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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.

From the Publisher

“It’s more difficult to hold on to wealth than it is to make it.”

As of 2022, Forbes estimated there were just over 700 billionaires in the United States, and you’ll struggle to find a single one who traces his or her wealth back to a millionaire ancestor from 1900. We needn’t go so far back in the past to find this pattern. Fewer than 10% of today’s US billionaires are descended from members of the first Forbes 400 Rich List published in 1982. Even the least wealthy family on that 1982 list, with “just” $100 million, should have spawned four billionaire families today. We recognize that some wealthy families purposefully chose to give away or consume virtually all of their wealth in their lifetimes, but we believe these cases were relatively rare and do not account for the near-complete absence of “old-money” billionaires we see today.

We’re not lamenting a scarcity of billionaires in the world today. Our point is that, collectively, we all face a really big and pervasive problem when it comes to making good financial decisions. If even the most financially successful members of our society, at least some of whom were smart and capable, and all of whom could afford the “best” financial advice, consistently made atrocious financial decisions, what can be expected from the

rest of us? There’s a Persian proverb Victor’s father was fond of, which seems improbable at first, but the truth of which has become a main

motivation for this book: “It’s more difficult to hold on to wealth than it is to make it.”

This book sets forth our framework for addressing the challenge faced by all families—not only potential and actual billionaires—to find a path to better financial decisions.

The Puzzle of the Missing Billionaires

Criticisms of Expected Utility Decision-Making

Spending Like You Won’t Live Forever

Human Capital

Publisher ‏ : ‎ Wiley
Publication date ‏ : ‎ September 6, 2023
Edition ‏ : ‎ 1st
Language ‏ : ‎ English
Print length ‏ : ‎ 416 pages
ISBN-10 ‏ : ‎ 1119747910
ISBN-13 ‏ : ‎ 978-1119747918
Item Weight ‏ : ‎ 2.31 pounds
Dimensions ‏ : ‎ 6.5 x 1.6 x 9.1 inches