How to Become a Billionaire

Michael Lewis’s The Big Short

One of the very best business books I have had the pleasure to read is The Big Short: Inside the Doomsday Machine which was written by one of the very best business writers working today, namely Michael Lewis. After starting it late last year I found it almost impossible to put down. Think of the book this way. It’s about a group of corporate world misfits, outsiders, and loners who after carefully analyzing the financial data available to everyone went out on a limb and bet the ranch on a housing market collapse of biblical proportions.

Now what makes the story so compelling is that after they laid their bets two or three years before the collapse, they then had to sit tight for 24 to 36 months while everyone else was scoffing and telling them that they were fools for being contrarians. Not many people have to backbone to stand up to public opinion for that long.

These guys did.

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How to Think About Money Like a Billionaire

Where attention goes, energy flows, and results show.

I have been struggling to get through the huge Warren Buffett biography, The Snowball, for several years now. My first attempt began in 2009 and saw me progress about 70 or 80 pages into it before running out of steam. My second attempt commenced in January of this year and I managed to beat my old record by 30 or 40 pages. However, I seem to have run out of steam yet again. There’s something about this book that grinds you down. Although it’s extremely well researched and written, there’s just way too much detail about Warren’s childhood and personal life as an adult. As a result the business lessons have been excruciatingly slow in coming. (By the way, I was shocked and amused to discover that Warren, who lived an idyllic Henry Aldrich life, was a bit of juvenile delinquent as a boy.)

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Hedge Funder vs. Tycoon

It often seems as if everybody wants to be a hedge fund guy these days. If you then ask the wannabes what hedge funders do, you invariably get a vague answer along the lines of “they invest in stuff” or worse, a simple blank stare. Now to be honest, it took me a while to get a handle on what they do. (Note that I didn’t use the word “understand.”) As far as I can make out a hedge fund is basically an unregulated mutual fund for sophisticated high net worth individuals and institutions. This is another way of saying that a hedge fund can invest in almost anything that its management believes it can earn a high “alpha” in. (The alpha is a rate of return above and beyond what one might expect from trading in stocks and bonds the way mere mortals do.)

So basically almost anything goes so long as there is potential for the high returns necessary to attract and keep sophisticated investor capital.

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Meshulam Riklis on the Use of Debt and Other Insights into Success

Meshulam Riklis is one of the modern era’s pioneers in the use of creative financing to acquire companies. He is also famous for coining such lines as “The effective nonuse of cash” and “Money is to look at, not to use.” They summed up his philosophy of hoarding cash to flaunt in front of bankers and other lenders while at the same time doing most of his empire building with debt financing. As the old joke goes, bankers are the most receptive to giving you money when you can show that you don’t need any.

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