Trust, Honor, Integrity: A Hedge Fund Pioneer on What Matters Most

Jerrold Fine 2

When people reach their 70s, with most of their struggles and ambitions behind them, they can look back on their lives with a perspective that eluded them in their youth. They can reflect on successes, failures, values and beliefs without the burden of having to prove anything to anyone; their life’s record speaks for itself. Insights born of such reflection transcend knowledge. They reflect wisdom distilled from decades of experience.

Knowledge@Wharton is launching a series to tap into such reflections. Our first conversation — prepared in collaboration with Wharton Magazine — is with Jerrold Fine, 76, a hedge fund pioneer. Three years after graduating from Wharton, in 1967, Fine teamed up with Michael Steinhardt and Howard Berkowitz to co-found Steinhardt, Fine, Berkowitz & Co., one of Wall Street’s most successful hedge funds. In 1976, when the firm was at its peak, he resigned to launch Charter Oak Partners Management in Westport, Conn. Fine converted the business into a family office in 2014 and set out to pursue his next calling as a novelist.

Fine’s debut novel, Make Me Even and I’ll Never Gamble Again, was published in August. (Read a review of Fine’s novel here.) In this interview, Fine speaks about what he has learned from his mentors, choices he made during his life and career, and what has kept him going after he acquired wealth and fame.

 Edited excerpts from the conversation appear below.

Knowledge@Wharton: Could you tell us about your mentors? How did they help shape your values?

Jerrold Fine: The one who was most important was my father. I was incredibly close to him; we were virtually inseparable. Unfortunately, he got sick when I was six years old and he died just as I was turning 13. He imparted some of my most important values, such as honor. Every time he would leave our house, he would say, “You’re on your honor.” I knew never to break my word. He also taught me the value of working up to my potential and even playing up to my potential. He had a great sense of balance. Had he been with me as I hoped, he would have remained my most important mentor.

My father came from a middle-class family. His parents were immigrants.  He was supposed to go East to college on a scholarship, but then his father got very ill and almost died.  So my father, at a very young age, had to join the union of movie projectors to help support his family. He borrowed some money later on and bought a movie theater – which he operated himself. After that, he started doing reasonably well. We became middle class. My father also started a savings and loan with some friends. Then, unfortunately, he suddenly died. We basically lost everything. Still, he had saved enough for my brother and me to go to college – but after that, it was up to us. It’s a good lesson, but a sad lesson – and one that I have never gotten over to this day.

I had another mentor. When I graduated from Wharton, I was 21. I went to work at a prestigious investment bank named Dominick & Dominick. The firm’s senior partner was Gardner Stout. He came from an extraordinarily important, wealthy family. He didn’t seem to belong on Wall Street. He really was a naturalist who loved animals and the environment.

“If you read an hour and a half every day, you can learn a lot.”

Gardner lost most of his money in the crash of 1973-74. But his dignity was extraordinary; he had invested in my fund, and he would insist upon taking money out each year to maintain his charitable contributions. He believed in honor, in keeping his word. A few years later I saw him go through Alzheimer’s, which was devastating. By then he had become the president of the American Natural History Museum. If you go to the museum in New York, there’s a wing dedicated to him. Fantastic man. I really admired him.

Both these people I cared a lot about died when they shouldn’t have. That’s a lesson in itself. They both had an impact on me, mainly in terms of trust and honor — as for the rest, you’re on your own. I learned that at a young age because I had to.

Knowledge@Wharton: Books play an important role in making us who we are. Which books shaped your outlook on life? When did you read them? Why do you think they meant so much?

Fine: I’m a voracious reader. I went through periods of my life when I commuted from Connecticut to New York and, on the way home, I had an hour and a half every day to read. I remember going through a China period, where for two years I read books on the history and culture of China. If you read an hour and a half every day, you can learn a lot.

I enjoy reading biographies. Among my favorites are those of George Washington. I have re-read them many times. The thing that gets me the most about him was, once he achieved what he did, there was a movement in the country to make him king. He probably could have become one – but he chose not to. He left when he should have and permitted the country to move forward with new leadership. That was remarkable! That was the beginning of our democracy.

Knowledge@Wharton: What were your aspirations when you were young? What are they now?

Fine: To be totally honest, my aspiration when I was young was to pitch for the Cincinnati Reds. That’s what I wanted to do more than anything. I had an aunt who was the secretary to the general manager of the Reds. She promised that if I continued to do well in school, she’d get me a tryout with the Reds. There was only one game a week on television in those days. I loved watching the Reds. I had an epiphany, which was somewhere during my senior year of high school and playing American Legion, when I pitched against a man named Pete Rose. He would be in the Hall of Fame, but it isn’t because he gambled on his own team. Rose has a record that has never been surpassed for the most hits in the history of baseball. I encountered him and gave him my best shot, and unfortunately saw what happened. I still wonder where the ball he hit eventually stopped. I realized then that I wasn’t going to make it. It was a tough pill to swallow, but I learned a lot from that.

My aspiration now involves writing novels. I have finished my first and now I’m working on my second. I want to write books that people will enjoy, but most importantly, that I will be proud of, that say something, but are also entertaining. I want them to mean something. I hope people understand the different currents within my book. That’s where I am now in my life. It’s very energizing.

As I said, I love biographies. To me, they are a great learning tool. But novels can touch you in a different way. Writing a novel is more creative. I’ve always been a storyteller. My kids will tell you that I’ve been doing it my whole life.

Knowledge@Wharton: Which choices have you made that had the most pivotal impact on your life and that of others? Why did you make those choices? In retrospect, were they the right ones?

Fine: The first and most important was the decision to marry my wife. We met in high school — she was 15 and I was 17. And that was that! It was one of those things and we both knew it. We committed to each other right then. Then off I went for four years to Philadelphia. She wasn’t allowed to go away to school. Her father was very Midwestern. He did a compass around their house, and he said, “Two hours.” The Berkeley of Ohio was Miami, so that’s where she went. When I graduated, we already had been together five years. When I got the job at Dominick & Dominick, we married and she transferred to New York University. We’ve grown together. She’s wildly creative as an artist, and she really doesn’t care about money or the markets. When I come home, it’s like a cleansing, which is important for my sanity.

The second choice I made, which was a bold thing to do, was leaving Dominick & Dominick after two years to start our hedge fund. I’ve thought a lot about it. I don’t know why I wasn’t frightened. I should have been — because I had no income. In those days, funds didn’t charge management fees. My wife was making $5,000 as a school teacher in New York, and I had saved a little money. It was a real risk to take, but I had no doubt we would succeed. I should have had doubts. But I didn’t at the time, and off we went.

“I think the greatest gift would be that there’s an afterlife…. I sure hope it’s true, but I don’t know. I’m not going to bet on it.”

I did that for nine fantastic years. Then the inevitable happened — which is, we had three guys who were very independent, who made joint decisions on everything. That’s the way our partnership arrangement was written, so each of us could block any action – which worked. But I could see the handwriting on the wall, that we each would sooner or later want to have our own operation. I took the step, right at our peak, to say I’m resigning. I’m going to do the same thing — but in Connecticut. I had decided to start Charter Oak. It was a gutsy step because I could have just stayed on in the partnership. We were on top of the world; we were the biggest hedge fund then. I liked everybody. I also knew that once I went out on my own, I’d have to re-prove myself.

Another reason I did that was related, again, to the death of my father. This is a theme that runs through my life, in that I know what it’s like to be alone. I wanted to be there for my children. I wanted to have dinner with them. I wanted to put them to bed. I wanted to coach their games. I wanted to be part of their lives. I knew that if I was running my own firm, I could time it that way. I could come home, be with them, and then if I needed to do more work, I could do it at night. I am a workaholic; I know that. It was the right decision because my kids have turned out great. I am very close to them.

My fourth pivotal choice was giving up Charter Oak to work on a novel. I did that in 2014 when we were at our performance high. It took about a year, because winding down is a big process. I called every single investor and told them I was doing it, and why I was doing it. That was an education in itself. Some people surprised me in a very positive way. They were complimentary and gave me gifts and dinners. Others said, “How could you do this to me?” – as though I were an indentured servant. It was interesting to see how people reacted. I started writing the novel at the end of 2014 and committed to doing it every day.

Knowledge@Wharton: What has been your guiding philosophy in dealing with others? How did you arrive at it?

Fine: First and foremost, honesty is most important. You should never operate with people and not be honest with them. I always treated our investors as if they were partners. I’ll tell you an interesting vignette. My children sometimes asked me, “Have you ever done anything dishonest?” And I said, “Two times.”

The first time was when I was in grade school. Right across the street, there was a little store where you could get candies and ice creams. The people who ran it had the most fabulous name — Mr. and Mrs. Brightholly. I saw the older boys do this game with them, where they would say, “What is down there?” Then Mr. Brightholly, this old man, would bend down, and they would steal candy from the top counter. I’d watch that — and one time I did it, wanting to be like the big guys. This is going to make me sound like a better person than I am, but all night long, I felt so guilty. I felt terrible. It was only penny candy. The next day I went back, and I did it again. When Mr. Brightholly bent down, I left a nickel on the counter and ran out. Then I felt better.

The second time was when we had a spelling test when I was in third or fourth grade. I was a good student, but I hadn’t studied for this test. I’ve never been a great speller, so I positioned myself next to this girl who I knew was very good. I’ll never forget what I did, because I copied off her test. When the teacher passed out the graded papers, she handed them out to everybody, and then she gave one to Carol Seinsheimer and said, “It seems like we have no Jerry Fine in the class, but we have two Carol Seinsheimers.” I even had copied her name! Isn’t that unbelievable? I must tell you that when I came home — I had to have my parents sign something those days — my mother was enraged. My father thought it was hysterical but still made me write an apology note to my teacher.

Knowledge@Wharton: Have you had a devastating experience that you came to see in a different light in the future? What did that teach you?

Fine: My father’s death was the big one. I can’t stop thinking about it. He smoked three packs of unfiltered cigarettes a day. He died in 1955. When I was six, he had his first heart attack. We moved to Florida for a year and moved in with my grandparents while he recuperated. I had to go to school down there. It seemed like things were okay and we returned to Cincinnati. Then he had his second attack. So, I was always aware of it.

“Listen. Don’t talk too much. Make your own decisions. Don’t just follow everybody. Ask questions that will take you somewhere … listen to the answer. Don’t be thinking about the next question.”

My dad and I did everything together. I caddied for him in golf tournaments. He said I was his good luck charm. He broke a lot of rules with me. Crazy ones. I’ll give you an example. He would drop my brother and me off at religious school on Sundays. Then I would walk through the school, go out the back door and he’d take me out to be his caddy. We were obviously deceiving my mother. I thought it was great at the time. The truth is, I’ve never gotten over his death.

My godfather was the most important internist in Cincinnati. He was my father’s good friend. He came to visit my father after the second heart attack. I heard him say to my father that you must stop smoking, you’ve got to take better care of yourself. I could hear my father say, “I’ll live my life like I want to. I know what I’m doing.” I have never forgiven him for that. I can’t.

I had one older brother. There’s a movie made about him. He was an incredible doctor, and had been at San Francisco General his entire professional life. They just named the outpatient department of the hospital the Richard Fine People’s Clinic. He hadn’t donated money to the hospital. It’s all because of what he did. I’ve never seen that in any other hospital. He was a public servant as a doctor. I grew up in a small bedroom separated by a night stand with him my whole life. He helped me get through many issues. When he moved to the west coast, I literally talked to him every week. Then he got cancer. He told me New Year’s Eve Day, soon after I had started my book. I asked him, “What’s the prognosis?” And he said, “It’s a very simple diagnosis. I’m [sunk].” That was his diagnosis. That was beyond terrible, because I saw my proud brother disintegrate.

What has this taught me? You’re probably not going to like my answer. It haunts me. It haunts me that good people, people who are helping society, who give of themselves, die at young ages. Meanwhile other people, people who care only about themselves, can live on and on and on. It haunts me, the right and wrong in life. It doesn’t make me cynical. It makes me angry. I think about it all the time. Because I’m the kind of person, if you cut me, I bleed. I want to bleed. I don’t want to be cold.

Knowledge@Wharton: If you were to think beyond your professional accomplishments, what would you say has been your life’s mission and purpose? When and how did you discover it? To what extent have you been able to fulfill it?

Fine: I’m probably old school this way. I’ve always believed that if you try harder, you can do better. If you practice more, you’ll be better. I understand that you’re not going to be here forever. I think the greatest gift would be that there’s an afterlife. That would be the greatest gift. I sure hope it’s true, but I don’t know. I’m not going to bet on it.

I’ve been given a few gifts and a lot of luck. I feel it’s my obligation to do the best I can — that includes as a person, as a husband, as a father, and when I ran other people’s money. I try my very, very best. I’m proud of our record. When I wrote my book, I put everything I had into it. Life is way too short.

“I’m not going to some retirement community or a gated golf community, and live some pristine life. That’s not going to happen.”

Knowledge@Wharton: What are your ideals? Have they changed over time? And by ideals, what I mean is a standard of perfection that you set for yourself.

Fine: That question would be easy to answer in terms of business. Because my ideal there was just to never lose. I figured if I never lost, somewhere in there, I would win. I’ve always thought that way. I gambled that way and I ran Charter Oak that way.

The most important thing is to be able to look in the mirror and ask, “Am I really trying my best? Am I really being honest? Am I treating everybody well? Am I being a good father, or am I being too tough on my kids? Am I pushing them too hard?” I have four children and they all went to very good schools. Both of my daughters went to Penn. But I just feel that being honest, trying hard, having respect for other people and — when I say be charitable, it’s not just giving money away. If you see somebody needs help, you help them. I try to do the best I can to be a good person. That’s enough. I can’t be more than that. I just can’t.

Knowledge@Wharton:  Since you mentioned your children, what are some of your deepest convictions and life lessons that you would like to pass along to your family to guide them on their own journeys?

Fine: Well, honesty is obviously one. Trying their best is another one. And, to not be naive. I don’t want somebody taking advantage of my children. They grew up with something I didn’t have, which is financial security. I was fortunate that I achieved it in my 20s. But it’s different when you earn it yourself. I keep telling them, listen. Listen. Don’t talk too much. Make your own decisions. Don’t just follow everybody. Ask questions that will take you somewhere. And when you ask a question, listen to the answer. Don’t be thinking about the next question. Listen to what the person is telling you. And then, if you have really thought something out, trust yourself. You’re going to have to make decisions. They won’t all be right. But at least you will have thought things out.

I’m Jewish and my wife is Christian. When it comes to religion we agreed to give our kids the gift of making their own decision. We’re not going to tell them what they should or shouldn’t believe. We’re not going to tell them they should believe that Jesus is the son of God. We’re not going to tell them that Jews are the chosen people. We’re going to educate them as best we can, and then, when they are old enough, they should make their own decision. We wanted them to be unencumbered by our backgrounds. I think that’s a gift that most people aren’t given.

Knowledge@Wharton: What matters most in life?

Fine: I’m 76 now, so you’ll probably get a different answer than if I were 40. What matters now is the race to the finish line and to be as productive as I can. I have a crazy amount of energy. I take care of myself. I have my life set up well so I have a lot of freedom. I still love investing our family’s assets. I do that in the mornings, but I want to be able to write in the afternoons and explore things I haven’t had a chance to explore before.

I want to do the best I can while I have whatever skills I have. I’m not going to some retirement community or a gated golf community, and live some pristine life. That’s not going to happen. I want to watch my family grow and hang out with my wife. I get a big kick out of that.

Image: Jerrold Fine by Mike McGregor

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