The Worst Investor in America Gets Lucky

Just over two years ago, the Irish rock star Bono was dubbed "the worst investor in America" by the financial site 24/7 Wall Street. Bono is one of the founders of the private equity firm Elevation Partners, which had made "a string of disastrous investments which even bad luck could not explain." The site concluded that the "Irishman would have been better off in CDs of the financial sort."

The investing ability of Bono and Elevation Partners looks very different today, of course. The private equity firm bought a 1.5% stake in Facebook (Nasdaq: FB  ) back in 2009, which it was later able to increase to a 2.3% position. That prescient investment may now be worth around $2 billion or so. When it comes to growth investing, fortunes -- both literally and figuratively -- can change very quickly.

Elevation Partners was founded in 2004 by Bono and several Silicon Valley luminaries. According to its website, it's focused on "large-scale investments in media, entertainment and technology businesses." The firm is particularly interested in companies that are "capitalizing on technology disruption" and has current positions in the online companies Move (Nasdaq: MOVE  ) and Yelp (NYSE: YELP  ) .

By early 2010, Elevation Partners had gotten off to a rocky start. Its investment in Palm, the smartphone manufacturer that was subsequently acquired by Hewlett-Packard (NYSE: HPQ  ) , was doing poorly. And its initial investment in Yelp, the online guide to local businesses, was looking ill-advised. According to 24/7 Wall Street, Bono had lost "millions and millions of dollars" as a result of his relationship with Elevation Partners.

Last week, of course, Elevation's Facebook investment became a fascinating turnaround story. The financial press was breathlessly talking about how Bono was now worth over $1.5 billion, and was richer than either of the two remaining Beatles. Bono had become part of the frenzy surrounding one of the most hyped IPOs in recent memory.

Fortunately, Bono stepped in to provide some clarity (and sanity) to the situation. Last Friday, he said:

Contrary to reports, I'm not a billionaire or going to be richer than any Beatle -- and not just in the sense of money, by the way. In Elevation, we invest other people's money -- endowments, pension funds. We do get paid of course. But you know, I felt rich when I was 20 years old and my wife was paying my bills. Just being in a band, I've always felt blessed.

He also said that he wanted to learn more about technology because he was interested in "forces that change the world."

Regardless of how much Bono has made personally from Elevation's Facebook investment, his experience is very instructive to investors. First of all, investing in technology companies is a way for him to learn. Education should always be a big part of investing. Secondly, he and his partners placed bets among a host of disruptive firms and technologies. And one of them ultimately paid off handsomely. There's nothing "lucky" about patience and focus.

Finally -- and most importantly for me -- Bono doesn't measure his self-worth by how much money he has. The line, "Just being in a band, I've always felt blessed" is the best takeaway of all from this tale, in my opinion.

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John Reeves does not own shares in any of the companies mentioned in this article.

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  • Report this Comment On May 21, 2012, at 1:31 PM, drpearso wrote:

    Your comments regarding Bono caught my eye since I read a report some time back regarding how bad his investings had turned out. But, as you mentioned, the real take away here is Bono's humble comments regarding 'rich' as it has to do with his life.

    I myself used to feel ultimately rich when 20 yrs old due to my health and tenacious ability to work hard. Then I had a life changing spinal operation at 32 years old. Since that time, life has been successful, but mercy, what a struggle.

    Message here is never take your health for granted. I'm not feeling so rich at the present, but I could be much worse off health wise. Thus, I try to keep that in perspective. Thanks for the 'worthy' article regarding Bono. He is a very fortunate person due to his artistic talents, projects, work, family, and HEALTH. Regards.

  • Report this Comment On May 21, 2012, at 2:01 PM, TMFBane wrote:

    drpearso, Thank you very much for sharing your personal story and words of wisdom! I couldn't agree more with what you have to say, and am grateful you took the time to add your thoughts.

    All the best,

    John

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