There is an interesting article at the New York Times entitled Fortuneâ€™s Fools: Why the Rich Go Broke. There are some pretty crazy stories about people who have gone from incredible wealth to bankrupcy and near poverty.
One part of the article reminded me of the talk of leverage in the comments section of a recent blog post. F used the term “leverage” which I wasn’t familliar with in the context of finances. In the article, Warren Buffett is quoted using it when talking to a group of college students:
Warren E. Buffett told an audience at Notre Dame that debt and alcohol were ever-present culprits in financial demise. â€œIâ€™ve seen more people fail because of liquor and leverage â€” leverage being borrowed money,â€ he said, according to a transcript of his comments. â€œYou really donâ€™t need leverage in this world much. If youâ€™re smart, youâ€™re going to make a lot of money without borrowing.
â€œIâ€™ve never borrowed a significant amount of money in my life. Never,â€ he added. â€œNever will. Iâ€™ve got no interest in it. The other reason is I never thought I would be way happier when I had 2X instead of X.â€
A real estate tycoon would probably have the exact opposite thing to say (with regard to leverage) but it’s an interesting statement nonetheless.