What I Learnt from Billionaires
I have been working with the ultra-rich for the last decade.
It’s been a humbling experience.
It isn’t the billions they quietly manage but how they think about the world.
I have come away believing that the rich think fundamentally differently:
Believe in change and innovation
Most fortunes across history were built from change.
These days we all confuse technology with change, but if you look at entrepreneurs and billionaires like Henry Ford, Warren Buffett, George Soros, Joseph Safra, Jacob Rothschild and Steve Schwarzman, they aren’t technology investors, they are change investors.
Each one of them saw, understood and invested in change, and benefited from it.
All of them understood changes in their economies, industries, markets and adapted and innovated. That’s how they made their money. You don’t need to be able to program to be a billionaire today anymore than you needed to do it a decade ago.
What you do need to be able to do is see change and evolve with it.
Play for the big bucks
They think much bigger, and act bolder. They are thinking in multiples rather than increments. While us mortals focus on the 20%, they focus on and therefore find solutions for the 5-10x.
One way they get to play for a multiple is that they think years in advance.
They think about what the world will look like five years from now.
This feel for how things will evolve let’s them be present for change, when it occurs.
If you want to learn more about thinking big, read this
Build an Edge
Every single ultra-rich person I have met understands their edge, what they are good at, and then what they aren’t good at, and therefore should pay to get done. They are very effective at this, to the point that they can extract the greatest economies of scale. They focus their energy on where they have the greatest competitive advantage and then leave the rest for someone else to do.
Once they have an edge they make sure to exploit it. They know what they are good at and what they are not good at. They focus on where they have an edge and not go where they don’t have one.
Their edge or advantage might come from a specific skill, know-how, or network. Whatever it is, they focus their time on it and make sure they can monetize it.
The billionaires don’t try to do everything on their own.
They pay for results and they hold people accountable. If you can create value for them they are happy to reward you.
They know and work with the best in the industry. This means knowing what works and what doesn’t. Sometimes this means being early – for example one of the families was a very early investor in Yukos, another was an early investor in Jim Simons at Medallion.
They seek and work with high quality people regardless what they are doing. They are agnostic to the exact innovation or style. They focus on whether it works or doesn’t and whether it will be profitable.
They are realist and opportunist in the best sense of the word.
Their best opportunities come from their network. They know they aren’t going to come up with opportunities on their own.
They listen to the experts in their network, ask questions, find more experts and keep digging until they can unearth the best opportunities.
They aren’t satisfied with the first answer they get or the first opportunity they come across.
They know that the best ideas and opportunities need to be discovered.
Sometimes their networks lead them to co-investment opportunities, something that is becoming very common with family offices.
You can read more about it here.
Live in the Present
They aren’t trapped in the past and what they did last year or last month. They are pragmatic and practical. They focus on the reality of where they stand now and don’t do things just because they have done them for the last decade or year.
They go where others aren’t.
Henry Ford wasn’t inventing the next horse drawn carriage. Jeff Bezos wasn’t starting the next hedge fund when he left D.E. Shaw.
While hedge funds represented innovation and change in the 2000’s and family office’s hedge fund allocation was 40-60% of their portfolio, this is now down to 15-25%.
While tech / VC is up to 15-25% from 0-5%.
To Sum Up:
Change & Innovation: They focus on and invest in innovation
Play the big game: Don’t think small, think how can you do 10x or 100x
Get an Edge: Find, research and build your edge
Outsource: Don’t do everything on your own, find experts and outsource
Network: Build your network and then use it to find opportunities
Let go of the past: Don’t be tied to what you have done or said in the past, focus on the current opportunity set
Go ahead, see what you’ve been missing.
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