15 Costliest Mistakes Billionaires (and YOU!) Make
Billionaires, they're actually just like you. You're one successful adventure away from claiming it, and they are one big mistake away from losing everything. We all make the same mistakes, but the bigger your bank account, the harder your fall. So, you should learn from these mistakes before you become a billionaire. Is that possible though? Not you becoming a billionaire; that's definitely in the cards. But learning from your mistakes, do we really learn from our mistakes, and how can we fast track those lessons so we don't keep stumbling over the same blocks?
Now, mistakes create a sort of stain on your brain. They're meant to, because that's how you learn. But the brain's process of getting over mistakes and taking away more lessons than emotions from them is flawed. You end up focusing on the guilt, shame, and embarrassment more than the puzzle pieces that were missing. If you haven't designed a strategy for learning from your mistakes, well then you'll never learn from them. So, today on the Alux app, we're going to fill in those missing pieces. We've got a strategy for you. We've looked at the peer-reviewed studies and research in neuroscience and behavioral economics to optimize that learning path for you.
So, here's what you're going to do: first, after this video, you're going to go to the App Store and download the Alux app. Then come right back here, right to this point in the video, and scan this QR code on screen because that'll take you to a discount page. You'll get 25% off your yearly subscription to the membership. Today's app session is going to dig deeper into everything we talk about in this video.
And here's the first mistake that billionaires and you make:
Getting sweet talked into a sour deal. Look, nobody thinks they're going to fall for the rich, long-lost dead relative story, but more than 50% of people who are exposed to scams—any scam—fall for them. You're sweet talked by someone offering a guaranteed return of 20% on stocks in just a few months. It sounds too good to be true! Or maybe you've just stumbled upon an awesome deal that nobody knows about yet. That's what investors at Theos thought. The company was valued at $9 billion; they tripped over their feet to pour $700 million of investments into Elizabeth Holmes's company. It was going to revolutionize blood testing technology. The promise was groundbreaking—faster, cheaper, and more accessible healthcare. But the technology never worked, and when the truth came out, investors lost everything. Rert Murdoch alone lost $125 million, which is a lot of money, but even that's not as much as the cost of our next mistake.
When you just don't have enough time to do your due diligence. If you got a job offer at another company where they offered you a 30% raise, would you take it? You have to start immediately though. Most people would do it! But what happens if six months later the company goes under? Now you're out of work with no severance package. This is Masohi Son, a Japanese billionaire investor. He lost $11.5 billion and his credibility when he rushed into investing in the co-working company WeWork. Now, WeWork was supposed to become the next big thing in tech. If he had looked a little bit deeper into the company's financials though, he would have seen that they were drowning. When WeWork's IPO failed, their valuation went from $47 billion to less than $8 billion. You have to look into and double-check all of the important details before you make a big decision.
You fall victim to the sunk cost fallacy. Imagine this: your first semester at university has just ended, and you realize you hate your course, but you've already invested all of those months and that money, so you can't leave now. You have to see it through—four years, about $18,000, and a lifetime of stress later, you realize you're not even going to be able to pay off your student loans with the jobs you qualify for. All because of those first few months when you had the chance to turn back but didn't. Rert Murdoch had a chance to turn back in 2005 when he bought Myspace. He paid $580 million for it, and as it declined, he continued to invest more. What was it that Warren Buffett said? When you find yourself in a hole, the best thing you can do is stop digging.
Nickel and diming over the big picture. Would you trade $230,000 just to save $1,000? Of course not! But here's how that actually happens. Today, you're looking at a $300,000 house. You negotiate the price down to $295—a $5,000 discount—but then you start haggling over small things, like $1,000 for minor repairs. The seller gets frustrated and walks away. Ten years later, that house is worth over $400,000, and another ten, and it's more like $530,000. Richard Branson has spoken about a time when he was so focused on saving small amounts, like negotiating fiercely over travel budgets and office furniture, that he missed the big picture. His competitors invested in their stores and marketing, so they beat him; they outpaced Virgin in the retail music business. If there's a little voice in your head saying "go for it," try listening to it. That voice could be your secret weapon.
You decide to ignore your instincts. What do you think the costs of marrying the wrong person are? With a wedding and a standard divorce, about $50,000. With legal battles, it could be more like $100,000 plus. Then, there's child support, alimony, maybe half of your pension, and that amount skyrockets if you've been with a partner who is racking up debt. You also lose time—time, emotional and mental energy, and your self-esteem! And you know you had that gut feeling, but you ignored it. Businessman Tony Shay has spoken about how he lost $350 million when he ignored his gut feeling. He wanted to revamp downtown Las Vegas and turn it into a tech hub, but there were too many issues from the start that deep down he knew it wouldn't work. Businesses came and left, and his vision never took off. Look, okay, it's all right to be idealistic, but you need to be able to balance that with being practical.
When you don't file your taxes properly. In the U.S., the IRS says they lose about $496 billion because people don't file their taxes at all, on time, or file them correctly. Every time you do that, you get hit with fines, penalties, back taxes, and interest. You need those reports to get a mortgage, for business loans, immigration documents—so many things! If it's not done properly, you'll have to pay up, and they don't accept excuses as payment either, which is what actor Wesley Snipes found out the hard way. He might not be a billionaire, but he had to pay more than $23 million in back taxes, and he went to prison for three years—all because, according to him, he was given bad advice by his accountants, who said due to a complex legal theory, most Americans aren't obligated to pay federal income tax, and therefore he didn't have to pay either. Look, if it's in your name, you pay the price.
Signing a contract you haven't even read. When you accept so many privacy and subscriber agreements online, the idea of reading a 20-page contract in legal jargon seems silly, so you just sign that too. You've been doing it for years, and you haven't lost anything yet, so what's the big deal? Until you want to get out of a gym or cell phone membership, and the cancellation fee is $300, or you buy a timeshare property for $20,000 and then have to pay thousands extra for yearly maintenance fees. At some point, not reading the contract will cost you more than taking the time to read it.
Not knowing your why in buying and investing. If you bought $55,000 worth of shares in Nvidia in early '16 and sold it just a few months later, you would have made a cool $116,000. That's great! But today, your shares would be worth more than $65,000. Yeah, that's better, but then your $5,000 investment in Snapchat back in 2017 would have grown to $8,000 in a few months. But if you held that until today, it would be $3,000. But how do you know when to sell? Well, Mark Cuban once said that when he buys a stock, he makes sure he knows why he's buying it. He holds it until he learns that something has changed. Even if the price has changed, if he still believes in the logic that made him buy the asset in the first place, he just won't sell it.
If you violate the terms of an insurance contract. When you sign up for insurance, you're in it for the long haul. Once you start paying, you're committed, and defaulting on that commitment just once can erase everything you've put into it. A storm hits and your roof is damaged, costing you $115,000 in repairs. If your insurance is up to date, you'd only have to pay like a $500 deductible. But we all stumble there sometimes, even the richest people. And that's why it's important to make sure all of these policies are up to date.
A one-night stand with no protection. What should the cost of one night of fun be? A lifetime commitment? $200,000 in child support? Half a million to a million as a single parent? One single decision with no thought and safety net in place can change your life forever! It can completely derail your financial goals. You're entering into a major deal without proper safeguards. You think you're cutting loose and having fun, but you're actually merging lives with someone you don't even know. Now, would it be fair to compare this to a billion-dollar deal that went sour? Well, maybe not, but we're going to do it anyway because it really does drive home the lesson. AOL Time Warner—the years 2000. They merged in a deal valued at $65 billion. It was supposed to be revolutionary. AOL had the internet dominance, Time Warner had the vast media empire, but they rushed the deal. Both of them had their beer goggles on, and they saw dollar signs when they should have been seeing red flags. The dot bubble burst and Time Warner gets the call saying that AOL's value has plummeted, and it's wiped billions of dollars away in shareholder value. This deal is still considered to be one of the worst mergers in corporate history, with around $200 billion in losses over time. Rush into any merger with no protection and you'll be left with the consequences for a long, long time.
You don't understand how important attention to detail is. In some jobs, missing one small detail can cost your company thousands of dollars. If you work on a job like this, you're constantly on high alert; you check everything twice. But if your job doesn't directly affect the bottom line, then you can become complacent with attention to detail. And it could get you in trouble because any position with responsibility has the potential for expensive mistakes. It can cost the company thousands and there are some great stories out there about mistakes, like a payroll integration that paid everyone in the company their annual salary in one go instead of their monthly salary, or a construction worker who dropped a $10,000 marble countertop on brand new floors, and adding one or two extra zeros to a standard order. Really, the list goes on. Here, billionaires have more freedom when it comes to paying attention to detail because they have so many experts whose sole job it is to look out for the small things that can cost them a lot of money. And here's an incredibly interesting but very tragic story that highlights the importance of this: in October 2023, a New York doctor, her husband, and his mother went to a restaurant at Disney World, Florida. They went to this restaurant because it specifically said that they can accommodate people with allergies, and Dr. Kenak Born Tang Swan was severely allergic to dairy and nuts. Their server said the food would be made to order. They ordered, they ate, and then Dr. Tang Swan went shopping on her own. A while later, she was struggling to breathe. She used her EpiPen and then collapsed, and unfortunately, she didn't make it. Her husband filed a wrongful death lawsuit against Disney, and get this, okay? Because the couple signed up for a Disney Plus account and clicked accept on the terms and conditions when they bought their amusement park tickets, Disney lawyers are saying that they essentially agreed that any lawsuits against the company would not go to court. Some smartass law intern probably picked up on this, and it could change the game of lawsuits. Although now, because Disney has gotten so much backlash, well, they're backtracking. Mistakes cost money, and sometimes they cost lives. Axer, so pay attention to the details.
Play Russian roulette with addiction. Don't do drugs; it'll destroy your life. But the truth is, not all drugs do this to everyone. Some people come out fine. The problem is that it's like playing Russian roulette; you don't know if you're going to be the one who gets addicted. And if you are, it's a long hard road to sobriety. Even with the warnings, millions of people still struggle, still get trapped by addiction. Those kinds of chances just aren't worth it. Humans have addictive personalities; we're always looking for that dopamine hit. For some people, it's food; for others, it's social media, video games, or shopping. None of these are good in excess, but the cost of them is lower than being addicted to drugs, alcohol, gambling, or smoking. Now, most billionaires, they're addicted to money and power. That doesn't come cheap either! But at least they make a profit from it. It's hard to force yourself away from something that your brain craves, so the best lesson is to choose your addiction wisely and try to control it as much as possible.
When you disregard red flags instead of turning around. There's ignoring your gut instinct where you can't exactly pinpoint the problem, but you know you've got an uneasy feeling about something. And then, there are simply ignoring red flags. They're there waving at you, and you just wave right back! These red flags are someone's actions showing you that you're making a mistake and that you should stop. But it's easy to think that if you keep on going, things will change or that it won't be that bad. But unfortunately, it usually only goes from bad to worse. Bill Amman, a well-known hedge fund manager, ignored red flags when he invested in Valiant Pharmaceuticals. He knew that Valiant was driving their revenue growth mostly by buying up other drug companies and then raising the prices. He marched on, thinking it was worth the deal. But when journalists started looking into their shady business practices, their stock plummeted, and everyone started filing lawsuits. Amman had to sell at a loss; his hedge fund lost about $4 billion. Those red flags are not a friendly hello, Aluer! So when you spot them, heed the warning and turn your ass around.
Choosing cash over equity. Imagine you're one of the first employees at a tech startup. They don't have a lot of cash, so instead of a big salary, they say that you can take a $5,000 annual increase or stock options to the value of 1% of the company's equity. You take the salary because, well, you like immediate cash, and there's no guarantee where this company will go. But a few years later, that company becomes wildly successful, and it's now valued at $50 million. Your shares would have been worth half a million, but hey, at least you made $25,000 over five years! That right there is probably the choice a street artist by the name of David Cho thinks about most often. Facebook's first president, Shawn Parker, hired him to paint murals at Facebook's first office. He was offered $660,000 in cash for his work or he could accept stock options in Facebook. He thought the idea of Facebook was silly and he didn't believe it was going to be successful. But can you guess what he did? He took those stock options anyway. He took the equity. In 2012, when Facebook went public, his share ended up being worth $200 million! So, Aluxer, when it's on the table, always take that equity.
Depending too much on other people. Most people rely on their parents, their partner, and their colleagues in some way, and there's nothing wrong with that. Connecting with and depending on other people is a sign of healthy relationships. But we can often cross a threshold of dependence without even realizing it, usually in financial or emotional support. At some point in your life, you're going to depend too much on one person to have your needs met. If something happens to that relationship, well, it's like a rug being pulled out from under you. You don't just lose the relationship; you lose whatever they were giving you. It can affect your self-esteem and how much you believe you can do things on your own. Travis Kalanick, the co-founder and former CEO of Uber, depended really heavily on his early investors. He had a relationship with them, so he didn't bother solidifying his position to make it hard for them to push him out. He thought he would always have their support. But when scandals at Uber started breaking and the company's reputation tanked, the board kicked him out. The company was his baby; he was there from the start, but he put all of his eggs—in himself—into one basket, and he was catapulted out of the nest. You have to safeguard your position by knowing how much you're depending on other people and what you're getting from them. Ask yourself if they took their support away, would you still be all right? If the answer is no, well, you know what to do—put those safeguards in place.
And that's all from us today, Aluxer! As you can see, nobody is immune from mistakes, no matter how rich and successful you are. But one mistake doesn't mean you're doomed forever. And to go even deeper into this topic, don't forget to download our app with the discount that we've given to you. You can even take it for a test drive with a cool 7-day free trial—no money up front. We'll even remind you on day five just to make sure you don't get charged accidentally. But you know what? Once you're in there, you'll see just how much value there is. You'll want to stick around!
All right, we'd love to hear your thoughts here. What's a mistake that you made that cost you far more than you expected, and what did you do about it? Let us know in the comments, enrich the community, and we'll all learn together. We'll see you back here next time, Aluxer. Until then, take care, my friend.
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