Wealthy, powerful, and potentially dangerous, hedge-find managers have
emerged as the stars of twenty-first century capitalism. Based on
unprecedented access to the industry, More Money Than God provides
the first authoritative history of hedge funds. This is the inside
story of their origins in the 1960s and 1970s, their explosive battles
with central banks in the 1980s and 1990s, and finally their role in the
financial crisis of 2007-9.
Hedge funds reward risk takers, so
they tend to attract larger-than-life personalities. Jim Simons began
life as a code-breaker and mathematician, co-authoring a paper on
theoretical geometry that led to breakthroughs in string theory. Ken
Griffin started out trading convertible bonds from his Harvard dorm
room. Paul Tudor Jones happily declared that a 1929-style crash would be
`total rock-and-roll' for him. Michael Steinhardt was capable of
reducing underlings to sobs. `All I want to do is kill myself,' one
said. `Can I watch?' Steinhardt responded.
A saga of riches and
rich egos, this is also a history of discovery. Drawing on insights from
mathematics, economics and psychology to crack the mysteries of the
market, hedge funds have transformed the world, spawning new markets in
exotic financial instruments and rewriting the rules of capitalism. And
while major banks, brokers, home lenders, insurers and money market
funds failed or were bailed out during the crisis of 2007-9, the
hedge-fund industry survived the test, proving that money can be
successfully managed without taxpayer safety nets. Anybody pondering
fixes to the financial system could usefully start here: the future of
finance lies in the history of hedge funds.
Sebastian Mallaby is the Paul Volcker Senior Fellow in International Economics at the Council on Foreign Relations and a Washington Post columnist. He spent thirteen years on The Economist, covering international finance in London and serving as bureau chief in Southern Africa, Japan and Washington. From 1999 to 2007 he was a member of the editorial board of the Washington Post, focusing on globalization and political economy. His previous books are The World's Banker (2004) which was named as an Editor's Choice by the New York Times and After Apartheid (1992), which was a New York Times Notable Book. He lives in Washington with his wife, Zanny Minton Beddoes, the economics editor of The Economist.