In May 1884, Ulysses S. Grant, a decorated Union Army general who played a key role in winning the Civil War, and served two terms as president, lost all of his fortune to a Ponzi scheme run by a Wall Street prodigy, promising to deliver 10% profit per month. With all his wealth gone, Grant spent the last year of his life writing his memoirs while suffering from throat cancer to ensure his wife would have something to live on. He was ultimately rescued by Mark Twain, who owned a publishing house. Ten years later, Mark Twain himself went bankrupt after investing his fortune in a new typesetting machine.
For every story where smart people made fatal investing decisions, there are many stories about ordinary people who consistently invested their money, making a fortune without anyone noticing. In one case, a young woman, Sylvia Bloom, was hired as a secretary in 1947, and she stayed at that job for 67 years. She invested a small portion of her secretary's pay. When she died in 2016, she had over $9M. No one knew about her financial success.
Two of the smartest men of their century both lost their fortunes within ten years while a secretary managed to amass a small fortune quietly. There are many stories like these, where an ordinary person with a modest income manages to create wealth. And this does not happen in any other field. No one has ever discovered that a hospital janitor was secretly the best surgeon in the hospital. Same thing holds true in other fields. The only field where an ordinary person can do better than those who are smarter and more educated is building wealth.
One way to explain this seeming contradiction is that long term financial outcomes are often driven by temperament instead of intelligence. In the short term, being smart can help you do better. In Finland, researchers matched military records of 88,000 investors to their trading accounts and found that the smartest group did better.
In the long term, many smart people keep underperforming when it comes to investing because they keep treating investing as an intelligence contest. On the contrary, success in investing is very closely correlated with long term patience and consistency.
There are more recent examples of very intelligent investors falling victim to their sophisticated analysis. In October 1929, Irving Fisher, one of the greatest economists of his time, announced his analysis showed stocks had reached a permanently high plateau. Shortly after that, the market crashed and he lost all his wealth. In the 1990s, Long-Term Capital Management, a sophisticated hedge fund, employed two Nobel Prize winners and the best quantitative minds. The fund did exceptionally well, returning 40% a year using a highly leveraged strategy, borrowing thirty dollars for every dollar it held. All that came crumbling down in a few months in 1998, when the fund lost more than 90% of its value, and its wreckage was sold off.
Intelligence helps you do better and get ahead almost everywhere else in your life, school, career. You get rewarded for fast answers, and good analysis. Investing does not reward fast movements. It pays for sitting still, and this is not the muscle memory you got trained on as you progressed in your career. Intelligence increases your self-confidence while doing little for your self-control.
Researchers looked through 650,000 brokerage accounts to study people's behavior during market downturns. Data showed that panic was more common among investors who rated their own experience as excellent. A smart brain is better at rationalizing the panic.
The same mechanic is at work on retail investors. Over the past decade, the average fund earned 8.2% while the average person investing in them earned only 7%. The more people analyzed the market, and moved their money to time the market, the less they made in the long term. On a $500K investment portfolio, that is about $6,000 a year investors could have lost for trying to time the market. It gets even worse for people who sell their portfolio in a panic when the market crashes. About one third of them never get back in the market.
To control your temperament, you need to plan in advance. Patience cannot be taught, no matter how smart you are.
More than 99% of Warren Buffett's fortune was made after his 52nd birthday. Buffett is proof of what happens when sound investing is combined with good temperament, and is run for 60 years. He once mentioned to a room full of business students that investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.
When Ray Dalio, one of the largest hedge fund managers in the world, was asked what mistake smart investors make, his answer was: "They don't have a game plan." This was the case for all the stories we mentioned. What mattered was the temperament to stand still, not intelligence or talent. It is decisions made while calm, before the world goes crazy.
After the market crash of 1987, the exchanges wrote a plan for what to do when the market crashes and there is panic. If the market falls 7%, trading stops for 15 minutes. At 20%, trading is halted for the rest of the day. You need a similar plan of your own that you created before the market crashes. Your plan should answer four questions:
- What do I own, and why?
- What will I do when it drops 30%?
- When will I need this money?
- What would have to be true, not scary, for me to sell?
Write down the answers on a quiet day when you are calm and the market is closed. Then stick to your plan and follow through if prices drop, even if it goes against your emotions.
Sylvia Bloom had a version of that page. Hers simply read the same way for 67 years. Grant and Twain found theirs too late for their fortunes, but in time for their debts. Grant finished his memoirs three days before he died, and the royalties carried his wife for the rest of her life. Twain lectured his way around the world until every creditor was paid in full.
Sources
Grant's ruin by Ferdinand Ward's fraud, Twain's rescue with the seventy percent royalty deal, and the memoirs finished three days before his death. National Park Service. https://www.nps.gov/articles/000/how-mark-twain-helped-ulysses-s-grant-write-his-personal-memoirs.htm
The Finnish intelligence study: Grinblatt, Keloharju, and Linnainmaa, "IQ, Trading Behavior, and Performance," Journal of Financial Economics, 2012. Backs the 88,000 investors and the smart-group edge. https://www.aalto.fi/sites/default/files/2018-12/iqperformance.pdf
Sylvia Bloom's 67 years and the more than $9 million she left, as reported from the New York Times account. https://www.cbsnews.com/newyork/news/legal-secretary-amasses-9-million-fortune-gives-most-of-it-to-students/
Long-Term Capital Management: the Nobel laureates, the 40 percent years, the leverage, and the 1998 collapse. Federal Reserve History. https://www.federalreservehistory.org/essays/ltcm-near-failure
Irving Fisher, the permanently high plateau, and the 1929 crash. Federal Reserve History. https://www.federalreservehistory.org/essays/stock-market-crash-of-1929
The 650,000-account panic study: Elkind, Kaminski, Lo, Siah, and Wong, "When Do Investors Freak Out?" Backs the self-rated-excellent finding and one in three never returning. https://dspace.mit.edu/server/api/core/bitstreams/08f1abd7-4bb6-463e-aa6e-5ffa7c6f8922/content
The 8.2 versus 7.0 gap: Morningstar, "Mind the Gap 2025," ten years to December 2024. Morningstar attributes the gap to the timing of moves, not to intelligence. The $6,000 figure is our illustration on a $500,000 account. https://www.morningstar.com/lp/mind-the-gap
Buffett's net worth by age: Forbes 400 lists (1982, 1986, 2026) and the Washington Post (1995). The figures behind the chart's early ages are biographical estimates, not audited statements. https://www.forbes.com/forbes-400/
Dalio's six words: My First Million, episode 842, July 17, 2026. https://www.mfmpod.com/ray-dalio-the-principles-that-made-me-a-billionaire/
Circuit breakers: the post-1987 market-wide halt rules as maintained by the NYSE. https://www.nyse.com/markets/hours-calendars
