This week we feature investing lessons from the legendary Stanley Druckenmiller, who in this free wheeling yet insightful interview with The Hustle, talks about everything from position sizing and taking concentrated bets to the tech bubble and Bitcoin. The article introduces him as:
“Stanley Druckenmiller is widely considered one of the greatest investors ever.
Born in Pittsburgh in 1953, he studied English at Bowdoin College before starting work towards an Economics PhD at the University of Michigan. In 1977, he dropped out of the PhD program and joined the Pittsburgh National Bank as a retail investment analyst.
After learning the ropes, Druckenmiller founded his own investment firm in 1981 — Duquesne Capital Management. He established such a strong track record that hedge fund legend George Soros recruited him to work at the Quantum Fund, which he did from 1988 to 2000.
As the Quantum Fund’s lead portfolio manager, Druckenmiller helped Soros pull off one of the single greatest trades: In 1992, the pair “Broke the Bank of England” with a bet against the British Pound that netted a $1B pay day.
Following his long partnership with Soros, Druckenmiller built Duquesne Capital to a peak of $12B of assets under management. In 2010, he returned all of his investors’ money and converted Duquesne into a family office.
Why?
Druckenmiller no longer wanted to deal with the “stress” of maintaining such an exceptional trading record.
And the record is almost peerless: over more than 4 decades of investing, Druckenmiller has never recorded a down year (his fund even notched a return of +11% in 2008). During one stretch, he compounded assets at 30%+ a year for 30 straight years. Today, he has a net worth of $5B+.”
The interview is well structured into sections with a little takeaway at the beginning of each section. Our favourite section, the one on concentrated, high conviction bets:
“When I’ve looked at all the investors (that) have very large reputations — Warren Buffett, Carl Icahn, George Soros — they all only have one thing in common.
And it’s the exact opposite of what they teach in a business school. It is to make large concentrated bets where they have a lot of conviction.
They’re not buying 35 or 40 names and diversifying.
I don’t know whether you remember that Icahn a few years ago put $5B into Apple. I don’t think he was worth more than $10B when he did that.
[In 1992] when I went in to tell Soros that I was going to short a 100% of the fund in the British pound against the Deutschmark, he looked at me with great disdain.
He thought the story was good enough that I should be doing 200%, because it was sort of a once-in-a-generation opportunity.
So, [these investors] concentrate their holdings. This is very counterintuitive.
In my thinking, [concentrating your bets] decreases your overall risk because where you tend to be in trouble is if you have 35 or 40 names.
If you start paying attention to one. If you have a big massive position, it has your attention.
My favorite quote of all time is maybe Mark Twain: “Put all your eggs in one basket and watch the basket carefully.”
I tend to think that’s what great investors do.”
“Stanley Druckenmiller is widely considered one of the greatest investors ever.
Born in Pittsburgh in 1953, he studied English at Bowdoin College before starting work towards an Economics PhD at the University of Michigan. In 1977, he dropped out of the PhD program and joined the Pittsburgh National Bank as a retail investment analyst.
After learning the ropes, Druckenmiller founded his own investment firm in 1981 — Duquesne Capital Management. He established such a strong track record that hedge fund legend George Soros recruited him to work at the Quantum Fund, which he did from 1988 to 2000.
As the Quantum Fund’s lead portfolio manager, Druckenmiller helped Soros pull off one of the single greatest trades: In 1992, the pair “Broke the Bank of England” with a bet against the British Pound that netted a $1B pay day.
Following his long partnership with Soros, Druckenmiller built Duquesne Capital to a peak of $12B of assets under management. In 2010, he returned all of his investors’ money and converted Duquesne into a family office.
Why?
Druckenmiller no longer wanted to deal with the “stress” of maintaining such an exceptional trading record.
And the record is almost peerless: over more than 4 decades of investing, Druckenmiller has never recorded a down year (his fund even notched a return of +11% in 2008). During one stretch, he compounded assets at 30%+ a year for 30 straight years. Today, he has a net worth of $5B+.”
The interview is well structured into sections with a little takeaway at the beginning of each section. Our favourite section, the one on concentrated, high conviction bets:
“When I’ve looked at all the investors (that) have very large reputations — Warren Buffett, Carl Icahn, George Soros — they all only have one thing in common.
And it’s the exact opposite of what they teach in a business school. It is to make large concentrated bets where they have a lot of conviction.
They’re not buying 35 or 40 names and diversifying.
I don’t know whether you remember that Icahn a few years ago put $5B into Apple. I don’t think he was worth more than $10B when he did that.
[In 1992] when I went in to tell Soros that I was going to short a 100% of the fund in the British pound against the Deutschmark, he looked at me with great disdain.
He thought the story was good enough that I should be doing 200%, because it was sort of a once-in-a-generation opportunity.
So, [these investors] concentrate their holdings. This is very counterintuitive.
In my thinking, [concentrating your bets] decreases your overall risk because where you tend to be in trouble is if you have 35 or 40 names.
If you start paying attention to one. If you have a big massive position, it has your attention.
My favorite quote of all time is maybe Mark Twain: “Put all your eggs in one basket and watch the basket carefully.”
I tend to think that’s what great investors do.”
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