A tale of two investors.
Hana Masako’s life was unremarkable. She was an orphan, never married and had no children. After her final year of high school, she began working as a personal assistant – a role she kept for over 50 years. In life, Hana revealed little to the world; but her death uncovered something extraordinary.
Hana had no higher education and certainly no training in finance or the stock market. She did not inherit a family fortune. Yet through humble savings, continuous investment, and the compounding effect of eight decades, her estate totalled at over $11 million. Money which was then directed to charity.
By contrast, Richard Fuscone graduated from Dartmouth and earned an MBA from the University of Chicago. He rocketed to the top of Merrill Lynch as Executive Chairman of the Americas; frequented the "40 under 40" list of successful businesspeople; and was described as possessing business savvy and sound judgment.
By the age of 41, Richard had amassed so much wealth that he retired. From his 18,000 square-foot New York mansion with 11 bathrooms, two pools, two elevators and a seven-car garage he announced his intention to pursue personal and charitable interests.
Nine years later, Richard was bankrupt.
In what other business can a person with decades of the most relevant experience, training, resources, connections and education be eclipsed by another who possesses none of those traits or opportunities? This sort of paradox may appear in art, music and literature – but it is hard to imagine in other industries: Hana Masako would be unlikely to perform heart surgery better than a Harvard-trained cardiologist or design a chip better than Intel’s engineers.
Investing is only partly the study of finance – the other ingredient is the study of how people behave with money. Behaviour is hard to teach, even to very smart people. Behaviour is inherent, individual, difficult to quantify, and changes over time.
Hana and Richard show that managing investment is not necessarily about what you know; it is how you behave and how well you understand your own emotional discipline.
