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(More customer reviews)Many well-respected money managers -- some of them with track records that spanned decades -- saw their reputations utterly destroyed in 2008. One manager who came through the carnage with reputation intact, and even enhanced, was David Einhorn (the author of this book). In addition to anticipating the fall of Lehman Brothers, Einhorn's fund, Greenlight Capital, significantly outperformed the S&P (though still ended up down on the year).
I am not an investor in Greenlight (Einhorn's fund), but I always enjoy reading their quarterly letters. They are consistently detailed, forthright and insightful, the way all investor communication should be.
I also give Einhorn respect (and admiration) for his 18th place finish in the 2006 World Series of Poker -- the $659,730 winings of which he donated to charity. The guy can clearly handle himself at a poker table.
The book itself was an interesting read on multiple levels. A friend of mine, who crunches spreadsheets in his sleep, made a friendly wager I wouldn't be able to get through the whole thing, as there is a great degree of detail (some would say mind-numbing detail) covering Allied Capital's various accounting irregularities.
I won the wager by devouring the book -- moreso out of hunger to absorb a highly trained investor's deeply analytical thought processes, than from a need to understand the particulars of Allied Capital or BDCs (business development companies).
The book sheds light on a number of excellent concepts above and beyond the Allied saga. The opening chapters, which describe the origins and philosophies and thought processes behind Greenlight Capital, are extremely informative.
The book as a whole, including all the Allied Capital detail, further offers a picture of what an exceptional investing mind looks like. If one were to try and reverse engineer the source of Einhorn's success (leaving out the irreducible good fortune component), four qualities would stand out:
- Exceptional analytical capability
- Exceptional creative ability
- Deep concentration ability
- Deep intestinal fortitude
To surpass "good" and make it to "great" as a trader or an investor, I would argue one needs all four traits. The presence of some but not all of these traits, I believe, accounts for the overwhelming tide of mediocre performance we see from Wall Street.
The typical investment banking path, for example, focuses heavily on the analytical side... while stomping the creative side into the dirt. The first few years of being an i-banker (if not one's entire career) are hallmarked by soul-crushingly repetitious activities that by and large replace spreadsheet gruntwork with any semblance of creative unconventional thought.
Worse still, the general institutional investment mindset runs directly counter to the "deep intestinal fortitude" idea -- in fact the whole of institutional investment culture seems expressly designed to browbeat the average manager into the mold of a gutless, benchmark-hugging coward, desperately afraid to deviate too far from the safety-approved track of his peers.
As if this were not enough, the mediocre types that hold the keys to most of the locks in the institutional investment world reinforce their plodding natures (and thus bolster their plodding dominance) with a "tried and true, proof in triplicate" way of thinking that drives the mavericks and creative thinkers mad (and out the door). At the end of the day, finding all four traits within a single individual becomes a rare thing indeed.
"Fooling" does have a touch of personal vendetta feel to it at times. The deep accounting detail can also be a bog in places, especially if one does not view keeping up with the myriad intricacies as an amusing challenge.
But the opening chapters alone are worth the price of admission... and if you want a gritty, true-to-life, wide-ranging gestalt feel for the combination of smarts and guts and tenacity it takes to successfully run a multi-billion-dollar hedge fund, "Fooling Some of the People All of the Time" delivers.
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Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New EpilogueA revealing look at Wall Street, the financial media, and financial regulators by David Einhorn, the President of Greenlight Capital
Could 2008's credit crisis have been minimized or even avoided? In 2002, David Einhorn-one of the country's top investors-was asked at a charity investment conference to share his best investment advice. Short sell Allied Capital. At the time, Allied was a leader in the private financing industry. Einhorn claimed Allied was using questionable accounting practices to prop itself up. Sound familiar? At the time of the original version of Fooling Some of the People All of the Time: A Long Short Story the outcome of his advice was unknown. Now, the story is complete and we know Einhorn was right. In 2008, Einhorn advised the same conference to short sell Lehman Brothers. And had the market been more open to his warnings, yes, the market meltdown might have been avoided, or at least minimized.
Details the gripping battle between Allied Capital and Einhorn's Greenlight Capital
Illuminates how questionable company practices are maintained and, at times, even protected by Wall Street
Describes the failings of investment banks, analysts, journalists, and government regulators
Describes how many parts of the Allied Capital story were replayed in the debate over Lehman Brothers
Fooling Some of the People All of the Time is an important call for effective government regulation, free speech, and fair play.
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