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Having not been able to maintain my own marriage, I think its more complicated than that. But the quality Musk has that almost no one in his position has is th

Having not been able to maintain my own marriage, I think its more complicated than that. But the quality Musk has that almost no one in his position has is the willingness to risk it all for the dream. Musk himself almost went broke on SpaceX and Tesla. Most billionaires are into preservation of capital in a big way.

JoeAltmaier 14y ago
That. Why do so few people win 7 in a row in craps? Becausethe odds are against you. Most don't get rich by risking it all. Of those that do, 1 in a million 'make it work' i.e. get lucky.
jessriedel 14y ago
> Most billionaires are into preservation of capital in a big way. This is surprising to me from a behavioral economics stand point. Seems like billionaires would know they've very nearly maxed out their utility function in terms of material stuff. I'd think it would be very worth it to them to risk a billion dollars (which, remember, is something like the cumulative life's work of a thousand human beings) on mere personal glory or hubris. Are you speaking from personal experience, or is there some conventional wisdom or data I should know about?
- danielweber 14y ago
  I read somewhere (can't remember where) that according to people who measure happiness, one of the most unhappy things that can happen to you is to have a lot of money and then lose it. It seems weird to people who haven't gone through it, but there you go.
- unreal37 14y ago
  I would suggest if you look at a sampling of billionaires (like Sam Walton's children who own Walmart), or any other high profile billionaire on Forbes list, they are actually pretty content earning 1-2% a year on that money. Even young Mark Zuckerberg would not take the money he made on Facebook and turn around and start a company where he could lose 66% of his fortune if it didn't work out. Most serial entrepreneurs work on borrowed money after the first exit, or only invest a small part of their wealth on the next one. Even Warren Buffet, who is renowned as an investor and sometimes a wild speculator (like trying to corner the silver market), won't risk more than a small percentage of his wealth/Berkshire on a risky investment. Elon Musk made $160MM on Paypal, invested $100MM of his own money in SpaceX which was an all or nothing bet. And the rest $60MM in Tesla (and a divorce), and in 2010 had to borrow money from friends to live on. That's guts! And believing in yourself!
loganfrederick 14y ago
"Most billionaires are into preservation of capital in a big way." Depending on how you define "are into", this could be argued as empirically wrong. A study done by the editor of the updated edition of Graham's "The Intelligent Investor" shows that the Forbes 400 (400 Richest Americans) only had 68 members who stayed on the list from some time in the 1980 to the early 2000s. The author calculated the return required to stay on the list and it was approximately 4.8% annually, which is very reasonable with their level of resources. Due to these results (only 68 out of 400 richest people staying in that position), you could say that billionaires are NOT into preservation of capital, when making 4% annually is not even accomplished. The hypothesized reason for these results is that most billionaire's fortunes are tied to one or two major companies/investments. Fluctuations in business over time eventually devalue their investment in the single entity. If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. Apologies for the vague dates. I am at work and do not have the book handy, but just read that passage 48 hours ago. If someone replies that they want more specific numbers and references, I can update this post in 10 hours. Reference: http://www.amazon.com/Intelligent-Investor-Book-Practical-Counsel/dp/B0002X1JKU http://www.amazon.com/Intelligent-Investor-Book-Practical-Co...
- jessriedel 14y ago
  Hey this is really interesting. Thanks very much for posting this.
- TheCoelacanth 14y ago
  > If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. That might not always be possible. If the shares they own are a substantial portion of the total company, selling a lot of them at once would cause the share price to plummet and a lot of their wealth would disappear. Most of them do sell off stock in the companies that made them rich, they just do it gradually, so that they don't cause the price to drop. For instance, Bill Gates has been dumping Microsoft stock for several years. The stock he sold in the past few years amounts to about 3% of all of Microsoft.

JoeAltmaier 14y ago

That. Why do so few people win 7 in a row in craps? Becausethe odds are against you. Most don't get rich by risking it all. Of those that do, 1 in a million 'make it work' i.e. get lucky.

jessriedel 14y ago

> Most billionaires are into preservation of capital in a big way. This is surprising to me from a behavioral economics stand point. Seems like billionaires would know they've very nearly maxed out their utility function in terms of material stuff. I'd think it would be very worth it to them to risk a billion dollars (which, remember, is something like the cumulative life's work of a thousand human beings) on mere personal glory or hubris. Are you speaking from personal experience, or is there some conventional wisdom or data I should know about?

danielweber 14y ago
I read somewhere (can't remember where) that according to people who measure happiness, one of the most unhappy things that can happen to you is to have a lot of money and then lose it. It seems weird to people who haven't gone through it, but there you go.
unreal37 14y ago
I would suggest if you look at a sampling of billionaires (like Sam Walton's children who own Walmart), or any other high profile billionaire on Forbes list, they are actually pretty content earning 1-2% a year on that money. Even young Mark Zuckerberg would not take the money he made on Facebook and turn around and start a company where he could lose 66% of his fortune if it didn't work out. Most serial entrepreneurs work on borrowed money after the first exit, or only invest a small part of their wealth on the next one. Even Warren Buffet, who is renowned as an investor and sometimes a wild speculator (like trying to corner the silver market), won't risk more than a small percentage of his wealth/Berkshire on a risky investment. Elon Musk made $160MM on Paypal, invested $100MM of his own money in SpaceX which was an all or nothing bet. And the rest $60MM in Tesla (and a divorce), and in 2010 had to borrow money from friends to live on. That's guts! And believing in yourself!

loganfrederick 14y ago

"Most billionaires are into preservation of capital in a big way." Depending on how you define "are into", this could be argued as empirically wrong. A study done by the editor of the updated edition of Graham's "The Intelligent Investor" shows that the Forbes 400 (400 Richest Americans) only had 68 members who stayed on the list from some time in the 1980 to the early 2000s. The author calculated the return required to stay on the list and it was approximately 4.8% annually, which is very reasonable with their level of resources. Due to these results (only 68 out of 400 richest people staying in that position), you could say that billionaires are NOT into preservation of capital, when making 4% annually is not even accomplished. The hypothesized reason for these results is that most billionaire's fortunes are tied to one or two major companies/investments. Fluctuations in business over time eventually devalue their investment in the single entity. If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. Apologies for the vague dates. I am at work and do not have the book handy, but just read that passage 48 hours ago. If someone replies that they want more specific numbers and references, I can update this post in 10 hours. Reference: http://www.amazon.com/Intelligent-Investor-Book-Practical-Counsel/dp/B0002X1JKU http://www.amazon.com/Intelligent-Investor-Book-Practical-Co...

jessriedel 14y ago
Hey this is really interesting. Thanks very much for posting this.
TheCoelacanth 14y ago
> If they really cared about "preservation of capital", they would liquidate more of their stakes when one company made them rich then diversify their holdings. That might not always be possible. If the shares they own are a substantial portion of the total company, selling a lot of them at once would cause the share price to plummet and a lot of their wealth would disappear. Most of them do sell off stock in the companies that made them rich, they just do it gradually, so that they don't cause the price to drop. For instance, Bill Gates has been dumping Microsoft stock for several years. The stock he sold in the past few years amounts to about 3% of all of Microsoft.