CHAPTER 1 HOW the WEALTHY USE DOWN to GO UP "There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction." --John F. Kennedy The best investment strategy I know is so counterintuitive, so shockingly upside down, such a crazy way of thinking about investing that hardly anyone who uses it wants to even try to explain it. It's not at all hard to do, but it is hard to explain. It just sounds so . . . impossible. But smart investors do it all the time and, man, does it work! I mean it really works. It's an "I can do whatever I want the rest of my life" kind of works. It works so well, it's the secret to the investing success of the best and richest investors in the world. Seriously. I know that sounds like hype, but honestly it's impossible to overstate the effectiveness of this strategy. It really is the basis of the biggest fortunes in the world, including those of quite a number of Forbes's World's Billionaires list. For example, #3 is Carlos Slim Helu, the Mexican telecom entrepreneur who is worth $35 billion and is currently buying into cheap media, energy, and retail assets, including the New York Times, using this strategy. Lakshmi Mittal, #8, of India, created a $19 billion fortune and now runs the world's largest steel company, ArcelorMittal. He built ArcelorMittal using this strategy in Eastern Europe in the 1990s after the Berlin Wall came down. Number 15 is Bernard Arnault of France, who built a $16 billion fortune by acquiring Christian Dior with this strategy. Number 16 on the World's Billionaires list is Li Ka-shing of China, who made $16 billion acquiring energy, banking, and utility companies with this strategy. Charles Koch and David Koch are ranked #19 with $14 billion each, which they got by using this strategy to build Koch Industries--one of the largest, privately held corporations in the United States. Michael Otto of Germany is ranked #23 and is using this strategy to take advantage of weak markets in the United States to buy up shopping centers in America. Don Bren is #26. He used it to become the sole owner of the Irvine Company and bank $12 billion. The Irvine Company is one of the largest construction companies in California and the developer of about a fifth of Orange County. The list of billionaires who used this strategy to become mega-wealthy goes on and on but wouldn't be complete without mentioning that the world's second wealthiest man, Warren Buffett (worth $37 billion), the world's best investor, used this strategy of investing to build his immense fortune and to increase his ownership and compounded return in companies like American Express, Washington Post, GEICO, and Coca-Cola. This strategy is also the basis of thousands of little fortunes, including mine. In fact, as any of the billionaires I mentioned above would agree, it's much easier to use the strategy if you are a small investor. Being a big investor is actually a huge disadvantage in using this strategy. Mr. Buffett once said, "Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money."* I used this strategy to build my wealth by buying shares of bioscience, software, and other private companies. And soon, if you pay attention and are willing to do a bit of fun work, you'll discover that this incredible strategy can be the basis of your fortune, too. STOCKPILING I call this amazing strategy "stockpiling" . . . as in "stash," "accumulate," and "collec Excerpted from Payback Time: Making Big Money Is the Best Revenge! by Phil Town All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.
