The Poison Pen
A manager that has become overconfident by using a bad process is like somebody who plays Russian roulette three times in a row without the gun going off, and thinks they’re great at Russian roulette. The fourth time, they blow their brains out.
—Daniel Loeb, October 2011 interview
Call it confidence, call it aggressiveness, or call it a passion for risk. There is a theme running though the life of Daniel Loeb, the founder of the $9 billion hedge fund Third Point. You see it in the boy on the surfboard challenging the waves off Malibu Beach (whose legendary break inspired the name Third Point); in the 12-year-old who fought the bullies at Paul Revere Junior High School in Los Angeles with his allowance, hiring a classmate as his bodyguard for a quarter a day; in the college student who precociously amassed $120,000 in profits from playing the stock market then lost it all on one bad trade; and in the hungry young junk bond salesman at Jefferies & Co., who late in 1992 heard that David Tepper was planning to leave his job as the head trader on the high-yield desk at Goldman in order to launch his own firm. Loeb promptly called Tepper at home. “I want to cover you,” he told Tepper.
“Unfortunately, I don’t have a need for you; I’m unemployed,” Tepper responded. Or anyone else, for that matter; Appaloosa was not yet formed.
“That’s okay,” said Loeb, “If you want to buy 50 bonds or something for your PA (personal account), I just want ...