Managing Money is Hard…Ask Peter Thiel

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  • on November 15th, 2010

I started my hedge fund in 1998. I started it because I was coming off a hit consumer product and some great years trading stocks with the profits from our product. When I pitched the fund, no matter what your financial goals were, our fund matched them because I was just going to make you money.

Six months in, I realized the business of managing money was different from the business of raising money. Smart and hard working did not equal returns.

Yesterday I was reading a story about the talented and famous Peter Thiel, part of the Paypal mafia, who could do no wrong with his fund in the early days. These returns were coming off his Paypal glory days. As a hard working money manager myself, hearing how easy someone like Peter made his outsized returns was deflating. He made big bests, that in hindsight seemed obvious. They worked. Much like Tiger Woods coming into the golf world and just changing all the metrics.

Like Tiger, it has taken Peter just a few years to lose his way. Peter has had two big down years in a row and lost hundreds of millions of dollars, if not billions for his partners and seen his fund’s assets drop to less than $1 billion from more than $8 billion.

Does this make Peter stupid…NO.

Peter, according to my friends in my investing community is wicked smart.

Once again though, we see that smart and returns are not enough.

My friends have seen the Clarium (Thiel) position reports for 5 years. Their opinion is that Peter has always been a gambler. From the looks of Peter’s return curve and the recent results, gamblers have cold streaks. In reading Peter’s thoughts about the US dollar in this piece, Peter does not seem confident about his strong dollar position.

People ask all the time why we don’t post people’s track records on Stocktwits. The answer is simple, I don’t think most people are cut out to be in the money management business and even fewer can make returns that justify being in the business for the long-term. I don’t want to be in the platform business of supporting failure. By being in the idea business, everyone can participate, even the money managers.

Everyone that invests his/her money should do so with the goal of outsized returns. The only way to do so though is with disciplined speculation. No strategy works all the time. Your money manager is not likely the next Warren Buffett and you can just buy Warren Buffett in the meantime.

PS – If you want to build on our Stocktwits API to create a tracking mechanism for people’s ideas and picks, just his me up by email

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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