If You Don’t Want to Play That Way, Don’t Play That Way

Us vs. Them

Michael Jordan in The Last Dance

Keith McCullough often quotes the headline above from Michael Jordan in the brilliant documentary The Last Dance about the Chicago Bulls’ last championship season. 

The basketball legend was addressing the claim that he was a tyrant with his teammates. Jordan said, in part, those were comments from people who “never won anything.”  

It’s well known that Jordan is an intense competitor. Competitive in everything he does, according to Tim Grover, Jordan’s former performance coach, who wrote in his book, Winning:

“You didn’t only have to keep up with his mentality and drive, he expected you to keep up in your knowledge, your skill, your pace, your desire to win. That was non-negotiable.” 

Hedgeye Risk Management self-directed subscribers and institutional clients know that McCullough is also an intense competitor. The company’s founder and CEO often talks about his blue-collar upbringing in Thunder Bay, Ontario, Canada, the son of a firefighter, working dirty jobs, and getting into scraps as a hockey player.  

Do You Have a Ball? 

One of the most telling anecdotes that exemplifies McCullough’s personality is from his book, Diary of a Hedge Fund Manager, (the name of this series is a play on that title. McCullough has said he’ll be releasing a second book later this year) where he recounts being interviewed for a job by a Lehman Brothers executive.

McCullough tells the story in this excerpt from my first interview with him: 

“When I walked in for my Wall Street interviews, I knew very little relative to a lot of these polished, prep school kids. I had the lowest SAT (Scholastic Aptitude Test) score at Yale, I think you know that, in my class. On paper, I was terrible.

And I walked into a room, and this guy, he’s talking to me like I’m a two-year-old. When he asked me what differentiated me competitively, because my resume didn’t have all these bells and whistles, I looked him in the eye and said, “Are you an athlete?” And he said, “Yeah.” I said, “Do you have a ball?”

And the person who’s interviewing me beside him, it was a he and she, and they were sitting there and she was looking at him like, “Is he really saying this to you?” Because this guy’s a big-time football player.

And I said, “Do you have a ball?” If you have a ball, I’ll show you who can compete. Let’s lock the door and let’s put everybody out there in this room, and let’s see who comes out with the ball.” 

McCullough admits he’s driven in part by anyone who’s ever doubted him or told him he couldn’t do something. Driven by any smug Wall Street prick who ever sat across from him and dismissed his ideas.  

McCullough is the kid from Northern Ontario, who showed up at Yale in cutoff jean shorts and a mullet, and had his first English paper deemed by the professor as “ungradable”. His classmates may have had privileged upbringings, better marks and nicer clothes, but they would not outwork him.  

McCullough plays down his intelligence by saying, “I’m not an intellect.” But the disruptive nature, intricacy, nuance and overall brilliance of the Hedgeye process proves he’s plenty smart.

Fighting Old Wall 

Fast forward to today, McCullough is still fighting. His main combatant is Old Wall Street, as he calls it. He’s battling against what he perceives to be its outmoded approach to investing, its overriding goal to sell credulous investors stock, its conflicts of interest, and the many “liars, cheats, thieves, and scoundrels” who make a good living duping people out of their money. He needs and wants Old Wall to play against. 

McCullough’s frequent target, along with Old Wall, is CNBC and the likes of “Drawdown” Josh Brown, and “Chrome Dome” Jim Cramer. McCullough explained his disdain for CNBC to me in our first interview.

“I think the biggest problem having been there and worked with their people is their culture and their principles. I could say that about a lot of places. Picking on CNBC would be unfair. When we talk about Wall Street, it has a lot of issues that if everyone could look inside of every day, it would make you cringe. It really would.”

Being a Better Coach

People who achieve at the highest level often have trouble conveying to others how to replicate what they do. (Wayne Gretzky’s ineffectual four-year run as head coach of the Phoenix Coyotes springs to mind.) They can get frustrated and lose patience with people who struggle to execute whatever skill or discipline they are attempting to master.  

McCullough admits he’s been guilty of that when a subscriber doesn’t understand a concept or complains, for example, about a stock that Hedgeye removed from its Investing Ideas - Levels list two days after he bought it. A few years ago, McCullough may have ripped that guy as part of a rant on the Macro Show or in a tweet calling him dumb.  

Now, the unofficial head coach of Hedgeye would have a calmer and more encouraging reaction. He knows he can’t expect people to quickly grasp a process that he created over 15 years ago and has refined through thousands of hours of work and thousands of trades. McCullough has said he’s making a concerted effort to be a better coach, part of what he calls Hedgeye 2.0. (He also coaches high level youth hockey.)

“Coach” McCullough instructing on The Macro Show

Driven to Win

But McCullough only has so much time for people who complain and aren’t willing to get better at learning the process or, worse still, are disrespectful in their comments.  

Similar to Jordan in that famous, emotional clip from The Last Dance where he explains his competitive drive, McCullough wants to win every day by beating Old Wall, growing Hedgeye’s business and growing his investment “pile” for his family.

He also wants his teammates to win by producing the highest quality, independent investment research out there. And McCullough wants self-directed subscribers and institutional clients to win by helping them to strengthen and refine their use of the Hedgeye process so they can preserve, protect and compound their capital.   

McCullough’s passion is palpable. His personality and values of hard work, transparency, accountability and trust permeate Hedgeye’s culture and extended community.

But if you don’t want to be part of “Hedgeye Nation” and don’t want to play at the highest level, then don’t play that way.  

I want to play the Hedgeye way.

Next Saturday: “Mandelbrot Will Blow Your Mind”

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Here’s a link on Hedgeye’s YouTube channel to my first interview with Keith McCullough, in which he explains the Hedgeye process and provides timeless commentary.

Disclosure: I do not have any financial arrangement with Hedgeye. I do not intend for this series to be instructional nor promotional. Dan Holland, Hedgeye’s Head of Media and Public Relations, has been gracious in making my writing available on Hedgeye’s website.