A year or so ago I discussed the reasoning of zillionaire financier Peter Thiel, who seems to believe his own hype and, worse, seems to be able to convince reporters of his infallibility as well. Apparently he “possesses a preternatural ability to spot patterns that others miss.”
More recently, Felix Salmon commented on Thiel’s financial misadventures:
Peter Thiel’s hedge fund, Clarium Capital, ain’t doing so well. Its assets under management are down 90% from their peak, and total returns from the high point are -65%. Thiel is smart, successful, rich, well-connected, and on top of all that his calls have actually been right . . . None of that, clearly, was enough for Clarium to make money on its trades: the fund was undone by volatility and weakness in risk management.
There are a few lessons to learn here.
Firstly, just because someone is a Silicon Valley gazillionaire, or any kind of successful entrepreneur for that matter, doesn’t mean they should be trusted with other people’s money.
Secondly, being smart is a great way of getting in to a lot of trouble as an investor. In order to make money in the markets, you need a weird combination of arrogance and insecurity. Arrogance on its own is fatal, but it’s also endemic to people in Silicon Valley who are convinced that they’re rich because they’re smart, and that since they’re still smart, they can and will therefore get richer still. . . .
Just to be clear, I’m not saying that Thiel losing money is evidence that he’s some sort of dummy. (Recall my own unsuccess as an investor.) What I am saying is, don’t believe the hype.