How a Communist Built The World's First Hedge Fund

Use my code HISTORY - 30% off

------

#business #history #finance

Written By: Sam

Video Created By:
Svibe Multimedia Studio
Editor: Cardan
Media Gatherer: Andrea Rivas

Footage Courtesy of: Getty Images

Music Provided By: Epidemic Sound

-----

Alfred Winslow Jones created the world’s first hedge fund and changed the financial landscape forever. [1]

Yet, he didn’t start out as an investment banker. In fact, he started out as a Marxist!

His studies in sociology and career in journalism helped him figure out a neat trick for finessing the market.

At the time, his novel idea flew under the radar.

But nowadays the hedge fund industry has between two and five trillion dollars in assets. [2]

That’s why some people curse Jones’s invention.

They say his idea only helps the elites while working folk pay the price for market crashes. They say lack of regulation means hedge funds are shady, and helped cause the global financial crisis.

However, finance fans will protect Alfred Winslow Jones with an ironclad defence: hate the game, not the player.

Alfred had unknowingly strengthened the muscles he’d need to lift up the world’s financial system.

But none of it would have happened without a chance encounter.

It’s time to understand how history works as we explain “the story of the first hedge fund”.

- Sources -

[NeflixNChill]

Coming from the how money works channel, this channel is just as good

[alexanderveritas]

_The road to _*_Hell_*_ is paved with good intentions._

[mulalobusinge]

Since most hedge funds underperform the market...new financial gimmicks need to rise up like a neq a.w jones

[yubtubtime]

Great video!

I'd say Jones most significant achievement is the Long-Short strategy more than the 2 and 20 though. Long-Short is still the gold standard, even if you're using AI, this, that, or the other.

At the end of the day, it's all just a mechanism to pick some assets to long and others to short, and the beauty of the strategy is that it works for almost everyone with a little know-how. Jones really didn't need the hedge fund structure to fail to achieve his mission of making finance more accessible though, as Peter Lynch later demonstrated.

Jones' innovation of the Long-Short strategy is only one step more complicated than Lynch's philosophy: Lynch says buy stock in the products you buy, and Jones would add to sell the stock in products you avoid.

So, buy what you buy, and sell what you don't. Sounds like some Yogi Berra advice, but that's still the foundation of investing. What Peter Lynch also shows us though is that Jones didn't need to invent a new organizational structure just to fail at democratizing finance!

No one listens to Lynch, despite having been a best-selling author throughout the 80s. Does his advice not work anymore? No, Apple still buys Raytheon stock as a hedge when they buy Raytheon parts, and KFC still buys Tyson stock when they buy their chicken, and so on, but individuals seem to hate the idea of doing the same with their own investments.

Too many folks would still rather gamble on something they know nothing about so that they feel like one of the cool kids. On the other hand, a lot of people just don't want *any* investment risk because they've grown up in a system with so much economic *abstraction* that they think everything is way more complicated and out of their reach than it is.

Given that people like Peter Lynch have *tried* to break through all the BS and jargon for people and it *still* isn't good enough to get the masses investing sensibly, I don't think this sense of "abstraction" is just the result of jargon. I think it's the result of monetary policy occluding how money and the financial system work.

More than hedge funds, the Federal Reserve benefits the most from our financial ignorance because their mandate is to pull the wool over our eyes. Think about that, and how much of an uphill battle finance and investment educators have.

Ultimately it's investor "protections" like individual accreditation rules that perpetuate this sense that it's all just too ✨abstract✨ for a mere mortal to comprehend...so just give your investment capital to Goldman Sachs and the other broker-dealers the State has picked as its racehorses.

Most people just don't want to believe they need investment risk, and too many are checked out and cynical, so I think Jones' aim was bound to be undermined sooner or later.

[stevedes]

3:15 "returns to the US" shows image of Tokyo

[LudosErgoSum]

His story is similar to the stort of the board game Monopoly referenced here in this video: It was created to spur on change, but ended up being the tool of the very people it tried to combat.

[nuineyc]

For most people the Index Fund does a better job giving giving everyone a more equal chance of being able to own a well diversified market portfolio. That being said mutual funds and hedge funds came first, Jack Bogle was the man who made the market accessible for almost everyone.

[johnd.]

It's always easy to tell when someone has never filled out a trade ticket on their own. When someone has made a few trades one year and held the shares. When someone makes a few trades a year. When someone trades every single day the market is open both long and short.

There's way over 4700 Hedge funds in America. There's capital management companies and family trading companies.

[skrazer]

5:08 "you don't have to spend 6-8 *hours* studying like doctors"

[michaelblakemutschler]

What a pristine case study in class-stratum inertia.

[CloudGamingBeliever]

Is it really worth it to put money into a hedge fund? 🤔🤔

Wouldn't it be just better to directly invest into the s and p 500 and similar index funds instead of shit like hedge funds, mutual funds, and blah blah

[mktf]

Francis Baring = 1700's/1800's, Cuthbert Heath, please do both of them.

[MCorpReview]

Do u have the story of Paul Tudor jones?😂

[juglardelzipa]

what if gladwell was actually able to understand something.

[lylecosmopolite]

Labor Day 1929 - Memorial Day 1949: American stocks on average moved sideways. Once it became clear (in December 1944) that the USA would be completely victorious in WW2, a great bull market should have begun. It did not, and many commentators in the latter 1940s predicted that the once the war was over, the Great Depression would rule the roost. Instead the market moved sideways until June 1949, then the Great 20th Century bull market began (it continues to this day.
Another financial wizard who began his career as an investor and fund manager around 1950, was John Bogle, the founder of the Vanguard funds, esp. Vanguard index funds.

[tuckerbugeater]

In 1932, for just under a year he was married to Anna Luise Hauser, née Block (1896–1982), a daughter of the German painter Joseph Block and a descendant of German small hat banker Joseph Mendelssohn

[bharath]

An Australian achieving this is commendable.

[MaulikParmar]

"You don't need to study for 8 to 10hrs like doctors" to enter tech market is the biggest lie you'll ever tell to sell without mentioning how many people survive after 1 or 2 years in industry.

Thats an insult similar to "You don't need an economics degree to understand small details of the economy"

Many do sell this dream, it's just like stock gambling if you don't know what you're doing.
All these professions do require constant improvement and constant learning and no such course can benefit in real world problem solving tasks.

The barrier to entry is already high in many fields but the ignorance of the people has no low :)

[priyankavaidya]

Aww a reverse peace corp. I love this guy!!

[rightwingsafetysquad]

Maybe I need to start taking this Marxism thing more seriously. Marxists seem to be great at making a lot of money in finance 😂.