The Missing Billionaires: A Guide to Better Financial Decisions - Paperback

by Victor Haghani (Author), James White (Author), Emmanuel Roman (Foreword by)

An Economist Best Book of the Year

"Making Money and Keeping It" - The Wall Street Journal

Over the past century, if the wealthiest families had spent a reasonable fraction of their wealth, paid taxes, invested in the stock market, and passed their wealth down to the next generation, there would be tens of thousands of billionaire heirs to generations-old fortunes today. The puzzle of The Missing Billionaires is why you cannot find one such billionaire on any current rich list. There are a number of explanations, but this book is focused on one mistake which is of profound importance to all investors: poor risk decisions, both in investing and spending. Many of these families didn't choose bad investments- they sized them incorrectly- and allowed their spending decisions to amplify this mistake.

The Missing Billionaires book offers a simple yet powerful framework for making important lifetime financial decisions in a systematic and rational way. It's for readers with a baseline level of financial literacy, but doesn't require a PhD. It fills the gap between personal finance books and the academic literature, bringing the valuable insights of academic finance to non-specialists.

Part One builds the theory of optimal investment sizing from first principles, starting with betting on biased coins. Part Two covers lifetime financial decision-making, with emphasis on the integration of investment, saving and spending decisions. Part Three covers practical implementation details, including how to calibrate your personal level of risk-aversion, and how to estimate the expected return and risk on a broad spectrum of investments.

The book is packed with case studies and anecdotes, including one about Victor's investment with LTCM as a partner, and a bonus chapter on Liar's Poker. The authors draw extensively on their own experiences as principals of Elm Wealth, a multi-billion-dollar wealth management practice, and prior to that on their years as arbitrage traders- Victor at Salomon Brothers and LTCM, and James at Nationsbank/CRT and Citadel.

Whether you are young and building wealth, an entrepreneur invested heavily in your own business, or at a stage where your primary focus is investing and spending, The Missing Billionaires: A Guide to Better Financial Decisions is your must-have resource for thoughtful financial decision-making.

Front Jacket

Over the past century, if the wealthiest families had spent a reasonable fraction of their wealth, paid taxes, invested in the stock market, and passed their wealth down to the next generation, there would be tens of thousands of billionaire heirs to generations-old fortunes today. The puzzle of the missing billionaires is why you cannot find one such billionaire on any current rich list. There are a number of explanations, but this book is focused on one which is of profound importance to all investors: poor risk decisions, both in investing and spending. Many of these families didn't choose bad investments--but they sized them incorrectly, and allowed their spending decisions to amplify this mistake.

This book offers a simple yet powerful framework for making important lifetime financial decisions in a systematic and rational way. It's for readers with a baseline level of financial literacy, but doesn't require a PhD. It fills the gap between personal finance books and academic literature, bringing the valuable insights of academic finance to non-specialists.

You will learn about the theory of optimal investment sizing from first principles. These ideas will then be extended to problems in lifetime financial decision-making, with emphasis on the integration of investment, saving and spending decisions. Throughout, attention will be paid to practical implementation details, including how to calibrate your personal level of risk-aversion, and how to estimate the expected return and risk on a broad spectrum of investments. Finally, you will see how a series of fascinating financial puzzles can be unlocked with the new framework and tools that have been acquired.

The book is packed with case studies and anecdotes, including one about Victor's investment with LTCM as a partner, and a bonus chapter on Liar's Poker. The authors draw extensively on their own experiences as principals of Elm Wealth, a multi-billion-dollar wealth management practice, and prior to that on their years as quantitative researchers and arbitrage traders.

Whether you are young and building wealth, an entrepreneur invested heavily in your own business, or at a stage where your primary focus is investing and spending, The Missing Billionaires: A Guide to Better Financial Decisions is your must-have resource for thoughtful financial decision-making.

Back Jacket

Praise for THE MISSING BILLIONAIRES

"Making Money and Keeping It"
--The Wall Street Journal

"No matter the size of your net worth, keen insights for everyone on the difference between getting rich and staying rich."
--Morgan Housel, Author of The Psychology of Money

"How much investment risk should I take? How much should I spend, and how much should I save? We all want answers to these questions, and financial economists have them, but the answers need to be translated into practical language. That's exactly why you should read this enjoyable and insightful book, to understand and apply the best thinking about risk-taking and lifetime financial planning."
--John Y. Campbell, Morton L. and Carole S. Olshan Professor of Economics at Harvard University

"If wealthy Americans in 1900 had followed modern optimal investment and spending policies, they could have had 16,000 billionaire descendants by 2025. Instead, the total of all billionaires is about 1,000, which implies they did not. This book is a guide for doing better."
--Edward O. Thorp, mathematician, hedge fund manager, legendary gambler, author of Beat the Dealer

"This book is a great education for all of us, seamlessly marrying sophisticated theory with applications, demonstrating the beauty of a risk architecture that combines specificity with illuminating implementations into the lifetime wealth management problem."
--Myron S. Scholes, Frank E. Buck Professor of Finance, Emeritus, Stanford Graduate School of Business, Nobel Laureate in Economic Sciences

"Real world financial decision-making is more akin to poker than chess, with uncertainty playing a central role in every hand. But unlike the zero-sum poker table, everyone can be better off by making well-reasoned personal financial choices. The Missing Billionaires provides the theory and practical tools you'll need to make your own financial decisions sensibly and confidently."
--Annie Duke, Decision science expert, poker champion, author of Thinking in Bets, How to Decide, and Quit

"The Missing Billionaires addresses a topic that gets far too little attention in the investment community: how much to invest. The book is a terrific blend of theory, practice, and stories from the front lines. This is must-reading for anyone seeking to invest and spend wisely."
--Michael Mauboussin, Author and Head of Consilient Research, Morgan Stanley

Author Biography

Victor Haghani has 40 years' experience working and innovating in the financial markets, and has been a prolific contributor to academic and practitioner finance literature. He founded Elm Wealth in 2011 to help clients, including his own family, manage and preserve their wealth with a thoughtful, research-based, and cost-effective approach that covers not just investment management but also broader decisions about wealth and finances. Victor started his career at Salomon Brothers in 1984, where he became a Managing Director in the bond-arbitrage group, and in 1993 he was a co-founding partner of Long-Term Capital Management. He lives in London and Jackson Hole, Wyoming.

James White has spent two decades working in finance, covering the gamut of quantitative research, market-making, investing, and wealth management. He is currently the CEO of Elm Wealth, and previously has held research, trading, and executive roles at PAC Partners, Citadel, and Bank of America. He lives in Philadelphia.