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Failure Is an Option


Don't I know it. After running peoples' money successfully for eighteen years, compounding at 23 percent after all fees, I stumbled in 1998. Coming into the home stretch of that year -- after Long-Term Capital, the Greenwich money manager, got blown out of the firmament -- we had an opening for my fund to please one of our clients. (Normally, we are closed to withdrawals.)

While we were off slightly for the year at the time of the opening, our investors, scared that the markets were too fragile, took advantage of the opening to demand $100 million of their funds in one day, a third of our invested funds. Most of these people had been with us for at least fifteen years. (Oh, unlike Dana's, our clients' names are none of your business.) I remember the afternoon of the opening, staring at the clock, waiting for it to hit 4 p.m., when the redemption window closed -- a modern-day George Bailey hoping to keep a couple of bucks under management.

I respected the decisions of my ex-partners, even as I wanted to rip their lungs out. To this day, I have nightmares about that terrifying redemption -- even though within eighteen months we nearly doubled the money of the faithful who stuck with us. Nevertheless, the scars left by the retreat of those summer soldiers still give me pain.

These days we have no illusions about what we do. We either perform or perish. To perform, however, means to work harder than you ever have and have much less to show for it as you share it with the younger people you need to stay in the game.

But then again, it was ridiculously easy for so many years, so easy that the guys coming into it didn't think they had to do anything but buy and hang out with the rich.

Fortunately for those of us willing to do the work, those days are now over.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had positions in Intel, Hewlett-Packard, Nokia, Brocade, Microsoft, Gillette, and Cisco. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites comments at E-mail:

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