The Smartest Guy in the Room
The current issue of Vanity Fair has a profile of William Ackman, the billionaire hedge fund manager who’s trying to bring down Herbalife. Ackman’s friends and enemies call him Bill; I know him as Billy.
You see, Billy Ackman and I grew up together in Chappaqua, New York. He was a year ahead of me in school. Our families went to the same synagogue. I knew his parents, and his older sister and my sister were in the same class. We weren’t friends, and he never made much of an impression on me. He was smart, but in the way many kids in Chappaqua were smart: he got good grades, obsessed about college, went to Harvard.
What I didn’t know was this:
In 1984, when he was a junior at Horace Greeley High School, in affluent Chappaqua, New York, he wagered his father $2,000 that he would score a perfect 800 on the verbal section of the S.A.T. The gamble was everything Ackman had saved up from his Bar Mitzvah gift money and his allowance for doing household chores. “I was a little bit of a cocky kid,” he admits, with uncharacteristic understatement.
Tall, athletic, handsome with cerulean eyes, he was the kind of hyper-ambitious kid other kids loved to hate and just the type to make a big wager with no margin for error. But on the night before the S.A.T., his father took pity on him and canceled the bet. “I would’ve lost it,” Ackman concedes. He got a 780 on the verbal and a 750 on the math. “One wrong on the verbal, three wrong on the math,” he muses. “I’m still convinced some of the questions were wrong.”
Ackman has made billions of dollars since 1984. According to Vanity Fair, he owns a $22 million mansion in the Hamptons, an estate in upstate New York, a co-op in a “historic” building on Central Park West, and a private Gulfstream 550 jet. He started his own hedge fund with a quarter-million dollars from Marty Peretz, who was his professor at Harvard (the only reason I could possibly imagine for taking a course with Peretz is that you think he might some day help you in just this way). He goes bone-fishing (whatever that is) in Argentina. He likes to say things like “Tennis, I practice. Presentations, I don’t.”— which I gather is hedge fund for “shaken, not stirred”—and “You know what? It’s time for me to do something for cancer.”
But with all that, he still remembers his SAT scores—and the number of questions he got wrong—as if he took them yesterday.
You see, Ackman is one of those guys for whom phrases like “smartest guy in the room” mean something. That’s a phrase I’ve been thinking about of late. I know smart people, but their minds are so various and incommensurate, it’d be impossible to rank them according to intelligence. They’re all smart, but in different ways: one sees deeply, one sees quickly, one sees things no one else sees.
But Ackman operates in a world—and it’s not just Wall Street; you can also find it in DC, the media, the law, and some parts of academia—where rankings of this sort mean something. They have to: no matter what the endeavor, someone always has to come out on top or in first. Whether it’s the most money, the biggest house, or the fastest cyclist.
It happened last summer when Ackman decided to join a group of a half-dozen dedicated cyclists, including [billionaire hedge-fund dude Daniel] Loeb, who take long bike rides together in the Hamptons. The plan was for Loeb, who is extremely serious about fitness and has done sprint triathlons, a half-Ironman, and a New York City Marathon, to pick up Ackman…The two would cycle the 20 or so miles to Montauk, where they would meet up with the rest of the group and ride out the additional 6 miles to the lighthouse, at the tip of the island. “I had done no biking all summer,” Ackman now admits. Still, he went out at a very fast clip, his hypercompetitive instincts kicking in. As he and Loeb approached Montauk, Loeb texted his friends, who rode out to meet them from the opposite direction. The etiquette would have been for Ackman and Loeb to slow down and greet the other riders, but Ackman just blew by at top speed. The others fell in behind, at first struggling to keep up with the alpha leader. But soon enough Ackman faltered—at Mile 32, Ackman recalls—and fell way behind the others. He was clearly “bonking,” as they say in the cycling world, which is what happens when a rider is dehydrated and his energy stores are depleted.
While everyone else rode back to Loeb’s East Hampton mansion, one of Loeb’s friends, David “Tiger” Williams, a respected cyclist and trader, painstakingly guided Ackman, who by then could barely pedal and was letting out primal screams of pain from the cramps in his legs, back to Bridgehampton. “I was in unbelievable pain,” Ackman recalls. As the other riders noted, it was really rather ridiculous for him to have gone out so fast, trying to lead the pack, considering his lack of training. Why not acknowledge your limits and set a pace you could maintain? As one rider notes, “I’ve never had an experience where someone has gone from being so aggressive on a bike to being so hopelessly unable to even turn the pedals…. His mind wrote a check that his body couldn’t cash.”
Apparently this story “is so widely known in the hedge-fund eco-system that it has practically achieved urban-legend status.” You might think people who make and break economies over breakfast would have something else to talk about. But when every last activity in life is a race, and someone must always win or lose, a weekend ride becomes just as much a revelation of the whole as a morning trade.
What’s odd in Ackman’s case is how loathed he is by his colleagues. So much so that they’ve banded together to take him down in this Herbalife deal.
Ackman says he suspected, when he “shorted” (i.e., bet against) Herbalife, that other hedge-fund investors would likely see the move as an opportunity to make money by taking the other side of his bet. What he hadn’t counted on, though, was that there would be a personal tinge to it. It was as if his colleagues had finally found a way to express publicly how irritating they have found Ackman all these years. Here finally was a chance to get back at him and make some money at the same time. The perfect trade. These days the Schadenfreude in the rarefied hedge-fund world in Midtown Manhattan is so thick it’s intoxicating.
So why is Ackman the object of such hate?
It’s Ackman’s perceived arrogance that gets to his critics. “The story I hear from everybody is that one can’t help but be intrigued by the guy, just because he’s somewhat larger than life, but then one realizes he’s just pompous and arrogant and seems to have been born without the gene that perceives and measures risk,” says [Robert] Chapman. “He seems to look at other members of society, even legends such as Carl Icahn, as some kind of sub-species. The disgusted, annoyed look on his face when confronted by the masses beneath him is like one you’d expect to see [from someone] confronted by a homeless person who hadn’t showered in weeks. You can almost see him puckering his nostrils so he doesn’t have to smell these inferior creatures.
Notice what Chapman says: Ackman treats his colleagues as if they were the homeless. In other words, it’s fine, even expected, to treat the homeless—and all the other little people—that way. As Ludwig von Mises wrote to Ayn Rand: “You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the effort of men who are better than you.” What’s not fine is to treat the big people that way.
Ackman’s mistake is that he takes the “smartest guy in the room” business too seriously. He really thinks he’s that dude. So much so that he’s willing to treat the other guys in the room as if they weren’t. That’s a no-no, and now they’re going to take him down for it.
Nietzsche understood this dynamic all too well. In an essay from 1872, “Homer’s Contest,” he remarked upon the centrality of competition to the Greek state. Not economic competition but other forms of contest: military, athletic, aesthetic, and so on. The idea was that “every talent must develop through a struggle” with one’s peers, but the point of that struggle was to serve the good of the state.
From childhood, every Greek felt the burning desire within him to be an instrument of bringing salvation to his city in the contest between cities: in this, his selfishness was lit, as well as curbed and restricted.
But when a competitor’s ambition is so unhinged, when he not only tries but actually manages to make his way to the top, and stay there, he must be removed. For the good of the state. That, says, Nietzsche, is the origins of the practice of ostracism. And if his competitors can’t do it, the gods will: they step in and take him out.
Why should nobody be the best? Because with that, the contest would dry up and the permanent basis of life in the Hellenic state would be endangered….the preeminent individual is removed so that a new contest of powers can be awakened: a thought which is hostile to the “exclusivity” of genius in the modern sense, but which assumes that there are always several geniuses to incite each other to action, just as they keep each other within certain limits, too.
Back to Wall Street: If the “smartest guy in the room” is going to serve the purpose for which it was coined—to spur little Billy Ackman’s to work hard, get into Harvard, and make lots of money—it has to remain an elusive prize. Something to strive for, never to be claimed.
No one, it turns out, can ever really be the smartest guy in the room. For two reasons. First, to make sure that everyone keeps fighting to get in, and stay in. Second, to make sure that everyone who doesn’t get in is kept out.
26 Comments
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“Everyone is ignorant, only on different subjects.” – Will Rogers
Your classmate Billy it seems sucks at life, but is very good at making money. I bet my Dad $20 on my first SAT test, and while 1340 is close to 1400 he collected. The second time he declined to bet, and I got a 1460. Not bragging at all, tests like that are almost entirely irrelevant to real performance, much like the bubble tests NHFD take for promotion. (Oh my, we had fun with that, as I am sure you are aware.)
Thanks for blogging, more importantly. As a more-or-less Centrist Lefty, the things you say and your words disturb me so much*, but your analysis and writing adds value. Much appreciated.
Loved the book, too, even if I needed to read Nick Turse’s calming, Mel Gibson-esque screenplay on the Vietnam War to be a little bit less furious afterwards. Not sure if I am joking or not there. The fury I mean, definitely joking about Kill Anything that Moves. Whatevs, the anger kept me plenty warm this Winter.
*You must have seen it already, but LGM’s SEK posted this years ago and it remains hilarious. http://acephalous.typepad.com/acephalous/2007/03/and_yet_i_still.html
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When the “rational pursuit of self-interest” becomes indistinguishable from the irrational pursuit of self-destruction, then hybris has become nemesis. That’s what I read into the parable of Mr. Ackman and his bike ride. And I suppose it appealed to you because it seems to foreshadow his current difficulty.
I think there is a tendency in Late Modernity to believe that through rationality, we have conquered, subdued, and subjugated hybris. I suspect that is our deepest delusion and is itself our great hybris.
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Just by chance while driving today I was thinking of another smart guy, a man possessed of such legendary brainpower that he was put in charge of an organization of 3 million personnel with exactly zero background in their line of work. In his memoirs he too took recalled–60 years after the event–his relish at academically beating an Asian-American kid in his class who was also pretty smart. The scores of his personnel tests from 1945 when his entire team was hired intact by Ford Motor Company also merited at least a couple of paragraphs. Chomsky did an analysis of the cult of smart-managerialism he stood for–this was after he has been humbled and left in tears the job for which he was brought into government–and found striking similarities with the views of Lenin and his closest comrades who also fervently believed in rule by the smartest guy in the room.
I compared some passages of articles of his in the late 1960s, speeches, on management and the necessity of management, how a well-managed society controlled from above was the ultimate in freedom. The reason is if you have really good management and everything’s under control and people are told what to do, under those conditions, he said, man can maximize his potential. I just compared that with standard Leninist views on vanguard parties, which are about the same. About the only difference is that McNamara brought God in, and I suppose Lenin didn’t bring God in. He brought Marx in.
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Hi Corey:
Thanks for writing this. The tale of Billy Ackman is one I never tire of reading about. I’m not sure what it is about these stories that is endlessly fascinating. Anyway, I hope you’re well.
Jack
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Hey Jack! Good to hear from you. Didn’t realize you were a reader of the blog. Drop me a note when you get a chance and let me know how you’re doing. corey.robin@gmail.com. Hope you’re well. Corey
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I got an 800 on the verbal section of the SATs and I skipped 4 questions. Ackman is definitely wrong about the number of questions you have to miss to lose the 800.
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ahaha yeah in his mind there would have been 20 questions on the entire test because the possible range is 400-800 and he thinks he lost 20 points for one question
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FWIW, I have no recollections of how many questions I skipped. I do remember circling a few on the test materials that had to be handed back with angry, penciled notes along the lines of “Fuck You, where’d you get the balls to ask students at Wilbur Cross High School analogy questions about wine cellars and yacht docking?”
(And yes, I was that much of a dick, even then.)
Public schools were the place, and time I guess, that I began to realize how fucked up things are. To be clear, I do not see myself as a victim, at all. Yay, I’m white! Yay, I have a penis! But it is even more clear to me that things are fucked up even worse now than they were in the Reaganland era. I’d contend ( a la Perlstein) that the real rot set in with Nixon.
Laugh at the Powell Memo all you like; he wrote it in 1971, and was confirmed to sit on the nation’s highest court a year later. Since just about then, we’ve been sliding down the bowl waiting for the flush. Worth reading, that memo. FOX News comes to mind.. Not my life story, but pretty much where we went as a nation throughout my lifetime.
And hey, it’s one thing to be “standing athwart history yelling STOP” like some grandiose privileged scumbag, empowered with Daddy’s money.
I have no money from Daddy’s crooked oil adventures in Mexico (Buckley) or from Stalin’s USSR (Koch). I’m labor. I’m standing here yelling “What THE FUCK IS WRONG WITH YOU PEOPLE?!?”
How to fight. Effectively. Important question. And if you missed the e-mail ( a small joke there, ha ha) Lewis Powell’s not-famous-enough- 1971 memo linked below.
http://billmoyers.com/content/the-powell-memo-a-call-to-arms-for-corporations/
Not a Greenpeace guy, I should note. Though looking at the latest climate data maybe I should be.
No disrespect for Prof. Robin, but I have been reading people like Adorno, Altemeyer, Paxton, Niewert for years as well. Disrespect? Hell, why the book alarmed me so much.
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Very fascinating text by Corey – and the remarks are too…
I think it is time, that we become more aware of the ‘us and them’ scheme in neoliberal thought – old as well as new. That is a break with the philosophy of equal human worth found in the best philosophy from the time of the greeks/stoics and christianity etc. to the writing of the american constitution. In short against the most fundamental value in the western historical tradition. – the repression of this value and ideal is of course – as is the whole of Ayn Rands philosophy – pathetic and ridiculous. That is… extremely dangerous when put into power and practice.. -
At the risk of seeming moralistic, I’d suggest that it’s more worthwhile to become the wisest person in the room than to compete in order to be the smartest.
Being wise seems to entail educating others to become wiser, as far as possible.
Spinoza Ethics IV p35c1: there is no singular thing in Nature which is more useful to man than a man who lives according to the guidance of reason.
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I am and have always been put off by the concept of the arrogant billionaire, but this story doesn’t enrage or alarm me to any extent. What I find alarming is that someone like Ackman can only thrive in a society where millions of those he considers his inferiors will line up to enthusiastically do his bidding. An extreme example of this dynamic is one I like to characterize with a simple rhetorical question that almost always draws an incorrect answer: How many Jews did Hitler kill?
I find this dynamic alarming because I am a professional firefighter, and I often work in concert with police officers. The cultures of these jobs– which are tasked with maintaining public order– are steeped in reactionary political and medieval social attitudes. Therein you find a toxic combination of militarism, jingoism, and an oft-expressed (and seemingly contradictory, perhaps even self-immolating) loathing of ‘big government.’ There is also a fundamental hatred of the less fortunate, especially those of darker hues and those lacking Y chromosomes. In other words, I’d never met so many small-government libertarian racist misogynists until I got hired to a well-paid, publicly funded, unionized job.
Back to the point, I’m not concerned about the Ackmans of our society. They could be reined in with tighter regulation and more progressive taxation schemes. However, those things are politically impossible as long as millions of Untermenschen faithfully follow the political diktats handed down to the public by the reactionary think tanks and media outlets funded by the Ackman types. As this Randian experiment continues to deteriorate, and the pretenses of inter-class civility collapse along with our social and physical infrastructure, the Ackmans will rally by propping up their own little dictators to rule the rubble (the Tea Party is but a precursor of this). The vanguards of their police forces-cum-death squads will be recruited from among our current publicly funded order keepers, who just happened to already be so inclined.
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Well Thought out sociologically. Well put…
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Hi Corey, Jack Goodman Sr. here. Like my son, I know him as Billy too. One day Jack Jr. and I were playing tennis with Billy and his dad, Larry. They were very agressive and Billy hit a volley which crashed into my groin. I fell, stunned and in pain.
The next thing I remember was Billy standing over me saying “can I get you a glass of water?”
Nice to see you are doing well.
Jack Goodman Sr.
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Given that story, Jack, it’s nice to see that you are doing well too! Anyway, really nice to hear from you. It’s like old home week around here. Corey
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Thanks so much. This is a well-written, considered piece with lots of interesting tidbits. I thoroughly enjoyed reading it.
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Corey,
You note the importance of rankings in some spheres — “But Ackman operates in a world—and it’s not just Wall Street; you can also find it in DC, the media, the law, and some parts of academia—where rankings of this sort mean something.”
Right now, Ackman and others from the hedge fund community are trying to remake K-12 public education as a part of this world. Here in NYC, our mayor, of the world you describe, is remaking education in this model. Testing is extended and used to rank students, teachers and schools. Public school assets are shifted from public control to charter schools controlled by private boards comprised largely of hedge fund managers.
While many, like Diane Ravitch and Liza Featherstone are looking at what’s happening, what would be great would be to get some better insight into why. Some, like Juan Gonzalez, have explored the profit-making motive but I think the philosophical motivation that you explore here is the core of it. If you have some time, consider looking at why these people are working so hard to transform public education.
Pat
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That is indeed a very interesting question… Besides making the educational system part of the normal industry, I guess it has the advantage of putting of critical social thinking, which is the guarantee, that the newly won educational field of the industry will be able to continue in the future without really being questioned…
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The movie, Election, is a great taxonomy of middle-class types: the sociopathic striver; the proud but pathetic shlub; the oblivious leisure class jock; the alienated upper-middle class seeker. It’s tough to win in life when you’re middle class…
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“What’s odd in Ackman’s case is how loathed he is by his colleagues. So much so that they’ve banded together to take him down in this Herbalife deal.”
I think it’s a false assumption to think he got taken down because of his personality. It’s a rule in trading to never reveal a market position because others will glom together and break you just for the cash. Even the buddy next door. It’s business, not personal.
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Reminds me of this…
http://www.newscientist.com/article/mg21729074.600-gang-of-chimpanzees-kills-their-alpha-male.html?cmpid=RSS|NSNS|2012-GLOBAL|online-news
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Pride is often considered the first and most dangerous of the seven deadly sins, with the others being derivatives of pride. I’d replace pride with vanity, though. Pride has a positive meaning that is worth preserving. I cannot imagine a positive meaning given in the word vanity.
Lasch’s “Culture of Narcissism” and “Minimal Self” are still timely books. I suppose the smartest guys in the room would have no use for them, vanity being the source of blindness without insight or luster.
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Hey Billy, guess what? I went to a crappy high school run by fundamentalist Christians, a long way from “affluent Chappaqua, New York,” and I barely even studied for the SAT, but I still scored higher than you did – 780 verbal, 760 math. So by your idiotic standard, I’m a smarter guy than you are. And so are a whole lot of other people you hilariously consider your inferiors.
One problem with capitalism (or whatever you want to call the socioeconomic arrangements that largely prevail in this part of the world at the moment) is that it encourages delusions of grandeur in people like Ackman, whose only evident skill is turning money into more money.