David Solyomi – The FALCON Method: Book Review & Audio Summary

Book Info

• Book name: The FALCON Method
• Author: David Solyomi
• Genre: Business & Economics, Self-Help & Personal Development
• Published Year: Not specified
• Language: English

Audio Summary

Synopsis

The FALCON Method presents a systematic approach to building passive income and achieving financial independence through stock investing. Named after author David Solyomi’s Hungarian surname meaning “falcon,” this method cuts through the complexity of financial markets by focusing on one superior asset class: company shares. Solyomi provides readers with objective measurements and equations to evaluate businesses, helping everyday investors make informed decisions without needing a finance degree. Drawing on wisdom from legendary investors like Warren Buffett, the book demystifies investment strategies and reveals why stocks outperform bonds, commodities, and other asset types. It’s a practical guide for anyone ready to transform their portfolio from a confusing gamble into a reliable wealth-building machine.

Key Takeaways

• Company shares (stocks) are superior to bonds and commodities because they’re productive assets that generate secondary income through dividends while maintaining underlying value
• Understanding a company’s cash flow—both input pipes (revenue, equity sales) and output pipes (expenses, debt payments)—is essential for evaluating investment opportunities
• The best companies use profits strategically through three key actions: paying dividends to shareholders, buying back shares to increase value, and retaining earnings for growth
• Currency-based investments like bonds suffer from inflation risk, making them less attractive for long-term wealth building
• The FALCON Method provides objective measurements and equations to rank businesses, removing emotion and guesswork from investment decisions

My Summary

Why I Picked Up This Book

I’ll be honest—I’ve always been intimidated by stock investing. Sure, I understand the basic concept of buying low and selling high, but the financial landscape has always felt like a foreign language to me. When I came across David Solyomi’s The FALCON Method, the promise of a “proven system” that didn’t require me to be a Wall Street genius caught my attention. The stakes really are high when your hard-earned money is on the line, and I was tired of feeling like I was throwing darts blindfolded.

What drew me in was Solyomi’s straightforward promise: focus on one asset class, use objective measurements, and stop making investment decisions based on gut feelings or hot tips from your brother-in-law. As someone who values systems and frameworks in both writing and life, this approach resonated immediately.

The Wisdom of Warren Buffett: Why Stocks Win

One of the most valuable sections of this book comes early when Solyomi breaks down Warren Buffett’s three main investment classes. This isn’t just name-dropping—Buffett’s 2011 letter to shareholders provides the foundation for understanding why not all investments are created equal.

The first category, currency-based investments like bonds, might seem safe on the surface. You loan money to a corporation or government, and they promise to pay you back with interest. Sounds reasonable, right? But here’s the killer flaw that Solyomi highlights: inflation is constantly eroding the value of currency. If you invest $10,000 in bonds and inflation increases by 10% over the holding period, you’ve essentially lost $1,000 in purchasing power. Your money came back, but it buys less than it did before.

I experienced this firsthand with a savings account I’d been proud of for years. The interest rate seemed decent at 2%, but when I calculated the real return after accounting for inflation running at 3-4%, I realized I was actually losing money by playing it “safe.” That was my wake-up call.

The second category, unproductive assets like gold, oil, or wheat, presents a different problem. These commodities don’t generate any secondary income while you own them. You’re simply betting that someone will pay more for them in the future than you paid today. It’s essentially speculation rather than investment. You can’t collect rent on a barrel of oil or receive dividend payments from your gold bars sitting in a vault.

This brings us to Buffett’s favorite and Solyomi’s focus: productive assets, specifically company shares. These are superior for several compelling reasons. First, they’re not tied to a single national currency—you can always value them against gold, euros, or any other benchmark. Second, and more importantly, they generate secondary income through dividends while you still maintain ownership of the underlying asset.

When you buy shares in Coca-Cola, as Solyomi explains, you become a part-owner of the business. You’re entitled to a share of the profits, typically paid annually as dividends. But unlike bonds where you’re just getting your money back with interest, you still own those shares and can sell them whenever you choose. It’s the best of both worlds: income generation and asset appreciation.

The Black Box: Understanding How Companies Really Work

Solyomi borrows a brilliant metaphor from David Van Knapp’s Sensible Stock Investing—the concept of a company as a black box with input and output pipes. This simple visualization transformed how I think about businesses and their financial health.

Imagine you can’t see inside a company’s operations (the black box), but you can observe what flows in and what flows out. For a company to be successful and worth investing in, more cash must flow out through the output pipes than flows in through the input pipes. It sounds obvious, but this framework helps you focus on the right metrics when evaluating potential investments.

The input pipes include things like revenue from selling goods or services—this is the lifeblood of any business. Another input pipe is equity sales, which happens when a company issues new shares. This is actually something to watch carefully because when new shares are created, the value of existing shares gets diluted. It’s like slicing a pizza into more pieces—each slice becomes smaller.

On the output side, you’ve got ongoing expenses like employee salaries, advertising costs, and rent for facilities. There are also debt payments, taxes on profits, and money spent on acquisitions when one company buys another. All of these represent cash leaving the company.

But here’s where it gets really interesting: the most important output pipe to examine is how a company uses its profits. This is where you separate great investment opportunities from mediocre ones.

The Three Hallmarks of Investment-Worthy Companies

Solyomi identifies three specific ways the best companies deploy their profits, and understanding these has completely changed how I evaluate stocks.

First, look for dividend payments to shareholders. This is the most direct way a company rewards its owners. When a business consistently pays dividends, it demonstrates financial health and a commitment to sharing success with investors. I think of dividends as proof that a company isn’t just making promises—it’s putting cash in your pocket regularly. Some of the most reliable dividend payers, like Johnson & Johnson or Procter & Gamble, have increased their dividends for decades. That’s the kind of track record that builds wealth over time.

Second, watch for share buyback programs. This practice was new to me before reading this book, but it makes perfect sense once you understand it. When a company buys back its own shares from the open market, it reduces the total number of shares in circulation. Basic math tells us that if the company’s value stays the same but there are fewer shares, each remaining share becomes more valuable. Additionally, the dividend per share increases because the same profit pool is divided among fewer shares. It’s like having fewer people at the dinner table—everyone gets a bigger portion.

Third, look for retained earnings being reinvested for growth. Not all profits should be paid out immediately. The best companies strategically reinvest cash back into the business for expansion, research and development, or improving operations. This is how companies grow and increase their value over time. Apple’s massive investment in developing new products and Amazon’s relentless reinvestment in infrastructure are prime examples of retained earnings driving long-term value creation.

The key insight here is balance. A company that does all three—pays dividends, buys back shares, and reinvests in growth—is demonstrating financial discipline and a multi-faceted approach to creating shareholder value.

Why the FALCON Method Matters Now More Than Ever

We’re living in an era of unprecedented financial uncertainty. Traditional pension plans are disappearing, Social Security’s future is questionable, and inflation is eroding the purchasing power of cash savings. The responsibility for retirement security has shifted squarely onto individual shoulders.

At the same time, we’re bombarded with conflicting investment advice. Cryptocurrency evangelists promise overnight riches. Day trading gurus sell courses on beating the market. Real estate investors tout rental properties as the only path to wealth. It’s exhausting and confusing.

What I appreciate about Solyomi’s approach is its clarity and focus. By concentrating on company shares and providing objective criteria for evaluation, the FALCON Method cuts through the noise. You’re not chasing trends or gambling on speculation—you’re becoming a part-owner in productive businesses that generate real value.

The method’s emphasis on systematic evaluation also removes emotion from investing, which is crucial. How many of us have bought stocks because everyone was talking about them, only to watch them crash? Or sold in a panic during a market downturn, locking in losses? Having a framework based on objective measurements helps you make rational decisions even when markets are volatile.

Applying These Principles to Your Investment Journey

So how can you actually use these insights in your own financial life? Here are some practical applications I’ve been implementing:

Start by shifting your mindset from saving to investing. If your money is sitting in a traditional savings account earning minimal interest, you’re falling behind due to inflation. Begin educating yourself about stock investing and consider opening a brokerage account. Even small amounts invested regularly can compound significantly over time.

Research companies using the black box framework. Before buying any stock, look at the company’s financial statements (most are available free online). Examine the input pipes—is revenue growing consistently? Are they issuing lots of new shares and diluting value? Then check the output pipes—are expenses under control? How much debt are they carrying? Most importantly, what are they doing with profits?

Focus on dividend-paying stocks, especially when starting out. Companies that pay regular dividends provide both income and tend to be more stable, established businesses. Look for companies with a history of maintaining or increasing dividends even during economic downturns. This provides a margin of safety for newer investors.

Reinvest your dividends automatically. Most brokerages offer dividend reinvestment plans (DRIPs) that automatically use your dividend payments to purchase more shares. This harnesses the power of compound growth—you’re earning dividends on your dividends. Over decades, this can dramatically accelerate wealth building.

Adopt a long-term perspective. The FALCON Method isn’t about getting rich quick. It’s about building sustainable, passive income over time. Resist the urge to constantly check stock prices or panic during market corrections. Focus on the underlying business quality and stay invested through market cycles.

Where the FALCON Method Excels

Having read numerous investing books over the years, I can identify several areas where Solyomi’s approach particularly shines.

The focus on a single asset class—company shares—is both a strength and a relief. Many investing books try to cover everything from bonds to real estate to commodities, leaving readers overwhelmed. By concentrating on stocks and explaining why they’re superior, Solyomi provides clarity and direction.

The use of objective measurements and equations (though not all are detailed in the summary I’ve read) promises to remove guesswork from investing. This systematic approach appeals to anyone who’s tired of making investment decisions based on hunches or hot tips. Having clear criteria for ranking businesses takes emotion out of the equation.

Drawing on Warren Buffett’s wisdom lends credibility to the approach. Buffett isn’t just successful—he’s one of the most transparent investors, regularly sharing his philosophy. Aligning the FALCON Method with Buffett’s principles grounds it in proven investment theory.

The black box metaphor makes financial analysis accessible to non-experts. Instead of drowning in accounting jargon, readers can visualize cash flows and understand what really matters when evaluating a company. This democratizes investing knowledge.

Potential Limitations to Consider

No investment approach is perfect, and it’s important to think critically about any method’s limitations.

The focus exclusively on stocks means missing out on diversification benefits that other asset classes provide. While Solyomi makes a compelling case for stock superiority, many financial advisors recommend a balanced portfolio including bonds, real estate, and other assets to reduce risk. Putting all your eggs in the stock basket—even using a systematic method—exposes you to market-wide downturns.

The book seems to assume readers have some capital to invest and the emotional fortitude to weather market volatility. For someone living paycheck to paycheck or with high-interest debt, the priority should be building an emergency fund and eliminating debt before investing in stocks. The FALCON Method appears geared toward people ready to invest, not those still building a financial foundation.

While objective measurements are valuable, they can’t predict every outcome. Companies with excellent fundamentals can still face unexpected challenges—regulatory changes, technological disruption, management scandals, or black swan events like pandemics. No formula can eliminate investment risk entirely.

The summary doesn’t fully detail the specific equations and ranking system that form the core of the FALCON Method. Without seeing these in action, it’s difficult to evaluate how practical and effective they are for everyday investors. This might be intentional to encourage purchasing the full book, but it leaves some questions unanswered.

How This Compares to Other Investment Books

The FALCON Method occupies interesting territory in the investing book landscape. It shares DNA with classics like Benjamin Graham’s The Intelligent Investor and Burton Malkiel’s A Random Walk Down Wall Street, but with a more focused approach.

Unlike Graham’s value investing philosophy, which requires deep financial analysis and patience to find undervalued stocks, Solyomi’s method appears more systematic and formulaic. This makes it potentially more accessible to beginners who might be intimidated by Graham’s detailed fundamental analysis.

Compared to Malkiel’s advocacy for index fund investing, the FALCON Method is more active. Malkiel argues most people should simply invest in broad market index funds and avoid trying to pick individual stocks. Solyomi, however, provides a framework for selecting specific companies. This appeals to investors who want more control and engagement with their portfolios.

The book also reminds me of Phil Town’s Rule #1 Investing, which similarly focuses on buying wonderful companies at attractive prices using specific criteria. Both approaches emphasize understanding business fundamentals rather than technical chart analysis or market timing.

What potentially distinguishes the FALCON Method is its promise of a complete system with objective equations for ranking opportunities. If these tools are truly user-friendly and effective, it could bridge the gap between passive index investing and intensive fundamental analysis.

Questions Worth Pondering

As I’ve been reflecting on Solyomi’s ideas, a few questions keep surfacing that I think are worth considering:

How much of your investment portfolio should be in individual stocks versus index funds? The FALCON Method advocates for stock picking, but does it make sense to have some portion in diversified index funds as a foundation, then use this method for a smaller active investing allocation?

In an era of rapid technological change, how do you evaluate companies in emerging industries that might not have established profit patterns yet? The framework focuses on companies with clear cash flows and profit deployment strategies, but some of tomorrow’s biggest winners might not fit traditional metrics today.

My Final Thoughts on Building Wealth Through Stocks

Reading about the FALCON Method has reinforced something I’ve come to believe deeply: financial independence isn’t about getting lucky or having secret knowledge. It’s about understanding fundamental principles and applying them consistently over time.

Solyomi’s focus on productive assets makes intuitive sense. When you own shares in great companies, you’re participating in value creation. These businesses employ people, serve customers, innovate products, and generate profits. As a shareholder, you benefit from all of that activity. It’s fundamentally different from speculating on commodity prices or hoping inflation doesn’t erode your bond returns.

The black box framework has genuinely changed how I look at companies, even beyond investing. When I hear about a business now, I automatically think about its input and output pipes. Is revenue growing? How are they using profits? It’s made me a more informed consumer and citizen, not just a better investor.

What I appreciate most is the emphasis on systematic evaluation over emotional decision-making. We’re all susceptible to fear and greed—the twin demons of investing. Having objective criteria to fall back on provides an anchor during turbulent times.

If you’re someone who’s been intimidated by stock investing or frustrated by conflicting advice, the FALCON Method offers a refreshing alternative. It won’t make you rich overnight, and it doesn’t promise to eliminate all risk. But it provides a rational framework for building wealth through ownership in productive businesses.

I’d love to hear from others who’ve read the full book or implemented similar approaches. What’s been your experience with systematic stock investing? Have you found ways to balance individual stock selection with broader diversification? Drop your thoughts in the comments—I’m always learning from this community, and your insights make these discussions so much richer.