Never forget the time Chamath Palihapitiya thought he had an edge on Buffett. The child of an immigrant who used his own hard work and determination to achieve wealth at Facebook Inc., earned billions as a daring investor, and led the trend of blank-check companies, at one point saw himself as a figure akin to Warren Buffett, but for the current Reddit era.
The arrogance was insane but not surprising. But time catches up and spares no one – unfortunately!
The underrated part of this is that he chose an arbitrary point in time in which Buffett still managed his fund and this was just one of the investments. It was misleading and dishonest from the start. He is comparing his return to a textile mill for most of those years.
In an interview with Bloomberg’s “Front Row,” the founder of Social Capital, Palihapitiya, suggested that Warren Buffett’s message may not resonate with the current generation, stating that “nobody’s going to listen to Buffett.” However, Palihapitiya also emphasized the need for other individuals to step up and take on the mantle of conveying important financial messages to younger generations in a language that they can understand, acknowledging that while it may be difficult to find someone who can fill Buffett’s shoes, it is crucial to have such figures in today’s world.
Undoubtedly, social media is the language of choice for the 45-year-old billionaire. It’s where he promotes his deals, challenges traditional norms, and generates enthusiasm for “all things Chamath.” Through his online presence, he recently fueled speculation that he might run for governor of California. Additionally, he occasionally shares shirtless selfies with his 1.3 million followers. His feed is a free-flowing stream of thoughts and opinions.
Using Twitter as his primary platform, Palihapitiya had solidified his position as the leading figure in the world of special-purpose acquisition companies, which were the most popular investment vehicles on Wall Street in 2021. Alongside Ian Osborne, a former PR professional turned financier, Palihapitiya has sponsored six SPACs, raising a total of $4.34 billion, and acquiring businesses in diverse fields such as space travel, health insurance, financial services, and real estate. If SPACs were emblematic of a speculative mania, then Palihapitiya was the face of that moment.
Palihapitiya played a prominent role in the hype surrounding meme stocks, including GameStop Corp. On January 26th 2021, he tweeted about purchasing call options for the company, which helped to drive its brief surge. Palihapitiya eventually exited the trade before the GameStop stock value plummeted, earning a profit of $500,000, which he subsequently donated to charity.
In addition, Palihapitiya had expressed a desire to emulate Warren Buffett’s success by expanding his own empire into a conglomerate similar to Berkshire Hathaway, tailored for the 21st century. This would include investor conference calls, an analyst day, and an annual meeting that investors would not want to miss. His ultimate goal is to generate significant wealth that can help to narrow the inequality gap in America. It was pretty grandiose stuff. But it all came to an end in 2022 when the SPAC speculative mania came crashing down.
Despite suffering losses from the SPAC frenzy, many of the major SPAC creators have been largely unaffected, as the fortunes they amassed during the craze were significant. For instance, Mr. Palihapitiya, who announced that he would close down two SPACs in September 2022, revealed to The Wall Street Journal that his investment firm, Social Capital Holdings Inc., generated roughly $750 million from several deals. Among the companies that the firm took public were Virgin Galactic Holdings Inc., which specializes in space tourism, and SoFi Technologies Inc., a personal finance application.
According to critics, Special Purpose Acquisition Companies (SPACs) have inherent flaws and pose a danger to investors, as the incentives provided by these companies overwhelmingly benefit sponsors and insiders, to the detriment of individual investor
He also gave us this beauty:
Having said that there’s a little bit of Chamath in all of us that has to be restrained at all times. When you think you have alpha, always ask yourself, but is it just levered beta. Nothing wrong with levered beta as long as you know it’s levered beta. That way you will sell out in time.
