The Greatest Trade Ever

In a recent study, “From Predators to Icons,” the French scholars Michel Villette and Catherine Vuillermot set out to discover what successful entrepreneurs have in common. They present case histories of businessmen who built their own empires—ranging from Sam Walton, of Wal-Mart, to Bernard Arnault, of the luxury-goods conglomerate L.V.M.H.—and chart what they consider the typical course of a successful entrepreneur’s career. There is almost always, they conclude, a moment of great capital accumulation—a particular transaction that catapults him into prominence. The entrepreneur has access to that deal by virtue of occupying a “structural hole,” a niche that gives him a unique perspective on a particular market.

Villette and Vuillermot go on, “The businessman looks for partners to a transaction who do not have the same definition as he of the value of the goods exchanged, that is, who undervalue what they sell to him or overvalue what they buy from him in comparison to his own evaluation.” He moves decisively. He repeats the good deal over and over again, until the opportunity closes, and—most crucially—his focus throughout that sequence is on hedging his bets and minimizing his chances of failure. The truly successful businessman, in Villette and Vuillermot’s telling, is anything but a risk-taker. He is a predator, and predators seek to incur the least risk possible while hunting.

And a little bit on John Paulson,

Paulson grew up in middle-class Queens, the child of an immigrant father. His career on Wall Street started relatively slowly. He launched his firm in 1994, when he was nearly forty years old, specializing in merger arbitrage. By 2004, Paulson was managing about two billion dollars of other people’s money, putting him in the middle ranks of hedge funds. He was, Zuckerman writes, a “solid investor, careful and decidedly unspectacular.” The particular kinds of deal he did were “among the safest forms of investing.” One of Paulson’s mentors was an investor named Marty Gruss, and, Zuckerman writes, “the ideal Gruss investment had limited risk but held the promise of a potential fortune. Marty Gruss drilled a maxim into Paulson: ‘Watch the downside; the upside will take care of itself.’ At his firm, he asked his analysts repeatedly, ‘How much can we lose on this trade?’ ” Long after he became wealthy, he would take the bus to his offices in midtown, and the train out to his summer house on Long Island. He was known for getting around the Hamptons on his bicycle.

Written by Malcolm Gladwell. Truly interesting, more here.


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