Victor Haghani and James White’s provocative essay, Extrapolators Beware the Money Pump, offers a cautionary tale for investors and their advisers. Originally published as part of their 2023 book The Missing Billionaires: A Guide to Better Financial Decisions, the essay explores how seemingly rational investment behavior — specifically, extrapolating past returns into future expectations — can lead to systematic wealth destruction. The authors illustrate this through a fictional investor named Mr. X, who allocates capital based on historical performance. Two savvy traders, Ping and Pong, exploit his behavior through subtle price movements. Over time, Mr. X loses nearly all his wealth, not through recklessness, but by consistently following his own flawed logic.
While the example is stylized, the implications for real-world investors — especially those allocating to private market alternatives such as real estate — are profound. And for private we
