Hedge Fund Manager Quotes

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.” Enough. I was stunned by the simple eloquence of that word—stunned for two reasons: first, because I have been given so much in my own life and, second, because Joseph Heller couldn’t have been more accurate. For a critical element of our society, including many of the wealthiest and most powerful among us, there seems to be no limit today on what enough entails.

At Mayflower-Plymouth, we believe that active capital management is the responsible way to invest. Even passive funds should be actively managed.

Nature is great at hedging investments. Nature doesn’t hedge by betting for and against the same things. Nature hedges by cultivating resilience.

The wise study the numbers and their ways. The wise count their movements and their stays.

I try to be a good investment to God. All the good things he’s given me, I aim to multiply and return to him and his purposes a maximum ROI. I’m just a tree in his fruit garden aiming to produce good fruit.

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds,“Yes, but I have something he will never have — enough.

Gratitude multiplies things to be grateful for. Faith multiplies proof of faithfulness. Love multiplies circumstances that facilitate love.

A small stock trader is like a small hedge fund manager, zen monk, psychologist, intelligence officer, sniper, sportsman, poker player, risk manager, analyst, and economist, all in one.

Lynch called these two mistakes, which often go together, “watering the weeds and cutting out the flowers.

The assault on education began more than a century ago by industrialists and capitalists such as Andrew Carnegie. In 1891, Carnegie congratulated the graduates of the Pierce College of Business for being “fully occupied in obtaining a knowledge of shorthand and typewriting” rather than wasting time “upon dead languages.” The industrialist Richard Teller Crane was even more pointed in his 1911 dismissal of what humanists call the “life of the mind.” No one who has “a taste for literature has a right to be happy” because “the only men entitled to happiness… is those who are useful.” The arrival of industrialists on university boards of trustees began as early as the 1870s and the University of Pennsylvania’s Wharton School of Business offered the first academic credential in business administration in 1881. The capitalists, from the start, complained that universities were unprofitable. These early twentieth century capitalists, like heads of investment houses and hedge-fund managers, were, as Donoghue writes “motivated by an ethically based anti-intellectualism that transcended interest in the financial bottom line. Their distrust of the ideal of intellectual inquiry for its own sake, led them to insist that if universities were to be preserved at all, they must operate on a different set of principles from those governing the liberal arts.

Things go wrong more often than they go right. Failure is actually a natural—even crucial—element of a healthy economy. And the people who are willing to acknowledge that fact can make a hell of a lot of money.

A business can drift aimlessly if it is efficient but not effective. A business can lose money excessively if it is effective but not efficient.

Nature was a quant way before all of these MBAs and Economists were quants. I respect MBAs, and I respect economists. I just happen to respect nature more.

Bad parent! Bad Parent! Your children will grow up to be drug addicts, derelicts, serial murderers and hedge fund managers!

Nature doesn’t have puts on one side and calls on the other side of the same things, nor does it waste energy betting against the same life it works to cultivate. Nature doesn’t insure high risk gambles by trying to be both the casino and the player. Instead, nature insures capital and profits through a variety of complimentary approaches. At Mayflower-Plymouth we aim to emulate nature in this way with how we approach investing and asset management.

There was a Dana Phelps with a son named Brandon, but they didn’t live on the Upper East Side of Manhattan. The Phelpses resided in a rather tony section of Greenwich, Connecticut. Brandon’s father had been a big-time hedge fund manager. Beaucoup bucks. He died when he was forty-one. The obituary gave no cause of death. Kat looked for a charity—people often requested donations made to a heart disease or cancer or whatever cause—but there was nothing listed.

The [carried-interest] loophole was in essence an accounting trick that enabled hedge fund and private equity managers to categorize huge portions of their income as ‘interest,’ which was taxed at the 15 percent rate then applied to long-term capital gains. This was less than half the income tax rate paid by other top-bracket wage earners. Critics called the loophole a gigantic subsidy to millionaires and billionaires at the expense of ordinary taxpayers. The Economic Policy Institute, a progressive think tank, estimated that the hedge fund loophole cost the government over $6 billion a year—the cost of providing health care to three million children. Of that total, it said, almost $2 billion a year from the tax break went to just twenty-five individuals.

Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it. If one can afford private security, public safety is of no concern; to the person fortunate enough to own a Gulfstream jet, crumbling bridges cause less apprehension, and viable public transportation doesn’t even compute. With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?

It defies reason to believe that Martin Luther King, Jr. would march arm in arm with Wall Street hedge fund managers and members of ALEC to lead a struggle for the privatization of public education, the crippling of unions, and the establishment of for-profit schools.

Over the last 30 odd years, Democrats have moved to the right and the right has moved into the mental hospital. So what we have is one perfectly good party for hedge fund managers, credit card companies, banks, defense contractors, big agriculture and the pharmaceutical lobby... That's the Democrats. And they sit across the aisle from a small group of religious lunatics, flat-earthers and civil war re-enactors who mostly communicate by AM radio and call themselves the Republicans and who actually worry that Obama is a socialist. Socialist? He's not even a liberal.

I was learning an important and fascinating lesson about business and human nature: Failure terrifies people. They’ll do whatever they have to do to downplay it, wish it away, and just plain pretend it doesn’t exist. Most of the time, they’ll go on living in denial long after the truth of their predicament becomes obvious.

Buffett being penalized for underperforming versus managers riding the long side of the dot-com bubble is a perfect illustration of a common investor mistake—failing to realize that often the managers with the highest returns achieve those results because they’re taking the most risk, not because they have the greatest skill.

He who smiles in a crisis; has finally found someone to blame.

Always maintain healthy margins of risk, shoulder it & have an upper hand in managing it

Always Seek Good Growth

Can You Get In The Habit?

Give people a voice, encourage, motivate and reward them

Always believe you are great and that you are the best

Growth is only possible when there is inclusivity

I dream of a world where we are all financially literate, financially free and we are all investors

All of life is Capital stewarded by God. And he allows us to steward some of it according to his purposes. And the more we model him in our stewardship, the more he seems to allow us to steward.

Father Jim was sent to jail in a special West Virginia prison filled with politicians, tycoons, confidence men, hedge fund managers, gamblers, and finance company executives, every one of them his least favorite kind of person. The local bishop arranged for him to give services in the cramped chapel, but only two Italian gentlemen regularly showed up, wearing sunglasses in the windowless room.

I'd somehow managed to get an executive stuck in a tree. Instead of a saucer of milk and 'Here kitty, kitty, kitty,' someone might want to bring a hedge fund and a recording of George Bush promising 'No new taxes.

One reason nature is efficient is because there is no waste. Everything produced creates value for others and is consumed by others on the basis of value. What one life may discard as not valuable is consumed by another life because of its valuable. And all things produced and consumed are continually upcycled, becoming more valuable each cycle. Perhaps it’s because nature has a capital-centric view of things; everything in nature is capital and produces capital which to varying degrees provides value to all other things in nature. Imagine if economies worked like this. Imagine if investment portfolios worked like this. Imagine if businesses worked like this. What a beautiful world it would be.

I had come to Boyne City because I have always been drawn to nature's secrets more than to, say Hollywood's secrets or the secrets of Wall Street hedge-fund managers. Nature is real. It exists beyond our ability to create it or even mediate it.

These guys, they work for five years at the Commission, then they become a compliance manager at a hedge fund.” And, he added, he knew that was true because every time an SEC investigator came up to his office he or she would ask for an employment application.

As the manager of my hedge fund, I’ve shorted the stocks of over two hundred companies that have eventually gone bankrupt. Many of these businesses started out with promising, even inspired ideas: natural cures for common diseases, for example, or a cool new kind of sporting goods product. Others were once-thriving organizations trying to rebound from hard times. Despite their differences, they all failed because their leaders made one or more of six common mistakes that I look for: They learned from only the recent past. They relied too heavily on a formula for success. They misread or alienated their customers. They fell victim to a mania. They failed to adapt to tectonic shifts in their industries. They were physically or emotionally removed from their companies’ operations.

It is surprising that nobody actually knows how many hedge funds or money management firms operating as hedge funds exist in this country. There are no regulations that require funds to register; in fact, there are actually few regulations that they have to follow.

people in management positions, even very senior management positions, are often completely wrong about the fortunes of their own companies. More important, in making these misjudgments, they almost always err on the side of excessive optimism. They think their businesses are in much better shape than they actually are. Jerry’s rig utilization chart at Global Marine and our own CFO’s boasts about Joe DiMaggio only underscored this lesson for me at the time. And, three decades and over 1,400 meetings with other executives later, I can say this tendency is as pronounced as ever.

What I didn’t realize at the time was that living through that bust was the luckiest thing that would ever happen to me. It taught me perhaps the single most important lesson about business and about life: Things go wrong more often than they go right. Failure is actually a natural—even crucial—element of a healthy economy.

Investors often make the mistake of equating manager performance in a given year with manager skill. In some instances, more skilled managers will underperform because they refuse to participate in market bubbles. In fact, during market bubbles, the best performers are often the most imprudent rather than the most skilled managers.

The most groundbreaking and important work can easily be forgotten and undervalued. Just like cleaning, nursing and teaching today, some of the most important jobs that keep society functioning, are desperately underpaid. While some might argue that bankers, academics and CEOs are paid more because they contribute more to the economy, we need to remember that pay is as much about power as it is productivity. Imagine for a moment what would happen if all the hedge fund managers in the City of London decided collectively to quit their jobs. How much of an impact on our lives would this actually have? While I'm sure there is a case to be argued that the loss of these jobs would cause some damage to the economy, it is not unreasonable to ask whether the world might actually be a better place? Compare this to the alternative case where all the carers - the workers who look after children, the elderly and the sick - stopped turning up for work. The negative human impact would be undeniably immediate and devastating.

At Bridgewater, criticism is encouraged, including subordinates criticizing superiors. Do any of your employees ever criticize you? All the time. Can you give me an example? I was in a client meeting with a big European pension fund that was visiting managers in Connecticut. After the meeting, the salesperson criticized me for being inarticulate, running on too long, and adversely affecting the meeting. I asked others who had been at the meeting for their opinions. I was given a grade of “F” by one of our new analysts who was just one year out of school. I loved it because I knew they were helping me improve and that they understood that was what they were supposed to be doing.

That’s why one of my strongest ideas is to look at the tax code in both its complexity and its obvious bias toward the rich. Hedge fund and money managers are important for our pension funds and the 401(k) plans that help millions of Americans—but far less important than they think. But financial advisers should pay taxes at the highest levels when they’re earning money at those levels. Often, these financial engineers are “flipping” companies, laying people off, and making billions—yes, billions—of dollars by “downsizing” and destroying people’s lives and sometimes entire companies. Believe me, I know the value of a billion dollars—but I also know the importance of a single dollar.

Can you think of another business in the world that would continue to exist as a going concern even after it had been proven definitively—as John Bogle of Vanguard proved about the financial industry—that most of its products are vastly inferior to other, cheaper alternatives like index funds? I can’t. How about a business whose most prestigious firms have been caught defrauding their own customers not once, but over and over again? In the normal corporate world, would such a business not only continue to operate, but actually make more and more money every year? Of course not. It would be long dead by now. And yet deceiving its clients and foisting inferior and even fraudulent products on them is exactly how Wall Street stays in business!

Which meant, if somehow GameStop did start to go up, the people who had shorted the company would begin to feel pressure to buy; the more the stock went up, the heavier that pressure became. As the shorts began to cover, buying shares to return them to their lenders, the stock would rise even higher. In financial parlance, this was something called a 'short squeeze.' It didn't happen often, but when it did, it could be spectacular. Most famously, in 2008, a surprise takeover attempt of the German automaker Volkswagen by rival Porsche drove Volkswagen's stock price up by a factor of 5 — briefly making it the most valuable company in the world — in two quick days of trading, as short selling funds struggled to cover their positions. Similarly, a battle between two hedge fund titans — Bill Ackman, of Pershing Square Capital Management, and Carl Icahn — led to a squeeze involving supplement maker — and alleged pyramid marketer — Herbalife, which cost Ackman a reported $1 billion. And perhaps the first widely reported short squeeze dated back a century, to 1923, when grocery magnate Clarence Saunders successfully decimated short sellers who had targeted his nascent chain of Piggly Wiggly grocery stores.

Data sliced sufficiently finely begin once again to tell stories. The top 1 percent of the income distribution—representing household incomes in excess of roughly $475,000—comprises only about 1.5 million households. If one adds up the numbers of vice presidents or above at S&P 1500 companies (perhaps 250,000), professionals in the finance sector, including in hedge funds, venture capital, private equity, investment banking, and mutual funds (perhaps 250,000), professionals working at the top five management consultancies (roughly 60,000), partners at law firms whose profits per partner exceed $400,000 (roughly 25,000), and specialist doctors (roughly 500,000), this yields perhaps 1 million people. These are surely not all one-percenters, but they are all plausibly parts of the top 1 percent, and this group might comprise half—a sizable share—of 1 percent households overall. At the very least, the people in these known and named jobs constitute a material, rather than just marginal or eccentric, part of the top 1 percent of the income distribution. They are also, of course, the people depicted in journalistic accounts of extreme jobs—the people who regularly cancel vacation plans, spend most of their time on the road, live in unfurnished luxury apartments, and generally subsume themselves in work, encountering their personal lives only occasionally, and as strangers.

Shortly before our CFO’s pep talk, another high-level executive at the bank stopped me in the hall to give me what he considered some critical advice. “A lot of smart kids like you come through the bank, and they use it for a stepping stone,” he said. “They stay for a year or two and then they leave. I think that’s a huge mistake. Look at me: I’ve been here forever and I’m happier than anyone I know. This place rewards loyalty, and I’m good at my job because I’ve got my finger right on the pulse of the company. I know everything that’s going on.” A week later, I saw two workmen hauling boxes out of his office. He was a victim of the bank’s first-ever round of layoffs. I’m not trying to put this man down for his faith in the bank or make light of his unemployment. I want to use his story to make another point about failure in business. That chat reinforced something else I was beginning to learn: people in management positions, even very senior management positions, are often completely wrong about the fortunes of their own companies. More important, in making these misjudgments, they almost always err on the side of excessive optimism. They think their businesses are in much better shape than they actually are. Jerry’s rig utilization chart at Global Marine and our own CFO’s boasts about Joe DiMaggio only underscored this lesson for me at the time. And, three decades and over 1,400 meetings with other executives later, I can say this tendency is as pronounced as ever.

Was this luck, or was it more than that? Proving skill is difficult in venture investing because, as we have seen, it hinges on subjective judgment calls rather than objective or quantifiable metrics. If a distressed-debt hedge fund hires analysts and lawyers to scrutinize a bankrupt firm, it can learn precisely which bond is backed by which piece of collateral, and it can foresee how the bankruptcy judge is likely to rule; its profits are not lucky. Likewise, if an algorithmic hedge fund hires astrophysicists to look for patterns in markets, it may discover statistical signals that are reliably profitable. But when Perkins backed Tandem and Genentech, or when Valentine backed Atari, they could not muster the same certainty. They were investing in human founders with human combinations of brilliance and weakness. They were dealing with products and manufacturing processes that were untested and complex; they faced competitors whose behaviors could not be forecast; they were investing over long horizons. In consequence, quantifiable risks were multiplied by unquantifiable uncertainties; there were known unknowns and unknown unknowns; the bracing unpredictability of life could not be masked by neat financial models. Of course, in this environment, luck played its part. Kleiner Perkins lost money on six of the fourteen investments in its first fund. Its methods were not as fail-safe as Tandem’s computers. But Perkins and Valentine were not merely lucky. Just as Arthur Rock embraced methods and attitudes that put him ahead of ARD and the Small Business Investment Companies in the 1960s, so the leading figures of the 1970s had an edge over their competitors. Perkins and Valentine had been managers at leading Valley companies; they knew how to be hands-on; and their contributions to the success of their portfolio companies were obvious. It was Perkins who brought in the early consultants to eliminate the white-hot risks at Tandem, and Perkins who pressed Swanson to contract Genentech’s research out to existing laboratories. Similarly, it was Valentine who drove Atari to focus on Home Pong and to ally itself with Sears, and Valentine who arranged for Warner Communications to buy the company. Early risk elimination plus stage-by-stage financing worked wonders for all three companies. Skeptical observers have sometimes asked whether venture capitalists create innovation or whether they merely show up for it. In the case of Don Valentine and Tom Perkins, there was not much passive showing up. By force of character and intellect, they stamped their will on their portfolio companies.

The title, as Bogle explains, comes from a conversation between Kurt Vonnegut and novelist Joseph Heller, who are enjoying a party hosted by a billionaire hedge fund manager. Vonnegut points out that their wealthy host had made more money in one day than Heller ever made from his novel Catch-22. "Yes," says Heller, "but I have something he will never have: enough.

Alex eyed the Bonesmen, robed and hooded, crowded around the body on the table, the undergrad Scribe taking down the predictions that would be passed on to hedge-fund managers and private investors all over the world to keep the Bonesmen and their alumni financially secure.

After a seminal paper in 2010 (see Bollen et al., 2011), the topic of alternative data started getting traction both in academia and in the hedge fund industry. The paper showed an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the Dow Jones index when using Twitter mood data. This

Hedge funds using satellite intelligence on ships and tank levels to identify upcoming impact to oil producers and commodity prices

Offer Incentives to Get All-Important Early Wins For most start-ups, creating incentives for early investors is a sensible path. Whether through a seeder or founder’s shares, preferential terms can align the manager and early adopters to encourage growth. As the industry faces scrutiny on fees, the opportunity to offer something that clients are actively seeking is a win-win proposition. If a manager canvasses a wide range of potential investors, he will encounter both supporters and critics of seeding and discounted shares. Among the pools of capital invested in hedge funds, the fund of funds community tends to embrace founder’s shares more actively than others. In doing so, funds of funds have a place in the industry ecosystem by providing R&D for the industry. Except for the fortunate few whose brand allows a mega-launch, a start-up needs flag wavers in its corner to create positive signaling effects and branding. Both seeders and founder’s share investors can help.

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.” Enough. I was stunned by the simple eloquence of that word—stunned for two reasons: first, because I have been given so much in my own life and, second, because Joseph Heller couldn’t have been more accurate.

Money changes everything. In Billionaires, a book by political scientist Darrell West, one member of the three-comma club brought up his “get-a-senator” strategy—a handy tactic, given that a lone senator can block objectionable legislation or pull strings on a favored donor’s behalf. West recalls how Senator Rand Paul held up Senate action for years on a treaty that would have forced Swiss banks to reveal the names of twenty-two thousand wealthy Americans who had assets stashed in overseas accounts, presumably to evade taxes. (An invasion of privacy, Paul insisted.) In another case, a billionaire hedge fund manager persuaded Democratic senator Edward Markey to write a letter to the SEC calling for an investigation of Herbalife, a multilevel marketing company the financier suspected of fraud, and whose stock he also happened to be short-selling. The effort paid off. After Markey’s letter was made public, Herbalife’s share price plummeted 14 percent.

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.

But this time, if and when discontented Americans like Amy and Sarah do reengage with democracy, it’s by no means clear that they will vote to stick with the capitalism part of the American model. The 1970s represented the first protracted stumble after the recovery from the Great Depression, with two oil-price shocks and a nasty recession mid-decade. Had recovery from those challenges been as strong as that in the late 1930s and 1940s, no doubt faith in the system would once again have been vindicated. Instead, as the data shows, the post-1970s decades have been, for Americans like Amy and Sarah, a slow drip feed of disappointment and frustration. In this environment, a more sinister narrative about capitalism has been taking root. Capitalism is no longer unambiguously about everybody working hard and getting ahead—it is about the benefit of overall economic growth flowing so disproportionately to rich people that there just isn’t enough left for average Americans to consistently advance. If the little that does trickle down isn’t enough to keep Amy and Sarah afloat, then sooner or later they will wonder why they trust the management of the economy to Wall Street CEOs and Beltway politicians and policy wonks. And then they will surely reengage with the democratic part of the US system—probably with dramatic and potentially harmful results. To be sure, it is always tempting to look for a clear, easily identified whipping boy—a bad president, an atrocious piece of legislation, callous Wall Street, venal hedge funds, the unfettered internet, runaway globalization, or self-absorbed millennials. While no one of these can be held responsible for the yawning inequality of the US economy and the alienation that it engenders, many actors have played a role. It has taken almost half a century of both Democratic and Republican presidents and houses of Congress to get us to the current point. And if numerous actors are in part responsible, then we have to ask—given all that the data shows—whether there may be a fundamental structural problem with democratic capitalism. If so, can we fix it?

Mick Mulvaney, director of the Office of Management and Budget, said in a CNN interview that investors shouldn’t take Trump “word for word.” He promised that there would be no Washington bailout of Puerto Rico. Hedge funds

At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.” Enough.

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He worked for a securities firm, talking to money managers and hedge funds about how best to manage risk. He specialized, he said, in corporate equity and debt.

I had no background, or I had a very exiguous background in finance. The guy who hired me always talked about hiring good intellectual athletes, people who were sort of mentally agile in an all-around way, and that the specifics of finance you could learn, which I think is true. But at the time, I mean, no hedge fund was really flooded with applicants, and that allowed him to let his mind range a little bit and consider different kinds of candidates. Today we have a recruiting group, and what do they do? They throw résumés at you, and it’s, like, one business school guy, one finance major after another, kids who, from the time they were twelve years old, were watching Jim Cramer and dreaming of working in a hedge fund. And I think in reality that probably they’re less likely to make good investors than people with sort of more interesting backgrounds. n+1: Why? HFM: Because I think that in the end the way that you make a ton of money is calling paradigm shifts, and people who are real finance types, maybe they can work really well within the paradigm of a particular kind of market or a particular set of rules of the game—and you can make money doing that—but the people who make huge money, the George Soroses and Julian Robertsons of the world, they’re the people who can step back and see when the paradigm is going to shift, and I think that comes from having a broader experience, a little bit of a different approach to how you think about things.

Wise council, like that of Joseph Chamberlain noted above, has always been that placing essentials like our water supply in private hands is folly. But for forty years, greed has been trumping wisdom. The new Gekkos – or should that be ‘geckos’? – have slithered into every corner of our national life. Water privatisation has been perhaps the most difficult to justify on any moral or societal grounds. It’s difficult to square with the celebrated ethos of competition, that mythical beast beloved of the free-marketeer. The customer has no choice, can’t take their business elsewhere, has to pay the price set by the monopoly provider and thus loses on every count. So much for the benefits of competition. It is absolutely emblematic of what Frank Cottrell-Boyce spoke of when he excoriated the corrupt, effete version of capitalism that now holds sway in Britain. ‘The phase of capitalism that we’re in is not remotely competitive. Where are the dynamic venture capitalists? Who’s in the driving seat of our economy? Is it entrepreneurs? Is it customers? Is it workers? No, it’s hedge fund managers. Ours is an economy run by retired dentists in the Cotswolds. That’s not a lively virile capitalism.

even much richer, than others. I object to gain of wealth through political connections rather than earning it by merit. If a basketball franchise pays my neighbor Kobe Bryant $20 million a year because it takes that much to get him, fine. But if hedge fund managers bribe politicians to put a clause in the laws cutting the tax rate on much of their income to a fraction of the percentage the average worker pays, I object.

A hedge fund, Hildene Capital Management, which had invested some of the family’s wealth, said that it was no longer comfortable doing business with the Sacklers. Brett Jefferson, the fund’s manager, revealed that someone close to the firm had suffered an “opioid-related tragedy,” and said, “My conscience led me to terminate the relationship.” Even Purdue’s banker, JPMorgan Chase, cut ties with the company.

A friend of ours from the world of high finance always says that the poor are like hedge-fund managers—they live with huge amounts of risk. The only difference is in their levels of income. In fact, he grossly understates the case: No hedge-fund manager is liable for 100 percent of his losses, unlike almost every small business owner and small farmer. Moreover, the poor often have to raise all of the capital for their businesses, either out of the accumulated “wealth” of their families or by borrowing from somewhere, a circumstance most hedge-fund managers never have to face.

In 1990 there were just 610 hedge funds, with $38.9 billion under management. At the end of 2006 there were 9,462, with $1.5 trillion under management.6

I think about patients who present ideal scenarios and insist that they can only be happy with that exact situation. If he didn’t drop out of business school to become a writer, he’d be my dream guy (so I’ll break up with him and keep dating hedge-fund managers who bore me). If the job wasn’t across the bridge, it would be the perfect opportunity (so I’ll stay in my dead-end job and keep telling you how much I envy my friends’ careers). If she didn’t have a kid, I’d marry her. Certainly we all have our deal-breakers. But when patients repeatedly engage in this kind of analysis, sometimes I’ll say, “If the queen had balls, she’d be the king.” If you go through life picking and choosing, if you don’t recognize that “the perfect is the enemy of the good,” you may deprive yourself of joy. At first patients are taken aback by my bluntness, but ultimately it saves them months of treatment. “The

Unlike some hedge fund managers who also had a waiting list, we could have increased our fees by raising our share of the profits or adding more capital, thereby driving down the return to limited partners. Such tactics by the general partner to capture nearly all the excess risk-adjusted return, or “alpha,” rather than share it with the other investors are what economic theory predicts. Instead, I preferred to treat limited partners as I would wish to be treated in their place.

The lessons we should have learned about excess leverage from the collapse of Long-Term Capital Management were ignored. Ten years later, history repeated on a worldwide scale when loose regulation and high leverage led to the near-collapse of the entire financial system in 2008. As part of the overall meltdown, hedge fund assets fell from $2 trillion to $1.4 trillion from losses and withdrawal of capital. Hedge funds were now a mature asset class. I predicted to The Wall Street Journal that any edge for investors would gradually disappear.

Today, although many such strikes continue—the Walmart strike of 2012, for example—many industrial work sites have been moved offshore to Mexico, China, Vietnam, and elsewhere. Other forms of social conflict have arisen in different theaters. One theater animates the politics of the left. It focuses on conflict in the private sector between the very richest 1 percent and the rest of America. Occupy Wall Street has such a focus. It is not between owner and worker over a higher wage or shorter hours of work. It is between haves and have-nots, the ever-more-wealthy 1 percent and the other 99 percent of Americans. What feels unfair to Occupy activists is not simply unfair recompense for work (the multi-million dollar bonuses to hedge fund managers alongside the $8.25 hourly rate for Walmart clerks) but the absence of tax policies that could help restore America as a middle-class society. For the right today, the main theater of conflict is neither the factory floor nor an Occupy protest. The theater of conflict—at the heart of the deep story—is the local welfare office and the mailbox where undeserved disability checks and SNAP stamps arrive. Government checks for the listless and idle—this seems most unfair. If unfairness in Occupy is expressed in the moral vocabulary of a “fair share” of resources and a properly proportioned society, unfairness in the right’s deep story is found in the language of “makers” and “takers.” For the left, the flashpoint is up the class ladder (between the very top and the rest); for the right, it is down between the middle class and the poor. For the left, the flashpoint is centered in the private sector; for the right, in the public sector. Ironically, both call for an honest day’s pay for an honest day’s work.

It turns out that there was good reason to be skeptical. Thanks in large part to increased transparency, the financial services world is now unhealthily tied to an annual compensation cycle. The desire to be paid the most each and every year has created perverse incentives directly impacting almost every facet of the banking and investment world. As the focus on and opportunity for outsized compensation in the financial industry has shifted from investment banking to the investing world, the short-term compensation arms race has moved to the realms of private equity, hedge funds, and managers of public market securities. Given investment managers’ desire to boost their annual—and, in some cases, quarterly—compensation, they’re motivated to pursue strategies that maximize returns on an annual basis, rather than allowing for longer hold periods. As such, these annual compensation structures often lead to shorter-than-ideal investment horizons and lower relative returns, all at the expense of investors—and, arguably, at the expense of the long-term compensation of the investment managers themselves. This was not always the way things were done. Of course it happened, but much less when the investment strategy wasn’t so laser-focused on an annual bonus cycle.

Invest off the beaten track, with small undiscovered managers; negotiate preferential terms, including a share of the business or at least preferential fees and reasonable liquidity; demand (and do not accept less) complete transparency about where

According to Steven Kaplan and Joshua Rauh, the average pay (in 2010 dollars) for the twenty-five highest-paid hedge fund managers climbed from $134 million in 2002 to an astonishing $537 million in 2012. In every year since 2004, those twenty-five hedge fund managers alone have received more income than all of the chief executive officers of the Standard and Poor’s 500 companies combined—and, of course, those CEOs haven’t been doing badly.

In February 2000, hedge-fund manager James J. Cramer proclaimed that Internet-related companies “are the only ones worth owning right now.” These “winners of the new world,” as he called them, “are the only ones that are going higher consistently in good days and bad.

if you just go along with what everybody else thinks, if you confuse popular consensus for an honest research process, you’ re setting yourself up for failure.

books on Kinesic20 interview techniques.

NEW YORK Climate change is likely to exact enormous costs on U.S. regional economies in the form of lost property, reduced industrial output and more deaths, according to a report backed by three men with vast business experience. The report, released Tuesday, is designed to persuade businesses to factor in the cost of climate change in their long-term decisions and to push for reductions in emissions blamed for heating the planet. It was commissioned by the Risky Business Project, which describes itself as nonpartisan and is chaired by former New York City Mayor Michael R. Bloomberg, former Treasury Secretary Henry M. Paulson Jr. and Thomas F. Steyer, a former Bay Area hedge fund manager.

A good salesman knows you better than you know yourself. If you are Chinese, they will sell you yield. If you’re European, they will stroke your sense of superiority. If you’re an ambitious manager of an American pension fund, sitting on piles of money but bound by rules and regulations, they will find a kosher way for you to become the big swinging dick you always knew you were. And if you are an American hedge fund — a serious fund, not two guys and a Bloomberg — a smart salesman cuts the bullshit and both of you reach an understanding.

I used to play golf,” said Serge. “It’s a frightening game. Forget football or even NASCAR.” He whistled in awe. “Golf takes it to the brink.” “That bad?” “It’s the mental component. They try to hush it up, but the game can destroy the strongest men. Every year, dozens of ugly psychotic breaks. Frustration builds over a lifetime until a tee shot lands in the water of a sadistic island hole, and then a hedge-fund manager hurls all his clubs like tomahawks at the other guys in plaid knickers before stripping off all his clothes and making ‘snow angels’ in a sand trap, prompting a special unit from the pro shop to hustle him away through secret underground doors. Fortunately, I have the perfect emotional composition to excel at golf.

Some at SpaceX who have not been through a public company experience may think that being public is desirable. This is not so. Public company stocks, particularly if big step changes in technology are involved, go through extreme volatility, both for reasons of internal execution and for reasons that have nothing to do with anything except the economy. This causes people to be distracted by the manic-depressive nature of the stock instead of creating great products. For those who are under the impression that they are so clever that they can outsmart public market investors and would sell SpaceX stock at the “right time,” let me relieve you of any such notion. If you really are better than most hedge fund managers, then there is no need to worry about the value of your SpaceX stock, as you can just invest in other public company stocks and make billions of dollars in the market. Elon

But she could make one decision- to change her environment. And if she could change her environment, she would be subject to a whole different set of cues and unconscious cultural influences. It's easier to change your environment than to change your insides. Change your environment and then let the new cues do the work. She spent the first part of eighth grade learning about the Academy, talking to students, asking her mother, and quizzing her teachers. One day in February, she heard that the board of the school had arrived for a meeting, and she decided in her own junior-warrior manner that she'd demand that they let her in. She snuck into the school when a group of kids came out the back door for gym class, and she made her way to the conference room. She knocked, and entered the room. There was a group of tables pushed toward the middle of the room, with about twenty-five adults sitting around the outside of them. The two Academy founders were sitting in the middle on the far side of the tables. "I would like to come to your school," she said loud enough for the whole room to hear. "How did you get in here?" somebody at the table barked. "May I please come to your school next year?" One of the founders smiled. "You see, we have a lottery system. If you enter your name, there is a drawing in April-" "I would like to come to your school," Erica interrupted, launching into the speech she had rehearsed in her head for months. "I tried to get into New Hope when I was ten, and they wouldn't let me. I went down to the agency and I told the lady, but she wouldn't let me. It took them three cops to get me out of there, but I'm thirteen now, and I've worked hard. I get good grades. I know appropriate behavior. I feel I deserve to go to your school. You can ask anyone. I have references." She held out a piece of binder paper with teachers' names on it. "What's your name?" the founder asked. "Erica." "You see, we have rules about this. Many people would like to come to the Academy, so we decided the fairest thing to do is to have a lottery each spring." "That's just a way of saying no." "You'll have as fair a chance as anyone." "That's just a way of saying no. I need to go to the Academy. I need to go to college." Erica had nothing more to say. She just stood there silently. She decided it would take some more cops to take her away. Sitting across from the founders was a great fat man. He was a hedge-fund manager who had made billions of dollars and largely funded the school. He was brilliant, but had the social graces of a gnat. He took a pen from his pocket and wrote something on a piece of paper. He looked at Erica one more time, folded the paper, and slid it across the table to the founders. They opened it up and read the note. It said, "Rig the fucking lottery." The founders were silent for a moment and looked at each other. Finally, one of them looked up and said in a low voice. "What did you say your name was?" "Erica." "Listen, Erica, at the Academy we have rules. We have one set of rules for everybody. Those rules we follow to the letter. We demand discipline. Total discipline. So I'm only going to say this to you once. If you ever tell anybody about bursting in here and talking to us like that, I will personally kick you out of our school. Are we clear about that?" "Yes, sir." "The write your name and address on a piece of paper. Put it on the table and I will see you in September".

Warren Buffett complains about it every year; it is a lot harder to manage billions than millions. The investable market is much smaller.

the smaller hedge funds tend to do better performance-wise than the large funds. Their management fees are not enough to keep the doors open so they have to make good returns and take those incentive fees, creating a sort of Darwinian eat-what-they-cook situation. And it is just easier to invest a tiny fund (again, just ask Warren Buffett).

In the early years, top incomes were derived from capital, and the richest people were what Piketty and Saez call “coupon clippers,” who received most of their incomes from dividends and interest. The fortunes underlying these receipts were eroded over the century by increasingly progressive income and estate taxes. Those who used to live off their (or their ancestors’) fortunes have been replaced at the top by earners, people like CEOs of large firms, Wall Street bankers, and hedge fund managers, who receive their incomes as salaries, bonuses, and stock options. Entrepreneurial

In this post I am going to take a look at what an investor can do to improve a hedge fund investment through the use of dynamic capital allocation. For the purposes of illustration I am going to use Cantab Capital’s Aristarchus program – a quantitative fund which has grown to over $3.5Bn in assets under management since its opening with $30M in 2007 by co-founders Dr. Ewan Kirk and Erich Schlaikjer.

Of course, the topography of global finance has changed dramatically since the heyday of the House of Rothschild. Today there are no family-owned global institutions of any significance. Huge publicly listed banks, asset managers, private equity firms, hedge funds, and insurance companies dominate and operate around the globe. Regulators are powerful and ubiquitous. But some things remain constant. Global finance is not for the fainthearted; it is too complex, too volatile, too dependent on uncontrollable political events within and among countries. Global finance also relies heavily on trust between the suppliers and consumers of money. Mayer Amschel Rothschild and his sons were the essence of trustworthiness. Garnering trust has many dimensions, one of which is accountability. If a banker is held responsible for his mistakes, then his customer has more confidence in him. The Rothschilds could not hide behind public corporations that today essentially shield top individuals from the legal liability of big mistakes, as we have seen in the failure of prosecutors to charge and convict senior financial officials in the global crisis of 2008–9. Unfortunately, few institutions today can command the confidence that the Rothschilds engendered and that is essential to a healthy global economy. Other

We make two assumptions that are vital to the arguments in this book: There are active managers that can beat the market (i.e., the market is not completely efficient). Superior active managers can be identified.

Although the art world is frequently characterised as a classless scene where artists from lower-msddle-class backgrounds drink champagne with high-priced hedge-fund managers, scholarly curators, fashion designers and other "creatives," you'd be mistaken if you thought the world was egalitarian or democratic. Art is about experimenting with ideas, but it is also about excellence and exclusion. In a society where everyone is looking for a little distinction, it's an intoxicating combination.

I never use hedge funds because I am well aware of what drives future performance, and hedge funds start out with a great disadvantage in every major category: taxes, fees, risk management, transparency and liquidity.

Right,” Hamza said, flipping his laptop open. “It’s a hedge fund. Starrer, Wern, Bigby and Greenborough. They manage assets valued in the neighborhood of thirty-five billion dollars, investing in a wide variety of concerns, from pharmaceuticals to agriculture to nanotech

. “And I came to know about the mistress. Andrea Darius. I met her for the first time before we were married. Beautiful woman, so beautiful. Smart, classy, very high-society type. She looked kind of like Katherine Heigl—that stately, confident, above-it-all look. I’d suspected from the first time I met her. There was something in the way she looked at him, it was just there. She was an image consultant, a public relations expert who specialized in the financial sector. Lenders and investors are constantly scrutinized, especially private companies and hedge fund managers. But that was just a front. That was one of the first issues I faced when I looked the other way. I made excuses to make my existence more acceptable in my own eyes.” She laughed hollowly. “While I’m a leper in Manhattan, Andrea is still a prominent figure in New York society. There’s been speculation that she’s a high-priced prostitute or even madam. Who knows? Who cares?

Some forty other Tea Party and antitax groups also clamored for all-out war. Among the most vociferous was the Club for Growth, a small, single-minded, Wall Street–founded group powerful for one reason: it had the cash to mount primary challenges against Republicans who didn’t hew to its uncompromising line. The club had developed the use of fratricide as a tactic to keep officeholders in line after becoming frustrated that many candidates it backed became more moderate in office. It discovered that all it had to do was threaten a primary challenge, and “they start wetting their pants,” one founder joked. Its top funders included many in the Koch network, including the billionaire hedge fund managers Robert Mercer and Paul Singer and the private equity tycoon John Childs.

The competitive landscape of hedge funds is rapidly changing, as hundreds of funds are opened and closed every year. For example, Pensions & Investments reported that 784 new funds were started in 2009, while 1,023 existing funds were closed. Amazingly, the median life of a hedge fund is only 31 months. Fewer than 15 percent of hedge funds last longer than six years, and 60 percent of them disappear in less than three years.[3]

I often point out to hedge fund proponents that their industry used to claim it was targeting absolute returns, with the promise that they'd make money over any reasonably long holding period and were uncorrelated with other major asset classes such as stocks or bonds. The 2008 crash showed how unattainable this was, and hedge fund proponents quietly adopted different descriptions of their objectives. These included generating attractive Relative Returns, and more recently when even this more modest objective proved to be beyond their collective ability the term Uncorrelated Returns gained favor. Since hedge funds have in recent years been worse than just about anything else it's been a good choice.

HFM: Well, what does it mean to have an enormous mound of cash sitting around? I mean, is it like in the executive suite, it’s like the pool that Scrooge McDuck has, with gold coins, and he swims around in that, and when money is needed he takes gold coins out of the pool and uses them to pay for things? I mean, what is a pile of money? A pile of money is, for example, a deposit at a bank. Okay, well, what is a deposit at a bank? The bank’s supposed to lend that out to somebody. So a cash balance is…one company’s cash balance eventually works its way to be credit, it’s credit to somebody else. The point is that, you say a company or a person has cash sitting around, what does that mean? It means that they have consuming power, that they’ve moved consuming power intertemporally. It means that they’ve produced more than they’ve consumed in the past, so they have a right to consume more than they’re producing at some point in the future. So that just means that some party has a claim on another party. It can’t be that all of us as an economy, that we all have lots of claims on future consumption and none of us have any debt. Otherwise you would have an economy that’s entirely demonetized, it would be entirely equity, you know, we would just have claims on capital goods or on ownership of companies. You know, if you want to have money that’s not just dead pieces of paper that will be worth nothing if everybody tries to spend it at once—really my money, through an extended chain of financial relationships, is somebody else’s debt, it’s a credit to somebody else.

I once had a foreign exchange trader who worked for me who was an unabashed chartist. He truly believed that all the information you needed was reflected in the past history of a currency. Now it's true there can be less to consider in trading currencies than individual equities, since at least for developed country currencies it's typically not necessary to pore over their financial statements every quarter. And in my experience, currencies do exhibit sustainable trends more reliably than, say, bonds or commodities. Imbalances caused by, for example, interest rate differentials that favor one currency over another (by making it more profitable to invest in the higher-yielding one) can persist for years. Of course, another appeal of charting can be that it provides a convenient excuse to avoid having to analyze financial statements or other fundamental data. Technical analysts take their work seriously and apply themselves to it diligently, but it's also possible for a part-time technician to do his market analysis in ten minutes over coffee and a bagel. This can create the false illusion of being a very efficient worker. The FX trader I mentioned was quite happy to engage in an experiment whereby he did the trades recommended by our in-house market technician. Both shared the same commitment to charts as an under-appreciated path to market success, a belief clearly at odds with the in-house technician's avoidance of trading any actual positions so as to provide empirical proof of his insights with trading profits. When challenged, he invariably countered that managing trading positions would challenge his objectivity, as if holding a losing position would induce him to continue recommending it in spite of the chart's contrary insight. But then, why hold a losing position if it's not what the chart said? I always found debating such tortured logic a brief but entertaining use of time when lining up to get lunch in the trader's cafeteria. To the surprise of my FX trader if not to me, the technical analysis trading account was unprofitable. In explaining the result, my Kool-Aid drinking trader even accepted partial responsibility for at times misinterpreting the very information he was analyzing. It was along the lines of that he ought to have recognized the type of pattern that was evolving but stupidly interpreted the wrong shape. It was almost as if the results were not the result of the faulty religion but of the less than completely faithful practice of one of its adherents. So what use to a profit-oriented trading room is a fully committed chartist who can't be trusted even to follow the charts? At this stage I must confess that we had found ourselves in this position as a last-ditch effort on my part to salvage some profitability out of a trader I'd hired who had to this point been consistently losing money. His own market views expressed in the form of trading positions had been singularly unprofitable, so all that remained was to see how he did with somebody else's views. The experiment wasn't just intended to provide a “live ammunition” record of our in-house technician's market insights, it was my last best effort to prove that my recent hiring decision hadn't been a bad one. Sadly, his failure confirmed my earlier one and I had to fire him. All was not lost though, because he was able to transfer his unsuccessful experience as a proprietary trader into a new business advising clients on their hedge fund investments.

Some public pension plans are responding to the continued disappointing returns. The California Public Sector Retirement System (CalPERS) is often regarded as a thought leader among other pension funds, and with over $300 billion in assets it is one of the largest institutional investors in the world. In September 2014 it announced (CalPERS 2014) the elimination of hedge funds from its portfolio, concluding that the cost of investing wasn't justified by the returns. One interesting disclosure was that in the most recent fiscal year through June 2014, CalPERS had paid $135 million in fees on a $4 billion portfolio that earned 7.1%. The approximately $280 million in investment returns ($4 billion × 7.1%) means that for every $2 in returns, it paid away a third dollar in fees. Of the gross returns (i.e., before fees), two-thirds went to CalPERS and one-third to the hedge fund managers. When you consider that it's possible to invest in equity index funds for less than 0.1%, this division of investment profits between the provider of capital and the managers must have appeared as absurd to CalPERS as it does to everyone else.

Guys who can’t get a job on Wall Street get a job at Moody’s,” as one Goldman Sachs trader-turned-hedge fund manager put it.

Going Public Per my recent comments, I am increasingly concerned about SpaceX going public before the Mars transport system is in place. Creating the technology needed to establish life on Mars is and always has been the fundamental goal of SpaceX. If being a public company diminishes that likelihood, then we should not do so until Mars is secure. This is something that I am open to reconsidering, but, given my experiences with Tesla and SolarCity, I am hesitant to foist being public on SpaceX, especially given the long term nature of our mission. Some at SpaceX who have not been through a public company experience may think that being public is desirable. This is not so. Public company stocks, particularly if big step changes in technology are involved, go through extreme volatility, both for reasons of internal execution and for reasons that have nothing to do with anything except the economy. This causes people to be distracted by the manic-depressive nature of the stock instead of creating great products. For those who are under the impression that they are so clever that they can outsmart public market investors and would sell SpaceX stock at the “right time,” let me relieve you of any such notion. If you really are better than most hedge fund managers, then there is no need to worry about the value of your SpaceX stock, as you can just invest in other public company stocks and make billions of dollars in the market.

Labor and employment firm Fisher & Phillips LLP opened a Seattle office by poaching partner Davis Bae from labor and employment competitor Jackson Lewis PC. Mr. Bea, an immigration specialist, will lead the office, which also includes new partners Nick Beermann and Catharine Morisset and one other lawyer. Fisher & Phillips has 31 offices around the country. Sara Randazzo LAW Cadwalader Hires New Partner as It Looks to Represent Activist Investors By Liz Hoffman and David Benoit | 698 words One of America’s oldest corporate law firms is diving into the business of representing activist investors, betting that these agitators are going mainstream—and offer a lucrative business opportunity for advisers. Cadwalader, Wickersham & Taft LLP has hired a new partner, Richard Brand, whose biggest clients include William Ackman’s Pershing Square Capital Management LP, among other activist investors. Mr. Brand, 35 years old, advised Pershing Square on its campaign at Allergan Inc. last year and a board coup at Canadian Pacific Railway Ltd. in 2012. He has also defended companies against activists and has worked on mergers-and-acquisitions deals. His hiring, from Kirkland & Ellis LLP, is a notable step by a major law firm to commit to representing activists, and to do so while still aiming to retain corporate clients. Founded in 1792, Cadwalader for decades has catered to big companies and banks, but going forward will also seek out work from hedge funds including Pershing Square and Sachem Head Capital Management LP, a Pershing Square spinout and another client of Mr. Brand’s. To date, few major law firms or Wall Street banks have tried to represent both corporations and activist investors, who generally take positions in companies and push for changes to drive up share prices. Most big law firms instead cater exclusively to companies, worried that lining up with activists will offend or scare off executives or create conflicts that could jeopardize future assignments. Some are dabbling in both camps. Paul, Weiss, Rifkind, Wharton & Garrison LLP, for example, represented Trian Fund Management LP in its recent proxy fight at DuPont Co. and also is steering Time Warner Cable Inc.’s pending sale to Charter Communications Inc. Willkie Farr & Gallagher LLP and Gibson, Dunn & Crutcher LLP have done work for activist firm Third Point LLC. But most firms are more monogamous. Those on one end, most vocally Wachtell, Lipton, Rosen & Katz, defend management, while a small band including Schulte Roth & Zabel LLP and Olshan Frome Wolosky LLP primarily represent activists. In embracing activist work, Cadwalader thinks it can serve both groups better, said Christopher Cox, chairman of the firm’s corporate group. “Traditional M&A and activism are becoming increasingly intertwined,” Mr. Cox said in an interview. “To be able to bring that perspective to the boardroom is a huge advantage. And when a threat does emerge, who’s better to defend a company than someone who’s seen it from the other side?” Mr. Cox said Cadwalader has been thinking about branching out into activism since late last year. The firm is also working with an activist fund launched earlier this year by Cadwalader’s former head of M&A, Jim Woolery, that hopes to take a friendlier stance toward companies. Mr. Cox also said he believes activism can be lucrative, pooh-poohing another reason some big law firms eschew such assignments—namely, that they don’t pay as well as, say, a large merger deal. “There is real money in activism today,” said Robert Jackson, a former lawyer at Wachtell and the U.S. Treasury Department who now teaches at Columbia University and who also notes that advising activists can generate regulatory work. “Law firms are businesses, and taking the stance that you’ll never, ever, ever represent an activist is a financial luxury that only a few firms have.” To be sure, the handful of law firms that work for both sides say they do so

Fund management is a skill—you cannot run money through consultants or committees. If you have a committee, you should buy an index fund and stop trying. Committees settle to the lowest common denominator, which is the lowest risk. A committee will not take risk. By the time a committee decides to buy tech, it is already March 2000. Fund management is like cooking, whereby 10 chefs have the same ingredients but make 10 different things. You have great chefs who get three stars and lousy chefs who make horrible food. Fund management is similar in that what is important is what you make out of the mix, how you interpret information, how you structure trades and build portfolios. But with committees somehow the results are always the same. When you have a committee, you cannot be the only guy making the decision because, at some stage, you will be wrong in the short-term and everyone will get fired. So the whole groupthink model makes things very difficult, as does the visibility of these posts. Making or losing a lot of money always makes headlines—there is no upside or solution for that.

The top twenty-five hedge fund managers in America make more than all the country’s kindergarten teachers combined.

If Cole successfully analyzes an opportunity for the hedge fund and it invests slightly more effectively, that will be a win for the fund’s managers and its investors. But there will very likely be an equivalent loss on the other side of the investment (whoever sold it to them makes out slightly less well for having undervalued the asset). It’s not clear what the macroeconomic benefit is, unless you either favor the hedge fund’s investors over others or have a very abstract view toward capital markets working efficiently.

Labor also dominates stories of elite income at the next rung down. Although only three hedge fund managers took home over $1 billion in 2017, more than twenty-five took home $100 million or more, and $10 million incomes are so common that they do not make the papers. Even only modestly elite finance workers now receive huge paydays. According to one survey, a portfolio manager at a midsized hedge fund makes on average $2.4 million, and average Wall Street bonuses exploded from roughly $14,000 in 1985 to more than $180,000 in 2017, a year in which the average total salary for New York City’s 175,000 securities industry workers reached over $420,000. These sums reflect the fact that a typical investment bank disburses roughly half of its revenues after interest paid to its professional workers (making it a better three decades to be an elite banker than to be an owner of bank stocks). Elite managers in the real economy also do well. CEO incomes—the wages paid to top managerial labor—regularly reach seven figures; indeed, the average 2017 income of the CEO of an S&P 500 company was nearly $14 million. In a typical recent year the total compensation paid to the five highest-paid employees of each S&P 1500 firm (7,500 workers overall) might amount to 10 percent of S&P 1500 firms’ collective profits. These workers do not own the assets—the portfolios or the companies—that they manage. Their incomes constitute wages paid for managerial labor rather than a return on invested capital. The enormous paydays reflect what prominent business analysts recently called a war between talent and capital—a war that talent is winning.

A complete meritocratic accounting of earned advantage is more expansive than this and traces income through its shallow sources back to its deep roots—to reveal that some income nominally attributed to capital in fact originates in labor and therefore should be counted as earned through effort, skill, and industry. An entrepreneur who sells founder’s shares in her firm, an executive who realizes appreciation after being paid in stock, and a hedge fund manager who gets paid a “carried interest” share of profits on funds she invests (but does not own) all report capital gains income on their tax returns. But all these types of income ultimately reflect returns to the founder’s, the executive’s, or the manager’s labor and, the meritocrat insists, are on this account earned. A similar analysis applies to pensions and owner-occupied housing. All this income is earned in a way that distinguishes it from the true capital income of the hereditary rentier who lives, at leisure, from returns on an inherited patrimony. Regardless of what the tax accounts say, therefore, accurate meritocratic accounting attributes all these types of income not to capital but to labor.

These are not marginal or idiosyncratic categories of income (although the need to translate from tax categories to moral ones inevitably introduces judgment and imprecision into any accounting). Founder’s shares, carried interest, and executive stock compensation give nominally capital gains a substantial component of labor income, especially among the very rich. To begin with, roughly half of the twenty-five largest American fortunes, according to Forbes, arise from founder’s stock still held by the founders who built the firms. Moreover, the share of total capital gains income reported to the Treasury that is attributable to carried interest alone—to the labor of hedge fund managers—has grown by a factor of perhaps ten in the past two decades and now comprises a material share of all the capital gains reported by one-percenters. And over the past twenty years, roughly half of all CEO compensation across the S&P 1500 has taken the form of stock or stock options. Pensions and housing also contribute substantially to top incomes today, roughly doubling the shares that they contributed in the 1960s. Once again, the data cannot sustain precise measurements, but these forms of labor income, taken together, plausibly comprise roughly another third of top incomes, sitting atop the roughly half of top incomes attributable to labor on even the most conservative accounting. The data therefore confirm—top-down—the narrative of labor income that bubbles up from a survey of elite jobs. Both the top 1 percent and even the top 0.1 percent today receive between two-thirds and three-quarters of their income in exchange not for land, machines, or financing but rather for deploying their own effort and skill. The richest person out of every hundred in the United States today, and indeed the richest person out of every thousand, now literally works for a living.

A somewhat provocative example of the interconnections between the gaming industry and finance. A technologist working for a large London hedge fund hinted this to me in interview. Trained in computer science and engineering, this interviewee first worked as a network programmer for large online multiplayer games. His greatest challenge was the fact that the Internet is not instantaneous: when a player sends a command to execute in action, it takes time for the signal to reach the computer server and interact with the commands of other players. For the game to be realistic, such delays have to be taken into account when rendering reality on the screen. The challenge for the network programmer is to make these asymmetries as invisible as possible so that the game seem 'equitable to everyone.' The problem is similar in finance, where the physical distance from the stock exchange's matching engines matters tremendously, requiring a similar solution to the problem of latency: simulating the most likely state of the order book on the firm's computers in order to estimate the most advantageous strategies or the firm's trading algorithms. Gaming and finance are linked not through an institutional imperative of culture or capital - or even a strategy, as such - but rather through the more mundane and lowly problems of how to fairly manage latency and connectivity.

Estimize site is a good source of information because they crowdsource earnings and economic estimates from over 72,000 hedge fund, brokerage, independent and amateur analysts.

In the event of hedge fund gains, the manager shares in a substantial portion of profits. In the event of hedge fund losses, the investor bears the burden alone. The asymmetry of the profits-interest structure clearly favors the fund manager.

The fall of Circuit City and another famous failure, the hedge fund Long-Term Capital Management, illustrate why business, when practised in the absence of wealth secrets, produces fire sales more often than fortunes.

Do you ever read a feature praising a woman whose life is to care for her disabled child or parent with Alzheimer’s? No, you don’t. When someone talks about ‘achievement’ they’re talking about salary and status, not the fact that you actually managed to take a shower and change your clothes after being in the hospital with your child for two nights straight even though, believe me, that’s an achievement. You read about hedge fund managers who get up at three in the morning so they can get their workout done, use the gym, clear their emails and make a healthy breakfast for the whole family before putting in a full day of work in the city and returning home in time to read bedtime stories and then do another few hours of work before having perfect sex, three hours undisturbed REM sleep and waking up and starting again. You read about women who were at home with children and suddenly realized that if they started charging for all the cupcakes they made for their children’s friends and school events, they could turn their baking skills into a profitable business.

Let me be clear, I am a feminist. But my aspirations are greater than hoping we can have more women as oil executives and hedge fund managers. As a woman, I support candidates who will create a system that provides dignity for all, rather than just changing the gender ratio of our oppressors.

I’ve long believed that to effectively manage it is not only a critical competency but a significant predictor of company performance,” he explains. “One of these days, I’d like to create a hedge fund that invests in companies, taking long positions on companies with great it organizations that help the business win, and short the companies where it lets everyone down. I think we’d make a killing. What better way is there to force the next generation of ceos to give a shit about it?

The population is angry, frustrated, bitter—and for good reasons. For the past generation, policies have been initiated that have led to an extremely sharp concentration of wealth in a tiny sector of the population. In fact, the wealth distribution is very heavily weighted by, literally, the top tenth of one percent of the population, a fraction so small that they’re not even picked up on the census. You have to do statistical analysis just to detect them. And they have benefited enormously. This is mostly from the financial sector—hedge fund managers, CEOs of financial corporations, and so on.

Alternatives include Brookfield Asset Management, Fairfax Financial, Leucadia National, Loews Companies, Markel Corporation, and White Mountains Insurance. While these companies meet Buffett-style compensation criteria, some public investment vehicles have married hedge-fund-style compensation with a value investment approach. Examples include Greenlight Capital Re and Biglari Holdings.

The obvious response to this is that the history of investing is littered with episodes of capital flowing too readily to areas that ultimately prove poorly considered. It's not that every successful investment idea eventually blows itself up, but every one that does blow up was preceded by a thoughtless scamper to join the crowd. Early, smart money is followed by the less astute. So we'll put financial success for hedge fund promoters in the category of dubious support for the notion that a bigger hedge fund industry is better.

As I write this, I’m sitting in a café in Paris overlooking the Luxembourg Garden, just off of Rue Saint-Jacques. Rue Saint-Jacques is likely the oldest road in Paris, and it has a rich literary history. Victor Hugo lived a few blocks from where I’m sitting. Gertrude Stein drank coffee and F. Scott Fitzgerald socialized within a stone’s throw. Hemingway wandered up and down the sidewalks, his books percolating in his mind, wine no doubt percolating in his blood. I came to France to take a break from everything. No social media, no email, no social commitments, no set plans . . . except one project. The month had been set aside to review all of the lessons I’d learned from nearly 200 world-class performers I’d interviewed on The Tim Ferriss Show, which recently passed 100,000,000 downloads. The guests included chess prodigies, movie stars, four-star generals, pro athletes, and hedge fund managers. It was a motley crew. More than a handful of them had since become collaborators in business and creative projects, spanning from investments to indie film. As a result, I’d absorbed a lot of their wisdom outside of our recordings, whether over workouts, wine-infused jam sessions, text message exchanges, dinners, or late-night phone calls. In every case, I’d gotten to know them well beyond the superficial headlines in the media. My life had already improved in every area as a result of the lessons I could remember. But that was the tip of the iceberg. The majority of the gems were still lodged in thousands of pages of transcripts and hand-scribbled notes. More than anything, I longed for the chance to distill everything into a playbook. So, I’d set aside an entire month for review (and, if I’m being honest, pain au chocolat), to put together the ultimate CliffsNotes for myself. It would be the notebook to end all notebooks. Something that could help me in minutes but be read for a lifetime.

I had several friends from law school who were very enterprising guys, much more so than the average law student. They each started businesses after practicing law at large firms for multiple years. What kind of businesses did they start? They started boutique law firms. This is completely unsurprising if you think about it. They’d spent years becoming good at delivering legal services. It was a field that they understood and could compete in. Their credentials translated too. People learn from what they’re doing and do it again on their own. It’s not just lawyers; the consulting firm Bain and Company was started by seven former partners and managers from the Boston Consulting Group. Myriad boutique investment banks and hedge funds have spun out of large financial organizations. You can see the same pattern in the startup world. After PayPal was acquired by eBay in 2002, its founders and employees went on to found or cofound LinkedIn (Reid Hoffman), YouTube (Steve Chen, Jawed Karim, and Chad Hurley), Yelp (Russel Simmons and Jeremy Stoppelman), Tesla Motors (Elon Musk), SpaceX (Musk again), Yammer (David Sacks), 500 Startups (Dave McClure), and many other companies. PayPal’s CEO, Peter Thiel, famously made a $500,000 investment in Facebook that grew to over $1 billion. In this sense, PayPal is one of the most prolific companies of recent times. But if you look at any successful growth company you’ll start to see their alumni show up doing parallel things. Former Apple employees founded or cofounded Android, Palm, Nest, and Handspring, companies that revolve around devices. Former Yahoo! employees founded Ycombinator, Cloudera, Hunch.com, AppNexus, Polyvore, and many other web-oriented companies. Organizations give rise to other organizations like themselves.

Both fathers, Hunter Moore, a physician, and Chick Baldwin, a hedge fund manager, were summoned from their places of work.

Many new funds may see these policies and procedures as something to be implemented after a fund has launched, but if the manager wants to attract institutional money, these must be in place from the start.

relationship management area, and bankers that have greater technical skills often work in a product area such as M&A or capital markets. Of course,

if we’re going to actually come up with robots that will do our laundry or tidy up the kitchen, we’re going to have to make sure that whatever replaces capitalism is based on a far more egalitarian distribution of wealth and power—one that no longer contains either the super-rich or desperately poor people willing to do their housework. Only then will technology begin to be marshaled toward human needs. And this is the best reason to break free of the dead hand of the hedge fund managers and the CEOs—to free our fantasies from the screens in which such men have imprisoned them, to let our imaginations once again become a material force in human history.

The risk models developed by private firms, whether hedge funds, rating agencies, or banks, are not reliable guides to the future. Even when these models are applied by government regulators, their application is flawed, because they look to past market history as received truth. But markets, we must emphasize, are imperfect; they are the agglomeration of myriad investors, most of whom usually act rationally - usually, as history has shown, but not always. Even perfectly logical investors will panic, as will theatergoers at the mere possibility of fire, so as not to be last to the exit; this threat of contagion renders financial markets inherently unstable.

his peers have expressed considerably more skepticism. “There is nothing Tesla [can] do that we cannot also do,” Fiat Chrysler CEO Sergio Marchionne said in June 2016. Two years earlier, he had asked customers not to buy the Fiat 500e electric car, because the company lost $14,000 on the sale of each one. Fiat would sell the minimum number of electric cars needed to meet government mandates and “not one more,” he said. In April 2016, Marchionne continued that theme in an interview on the sidelines of his company’s annual meeting, this time responding to the price of the Model 3. If Musk could show him that the car would be profitable at the $35,000 price tag, Marchionne said, “I will copy the formula, add the Italian design flair, and get it to the market within twelve months.” The German automakers have been even more dismissive. In November 2015, Edzard Reuter, the former CEO of Daimler, called Tesla a “joke” and Musk a “pretender,” suggesting in an interview with a German newspaper that Tesla didn’t stand up to serious comparison with “the great car companies of Germany.” Daimler, BMW, and Volkswagen were slow to accept that Tesla could one day challenge their market dominance. “German carmakers have been in denial that electric vehicles can create an emotional appeal to customers,” Arndt Ellinghorst, an automotive analyst at Evercore ISI, told the Los Angeles Times in April 2016. “Many still believe that Tesla is a sideshow catering to a niche product to some tree-hugging Californians and eccentric US hedge fund managers.” GM wasn’t quite so blasé. In 2013, then CEO Dan Akerson established a team within the company to study Tesla, based on the belief that it could be a big disrupter. GM’s Chevrolet Volt, a hybrid sedan that could drive about forty miles in full electric mode, had won Motor Trend’s 2011 Car of the Year, but GM was looking further into the future. At the 2015 Detroit auto show, it unveiled a concept of the Chevy Bolt, a two-hundred-mile electric car that would retail for $30,000 (after a $7,500 rebate from the US government). It was seen as a direct response to Tesla and new CEO Mary Barra’s biggest risk since she took over in 2014. Wired magazine celebrated the Bolt’s impending arrival with a February 2016 cover story about how GM had beaten Tesla “in the race to build a true electric car for the masses

It was as if Bill Gates had been forced out of Microsoft, only to reappear on Wall Street as one of the largest hedge fund managers.

Our struggle is against a system where the top twenty-five hedge fund managers in the United States pocket more money than 350,000 kindergarten teachers combined. When did we the people make that determination? When did we decide that a drug company executive at Moderna can collect a “golden parachute” valued at $926 million for not working, while EMT workers who work around the clock to save lives make as little as $40,000 a year?

Warren Buffett and George Soros eschew derivatives. Hedge fund managers bet against the Wall Street banks that develop complex products. The best investors – today and yesterday – make money not because they understand abstruse mathematical models, but because they have a deep intuition about the timing and machinations of financial markets. Markets have been complex for a long time, and their ebbs and flows always have depended, not only on intricate disclosures about assets and liabilities, but also on human psychology. That has not changed since the 1920s.

I felled 3,000 of their fighting men with the sword. I carried off prisoners, possessions, oxen and cattle from them. I captured many troops alive: I cut off of others their noses, ears and extremities. I gouged out the eyes of many troops. I made one pile of the living and one of heads. I hung their heads on trees around the city. I burnt their adolescent boys and girls. I razed, destroyed, burnt and consumed the city.

Pat Dorsey, a Chicago-based hedge fund manager, expresses a similar view. “The single best thing any investor can do is to not have a TV and a Bloomberg terminal in their office,” he once told me. “That I have to walk fifty feet down the hall to look at stock prices or check the news on our portfolio is great. It’s so tempting. It’s like checking email obsessively: you get a little dopamine rush. But as we all know logically and rationally, it’s utterly nonproductive.

Another recent event is the almost-instant bankruptcy, in 1998, of a financial investment company (hedge fund) called Long-Term Capital Management (LTCM), which used the methods and risk expertise of two “Nobel economists,” who were called “geniuses” but were in fact using phony, bell curve–style mathematics while managing to convince themselves that it was great science and thus turning the entire financial establishment into suckers.

As legendary hedge fund manager Ray Dalio told Tony Robbins (page 210): “It’s almost certain that whatever you’re going to put your money in, there will come a day when you will lose 50% to 70%.” It pays to remember that if you lose 50%, you need a subsequent 100% return to get back to where you started. That math is tough.