The Hustle (16 page)

I crane my head around and catch a glimpse of a man with a shaved head walking down the street in baggy jeans and a dirty yellow parka.

“I'm going to roll on him,” Damian says.

We take a right, drive around the block, and pull up next to Myran as he waits for a crossing signal on the corner diagonal to the one we were just on. He stands in front of a mission for the homeless. Psalm 23 is spelled out in plastic letters inserted into the reader board on the front of the building:

The Lord is my shepherd

I shall not be in want

“All right, get up against that wall over there!” Damian barks, imitating a cop.

Myran, who is digging into a Styrofoam container of chow mein with a plastic fork, is startled. He peers into the car, recognizes Damian, and smiles.

“Hey man, what are ya doing?”

“We're just driving around. You remember Doug? He used to play on that basketball team with us, up at Lakeside School.”

“Hey,” Myran nods at me. His eyes, which look dull and glassy, give no hint of recognition.

Myran shifts his gaze to Damian.

“You lookin' sharp.”

“You know what I'm doing.”

“Yeah, I heard about that.”

Myran fidgets as a man approaches him from behind.

“I'm getting ready to go to work. I gotta go.”

“Well, take care,” Damian says.

We drive off in silence, both of us looking ahead. Damian is pensive, the “V” etching his forehead as he stares through the windshield. “He's still in the mix,” he finally says. “If it was just me, it would have been better. Sometimes I pick him up and give him a ride. He's always running something. He asks me for money and I just say, ‘Man, don't run a game on me, because I know how that's played.' ”

Boom, Bust

Dino Christofilis's office is a mile down Second Avenue from where Damian and I ran into Myran, on the top floor of a glass-and-steel office building. There is no indication in the lobby of its existence. It takes an alert eye to spot the small sign reading “Archon Capital Management” when you get off the elevator on the fourteenth floor.

At a few minutes after seven on a morning in August 2007, the four analysts who work for Dino hunch over their computers. The fluorescent-lit room is about thirty feet long and fifteen feet wide. As you enter through a door in the middle, the four desks of the analysts are to the right. A framed print of an oil painting of bulls stampeding down Wall Street hangs on the far wall. An oval conference table fills the middle of the room between the analysts' desks. Dino's large, dark cherrywood desk is to the left of the entrance, facing the rest of the room, its surface completely covered with manila file folders and paper printouts of company financial information. File cabinets line the wall behind the desk.

A whiteboard set on a ledge behind Dino's chair is stacked with handwritten admonitions:

BE THE BEST
!

FACTS
!

INVEST WITH
EDGE

LISTEN
+
ACT

FAMILY

KNOW YOUR COMPANIES

PLAY TO WIN
!

The windows along the wall across from the door look out at a taller, matte-black office building that reflects the morning sun. A water cooler stands next to the window near Dino's desk, and a tangle of power, phone, and Internet cables run next to the wall the length of the room.

For more than an hour, the analysts—all young men dressed casually in jeans or khakis, Polo or button-up shirts—barely speak as they flip through papers, read articles on the Internet, and listen to quarterly company conference calls through headphones plugged into their computers. For long stretches of time, the only sound is the clicking of computer mice and the shuffling of papers.

Dino arrives at eight forty, pulling a black roller-bag briefcase bulging with printouts and pink copies of the
Financial Times
that spill out from its unzipped compartments. The energy level immediately notches up. At six feet tall, Dino looks like every bit of spare fat has been sandblasted off his body. He parts his straight black hair in the middle, and his face is thin, so that each feature—black eyebrows, high cheekbones, brown eyes—is individually defined. His chocolate-brown suit, worn over a blue shirt with no tie, hangs off his frame. He nods at me and goes straight to his desk, jettisoning his roller bag as he sits down and begins to look through his side-by-side Bloomberg terminals, which display real-time quotes on the forty or so stocks he holds positions in. After a few minutes he begins a running conversation with seemingly everyone in the room.

To Marc, who is looking into the financials behind the initial public offering of the online travel site Orbitz: “How fast is Expedia growing? How much cash is Orbitz generating?”

To John, who sits in the far corner near the window and is following a company that makes meters for utility companies: “How much revenue do they potentially lose with this contract?”

To Carson, who sits near Dino to his left: “These guys are messing around with the tax returns, too.”

To me, as he flips through screens on his computer: “Europe is fading fast.”

Dino started his hedge fund in July 2004 with $1.5 million, about half of it his own money. Back then, the whole operation consisted of him sitting at a computer screen, working the phones for information, and trading stocks. In its first three years, the fund grew to more than $100 million in assets and returned 232 percent (in the same period, the Standard & Poor's 500 benchmark index of large companies returned 39.6 percent). That record placed it among the best-performing of the nine thousand or so hedge funds in the country. Dino hired an old fraternity brother from the University of Washington to work as an analyst, moved to a bigger office, and then had to tear out a wall in that office to double its size in order to fit more people. Institutional money managers in New York and Los Angeles who used to ignore his calls began to meet with Dino when he visited town. Despite his success, there's no room for complacency. “You can't sit still because there's guys out there that are going to pass you right by. You have to actively, aggressively look for the next idea, or the next opportunity, or the next data point,” he tells me. “You can't let your eye get off the ball. It's the punch that you don't see that gets you. They'll knock you out.”

If you were looking to find the single person who has most adroitly ridden the changes in Seattle's economy over the past two decades, Dino could certainly be a finalist. Like a basketball player who always gets to the open spot on the court before his defender does, Dino has examined how things are playing out and hustled to position himself ahead of the money.

As it turned out, our basketball team worked out for Dino perhaps better than anyone. Though he had been rejected by Lakeside twice, Dino got into the school in sophomore year. He credits his admission to his family's persistence, higher visibility from being on our team, and Randy Finley's cajoling of the school administration.

The school changed the course of Dino's life. While he was used to feeling at ease with his Greek family, Lakeside forced Dino—a fierce competitor on the basketball court but fairly shy off of it—to interact in a different way. “They helped you formulate opinions and articulate them, because I was more introverted, I kept things to myself,” he says. “It really kind of pushed me on that front.” His interest in business and finance grew from reading newspapers and business magazines in the school library, and his first job in the field—working part-time at the brokerage department of a bank during his senior year—was set up by a Lakeside contact.

By the time he graduated, Dino knew that he wanted to manage money for a living. He enrolled at the University of Washington, where he majored in finance. He knew that if he planned on working as a money manager in Seattle, instead of moving to a financial center such as New York or San Francisco, he was going to have to stand out from the crowd. So he upped his hours at the bank to full time and took classes at night, with the thinking that he would finish college with the real-world experience that others would only get in their first jobs after graduation. He had virtually no social life in college, but coming from a family of Greek immigrants from poor, rural backgrounds, he felt he had to grab every opportunity while it was there. When he graduated in 1994, everything seemed to be going according to plan. Dino took a job as an analyst at a Seattle-based financial management company, and his career looked to be off to a promising start. It just happened that the city was about to be turned upside down.

The beginning of the dotcom stock boom is generally pinpointed to August 9, 1995, the day when Netscape, the company that had designed the Internet browser of the same name, first offered its shares on the market. Even though the firm was only a year and a half old and had yet to turn a profit, the stock soared from an initial offering of $28 to $58 a share. Its founders were instantly rich.

Like the crack epidemic, the dotcom craze seemed to come from nowhere and land like a fist. But as with crack, the conditions that prepped the way were a long time in building. Beginning in the 1970s, American corporations had begun a “restructuring” process that involved eliminating jobs through layoffs, increasing productivity through the use of technology, and relocating manufacturing operations to cheaper locations overseas. As corporate profits increased in the 1980s, the stock market, which had been moribund for more than a decade, began to spasm back to life. At the same time, Americans started to funnel money into individual retirement accounts, which were then newly invented. Mutual funds sprouted to guide money into the market just as tens of millions of baby boomers began to save for their golden years. All these factors came together to sluice money into the market. This flow needed a place to be invested just as the Internet, in the mid-1990s, began to come into the public consciousness. No one knew exactly how people were going to use the Internet, but it seemed sure that they would. Companies that figured out how to profit from it would make fortunes. With the Cold War over and American economic dominance seemingly stretching as far into the future as anyone could see, anything seemed possible.

Russell Horowitz, a 1984 Lakeside graduate who had worked as an investment banker in New York, watched Netscape catch fire and realized that people who got in early on the Internet could make a lot of money. He came up with an idea for a dotcom and recruited John Keister, a former Lakeside classmate and soccer teammate, as a cofounder. The company, Go2Net, was a web “portal,” a site that offered people a variety of information—stock prices, sports scores, news headlines—all in one place. The idea was to draw traffic and then make money through advertising. Though Horowitz and Keister were six years older, Dino had gotten to know both of them through the annual Lakeside alumni basketball game. After he'd started to work as a financial analyst, Dino kept in touch with Keister, occasionally calling him and passing on stock tips. The pair approached Dino and asked him to join their start-up. He became Go2Net's fourth employee.

Dino was one of those rare people who know from a young age exactly what they want to do—in his case, manage money—and then single-mindedly apply themselves to getting there. The job with Go2Net offered him two pieces that fit with his ultimate goal. The first was the chance to get in and observe how a company actually runs, so he could use the experience in evaluating the management of other businesses as an investor. Second, he was put in charge of the stock market section of Go2Net, including writing a column of investment advice, so he remained in touch with the market. “The whole passion behind it was staying in finance and sharing my knowledge with individual investors, that was the reason why I went there,” Dino says. “I didn't know what the Internet was going to be like. It was early.” The early days passed quickly. Go2Net went live on the Internet in November 1996. Five months later, the company went public at an initial stock price of a little under $7. Two years later, it had climbed to $199; a $10,000 investment at the public offering would have been worth more than $280,000.

Though it's forgotten today, in the late 1990s Go2Net often appeared next to Amazon.com when business reporters rolled out examples of Seattle start-ups with stratospheric stock prices and world-changing potential. Articles such as “Young, Rich and Wondering How to Spend” ran in newspapers, relating tales about people like the Taco Bell manager from Phoenix who moved to Seattle, joined a dotcom, and became a millionaire before age thirty. Exactly as it had in the days of the Klondike Gold Rush a century earlier, Seattle swelled with new arrivals looking to make quick fortunes.

The euphoria created by easy money is hard to relate. Though I didn't live in Seattle during the dotcom frenzy, every time I visited and went out with high school friends for drinks, the talk always centered around who had landed a job at what start-up as well as rampant speculation about how much he might make when he could cash his stock options. The idea that, by age thirty, you could be rich enough not to work for the rest of your life was intoxicating, leading people to abandon their plans and desperately seek—with a lust similar to Humphrey Bogart's cascading mania for gold in
The Treasure of the Sierra Madre
—to get on with the hottest dotcom. “Greed was driving a lot of new people that wanted to get into the industry. They weren't there for the right reasons.… It was across the board from the top to the bottom,” Dino says. “Once you get one guy making money, it's like, ‘Jesus, that guy made a million bucks, I'm going to do it, too.' ”

As Go2Net rode the wave, Dino took a new job in the company as head of investor relations and vice president for corporate development and strategy. By 1999, Go2Net, which had revenues that year of $22 million and a net loss of $10 million, was worth more than $1 billion. Then, on March 11, 2000, the dotcom bubble—which had inflated the value of hundreds of companies to ridiculous levels—burst. Over the next year, the tech-heavy NASDAQ stock exchange lost 60 percent of its value.

The plunge trimmed the price of Go2Net's stock, but it shouldn't have finished off the company, which still had cash in reserve and was not losing a ton of money. The beginning of the end came in July 2000, when InfoSpace, another Seattle Internet company, acquired Go2Net for what was then valued at a $4 billion deal. Naveen Jain, a charismatic CEO who had formerly worked as a software engineer at Microsoft, had founded InfoSpace in 1996. It was basically a phone book on the Internet. Jain later announced that the company, for a monthly fee, would begin to deliver stock prices and other information to consumers through their cell phones. Wall Street analysts bought into it, the masses bought the stock, and, at the time of the merger, InfoSpace—which had never turned a profit—was worth more than $11 billion. Dino, though, didn't agree with the move to join the companies. “I wasn't a part of that whole process. I maybe said, ‘Hey, it looks interesting,' but I wasn't really involved in the decision,” Dino says. “After that merger I left. It wasn't a pretty time.”

Things quickly went sour. In an article published several years later, the
Seattle Times
reported that before the merger, InfoSpace executives had been using “accounting tricks and dubious deals” to boost revenues to keep the company's lofty stock valuation from collapsing. After the companies formally merged in October 2000, Jain and Go2Net's founder, Horowitz—the chairman and the president of the company, respectively—began to bicker as the dotcom bubble continued to deflate. In January 2001, Horowitz left. Jain remained at the helm for two more years, but it was a long way down. In a mirror image of the heady early days of the dotcom boom, $10,000 invested in InfoSpace in March 2000 would have yielded $20.67 by June 2002.