After watching the global financial system almost melt down, I began an amazing journey several years ago to find a way for individual investors to take control of their money in a system that seems rigged against them.
I vowed that, if I was going to do this, I would do it all the way; to bring people the best possible information from the world’s most knowledgeable and influential experts.
But where to start?
Throughout my career I’ve been obsessed with finding successful strategies and tools that can immediately change the quality of people’s lives. Time and again I have proven the effectiveness of those strategies by producing measurable results where others have failed. What I knew from the beginning was that success leaves clues. People who succeed at the highest level are not lucky; they’re doing something differently. They zig when others zag, attack when others retreat. I’m interested in those people, and their relentless hunger to learn, grow, and achieve.
On my quest to help people take control of their money, I searched out these success stories. And in the process, I interviewed more than 50 self-made billionaires, Nobel Prize winners, investment titans, bestselling authors, professors, and financial legends, asking every question I could think of about the art of building wealth.
It was the ultimate PhD in investing, where my “professors” weren’t professors at all, they were practitioners — moving markets and shaping the world economy while they were coaching me one-on-one.
I asked them:
What is your competitive advantage in investing? What sets you apart? What insights have allowed you to dominate the markets decade after decade?
Is the game still winnable? How can individual investors thrive in the volatility of today’s economy?
What are the biggest challenges around the world? What are the biggest opportunities for investors today?
And, perhaps most important of all: If you couldn’t leave any money to your children, just a set of financial principles to help them thrive, what would it be?
Their answers excited me, shocked me, and sometimes made me laugh. Other times, they moved me to tears. It was beyond any university education one could imagine. Like all experts, these money masters have different views of what the near-term future might hold, and they have different opinions on which investment vehicles they favor most. Some are short-term traders; some like to hold long-term. Some think indexed investing is the way to go, while others swear you can make more money in arbitrage.
Even though they sometimes disagree on tactics, we can applaud how often these money masters’ divergent paths have led them to the same goals. Indeed, what I found most interesting in my examination of these financial legends’ distinct approaches is not what makes them different, but rather what makes them similar.
They all share at least these four common obsessions:
1. Don’t lose. Every single one of these masters, while driven to deliver extraordinary returns, is more obsessed with not losing money. Even the world’s greatest hedge fund managers, who you’d think would be comfortable taking huge risks, are actually laser-focused on protecting their downside. From Ray Dalio (the founder of the largest hedge fund on the planet) to Kyle Bass (who turned $30 million in investments into $2 billion in two years) to Paul Tudor Jones (one of the top 10 financial traders since 1993), they understand implicitly that if you don’t lose, you live to fight another day.
As Jones said: “I care deeply about making money. I want to know I’m not losing it . . . The most important thing for me is that defense is 10 times more important than offense . . . You have to be very focused on the downside at all times.”
2. Risk a little to make a lot. While most investors are trying to find a way to make a “good” return, each of these famed investors, without exception, looks for something completely different: home runs! They live to uncover investments where they can risk a little and make a lot. They call it asymmetric risk/reward.
Sir John Templeton’s path to great gains with the least risk was not to buy the market, but waiting until, as the 18th-century English nobleman Baron Rothschild put it, there is “blood in the streets” and everybody is desperate to sell. That’s when you pick up the best bargains. John D. Rockefeller also built his massive fortune on this notion.
Jones, on the other hand, follows trends in the market. But, as he told me, he doesn’t make an investment until he can potentially get a return of at least $5 for every $1 he risks. And that, he says, is a $150,000 MBA in a nutshell!
3. Anticipate and diversify. To find the best opportunity for asymmetric risk/reward, the best of the best anticipate. They do their homework until they know in their gut that they are right — or not.
And to protect themselves from being wrong, they anticipate failure by diversifying. Because in the end, all great investors have to make decisions with limited information. When I interviewed Kyle Bass’s former partner Mark Hart, he told me, “A lot of brilliant people are terrible investors. The reason is that they don’t have the ability to make decisions with limited information. By the time you get all the information, everyone else knows it and you no longer have the edge.” T. Boone Pickens (billionaire chairman and CEO of BP Capital Management) puts it this way: “Most people say, ‘Ready? Aim! … Aim! . . .’ But they never fire.”
Anticipation is about skating to where the puck is going to be. Diversification is about wearing pads in case you miss the puck and fall on your face when you take your shot.
4. You’re never done. Contrary to what most people would expect, this group of achievers is never done! They’re never done learning, never done earning, never done growing; they’re never done giving! No matter how well they’ve done, or how well they’ve continued to do, they never lose their hunger — the force that unleashes human genius. Most people would think, “If I had all this money, I would just stop. Why keep working?”
Why? Because each of these achievers believes, somewhere in his or her soul, “that to whom much is given, much is expected.” Their labor is their love.
Just like these money masters invest in different ways, they give back in different ways. They share their time and their money; they create foundations, they invest in others. Each of them has come to realize that true meaning in life comes from giving. They feel a responsibility to use their gifts to serve others. As Winston Churchill said, “We make a living by what we get. We make a life by what we give.” What unites them is the ultimate truth that life is about more than what you have. It’s really about what you have to give.
These four obsessions were distilled from the world’s most successful financial players. The few who actually do, versus the many who just talk. As I said, I am a hunter of human excellence. I seek out those individuals who break the norms and demonstrate to all of us what’s really possible. I learn what those few extraordinary individuals do that’s different from everybody else, and then emulate them. I find out what works, then I clarify it, simplify it, and systematize it in a way to help people move forward.
I hope these small insights can help you move forward as well. Remember that knowledge is not power, execution is. Just make a little bit of progress each day or each week, and before you know it, your path to financial freedom will be realized.