Seeing the numbers, hitting it big, giving big, and more
Editor’s Note: Bruce and Suzie Kovner have won the William E. Simon Prize for Philanthropic Leadership. It is given by the Philanthropy Roundtable. The Kovners are celebrated in the current issue of Philanthropy magazine. The article about them is based on reporting by our Jay Nordlinger. In a series this week, he is writing about the Kovners himself, in a kind of amplification. For Parts I and II, go here and here.
We have been talking about Bruce Kovner, and his journey from Brooklyn kid to Harvard academic to world-champion trader and philanthropist. In the ’70s, he is doing some kicking around: some political work, some cab-driving, etc.
I mentioned his fiancée, Sarah Peter. I’ll say just a brief word about family. In 1973, Bruce and Sarah married. They had three children: two daughters and a son. This generation went on to do interesting things themselves. Their parents divorced in the late ’90s.
Return now to the ’70s. In the middle of that decade, Bruce hit on a new field of study: the financial markets. “I immediately found an affinity for them,” he says. “I just got it. It was like everything clicked. I’m very comfortable with mathematical relationships, and I could see the numbers. I could literally see the arbitrages. I don’t mean this in a metaphorical way. I could see them as a matrix. I could see what was out of place, what was incongruous. It was a moment of self-revelation to me.”
Eventually, the theoretician put his money where his mouth was, or where his brain was. He made his Legendary First Trade. This was in February 1977. Actually, the legendary trade was three trades. Kovner borrowed $3,000 from his Master Charge (his credit card). One of the trades resulted in a small loss. Another produced a small gain (and larger gains later). The third trade was on soybeans — and exploded, reaching $50,000 in two months. Bruce let it drop to $25,000 before liquidating. And he was upset.
“He couldn’t eat for three days,” Suzie Kovner points out. It was not so much that he had $25,000 in the bank instead of $50,000. It was, in Bruce’s words, “the feeling that I had lost control of the process. I realized that I had attempted to play this game without a full toolkit. I did not understand how to manage risk.” Finding trades is one thing, Bruce explains. It is an important skill. Managing risk is another.
Bruce got good in a hurry. By the end of the year, he had a million dollars in the bank. Let that sink in for a moment. Not a million dollars in today’s dollars, a million dollars in 1977 dollars. In less than a year, Kovner went from the $3,000 loan to a million dollars. And never looked back.
In that year, 1977, he saw an ad in the Wall Street Journal: A trader needed an assistant. Bruce applied, because he did not want to remain an amateur, however good; he wanted to be a proper pro. The trader needing an assistant was Michael Marcus, of Commodities Corporation, in Princeton, N.J. The company was a proto–hedge fund, started by some brainy academics in 1969. Kovner was one of a roomful of applicants. And his interview with Marcus went swimmingly. They talked of markets at a very high level. Marcus left him with, “This is easy. We’ll be in touch. I look forward to it.”
A couple of weeks went by, and Kovner heard nothing. Eventually, he called Marcus’s secretary, who was cold to him. But she did say he ought to come back in. A week later, he returned, to a room full of applicants. This was upsetting to Kovner, naturally. In due course, the secretary, still cold, told him to go in and see Marcus — who said to him, “I have some good news and bad news. What do you want first?” The bad news, said Kovner. “Well,” said Marcus, “you’re not getting the job as my assistant.” The applicant was crestfallen. What was the good news? “We’re hiring you as a senior trader.”
Kovner talks engagingly about the trading world, as he does about everything, and I will relate just a little: “The single most important thing about trading — aside from the other single most important things — is learning emotional control. Discipline. Objectivity. The ability to confront error. The ability to see that what you’ve done is not correct and to adjust accordingly.” A trader must learn to “listen to the market,” says Kovner. That is a key lesson that he learned from Michael Marcus.
In 1983, Kovner went off on his own, founding Caxton. Were there any hard feelings at Commodities Corporation? Not at all. Kovner remained friends with his former colleagues, and they were his first investors. He ran his company until 2011, afterward setting up CAM Capital, which manages his financial and business affairs.
I am curious about something: What did Ed Banfield, his academic mentor, think about all this? “He was originally perplexed and puzzled about why I gave up academic life, because he was a pure soul and didn’t understand why anybody would choose to do anything but read books, write, and teach. But when I started to succeed in the financial world, he was pleased.” One day, Banfield asked Kovner if he could just come into the office to watch. Kovner said, “There’s nothing to see, really — it’s like watching paint dry — but sure.” Banfield came in.
Also, Kovner opened a trading account for him, which made Banfield’s life easier in his final years. As you can imagine, it was very satisfying for a former student to help a beloved teacher and friend in this way.
***
When Bruce got money, he did something that was natural to him: He gave. At first, he did some “minor civic giving,” as he puts it. He made donations to various local institutions. “I wanted to be a good citizen,” he says. Soon, though, he started major philanthropy. His college friend Chris DeMuth was president of the American Enterprise Institute, the conservative think tank in Washington, D.C. He called Kovner and asked whether he would like to play a part in AEI. The answer was yes.
AEI was a natural for Kovner, really. It defended the values of classical liberalism — free enterprise, the rule of law, individual rights — and it advocated a strong military and a tough-minded foreign policy. These were indispensable in a dangerous world, Kovner thought.
He was an interesting donor to AEI: an intellectual, like the people he was supporting through his gifts. A peer as well as a patron.
Kovner joined AEI’s board in 1989, and became its chairman in 2002. He served in that role for six years. He continues on the board. One thing he considers important is independent review — which AEI has. An institution can fall into self-congratulation, Kovner says. It’s important to be self-critical — and if that is not quite possible, let an independent organization do the criticizing for you.
DeMuth tells me, “A key to understanding Bruce Kovner is that he has always been a man of principle, and his first principle has always been excellence.”
Another object of Kovner’s philanthropy has been the Institute for Justice, or “IJ,” which bills itself as “the National Law Firm for Liberty.” This outfit works in court “to limit the size and scope of government power and to ensure that all Americans have the right to control their own destinies as free and responsible members of society.” Chip Mellor was IJ’s president from its founding in 1991 to just last year. He makes a point about Suzie Kovner: She is “integral” to the couple’s philanthropy, and is “a special dimension” of having Bruce around.
Of IJ, Suzie says, “They do so much to defend the least empowered and least well off in our country. There are so many barriers to entry. Shouldn’t American citizens who pay taxes have the right to start their own hair-braiding business, or to sell hot dogs on the street, or to start a bus line? Why wouldn’t we allow people to do that? Why shouldn’t people be able to build a better, cheaper coffin? Why should a coffin cost a fortune, especially at a time when a family may be most vulnerable?”
This is a particular concern — even a peeve — of Suzie’s. Bruce adds, “They’re such a protected industry. All the regulations make it impossible to have real competition.”
He first got involved with IJ for a particular reason: “I saw that they were the principal defenders of school choice in the courts.” And “they did a great job of it.” Ah, school choice: the Kovners’ most passionate cause (along with their other causes). They are on fire with school choice, and the desire to give children a shot at achieving their potential. “I think that education is the fundamental tool of empowerment for all of us,” says Bruce, “and especially for those who don’t have the other advantages of society.” His contempt for the education establishment — what William J. Bennett, 30 years ago, dubbed “the Blob” — is palpable. Kovner fairly burns with moral indignation. “We know how to fix the education system in the United States, and that is to break the Post Office–style monopoly. It’s awful.”
The Kovners have poured their heart, soul, time, and money into educational projects. Many of them. For instance, they are backers of Success Academy Charter Schools, a network in New York City. It was founded in 2006 by Eva Moskowitz, a former city councilwoman.
Suzie Kovner is a director of the Success Academy schools. She says, “Many of us were lucky to grow up in stable families with a mother and father who encouraged learning and discussion.” Students in these charter schools, however, are apt to come from broken homes, with a mother but no father. “And what Eva and Success are providing is not only stability but an invitation to think. To play with blocks, to read, to learn chess. It is amazing, to see what has been accomplished.”
Moskowitz points out that school choice and charter schools are still controversial — dumbfoundingly so, I say — and that the Kovners are bold givers and participants. They were, in fact, ahead of their time, where school choice and other educational innovation was concerned. Bruce, in particular, has had an impact, she tells me. Why? Because his example has encouraged other givers. “They know he is a person of serious purpose and thoughtfulness, so his influence goes beyond the gift, which is substantial. He is a leader.”
I make a confession to the Kovners: Several years ago, I grew very discouraged about school choice, though I am, like them, an almost evangelical advocate of it. It seemed that the public was not receptive and, frankly, not very grateful. Often, benefactors such as the Kovners were vilified. Who needs it? Bruce says, quickly, “Don’t look for gratitude.” He thinks it is wrong to do so. Suzie takes a long and optimistic view. “Once parents from the poorest areas realize that these schools, these programs, mean liberation for their kids, we’ll have an army. Parents will come on board when they realize that their kids are going to Ivy League colleges, and becoming surgeons, and becoming rocket scientists. These are still early days. Maybe I’m naïve, but I can’t look for thank-you notes at this point. Yet when you shake the hand of one of those kids and you look into his eyes and he tells you that he loves reading or loves science or loves to write code — it’s exciting.”
Suzie is more patient than I am. And I’m sure she is right.
In their home state of Florida, the Kovners have established yet another program: the Kovner Opportunity Scholars. The couple puts young people through college (as Suzie’s grandfather did, those years ago) and provides them with other support as well. This helps the fortunate individuals, needless to say, but it also helps the country, right? Giving of this kind — care of this kind — does collateral good.
***
The Kovners’ giving does not exclude politics: does not exclude donations to candidates and related organizations. They have done plenty of this. But Bruce, for one, doubts that he has done much good in this area. There is an exception, however: “For the past 20 years, I’ve given, in New York State, to people who support school choice, and that has been very effective. It has made the difference at times,” in legislative races.
Has he ever considered running for office himself? He has the range and knowledge, and he would be one heck of a self-funder. He did want to run for office, yes: before he made money. He was a devotee of John Kennedy, remember, and it was natural to want to follow in his footsteps. Through college and graduate school, and for a while thereafter, he thought of a political career. He worked in politics, as you know. But the closer he got to the game, the less he wanted to play it. He was unwilling to make the compromises — the intellectual compromises — required in politics.
“You could have pulled a Bloomberg,” I tell him. (Michael Bloomberg financed himself to three terms as mayor of New York.) “You could do it now.” Kovner smiles a bit, but will have none of it. He would rather make his contribution in the intellectual world. “Milton Friedman and Ed Banfield were right,” he says. “The power of ideas is the greatest power. And as Keynes said, we’re all slaves to some dead economist.” Ideas shake and shape the world.
See you tomorrow, everybody. Thanks for coming along on this Kovner journey.