Summary of Sebastian Mallaby's More Money Than God

By IRB Media

Please note: This is a companion version & not the original book. Book Preview:

#1 The hedge-fund managers of the second gilded age are not new, and they are not unique. They are the descendants of the hedge-fund managers of the 1960s boom, who were described as being secretive and arrogant.

#2 Alfred Winslow Jones, the founder of the first hedge fund, was a unlikely Wall Street patriarch. He had experimented restlessly with multiple careers, and in 1949 he invented his hedged fund. He was cut from different cloth than his competitors.

#3 Jones was posted to Berlin in December 1930, and he met Anna Block, a socialite and left-wing anti-Nazi activist. They married in secret, but the union was soon discovered by his embassy colleagues. The divorce forced his resignation from the State Department in May 1932.

#4 As a sociologist and journalist, Jones was able to navigate the turmoil in America and come out more levelheaded than before. He wrote a book in 1941 titled Life, Liberty, and Property, which was a standard sociology textbook.

• Language: English
• Publisher: IRB Media
• Release date: Jun 14, 2022
• ISBN: 9798822540699

IRB Media

With IRB books, you can get the key takeaways and analysis of a book in 15 minutes. We read every chapter, identify the key takeaways and analyze them for your convenience.

Book preview

Insights on Sebastian Mallaby's More Money Than God

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 5

Insights from Chapter 6

Insights from Chapter 7

Insights from Chapter 8

Insights from Chapter 9

Insights from Chapter 10

Insights from Chapter 11

Insights from Chapter 12

Insights from Chapter 13

Insights from Chapter 14

Insights from Chapter 15

Insights from Chapter 16

Insights from Chapter 1

#1

The hedge-fund managers of the second gilded age are not new, and they are not unique. They are the descendants of the hedge-fund managers of the 1960s boom, who were described as being secretive and arrogant.

#2

Alfred Winslow Jones, the founder of the first hedge fund, was a unlikely Wall Street patriarch. He had experimented restlessly with multiple careers, and in 1949 he invented his hedged fund. He was cut from different cloth than his competitors.

#3

Jones was posted to Berlin in December 1930, and he met Anna Block, a socialite and left-wing anti-Nazi activist. They married in secret, but the union was soon discovered by his embassy colleagues. The divorce forced his resignation from the State Department in May 1932.

#4

As a sociologist and journalist, Jones was able to navigate the turmoil in America and come out more levelheaded than before. He wrote a book in 1941 titled Life, Liberty, and Property, which was a standard sociology textbook.

#5

In 1948, Jones wrote an essay titled Fashions in Forecasting, which predicted many of the hedge funds that would come after him. He believed that investor emotions created trends in stock prices, and that stock prices were driven by a feedback loop between investor optimism and market prices.

#6

Jones’s essay was published in March 1949, and he had started the world’s first hedge fund in 1944. He had two children and expensive New York tastes, and he wanted money. He raised $60,000 from four friends and put up $40,000 of his own to invest.

#7

Jones’s investment record was one of the most remarkable in history. He had a cumulative return of just under 5,000 percent between 1968 and 1975, meaning that the investor who had given him $10,000 in 1949 was now worth a tidy $480,000.

#8

The idea behind hedging is that you take on less risk by spreading your money across different investments, but you earn higher returns because of it. The stigma surrounding short selling was due to the crash of 2008, but the practice was actually beneficial to society.

#9

The Jones method involved shorting bad stocks, which was not an easy task at the time. To make it easier, he measured the volatility of all stocks and compared it to the volatility of the Standard Poor’s 500 Index.

#10

Modern portfolio theory was born in 1952 with the publication of a paper titled Portfolio Selection. The author was a twenty-five-year-old graduate student named Harry Markowitz, and his chief insights were twofold: the art of investment is not just to maximize return but to maximize risk-adjusted return, and the amount of risk an investor takes depends not just on the stocks he owns but on the correlations among them.

#11

In the 1950s, almost no one understood Jones’s investment methods, and he wanted to keep it that way. He was secretive about his activities in Europe, and he wanted to avoid drawing attention to the tax loopholes that had been created for him by Richard Valentine.

#12

Jones’s hedge fund was based on the premise that market prices were too faint to be