Forbes recently featured a profile on the greatest billionaire investor you’ve probably never heard of.
Dr. Herbert Wertheim, a 79-year-old semi-retired optometrist and small-business owner, has a stock portfolio worth $2.3 billion (according to Forbes estimates).
“Dr. Herbie,” as his friends call him, built his portfolio through old-fashioned, long-term investing techniques. He rarely uses leverage, he doesn’t like high fees, and he mostly invests through plain vanilla Fidelity and Schwab accounts.
Of course, nobody becomes a billionaire without a share of incredibly good fortune. Dr. Herbie invested in Microsoft and Apple stock shortly after their IPOs, and still holds positions in both that are worth hundreds of millions.
In perhaps his greatest triumph, he made a $5 million investment in a penny stock at 33 cents — the company was run by a Florida neighbor who shared a boat dock with him — and nearly three decades later, that same position is worth $800 million.
The whole Herbert Wertheim story is amazing. You can read the Forbes profile here.
Putting good fortune aside, there are multiple lessons to be learned from Dr. Herbie. For example: It was clearly his attitude, his habits, and his ability to control emotions that contributed most to his ultimate success — not luck.
“I never really had fear,” Dr. Herbie told Forbes. “When I was in the Navy flying planes, you know, yeah I had fear then. But day-by-day fear I usually don’t have. I don’t fear business, I don’t fear making decisions. And as the circumstances change, I change.”
How many investors can participate in markets calmly and without fear, even when the waters are turbulent?
Dr. Herbie certainly saw his share of volatility and setbacks. Like the time in the early 1980s, when he miscalculated his exposure to sharply rising interest rates (they would peak in the high teens) and a margin call cost him $50 million.
His childhood background may have helped. Dr. Herbie was born in 1939, and he grew up poor as the son of Jewish immigrants who had fled Nazi Germany. He also struggled with dyslexia.
“My father was a baker. We lived above the bakery as a family,” he told Forbes. “It was a difficult existence. I tell the story about when we were in school and I only got one pair of shoes each year. And the shoes couldn’t cost more than five dollars, that was the rule.”
In the 1940s, the educational community didn’t understand dyslexia. So, Dr. Herbie’s teachers simply thought he was unintelligent. “In those days, they just called you dumb,” he said. “I would sit in the corner sometimes with a dunce cap on.”
His childhood was so rough — in addition to dyslexia, his father was sometimes abusive — Dr. Herbie repeatedly ran away from home. As a young teen, he spent time in the Everglades with a group of Seminole Indians, hunting and fishing and selling frog legs.
His refusal to stay in school became a problem, and eventually a truancy judge gave him a choice: He could go to the state reformatory or join the Navy.
Joining the Navy at age 17 changed Dr. Herbie’s life. A series of tests revealed that, far from being “dumb,” he was actually very smart.
Dr. Herbie used his Navy stipend to invest in his first stock at age 18 and developed an unshakeable devotion to investing forever afterward. “You take what you earn with the sweat of your brow, and then you take a percentage of that and you invest it in other people’s labor,” he said.
Dr. Herbie spotted the potential of Apple and Microsoft right away — investing in their IPOs — because he was an early computer user and inventor and understood the power of technology and patents.
After attending optometry school and setting up a South Florida practice, Dr. Herbie developed a series of patents around the tinting process for plastic eyeglass lenses. His success as an inventor in the optometry space led to the creation of a successful small business with 49 employees, Brain Power Inc., that generates $10 million a year in net income to this day.
For decades, Dr. Herbie used the cash flow from his business to add to his stock investments year after year, similar to how Warren Buffett reinvested the “float” from Berkshire Hathaway’s insurance company holdings.
He never wanted to run a big or complicated operation. One of his main motivations was having time for what’s truly important. “My thing is,” Dr. Herbie told Forbes, “I wanted to be able to have free time. To me, having time is the most precious thing.”
He also had an attitude of giving back, right from the very start. Dr. Herbie has given away more than $100 million to public universities and various causes, and ultimately plans to give away half his fortune. He started a family foundation decades ago, in 1977, before amassing serious wealth.
“Why did we start a foundation? I just thought at the time it was a good idea,” he said. “It’s not that I had a lot of money. I don’t believe it’s what you have, but what you do with what you have.”
Many aspects of Dr. Herbie’s story can’t be replicated. But then again, nor do they have to be. If the average investor could achieve, say, just one-half of 1 percent of Dr. Herbie’s success, that would imply a retirement nest egg larger than $10 million — enough to retire well for most any American.
And again, it is Dr. Herbie’s attitude and approach to investing, and to life itself, that really stands out.
His hardscrabble childhood, his early struggles with dyslexia, and a tough home life could all be seen as bad breaks. But those experiences likely contributed to his ultimate ability to think long-term, to control his emotions, and to stick with a plan and believe in himself.
Keeping a small fortune can be harder than making one. Growing a small fortune into a large one, over many decades, is harder still.
As a result, if other investors could emulate Dr. Herbie’s skills, it wouldn’t be his stock picking abilities or his technology patent prowess that made the biggest contribution. It would be his winning mindset, his ability to control emotions and act without fear, and his ability to stick with a logical long-term plan.
At TradeSmith, capturing this behavioral magic — though of course it isn’t actually magic — is one of our most important goals.
All investors can learn to develop a winning mindset, to stick with a long-term plan, and to make rational investment decisions backed by math, logic, and science. Making that happen, and empowering individual investors as a result, is the mission and vision behind our software.
Dr. Herbie is an example of what’s possible when a lifetime of wise investing choices comes together.
