- Thomas M.
- Saturday, November 25, 2023
The Financial Literacy book review series #FinLit recommends thought-provoking books about money, investing, and personal finance. This post is about The Missing Billionaires by Victor Haghani and James White.
When [Cornelius] Vanderbilt died in 1877, he was the wealthiest man in the world. His eldest son, Billy, received an inheritance of one hundred million dollars – 95% of Cornelius’ fortune. Unfortunately, it came without even the most basic of instructions on how to invest and spend this wealth over time. Within 70 years of the Commodore’s death, the family wealth was largely dissipated. Today, not one Vanderbilt descendant can trace his or her wealth to the vast fortune Cornelius bequeathed. The Vanderbilt clan grew at a higher rate than the average American family, but even so this outcome was far from guaranteed. If the Vanderbilt heirs had invested their wealth in a boring but diversified portfolio of US companies, spent 2% of their wealth each year, and paid their taxes, each one living today would still have a fortune of more than five billion dollars.
What went wrong?
(from an excerpt available at Advisor Perspectives)
The Vanderbilt example above illustrates a wider issue in wealth management: people take on too much risk and make poor decisions with money. Billionaire families can live lavishly and still pass along mind-boggling estates, yet there are thousands of "missing billionaires" caused by reckless gambling. Authors Victor Haghani and James White have written a book that academically and playfully teaches how to measure and act on risk, no matter your net worth. The mixture of psychology, economics, and puzzle games provides hooks for all kinds of readers, and the authors even suggest alternate chapter orders depending on what or how you want to learn. For a 300+ page financial treatise, it's pretty accessible. There's even a "cheat sheet" in the back with numbered rules of thumb.
Haghani and White share anecdotes from their respective careers in finance, but they usually credit others' ideas and research. This is not a beginner-level money guide - the preface acknowledges that the book is more advanced than a guide to ETFs and credit card interest. However, for exposure to lots of time-tested and well-researched financial principles that are ordered in a naturally flowing sequence, this is a gold mine. And that's including the section of commentaries about various asset classes, including gold. If you want the charts and algebra to back up a specific investing strategy, you will find several compelling models here. If you want to skip those and stick to interesting thought experiments about risk and perspectives on building wealth, there are plenty of those, too.
Thomas M. is an Accredited Personal Finance Instructor℠ (APFI®) and has previously blogged about Financial Lessons That Can Backfire, Talking To Kids About Money, and Online Financial Literacy Library Resources.