A few weeks ago, I wrote about The Art of Not Destroying Wealth. Wealth is unstable, hard to accrue and easy to lose. The latest podcast is a case study in both the art of gaining it, a case study in how to lose it and, perhaps more importantly, a discussion of how to keep perspective as the world’s perception of you gyrates.
My guest Dan Zwirn is a sophisticated investor who provides finance of the type I read about in books from writers like Honore de Balzac and Victor Hugo. There have always been complicated flows of borrowing and lending, transactions a bureaucratic bank can’t get in the middle of but if you can figure out the details and collateral and have an appetite for risk, you can make a bundle.
Dan had the idea for this type of company … in his 20s. By his 30s, the company was a reality. He was managing billions and was worth hundreds of millions of dollars. It’s an understatement to say that type of vision, drive and execution at that age is rare.
Then, disaster.
I’ve always been wary of the authorities. The authorities to me mean the IRS, state police, local police, anyone who legally has the right to abridge my liberty. When I’ve been in authoritarian countries, I’ve been cautious about the secret police as well. These structures exist in different forms and to different degrees in every country. They have enormous power.
For a US hedge fund, the dominant regulatory authority is the SEC, the Securities and Exchange Commission. Dan identified and self-reported an issue at his fund to the SEC, thinking self-reporting was the right thing to do.
The SEC agreed with him. However, agreement came in writing many years later. Between reporting to the SEC1 and getting a letter from them saying he hadn’t done anything wrong (but a CFO had), Dan lost his wealth. Now he is re-building his original vision. This is his story.
What’s it like to go boom to bust and bounce back? Probably different for everyone. Dan found comfort in the Stoics (note to self, read more classics). Think Seneca or Marcus Aurelius.
By the way, on the topic of wealth shifts, Sunday’s paid post was about navigating inflation, including about the potential risks of a less known instrument called an inflation-linked bond. For whatever reason, the market action in the ensuing days is the very type of thing I was worried about. Let’s see if it lasts.
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Enjoy.
I did not get comment from the SEC.