and super convinced about MSFT, APPL, and HEI. Doing some rough guesstimation based on what's written about his various holdings, position sizes, etc, it seems quite possible that Wertheim actually built an index-style portfolio of a 100 or 100's of companies and a handful worked out really, really well. If you look at the other names mentioned (3M, Intel), they would've been worth more than his current MSFT and APPL holdings if bought early and in any real quantity. Whatever the case, the alpha generated via his focus on the patents and the technical papers he reads might be questionable since it seems never to have got him, besides possibly with Heico, to put more than 2% of his portfolio into any of the truly amazing stocks mentioned here. I'm happy to have my math corrected, but I think that's accurate.

 

Ultimately then, I think Wertheim's real investment success was more his own innovative ability and products not his public market bets. If anything, this article is possibly a far better advert for extraordinary patience and the buying-and-holding of index funds since Wertheim would've also then had 12 extra hours per week of the time he values so much. As far as the article goes though, it seems poorly done and a significant amount of skepticism is warranted. Interesting story though, and congrats to him on the sweet life.

 

 

 

[Liberty]

So a person who had great long-term orientation, good business experience, picked and held at least 3 great companies and great stocks that everyone would have loved to pick from their IPOs, still possibly (likely) underperformed SP500.

 

I'm sure there's a lesson in this. But probably not for CoBF crowd.  8)

 

I agree that it's very hard to overperform, and that a lot of people who pretend to try are actually just gathering AUM and getting rich off fees rather than alpha.

 

But in this case, based on what we know, I don't think it's likely he underperformed on his equity allocation, but we don't know. It's possible he underpferformed on his whole net worth, though, but that's not a fair comparison, as few people have 100% of it invested in equities, don't take anything out (and anything taken out early will have oversized impact on final CAGR because of the nature of compounding growth), don't have cash, real-estate, business reinvestments, art collections, etc.

[Liberty]

In his opening post, Liberty did pull quotes focused mostly on the guy's investments and method. It's therefore sort of unreasonable for him to later say "you have to differentiate between how the journalist spins things and the important/interesting parts" and that "readers here should be able to not be sidetracked this easily". To accept that, it seems fair to say Liberty should've probably focused more on those aspects to start with.

 

Oh please. I shared an article, I wasn't defending a thesis for a PhD.

 

After that, some posters used critical, reasoned feedback to point out possible inconsistencies. The smart response is to welcome those sensible, alternative perspectives. I'm sure he's an intelligent guy, so no doubt he'll come round to the fact that people who've been helpful enough to apply a critical eye to the overall issue deserve praise not dismissal.

 

I didn't dismiss, I pointed out what I saw as critical flaws in those arguments.

 

Going back to his investment record and method, I'll throw another spanner in. Based on their split-adjusted IPO prices, MSFT has been a 1000-bagger plus and APPL a 350-bagger plus. From StahleyP's estimates of his portfolio value at the time, MSFT wasn't even close to a 1% position when he bought it. Yet, the Forbes article makes it sound like he was very prescient and super convinced about MSFT, APPL, and HEI. Doing some rough guesstimation based on what's written about his various holdings, position sizes, etc, it seems quite possible that Wertheim actually built an index-style portfolio of a 100 or 100's of companies and a handful worked out really, really well. If you look at the other names mentioned (3M, Intel), they would've been worth more than his current MSFT and APPL holdings if bought early and in any real quantity. Whatever the case, the alpha generated via his focus on the patents and the technical papers he reads might be questionable since it seems never to have got him, besides possibly with Heico, to put more than 2% of his portfolio into any of the truly amazing stocks mentioned here. I'm happy to have my math corrected, but I think that's accurate.

 

You're making this up because the facts aren't in the story. You don't know if he bought in lump sums or over time. And just because it says that he likes to hold things for the long term and not sell doesn't mean that he didn't sell from those positions (and we don't know when or how much). For all we know he put 10% in each and pared them down over time, maybe to give to charity or fund other businesses or buy a wine collection. We don't know. You don't even know if the estimate of his portfolio in the early 80s is correct, and how much of that portfolio was equities and how much was municipal bonds or whatever.

 

Ultimately then, I think Wertheim's real investment success was more his own innovative ability and products not his public market bets. If anything, this article is possibly a far better advert for extraordinary patience and the buying-and-holding of index funds since Wertheim would've also then had 12 extra hours per week of the time he values so much. As far as the article goes though, it seems poorly done and a significant amount of skepticism is warranted. Interesting story though, and congrats to him for creating a sweet life.

 

As I said, we can't know what his returns are because we don't know how much of his net worth was allocated to equities, how much was cash, real estate, reinvested in his businesses, how much was taken out when (taking out some millions in the early years makes a huge difference to where the net worth ends up decades later, and since you guys calculate the CAGR based on the net worth and not the (unknown) equity portion, we can't judge what his performance as a stockpicker was compared to an index.

 

I'm sitting here saying I don't know, while you guys are saying "it's probably this" but you're basing your math on unrealistic assumptions. It feels more honest to me to say "I don't know"...

 

My point in posting the article was sharing a story that I found interesting. A man starting from nothing with many disadvantages in life became a multi-billionaire, in large part thanks to his ingeniosity and long-term oriented public market investing. Guess that's really controversial.

[Cevian]

The Media (and readers) loves these stories.

 

I prefer Nassim Taleb's take in Fooled by Randomness. The book is about "luck disguised and perceived as non-luck (that is, skill) and, more generally, randomness disguised and perceived as non-randomness.

 

Reverse engineering (re: backtesting) a process that has worked for one doesn't mean one has found the recipe that will work for all in the future.

[writser]

In his opening post, Liberty did pull quotes focused mostly on the guy's investments and method. It's therefore sort of unreasonable for him to later say "you have to differentiate between how the journalist spins things and the important/interesting parts" and that "readers here should be able to not be sidetracked this easily". To accept that, it seems fair to say Liberty should've probably focused more on those aspects to start with.

 

After that, some posters used critical, reasoned feedback to point out possible inconsistencies. The smart response is to welcome those sensible, alternative perspectives. I'm sure he's an intelligent guy, so no doubt he'll come round to the fact that people who've been helpful enough to apply a critical eye to the overall issue deserve praise not dismissal.

 

Given that Liberty's signature contains a link to The importance of saying 'oops' I'm sure he'll come round.

 

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

[Liberty]

In his opening post, Liberty did pull quotes focused mostly on the guy's investments and method. It's therefore sort of unreasonable for him to later say "you have to differentiate between how the journalist spins things and the important/interesting parts" and that "readers here should be able to not be sidetracked this easily". To accept that, it seems fair to say Liberty should've probably focused more on those aspects to start with.

 

After that, some posters used critical, reasoned feedback to point out possible inconsistencies. The smart response is to welcome those sensible, alternative perspectives. I'm sure he's an intelligent guy, so no doubt he'll come round to the fact that people who've been helpful enough to apply a critical eye to the overall issue deserve praise not dismissal.

 

Given that Liberty's signature contains a link to The importance of saying 'oops' I'm sure he'll come round.

 

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

 

What's my error, except maybe engaging with posters here longer than I should've?

 

btw, that first part that you bold in the Yudkowsky quote doesn't mean what you seem to be implying it means. Will you admit that error?

[writser]

Gladly. Oops!

[stahleyp]

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.

 

 

 

 

[Liberty]

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.

 

I'm saying, again, that you don't have enough info here to know. You have to fill in too many points and this makes any conclusion you draw very tenuous, the probability distribution is so wide as to be useless. You don't know how much he had, how much was in equities, how much was withdrawn, when, how allocation fluctuated over time (could be big swings that affect things a lot). You don't know the 50 million drop was out of how much, how long it lasted, etc. A single variable can make a gigantic difference to the performance of the stocks (ie. if you withdraw a big chunk 30 years ago as opposed to recently).

 

I understand wanting to zoom in on the stockpicking and make a judgement call there. But I don't think we have enough to know how good a stock picker he is, except for the fact that he held a 160-bagger to today, and has help some other hundred baggers at least partly to today, which in itself is very impressive to me, showing long-term thinking and conviction in very very very large positions.

 

Personally, even without knowing his CAGR for stocks, I'm still impressed by the facts that we do know: He started with nothing and ended up with around 2.3 billion, with most of that in common stocks. That's enough to impress me, even if there's a lot I don't know.

 

I also find interesting the concept I saw elsewhere in this thread of "he was bailed out by these 3 good investments" or whatever. It's like dumping on a guy who found Berkshire early because he didn't find a dozen more like that. All you need is one plus the ability to hold it all the way up, and he clearly did with Heico. If Heico is almost half his net worth right now, I kind of doubt that he was some closet indexer back in the day and didn't make concentrated bets, but who knows?

[LC]

Only here could we rationalize away a guy who made billions. I mean, how many of today's top "alpha" generators are billionaires?

 

To me, it looks like the guy followed rules 1 & 2 - don't lose money, don't forget rule #1

[stahleyp]

I never said we "knew". I simply said that based on the article it doesn't look like he's a great investor. I have no reason to believe that. In fact, there is plenty of evidence to suggest otherwise by "creating math" and making conservative assumptions.

 

Also as far as the 3 bailout stocks go. It looks like he under performed the market even with the 3 home runs. Just imagine what it would look like if he missed out on one of them? How bad must his other picks be if he had those and still didn't beat the market? It certainly seems more like luck than skill.

 

For what it's worth if someone had bought only berkshire (or the S&P 500!) with $50 million in 1981 and never sold, they'd be worth more (or a lot) than $2.3 billion. ;)

 

 

[dwy000]

Any way you spin it, it's really an impressive story.  To start out with nothing and end up with billions is admirable (almost) any way you got there.  For me it piqued a number of questions and I suspect the writer was painting with a very broad brush to make the story more reader friendly.  For example, if he bought Apple at it's IPO he must have held it through the near bankruptcy years, which would have contradicted his rule to sell when down 25%. 

 

My favorite part (assuming its not exaggerated) is that even with literally billions to invest, he invests through Fidelity and Schwab.  Do you think he qualifies as a Gold customer and gets free trading software?

[Foreign Tuffett]

I never said we "knew". I simply said that based on the article it doesn't look like he's a great investor. I have no reason to believe that. In fact, there is plenty of evidence to suggest otherwise by "creating math" and making conservative assumptions.

 

Also as far as the 3 bailout stocks go. It looks like he under performed the market even with the 3 home runs. Just imagine what it would look like if he missed out on one of them? How bad must his other picks be if he had those and still didn't beat the market? It certainly seems more like luck than skill.

 

For what it's worth if someone had bought only berkshire (or the S&P 500!) with $50 million in 1981 and never sold, they'd be worth more (or a lot) than $2.3 billion. ;)

 

This hits on an issue I have with super concentrated buy-and-hold strategies: It's tough to figure out if you're generating actual alpha, or if you're just experiencing positive/negative variance.

 

[Liberty]

I never said we "knew". I simply said that based on the article it doesn't look like he's a great investor. I have no reason to believe that. In fact, there is plenty of evidence to suggest otherwise by "creating math" and making conservative assumptions.

 

Also as far as the 3 bailout stocks go. It looks like he under performed the market even with the 3 home runs. Just imagine what it would look like if he missed out on one of them? How bad must his other picks be if he had those and still didn't beat the market? It certainly seems more like luck than skill.

 

For what it's worth if someone had bought only berkshire (or the S&P 500!) with $50 million in 1981 and never sold, they'd be worth more (or a lot) than $2.3 billion. ;)

 

If you'll just be repeating what you've already said, you can go re-read what I've already said. You still don't know how much he allocated to equities, how much he took out, when, etc. It's very possible for someone to be an amazing stockpicker beating the market every year with their stock picks, and yet have a net worth that doesn't beat the market for a period (and what you've selected is only a period) because you have a conservative posture and keep your exposure limited (taking money out of equities, putting it into safe things, or into things that aren't investments). That's partly why Buffett is so rich, he stayed all-in for his whole life and almost didn't spend or give anything. Not many people do that (most don't want to or need to, it's just not their game).

 

Also, your starting point for net worth is arbitrary. If you start a little earlier in his life, you'll get much higher CAGRs for his whole net worth (unless you're saying that going from zero to 2.3bn isn't better than the SP500 would've done), because what you're doing is comparing net worth to SP500, rather than equities to equities. If you want to know how good an investor he is, you'd have to know the IRR on his investments. Pretty unfair to say he's potentially mediocre for other factors totally unrelated to investing.

 

ie. Would you say that Buffett's record should be cut by a lot if he had given a billion to charity in his 60s and today was worth tens of billions less? Or would you still need to look at his portfolio and the CAGR there would be the same regardless or the money he took out? You can't equate net worth to investing performance 1:1, which is why I'm still saying we don't know about that part, but what we do know is very impressive.

[stahleyp]

I never said we "knew". I simply said that based on the article it doesn't look like he's a great investor. I have no reason to believe that. In fact, there is plenty of evidence to suggest otherwise by "creating math" and making conservative assumptions.

 

Also as far as the 3 bailout stocks go. It looks like he under performed the market even with the 3 home runs. Just imagine what it would look like if he missed out on one of them? How bad must his other picks be if he had those and still didn't beat the market? It certainly seems more like luck than skill.

 

For what it's worth if someone had bought only berkshire (or the S&P 500!) with $50 million in 1981 and never sold, they'd be worth more (or a lot) than $2.3 billion. ;)

 

If you'll just be repeating what you've already said, you can go re-read what I've already said. You still don't know how much he allocated to equities, how much he took out, when, etc. It's very possible for someone to be an amazing stockpicker beating the market every year with their stock picks, and yet have a net worth that doesn't beat the market for a period (and what you've selected is only a period) because you have a conservative posture and keep your exposure limited (taking money out of equities, putting it into safe things, or into things that aren't investments). That's partly why Buffett is so rich, he stayed all-in for his whole life and almost didn't spend or give anything. Not many people do that (most don't want to or need to, it's just not their game).

 

Also, your starting point for net worth is arbitrary. If you start a little earlier in his life, you'll get much higher CAGRs for his whole net worth (unless you're saying that going from zero to 2.3bn isn't better than the SP500 would've done), because what you're doing is comparing net worth to SP500, rather than equities to equities. If you want to know how good an investor he is, you'd have to know the IRR on his investments. Pretty unfair to say he's potentially mediocre for other factors totally unrelated to investing.

 

ie. Would you say that Buffett's record should be cut by a lot if he had given a billion to charity in his 60s and today was worth tens of billions less? Or would you still need to look at his portfolio and the CAGR there would be the same regardless or the money he took out? You can't equate net worth to investing performance 1:1, which is why I'm still saying we don't know about that part, but what we do know is very impressive.

 

If it's unfair to say his performance mediocre, why is it fair to say he has great performance? If we don't know about his performance why suggest he has superior performance? Virtually everything we see suggests otherwise.

 

Keep in mind I never said his life story was mediocre. There is plenty of evidence to suggest that's not the case. Indeed, he'll do (and has already done) more than than most if not all of the folks on this site for the world.  I'm not knocking his incredible life. I'm simply skeptical of the purported "great" investment ability he has.

[Liberty]

If it's unfair to say his performance mediocre, why is it fair to say he has great performance? If we don't know about his performance why suggest he has superior performance? Virtually everything we see suggests otherwise.

 

What we know is he's a self-made billionaire, that his business never got that big (unlike most other self-made billionaires), that he owns hundreds of millions, if not billions, in common stock, some positions having gone up hundred-folds, at least one being worth 800m. This suggests great investing performance, though we can't know for sure. The only thing that goes against this is you picking an arbitrary starting point, guessing at a number based on a loss, and then equating net worth during that period to stock investing performance when there clearly can be a huge chasm between those; I'm saying that's not a good analysis if you want to know if he's a good investor.

 

Keep in mind I never said his life story was mediocre. There is plenty of evidence to suggest that's not the case. Indeed, he'll do (and has already done) more than than most if not all of the folks on this site for the world.  I'm not knocking his incredible life. I'm simply skeptical of the purported "great" investment ability he has.

 

Being skeptical is fine. But it has to be based on reasonable doubt. You haven't addressed most of my criticism of your methodology, you just keep repeating the same things, so I'll draw my conclusions that you don't have anything to say about those.

[rkbabang]

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?

 

[stahleyp]

If it's unfair to say his performance mediocre, why is it fair to say he has great performance? If we don't know about his performance why suggest he has superior performance? Virtually everything we see suggests otherwise.

 

What we know is he's a self-made billionaire, that his business never got that big (unlike most other self-made billionaires), that he owns hundreds of millions, if not billions, in common stock, some positions having gone up hundred-folds, at least one being worth 800m. This suggests great investing performance, though we can't know for sure. The only thing that goes against this is you picking an arbitrary starting point, guessing at a number based on a loss, and then equating net worth during that period to stock investing performance when there clearly can be a huge chasm between those; I'm saying that's not a good analysis if you want to know if he's a good investor.

 

Keep in mind I never said his life story was mediocre. There is plenty of evidence to suggest that's not the case. Indeed, he'll do (and has already done) more than than most if not all of the folks on this site for the world.  I'm not knocking his incredible life. I'm simply skeptical of the purported "great" investment ability he has.

 

Being skeptical is fine. But it has to be based on reasonable doubt. You haven't addressed most of my criticism of your methodology, you just keep repeating the same things, so I'll draw my conclusions that you don't have anything to say about those.

 

You think he is a great investor. You have no evidence to support that. Perhaps a rich relative gave him a large inheritance to help him get to his billions?

 

He is a billionaire. Yes, I agree.  Being a billionaire does not mean one knows how to outperform i the stock market. He had a lot of money invested in the stock market in the early 80s yes. That amount alone (which is conservative compared to his overall net worth) compounded at a rate that was less than the stock market (assuming it was in the market which we are led to believe) Yes, he could of spent it, gave it away, bought real estate, etc.  Even if he gave part of the $50 million away, the lack of investment skill is still pretty clear considering he was probably saving millions a year (which the article seems to indicate).

 

Even if the starting point is arbitrary, nearly 40 years of probable under performance doesn't seem to indicate superior investment ability.

 

You and the author seem to think this guy is a great investor. I have no reason to believe that.

[stahleyp]

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.

 

He is extraordinary, I agree. He has overcome difficult in life and is a success.

 

 

 

But with his investment prowess (which is the point of the article), you can't look at it like that.

 

I agree that few people even with a $10 million a year income would have that much in current dollars after 30 years. Here's why.

 

First, the starting point is $50 million (conservatively estimated) since he lost $50 million in 1982. He didn't make his billions solely off of the $10 million a year.

 

Second, you need to have a benchmark of something. That's how you measure superior ability. This guy invested in a market that averaged about 11% from 1981 to 2018. If the market over the next 30 years averages 5%, you can't expect many of the 1000 people to pull crazy numbers.