The Disappeared Tycoons | Bill It Up Memo

2025-10-16 15:57:33

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"The Missing Billionaires," co-authored by Victor Haghani, one of the founders of the legendary hedge fund LTCM, combines his extraordinary financial experience to analyze the common phenomenon of wealthy families losing their fortunes within three generations or even underperforming the market within a single generation over the past century. It provides contemporary ordinary people with a set of simple yet profound principles for wealth management, accumulation, and spending.

Original Author: Bill Qian

Recently, I read a book called "The Missing Billionaires." This book uses data comparing almost all wealthy individuals who couldn't pass their wealth beyond three generations over the past 100 years as a starting point to share how an ordinary person today should manage, accumulate, and spend their wealth.

Co-author Victor Haghani is one of the founding partners of LTCM (Long-Term Capital Management), once a king in the hedge fund industry. LTCM suffered huge losses in 1998 due to high leverage and the financial crisis, leading to a bailout led by the Federal Reserve. He now shares these particularly simple and unadorned experiences, which are rare coming from someone like him.

I. Takeaway:

1. Wealth generally cannot be retained; not only do people fail to pass it beyond three generations, but sometimes even within one generation, it can underperform the stock market.

2. One key opens one lock; do not blindly believe in any "60/40 rule," Yale's David Swensen portfolio, Buffett's 90/10 rule, or Dalio's All Weather portfolio. What suits you is the most important. Especially in today's world, there are too many changes, and many previous frameworks are no longer applicable.

3. Dynamic adjustment: In the future world, the only constant is change. Even if you are a minimalist, it should not be a dogmatic minimalism. You need to flexibly adjust according to changes in the market environment, asset risk, and your own situation: 1. The ratio of your risk assets to bond assets; 2. Your consumption level.

4. Observe yourself and judge whether you are more like a "stock" or a bond? If you are a dentist, you are more like a bond, and you should allocate more to risk assets; if you are in a startup every day, you are like a stock, and you may want to consider allocating some low-risk assets.

5. How much risk asset should you allocate? As follows, for reference:

6. From now on, take responsibility for yourself. Before the mid-20th century: In many countries, the mainstream was defined benefit pensions (DB), where employers or governments promised fixed retirement benefits, and individuals did not have to worry about investments. In the latter half of the 20th century: With aging populations, increased life expectancy, and rising fiscal pressures in various countries, the DB system has become increasingly difficult to maintain. The risk of retirement has been transferred to individuals in most aging economies, including the United States, mainland China, Japan, etc. Longevity is becoming a risk; spend within your means. People are generally living longer now, so be cautious of "living without money after you die." Spend like you'll live forever.

7. Do not blindly pick stocks or assets. Acknowledging your ordinariness (invest as much as possible in indices) is the beginning of being extraordinary. Most people think they are extraordinary, so they prefer to actively trade stocks and cryptocurrencies. The author shared a surprising statistic: active non-professional investors underperform passive benchmarks by about 6% each year. Everyone believes "investing changes destiny," but the result often leads to downward changes in destiny.

II. Expanding on the story of "Missing Billionaires" mentioned in the book:

1. Wealth generally cannot be retained; not only do people fail to pass it beyond three generations, but sometimes even within one generation, it can underperform the U.S. stock market.

In 1900, there were about 4,000 millionaires in the United States. If those families had invested $5 million in a diversified stock portfolio and spent only 2% each year, by today (2022), the descendants of just one of those families could have produced 16 billionaire families. If this logic is extended to all millionaires (even if only a quarter of them started with wealth ≥ $5 million), there should be nearly 16,000 billionaires in the U.S. today. But the reality is: as of 2022, the total number of billionaires in the U.S. counted by Forbes is only about 700, and almost none can trace their lineage back to a millionaire ancestor from 1900.

Even if we shorten the time frame: In 1982, the last family on the Forbes 400 list had a wealth of $100 million. Theoretically, these families should have produced at least 4 billionaire families by today. But the fact is, less than 10% of today's billionaires in the U.S. come from that 1982 list.

Of course, some might say that the Rockefeller family, the British royal family, and the Rothschild family have hidden their wealth through charity and trusts, so you can't see it. I believe this phenomenon exists, but it does not significantly affect the above conclusion.