Missing Billionaires: A Guide to Better Financial Decisions - This is a good book. It has been on several best books for the year in 2023. It is also an oddity. It is a book of investment advice for everyone, but it does not pull any punches with being simple and just wordy. It is grounded in modern finance with all the math that is necessary, yet it is still accessible and easy to read. Never has a set of authors done a better job of explaining the usefulness of expected utility and the use of core finance embodied by the work of Robert Merton.
There are two core theses with this book. One, make sure you get your bet sizes right. Two, understand your expected utility through knowing your level of risk aversion.
For the first point, understand the Merton share which like the Kelly Criterion states that the optimal bet size is related to your level of risk aversion time the expected return relative to volatility. There dictum is very clear. Do not take too much risk in any part of your portfolio. Temper your bets to ensure that you can maximize wealth through staying in the game.
The second point is critical for setting bet sizes, know and understand your risk aversion. You are not indifferent to risk and this aversion can be measured. When risk aversion is measured, it can help set bet sizes and portfolio risk.
The amazing part of this book is that seasoned investment professionals will get a lot from this work just the same as a novice. Even someone who has studied formal finance will find their framework thought provoking and useful.
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