Running Money, page 27
Withdrawals were relentless, so Julian Robertson closed Tiger in March 2000, holding onto a few shares he thought would do well, like US Air.
US Airways filed for bankruptcy in August 2002, its stock a children’s shoe size of 2 or 3 compared to the mature $60 United offered and withdrew.
Soros didn’t fair much better. Back on April 28, 2000, news leaked out that the two top guys at Soros had left the firm. Stanley Druckenmiller, who ran the Soros Quantum fund with over $8 billion in it, and Nicholos Roditi, who ran the billion-dollar Quota fund, were out. Chasing returns, these guys apparently made huge investments in technology and Internet names in the second half of 1999 and got caught holding them. Soros had lost close to $3 billion since March 1, 2000.
And in a tragic coincidence, on that same April 28, 2000, a federal judge ruled that my favorite hot IPO, MP3.com, had violated copyright laws by creating a database of music downloadable off the Web. The stock dropped 4?, or 40%, to 7, on its way to 3. Goddamn, if Nick Moore wasn’t right. M-P-Three! Never buy a stock with the price target in its name. MP3.com eventually hit zero, a long way from $60.
747 Office
“Now what?” Mr. Zed wanted to know.
“Now what, what?” I evaded.
“So, you’ll set up another fund soon?” he asked.
“Not yet,” I answered. “At some point.”
“Why wait? It seems like a great time, now.”
“Because I’m not sure yet where the next waterfalls will come from.”
“But you’re never really sure,” Mr. Zed reminded me.
“I know, but I’ve got to look under a lot more rocks in a lot more places with a lot more languages.”
“Ah, I think I understand. The world is now smaller, but it takes a lot longer to see companies from a plane than from a car.” Mr. Zed figured it out.
“I still think the best investments will be within a 10-mile radius of our old art supplies store in Palo Alto. It’s just that I’ll need to travel around the world to get the needed amount of conviction. I’m going to have to go to places like Ghana someday to figure this all out.”
If there is one piece of denial in Silicon Valley, it’s that the Internet really happened. Well, of course everyone knows that it happened. But the fact that so much of the ideas and code and chips and lasers and optics that made the Internet happen came from around here has provided a kind of bravado that everything new that is going to happen will come from Silicon Valley.
I think it will all roll up here, but piece parts will come from a lot of far-flung places. Things have spread out. Those soap operas Fred warned me about are now happening in places I’ve never been to. I still don’t think you can skip the industrial step; Mr. Haavaard is going to keep Ghana in poverty for too long, but at least they are thinking about intellectual property and its value.
To invest right, I’ve got to find the waterfalls for the new monster markets, and an office above an art supplies store in Palo Alto driving around in a car all day probably won’t cut it anymore.
This is not to say I need to invest in Bangalore or Shanghai—probably the opposite. The margin surplus idea gives me enough comfort to invest in the U.S.—that’s not the issue. The problem is finding the big explosive markets since the clues—the ideas that drive great investments—might come from a stilted or choppy conversation in Finland or Mumbai.
I want to find as many pieces of intellectual property as I can. And some are probably right in front of my eyes in an industrial park in San Jose next to a SpeeDee Oil Changer. But will I recognize it? I can’t be sure anymore.
Should I move my family to China? Or is it the next Russia or Korea and about to blow up? Or is it India and tikka masala for dinner every night? Or Finland? Or, gasp, Ghana? Or worse, head to these places once a month? The idea of living on Singapore Airlines 747s or United Airlines 777s doesn’t float my boat.
The answer is simple—I’m not sure. There is no way to be sure. Most of these places still seem stuck in that industrial mode—making stuff for us. But the more I look, the more I see these pockets of innovation: a group writing code for Symbian cell phones in Norway, architecting call centers in Bombay, designing a chip for Chinese set-top boxes in Guangzhou, rethinking the physics of nanoscale electronics in Tel Aviv. They may not amount to much, but I damn sure need to understand them before I invest in any technology, in Silicon Valley or anywhere else.
George Soros and Julian Robertson of Tiger had it easy. They analyzed central banks and politicians and figured out the direction of currencies. In an era of relatively stable currencies, the modern-day investor has to dig, early and often and everywhere. I’d still rather dig than get whacked by a runaway yen-carry trade.
Another cycle is coming. The drivers of it are still unclear. Likely suspects are things like wireless data, on-command computing, nanotechnology, bioinformatics, genomic sorting—who the hell knows what it will be.
But this is what I do. Looking for the next barrier, the next piece of technology, the next waterfall and the next great, long-term investment. Sounds quaint.
I’ve come a long way from tripping across Homa Simpson dolls trying to raise money in Hong Kong. Or getting sweated on by desperate Koreans. Or driving around all day with Fred. Or getting thrown out of deals. Or yucking it up with Nick Moore.
But this is what I do.
Wealth really is a never-ending process. So is running money. You can’t just walk away and ask about the meaning of life. It is my life—and all-consuming. I’ve just got to find the right time to get back in.
Acknowledgments
I’d like to thank Marion Maneker of HarperCollins for taking a ragtag collection of chapters, getting rid of most of them, bugging me for new ones and turning the mess into a real book. I sometimes felt like George S. Kaufman, who was playing pinochle backstage during a Marx Brothers performance of his play Animal Crackers when he paused, shook his head and said “Sorry, I thought I just heard an original line I wrote.”
Edwin Tan and the rest of the folks at HarperCollins were extremely helpful throughout the process. So was my agent, Daniel Greenberg.
I want to thank Fred Kittler for being my partner in Velocity Capital through this bizarre journey and agreeing to let me tell this story. Nick Moore was critical in helping reconstruct the rollercoaster ride, and Rich Karlgaard provided needed insight when I got stuck. Michael Lewis gave me words of encouragement over the years and a path to follow.
I made a few friends suffer through early drafts—John Malloy, Stuart Litwin, Alex Balkanski and Eric Lamb—and each of them made important suggestions that I incorporated. Michael Dreyfus consulted on spatial considerations. I got revenge on my parents, Joan and Fred Kessler, who from age two always told me to do my best, by making them plow through more iterations of this book than anyone else.
My boys, Kyle, Kurt, Ryan and Brett, figured out when to leave me alone (rarely) and when Dad needed some distraction (always). Most importantly, I’d like to express my deep appreciation and love to my wife, Nancy, for encouraging me to pursue my dreams and helping to clear a path. She is my partner and real meaning of everything in life.
Searchable Terms
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big-time trends. See waterfalls
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