This was me, one year ago. After years in allocator seats, I joined a friend who was spinning out to set up his own fund. Strong team, track record, locked-up capital.

It was so much harder than I expected it to be.
First off: I was so enamored with the idea of helping to build something that I overruled my gut. I knew I wasn't a good fit for a sales role.
My friends know I'm more comfortable in the basement of the NY Public Library than bantering with a group of strangers. It is what it is.
Bad idea. Shortly after COVID hit I was let go.

I was angry. Resentful. But in the back of my mind I knew that I hadn't been a good fit.

Today I can see the positive that came out of it.
Now for any of you thinking about starting their own funds, this was the tweet that triggered my memory:

Dan is right. It's insanely hard. I've seen people much smarter and harder working than me try and not succeed.

There are some subtle dynamics at play that can be difficult to understand from the outside.
Allocators are often understaffed and swamped with pitches. They have their guard up.

Think of it like pitching a VC. @pmarca won't talk to you unless you can get an introduction. Think of your network as edge that you must cultivate to succeed.
Picking stocks is a commodity. You may think your work is special. Perhaps it is. But allocators have listened to the same pitch a hundred times.

Describing your process violates a cardinal rule of storytelling: "show, don't tell." Figure out how to show, how to be interesting.
I hope you don't think Howard Marks writes those letters for fun?

Or that Dalio puts out Bridgewater's Daily Observations because he likes to keep you informed?
Recognize the difference between the organization and the individual you're pitching.

Unfortunately you are a bad career risk. Allocators don't get a big bonus for picking a great fund that represents a tiny sliver of the portfolio.
But if you blow up? They'll have to answer for that. Nobody likes to lose money. Or look stupid.

You are asking someone to go out on a limb for you - despite your lack of track record, team, infrastructure. Unless you can build trust, your product has no chance.
To me, it all comes down to what you're trying to achieve. Are you building a business or a practice?

What is your measure of success? Building wealth or practicing your craft?
Blackstone is a business. They allow allocators to satisfice: to buy a product that reliably does the job and won't get you fired.

You can charge a premium for that and it scales nicely. It's what you want as a shareholder.…
My old boss wanted to run money his way: concentrated, flexibility in equities, credit, private assets. No shorting.

It was an expression of his style and personality. It didn't maximize his wealth. It wasn't what most customers wanted. But it allowed him to practice his craft.
I find that investors avoid analyzing their own businesses the way they would an investment.

I think it's because they like to think of themselves as artisans practicing a craft. They feel they do something unique.
The disconnect is when you confuse the two. When you act like an artisan but expect the results of a business.

I shared what little advice I have here:…
Perhaps the best advice: leverage the new world of fintwit and learn from people in the trenches:
and many, many others

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More from @NeckarValue

8 Apr
“Investing With Keynes”

"After losing 80% of his net worth in the '29 crash, he “switched from market timer to value investor, seeking to profit from swings in the market rather than participating in them.”…
Focus on intrinsic value (projected earnings)
Margin of safety
Think for yourself and be contrarian if necessary
"Steadfast holding" to limit transaction costs
Concentrate in a few great companies
Right temperament, balancing “equanimity and patience” with decisiveness. Image
"During his 25 years running the King’s College endowment, he generated an annual return of 16%, adapting his investment style to flourish even during the Great Depression and World War II." Image
Read 12 tweets
6 Apr
In 2009, @BGurley bet on $AMZN in his PA because he saw the potential of AWS:

"it was obvious they were winning. You could see it in the number of startups that were building on their platform and that were adding to their platform"…
"Many are quick to point out that only small businesses and rogue developers in large organizations are using AWS. This is exactly how these markets develop. Amazon is selling to the innovators and early adopters — the exact customers that are prescribed in Crossing the Chasm.
"First, as a “retailer” Amazon was comfortable running a low-margin business."

"The second piece of the strategy leverages the company’s prowess in customer support ... They would have the best developer relations attitude and execution in the business."
Read 4 tweets
6 Apr
"Most people have the brain power - almost everybody has the brain power to make money in the stock market. The question is whether you have the stomach for it. Whether you're willing to do a little bit of work. Those are the key elements. It's not that hard." Peter Lynch
"You can never predict the economy, you can't predict the stock market. But when you look at Dunkin' Donuts, you say 'they're the best donut chain.' You don't have to worry about Korean imports or what's happening with M1."
"You have to be very careful. Some stocks in the next 20 years, a lot of money is going to be made. A lot of money is going to be lost. People that gamble, that buy options. What a tragedy if you're right on a company and you have a three month option on, or a six month option."
Read 6 tweets
6 Apr
John Templeton, when told that academics believing in efficient markets considered his fundamental analysis to be worthless: "That's just resigning from the game. If you take the game of tennis: exactly as many loses as winners. But that's no reason to give up playing tennis."
"The thing that people need to learn is that selecting assets is totally different from almost every other activity.

If you go to 10 doctors and they tell you to the same medicine - that's the thing to take.
You go to 10 engineers to build a bridge and they tell you the same thing - that's the thing to do.

But you go to 10 investment advisors and they pick out the same asset. You better stay away from it."
Read 4 tweets
3 Apr
Munger the ruler: leverage is how you go broke.

Munger the conqueror: leverage is how I'll get rich.

(Doesn't mean his advice isn't generally right.)
Munger Partnership
"Munger at one point had almost 84% of his assets in two stocks, Blue Chip Stamps and New America Fund. By employing leverage, Charlie was able to vastly amplify the potential gains if the prices of these two businesses went up."…
"Munger did enormous trades like B.C. Power, which was being taken over. He put all the money he had and all that he could borrow into an arbitrage on this single stock-but only because there was almost no chance that this deal would fall apart."…
Read 7 tweets
3 Apr
Peter Lynch on the biggest mistake investors make:

"They don't know what they own. They do more research on a microwave oven and buy based on a tip they heard on the bus. They buy into the potential of something. They hear a terrific story."
"I find when you hear that [story], you just have to black out. You have to think of a movie you went to recently because the stories are very appealing."
"The public is very careful with their money when they buy a dishwasher or a TV set, when they rent an apartment. When it comes to the stock market, for some reason they just don't do any work."
Read 9 tweets

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