"No man can become rich without himself enriching others"
Andrew Carnegie



Friday, May 3, 2013

Are Billionaires Smarter Than You?

Street Smarts
Street Smarts (Photo credit: Wikipedia)
By Investment U

Chicago, May.3, hot stock picks .- Do you have to be a genius to be a billionaire? I certainly hope not. But a recent study by Jonathan Wai of Duke University suggests a strong link between brains and billions. The study says "the top 1% in wealth highly overlaps with the top 1% in brains."

The research shows that 45% of billionaires are in the top 1% of cognitive ability.

Even more interesting was the study's breakdown of brains and billionaires.

For example:
  • Billionaires are smarter than Fortune 500 CEOs.
  • Billionaires who made their money from investments and technology are significantly more likely to have high IQs than other billionaires.
  • Billionaires who hit the jackpot in fashion, retail, or restaurants required less brainpower than most industries.
My take is that while being smart is crucial in some areas, such as creating new technologies, it can also get in the way of being focused and using common sense. For example, there are many wealthy people who made their fortunes using "street smarts" in the real estate business.

If forced to pick what characteristics were most important in becoming uber-wealthy, I would pick being opportunistic, patient, decisive... and contrarian.

Let's look at a few examples.

Street Smarts

John Templeton was a Rhodes Scholar, but it was his contrarian desire to scour the world for bargains ignored by the herd that put him in the investment hall of fame. And the patience to hold on until markets recognized the value was a key part of this successful, common-sense strategy.

Sam Zell also displayed street smarts in building a $4 billion real estate empire. Zell bought deep-value real estate in down markets in the 1960s and following this strategy over the next 40 years yielded huge gains.

In 1990 when Argentina was going through a currency crisis, a young Eduardo Elsztain had the guts to walk into the New York City offices of George Soros and talk him into investing $10 million in Argentine real estate.

With a little patience and some luck, Elsztain turned the $10 million into a $500 million real estate portfolio. Investors who joined him and Soros in their Dolphin Fund would have turned $100,000 into $1.9 million in a decade. And Elsztain is now the CEO of Cresud (Nasdaq: CRESY), a huge Argentine real estate company.

You can call it courage, common sense, an opportunistic personality or just plain patience. But I call it smart investing.

You don't have to be a genius to be a billionaire. You just have to make bold moves.
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