Founder and president of Kynikos Associates, Jim Chanos, is best known as the man who bet against Enron when everyone else thought it was made of gold. After proving right about the energy giant, he turned his sights on Telsa and China, predicting the economic collapse of the latter and the financial ruin of the former. This time, Chanos’ predictions failed to materialize, leading many to question his investment wisdom. However, Chanos has bounced back before and will no doubt do the same again, making it a great time to catch up on the life and career of “The Guy Who Called Enron.”
1. He’s of Greek heritage
James “Jim” Chanos was born and raised in a Milwaukee suburb as part of a family of 2nd generation Greek immigrants. His mother worked as an office manager at a steel company, while his father ran a chain of dry-cleaning stores. After graduating from Wylie E. Groves High School, Chanos enrolled in Yale, graduating in 1980 with a B.A. in Economics and Political Science. Like many students, Chanos had to work to pay his way through college: in Chanos’ case, this meant spending his summers getting a taste for hard graft as a union steel worker.
2. He was a hell raiser
Despite majoring in economics, Chanos had no desire to be seen as a nerd and spent most of his time as a student raising as much hell as he could get away with. “He was one of those special guys who could light the candle at both ends and never get burned,” recalls his former classmate Keith Allain . “When he had parties, he spent the week before making mixtapes. He introduced me to Bob Seger.”
3. His first job was as an analyst
Fresh from graduation, Chanos secured his first job as a humble analyst at Blyth Eastman Dillon, an investment bank based in Chicago. In accord with his lowly status, Chanos earned the miserly sum of $12500 a year, despite regularly putting in 80-hour weeks. Even by the standards of the time, this was barely enough to keep him in bread and water, with Chanos later saying, “I could’ve made more money shoveling snow in Milwaukee.” Fortunately, Chanos didn’t have to resort to an ice pick and plow to pay the bills: when a group of colleagues broke away from the business to found their own firm, Gilford Securities, they offered to take the cash-strapped Chanos with them.
4. He exposed Baldwin-United
While working as an analyst at Gilford Securities, Chanos was instrumental in the exposé of the beleaguered piano and keyboard manufacturer, Baldwin- United. During the late ‘70s and early ‘80’s, the manufacturer moved into insurance, with its rapid-fire series of acquisitions marking it as a “company of interest” to Wall Street investors. In 1982, it announced yet another acquisition: this time, it was Chanos who got the job of working out if it represented a good deal for Gilford’s clients. “I started looking at this mess of a company and couldn’t figure out how they were making money and what their disclosures were saying,” Chanos has recalled. In the end, he did figure it out, with the result that Baldwin- United were forced to declare bankruptcy after word of their financial shenanigans spread.
5. He joined Deutsche Bank at 26 years old
Thanks to his success at calling Baldwin- United, Chanos suddenly found the financial world at his feet. At just 26 years old, the young talent was poached from Gilford by Deutsche Bank in New York. While working for the bank, Chanos began investigating Michael Milken’s Drexel Burnham junk-bond empire. After recommending his employers short the Drexel-financed company Integrated Resources, his bosses pushed back- largely as a result of the company’s pressure on the bank to bury the story. Chanos’ boss at the time, Jim Levitas, recalled how Chanos became furious at the decision: “Jim likes publicity,” Levitas told NY Magazine. “He was interested in getting it aired.”
6.He was fired from Deutsche Bank
After several years of success, Chanos suffered a setback in September 1985 when The Wall Street Journal named him in a damaging piece about the underhand tactics of short sellers. Among the devious methods listed were impersonating a Journal reporter to tap insider knowledge and spreading deliberately inflammatory rumors. Unimpressed, Deutsche Bank decided Chanos was too big a risk to keep on the payroll, and Chanos once again found himself at the bottom of the pile.
7. He founded Kynikos Associates in 1985
In 1985, Chanos founded what would go on to become the world’s largest exclusive short-selling investment firm, Kynikos Associates. The company was founded by Chanos and his former boss at Deutsche bank, Jim Levitas, with the aim of providing investment management services to both domestic and international clients. According to Bloomberg,in addition to catering to individuals, the company also serves pension and profit-sharing plans, charitable organizations, corporations, endowments, and foreign sovereign wealth funds.
8. He nearly went bust
Kynikos proved massively successful in the first few years of its run, and by 1990, the company was managing $600 million in assets. However, Kynikos suffered a huge set back in the early 90’s when the tech bubble pushed the bull market to an all- time high. In 1991, Chanos was posting huge losses of 30 percent. Things improved slightly the following year, with losses decreasing to 15%, but by 1993, they were back up to 40 percent. Fortunately, he had a savior waiting in the wings: Dirk Ziff, heir to the Ziff Davis publishing fortune, offered to restore the company’s fortunes by pumping in enough new money to keep the business afloat.
9. He’s best known as the man who bet against Enron
Chanos had already developed a reputation for predicting corporate financial disasters by the early 2000’s, but it was his early detection of the Enron collapse of 2001 that truly marked him out as a name to watch. “…As soon as I looked at Enron, I saw an exodus of executives leaving,” he’s recalled. ‘When you spent a little time with Enron, it was clear that something was wrong and people were voting with their feet. We just did not know until the end that it was outright fraud.” Thanks to his early suspicions, Chanos led the way as a short seller of Enron throughout 2001, earning a ton of profit for Kynikos and a name for himself as “The Guy Who Called Enron.”
10. He considers himself a Financial Sheriff
Chanos doesn’t just want to make a profit from financially dubious companies, he wants to expose them. By deciding which companies to short, Chanos serves almost as a financial detective, sniffing out shady deals and irregularities, no matter how well hidden:- “Short-sellers play an important role in the marketplace not only in terms of capping, sometimes, irrational exuberance in terms of prices, but also in ferreting out wrongdoing,” he’s explained to Salon.
11. He’s sniffed out disaster in multiple companies
Chanos may be best known for calling Enron, but the list of companies he’s identified as playing fast and loose with financial regulations doesn’t stop there. The financial disasters at Commodore International, Coleco, Integrated Resources, Boston Chicken, Sunbeam, Conseco and Tyco International have all been identified and sold short by Chanos over the years, leading to healthy profits for both him and his clients.
12. He’s the founding chairman of the Coalition of Private Investment Companies
As well as his interests in Kynikos, Chanos serves as the founder and chair of the Coalition of Private Investment Companies “a global multi-stakeholder initiative focused on enabling conditions that support a material increase in private, return-seeking investment in conservation”. In his role as chairman, Chanos has delivered numerous testimonies to congress on the proposed regulations of the Securities and Exchange Commission and the Financial Services Authority in the United Kingdom.
13. He’s one of the wealthiest Greek-Americans
In 2016 and 2017, Chanos was voted one of the wealthiest Greek-Americans in the world. While he may not have made the list in 2018, he’s unlikely to be too worried; according to sources, the 2nd generation Greek immigrant is still sitting on a very healthy fortune of $1.5 billion.
14. He’s a trustee of the Citizens Budget Commission
Outside of his daily activities with Kynikos, Chanos finds time to serve on several boards. In addition to his chairmanship of the Coalition of Private Investment Companies, Chanos serves as President of the Board of Trustees of The Browning School, as well as a Trustee of The Nightingale-Bamford School, The New-York Historical Society, and the Citizens Budget Commission, a non-profit that aims to encourage positive change in the financial services of New York City and New York State government.
15. He wrongly predicted the collapse of the Chinese economy
In 2009, Chanos began researching the Chinese economy. The findings of his investigations led him to state the country was “on a treadmill to hell” that would lead to the collapse of the nation’s economy in a crash that would be like “Dubai in 2007 times 1,000.” The predicted collapse failed to materialize, leading many to cast doubt on his investment wisdom and to Chanos himself backtracking on going short on China. “In the past few years we’re actually now [have] reduced our China short and our global fund to the lowest it’s been”, he said during a forum event hosted by Schechter Wealth.
Ever since the Wall Street Journal published their damning indictment of Chanos in 1985, the self- professed financial detective hasn’t been short of detractors. For every reporter that’s praised his insights and investment acumen, another has cast doubt on his intentions and methods. Among his critics, the most common reproach is that Chanos is a manipulator of markets who deliberately feeds reporters biased information to cast doubt on his targeted companies. Chanos, naturally enough, has denied the allegation. “We do not call journalists. They call here all the time. We live by the rules,” he told the Globe and Mail.
17. He’s an art collector
One of the joys of a $1.5 billion fortune is the financial freedom it gives to develop highbrow tastes; in Chanos’ case, this means building a significant art collection. His collection is noteworthy enough for Chanos to have been invited to appear on the BBC Four documentary The Bankers Guide to Art.
18. He’s claimed Telsa customers are “paying money to lose money”
In 2018, Chanos found his next target: the Elon Musk owned company, Tesla. “I think the company is ultimately going to become a troubled company,” he told CNN’s Maggie Lake, before going on to warn investors banking on Musk’s personal history of success that Musk would likely leave the company in the near future to concentrate on other ventures. Thus far, Chanos’ predictions have failed to deliver: in 2018, the company ranked as the biggest provider of plug-in passenger cars in the worlds, and between 2017 and 2018, saw vehicle sales rise from 48,000 to 182,400.
19. He thinks short sellers are key to uncovering financial fraud
Following his predictions of Enron’s collapse coming true, Chanos didn’t hesitate in using the opportunity to silence his critics. During a speech to the House of Representatives, Chanos made it clear he believed short sellers such as himself were better positioned to uncover and reveal fraudulent activity than anyone else: “I can’t think of one major financial fraud in the United States in the last 10 years that was uncovered by a major brokerage house analyst or an outside accounting firm,” he said. Almost every such fraud ultimately was unmasked by short sellers and/or financial journalists.”
20. He owns a gym
With his thick glasses and lanky frame, Chanos may look like the archetypal nerd, but in reality, he’s a keen athlete who co-owns the Manhatan Edge Gym and according to his own admission, can bench press over 300lb. “I own a gym and have a great partner to train with, who actually used to be a world strength champ and who gets mad when I lose too much weight,” he told Square Mile. “I enjoy it because it gets the aggression out.”