Eric Siu examines Charlie Munger's warning about leverage and reviews a fund manager named Leopold who lost heavily on public bets but stayed afloat through private investments like Anthropic. Small losses compound fast when you're leveraged, and silence with investors makes it worse.
Charlie Munger has said there's only 3 ways you go broke: ladies, liquor, and leverage, right? And he's like, I just added the first 2 because it's like more funny, right? But it's really leverage at the end of the day. Because when you think about if you're on 4 turns of leverage, if you're down 20%, you just multiply that by 4, right? It's hard to recover from that. The letter that Leopold sent to his LPs was actually pretty good. It was very humble. The numbers here basically are the public book is down 100%, but his private investments like Anthropic is what has kept it alive. I think he's a very smart guy. I think he'll learn from this ultimately. And he did tell the LPs like, it's not like we're like completely wiped out. Maybe some of the recent people that invested are, but I think it's important that when you get knocked down like that, you learn from that lesson. You send a note apologizing and you say, hey, I'm down to have these one-on-one calls. I think that's good. I don't think he's dead by any means. And I think people will learn from it, but leverage can be very dangerous.
