David Tepper is the CEO of Appaloosa Management, a hedge fund with approximately $14 billion under management. In 2009, Tepper had a fantastic year earning over $4 billion. However, Tepper had his share of ups and downs before becoming super famous.
Before Tepper started Appaloosa Management in 1993, he was a rising star at Goldman Sachs. Tepper was supposed to become a partner, but was passed up. Little details have been revealed about why he left and his time at Goldman Sachs. Maneet Ahuja in The Alpha Masters provides some exclusive details about what happened behind the scenes.
Tepper had one goal at Goldman Sachs Group, Inc. (NYSE:GS). He wanted to do his job better than anyone else could do it making as much money as possible for the company in the process. He faced obstacles in the form of personal grudges, but his abilities shone through and guided him to the top. He ended up becoming the head of the company’s junk bond trading and it looked like he would only go further.
Tepper’s difficulty in playing by the rules at Goldman Sachs Group, Inc. (NYSE:GS) in order to achieve the most efficient outcome stung some at the firm. He recounts bypassing Jon Corzine when looking for advice. Corzine was the head of the firm’s International Risk Arbitrage department. Tepper didn’t get along with him and sought advice from the former head of the department Robert Rubin. Tepper stated that Corine knew treasuries, however he ‘didn’t know corporates.’ Tepper has a prophetic insight to Jon Corzine’s recent bad bet involving European repos involving sovereign debt, which brought down MF Global.
An inability to get along with those necessary to get ahead hurt Tepper but it may have been something else that really suppressed his chances of success at the firm. In the book, he made a brief reference to some trades he was asked to carry out that he didn’t feel comfortable doing. He notified the company’s legal department of the trades. The corporate finance team, who asked for those trades were angry at his defiance.
Tepper states in The Alpha Masters “What was I going to do? Trade for them when I think they’re doing something that’s wrong? And then not see my kids again because I’ll get blamed for the trades? So I didn’t do the trades, but I didn’t get made partner either.”
Tepper was never made a partner at Goldman. That is a title he felt he deserved and one he was considered for on two separate occasions in 1988 and 1990. He was passed over each time and became frustrated with the lack of recognition he was garnering for the job he was doing at the firm. In 1993, after 8 years at Goldman, Tepper left the bank and started Appaloosa.
Tepper may have hurt his short term chances of success by sticking to his guns and refusing to do anything he felt illegal. Those are exactly the kind of attributes that have accelerated him to the top of his field today leaving behind many of those at Goldman who kept him down.
It is important to note this story happened over 20 years ago and Goldman has an entirely new management team.