Fooling Some of the People All of the Time: David Einhorn - 2010

Published in 2010 and written by David Einhorn – one of the top investors in the country and the President of Greenlight Capital. This is the revised version of the original Fooling Some of the People All of the Time now that the outcome of the advice given in the book is known.

“Some have observed that naming a sports arena is a good way to identify short-sale candidates.”

The original is the detailed narration of David Einhorn’s battle against Allied Capital, one of the leaders in private financing at that time. Einhorn manages a hedge fund which bets against fraudulent companies as part of their strategy. The book recounts the heated argument between Allied (one of the fraudulent companies) and Einhorn. It uncovers the questionable tactics, such as lying about their numbers and stealing private data from Einhorn’s phone that Allied used to cover themselves up with. He describes the endless documents sent to the SEC to warn them about Allied, which were all in vain as no proper action was taken.

At a charity investment conference in 2002, David Einhorn was asked a question which led to him giving the controversial advice of short selling Allied Capital. We now know that his opinion was correct.

The revised version highlights how many questionable practices are maintained and that history repeats itself. In 2008 at the same conference, Einhorn advised the short selling of Lehman brothers. Had the market been more open to suggestions, the meltdown of the market could have been at least minimized.

His argument in the book is twofold. Firstly, that hedge funds are one private-sector solution to uncover corrupt companies, and secondly, the fact that government agencies do not have correct incentives to catch these businesses.

As such Fooling Some of the People All of the Time becomes a public service, as it calls for more stringent regulation by the government and fair play. It is a compelling read, for anyone interested in questionable practices, our government regulations and whether the crisis of 2008 could have been avoided.