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

[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...

 

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.

 

The dude's a self-made billionaire with a small company and multiple hundred-baggers worth over a billion in his fidelity account, but yeah, there's no evidence because you've decided to assume 100% of his net worth has always been invested in equities, he's never withdrawn big amounts (especially early on, which would have a HUGE impact on your math), and that your guessed starting point (midway through his life, why not start earlier?) is correct.

 

I'd rather say that what we do know is very impressive, and that we don't know his exact investing performance, but that the chances that all your assumptions are correct is pretty low, so he's likely outperformed the market with the money he's invested, and that holding on to multiple hundred-baggers is impressive in itself.

[stahleyp]

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.

 

The dude's a self-made billionaire with a small company and multiple hundred-baggers worth over a billion in his fidelity account, but yeah, there's no evidence because you've decided to assume 100% of his net worth has always been invested in equities, he's never withdrawn big amounts (especially early on, which would have a HUGE impact on your math), and that your guessed starting point (midway through his life, why not start earlier?) is correct.

 

I'd rather say that what we do know is very impressive, and that we don't know his exact investing performance, but that the chances that all your assumptions are correct is pretty low, so he's likely outperformed the market with the money he's invested, and that holding on to multiple hundred-baggers is impressive in itself.

 

Not all of my assumptions have to be correct to show that he probably underperformed the benchmark. I assumed he started with less than he probably had and didn't invest any of his income (which the article suggested he had). Even with that additional help, he still compounded at a rate lower than an S&P 500 index fund. The fact that he had "multiple hundred-baggers" and probably still didn't have market beating performance just enhances my argument.

 

Is he super successful, yes! He's the "best investor you've never heard of" highly, highly suspect.

[Liberty]

Not all of my assumptions have to be correct to show that he probably underperformed the benchmark. I assumed he started with less than he probably had and didn't invest any of his income (which the article suggested he had). Even with that additional help, he still compounded at a rate lower than an S&P 500 index fund. The fact that he had "multiple hundred-baggers" and probably still didn't have market beating performance just enhances my argument.

 

Is he super successful, yes! He's the "best investor you've never heard of" highly, highly suspect.

 

There are too many unknown factors to tell the exact thing you're pretending to know, and by giving him one or two conservative assumptions, you can pretend that you're lowballing things while in fact if some of the other unknown factors are different from your assumptions, the delta could dwarf the assumptions in his favor.

 

You're basically saying: "Here, I'll give you 5 in your favor here, so that makes it a conservative assumption, and you're still not beating the SP500" while in fact there are these other 2-3 factors that could make a difference of 50 the other way (but can't make a difference against him because you've pegged them as far as they can go in that direction), but you won't even acknowledge them. It's either bad logic, or dishonest.

 

Instead of trying to come up with conclusions based on unknown facts, I'd rather come to my conclusions based on known facts, and those facts are very impressive (his starting point and end point, the ratios of where his wealth is and likely came from, how he did things that almost no investor is capable of doing in practice, etc). Show me other self made billionaires that didn't have a fast-growing company that got huge and built most of their wealth by investing only their own money (not AUM gathering with fees) with long-term concentrated portfolios (his Heico position alone is almost half his net worth). I'll wait.

[Hielko]

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.

 

The dude's a self-made billionaire with a small company and multiple hundred-baggers worth over a billion in his fidelity account, but yeah, there's no evidence because you've decided to assume 100% of his net worth has always been invested in equities, he's never withdrawn big amounts (especially early on, which would have a HUGE impact on your math), and that your guessed starting point (midway through his life, why not start earlier?) is correct.

 

I'd rather say that what we do know is very impressive, and that we don't know his exact investing performance, but that the chances that all your assumptions are correct is pretty low, so he's likely outperformed the market with the money he's invested, and that holding on to multiple hundred-baggers is impressive in itself.

The article claims he is the best investor you've never heard of and then proceeds to provide near zero evidence for that statement, and based on some on the information in the article it seems quite likely his returns have been below average. Perhaps instead of faulting people for questioning the premise of the article you should fault the author of the article for making such an extraordinary claim with nothing to back it up...

 

And to address some of your points: according to the article he's a buy-and-hold forever type of guy, so yes: assuming that he has never withdraw huge amounts and has stayed fully invested most of the time should be true. Secondly, according to the article he liked to use leverage, so probably comparing his return to the S&P500 index without any leverage is already pretty favorable for him.

[Rod]

This guy did 3 remarkable things:

 

1) Took a large fortune and put it all in stocks.

2) Made this investment in 1980 when just about nobody wanted to own stocks.

3) Held on for decades.

 

I'd guess that few wealthy people in 1980 did even one of those things, he did all three. He didn't need to match the index to be a star, assuming he didn't as some suspect.

[Liberty]

The article claims he is the best investor you've never heard of and then proceeds to provide near zero evidence for that statement, and based on some on the information in the article it seems quite likely his returns have been below average. Perhaps instead of faulting people for questioning the premise of the article you should fault the author of the article for making such an extraordinary claim with nothing to back it up...

 

I've said elsewhere that I don't care what the journalist calls him. I'm interested by the guy, not by how he's framed by someone else. I don't believe he's the best investor ever or whatever. But to go and say that he's an underperforming investor and that he did nothing special based on shaky guesses feels wrong.

 

And to address some of your points: according to the article he's a buy-and-hold forever type of guy, so yes: assuming that he has never withdraw huge amounts and has stayed fully invested most of the time should be true. Secondly, according to the article he liked to use leverage, so probably comparing his return to the S&P500 index without any leverage is already pretty favorable for him.

 

I disagree that you can automatically assume that he's fully invested and never withdraws amounts just because he has a preference for long-term holdings or because the journalist framed it that way. Buffett is also a "buy and hold forever" kind of guy and he sold IBM and many other things. It's not because something is your preferred outcome/style that you do it all the time.

 

You also have no idea how he uses leverage. Is it just tactically once in a while for short bursts, is it over long periods, it is for special situation bets with more binary outcomes. Does he have 50% or 30% of his net worth in equities and the rest in real estate and bonds or cash? Did he give millions to charity 30-40 years ago? Did he invest a bunch back in a startup venture that didn't work? You don't know, and that makes a huge difference in the outcome. Net worth is a flawed proxy for investment performance. But the chances that he's been 100% equities and never withdrew significant amounts feel a lot less likely than the alternatives, which are a lot more common with wealthy people. Buffett is an exception because he's been fully invested all that time and so frugal with expenses and withdrawals, but that's a very very rare situation.

 

What we know is the starting point, end point, and and that he almost half his net worth in a single position that he held for over 160x and probably a decent chunk of the rest in other hundred-baggers that he held for decades (when most investors here probably sell most of something when it doubles once), and that his company has stayed pretty small. Those are the facts, and they're pretty extraordinary in themselves.

[Liberty]

This guy did 3 remarkable things:

 

1) Took a large fortune and put it all in stocks.

2) Made this investment in 1980 when just about nobody wanted to own stocks.

3) Held on for decades.

 

I'd guess that few wealthy people in 1980 did even one of those things, he did all three. He didn't need to match the index to be a star, assuming he didn't as some suspect.

 

We don't know #1. We don't know how much he put in stocks and how much he put in other things and what his allocation has been over time, whether as his equities went up he kept reducing his exposure, whether he changed his mind at various point and sometimes was 50/50, then 75-25, then 25-75, etc. We don't even know how much he really had at various points of his life except at the beginning and today.

 

But #2 and #3 are impressive. In hindsight it seems like it was obvious, but the reason why P/E were so low back then is because everybody hated stocks after a decade of high inflation and high interest rates and crappy economy and various shocks, and assumed it would continue forward, and there certainly wasn't the info that we have today about stocks and investing back then, especially for someone who wasn't even working in the financial industry and approached investing as an amateur.

[Hielko]

This guy did 3 remarkable things:

 

1) Took a large fortune and put it all in stocks.

2) Made this investment in 1980 when just about nobody wanted to own stocks.

3) Held on for decades.

 

I'd guess that few wealthy people in 1980 did even one of those things, he did all three. He didn't need to match the index to be a star, assuming he didn't as some suspect.

 

We don't know #1. We don't know how much he put in stocks and how much he put in other things and what his allocation has been over time, whether as his equities went up he kept reducing his exposure, whether he changed his mind at various point and sometimes was 50/50, then 75-25, then 25-75, etc. We don't even know how much he really had at various points of his life except at the beginning and today.

If he did that wouldn't that just make him exactly the below average investor some suspect him to be?

 

But #2 and #3 are impressive. In hindsight it seems like it was obvious, but the reason why P/E were so low back then is because everybody hated stocks after a decade of high inflation and high interest rates and crappy economy and various shocks, and assumed it would continue forward, and there certainly wasn't the info that we have today about stocks and investing back then, especially for someone who wasn't even working in the financial industry and approached investing as an amateur.

Impressive, or just lucky? Or impressively lucky?

[Liberty]

If he did that wouldn't that just make him exactly the below average investor some suspect him to be?

 

No. It would just mean he made different trade-offs.

 

Let's imagine a scenario: To me, someone who puts 90% of their wealth in T-Bills and does 20% CAGR for 20 years with the remaining 10% is still a great investor.

 

They haven't created as much wealth as they could (which is one of the impressive things about Buffett, he's a top-tier wealth-maximizer, unlike Munger, f.ex., who spent a lot more of it along the way), but they still know damn well how to create value with stock-picking. A lot of money managers get measured on other people's money they manage, but we don't always know what percentage of their own net worth is invested.

 

Jeff Bezos has made early investments in Google and other successful companies and would probably be a billionaire even without Amazon. But do you say that he only invested a smaller percentage of his money in non-controlled-by-him VC-type investments, so he's a bad VC investor?

 

Impressive, or just lucky? Or impressively lucky?

 

There's always luck involved with investing. Always.

 

But over long periods, skill matters. It's like poker. Anyone can win a few rounds, but over long periods, the real pros come out on top. And when you are a concentrated active investor (as opposed to a passive, highly diversified one) over multiple-decades, skill matters most.

 

You can look at cohorts born the same year as Buffett and the same year as this guy, and almost nobody ends up with similar outcomes. Lots of people go into investing, but there's very few with records like Buffett's. Lots of entrepreneurs make millions and decide to invest in the stock market, but very few end up with 800m single-stock-positions in their fidelity accounts and with 2.3bn in net worth.

 

Of course, after the fact, people always try to explain these things are just being luck and survivorship bias. That's how the EMT people tried to explain away Buffett's success, to which Buffett responded with the Graham & Doddsville essay. I think the same kind of applies to this guy; he has non-random characteristics that make it less likely that he was just lucky as an investor (long-term orientation, doing fundamental and primary research, focusing on management and owner-operators/founders, concentration into industries he understands, focusing on industries with generally good economics and secular tailwinds (software, aerospace), etc).

 

I don't know how good an investor he is, but under most realistic scenarios I can imagine, considering his starting point, portfolio composition, and current outcome, it seems highly likely that he's a quite good investor. Someone could've come out with some math and assumptions that could've convinced me otherwise, but so far the arguments I've seen haven't been convincing to me.

[Cardboard]

Wow! This discussion is still going. Amazing! That guy definitely needs the last word...

 

One thing that cannot be disputed is that the guy is a terrible capital allocator. Returns have been abnormally poor, even for someone who has spent and given a lot of money.

 

Plus, the guy disclosed that he used margin. If you do that, you are no cash or bond investor or conservative investor. You do that to juice up returns. So the guy likes to make money, a lot. That would indicate almost everything but, someone who has a balanced portfolio.

 

And to hold on things forever does not take any kind of genius investor either. I know many people like that: they hold to both winners and losers forever.

 

Cardboard

[Liberty]

Wow! This discussion is still going. Amazing! That guy definitely needs the last word...

 

One thing that cannot be disputed is that the guy is a terrible capital allocator. Returns have been abnormally poor, even for someone who has spent and given a lot of money.

 

Plus, the guy disclosed that he used margin. If you do that, you are no cash or bond investor or conservative investor. You do that to juice up returns. So the guy likes to make money, a lot. That would indicate almost everything but, someone who has a balanced portfolio.

 

And to hold on things forever does not take any kind of genius investor either. I know many people like that: they hold to both winners and losers forever.

 

Cardboard

 

Don't you know envy is one of the deadly sins? No need to be so jealous of him, not everybody can be a self-made billionaire.

[rkbabang]

Wow! This discussion is still going. Amazing! That guy definitely needs the last word...

 

One thing that cannot be disputed is that the guy is a terrible capital allocator. Returns have been abnormally poor, even for someone who has spent and given a lot of money.

 

Plus, the guy disclosed that he used margin. If you do that, you are no cash or bond investor or conservative investor. You do that to juice up returns. So the guy likes to make money, a lot. That would indicate almost everything but, someone who has a balanced portfolio.

 

And to hold on things forever does not take any kind of genius investor either. I know many people like that: they hold to both winners and losers forever.

 

Cardboard

 

Don't you know envy is one of the deadly sins? No need to be so jealous of him, not everybody can be a self-made billionaire.

 

Absolutely!  It's like the fat guy at home in his arm chair second guessing what the quarterback does in the Superbowl.  The number of people who make 8 figures per year is quite large compared to the number of billionaires in the world.  Anyone who ends up a billionaire has done something extraordinary.  Actually they've probably done a great number of somethings extraordinary.

 

[Cardboard]

Au contraire.

 

Unlike the left, I am not jealous of billionaires and wanting to tax them to death. He has done well for himself and that is fine.

 

However, I do look at their methods and see if there is something I can use in my life to improve my lot.

 

So in essence, I have done what others have done in this thread or see if is truly a great investor and how to replicate?

 

Unfortunately, I see nothing other than digging through patents, trying to find the next Microsoft at IPO, holding forever and plugging into it a much, much higher percentage than he did.

 

Cardboard

[stahleyp]

Not all of my assumptions have to be correct to show that he probably underperformed the benchmark. I assumed he started with less than he probably had and didn't invest any of his income (which the article suggested he had). Even with that additional help, he still compounded at a rate lower than an S&P 500 index fund. The fact that he had "multiple hundred-baggers" and probably still didn't have market beating performance just enhances my argument.

 

Is he super successful, yes! He's the "best investor you've never heard of" highly, highly suspect.

 

There are too many unknown factors to tell the exact thing you're pretending to know, and by giving him one or two conservative assumptions, you can pretend that you're lowballing things while in fact if some of the other unknown factors are different from your assumptions, the delta could dwarf the assumptions in his favor.

 

You're basically saying: "Here, I'll give you 5 in your favor here, so that makes it a conservative assumption, and you're still not beating the SP500" while in fact there are these other 2-3 factors that could make a difference of 50 the other way (but can't make a difference against him because you've pegged them as far as they can go in that direction), but you won't even acknowledge them. It's either bad logic, or dishonest.

 

Instead of trying to come up with conclusions based on unknown facts, I'd rather come to my conclusions based on known facts, and those facts are very impressive (his starting point and end point, the ratios of where his wealth is and likely came from, how he did things that almost no investor is capable of doing in practice, etc). Show me other self made billionaires that didn't have a fast-growing company that got huge and built most of their wealth by investing only their own money (not AUM gathering with fees) with long-term concentrated portfolios (his Heico position alone is almost half his net worth). I'll wait.

 

Did I not say his life story is impressive? I said his investment results probably didn't beat the market. Isn't the premise of the article about the "greatest investor you've never heard of?" I think he got lucky.

 

What known facts do you have, by the way, to suggest he is a superior investor (and by superior, I mean beating an index fund)? I can't seem to find anything!

 

We aren't suggesting he put "90% of his wealth in the market". We're suggesting he had invested at least $50 million...since he lost that much in 1982. Even at $50 million (which was, in all likelihood less than his net worth, in 1981 in the S&P 500 would have turned into more money than what he has now. I don't see what this is so hard for you to admit that there are serious holes in this article?

[Cardboard]

"I don't see what this is so hard for you to admit that there are serious holes in this article?"

 

Exactly!

 

This is an investment forum and we try to see what works?

 

I also don't see why this is now being turned into jealousy, sins and deadly sins from self-proclaimed atheists?  :o

[Liberty]

Au contraire.

 

Unlike the left, I am not jealous of billionaires and wanting to tax them to death. He has done well for himself and that is fine.

 

However, I do look at their methods and see if there is something I can use in my life to improve my lot.

 

So in essence, I have done what others have done in this thread or see if is truly a great investor and how to replicate?

 

Unfortunately, I see nothing other than digging through patents, trying to find the next Microsoft at IPO, holding forever and plugging into it a much, much higher percentage than he did.

 

Cardboard

 

Not every article has to be a tutorial. It's possible to just read about success stories and find them interesting. And even so, you don't seem to be learning too much, or in any case, you certainly don't share much that is useful, instead spending all your time trolling.

[Liberty]

"I don't see what this is so hard for you to admit that there are serious holes in this article?"

 

Exactly!

 

This is an investment forum and we try to see what works?

 

I also don't see why this is now being turned into jealousy, sins and deadly sins from self-proclaimed atheists?  :o

 

Have you guys read anything I've written, or you just reflexively oppose anything just because it comes from me? I keep talking about what I know and don't know about this story. You guys make a lot more leaps than I do. I instead focus on what we do know, and what is most likely based on the actual base rate of other investors we know about.

[Rod]

Maybe the one thing we could all agree on is that the red novelty fedora is annoying.

[Liberty]

Maybe the one thing we could all agree on is that the red novelty fedora is annoying.

 

Yeah, he looks a bit like a guy who would get whacked on Boardwalk Empire...

[Liberty]

Absolutely!  It's like the fat guy at home in his arm chair second guessing what the quarterback does in the Superbowl.  The number of people who make 8 figures per year is quite large compared to the number of billionaires in the world.  Anyone who ends up a billionaire has done something extraordinary.  Actually they've probably done a great number of somethings extraordinary.

 

Reminds me of the Theodore Roosevelt quote:

 

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

[LC]

How is this topic still going?

 

The lessons here seem pretty obvious:

-Be really good at your job. This dude was raking in cash from his dental clinics.

-Buy and hold works if you buy right.

 

Put the two together and you have a chance at something really special.

[Cardboard]

If you want to teach us something LC maybe you should get your act right:

 

"This dude was raking in cash from his dental clinics."

 

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

 

 

[LC]

Thanks for your elucidating correction.

[John Hjorth]

An old post - posted a bit more than four years ago - by Kraven - has come to my mind related to this topic:

 

I would say that no one ever arrives.  There is always more to learn.  When you think you know it all that's when you get your head handed to you.  It's like life.  When you're 18 you know everything.  When you're older, you realize that your 18 year old self was full of crap and you know nothing.  Try to learn something every day and get better.  That journey never ends. 

 

I don't think one can have a goal of beating the market.  That's a number you can't control.  All you can control is your process and your own thinking.  If you put up returns you feel are satisfactory, then you've accomplished something.  Of course the meaning of satisfactory may include a look to the market returns, but that's after the fact.

 

To comment on another point made in the thread about looking back at 90 to see if one beat the market, clearly that is tongue in cheek.  While determinations of success must encompass longer than a one year period, perhaps even a 3 year period, there has to be some kind of realistic time frame in which to reach the conclusion about whether returns are satisfactory.  I would posit that 3-5 years is long enough to make that determination.  There has to be a balance between the view of value investing as the hanging of beautiful art in a museum and real life. What good does it do anyone to say on their death bed "well, I guess in the final accounting, I lived a good life, had wonderful children and a beautiful wife . . .  and the final numbers are in, and I guess my returns from investing were good after all!"