Yes, it’s real, and the failure is much more about risk management than about having wrong fundamentals.

His fundamental thesis is as an AI maximalist, with expertise on who will be the winners.

His fund completely blew up, even though his fundamental thesis still may be correct.

He made a ton of money early, but then he just kept increasing his bet size via leverage. The problem is that these stocks may be going up, but they are EXTREMELY volatile. When the whole market went down with some of the Iran news, his margin levels dipped too low, and his lenders issued margin calls. He had to sell his stakes at losses, and his fund collapsed.

Now, part of the problem is he was not a legacy hedge fund with great relationships with his banks, because if he was, he might have been able to postpone the margin calls. Had he been able to do that, he would have been ok, because his positions actually recovered within a few weeks.

It didn’t matter, though, because he was forced to sell at the low point.

In other words, even if your long term bet is correct, if you are maxing out your margin to max out your bet, you are one volatile dip away from blowing up.

No matter how good the bet, you have to be able to ride out the volatility to survive.

It’s like if someone offered you a bet on a coin flip, where they will pay 5x your bet if you win. How much should you bet on each flip?

Well, by expected value you should bet everything you have, because your EV is 2.5x, so the more you bet the higher your expected value.

However, if you bet it all, you have a 50% chance of losing all your money and not being able to make any more bets.

It's real. Obviously he's a pretty accomplished young guy, but that doesn't mean he knows anything about investments.

It's an interesting look into who gets opportunities in our society.

Yes… and some folks gave him money. Per reporting from the NY Times he was broadly laughed out of the room with “East Coast” money which has a massive amount to invest but tends to hold a higher standard on where it goes. Per that reporting, the combination of a lack of experience and inability to give coherent answers to basic questions meant those folks stayed far away.

Regardless he was still able to build a giant pile of cash before alighting it on fire.

Well it's not a random 25 year old. He became valedictorian at Columbia and graduated at 19. He was then briefly a part of OpenAI's superalignment team.

After he got fired, he wrote a 165 page thesis on AI in early 2024 that all ended up becoming true in 2026; you can read it for yourself and be the judge: https://situational-awareness.ai

That's what he based the fund on.

It's generational foresight not available to 99.999999999999999999% of 25 year olds. I want to get ahead of the default cynicism and "oh it's just dumb luck woe is me" aspect of HN.

FWIW, I quite enjoyed this write up of it, and the state of AI investment at the moment. It doesn't entirely dwell on the blowup, but I found it worth the read:

https://xcancel.com/porterstansb/status/2083606266388029691

(I also enjoyed the meandering in to Amex and Wells & Fargo's founding stories)

Yeah. And he made good returns even after the downfall everyone was so gleeful about.

It's better than performance art, it's something you couldn't write.

Trading like forecasting cannot be evaluated. They could be right in a different reality. We just experience one realization of the uncertainty.

>> Wait is this real? Did a random 25yo get 45B under management because he got some interviews after getting fired from OpenAI?

They though they would laugh all the way to the bank...but that laugh was already the problem...

"We Need To Talk About Leopold" - https://youtu.be/rE75WvOtcu8

And before OpenAI, he was at FTX.