Going from rags to riches is a success story that inspires everyone who has ever dreamed of making it big. Unfortunately, going from riches to rags is an all too common phenomenon that not everyone is aware. Take for example the story of Sean Quinn who was once the richest man in Ireland. It was reported by Forbes that in 2008, his assets reached as high as $6 billion. Fast-forward to 2012 and Sean Quinn now owes Anglo Irish Bank $2.7 billion and he has less than £15,000 in his personal savings account. In January of this year, he was declared bankrupt by an Irish court.
Sean Quinn’s rise to fortune tells of a story of a self-made businessman who started with only £100 in capital. He dropped out of school when he was 14 years old, still unable to read or write. The QUINN Group’s beginnings can be traced with the simple sale of gravel from his family’s property to local and independent builders.
His company began trading other building materials and has expanded from his Irish town to the rest of Europe. Unfortunately, even the mighty Sean Quinn was not safe from Ireland’s home and property collapse of 2009 that brought the country’s economy to its knees.
His quick demise was unprecedented among the rich and powerful of Ireland. Though the extent of his fall from grace is still unraveling, there are four important investment lessons that we can learn from his experience so far:
- Diversity is key.
Banking investments may not have been Sean Quinn’s golden ticket but it was his undoing. The QUINN Group may have invested in other industries like insurance, hotels and manufacturing but Sean Quinn gradually increased his shares in the Anglo Irish Bank. When the credit crises unfolded, he wasn’t able to recover from his losses.
Lesson to be Learned: Invest thoughtfully and spread out your assets. If you rely on one area heavily, it might tank your entire portfolio if something goes south. No matter how much money you think you’ll make by investing a big chunk of your finances on one area, it’s always more advisable to avoid putting all your eggs into just one basket.
- Don’t let greed affect your decision-making.
Even Sean Quinn confessed that his risky investment in Anglo Irish Bank was motivated by greed and not by sound research. After the Irish court declared him bankrupt, he may be banned from getting involved in any business activity for the next 12 years. On top of that, he may be forced to liquidate his remaining assets and properties to pay off his debts which may leave him with absolutely no more capital to start another business in the future.
Lesson to be Learned: The prospect of wealth can be a good motivator but obsessing about it can lead you to make poor business decisions that can contribute to or cause your undoing.
- Value transparency.
We now know that Sean Quinn’s undoing was his massive investment in Anglo Irish Bank, which was also the largest creditor for the construction industry at that time. When the industry went bust and the loans defaulted, Sean Quinn sunk along with his investment. He obtained a 28% stake in the company because of lenient Irish laws that actually allowed the QUINN Group to conceal the size of its investment from the other shareholders.
Valuable Lesson: The Irish laws actually worked against Sean Quinn because he wasn’t required to reveal his huge stake to other stockholders. If there were checks and balances in place, the other shareholders may have protested the size of his stake which may have forced Sean Quinn to put some of his shares back to the market.
- Cross borders very carefully.
Sean Quinn initially tried to file his bankruptcy in Northern Ireland, a territory of the United Kingdom where bankruptcy laws are more lenient. Even if he was originally from Northern Ireland and his business was established there, the QUINN Group mostly operates in the Republic of Ireland and he was forced to file his bankruptcy there.
Valuable Lesson: Doing business in an international scale can bring massive profits but it’s the only consideration that you should make. Sean Quinn only considered the tax advantages of putting his headquarters in the Republic of Ireland. He never once considered the implications of his location in the event of bankruptcy filing.
Keep in Mind: Ambitious businessmen frequently look up to the billionaires in their field for investment wisdom. However, in Sean Quinn’s case, you will be able to learn about the business moves to avoid in order to prevent facing the same fate, which are:
- Avoid investing a big bulk of your assets into one investment.
- Don’t let greed overcome good business sense and sound investment strategies.
- Don’t make rash decisions, especially in international business practices, without thoroughly researching its implication.