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Chaos Kings by Scott Patters

There is a popular quote often referenced to be investment mogul Warren Buffet that one needs to be investing when there is ‘blood in the streets’, but realistically it goes much further back than the Oracle of Omaha - certainly the premise of the quote speaks to the ability to hold one's nerve when those around you are in a state of crisis. This new book by Scott Patterson, Chaos Kings, explores this ability.

The book highlights those who have made money while the world falls apart. But not just any money - this book talks about making billions while there is metaphorical, or literal blood on the streets. These are the stories of those who made riches during the World Trade Centre attack, and then again through Covid. Converting market anxiety into tremendous profits takes a steely nerve and a calm and logical head in the face of absolute adversity.

It comes down, ultimately, to a concert called ‘shorting’, which basically means betting on the extreme disruptions caused by turmoil in the political and economical market. In investment terms, these events (like COVID) are referred to as Black Swans. They go against everything the market exists for - to make money. Perhaps the most well known of this style of investment is Universa Fund. Specifically, the focus is on Nassim Taleb, and it is he who author Scott Patterson turns his attention toward. Universa bet on the impossible, and make incredibly massive gains when it eventually happens.

Above all the technical talk, there is an absolutely gripping tale of a pretty chaotic lifestyle. These traders live life on the edge, edge of bankruptcy, edge of sanity and often the edge of reason. It is surprising, some of the lengths they go to spot the opportunities that may come available. For example, recognising the opportunities that would come from increased gas prices due to the Ukraine crisis.

For the vast majority of us, the risk of losing everything is too much of a challenge to really push through, but for these maniacs there is always the possibility that tomorrow will be a windfall like no one has seen before. The chance to bank literally billions of dollars if and when their bets pay off. As humans we are quite comfortable with routine, with systems and logical outcomes, we do not like change. These guys have short-circuited that system to expose shortcomings in our psyche and the knowledge that panic will send the prices spiralling downwards, thus creating billions in net worth.

It’s fascinating, a little sickening, and one heck of a yarn of a book. It is well worth the read and the learning that will come from it. Who knows, perhaps you will find yourself face to face with a black swan opportunity and manage to secure the equivalent of a winning record-breaking lottery ticket with your name on it.

Whatever the outcome, Patterson’s book is one of the best financial stories around. Highly recommended.

Reviewer: Chris Reed



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