The Bankrupt Billionaire Review - Sean Quinn and Via Negativa
The Bankrupt Billionaire is an Amazon Prime show about the rise and fall of one of Celtic Tiger Ireland’s wealthiest Businessman. For aspiring investors and those looking to accumulate wealth, watching the show is a useful exercise in the practice of Via Negativa.
The term Via Negativa originates in Christian theology to explain a way of describing God by focusing on what he is not, rather than what he is. In his various writings NN Taleb has popularised the concept as a methodology to increase knowledge through subtraction. In the case of Sean Quinn, we can think of watching and learning from the show by understanding his thought process in the lead up to the financial crisis and during the crisis and what he did that we can avoid.
I am increasingly of the view that there is much we can learn from studying the empirical facts of failure and trying to avoid it, rather than just studying success that may have considerable luck involved.
So why did Sean Quinn go from Billionaire with a network of solid profitable businesses (Quarries, Cement, Insurance, Glass and Packaging) to a bankrupt? It is clear from the documentary that Quinn was brilliant, charismatic, gifted with a natural flare for business but in the heat of a crisis with emotions high, he made a plethora of cataclysmic errors:
- During the latter stages of the boom, he diverted attention away from running businesses to speculating on the stock market outside of his circle of competence.
- He used CFDs (Contracts for Difference) to avoid making his holdings public but also to employ 75% leverage.
- He began by speculating in blue chip stocks but then became increasingly concentrated in one company, Anglo-Irish bank. He wasn’t alone in this trade in 2008. Warren Buffett, "During 2008, I spent $244m for shares of two Irish banks that appeared cheap to me." Clearly, the investment thesis was credible enough for many good investors to be of the same view as Quinn, however the difference was one of concentration.
- He didn’t compartmentalise his wealth, he was all in on this one trade. All the family wealth was tied up in the Quinn businesses.
- In trying to value the bank, he anchored to his own experience in an industrial business and applied his experiences to the decision to average down.
- His success meant that he…
