Ken Griffin's $30 Billion Masterstroke
Good morning, everyone.
This week’s newsletter includes: Ken Griffin putting his gulf stream jet to good use, and the $18 Billion hole Blackstone President Jon Gray found himself in.
Where Does The Value Sit?
Enron collapsed - but while Wall Street panicked, a 33-year-old Ken Griffin flew a Gulfstream to Houston and walked away with $30 billion…
In December 2001, energy trading firm Enron dramatically imploded in the largest corporate bankruptcy in U.S. history.
The fallout was enormous.
Energy trading was considered toxic, nobody wanted anything to do with it. Executives were lawyering up. Regulators were circling.
The traditional approach to large bankruptcies was for a huge firm to scoop up the business at a large discount, and slowly dissect the most valuable elements of the firm.
And that’s exactly what happened. First out of the blocks was giant Swiss bank UBS, who made a play to buy Enron from the ashes.
But, Citadel Founder & CEO Ken Griffin spotted something…
He chartered a Gulfstream jet, filled it with 16 of his best staff, and flew straight into the belly of the beast - to Enron’s Houston HQ.
“All we did was interview people at Enron for several days to see what worked,” Ken said.
Ken wasn’t interested in the tainted Enron brand or the buildings. He wasn’t even interested in their trading desk.
He wanted the people.
Ken homed in on the leadership of Enron’s quantitative research team, a team he identified as the intellectual backbone of its commodities business.
Enron trader John Arnold recalled: “Other companies set up a few interviews with Enron’s senior people…Citadel interviewed everyone in the trading operation - all functions, all levels”.
UBS ended up buying the entire Enron business, except for the quant research team.
UBS got the assets. Ken took the brains.
However, after losing the quant team to Citadel - the division struggled and UBS shut it down a few years later.
Ken, now armed with a supercharged quant research team, built Citadel’s commodities unit into a money making machine that has made $30 Billion since then.
When remembering this time, Ken will often cite his favorite quote by Abraham Lincoln:
“Things may come to those who wait, but only the things left by those who hustle.”
Recommendation’s
For a crazy real life story about Ken he didn’t reveal until years after it happened, check out this article from 2015.
A barnstorming recent interview with Ken here - where he talks about Elon Musk, social media but also the potentially devastating long term impact of a 3% inflation rate on US households.
The $18B Mistake That Made Blackstone
How did Jon Gray manage to turn an $18 Billion loss into one of the most profitable deals ever?
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Joseph Cass