Morning Coffee: How precocious 24-year-old hedge fund managers talk at parties. The Russian traders who made a fortune for themselves
If someone says “I’m thinking about buying a galaxy”, most of us would probably reply something like “solid choice but you can get an iPhone for nearly the same money”. If you’re at a party in Silicon Valley, though, it’s just as likely that you’re talking to somebody like Situational Awareness founder Leopold Aschenbrenner, who actually does want to buy a galaxy.
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Or possibly more than one galaxy, in order to “make his mark on the universe”, as 24-year-old Aschenbrenner has apparently said at several parties. The media coverage does not record how he might have dealt with follow-up questions like “what would you do with one if you owned it?”, “do you know what a light year is, and how long it takes to travel 25,000 of them” or even “there’s already a website that lets you do that, it only costs $19.95”.
We have all met people like this; they seem to be particularly drawn to the investment banking industry as well as to tech. People who are very clearly, very obviously incredibly intelligent – Aschenbrenner went to Columbia University at the age of 15, graduated as valedictorian and was described by professors as “one of the most brilliant undergraduates they ever met”.
But, people whose intelligence and original thinking seem to regularly lead them to do and say things which are … kind of dumb. Not just dumb in the “ignoring both the legal reality of ownership and general relativity” kind of way, but also dumb in the “making horrible career moves” kind of way. Aschenbrenner seems to have been one of those.
One might have said that it wasn’t really his fault that his first job out of university was with FTX – plenty of otherwise street-smart people were also taken in by Sam Bankman-Fried, and he got out early (apparently after an unrelated argument with Sam). But when he walked into his next job, at OpenAI, it didn’t take him long to get involved in the internal drama, pick the wrong side and get fired (with a cloud of accusations and counter-accusations about sensitive company information).
And then he sat down and wrote a 160 page blog post, called “Situational Awareness”, which was so good that people gave him, at the age of 24, his own $45bn hedge fund to manage. Which he then levered up by a factor of three, “hedging” his long positions in AI stocks with short positions in stocks that he thought would be vulnerable to AI. In other words, doubling up the same investment thesis rather than de-risking it. Which brings us roughly up to date.
People like this are fascinating company, and they will never be poor for long, because they keep getting job offers. But the lack of common sense can make them somewhat exhausting to be around, particularly if any of your own financial security or wellbeing depends on their judgement. If you ever wonder why investment banking is such a heavily regulated industry, guys like this are a big part of the reason.
Elsewhere, when life hands you lemons, make lemonade. Or, as they might have said in the Luxembourg office of Gazprombank, when life hands you sanctions, make sanctionsade.
It was quite a simple trade; in the aftermath of the invasion of Ukraine, a lot of Gazprom’s foreign currency debt was “stranded”, in the sense that although the company wasn’t subject to sanctions itself, most of the financial institutions involved in handling its interest payments were, so it became extremely difficult for non-Russian holders to get paid. For this reason, the bonds traded at a hefty discount.
Vladimir Putin’s government decided to solve the problem by allowing them all to be exchanged for new rouble-denominated bonds, held in Russia at full face value. So if you were a Russian citizen who was able to predict which bonds were about to be exchanged, and you had an employer who was willing to lend you lots of money, you could get rich.
It seems a bit too good to be true, and indeed, the news story is full of people “denying all wrongdoing” and pointing to regulatory investigations which didn’t end in action. All four bankers have now left Gazprombank and are doing other things, presumably with fond memories of the day that an opportunity crossed their desk.
Meanwhile …
Deutsche Bank’s cloud computing partnership with Google is extending into using Gemini agents for its lending business – it now has quasi-autonomous AI analysts doing credit risk assessments and portfolio monitoring. These will apparently be extensively deployed later this year, with as yet unspecified consequences for hiring and firing. (Bloomberg)
A recent SpaceX job ad isn’t just for someone who knows how to procure the natural gas to power their datacentres – it’s asking for expertise “P&L generation, pricing inefficiencies and CFTC compliance”, which sounds much more like a trading desk role. (Navnoor Bawa Research)
If you didn’t get an offer after a summer internship, it’s a better idea to get feedback quickly and then concentrate on making applications, rather than trying to network. Apparently bankers are a bit disconcerted to be asked for “pick your brains” coffee meetings with students in October. You might have to accept a slightly less glamorous role or location though. (Business Insider)
In America, lots of banks have reacted to the shift in political and economic priorities by opening up or growing their Washington DC offices to be close to decision makers. The small but proud investment banking community in Manchester is hoping for a similar effect from Andy Burnham’s “Number 10 North”. (Financial News)
A Danish start-up is hoping to do what everyone would love to see, but which everyone is scared to try – using AI to automate the drudgery of audit work. The trouble is, you can’t yet automate the work of taking the blame. (Finextra)
A famous clown school in France has proved to be so good at giving people a new lease of life after mid-career burnouts that drama professors are having to warn that it’s not therapy – it’s clowning. (WSJ)
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