Introduction
Many managers are little better than gamblers who are adept at strutting their stuff convincingly and looting their companies. Sometimes they get lucky and add value, but many destroy shareholder investments. The history of the FTSE is littered with expensive ego trips, which went wrong. Defending yourself against cowboys in the FTSE isn’t hard: don’t buy into a story of managerial genius. Like all gamblers, some hit the big time with investors making mega-returns. Every gambler knows massive returns can’t be relied on. Gamblers love the buzz, otherwise they’d put their money into a savings account. Investors should know their risk tolerance level before investing. If you will be heartbroken losing 20% on your investments, the Stock Market isn’t for you.
Discussion
Amazon was floated on the US Stock Market on 15th May 1995, claiming to be the “earth’s biggest bookstore”.1 This was the first internet bookshop and investors gambled on a successful innovation. They’ve had a massive reward. Those unlikely investors – who also kept their stock – have seen their investment grow by 187,849%.2
Steve Whitely, a naked and unashamed gambler,3 won £1.45m for a £2 six-horse accumulator on 8th March 2011 at Exeter Racecourse. Gamblers like Steve believe and act on their beliefs. Gamblers have the courage of their convictions. They accept the ‘slings and arrows of outrageous fortune’ as Shakespeare put it in Hamlet. And, of course, Steve could only lose £2, which probably didn’t matter too much to him.
Fred Goodwin, an unwitting gambler, was a ‘Master of the Universe’ running RBS Bank Group. He bankrupted the company with the disastrous merger with AMB Amro in 2007.
“The impact of a dominant leader/ego on the takeover process (the deal was driven more by managerial motives rather than genuine strategic motives),” (my emphasis)
another commentator said,
“….buying ABN Amro at the wrong price and the wrong time, disastrous though that was. Rather, this bid was just one of a whole series of bad boardroom decisions, which taken together point to substantive failures of board effectiveness at RBS.”5
Vodafone was unstoppable in 1999. Mobile (cell) phones were the future and investing in tech companies looked like a one-way bet. Vodafone’s managers paid £112bn for Germany’s Mannesmann in 2000. The new company was ‘worth’ £228bn. By December 2025 that became £22.6bn. Taking inflation into consideration the destruction of shareholder value is95%.4
Vodafone’s management convinced themselves that they were shrewd, hard-headed managers. They extrapolated past performance thinking it predicted the future. It can’t. As any fool knows.
Business Schools teaching MBAs across the world use the RBS and Vodafone merger decisions as prime examples of what not to do.
The world’s stock markets collapsed on Monday 19th October 1987. The US Dow Jones fell 22.61% and the FTSE fell 26.45%. Anyone investing on Friday 16th October lost between a fifth and a quarter of their money over the weekend. No-one knew that Iran would attack Kuwaiti oil tankers.6 The world’s stockbrokers stampeded for the door. Their collective ‘wisdom’ was panic. They forgot desperate sellers don’t have any bargaining power. Black Monday was born.
If they’d known economic history they’d have bought shares. It’s counter-intuitive but has a long history from the Rothschild family in the early 19th century. Their dictum was, “Buy when the guns start firing.” This disposes of the credibility of stockbroker peer group wisdom.
2020 provided another insight into stockbroker behaviour when Covid-19 struck.7 The Dow Jones fell 12.93% on the 16th March and rose by 11.37% on the 24th March. Think what a stunning increase of your wealth if you had invested on the 16th: 11%+ in eight days. Investors can’t time investment days to maximise profits. Investors need luck. Or they can try to even things out by making programmed investments. This normally means investing on a monthly or quarterly basis.
An investor’s life is bi-polar. Their working lives oscillate between suicidal pessimism and delusional optimism. They are gamblers.
Most investors don’t appreciate they are investing in the luck of gamblers.
Addendum: Israel-USA attack on Iran 28th February 2026
Investors can get caught out by externalities like an unexpected war (see footnote 6). Situation-specific wars can offer investment opportunities. The chokehold that exists in the Gulf region is a very good argument to pivot away from fossil fuel dependency. Obviously vested interests will try to prevent this from happening. The oil companies would be left with trillions of dollars of stranded assets – refineries, oil wells, tankers, pipelines, petrol stations and so on – but the geopolitical strategic arguments might win. Renewables can’t be left to individual decision-making there has to be political leadership. This is unlikely to happen given the economic power of the industries involved and the employment consequences of the transition.
Notes
1 Chart: Amazon at 30: All Grown Up | Statista
2 Amazon Stock Price 1995 To 2025 | StatMuse Money
3 Fred Goodwin – Wikipedia See the more successful ‘I only went racing as I had a free ticket – and I came away with £1.4 million’ | Racing Post Exeter is the place to go for shocks. Blowers won at 300-1 on 18th December 2025. One man had a £15 e.w. bet giving him a £5,400 win for £30. For taxation policy see Changes to Gambling Duties – GOV.UK
4 value of vodafone shares – Search For the takeover see Vodafone Acquires Mannesmann in the Largest Acquisition in History | Goldman Sachs Since 1995 there has been 107% inflation in Britain Inflation calculator | Bank of England
5 The story of a failed takeover – Fred Goodwin, RBS & ABN-Amro | Blog | Business | tutor2u and see also Unchecked excess: the lessons of RBS failure
6 Iran vs. America: In 1987, the “Tanker War” Began in Earnest – The National Interest 7 List of largest daily changes in the Dow Jones Industrial Average – Wikipedia
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