How did you first get interested in markets? When I was in college, I took a business course with a professor who had a trenchant sense of humor. To give
you an example, he also worked as a bank examiner. One day, before leaving the bank following an audit, he turned
to the bank president and, as a joke, said, "Got you!" The man had a heart attack on the spot. After that, they did
another audit and found that the bank president had embezzled $75,000. Anyway, in class one day, this professor is
reviewing all the financial instruments: stocks, bonds, and so on. Then he says, "Now we come to the craziest market
of all—commodities. Thesepeople trade on only 5 percentmargin—and most of them borrow that." The whole class
laughed, except me. For some reason, the idea of trading on 5 percent margin made perfect sense tome.
When did you first get involved in the financial markets? Not until many years later. I was a rock promoter at the time, and on one weekend, there were three
separate shootings in clubs at which the groups I managed were working. I decided it was an opportune time to
change careers and pursue my true interest—the financial markets. Although I was really interested in futures, I
didn't have any idea how to look for a job in that field. So I decided I would start out as a stockbroker.
My first interview was with a very old-line Wall Street firm, with offices that made you feel like you should
speak in hushed tones. The man who interviewed me was the kind of guy [he adopts a pompously refined voice] who
talks with his teeth together and lives in Connecticut. He tells me, "We only buy blue chips for our clients."
Not having a financial background, I was unfamiliar with the term "blue chip," but it sounded odd to me in the
context of a staid investment firm. So after the interview, I looked up its derivation. I found that the origin of the
term could be traced to the color of the most expensive chip in Monte Carlo. I said to myself, "Aha, now I know what
this game is all about—gambling." I threw away my copy of Graham and Dodd
[Principles of Security Analysis, considered by many to be the "bible" of stock market analysis] and bought a book called
Beat the Dealer. I came
away with the idea that successful investment was really a matter of odds, and if you could compute the odds, you
could find and test methods that could beat the market.
