When up-and-coming Western and Southern entrepreneurs wanted to kickstart their wealth-building process in the mid-1800s, they turned their attention towards one lucrative source of income—mail transportation contracts from the United States government. In 1845, Congress created something called star routes, which awarded mail distribution networks automatically to the lowest bidder with no conditions except those affecting “celerity, certainty, and security.” Each of these terms was noted on receipts with a *, and the *** led to the star-route nomenclature.
Charlie Munger had to bury his adolescent son. Warren Buffett had to deal with his mother’s mental instability and his father’s death while a relatively young man. Seth Klarman had to deal with the pain of his parent’s divorce at an early age. When Peter Lynch was ten years old, his father died of cancer. Benjamin Graham was a British immigrant following the death of his father as a toddler.
A common thread among the world’s most successful investors is that you can point to some aspect of their life in which they experienced a significant hardship. It is entirely possible that the experience of these personal hardships have contributed to their ability to be successful investors.
Between 1950 and 2000, a period that included both privately held and public trading for Monsanto stock, the compounding rate was 18.5%. It was one of the businesses that was so inherently lucrative that it was able to compound at a rate that almost tracked Warren Buffett’s accomplishments with Berkshire Hathaway stock.
The secret to Monsanto’s business success is that it was able to participate in the “toll booth” business model, which Kinder Morgan founder and CEO Richard Kinder has described as follows: “If you own a toll road, you don’t care how many passengers are in each car or what kind of car it is. You just want as many cars to move down the road as possible, and you make certain that they pay their tolls.”
Dr. Thomas J. Stanley, the author of “The Millionaire Next Door” and “The Millionaire Mind” who tragically died in a car accident a few years back, dedicated the research portion of his life to accurately assessing the behaviors of the self-made wealthy and helping to debunk many of the media’s sensationalist representations and depictions of how the wealthy actually behave.
The most commonly cited aspects of his research are the facts that the rich who enter the top 1% of America based on net worth only actually spend about eight years of their life at that classification level (i.e. “the 1%” is a constantly shuffling deck) as well as the fact that self-made millionaires love their Toyotas. I don’t remember the specific figure and don’t have the book available—but my impression is that the figure was absolutely silly—something like 15-20% of millionaires stuff their garages with Toyota-manufactured vehicle.
Few stories grip your attention quite as strongly as those that involve someone with a relative lack of advantage rising up and surpassing another that did, in fact, have superior advantages. Aesop covered it. Shakespeare covered it. F. Scott Fitzgerald covered it. A hundred years from now, stories will cover it.
With that narrative arc in mind, I have begun studying how the families of Korean immigrants, with next to no capital and the extreme social disadvantage of not having a strong command of the English language, arrive in the United States with nothing and die with fortunes estimated worth millions of dollars. What are they doing that a native-born American, born into a middle-class family, that dies with an average amount of $164,000 to his name, does not?