Hedge Fund 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.

Behold. The festering carcass of American rot shoved into an ill-fitting suit: the sleaze of a conman, the cowardice of a draft dodger, the gluttony of a parasite, the racism of a Klansman, the sexism of a back-alley creep, the ignorance of a bar-stool drunk, and the greed of a hedge-fund ghoul - all spray-painted orange and paraded like a prize hog at a county fair. Not a president. Not even a man. Just the diseased distillation of everything this country swears it isn't but always has been - arrogance dressed up as exceptionalism, stupidity passed off as common sense, cruelty sold as toughness, greed exalted as ambition, and corruption worshipped like gospel. It is America's shadow made flesh, a rotting pumpkin idol proving that when a nation kneels before money, power, and spite, it doesn't just lose its soul - it shits out this bloated obscenity and calls it a leader.

Hedge funds have made massive leveraged credit bets, knowing that their upside is billions in fees and their downside is millions in fees.

You’re told that you’re supposed to go to college, but you’re also told that you are being self-indulgent if you actually want to get an education. As opposed to what? Going into consulting isn’t self-indulgent? Going into finance isn’t self-indulgent? Going into law, like most of the people who do, in order to make yourself rich, isn’t self-indulgent? It’s not okay to study history, because what good does that really do anyone, but it is okay to work for a hedge fund. It’s selfish to pursue your passion, unless it’s also going to make you a lot of money, in which case it isn’t selfish at all.

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.

To hedge effectively, you have to reject the silo mentality and instead embrace the systems thinking mentality.

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.

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.

All new markets are inefficient at first,

Nature doesn’t hedge by betting for and against the same things. Nature hedges by cultivating resilience. At Mayflower-Plymouth we aim to hedge by cultivating resilience in our portfolios.

Waste is antithetical to efficiency. You cannot have one while also having the other. In maximizing one, the other will definitely be minimized. In minimizing one, the other will definitely be maximized.

Nature is great at hedging. All kinds of natural disasters can hit a forest - from hurricanes to heat waves to floods to freezing temperatures - and yet the forest can remain intact and continue to thrive year after year and decade after decade. At Mayflower-Plymouth we aim to hedge our funds the way nature hedges - by cultivating resilience through systems design.

He read Adam Smith, Thomas Hobbes, and Niccolò Machiavelli.

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

He commuted to his Canadian office in a Ferrari, though sometimes snowy conditions forced him to use Bentley.

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

some estimates suggest that the failure rate is around 20 percent, meaning that each year, one of every five hedge funds goes up in smoke.

Everyone told me it was a really stupid idea to start my own hedge fund right out of business school,' says Ackman of the idea. 'That's how I knew that it was a good idea.

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

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.

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.

Traders focus almost entirely on where to enter a trade. In reality, the entry size is often more important than the entry price

In terms of biological systems, efficiency is a matter of life or death. And the same is true in terms of business systems.

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.

A lot of folks look to non-profits as platforms to solve major societal scale problems. But the major capital allocators like banks, Hedge Funds, Venture Capital firms and so forth - these are the kinds of ent that have the capacity to affect real change.

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.

A lot of folks look to non-profits as platforms to solve major societal scale problems. But the major capital allocators like banks, Hedge Funds, Venture Capital firms and so forth - these are the kinds of entities that have the capacity to affect real change.

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.

he thought a bit about God, and whether He might be some kind of universal digital computer, subject to the occasional bug or hack. Was it possible that politicians and hedge-fund operators were some kind of garbled cosmic computer code? That the Opponent, instead of having horns and a forked tail, was a fat bearded guy drinking Big Gulps and eating anchovy pizzas and writing viruses down in a hellish basement? That prayers weren’t answered because Satan was running denial-of-service attacks?

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.

Capitalism works only when institutions are forced to absorb the consequences of the risks that they take on.

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.

Prices are determined by supply and demand.

Diversification should be an offensive contributor to growth, not just a defensive hedge against loss.

Feelings of entitlement make people do horrible things, or, rather, they allow them to do horrible things without feeling the slightest inkling of guilt.

Just because it's not hard science, just because it doesn't lead to a high-paying job at a hedge fund after college, doesn't mean it's not worth pursuing.

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.

The “reform” movement is really a “corporate reform” movement, funded to a large degree by the major foundations, Wall Street hedge managers, entrepreneurs, and the U.S. Department of Education.

Years later, (Paul) Jones described the mental gymnastics that went into writing these scripts. "Every evening I would close my eyes in a quiet place in my apartment ... I would visualize the opening and walk myself through the day and imagine the different emotional states the market would go through... Then when you get there, you are ready for it. You have been there before. You are in a mental state to take advantage of emotional extremes because you have already lived through them.

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.

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.

From the social point of view the slow and possibly fraudulent unraveling of a multi-trillion-dollar U.S. bond market was a catastrophe. From the hedge fund trading point of view it was the opportunity of a lifetime.

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.

When someone is viewed as more extraordinary than they are, you're more likely to overvalue their opinion on things they have no special talent in. Like a successful hedge fund manager's political views, or a politician's investment advice.

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?

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.

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.

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.

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.

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

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

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

You can use charts to give you a plus or minus toward your view, but you can never start with the chart.

Psychologists have done tests about how humans approach problem solving and found that we are somehow preprogrammed to look for confirmation and not for disconfirmation.

you have enough monkeys randomly striking keyboard keys (they have recently traded in their typewriters for PCs), one of them will eventually type Hamlet

Big market price changes happen when lots of people are forced to reevaluate their prejudices, not necessarily when the world actually changes. — Colm O'Shea

The great thing about alpha was that it could be explained:

I’ve seen the answer: some of them figure, “If that’s what science is, I might as well make money!” Four years later their brainpower is applied to thinking up algorithms that allow hedge funds to act on financial information a few milliseconds faster rather than to finding new treatments for Alzheimer’s disease or technologies for carbon capture and storage.

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.

relationships. For example, if the S&P was moving in an inverse lockstep to the bonds, and bonds were down for the day, but the S&P was not responding on the upside, it would tell me I should sell the S&P.

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?

Look at what we have come to. We like to think of ourselves as a wealthy country, but it is one of the great testaments to the intellectual - and moral, and spiritual - poverty of American society that is makes its most intelligent young people feel that they are being self-indulgent if they pursue their curiosity. You're told that you're supposed to go to college, but you're also told that you are being self-indulgent if you actually want to get an education. As opposed to what? Going into consulting isn't self-indulgent? Going into law, like most of the people who do, in order to make yourself rich, isn't self-indulgent? It's not okay to study history, because what good does that really do anyone, but it is okay to work for a hedge fund. It's selfish to pursue your passion, unless it's going to make you a lot of money, in which case it isn't selfish at all.

they pale by comparison to the trading volumes of hedge funds, to say nothing of the levels of trading in exotic securities such as interest rate swaps, collateralized debt obligations, derivatives such as futures on commodities, stock indexes, stocks, and even bets on whether a given company will go into bankruptcy (credit default swaps). The aggregate nominal value of these instruments, as I noted in Chapter 1, now exceeds $700 trillion.

The “German problem” after 1970 became how to keep up with the Germans in terms of efficiency and productivity. One way, as above, was to serially devalue, but that was beginning to hurt. The other way was to tie your currency to the deutsche mark and thereby make your price and inflation rate the same as the Germans, which it turned out would also hurt, but in a different way. The problem with keeping up with the Germans is that German industrial exports have the lowest price elasticities in the world. In plain English, Germany makes really great stuff that everyone wants and will pay more for in comparison to all the alternatives. So when you tie your currency to the deutsche mark, you are making a one-way bet that your industry can be as competitive as the Germans in terms of quality and price. That would be difficult enough if the deutsche mark hadn’t been undervalued for most of the postwar period and both German labor costs and inflation rates were lower than average, but unfortunately for everyone else, they were. That gave the German economy the advantage in producing less-than-great stuff too, thereby undercutting competitors in products lower down, as well as higher up the value-added chain. Add to this contemporary German wages, which have seen real declines over the 2000s, and you have an economy that is extremely hard to keep up with. On the other side of this one-way bet were the financial markets. They looked at less dynamic economies, such as the United Kingdom and Italy, that were tying themselves to the deutsche mark and saw a way to make money. The only way to maintain a currency peg is to either defend it with foreign exchange reserves or deflate your wages and prices to accommodate it. To defend a peg you need lots of foreign currency so that when your currency loses value (as it will if you are trying to keep up with the Germans), you can sell your foreign currency reserves and buy back your own currency to maintain the desired rate. But if the markets can figure out how much foreign currency you have in reserve, they can bet against you, force a devaluation of your currency, and pocket the difference between the peg and the new market value in a short sale. George Soros (and a lot of other hedge funds) famously did this to the European Exchange Rate Mechanism in 1992, blowing the United Kingdom and Italy out of the system. Soros could do this because he knew that there was no way the United Kingdom or Italy could be as competitive as Germany without serious price deflation to increase cost competitiveness, and that there would be only so much deflation and unemployment these countries could take before they either ran out of foreign exchange reserves or lost the next election. Indeed, the European Exchange Rate Mechanism was sometimes referred to as the European “Eternal Recession Mechanism,” such was its deflationary impact. In short, attempts to maintain an anti-inflationary currency peg fail because they are not credible on the following point: you cannot run a gold standard (where the only way to adjust is through internal deflation) in a democracy.

McGovern’s revenge also represents the Democrats’ switch from a party of blue-collar workers to a party of urban elites—feminists, vegans, drug legalizers, untaxed hedge fund operators, and transgender-rights activists. Back when Democrats still claimed to represent working Americans, they opposed illegal immigration. Since being taken over by the Far Left, all that matters to them is changing the electorate to one that doesn’t mind liberal insanity.

Madoff was not inhumanly monstrous. He was monstrously human. He was greedy for money and praise, arrogantly sure of his own capacity to pull it off, smugly dismissive of skeptics—just like anyone who mortgaged the house to invest in tech stocks, or tapped the off-limits college fund to gamble on a new business, or put all the retirement savings into a hedge fund they didn’t understand, or cheated a little on the tax return or the expense account or the spouse.

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.

Children raised on the ethic of the 'Neighborhood', though less likely to make millions on an innovative hedge-fund scheme on Wall Street, are more likely to grow up with the kind of social and emotional understanding that can lead to a happy balanced life.

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.

For years, I observed and experienced the SEC protecting large perpetrators of abuse at the expense of the investors whom the SEC is supposed to protect. The SEC has been very tough, and usually appropriately so, on small-time cons, promoters, insider traders, and, yes, hedge funds. But when it comes to large corporations and institutionalized Wall Street, the SEC uses kid gloves, imposes meaningless nondeterring fines, and emphasizes relatively unimportant things like record keeping rather than the substance of important things—like investors being swindled.

Teacher trainings and district-led meetings were often run this way, with an approach that treated the adults as if they were children, not professionals. Ms. Jackson had sometimes wondered if hedge fund managers and attorneys sat around in meetings being asked to draw a colorful picture that represented the group’s consensus or to post clarifying follow-up questions on a piece of chart paper labeled “parking lot” so that these things could be considered later. It was demeaning, and Ms. Jackson prided herself on never treating her colleagues in such a manner.

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.

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.

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.

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.

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.

So, one of your shortcomings has been in letting your rational assessment of a situation keep you from participating in a psychologically driven trade. Yes, failing to participate in markets when the fundamentals are less important than the psychology. But how do you recognize that type of situation? Well, that’s the key question, isn’t it? [He laughs.]

Edward Crosby Johnson II, who in the 1950s established Fidelity as a dominant investment firm and made the same point in his own way: “The market is like a beautiful woman—endlessly fascinating, endlessly complex, always changing, always mystifying. I have been absorbed and immersed since 1924 and I know this is no science. It is an art…. It is personal intuition.

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!

I have what I call my Evel Knievel screen. These are companies that are trying to jump the Grand Canyon and probably won’t make it. There are only two conditions for the screen. First, the company is trading at more than five times book value. Second, the company is losing money. My job is to figure out which stocks won’t make it across the Grand Canyon and then go short those stocks.

To the untrained eye, the Wall Street people who rode from the Connecticut suburbs to Grand Central were an undifferentiated mass, but within that mass Danny noted many small and important distinctions. If they were on their BlackBerrys, they were probably hedge fund guys, checking their profits and losses in the Asian markets. If they slept on the train they were probably sell-side people—brokers, who had no skin in the game. Anyone carrying a briefcase or a bag was probably not employed on the sell side, as the only reason you’d carry a bag was to haul around brokerage research, and the brokers didn’t read their own reports—at least not in their spare time. Anyone carrying a copy of the New York Times was probably a lawyer or a back-office person or someone who worked in the financial markets without actually being in the markets. Their clothes told you a lot, too. The guys who ran money dressed as if they were going to a Yankees game. Their financial performance was supposed to be all that mattered about them, and so it caused suspicion if they dressed too well. If you saw a buy-side guy in a suit, it usually meant that he was in trouble, or scheduled to meet with someone who had given him money, or both. Beyond that, it was hard to tell much about a buy-side person from what he was wearing. The sell side, on the other hand, might as well have been wearing their business cards: The guy in the blazer and khakis was a broker at a second-tier firm; the guy in the three-thousand-dollar suit and the hair just so was an investment banker at J.P. Morgan or someplace like that. Danny could guess where people worked by where they sat on the train. The Goldman Sachs, Deutsche Bank, and Merrill Lynch people, who were headed downtown, edged to the front—though when Danny thought about it, few Goldman people actually rode the train anymore. They all had private cars. Hedge fund guys such as himself worked uptown and so exited Grand Central to the north, where taxis appeared haphazardly and out of nowhere to meet them, like farm trout rising to corn kernels. The Lehman and Bear Stearns people used to head for the same exit as he did, but they were done. One reason why, on September 18, 2008, there weren’t nearly as many people on the northeast corner of Forty-seventh Street and Madison Avenue at 6:40 in the morning as there had been on September 18, 2007.

A regulator's greatest fear is the sequential collapse of hedge funds, banks, and brokerages. That process is hard to spot and even harder to stop. ... There are two sides to every trade. In a crash there can be just as many winners as losers. The problem arises when the losers go out of business. At that point the winners can't collect so they become losers too. It's as if you were a big winner at roulette and went to the cashier to collect your winnings only to find the cashier window closed and the casino had just filed for bankruptcy. All you have left is a pocketful of worthless chips. At that point, even the market winners can fall into financial distress. Because of leverage, total losses can exceed the size of the market itself. It's like a minefield. Banks running from panic start stepping on mines.

As Mayor Giuliani began his cleanup of the Times Square area, nobody in power gave any thought to the thousands of “support” people whose survival would be affected when the economic driver of sex was removed from the scene. And the optimistic view that these workers would be forced toward more legitimate work turned out to be puritanical hypocrisy—it was crime itself that gave these men an entrée into the straight world. In time, Santosh began selling laptops of dubious origin, Rajesh started offering small short-term loans, and Azad operated an increasingly successful sideline as a job referral service for undocumented immigrants. Whenever otherwise legitimate employers found themselves in need of some quick off-the-books labor—and they often did, even the hedge fund titans and investment banks down on Wall Street—Azad made it happen for them with one phone call.

I'd encourage [you] to think big and be delusional when setting goals. Yes, delusional. The biggest mistake that I made with my first business was I didn't think big enough. I limited my success by just focusing on a small geographic area and focusing on hitting small sales targets. Now when I set my goals, I make sure that they are ridiculous. I prefer to work extremely hard and fall short on my ridiculous goals than to achieve mediocre goals.

Jim Simons, head of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record. As we just saw, Buffett has compounded at roughly 22% annually, a third as much. Simons’ net worth, as I write, is $21 billion. He is—and I know how ridiculous this sounds given the numbers we’re dealing with—75% less rich than Buffett. Why the difference, if Simons is such a better investor? Because Simons did not find his investment stride until he was 50 years old. He’s had less than half as many years to compound as Buffett. If James Simons had earned his 66% annual returns for the 70-year span Buffett has built his wealth he would be worth—please hold your breath—sixty-three quintillion nine hundred quadrillion seven hundred eighty-one trillion seven hundred eighty billion seven hundred forty-eight million one hundred sixty thousand dollars.

Coming back again to the investment bank world, they have meetings and all sorts of stuff going on that suck up time. Traders would all complain about the waste of time, but what it actually meant was that it limited the amount of time they were in front of their screens staring at their positions. You don’t want to be sitting in front of your screen and staring at market prices for 12 hours a day. Staring at the price is not going to tell you very much.

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.

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.

Markopolos first heard about Madoff in the late 1980s. The hedge fund he worked for had noticed Madoff’s spectacular returns, and they wanted Markopolos to copy Madoff’s strategy. Markopolos tried. But he couldn’t figure out what Madoff’s strategy was. Madoff claimed to be making his money based on heavy trading of a financial instrument known as a derivative. But there was simply no trace of Madoff in those markets. “I was trading huge amounts of derivatives every year, and so I had relationships with the largest investment banks that traded derivatives,” Markopolos remembers. So I called the people that I knew on the trading desks: “Are you trading with Madoff?” They all said no. Well, if you are trading derivatives, you pretty much have to go to the largest five banks to trade the size that he was trading. If the largest five banks don’t know your trades and are not seeing your business, then you have to be a Ponzi scheme. It’s that easy. It was not a hard case. All I had to do was pick up the phone, really.

He would expose, remorselessly, those hypocrites and cynics who publicly denied the catastrophe of climate change while secretly short-selling that very same position and hedging all their bets; the millionaires and billionaires who preached self-reliance while accepting vast handouts in the form of subsidies and easy credit, and who bemoaned red tape while building contractual fortresses to shield their capital from their ex-wives; the tax-dodging economic parasites who treated state treasuries like casinos and dismantled welfare programmes out of spite, who secured immensely lucrative state contracts through illegitimate back channels and grubby, endlessly revolving doors, who eroded civil standards, who demolished social norms, and whose obscene fortunes had been made, in every case, on the back of institutions built with public funding, enriched by public patronage, and rightfully belonging to the public, most notably, the fucking Internet; the confirmed sociopaths who were literally vampiric with their regular transfusions of younger, healthier blood; the cancerous polluters who consumed more, and burned more, and wasted more than half the world’s population put together; the crypto-fascist dirty tricksters who pretended to be populists while defrauding and despising the people, who lied with impunity, who stole with impunity, who murdered with impunity, who invented scapegoats, who incited suicides, who encouraged violence and provoked unrest, and who then retreated into a private sphere of luxury so well insulated from the lives of ordinary people, and so well defended against them, that it basically amounted to a form of secession.

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.

Speculators, meanwhile, have seized control of the global economy and the levers of political power. They have weakened and emasculated governments to serve their lust for profit. They have turned the press into courtiers, corrupted the courts, and hollowed out public institutions, including universities. They peddle spurious ideologies—neoliberal economics and globalization—to justify their rapacious looting and greed. They create grotesque financial mechanisms, from usurious interest rates on loans to legalized accounting fraud, to plunge citizens into crippling forms of debt peonage. And they have been stealing staggering sums of public funds, such as the $65 billion of mortgage-backed securities and bonds, many of them toxic, that have been unloaded each month on the Federal Reserve in return for cash.21 They feed like parasites off of the state and the resources of the planet. Speculators at megabanks and investment firms such as Goldman Sachs are not, in a strict sense, capitalists. They do not make money from the means of production. Rather, they ignore or rewrite the law—ostensibly put in place to protect the weak from the powerful—to steal from everyone, including their own shareholders. They produce nothing. They make nothing. They only manipulate money. They are no different from the detested speculators who were hanged in the seventeenth century, when speculation was a capital offense. The obscenity of their wealth is matched by their utter lack of concern for the growing numbers of the destitute. In early 2014, the world’s 200 richest people made $13.9 billion, in one day, according to Bloomberg’s billionaires index.22 This hoarding of money by the elites, according to the ruling economic model, is supposed to make us all better off, but in fact the opposite happens when wealth is concentrated in the hands of a few individuals and corporations, as economist Thomas Piketty documents in his book Capital in the Twenty-First Century.23 The rest of us have little or no influence over how we are governed, and our wages stagnate or decline. Underemployment and unemployment become chronic. Social services, from welfare to Social Security, are slashed in the name of austerity. Government, in the hands of speculators, is a protection racket for corporations and a small group of oligarchs. And the longer we play by their rules the more impoverished and oppressed we become. Yet, like

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.

The Democratic Party has been as guilty as the Republicans in the abdication of real power to the corporate state. It was Bill Clinton who led the Democratic Party to the corporate watering trough. Clinton argued that the party had to ditch labor unions, no longer a source of votes or power, as a political ally. Workers, he insisted, would vote Democratic anyway. They had no choice. It was better, he argued, to take corporate money and do corporate bidding. By the 1990s, the Democratic Party, under Clinton’s leadership, had virtual fund-raising parity with the Republicans. Today the Democrats raise more. The

[Hyun Song Shin] most accurately portrayed the state of the global economy. 'I'd like to tell you about the Millennium Bridge in London,' he began…'The bridge was opened by the queen on a sunny day in June,' Shin continued. 'The press was there in force, and many thousands of people turned up to savor the occasion. However, within moments of the bridge's opening, it began to shake violently.' The day it opened, the Millennium Bridge was closed. The engineers were initially mystified about what had gone wrong. Of course it would be a problem if a platoon of soldiers marched in lockstep across the bridge, creating sufficiently powerful vertical vibration to produce a swaying effect. The nearby Albert Bridge, built more than a century earlier, even features a sign directing marching soldiers to break step rather than stay together when crossing. But that's not what happened at the Millennium Bridge. 'What is the probability that a thousand people walking at random will end up walking exactly in step, and remain in lockstep thereafter?' Shin asked. 'It is tempting to say, 'Close to Zero' ' But that's exactly what happened. The bridge's designers had failed to account for how people react to their environment. When the bridge moved slightly under the feet of those opening-day pedestrians, each individual naturally adjusted his or her stance for balance, just a little bit—but at the same time and in the same direction as every other individual. That created enough lateral force to turn a slight movement into a significant one. 'In other words,' said Shin, 'the wobble of the bridge feeds on itself. The wobble will continue and get stronger even though the initial shock—say, a small gust of wind—had long passed…Stress testing on the computer that looks only at storms, earthquakes, and heavy loads on the bridge would regard the events on the opening day as a 'perfect storm.' But this is a perfect storm that is guaranteed to come every day.' In financial markets, as on the Millennium Bridge, each individual player—every bank and hedge fund and individual investor—reacts to what is happening around him or her in concert with other individuals. When the ground shifts under the world's investors, they all shift their stance. And when they all shift their stance in the same direction at the same time, it just reinforces the initial movement. Suddenly, the whole system is wobbling violently. Ben Bernanke, Mervyn King, Jean-Claude Trichet, and the other men and women at Jackson Hole listened politely and then went to their coffee break.

We cannot pick and choose whom among the oppressed it is convenient to support. We must stand with all the oppressed or none of the oppressed. This is a global fight for life against corporate tyranny. We will win only when we see the struggle of working people in Greece, Spain, and Egypt as our own struggle. This will mean a huge reordering of our world, one that turns away from the primacy of profit to full employment and unionized workplaces, inexpensive and modernized mass transit, especially in impoverished communities, universal single-payer health care and a banning of for-profit health care corporations. The minimum wage must be at least $15 an hour and a weekly income of $500 provided to the unemployed, the disabled, stay-at-home parents, the elderly, and those unable to work. Anti-union laws, like the Taft-Hartley Act, and trade agreements such as NAFTA, will be abolished. All Americans will be granted a pension in old age. A parent will receive two years of paid maternity leave, as well as shorter work weeks with no loss in pay and benefits. The Patriot Act and Section 1021 of the National Defense Authorization Act, which permits the military to be used to crush domestic unrest, as well as government spying on citizens, will end. Mass incarceration will be dismantled. Global warming will become a national and global emergency. We will divert our energy and resources to saving the planet through public investment in renewable energy and end our reliance on fossil fuels. Public utilities, including the railroads, energy companies, the arms industry, and banks, will be nationalized. Government funding for the arts, education, and public broadcasting will create places where creativity, self-expression, and voices of dissent can be heard and seen. We will terminate our nuclear weapons programs and build a nuclear-free world. We will demilitarize our police, meaning that police will no longer carry weapons when they patrol our streets but instead, as in Great Britain, rely on specialized armed units that have to be authorized case by case to use lethal force. There will be training and rehabilitation programs for the poor and those in our prisons, along with the abolition of the death penalty. We will grant full citizenship to undocumented workers. There will be a moratorium on foreclosures and bank repossessions. Education will be free from day care to university. All student debt will be forgiven. Mental health care, especially for those now caged in our prisons, will be available. Our empire will be dismantled. Our soldiers and marines will come home.

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.

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

The capitalist who does no useful work has the economic power to take from a thousand or ten thousand workingmen all they produce, over and above what is required to keep them in working and producing order, and he becomes a millionaire, perhaps a multi-millionaire. He lives in a palace in which there is music and singing and dancing and the luxuries of all climes. He sails the high seas in his private yacht. He is the reputed “captain of industry” who privately owns a social utility, has great economic power, and commands the political power of the nation to protect his economic interests. He is the gentleman who furnishes the “political boss” and his swarm of mercenaries with the funds with which the politics of the nation are corrupted and debauched. He is the economic master and the political ruler and you workingmen are almost as completely at his mercy as if you were his property under the law.

The extreme consolidation in the corporate world over the past three decades has produced a playing field so rigged against consumers that pursuing the basics of life can feel like navigating a never-ending series of scams. It’s as if everyone is trying to trick us in the fine print of pages and pages of terms of service agreements they know we will never read. The black box is not just the algorithms running our communication networks—almost everything is a black box, an opaque system hiding something else. The housing market isn’t about homes; it’s about hedge funds and speculators. Universities aren’t about education; they’re about turning young people into lifelong debtors. Long-term care facilities aren’t about care; they’re about draining our elders in the last years of life and real estate plays. Many news sites aren’t about news; they’re about tricking us into clicking on autoplaying ads and advertorials that eat up the bottom half of nearly every site. Nothing is as it seems. This kind of predatory, extractive capitalism necessarily breeds mistrust and paranoia. In this context, it’s not surprising that QAnon, a conspiracy theory that tells of elites harvesting the young for their lifeblood (adrenochrome), has gone viral. Elites are sucking us dry—our money, our labor, our time, our data. So dry that large parts of our planet are beginning to spontaneously combust. The Davos elite aren’t eating our children, but they are eating our children’s futures, and that is plenty bad. QAnon believers imagine secret tunnels underneath pizza parlors and Central Park, the better to traffic children. This is fantasy, but there are tunnels—literal Shadow Lands—under some major cities, and they do house and hide the poor, the sick, the drug-dependent, the discarded. Under the flashing lights of Las Vegas, hundreds or even thousands of people really do live in a sprawling network of storm tunnels.

If you look back in the 1930s, Leon Trotsky said that fascism was the inability of the socialist parties to come forth with an alternative,” Hudson said. “If the socialist parties and media don’t come forth with an alternative to this neofeudalism, you’re going to have a rollback to feudalism. But instead of the military taking over the land, as occurred with the Norman Conquest, you take over the land financially. Finance has become the new mode of warfare. “You can achieve the takeover of land and the takeover of companies by corporate raids,” he said. “The Wall Street vocabulary is one of conquest and wiping out. You’re having a replay in the financial sphere of what feudalism was in the military sphere.” The debauched ethics of all casino magnates, including Trump, define the dark, petulant heart of America. Our schools and libraries lack funding, our infrastructure is a wreck, drug addiction and suicide are an epidemic, and we flee toward the promise of magic, unchecked hedonism, and perpetual stimulation. There is a pathological need in America to escape the dreary and the depressing.

Every day, the markets were driven less directly by human beings and more directly by machines. The machines were overseen by people, of course, but few of them knew how the machines worked. He knew that RBC’s machines—not the computers themselves, but the instructions to run them—were third-rate, but he had assumed it was because the company’s new electronic trading unit was bumbling and inept. As he interviewed people from the major banks on Wall Street, he came to realize that they had more in common with RBC than he had supposed. “I’d always been a trader,” he said. “And as a trader you’re kind of inside a bubble. You’re just watching your screens all day. Now I stepped back and for the first time started to watch other traders.” He had a good friend who traded stocks at a big-time hedge fund in Stamford, Connecticut, called SAC Capital. SAC Capital was famous (and soon to be infamous) for being one step ahead of the U.S. stock market. If anyone was going to know something about the market that Brad didn’t know, he figured, it would be them. One spring morning he took the train up to Stamford and spent the day watching his friend trade. Right away he saw that, even though his friend was using technology given to him by Goldman Sachs and Morgan Stanley and the other big firms, he was experiencing exactly the same problem as RBC: The market on his screens was no longer the market. His friend would hit a button to buy or sell a stock and the market would move away from him. “When I see this guy trading and he was getting screwed—I now see that it isn’t just me. My frustration is the market’s frustration. And I was like, Whoa, this is serious.” Brad’s problem wasn’t just Brad’s problem. What people saw when they looked at the U.S. stock market—the numbers on the screens of the professional traders, the ticker tape running across the bottom of the CNBC screen—was an illusion. “That’s when I realized the markets are rigged. And I knew it had to do with the technology. That the answer lay beneath the surface of the technology. I had absolutely no idea where. But that’s when the lightbulb went off that the only way I’m going to find out what’s going on is if I go beneath the surface.

By now Soros had melded Karl Popper’s ideas with his own knowledge of finance, arriving at a synthesis that he called “reflexivity.” As Popper’s writings suggested, the details of a listed company were too complex for the human mind to understand, so investors relied on guesses and shortcuts that approximated reality. But Soros was also conscious that those shortcuts had the power to change reality as well, since bullish guesses would drive a stock price up, allowing the company to raise capital cheaply and boosting its performance. Because of this feedback loop, certainty was doubly elusive: To begin with, people are incapable of perceiving reality clearly; but on top of that, reality itself is affected by these unclear perceptions, which themselves shift constantly. Soros had arrived at a conclusion that was at odds with the efficient-market view. Academic finance assumes, as a starting point, that rational investors can arrive at an objective valuation of a stock and that when all information is priced in, the market can be said to have attained an efficient equilibrium. To a disciple of Popper, this premise ignored the most elementary limits to cognition.

In his book Democracy Incorporated, Wolin, who taught political philosophy at Berkeley and at Princeton, uses the phrase inverted totalitarianism to describe our system of power. Inverted totalitarianism, unlike classical totalitarianism, does not revolve around a demagogue or charismatic leader. It finds expression in the anonymity of the corporate state. It purports to cherish democracy, patriotism, and the Constitution while manipulating internal levers to subvert and thwart democratic institutions. Political candidates are elected in popular votes by citizens, but candidates must raise staggering amounts of corporate funds to compete. They are beholden to armies of corporate lobbyists in Washington or state capitals who author the legislation and get the legislators to pass it. Corporate media control nearly everything we read, watch, or hear. It imposes a bland uniformity of opinion. It diverts us with trivia and celebrity gossip. In classical totalitarian regimes, such as Nazi fascism or Soviet communism, economics was subordinate to politics. “Under inverted totalitarianism the reverse is true,” Wolin writes. “Economics dominates politics—and with that domination comes different forms of ruthlessness.

The only word these corporations know is more,” wrote Chris Hedges, former correspondent for the Christian Science Monitor, National Public Radio, and the New York Times. They are disemboweling every last social service program funded by the taxpayers, from education to Social Security, because they want that money themselves. Let the sick die. Let the poor go hungry. Let families be tossed in the street. Let the unemployed rot. Let children in the inner city or rural wastelands learn nothing and live in misery and fear. Let the students finish school with no jobs and no prospects of jobs. Let the prison system, the largest in the industrial world, expand to swallow up all potential dissenters. Let torture continue. Let teachers, police, firefighters, postal employees and social workers join the ranks of the unemployed. Let the roads, bridges, dams, levees, power grids, rail lines, subways, bus services, schools and libraries crumble or close. Let the rising temperatures of the planet, the freak weather patterns, the hurricanes, the droughts, the flooding, the tornadoes, the melting polar ice caps, the poisoned water systems, the polluted air increase until the species dies. There are no excuses left. Either you join the revolt taking place on Wall Street and in the financial districts of other cities across the country or you stand on the wrong side of history. Either you obstruct, in the only form left to us, which is civil disobedience, the plundering by the criminal class on Wall Street and accelerated destruction of the ecosystem that sustains the human species, or become the passive enabler of a monstrous evil. Either you taste, feel and smell the intoxication of freedom and revolt or sink into the miasma of despair and apathy. Either you are a rebel or a slave. To be declared innocent in a country where the rule of law means nothing, where we have undergone a corporate coup, where the poor and working men and women are reduced to joblessness and hunger, where war, financial speculation and internal surveillance are the only real business of the state, where even habeas corpus no longer exists, where you, as a citizen, are nothing more than a commodity to corporate systems of power, one to be used and discarded, is to be complicit in this radical evil. To stand on the sidelines and say “I am innocent” is to bear the mark of Cain; it is to do nothing to reach out and help the weak, the oppressed and the suffering, to save the planet. To be innocent in times like these is to be a criminal.

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.

BUYING OFF THE ENVIRONMENTALISTS Where are the environmentalists? For fifty years, they’ve been carrying on about overpopulation; promoting family planning, birth control, abortion; and saying old people have a “duty to die and get out of the way”—in Colorado’s Democratic Governor Richard Lamm’s words. In 1971, Oregon governor and environmentalist Tom McCall told a CBS interviewer, “Come visit us again. . . . But for heaven’s sake, don’t come here to live.” How about another 30 million people coming here to live? The Sierra Club began sounding the alarm over the country’s expanding population in 1965—the very year Teddy Kennedy’s immigration act passed65—and in 1978, adopted a resolution expressly asking Congress to “conduct a thorough examination of U.S. immigration laws.” For a while, the Club talked about almost nothing else. “It is obvious,” the Club said two years later, “that the numbers of immigrants the United States accepts affects our population size and growth rate,” even more than “the number of children per family.”66 Over the next three decades, America took in tens of millions of legal immigrants and illegal aliens alike. But, suddenly, about ten years ago, the Sierra Club realized to its embarrassment that importing multiple millions of polluting, fire-setting, littering immigrants is actually fantastic for the environment! The advantages of overpopulation dawned on the Sierra Club right after it received a $100 million donation from hedge fund billionaire David Gelbaum with the express stipulation that—as he told the Los Angeles Times—“if they ever came out anti-immigration, they would never get a dollar from me.”67 It would be as if someone offered the Catholic Church $100 million to be pro-abortion. But the Sierra Club said: Sure! Did you bring the check? Obviously, there’s no longer any reason to listen to them on anything. They want us to get all excited about some widening of a road that’s going to disturb a sandfly, but the Sierra Club is totally copasetic with our national parks being turned into garbage dumps. Not only did the Sierra Club never again say another word against immigration, but, in 2004, it went the extra mile, denouncing three actual environmentalists running for the Club’s board, by claiming they were racists who opposed mass immigration. The three “white supremacists” were Dick Lamm, the three-time Democratic governor of Colorado; Frank Morris, former head of the Black Congressional Caucus Foundation; and Cornell professor David Pimentel, who created the first ecology course at the university in 1957 and had no particular interest in immigration.68 But they couldn’t be bought off, so they were called racists.

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.

The piece would be a searing indictment of the super-rich. He would expose, remorselessly, those hypocrites and cynics who publicly denied the catastrophe of climate change while secretly short-selling that very same position and hedging all their bets; the millionaires and billionaires who preached self-reliance while accepting vast handouts in the form of subsidies and easy credit, and who bemoaned red tape while building contractual fortresses to shield their capital from their ex-wives; the tax-dodging economic parasites who treated state treasuries like casinos and dismantled welfare programmes out of spite, who secured immensely lucrative state contracts through illegitimate back channels and grubby, endlessly revolving doors, who eroded civil standards, who demolished social norms, and whose obscene fortunes had been made, in every case, on the back of institutions built with public funding, enriched by public patronage, and rightfully belonging to the public, most notably, the fucking Internet; the confirmed sociopaths who were literally vampiric with their regular transfusions of younger, healthier blood; the cancerous polluters who consumed more, and burned more, and wasted more than half the world’s population put together; the crypto-fascist dirty tricksters who pretended to be populists while defrauding and despising the people, who lied with impunity, who stole with impunity, who murdered with impunity, who invented scapegoats, who incited suicides, who encouraged violence and provoked unrest, and who then retreated into a private sphere of luxury so well insulated from the lives of ordinary people, and so well defended against them, that it basically amounted to a form of secession.

As I saw it, there was a 75 percent chance the Fed’s efforts would fall short and the economy would move into failure; a 20 percent chance it would initially succeed at stimulating the economy but still ultimately fail; and a 5 percent chance it would provide enough stimulus to save the economy but trigger hyperinflation. To hedge against the worst possibilities, I bought gold and T-bill futures as a spread against eurodollars, which was a limited-risk way of betting on credit problems increasing. I was dead wrong. After a delay, the economy responded to the Fed’s efforts, rebounding in a noninflationary way. In other words, inflation fell while growth accelerated. The stock market began a big bull run, and over the next eighteen years the U.S. economy enjoyed the greatest noninflationary growth period in its history. How was that possible? Eventually, I figured it out. As money poured out of these borrower countries and into the U.S., it changed everything. It drove the dollar up, which produced deflationary pressures in the U.S., which allowed the Fed to ease interest rates without raising inflation. This fueled a boom. The banks were protected both because the Federal Reserve loaned them cash and the creditors’ committees and international financial restructuring organizations such as the International Monetary Fund (IMF) and the Bank for International Settlements arranged things so that the debtor nations could pay their debt service from new loans. That way everyone could pretend everything was fine and write down those loans over many years. My experience over this period was like a series of blows to the head with a baseball bat. Being so wrong—and especially so publicly wrong—was incredibly humbling and cost me just about everything I had built at Bridgewater. I saw that I had been an arrogant jerk who was totally confident in a totally incorrect view. So there I was after eight years in business, with nothing to show for it. Though I’d been right much more than I’d been wrong, I was all the way back to square one.

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.

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 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.

Blackstone Group CEO Stephen Schwarzman and Ray Dalio, cochairman of the massive Bridgewater hedge fund, have consistently portrayed China as an unquestionably positive economic force.

The GOP passed a tax bill that is performing exactly as expected and predicted: A handful of hedge funds, America’s top corporations, and a few dozen billionaires were given a trillion-dollar-plus tax benefit. Even the tax cut’s most fervent proponents know that its effects were short-lived, the bill is coming due, and in 2022 or thereabouts it’s going to lead to annual deficits of close to $2 trillion. When the bubble pops, the correction hits, and Wall Street investment firms and banks go tango uniform, Trump will bail them out before you can say “golden parachute.” The “average guy with a 401k” who is going to get crushed in the next drop? Not so much.

When playing a bear market, the same rules hold: You want to diversify your risks, especially knowing that collapses move even faster than rallies. You need to decide how much safe cash or near cash you want to hold to sleep at night and to handle financial emergencies, like the loss of your job or your house. Then decide how much to put into longer-term high-quality bonds, like those 30-year Treasuries and AAA corporates, but I think it’s still premature to make this move at the time of this writing, in August 2017. Then decide how much you want to put into a dollar bull fund or the ETF UUP, which tracks the U.S. dollar versus its six major trading partners. If you’re willing to risk part of your wealth, you can also bet on financial assets going down—from stocks to gold. Stocks are the one type of financial asset that goes down in either a deflationary crisis, like the 1930s, or an inflationary one, like the 1970s. So shorting stocks is the best way to prosper in the downturn, either way. But don’t leverage this bet. The markets are simply too volatile. You can short the stock market with no leverage by simply buying an ETF (exchange-traded fund) like the ProShares Short S&P 500 (NYSEArca: SH). It’s an inverse fund on the S&P 500, so if the index goes down 50 percent, you make 50 percent. The ProShares Ultrashort (NYSEArca: QID) is double short the NASDAQ 100, which is likely to get hit the worst. If you make this play, just do a half share, to avoid that two-times leverage (hold the other half in cash or short-term bonds). Direxion Daily Small Cap Bear 3X ETF (NYSEArca: TZA) is triple short the Russell 2000, which is also likely to lead on the way down. So buy only a one-third share of this one, to remain without leverage. (That means the money you allocate here should be one-third in TZA and two-thirds in cash, to offset the leverage.) And unlike the gold bugs, I see gold collapsing. It’s an inflation hedge, not a deflation hedge. If gold rallies back as high as $1,425—on my predicted bear-market rally—then it could easily drop to around $700 within a year. Your last decision is whether to risk some of your funds betting on gold’s downside, for the greatest potential returns. You can buy DB Gold Double Short ETN (NYSEArca: DZZ)—double short gold—at a half share, to offset the leverage, or just simply short GLD, the ETF that follows gold. There you have it. How to handle the coming crash.

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.

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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.

Harvard University was a hedge fund that masqueraded as an institution of higher learning. It was one of the places where the world’s upper classes enjoyed grade inflation as they became economic war-lords of the technocratic elite who mouthed platitudes about equality while crushing the global poor.

When I was at JP Morgan, they burdened me with assets until I broke.” “What do you mean?” “You start chasing lousy businesses just to put the money to work.” “How?” I asked. “Because there are only so many good investments out there.

The best investors don’t get persuaded by stock blips or charts. It’s about staying ahead of the curve—anticipating changes in sentiment. You’ve got to anticipate what newspaper headlines will say next.

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.

When a stock is breaking out of a base, I like to see huge volume that is many times greater than the average volume during the last 50 days. I also like to see that the volume continues higher for at least three days. That will be a sign that the large institutions and hedge funds are also buying. If the stock breaks to new highs on volume for one day and has no follow-through, then that indicates to me it was just a bunch of traders playing the new high.

While working at the hedge fund in 1994, Bezos came across the statistic that the web had been growing by more than 2,300 percent each year. He decided that he wanted to get aboard that rocket, and he came up with the idea of opening a retail store online, sort of a Sears catalogue for the digital age. Realizing that it was prudent to start with one product, he chose books—partly because he liked them and also because they were not perishable, were a commodity, and could be bought from two big wholesale distributors. And there were more than three million titles in print—far more than a bricks-and-mortar store could possibly keep on display.

high end” of finance—the investment banks, junk bonds, hedge funds, mortgage-backed securities, private equity, quants, etc.—and this is where many of the astronomical earnings have shown up in recent years.

Or consider the hundreds of thousands of economists—in service of banks, think tanks, hedge funds, and governments—and all the white papers they have published from 2005 to 2007: The vast library of research reports and mathematical models. The formidable reams of comments. The polished PowerPoint presentations. The terabytes of information on Bloomberg and Reuters news services. The bacchanal dance to worship the god of information. It was all hot air. The financial crisis touched down and upended global markets, rendering the countless forecasts and comments worthless.

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.

When a young employee gasped at his blue language, Simons flashed a grin. “I know—that is an impressive rate!” A few times a week, Marilyn came by to visit, usually with their baby, Nicholas. Other times, Barbara checked in on her ex-husband. Other employees’ spouses and children also wandered around the office. Each afternoon, the team met for tea in the library, where Simons, Baum, and others discussed the latest news and debated the direction of the economy. Simons also hosted staffers on his yacht, The Lord Jim, docked in nearby Port Jefferson. Most days, Simons sat in his office, wearing jeans and a golf shirt, staring at his computer screen, developing new trades—reading the news and predicting where markets were going, like most everyone else. When he was especially engrossed in thought, Simons would hold a cigarette in one hand and chew on his cheek. Baum, in a smaller, nearby office, trading his own account, favored raggedy sweaters, wrinkled trousers, and worn Hush Puppies shoes. To compensate for his worsening eyesight, he hunched close to his computer, trying to ignore the smoke wafting through the office from Simons’s cigarettes. Their traditional trading approach was going so well that, when the boutique next door closed, Simons rented the space and punched through the adjoining wall. The new space was filled with offices for new hires, including an economist and others who provided expert intelligence and made their own trades, helping to boost returns. At the same time, Simons was developing a new passion: backing promising technology companies, including an electronic dictionary company called Franklin Electronic Publishers, which developed the first hand-held computer. In 1982, Simons changed Monemetrics’ name to Renaissance Technologies Corporation, reflecting his developing interest in these upstart companies. Simons came to see himself as a venture capitalist as much as a trader. He spent much of the week working in an office in New York City, where he interacted with his hedge fund’s investors while also dealing with his tech companies. Simons also took time to care for his children, one of whom needed extra attention. Paul, Simons’s second child with Barbara, had been born with a rare hereditary condition called ectodermal dysplasia. Paul’s skin, hair, and sweat glands didn’t develop properly, he was short for his age, and his teeth were few and misshapen. To cope with the resulting insecurities, Paul asked his parents to buy him stylish and popular clothing in the hopes of fitting in with his grade-school peers. Paul’s challenges weighed on Simons, who sometimes drove Paul to Trenton, New Jersey, where a pediatric dentist made cosmetic improvements to Paul’s teeth. Later, a New York dentist fitted Paul with a complete set of implants, improving his self-esteem. Baum was fine with Simons working from the New York office, dealing with his outside investments, and tending to family matters. Baum didn’t need much help. He was making so much money trading various currencies using intuition and instinct that pursuing a systematic, “quantitative” style of trading seemed a waste of

Over the years, my brain trust of more than twenty-five people has included a guy who was number one in his class at Caltech, a department chair of economics at a major U.S. university, mathematical savants, computer wizards, PhDs, and quantitative and database handicappers who live and breathe algorithms and theoretical angles not found in your average textbook. Our team members act like hedge fund analysts, assigning a numerical value to every conceivable factor or variable capable of affecting sporting events to within a tenth of a point. In the NFL alone, I have several teams of experts working independently. They have never met each other, even though most have worked with me for more than thirty years, funneling their information to one common denominator: me.

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The Commodity Futures Modernization Act of 2000 -- buried in an 11,000-page budget bill and never debated -- was passed the night before Congress recessed for Christmas in December 2000. It exempted credit-default swaps from federal oversight and from state gambling laws.

A friend from university has offered him a job at a hedge fund, and someone he met at the party suggested he go into politics and offered to make a few introductions. Nice to have options.

In a study of 720 hedge funds that started twenty years ago, only 262 were still operating after the first decade, and only 13 after the second.15 Another study of over one thousand hedge funds showed that from 2004 to 2014, fewer than half that started at the beginning of the period were still in business ten years later.16 As expected, the number of hedge fund closures varies

There are a lot of great investors in the world, hedge fund guys that make a lot of money. But they have very little purpose. They don’t create anything tangible, fix anything, or provide a service. On the other hand, there are incredibly important roles in society that are underpaid but deeply respected. The variables in this equation are: - Value created → what you contribute to society - Value awarded → how the market values the work - Value captured (by you) → how much you earn

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

The list of issues goes on, the point being that hedge fund investors don’t have much protection and that the most important single thing to check before investing is the honesty, ethics, and character of the operators.

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.

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.

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.

Despite their shared centrism, there was an ideological difference that separated them. They championed different constituencies. Where Sinema built an alliance with Wall Street, Manchin enjoyed occasionally sticking it to the bankers, like a good old-fashioned populist from the hollers. And where Manchin felt a home-state duty to the fossil fuels industry, and personally benefited from its success, Sinema wanted to break its stranglehold over climate policy. In the course of negotiations with Schumer, Manchin had insisted on a provision ending the carried-interest loophole—a gaping unfairness in the tax code that allows hedge fund and private equity managers to count their revenue as capital gains and avoid the income tax. But Sinema had a history of defending that loophole. Manchin had every reason to believe that Sinema would despise his proposal—and that she would likely consider it a red line—but he insisted on pushing forward with it, regardless. Schumer didn’t fight Manchin. He wasn’t going to worry about his Sinema problem when it was theoretical. But now her objection was more than a theoretical source of worry. Sinema constituted the primary obstacle to the realization of Schumer’s greatest achievement, and he was stuck.

The extreme consolidation in the corporate world over the past three decades has produced a playing field so rigged against consumers that pursuing the basics of life can feel like navigating a never-ending series of scams. It’s as if everyone is trying to trick us in the fine print of pages and pages of terms of service agreements they know we will never read. The black box is not just the algorithms running our communication networks—almost everything is a black box, an opaque system hiding something else. The housing market isn’t about homes; it’s about hedge funds and speculators. Universities aren’t about education; they’re about turning young people into lifelong debtors. Long-term care facilities aren’t about care; they’re about draining our elders in the last years of life and real estate plays. Many news sites aren’t about news; they’re about tricking us into clicking on autoplaying ads and advertorials that eat up the bottom half of nearly every site. Nothing is as it seems. This kind of predatory, extractive capitalism necessarily breeds mistrust and paranoia.

That means thinking more about what you really want now and less about what you wanted in the past; lowering your expectations about monetary compensation; and worrying less about whether it will look to someone else like a step down in prestige or not using your past experience and skills in the most obvious way. In other words, you might just go from running a hedge fund to teaching middle school history. And that is great.

a bottle of champagne after establishing that she does indeed want bubbles. I’ll let her enjoy a glass before I bring up the topic I know will raise a flush to the surface of that slim, golden neck. But she beats me to it, in a roundabout way, when she asks me what I actually do for a living. ‘I know about one bit, obviously.’ She looks down at her glass. ‘But I’m sure Mummy told me you were in finance.’ ‘Yeah. I definitely didn’t tell your mum I owned a sex club,’ I deadpan, and she giggles. ‘So what else do you do?’ ‘I started out in M&A. Worked my arse off. Learnt how to model a company from scratch. Then I went to a hedge fund for a while. Ran some long-short funds.’ I take a sip of champagne. ‘A few years ago, I left with some mates and we struck out on our own. Now we run our own money and we provide leverage for other people who want to do the same.’ She scrunches up her nose. ‘You mean you lend them money?’ ‘Exactly. So they can take riskier positions. We also provide their infrastructure. Trading systems. Compliance. That sort of thing.’ ‘And what do you trade?’ ‘A bit of everything. The way my mates and I have organised things, everyone has their own expertise. Mine’s equity and corporate debt. That’s what I learnt in M&A. Some of the others

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

Me, I’m on the hunt for waterfalls—big-time trends—barriers broken by the intense pressure of change behind them, cutting through everything in their path, accelerating at will. And hopefully, I can jump off the investments before the trend crashes into a pile of debris. Sick, but that is what I chose to do.

For the aspiring provincial, the university looks like a ladder. An education is a tool for climbing. Sadly, we live in an age in which the university has adopted this picture of itself. Colleges are credential factories, and the Ivy League is a ridiculously expensive employment agency connecting the new meritocracy with hedge funds and Supreme Court clerkships that function as escalators to wealth and power.

It’s a sad commentary on America’s literacy that a book urging you to adopt the habits of “successful” people—meaning those who wear dark suits, lack a sense of humor, invent things like hedge funds and send their kids to Harvard—is a best seller.

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.” Enough.

I asked [Nick Maounis]: “What’s the main goal of your career?” He thought about it deeply in silence and then answered: “To be a billionaire. And also to own a sports team.” Sadly, Maounis never achieved either goal because Amaranth famously imploded the following year.

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.

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.

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The long tail is a myth, a fact evidenced by the current music business, in which 80 percent of the revenue is generated by 1 percent of the content. Even at the height of the early blockbuster era, spawned by Michael Jackson’s Thriller, 80 percent of the revenue was spread among the top 20 percent of the content. So even in a different winner-takes-all scenario, the revenue was spread out among more artists than it is today. Economists have noted that winners “take all” in many sectors (including hedge funds), and that this has clearly contributed to global income equality, but in the digital media business it seems especially Darwinian. In a world where four hundred hours of video are uploaded to YouTube every minute of every day, the commodification of what was once considered an art (or at least a craft) has become inevitable. For all the stories promoted by Google about YouTube millionaires, the traffic statistics tell another story. Most YouTube videos have fewer than 150 views.

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.

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.

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

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

When he told David Shaw that he wanted to leave the hedge fund to pursue this idea, Shaw took him on a two-hour walk through Central Park. “You know what, Jeff, this is a really good idea. I think you’re onto a good idea here but this would be a better idea for somebody who didn’t already have a good job.” He convinced Bezos to think about it for a couple of days before making a decision. Bezos then consulted his wife, MacKenzie, whom he had met at the hedge fund and married the year before. “You know you can count me in 100 percent, whatever you want to do,” she said.

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.

For every company, you see a gazillion pieces of information on tap: revenue growth, profit growth, debt level, margin profile, stock price movement, analysts’ views, bond ratings, Twitter commentary, shareholder information, top management résumés, conference call transcripts, annual reports, quarterly filings, media coverage, competitor profiles, shares bought or sold by senior management, receivable and inventory levels, CEO statements, Reddit threads, hedge fund ownership, and so much more. And all this is just at the company level.

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.

There is a conundrum at the heart of the efficient-markets hypothesis, often called the Grossman-Stiglitz Paradox after a seminal 1980 paper written by hedge fund manager Sanford Grossman and the Nobel laureate economist Joseph Stiglitz.22 “On the Impossibility of Informationally Efficient Markets” was a frontal assault on Eugene Fama’s theory, pointing out that if market prices truly perfectly reflected all relevant information—such as corporate data, economic news, or industry trends—then no one would be incentivized to collect the information needed to trade. After all, doing so is a costly pursuit. But then markets would no longer be efficient. In other words, someone has to make markets efficient, and somehow they have to be compensated for the work involved. This paradox has hardly held back the growth of passive investing. Many investors gradually realized that whatever academic theory one subscribes to, the cold unforgiving fact is that over time most active managers underperform their benchmarks. Even if they do beat the market, a lot of the “alpha” they produce is then often gobbled up by their fees. With his usual wit, Bogle dubbed this the “Cost Matters Hypothesis.”23 However, the truth of the Grossman-Stiglitz Paradox does raise some pertinent questions around whether markets may become less efficient as more and more investing is done through index funds.

Robert Harris wrote a 2011 novel, The Fear Index, that played with the idea of AI actively promoting a feedback loop to spiral human fear out of control, creating market disruption that the “evil hedge fund” could take advantage of.

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.

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.

Lion Capital also nominated one of its founding partners, Lyndon Lea, to American Apparel’s board in place of another nominee, Gene Montesano, the founder of Lucky Brand Jeans, whose name the hedge fund is withdrawing.

With their ability to move billions of dollars at the speed of light away from a country whose economic policies they distrust, hedge funds are just one of the many financial institutions whose

In 2007, according to the IRS, the richest four hundred taxpayers had an average income of more than ten thousand times the average income of the bottom 90 percent of taxpayers. Hedge fund billionaire John Paulson made $2.4 million per hour in the year 2010. That’s as much as a worker making $50,000 a year would make over the course of her entire forty-seven-year working career.10

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

For example, you could build many companies based on applying the cutting edge predictive analytics and data mining techniques commonly used at consumer web startups, quantitative hedge funds, etc., to less advanced industries.

Revolutions can even be faux revolutions when, through the careful manipulation of counterrevolutionary forces, they demand not reform but the restoration of retrograde power elites. The Central Intelligence Agency has long been a master of this technique. It organized street demonstrations and protests in Iran in 1953 to overthrow Prime Minister Mohammad Mosaddegh and his cabinet. It funded and stoked protests again in 1973 in Chile to prompt the Chilean military to overthrow President Salvador Allende.

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. Congressional

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.

10/20/30 Rule in my book can level the playing field for a retail forex trader to trade alongside big banks and hedge funds.

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

During the primaries, conservative website The Washington Free Beacon commissioned Fusion to investigate Trump. The Washington Free Beacon was backed by one of Trump’s wealthy opponents, Paul Singer, a New York hedge fund billionaire and Republican donor. Singer dropped out after Trump became the presumptive nominee. Senior Democrats seeking to elect Hillary took over the Trump contract. The new client was the Democratic National Committee. A lawyer working for Hillary’s campaign, Marc E. Elias, retained Fusion and received its reports.

And so, the good people of Frankfurt pressured Ireland’s central bank to unload these bonds, to sell them to private bankers who would then, in the fullness of time, collect the interest from the Irish taxpayers. If anyone was to benefit, it ought to be the bankers and the hedge funds again. Never the citizens.

banking activities

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.

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".

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).

A portion of China’s sovereign wealth fund - named China Investment Corporation, Ltd - has been used to invest in China’s state-owned banks, African infrastructure ventures, and other foreign resources.

Large retail banks that take in deposits from everyday folks have to pay interest on those deposits, especially if they are held in savings accounts that yield some amount of interest. Often times these banks would fund these payments through the interest revenue that they collect on mortgages, credit cards, and small business loans that they make to customers.

Our culture of achievement has grown to emphasize visions of success that are, for the most part, fairly predictable. Cole skipped a couple of steps. The basic plan is to go to Goldman Sachs, McKinsey, or the like, then maybe to a top-ranked business school, then back to banking, consulting, private equity, hedge funds, or a name-brand tech company. Or maybe go from law school to top firm to partner or in house at an investment firm, and live in New York, San Francisco, Boston, or Washington, DC.* Again, these institutions and roles are necessary, and they’re natural developments in our economy. We need them. But we need people doing other things too. We need people willing to take risks and, yes, to occasionally fail. Like real-world consequences fail. We need people committed over extended periods of time to creating value, no matter how hard that is. We need people who care deeply about the work they’re doing. Imagine someone who you think could stand to take on some risk—someone well educated who would always have something to fall back on, whose family might have some resources so he would be unlikely to starve. And this person would probably be young and free of major life obligations. Someone sort of like . . .  Cole. What’s interesting is that many of the people I meet who are young, highly educated, and from good families are among the most risk-averse. They feel like they need to be making progress along a ladder with each passing month or year. Their parents have often set high expectations for them. They measure themselves each period against their peers, who are generally following various well-defined paths.

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.

One Stanford op-ed in particular was picked up by the national press and inspired a website, Stop the Brain Drain, which protested the flow of talent to Wall Street. The Stanford students wrote, The financial industry’s influence over higher education is deep and multifaceted, including student choice over majors and career tracks, career development resources, faculty and course offerings, and student culture and political activism. In 2010, even after the economic crisis, the financial services industry drew a full 20 percent of Harvard graduates and over 15 percent of Stanford and MIT graduates. This represented the highest portion of any industry except consulting, and about three times more than previous generations. As the financial industry’s profits have increasingly come from complex financial products, like the collateralized debt obligations (CDOs) that ignited the 2008 financial meltdown, its demand has steadily grown for graduates with technical degrees. In 2006, the securities and commodity exchange sector employed a larger portion of scientists and engineers than semiconductor manufacturing, pharmaceuticals and telecommunications. The result has been a major reallocation of top talent into financial sector jobs, many of which are “socially useless,” as the chairman of the United Kingdom’s Financial Services Authority put it. This over-allocation reduces the supply of productive entrepreneurs and researchers and damages entrepreneurial capitalism, according to a recent Kauffman Foundation report. Many of these finance jobs contribute to volatile and counter-productive financial speculation. Indeed, Wall Street’s activities are largely dominated by speculative security trading and arbitrage instead of investment in new businesses. In 2010, 63 percent of Goldman Sachs’ revenue came from trading, compared to only 13 percent from corporate finance. Why are graduates flocking to Wall Street? Beyond the simple allure of high salaries, investment banks and hedge funds have designed an aggressive, sophisticated, and well-funded recruitment system, which often takes advantage of [a] student’s job insecurity. Moreover, elite university culture somehow still upholds finance as a “prestigious” and “savvy” career track.6