Despite its intriguing title, Victor Haghani’s and James White’s book, The Missing Billionaires, is not an anthology about squandered wealth. Both authors are wealth managers and principals at Elm Wealth and they bring a lifetime of theoretical and practical experience to this important topic. The book consists of theory, anecdotes, case studies, history, mathematics, and financial advice. It examines the common mistakes investors make and how rational decision-making can lead to better financial outcomes. Haghani, co-founder of Long-Term Capital Management (LTCM), uses his own experiences, including the catastrophic collapse of LTCM, as a case study to illustrate the dangers of poor risk management and behavioral biases in finance. The advice centers around the application of Expected Utility to managing investment portfolios. Their key insight: diversified asset allocation is the key to building and maintaining wealth. Expected Utility can also be applied to related questions of how to spend one’s money, especially in retirement.
The missing billionaires is motivated by the observation that virtually none of the old money wealth is represented among present-day billionaires. Haghani and White attribute this absence to poor money management, especially having to make investment decisions with uncertain outcomes that have impact on welfare, which in turn are not necessarily…