Career Advice from David Tepper
Career Advice from David Tepper
David Tepper's advice to budding investors on getting started, process, mistakes, and life
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One of the Best
David Tepper, Carnegie Mellon University, 2007
“We were in Russia in 1996. That was a crazy time. I don’t know if anybody is a history person at all, but 1996 was crazy. And when it’s a little bit dangerous, it’s a lot more exciting. We were supposed to have a meeting with this guy, Boris, who was a big deal investor in Russia at the time. And Boris was trying to take over some companies in Russia which was kind of dangerous in 1996. He had a brokerage firm and we were going to go up to his office. We go to this office and at the bottom of his office, there’s all these guys with machine guns. We’re like, what the heck’s going on? I happened to have taken two years of Russian when I was in high school, so I can speak basic Russian. I try to see what’s going on, tell them who I am and who we’re going to see. They let us go up to the office and when we got up to the office, there was almost nobody there. One guy.
He says Boris can’t get back in the country because they took away his visa so I’m going to meet with you. And he said we have the guards downstairs because Boris’ car was bombed last night and the reason we don’t have any people here, is we have a bomb threat in the office. I said to the guy, you could have called us up and we could have had breakfast in the hotel”.
This isn’t an excerpt from the latest Bond movie; it was David Tepper recalling one eventful evening in Russia during the mid-90s. Tepper, arguably one of the greatest hedge fund managers of his generation, is a son of Pittsburgh, Pennsylvania, born in 1957. He would graduate from the University of Pittsburgh in 1978 as an economics major and later complete an MBA from Carnegie Mellon in 1982.
Tepper had known that he “wanted to be in investing somehow” as early as high school, where he endured his first 100% equity loss. During his undergrad years, he worked as a security analyst for Equibank and traded options with “whatever money [he’d] made on the side” which he admits “wasn’t a lot of money on the side”. At this stage, he was continuing to acquire insight into the profession, but didn’t yet “know how it all tied together”.
Formative Years
Tepper quickly became head trader at Goldman’s junk bond desk
Before rushing to Wall Street after graduation like his peers, Tepper joined Republic Steel, an American steel manufacturer, during a particularly challenging time. Despite being over 100 years old, the company had run into distress. In the two years that Tepper was there, Republic Steel “did more financings than the previous 100 years of the history of the company”. He recalled the period was “fun” and one that nurtured his early analytical ability. Being exposed to distressed debt would provide Tepper with the experience that later shaped his career, and would form part of the strategy of his own hedge fund.
After a brief stint at a mutual fund, he joined Goldman Sachs. Six months later, he was the head trader at Goldman’s junk bond desk, where he would spend the next eight years.
“If any of you guys know anything about economic history or Wall Street History, I was on the other side of Drexel Burnham, run by a guy by the name of Mike Milken. So I was there early in the junk bond era at Goldman Sachs”.
David Tepper
Appaloosa
Tepper’s hedge fund generated a CAGR of 25% over 26 years
In 1993, he would go on to found Appaloosa Management, which became famous for Tepper’s aggressive style and confidence. The performance also became a factor in the fund’s recognition. Between inception and 2019, when the fund converted into a family office, Appaloosa is reported to have compounded in excess of 25% per year, net of fees. This made Tepper an extraordinarily wealthy man but he remained grounded; claiming he is “just a regular upper-middle-class guy who happens to be a billionaire”. That doesn’t mean he excludes himself from doing ‘billionaire things’. Today Tepper continues to run the family office, and owns two sports teams; the Carolina Panthers (NFL) and Charlotte FC (MLS), and engages in philanthropy. One of the recipients of his philanthropinism, Carnegie Mellon University, has been gifted upwards of $125 million. The university has meaning to Tepper and is a place where he has returned several times to give presentations and share advice with students passing through the institution on their way to adulthood. In the year prior to the great financial crisis, Tepper found himself giving a Q&A session with business students of the undergraduate program.
There, he would discuss; starting out in the industry, setbacks, the perks and downsides of having wealth, how to sell yourself, gauging political risk, and balancing work with life. Today, I have curated the lessons those fortunate pupils were given.
When you’re starting out, there are no bad choices.
To become a great hedge fund manager, does it matter whether you jump directly into Wall Street from college, or would you be better off going the long way around, like Tepper?
“You know what, when you’re starting out, there are no bad choices. I really do believe that. You just keep driving at what you want and even if you don’t go to Wall Street right away, and you still want to, then you still can go there”.
David Tepper
Despite admitting that his own path made him the success he became, there are no bad decisions for young investors in their early 20s. There are wrong ones; but it’s all about absorbing experience, finding mentors, and recognising there will be mistakes along the way. This is not advice exclusive to investors. Tepper remarks that kids today are “so much more uptight about this stuff” because of the pressure placed upon them from early education; “they’re uptight in high school, SATs and that stuff; much more uptight than we were when we were young”. If stress-inducing academic pressure was more noticeable back in 2007, one can only imagine how much worse it has become sixteen years later.
“You know what, it’s okay if you don’t know what you want to do exactly right now. It’s not as good if you don’t know what you want to do when you’re 30, but right now, you can be a little confused and try to figure it out and you can have a lot of different paths. I kind of knew I wanted to do investing. I wasn’t sure, I was leaning that way so I kind of knew where I wanted to try to get to. So if you do, just don’t stop driving there. You don’t have to settle. Just keep driving at it and it will come”.
David Tepper