A Quiet Secretary Saved $7 Million While a Harvard Banker Filed for Bankruptcy

When Grace Groner died in 2010 at age 100, the people who knew her were stunned to learn what she left behind. She had spent decades on her own in a small house, earning a living doing office work. To charity, she left $7 million.

Groner had lost both parents when she was 12. She stayed single, had no children, and never learned to drive. Those who knew her remembered her as kind, and recalled a modest and quiet routine. Friends wondered how she had accumulated so much.

There was no secret and no inheritance. She set aside savings from a modest paycheck and left them in the stock market for nearly 80 years. That hands-off patience allowed compounding to do the rest.

That is what makes what happened just weeks later so striking. Richard Fuscone, who had overseen Merrill Lynch's business in Latin America as a senior executive, sought court protection from his debts. He held degrees from Harvard and the University of Chicago, had prospered so greatly as an investor that he stepped away from Wall Street in middle age to focus on other pursuits, and owned two homes, including one of nearly 20,000 square feet with monthly mortgage payments of $66,000.

Large debts and holdings he could not quickly sell proved ruinous when markets fell. Facing foreclosure, Fuscone told a bankruptcy judge, "I have been devastated by the financial crisis... The only source of liquidity is whatever my wife is able to sell in terms of personal furnishings."

In almost any other profession, this kind of reversal would be impossible. To illustrate the point, author Morgan Housel offers a hypothetical: "There will never be a story of a Grace Groner performing heart surgery better than a Harvard-trained cardiologist." The same would hold, he suggests, for an untrained person building a faster computer chip than career engineers at Apple. Yet in investing, reversals like this happen.

The reason, as Housel puts it, is that "investing is not the study of finance. It's the study of how people behave with money." He adds, "You can't sum up behavior with formulas to memorize or spreadsheet models to follow." He writes, "Behavior is inborn, varies by person, is hard to measure, changes over time, and people are prone to deny its existence, especially when describing themselves." Groner left her savings alone for decades, while Fuscone relied on large borrowings and holdings he could not easily sell, and their contrasting outcomes show how behavior shapes investing results.