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Michael Burry – Part 1

2 minute read

In the land of the blind, the one eyed man is king. This saying and its many forms is over a thousand years old. It has never been truer than in the trading world, with Michael Burry.

Michael Burry was born in 1971 in NYC. He had a rare disease as a baby and he had his left eye removed. He grew up with a glass eye instead, which affected how people treated him. So much that it became part of Burry’s personal narrative. He always had trouble dealing with people, instead preferring solitude and his own specific interests.

The interest that dominated his early life was the study of medicine. He went to medical school and earned an M.D. from Vanderbilt University School of Medicine. This led to a neurology residency at Stanford Hospital and Clinics. Burry would work long days and spend the sliver of his remaining time writing about trading online. He was focussing on value investing during the dotcom bubble, making him an outlier once more.  

It didn’t take long before Burry felt that he had learned everything he could from the forums online. He went on to start his own blog, though it was more loose than what most people recognize as a blog. This took up his night time, around 3 hours per night from midnight to 3am.

He quickly noticed people were following his blog more and more. At first the source of his readers were random, but they increasingly showed traffic from big Wall Street firms. His sway would come to be proven when he spoke ill of an index fund run by Vanguard, and got a letter from their lawyers.

As Burry got more involved and visible in the trading world, he was also getting less interested in medicine. He was coming to terms with the truth that although he wanted to help people, he did not like dealing with them personally. He even became disgusted with medicine at times. He realized that he was in medicine because it was easy for him, not because he liked medicine.

This led to the inevitable. He left medicine to start managing money. Between his own savings and what his family gave him, he had about $40,000. He owed $145,000 in student debts by comparison. He decided his investors should have $15 million in net worth to join his fund. Although this may sound ridiculous, he was seeing things clearly.

As he was setting up his office, he got an interesting phone call. He was called by Joel Greenblatt, founder of an investment fund named Gotham Capital. Joel had also written a book called You Can Be a Stock Market Genius. Joel told him he had been waiting for him to leave medicine, and invited Michael and his wife to come to New York to meet.

The meeting caused some anxiety for Burry, which is typical for him when meeting new people. Thankfully, this meeting was nearly impossible to screw up. At Gotham’s office, they offered him a million dollars to buy into ownership of Michael’s newly created firm, Scion Capital. This stunned Burry, but he accepted. This was the first time that Gotham had ever done such a thing.

They were not the only ones to do this. An insurance holding company named White Mountain also contacted Burry. It was managed by Jack Byrne, who was close to Warren Buffett. Byrne had discovered the deal with Gotham, and he wanted a piece as well. By the end of the discussion, White Mountain had bought into co-ownership for $600,000 and pledged $10 million to let him invest. Just like Gotham, they had not done such a thing before they met Burry.

Find out in the next article how Burry moved forward with the money that flooded into Scion.

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