The Opportunity I Couldn’t See

“For it is impossible for a man to begin to learn that which he thinks that he knows.”

— Epictetus, Discourses, II.17

Opportunity did not pass me by. It appeared repeatedly. I was simply too focused on one path to recognize the value of the others.

In Buying Madoff, I told the story of how I acquired Bernie Madoff’s market-making business.

It was one of the most audacious things I ever attempted.

I found a legitimate operating business buried beneath the wreckage of one of history’s largest financial frauds. I became the stalking-horse bidder, assembled the capital, navigated the bankruptcy auction, helped preserve a team of approximately 50 people, and restarted an automated market-making operation that had stopped functioning.

It was also one of the most painful experiences of my career.

I entered the transaction without enough money. Because I lacked capital, I negotiated from weakness. I surrendered most of the economics, lost control of the company, and eventually found myself pushed out of the business I had helped create.

But the transaction cost me something else—something I understood only much later.

It consumed my entire field of vision.

I became so focused on completing the acquisition that I stopped properly evaluating the other opportunities appearing around me. Every problem inside the Madoff transaction seemed urgent. Almost everything outside it felt like a distraction.

The acquisition became more than a deal. It became my recovery plan.

It was how I would rebuild my finances, restore my professional standing, and prove that I could still make something extraordinary happen.

Because I had invested so much of myself in it, I became unable to imagine that another path might be better.

Then one of the greatest opportunities of my career called me directly.

I pushed it aside.

The call from Paul Reeder

Paul Reeder ran PAR Capital Management in Boston.

PAR was not a household name, and Paul did not seek publicity. But among institutional investors and people who understood hedge funds, he was extremely well known.

He had built an exceptional investment record and developed a reputation as one of the industry’s most capable and disciplined managers. PAR was the kind of fund investors wanted access to.

It was not the kind of fund that ordinarily needed someone to raise money for it.

That distinction matters.

Most hedge-fund managers who hire capital raisers need help because something is missing. They may be talented but lack a sufficiently long track record. They may have an interesting strategy but no institutional recognition. They may perform well but have not yet built the organization investors expect.

Raising money for those managers requires persuasion.

You must convince investors that the manager deserves a chance.

PAR was different.

Paul already had the reputation.

He had the performance.

He had credibility.

Most importantly, he had scarcity. Investors could not assume that PAR would accept their money merely because they wanted to invest.

Then, in the middle of the financial crisis, Paul called me.

He had received my number from Chris Argyrople, who had previously worked at PAR and was also helping me pursue the Madoff acquisition.

Paul offered me the opportunity to raise capital for him.

The economics were extraordinary.

As I remember the offer, I would receive the equivalent of a full 20% share of the fees attributable to the capital I brought into the fund.

For a manager of Paul’s stature, that was almost unheard of.

This was not an unknown fund offering generous economics because nobody wanted to invest. It was a highly respected and historically difficult-to-access manager offering me an unusually valuable arrangement during one of the most dislocated moments in financial history.

I had spent years building exactly the relationships required.

I knew wealthy individuals.

I knew family offices.

I knew hedge-fund investors.

I knew institutions and intermediaries.

Even during the financial crisis, I believe I could have raised meaningful capital for PAR. Perhaps $50 million. Perhaps $100 million. Possibly more.

The market was terrified, but sophisticated investors still had money. Fear does not eliminate demand for exceptional managers. In many cases, it increases it.

PAR’s reputation would have opened doors that were normally difficult to open.

Had I raised $100 million, the economics could have been transformative.

PAR charged a management fee and received a share of investment profits. If that capital performed and compounded over the following decade, the original investment could have become several times larger.

My share of the fees might have continued producing income year after year.

It could have earned me millions.

It might have restored the financial security I had lost.

It might have allowed me to rebuild without bankruptcy auctions, without controlling investors, without operating a 50-person trading business, and without the legal conflict that eventually followed the Madoff acquisition.

It would certainly have involved fewer headaches.

In truth, it might have changed the course of my life.

And I did not simply fail to follow up.

I told Paul I did not have time.

I treated it as an interruption

Even now, it is difficult for me to explain how I could have said that.

I was being offered unusually generous economics to raise money for one of the most respected and difficult-to-access managers in the industry.

The opportunity matched my experience.

It matched my relationships.

It matched what I had already proved I could do.

Yet I treated it as an interruption.

I did not misunderstand the offer.

I did not carefully evaluate it and decide that the timing was wrong.

I did not attempt to raise the money and fail.

I simply pushed it aside.

I told Paul I was too busy.

The financial crisis might appear to offer an explanation. Investors were frightened. Markets were collapsing. Institutions were dealing with losses, liquidity problems, and extraordinary internal pressure. Raising money was undoubtedly more difficult than it had been a few years earlier.

But that explanation is not good enough.

The difficulty of the market was precisely why the opportunity existed.

Paul Reeder had not previously needed to make an offer like that. PAR had rarely required outside fundraising help. The crisis had temporarily changed the circumstances and created an opening that might never appear again.

The opportunity existed because the world was in turmoil.

I had spent years telling investors that exceptional managers mattered most during difficult periods. Yet when one of the most respected managers in the industry offered me extraordinary economics during one of the most difficult periods in financial history, I told him I did not have time.

The real reason was much simpler.

I was obsessed with Madoff.

Urgency took over everything

Every part of the acquisition demanded attention.

I was negotiating with the trustee.

I was dealing with lawyers.

I was looking for capital.

I was trying to preserve the employees.

I was working through regulatory problems.

I was attempting to understand the technology.

I was trying to keep the transaction alive while managing a financial crisis of my own.

The deal felt existential.

Raising money for PAR felt like something I could do later.

But opportunities of that quality rarely wait until later.

I had confused urgency with importance.

The Madoff transaction was urgent because it constantly produced problems demanding an immediate response. The PAR opportunity was important, but it was not shouting at me every day.

So I paid attention to what was loud.

And I neglected what was valuable.

That is one of the most dangerous effects of overfocus.

The thing consuming the most time begins to feel like the thing that matters most.

It may not be.

Sometimes it is simply the thing generating the most noise.

The seduction of the difficult path

There was also something psychologically attractive about the Madoff acquisition.

It was nearly impossible.

Everyone knew the name. Everyone understood the scandal. The transaction involved bankruptcy, regulators, technology, capital, employees, and enormous reputational complications.

Buying the market-making operation would prove something about me.

It would prove that I could see value where others saw only disaster.

It would prove that I could assemble a transaction nobody thought possible.

It would prove that I was still capable of doing something extraordinary.

Raising money for PAR did not offer the same drama.

It would have involved conversations, relationships, judgment, and persistence—the skills I had already developed over many years.

It might have been far more profitable.

But it would not have felt heroic.

That is an uncomfortable thing to admit.

Sometimes we choose the harder opportunity not because it is better, but because overcoming it would tell a more satisfying story about us.

Difficulty becomes part of the attraction.

We begin to believe that the path demanding the most sacrifice must also contain the greatest reward.

That is not always true.

Sometimes the difficult path is simply difficult.

Sometimes the better path appears almost too easy because it fits the abilities and relationships we already possess.

The PAR opportunity aligned almost perfectly with my existing advantages. I had the relationships, fundraising experience, and institutional credibility. Paul had the record, reputation, and scarcity.

It was a natural fit.

The Madoff acquisition required me to solve problems for which I was undercapitalized and politically vulnerable.

I chose the path of greatest resistance.

Then I congratulated myself for resisting it.

The knowledge I failed to value

There was another opportunity hidden inside the same period.

Years earlier, through Pine Street Associates, I had learned that Leon Cooperman’s personal fund-of-funds portfolio had approximately $25 million of indirect exposure to Madoff through another fund.

James Daehler and I had insisted that the position be redeemed.

We were concerned that meaningful due diligence could not be performed on the underlying Madoff exposure. We were also troubled by returns that appeared too consistent to be credible.

Eventually, Leon agreed, and the approximately $25 million position was redeemed.

After Madoff collapsed, the trustee began pursuing money that had previously been withdrawn from the fraudulent investment operation. I later became aware that lawyers working on recovery matters could receive significant double-digit contingency compensation connected to the money recovered.

I had firsthand knowledge of a substantial redemption.

I knew the participants.

I knew why the position had been redeemed.

I understood the structure through which the exposure had been held.

At a minimum, I should have investigated whether that knowledge had value.

I did not.

I never seriously explored whether I could assist the recovery effort, connect the relevant parties, or participate in any resulting compensation.

Perhaps it would have produced nothing.

Perhaps the trustee already possessed all the relevant records.

Perhaps there were legal complications I did not understand.

But I never even asked.

That is the point.

There is no shame in investigating an opportunity and concluding that it is not worth pursuing.

That is not what happened.

I failed to investigate it at all.

The information was already in my possession, but I did not recognize it as an asset.

I was so consumed with acquiring the market-making business that I failed to ask a basic question:

What else do I know that has become valuable because the world has changed?

The Madoff collapse had transformed old information.

A redemption that had once been merely an investment decision may suddenly have acquired substantial legal and economic significance.

But because I had categorized it as part of the past, I did not reassess it when circumstances changed.

Opportunity is not always something new arriving.

Sometimes it is something old becoming valuable.

Opportunity appeared more than once

The painful part is not that the world denied me opportunities.

The world gave me several.

One was the Madoff market-making business.

One was the PAR Capital offer.

One was the knowledge surrounding the earlier Madoff-related redemption.

I saw only the first.

And even within that opportunity, I saw only one acceptable outcome: I had to buy the business, restart it, and prove that my vision had been correct.

The other paths did not disappear because they lacked value.

They disappeared because I lacked attention.

This is one of the dangers of extreme focus.

We are constantly told that success requires eliminating distractions. Choose one thing. Commit completely. Ignore everything else.

There is truth in that advice.

Nothing important is built without concentration. Divided attention produces shallow work and unfinished projects.

But focus has a shadow side.

The same concentration that allows us to overcome obstacles can prevent us from recognizing that the world has changed—or that a better opportunity is standing beside us.

Persistence can become rigidity.

Commitment can become attachment.

Focus can become blindness.

The answer is not to chase every new idea. That produces another form of failure. A person who changes direction every time something interesting appears will never build anything substantial.

The challenge is to remain committed without becoming unconscious.

You need peripheral vision.

The price of overfocus

When we describe missed opportunities, we usually calculate only the money.

I might have raised $50 million or $100 million for PAR.

That capital might have compounded.

My share of the fees could have been worth millions.

The information surrounding the earlier redemption might also have had value.

Those numbers matter.

But the real cost was larger.

The PAR opportunity could have produced an entirely different life.

Instead of operating a distressed market-making business under controlling investors, I might have continued doing work I already understood exceptionally well.

Instead of becoming trapped inside internal politics, I might have built an independent stream of income based on relationships and results.

Instead of being progressively isolated inside a company I had created, I could have restored my financial position while retaining control of my time and future.

The opportunity cost of a decision is not merely the money attached to the road not taken.

It is the person you might have become on that road.

It is the energy you would have retained.

The conflicts you would not have entered.

The years you might have spent differently.

The Madoff acquisition gave me an extraordinary story and extraordinary lessons.

But stories are expensive when you must live through them first.

A better way to focus

I no longer believe focus should mean refusing to look away.

Focus should mean committing your energy while periodically lifting your head.

There must be moments when you step outside the urgency of the work and ask:

• What has changed?
• What opportunities have appeared since I chose this path?
• What do I know now that I did not know when I began?
• What relationships or information have become newly valuable?
• Am I continuing because this remains the best path—or because I have already sacrificed too much to leave it?
• Is the difficulty evidence of importance, or merely evidence of difficulty?
• What would I choose if I were not trying to justify everything I have already invested?

Those questions are not distractions from execution.

They protect you from executing the wrong thing brilliantly.

A person should be deeply committed to the work in front of him.

But he should not become so identified with it that he cannot recognize a better future when it calls.

The opportunity I couldn’t see

Paul Reeder did not send me a vague message suggesting that we should speak someday.

He called me.

He offered me access to one of the most respected investment firms in the industry.

He offered me exceptional economics.

I possessed the experience and relationships needed to act.

The opportunity was not hidden.

It was not disguised.

It did not require me to interpret a coincidence or predict the future.

It was explicit.

And I told him I did not have time.

That may be the hardest kind of missed opportunity to accept.

But it taught me something essential:

Opportunity does not matter merely because it appears. It matters only if we have enough awareness to recognize it—and enough internal freedom to act.

I was not free.

I had given all of my attention, hope, and identity to one transaction.

The world offered me another path.

I pushed it aside because I could not see beyond the one I was already walking.