Wealth Allocator

Wealth Allocator

Walk a founder through post-exit or post-liquidity capital deployment using the TIGER 21 asset allocation framework, Howard Marks's market cycle positioning, Mohnish Pabrai's value investing system, Andrew Wilkinson's recession stress test, and the MoneyWise "Enough Number" calculator from My First Million.

When to Use

The user has money (or is about to) and needs to figure out what to do with it. They might say:

• "I just sold my company — what do I do with the money?"
• "How should I allocate my portfolio?"
• "I have $X and don't know where to put it"
• "Am I ready to stop working?"
• "How much is enough?"
• "Should I be investing more aggressively or defensively right now?"

Phase 1: The Enough Number

How Much Do You Actually Need?

From Andrew Wilkinson (via MoneyWise) and Sam Parr:

Three stages of financial freedom:

1. Launchpad: ~$250K/year passive income — enough to quit and take big swings
2. Enough: Dream annual spend × 25-33 = target net worth
3. Life's Work: What you'd do for free once money isn't the constraint

Run the math with the user:

Ask the user:

1. What's your current monthly spend?
2. What's your dream monthly spend? (Be specific — not "more" but a number)
3. What's your current net worth? Liquid vs. illiquid?

The Unbreakable Year exercise (Mike Brown, MoneyWise):

Most founders realize they are already AT or near their ideal spend — meaning more money won't improve quality of life.

The gap is usually: fewer working hours + more family time + the vacation they keep deferring. These changes are free.

The Sticker Shock Math

From Michael Sonnenfeldt / TIGER 21 (_FczUETbksU.md):

Before deciding to sell a business, run this:

• Business earnings × exit multiple = gross proceeds
• Subtract taxes (25-40%) = net proceeds
• Net proceeds × 2% safe withdrawal = annual income from capital
• Compare to: current business annual profit

Example: $3M/year business sells for $20M. After tax: $16M. At 2%: $320K/year — a 90% income reduction.

If the sticker shock math doesn't work, the user might be better off keeping the business and hiring a CEO (Wilkinson's "Door 3").

Phase 2: Where Are We in the Cycle?

From Howard Marks (cWntNpgDCZk.md):

"We never know where we're going, but we sure as hell ought to know where we are."

Before allocating a single dollar, diagnose the market cycle. Ask four questions:

If all four say "defensive" — dial down risk, hold more cash, buy bonds. If all four say "aggressive" — deploy into opportunities, lean into equities. Usually mixed — adjust the dial, don't flip the switch.

The Speedometer Model (Marks)

Think of portfolio posture as a dial from 0 (fully defensive) to 100 (fully aggressive):

• Know your personal "appropriate normal" (conservative person: maybe 55-65)
• Adjust around that based on cycle position
• Never go all the way to 0 or 100

The PE Diagnostic

From Marks's JP Morgan scatter chart:

• S&P PE at 23+ historically → 10-year return between +2% and -2%
• When PE is low → 10-year returns are consistently strong
• Check the current Shiller CAPE ratio and factor it into allocation

Phase 3: Asset Allocation

The TIGER 21 Model (Sonnenfeldt, _FczUETbksU.md)

Aggregate allocation of ultra-high-net-worth members:

Sam Parr's 80/20 Rule (MoneyWise)

"80% index/bonds (boring, certain, matches 100-year average of 10% nominal), 20% in the thing you're a professional at — for me, that's companies I start and control."

The Post-Exit Protocol (Harry Morton, MoneyWise)

First year after exit:

1. Put everything in treasuries or bonds. Don't invest in anything for 6 months.
2. "Everyone's going to sell you stuff." Say no to everything.
3. After 6 months: 80% index funds, 20% bonds. Live on 3% withdrawal.

Wilkinson's Personal Allocation (hbIgmVWZTgM.md)

• ~90% in operating business (Tiny)
• Personal liquid: ~50% Treasury bills, ~50% Pershing Square Holdings
• No ETFs — "Pershing Square IS my ETF; it's just managed by Bill"

The Mr. Market Rule: Business value changes slowly. Market price swings wildly. If someone yells a low number at you, just say no — unless they yell a number high enough to justify selling.

Phase 4: The Pabrai Default

From Mohnish Pabrai (TN5aKByr3Rs.md):

Plan B (Default — Do This If Nothing Else)

Buy Berkshire Hathaway Class B shares. Even at 10%/year for 49 years = 128x. Better than S&P when the market is expensive. This is your "uninvested" state — not cash, not bonds, but Berkshire.

Plan A (When a 2x4 Hits You)

Run a "mental Geiger counter" over everything — looking for anomalies where numbers don't make sense. When found:

1. Can you explain why it's great to a 10-year-old? If not, pass.
2. Is it in your circle of competence? If not, pass.
3. Is it low risk / high uncertainty? (Uncertainty ≠ risk — Wall Street confuses them)
4. Does it pass the "too hard pile" test?
5. If all yes: peel off 10-15% of your default position, make the bet, let it play out.

Never use leverage. The Rick Guerin lesson: as smart as Buffett and Munger, used margin, wiped out in one crash, had to sell Berkshire shares at $40.

Acceptable hit rate: Buffett made ~12 exceptional decisions in 58 years. Don't expect constant action.

Phase 5: The Recession Stress Test

From Andrew Wilkinson (hbIgmVWZTgM.md):

If the user still operates a business alongside their portfolio:

Build a simple scenario spreadsheet:

For each scenario:

• Can you lay off people, or are you locked into contracts?
• What fixed costs can't you cut?
• Do you have 3 months operating cash?
• Do you have credit lines already drawn?

Two failure modes to test for:

1. Total loss / bankruptcy
2. Illiquidity during a great opportunity (errors of omission)

Both are bad. The stress test addresses both.

Phase 6: Angel Investing (If Applicable)

From Shaan Puri (gEaLP2RXSUc.md):

Readiness check:

• Do you have $3M+ in investable assets? (Auren Hoffman's threshold from MoneyWise)
• Is 80%+ of your net worth in "safe" assets first?
• Can you commit to 7-10 years of illiquidity?

If yes:

Portfolio construction:

• Minimum 20-30 bets (fewer and variance kills you)
• $25K per company → $750K total over 4-5 years
• Every investment must have a plausible path to $100M revenue
• Expected: 4-5 go to zero, 2-3 return 1-3x, hope for one 10x+

Capital-constrained workaround: Find an established angel, pitch your deal flow, negotiate 10% carry. You source, they fund, you share profits.

Founder evaluation checklist:

• Domain knowledge (can they answer probing questions with specificity?)
• Executor vs. talker (all-in or side project?)
• Reality calibration (can they name their biggest threat?)
• Track record (history of doing interesting things, even unrelated)

Phase 7: Tax Optimization Layer

From Ankur Nagpal (4pUd2A9jjZE.md):

If the user is pre-exit with a C-corp:

1. QSBS eligibility check: C-corp, under $50M assets, held 5+ years → up to $10M tax-free per person
2. Family stacking: Transfer shares to trusts for spouse/children before exit → each gets their own $10M exclusion
3. 83(b) election: File within 30 days of receiving restricted stock — starts the QSBS and capital gains clock early
4. Solo 401(k): If self-employed, max at $69K/year — use self-directed Roth to hold private company shares
5. Real estate depreciation: Own through business entity, run cost segregation study for accelerated depreciation

Always: Run a quarterly "data room" session with CPA — tax offense, not just defense.

Phase 8: Search the Archive

grep -ri "portfolio\|allocation\|invest\|enough" transcripts/
grep -ri "after.*exit\|post.*sell\|what.*do.*money" transcripts/
grep -ri "QSBS\|tax\|estate plan\|trust" transcripts/

Output

After the session, deliver:

1. Enough number — calculated three ways (2%, 3%, 4% rule)
2. Sticker shock math — if considering selling, the income comparison
3. Cycle position — where we are on the Marks speedometer
4. Target allocation — customized based on risk profile and stage
5. Default position — what to do with money you haven't allocated yet
6. Stress test — three-scenario survival analysis (if operating a business)
7. Angel readiness — go/no-go with specific thresholds
8. Tax moves — QSBS, 83(b), Solo 401(k) applicability
9. 90-day action plan — the 3 most important moves to make now