Ben Hunt
(Illustration by Xia Gordon)
In early March, as Congress bargained over an emergency coronavirus spending bill, big pharma lobbyists were on the move — and Ben Hunt was livid.
“Industry lobbyists successfully blocked attempts to include language in the $8.3b CV19 bill that would threaten IP rights for vaccines and treatments the gov’t decides were priced unfairly,” Hunt tweeted under the handle @EpsilonTheory, quoting a Politico article that had broken the news.
“I haven’t said this in a while,” he noted, repeating what has become his signature line:
“Burn. It. The. Fuck. Down.”
Hunt first used that line when the well-connected financier and convicted pedophile Jeffrey Epstein died suddenly in jail last summer. “Epstein’s death made me feel the same way I feel now in April 2020,” Hunt wrote in a recent post.
“When Jeffrey Epstein died in that jail cell, I realized that the people in that room of violence and power and wealth will never be defeated on a single point of failure like his testimony at trial . . . or like the election this November,” he continued.
And that’s how Hunt, former hedge fund manager, chief risk officer, tech entrepreneur, political science professor, hobby farmer, and newsletter enthusiast, became a cult hero to tens of thousands of people around the world.
These days, sometimes he’ll just write #BITFD, like when he retweets a news article about a Florida island inhabited by the uber-wealthy, where every resident managed to get a novel coronavirus test.
The 55-year-old Alabama native has become a phenomenon that perhaps only a global plague could have created. A Harvard Ph.D. in government and a financial maven, Hunt has become the hottest new thing in #FinTwit. And it’s not just short-sellers and other disgruntled investors cheering him on.
His Twitter feed now has more than 90,000 followers — almost double what he began the crisis with. Monthly page views on the website of Epsilon Theory, which says it “examines the narratives that drive markets,” have quadrupled to 400,000 in that same time frame. There’s also an Epsilon Theory online shop selling such items as logo-embossed baseball caps, sweatshirts, and mugs.
To be sure, some of Hunt’s views (like #BITFD) may be radical for the institutional investors — public pensions and endowments — that Epsilon Theory counts as top-paying subscribers to longer and more technical articles and additional financial research. Those people each cough up $2,950 per year, but a basic annual subscription costs just $200 and shorter blog posts (“The Zeitgeist”) are free to all.
Yet investors love Hunt’s writing, which is peppered with both pop references like the Talking Heads and classical ones like St. Augustine, along with financial analysis. To wit: Hunt just landed a book deal with U.K. publisher Harriman House, and says he’s tentatively titling it Hollow Men, Hollow Markets: The Micro and Macro Foundations of a Financialized World.
Investors also give Hunt credit for warning about the coronavirus early on, even if they hoped it wasn’t as bad as he was suggesting.
“I don’t always agree with Ben, but I like to read him,” says Sandy Rich, an early subscriber who is the executive director of the New York City Board of Education Retirement System. What about the virus? Says Rich, whose daughter recently recovered from Covid-19: “He was right.”
The truth is that Hunt doesn’t have to worry about what anyone thinks. “There’s no one he has to treat with kid gloves,” notes Josh Brown, the CEO of Ritholtz Asset Management and a CNBC pundit who got to know Hunt several years ago when he agreed to a debate on Ritholtz’s YouTube channel. “The politics of the industry aren’t going to touch him.”
That’s because Hunt has now left finance to go full-time with Epsilon Theory, which he launched as a sideline project in 2013. His writings were so provocative that Salient Partners, a Houston-based asset management firm, hired Hunt as its chief risk officer that year. At Salient, Hunt worked alongside Rusty Guinn, and the two spun off a separate company — Second Foundation Partners, a research and publishing firm — in 2018.
“By leaving the industry, Ben has freed himself of the guardrails,” notes Brown.
Hunt says he and Guinn made a pact. “We swore a vow to each other to never run a mutual fund or a hedge fund again,” he tells Institutional Investor from his 45-acre farm in the bucolic New England woods of Redding, Connecticut. His wife and four daughters (ages 15 to 23) are also now at home, sharing the land with a gaggle of animals: dogs, cats, chickens, sheep, goats, and horses. (“I’m a hobby farmer, and they’re our pets,” he says, noting that his grandfather was a dairy farmer in Alabama.)
Running a hedge fund “ages you in dog years,” Hunt says. “There are so many bigger fish to fry than being another investment manager for rich guys, frankly.”
For Hunt right now, that means trying to fix the world — one small act at a time. By April he had helped launch a nonprofit, called Frontline Heroes, that has been able to procure N95 masks in China and get them straight to nurses and doctors in the U.S. So far the group has raised $800,000 and delivered masks all across the country through what Hunt calls an “underground railroad for PPE.”
“This really is how the world changes,” says Hunt, who likes to quote Margaret Mead’s famous line: “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”
Beneath his gentle demeanor and Southern drawl, however, Hunt is furious.
Hunt calls it righteous anger. “What makes me angry is that all of our institutions have betrayed us,” he says.
He ticks off a long list of familiar names he says lied about the coronavirus: the Chinese Communist Party, the World Health Organization, the Centers for Disease Control, and the White House, to name a few.
In late January, Hunt and Guinn began sounding the alarm that the disease then infecting Wuhan, China, was probably much worse than officialdom was letting on.
On February 10, Hunt’s first long-form piece on the topic, “Body Count,” used a Vietnam War analogy to take issue with the Chinese government’s official tally of cases. It promptly exploded on the internet. “It’s been a crazy response,” Hunt says.
In his previous life as a tenured political science professor at Southern Methodist University in Dallas, his specialty was statistics, so Hunt dug into the numbers of the sick coming out of Wuhan.
“My central insight was that the numbers were made up. It was almost statistically impossible that the numbers the Chinese government was providing could have been true,” he says. He suspects the Chinese government created those numbers by using simple algorithms.
Chinese researchers with the World Health Organization also found the numbers suspect, but the WHO’s leader, Director General Dr. Tedros Adhanom Ghebreyesus, backed the Chinese version of events — to catastrophic effect.
“The WHO created the story. The narrative around the disease was the real betrayal,” Hunt insists. Not only did the senior leadership betray its own scientists and doctors, he says, “it betrayed the entire world.”
What resulted was a muted response to the contagious, deadly disease that has led to the current situation: more than 3 million known cases worldwide, with more than 225,000 dead.
By March 29, Hunt had found the perfect word to describe the leaders who were underplaying what was by then becoming a crisis of ghastly proportions: sociopaths.
“That’s what we are today, clinically speaking, a society largely governed by high-functioning sociopaths in both our economy and our politics, humans devoid of empathy for any other human outside of the narrowest bonds of convention,” he wrote on his website.
Given his financial background, Hunt has a way of looking at the problem that perhaps only other finance professionals can appreciate. Instead of viewing the world through the risk/reward lens that dominates investment decision-making, he says, it is necessary to reframe our thinking as one of “minimizing regret.” Bluntly, he believes, if the risk is loss of life, there isn’t a reward worth it.
“I’m asking for empathy,” he wrote as the death count started to mount to levels Hunt now admits even he failed to anticipate. “We’ve got to save lives.”
Early on, Hunt thought the U.S. city that would have the most cases would likely be San Francisco, not New York City, which has become the epicenter of cases worldwide. “I never thought that, not in my wildest dreams,” he says.
Even before the videos emerged of New York City nurses decked out in garbage bags and reused N95 masks, Hunt began to call for protection for health care workers, along with massive testing. He says fixing those two problems is the key to reopening the economy.
By now much of the rest of the world has caught on to many of Epsilon Theory’s observations, including that China was fudging the numbers. When China raised the death toll in Wuhan by an astounding 50 percent, Hunt had one response:
“LOL,” he tweeted.
“Ben was a born revolutionary,” chuckles Guinn, Second Foundation’s co-founder. He says that Hunt’s provocative take on the world made investors want to hear what Hunt had to say, even in the conservative state of Texas, where many Salient clients tended to disagree with him. “People always knew that Ben’s voice was authentic. He wasn’t trying to sell people on anything,” points out Guinn, who grew up outside of Houston and calls himself “someone who used to be a conservative but who isn’t anymore.”
Indeed, Hunt defies political categorization, blaming both Republicans and Democrats for our current woes.
But he has always “waded into politics,” notes Guinn, who recalls another insight of Hunt’s: Unlike most people in the financial industry, Hunt was predicting in 2016 that Donald Trump would win the presidential election “and that it’s going to break us.”
Hunt has also taken controversial stances on financial sacred cows. Last year, for example, he criticized corporate stock buybacks — an unpopular take among investors who weren’t about to complain about the rising share prices such buybacks were fostering. This year, when airlines needed a bailout, Hunt was quick to point out that the companies had for much of the past six years spent most of their free cash flow on buybacks and awarding lucrative stock-based management compensation. (Employees of Fairfield, Connecticut–based Second Foundation, whose staff now includes four people, aren’t allowed to trade individual stocks, nor does Epsilon Theory offer stock recommendations.)
But there is no more obvious focus for Epsilon Theory than the coronavirus itself. Hunt named his newsletter for the Greek letter Epsilon. “Epsilon is the error term; it’s everything that’s left over after alpha and beta,” he explains. The Epsilon variable considers behavioral finance and black swans at the same time — “all the shocks to the system.”
Of course, that’s exactly what the coronavirus is — but it isn’t the first for Hunt. In 2008 the portfolio he was running at Iridian Asset Management — where he worked from 2006 until 2011 — was up more than 20 percent for the year, and Hunt was known as a savvy short-seller. But after the Federal Reserve started its massive asset-buying spree and markets took off, managing money at a long-short equity fund became harder.
Hunt soon began looking at the world of finance differently. “The past 11 years was the greatest transfer of wealth to the managerial class,” he says. “You saw the naked sinews of power during the financial crisis, and today we’re seeing the same thing. Our economic relief is being geared, as always, in a trickle-down fashion.” It’s not aimed, he says, at “the single mom without a job who doesn’t have money saved up.”
Outside of the effort to source masks for health care workers, Hunt’s call to action is somewhat vague, as laid out in a recent post called “Inception.” First off, Hunt says, “we’re going to vaccinate ourselves to their answers, to their false stories, so that we think for ourselves again. Without this we will inevitably fall back into the patterns of crony capitalism and obscene financialization that got us here in the first place.”
A tall order, perhaps, but Hunt thinks that the crisis has created momentum for change.
“There’s a real opportunity for a bottom-up grassroots social movement,” he says. “We absolutely can come out of this without the need for even more opportunity for the state and the rich to enshrine their positions.”
The point, note his supporters, is that Hunt is trying to make the greater world — and the world of finance — a better place.
“He’s not just a guy ranting and raving,” says Josh Brown. “He’s trying to bring about change using his platform to help. It’s not just words, but deeds. He deserves credit for that.”
