Power Players

Self-made billionaire and presidential hopeful Tom Steyer's investing rule: Don't be greedy

Tom Steyer
Photo courtesy Tom Steyer's campaign for President

Presidential hopeful Tom Steyer founded hedge fund Farallon Capital Management, the success of which made him a billionaire. And Steyer, who declared his candidacy for President of the United States on July 9, lead the firm guided by a North Star principle that might seem surprising: Don't be greedy.

"When we thought about investing, our rule was it's really important not to be greedy," Steyer said on the podcast The Forbes Interview in 2017. "So we were always trying to be honest and not take huge risks and to understand the risks we were taking."

Steyer said the the idea was to "compound at a good rate and not be greedy, but just do it consistently. Because if you do the math, but if you think about it in any long-term way, the people who do well are the people who compound over and over again."

As of June 30, Farallon Capitol was managing $28.5 billion in assets.

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With Steyer's investment philosophy, it's no surprise that he considers Berkshire Hathaway boss Warren Buffett, who has a similar investing strategy, "the icon of American business." Buffett's philosophy is to get into the stock market early, own a diverse portfolio of stocks and hold them for a long time.

"For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward," Buffett wrote in his 2017 annual letter to shareholders of Berkshire Hathaway.

Steyer (like Buffett) also believes business relationships should be for the long run: Steyer and Farallon aimed for "long, honest relationships with our partners," he told Forbes. "Both the people we worked with and for the people who were our lawyers, our accountants, our brokers who we did business with. Our idea was long, positive relationships beat short, competitive ones. Which I think is a big point of life."

Steyer's route to investing was by way of Yale, where he earned his bachelors in 1979, and Stanford University Graduate School of Business, where he earned his MBA in 1983. He founded Farallon Capital in 1986 with $9 million in investments and grew the fund to $36 billion in investments at its peak in 2008 before the recession hit. Steyer left the firm at the end of 2012 to focus full-time on "to focus full-time on giving back," he said at the time in a letter to investors, according to Philanthropy News Digest. Shortly after Steyer left, Farallon Capital had $18.6 billion assets under management, according to Institutional Investor.

After leaving Farallon, Steyer founded NextGen America in 2013, a nonprofit group which fights against climate change and promotes social justice and participation in the democracy through voter registration and grassroots organization.

In 2017, Steyer became a vocal and public advocate for impeaching Donald Trump.

He is now running for President on a platform that includes taking "corporate control out of politics," he said in his campaign announcement. "We need the broadest democracy possible," Steyer says on his campaign website, "to take back our government from the corporations that now control it and have stolen the rights of everyday Americans."

Today, Steyer is worth of $1.6 billion, ranking as the 1,425th richest person, according to Forbes. He's committed to giving much of that fortune away as part of The Giving Pledge, an initiative co-founded by Buffett and Bill Gates, whereby billionaires publicly pledge to give away more than half of their wealth.

Steyer told Forbes investing was "relaxing and exciting" for him; he liked the challenge of trying to understand what's going to happen in the future. But he felt compelled to do more with his time and resources.

"What happened to me was I realized, 'Wow, I've been super lucky. I love doing this. I've had a great career. But there are things in our society that I find...there are opportunities that we're missing that are gigantic,'" Steyer told Forbes.

"I felt like as an American citizen, I don't want my grandchildren to say, 'When we were completely screwing it up, grandpa, what were you doing?' And I was going to say, 'Well, I was running my business.' I'm an American too. I take that responsibility really seriously."

See also:

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