Hedge funders are in the news. Carl Icahn tweets about his dinner with Apple's Tim Cook. Dan Loeb tussles with George Clooney. Bill Ackman says Herbalife is a pyramid and shorts the stock; George Soros goes long. If you want to understand the guys who run hedge funds, you first have to realize that they—we—are a little nuts.
The trick to running a hedge fund is to drink from the fire hose of information, take it all in, figure out what everyone else knows and then position your portfolio to benefit when everyone else is inevitably wrong. This is no simple feat. Sleepless nights, second guessing, minds racing, almost a split personality working out both sides of all arguments.
You force yourself to think like a contrarian. Actually, you become like George Costanza in the "Opposite" episode, listening when Jerry Seinfeld suggests "if every instinct you have is wrong, then the opposite would have to be right."
Famed investor Julian Robertson climbed mountains because, I'm convinced, at the summit, when the air is thinnest, you become euphoric. Great hedge funders bottle that feeling—because once you invest, you're at the whim of markets that no one can forecast day to day. You are floating, drifting—your gut knows you're right but you tumble violently until the market catches up with your way of thinking. Stay sane? No gain.