Michael Novogratz calls himself “the Forrest Gump of bitcoin,” citing his luck at being in the right place at the right time.
Illustration by Keith Negley
Michael Novogratz was in a good mood. It was the thirtieth reunion of Princeton’s class of 1987, and the on-again, off-again billionaire was getting a lot of respect. “I want to hit you up about something,” a two-star general said. “Those are the freshest kicks,” a young bro in a dressing gown observed, complimenting Novogratz’s black patent shoes with orange piping and matching tassels. (“It’s all about peacocking,” Novogratz later told me, of his sartorial extravagance.) He huddled with Joseph Lubin, a former roommate and one of the co-founders of the hit cryptocurrency platform Ethereum. It was a warm June day, last year, and the Princetonians were amiably crushing cans of Bud amid chants of “Tiger, tiger, tiger, sis sis sis, boom boom boom, ah!”
The alumni parade, known as the P-rade, started to wind through the neo-Gothic campus, its mob of participants marching past signs for a symposium entitled “Can America Still Lead?” As we joined the P-rade, we heard shouts of “Novo! Novo! Novo!” He stopped by a gaggle of young wrestlers, all of whom seemed monumentally drunker than the rest of Princeton’s population—a notable distinction. Novogratz, formerly the captain of the college’s wrestling team, slapped a half-naked man on the back so hard that he left a red palm print. “I five-starred a guy!” he shouted as we continued down the P-rade, men running up to him as if he were the mayor of a small Sicilian hill town. “Mr. Novogratz! I’m Goldman corporate trading!”
Princeton, like Wall Street, where Novogratz has made at least three fortunes and lost at least two, is full of stories about him. There was the story of how Novogratz never showed up for R.O.T.C. (he was admitted to Princeton on an R.O.T.C. scholarship). And the time, at the previous reunion, when he flew a helicopter—Novogratz did a year’s worth of helicopter-pilot training, at the Army’s flight school in Alabama—down Prospect Avenue, nearly clipping a gate. “He’s bombastic and he’s full of shit,” one of his friends said, “but he doesn’t have a mean bone in his body.” Novogratz, who is properly bald, with a pair of sharp blue eyes and a gravelly voice that can go full Muppet after a volley of drinks, was, uncharacteristically, sober. At the behest of his wife, he was preparing himself for an eleven-day Vipassana meditation retreat in Wales. “I’m trying to regrow my discipline muscle,” he told me as we approached the Tudor hulk of the Tiger Inn, his eating club, where a beer-pong tournament was already well under way in the basement.
Novogratz had risen quickly, at Goldman Sachs and in the hedge-fund world, but each rise was met with a stunning, often humiliating reversal—first a parting with Goldman, in 2000, over what has been referred to in the press as “lifestyle issues,” and then the removal from his partnership, in 2015, at the high-flying Fortress Group after losing a series of currency bets. Once worth north of two billion dollars, Novogratz had been reduced to the ranks of mere centimillionaires. But 2017 was proving to be pivotal for him and a motley band of other sidelined investors seeking redemption—think the Winklevoss twins—as they tethered themselves to the year’s most befuddling financial event: the rise of cryptocurrency.
Novogratz had recognized its potential when one of his partners at Fortress, Peter Briger, introduced him to one of its earlier evangelists, an Argentinean investor named Wences Casares. In 2013, Novogratz put seven million dollars of his own money in cryptocurrency investments when bitcoin was selling at around a hundred dollars a coin. (A single coin currently sells for more than sixty times that amount.) Citing his luck at being in the right place at the right time, Novogratz has called himself “the Forrest Gump of bitcoin.”
Novogratz’s crypto bets had coaxed him out of self-imposed retirement, and soon sprang him back onto CNBC and Bloomberg. Late last year, as the G.O.P.’s tax bill barrelled through Congress, he called Steve Mnuchin, the Treasury Secretary, an “idiot” (spelling out the word, for good measure) and rebuked Trump’s economic adviser Gary Cohn for the tax overhaul, saying that he “shouldn’t be able to live with himself.” Both Mnuchin and Cohn had been partners alongside Novogratz at Goldman Sachs, and this made for an unusual breach of Goldman etiquette.
To cap off the reunion, Novogratz had paid for a concert by Duran Duran. “Every five years, he does us well,” a classmate told me. Even in the middle of a streak of sobriety, it was hard for Novogratz to say no to a good party. “We’re a family of near-alcoholics,” he joked earlier that day, referring to the hungover crowd at a Princeton brunch that included his wife, Sukey Cáceres, also an alum, and their four children, three of whom have attended the university. The night ended with a touch of eighties style and contemporary dissonance. As gracefully aging Princetonians drained the booze from their red plastic cups, Simon Le Bon, dressed in what looked like a swath of green vinyl, belted out “A View to a Kill,” and, in one corner, Ted Cruz (class of ’92) darkly made his presence known.
In the past decade, a large number of the friends I had come of age with in Manhattan left the city, displaced by rising costs to Berlin or Los Angeles or the mid-Hudson Valley. These friends, many of whom were fellow-alumni of my alma maters, Stuyvesant High School and Oberlin College, were writers, graphic designers, architects, academics, and journalists—the heart of what used to be the creative middle class. As I walked down the now unfamiliar streets of my city, eying a new breed of closely cropped, athletic individuals, I kept wondering, Who are these people? Eventually, I discovered that they worked mostly for banks or hedge funds or private-equity firms. Around 2012, I decided that my next novel would be about finance. When I first broached the idea of making a fund manager the hero to a friend whose husband works in the industry, she asked me, “Why would you do that? Bankers have no imagination.” (In my research, wives saying unflattering things about their spouses became a consistent theme.)
Do bankers have imagination? That statement felt both like a challenge and like a lodestar for my work. I would find hedge funders worth writing about or invent my own. More than a few reminded me of Novogratz’s wrestling friends—scrappy lower-middle-class kids from the peripheries of New York or Naples or Moscow. As a hungry, insecure kid growing up in eastern Queens, I remember watching the movie “Wall Street” and fantasizing about how I would look in suspenders and a contrasting collar. The men on the big screen did not have to understand themselves; the money made them understood. Although my greed had been expunged at Oberlin, and the financial crisis of 2007-08 had left me with a more or less permanent view of finance as an industry built on fraud, I found it hard to dislike some of my new acquaintances. The more intellectually vibrant ones came with backgrounds in advanced math and physics; they approached their trades like a puzzle, albeit one they were increasingly unable to solve. Others seemed to be flirting with the edges of sociopathy, or, at least, an inability to pass “Blade Runner” ’s Voight-Kampff empathy test.
In the popular imagination, “hedge funder” has become shorthand for a special breed of super-rich, super-intelligent scoundrel. Hedge funds raise money from so-called accredited individuals (a minimum of a million dollars in investable assets is required) and institutions such as university endowments or pension and sovereign wealth funds, and then deploy it in any way they see fit. It may help to think of hedge-fund managers as an army of men—and they are mostly men—walking down the street with dustbusters, trying to suck up cash and assets from every nook and cranny in the universe. In theory, at least, hedge funds are supposed to generate returns in bear as well as bull markets, because the contents of their dustbusters are hedged, by the managers taking long positions on assets that are expected to increase in value and shorting those they expect will decrease.
The rise of this less regulated “buy” side of finance has put to shame the income of the “sell” side. Around Manhattan, “investment banker” now carries the same sad also-ran cachet as “doctor” or “lawyer.” An older managing director at a large bank complained of the struggles of the middle class. When I asked him to define “middle class,” he spoke of people like him, earning between two and four million dollars a year. Young analysts told me they were being priced out of Brooklyn, much less Manhattan, by rising hedge-fund plutocrats and their ilk.
Part of this may be ascribed to a strategy involving two numbers—“the two and twenty.” Traditionally, many hedge-fund managers have collected twenty per cent of a fund’s profits, and they have also kept two per cent of the assets committed to a fund, regardless of the outcome of their bets. Huge losses for clients could still mean a payday for managers. Wall Street has long been a place of outsized compensation for the few who can master its rules, or at least pretend to. (There is a book that handily explains the investor-manager relationship in its title alone: “Where Are the Customers’ Yachts?”) Hedge funds seemed to offer the best and the brightest the quickest road to riches yet. As one hedge-fund manager told me, “There’s money sloshing around and chunks falling off, and people get compensated for standing there.”
These people could be divided into many categories, but the two most useful I’ve found are the rainmakers—the polished, fraternal, athletically built avatars of the Princeton-Colgate-Duke axis—and the Dockers-wearing, kielbasa-munching math whizzes. Some funds seemed to make an art form out of how many brilliant physicists from the former Soviet Union can be squeezed into a small, overlit room. There was no question which of these two groups the socially brilliant but algorithmically challenged Novogratz belonged to.
What struck me about both sets was their desire to live their lives as a competitive sport. “Money has nothing to do with it,” Turney Duff, a former partner at a health-care hedge fund, told me. “It’s literally about winning.” I began to think of the financial world as a tax on the rest of us, a way to transfer wealth into the hands of a select few through their own considerable cleverness and also through the way their income was taxed versus our own.
And yet the majority of the hedge funders I befriended were not living happier or more interesting lives than my friends who had been exiled from the city. They had devoted their intellects and energies to winning a game that seemed only to diminish the players. One book I was often told to read was “Reminiscences of a Stock Operator,” first published in 1923. Written by Edwin Lefèvre, the novel follows a stockbroker named Lawrence Livingston, widely believed to be based on Jesse Livermore, a colorful speculator who rose from the era of street-corner bucket shops. I was astounded by how little had changed between the days of ticker tape and our own world of derivatives and flash trading, but a facet that none of the book’s Wall Street fans had mentioned was the miserableness of its protagonist. Livingston dreams of fishing off the Florida coast, preferably in his new yacht, but he keeps tacking back up to New York for one more trade. “Trading is addictive,” Novogratz told me at the Princeton reunion. “All these guys get addicted.” Livermore fatally shot himself in New York’s Sherry-Netherland Hotel in 1940.
By 2016, I started drinking more heavily than is usual for me (I was born in Russia). For the second year in a row, there were more shuttered hedge funds than new ones, investors having been turned off by a mixture of high fees and subpar returns, owing in part to a crowded field of funds executing similar strategies and also to an unusual absence of volatility in the markets. Even the legendary traders, like Paul Tudor Jones II, of Tudor Investment, were being walloped. The “two and twenty” model was turning into more of a “1.5 and fifteen” one. The secret-sauce bottles containing trading algorithms and the like had run empty, and to fill the void my new friends and I turned to Scotch—thirty-year-old Balvenie and twenty-one-year-old Hibiki. After a particularly rough night, my wife found me at 4 A.M., sitting in the corner of our bedroom, trying, and failing, to unbutton my shirt. The stress and the consequent loss of control felt familiar. The fund managers’ ambition was like a drug whose potency I had forgotten. At Stuyvesant High School, a competitive math-and-science school in Manhattan with a high proportion of first-generation immigrants, my classmates and I would get up every morning to wage battle over a hundredth of a percentile on our grade-point average; my new friends were fighting over so many basis points on their Bloomberg monitors. When we failed, we failed in front of our families, our ancestors, our future and our past.