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Inside the Meltdown of a Wunderkind’s A.I. Hedge Fund

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philb2

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https://www.nytimes.com/2026/07/31/...old-aschenbrenner.html?smid=nytcore-ios-share

Last year, Leopold Aschenbrenner, a man barely of legal drinking age with a fondness for Rubik’s Cubes, crisscrossed the nation to raise money for his high-flying hedge fund.

An ex-researcher at OpenAI, who departed there in a cloud of controversy and then wrote a viral essay predicting an artificial intelligence revolution, Mr. Aschenbrenner had started his fund, Situational Awareness, in 2024 at age 22 with a burst of attention. That November, he raised $100 million from big names in the tech world and immediately began going whole hog into A.I. investing.
 
The kid doesn't have the greatest resume to begin with and overleveraged his positions. Citadel saw weakness and exploited it.

Doesn't matter how smart you are and you attended a good school and were valedictorian and graduated early. Being that young, he lacked the experience of how the real world works. He took the hedge out of hedge fund, gambled, and lost.
 
When I look at the stock market, VC, and bitcoin. I don't see people who give a shit about investing or products or services. I see people wanting to get as rich as possible with as little effort as possible. It's a tale as old as time. And we will continue to see in the future new ways that people dream up to become rich.

Additionally, Sam Altman is a hell of sales guy though. He has a knack for bringing people into the group. Is Effective Altruism™ a cult? The experts say "not exactly". So you can't really blame a young person for being swept up.
 
westrock2000 said:
When I look at the stock market, VC, and bitcoin. I don't see people who give a shit about investing or products or services. I see people wanting to get as rich as possible with as little effort as possible. It's a tale as old as time. And we will continue to see in the future new ways that people dream up to become rich.

Additionally, Sam Altman is a hell of sales guy though. He has a knack for bringing people into the group. Is Effective Altruism™ a cult? The experts say "not exactly". So you can't really blame a young person for being swept up.
Click to expand...

I mean, it isn't surprising. The current state of the world is that getting an entry level position just fucking sucks thanks to AI. Get rich quick and gambling schemes are kind of getting popular because there's a tiny chance that they will work, but hey if they do they sure as fuck beat all of the other shit. Of course, not sure if that in any way explains this guy's motivations, but yeah.
 
StoleMyOwnCar said:
I mean, it isn't surprising. The current state of the world is that getting an entry level position just fucking sucks thanks to AI. Get rich quick and gambling schemes are kind of getting popular because there's a tiny chance that they will work, but hey if they do they sure as fuck beat all of the other shit. Of course, not sure if that in any way explains this guy's motivations, but yeah.
Click to expand...
Just look to South Korea - prospects for the majority of young folks are grim, so they all piled into KOSPI leveraged to the tits
A ton of them got margin called and blew up their accounts with KOSPI's rollercoaster ride over the past 2-3 weeks

1785723338570.png
 
WhoBeDaPlaya said:
Just look to South Korea - prospects for the majority of young folks are grim, so they all piled into KOSPI leveraged to the tits
Click to expand...
I don't know that it is all quite as grim as people want to pretend. I see a lot of "Oh young people do this because they have no hope of a good future otherwise, they can only get one by gambling!" However that doesn't seem to be borne out by the amount of money that many make and then blow. While I'm not saying there are no people who just say "I'm fucked either way, might as well gamble and hope I win," I think there's more that are like what westrock is talking about where it is just get rich quick. They want a shortcut, they want to not have to work, and they want it fast. I get it, I'd love to be rich enough to not work too, but it is foolish, and they get fucked.

It's one of the places that gambling bans come from: Plenty of people are just drawn by the siren call of "get rich quick" and continually screw themselves losing their money to it. This modern gambling is even worse because it gets covered in the thin veneer of "investing". Oh buying 0DTE options isn't gambling, no it is "investing" because you do it on the stock market! No, a prediction market isn't "gambling" because you are so smart you KNOW what the outcome will be! That kind of shit.

Nytegard said:
Doesn't matter how smart you are and you attended a good school and were valedictorian and graduated early. Being that young, he lacked the experience of how the real world works. He took the hedge out of hedge fund, gambled, and lost.
Click to expand...
It is always a potential problem with really smart people, and particularly young people in tech: In school they were generally much smarter than their peers, and found topics extremely easy to pick up and excel at. They few that they didn't they forget about or write of as "stupid". This leads to a mindset where they think they are smarter than basically everyone at EVERYTHING and anything they try will be easy to them and they'll do great. That is not the case, of course, doesn't matter how smart you are, you can't be good at everything. Spend a lifetime working and you'll still only master a few things. They don't know that, and thus will get themselves in over their head.

It's made worse because society worships the idea of kids like that and throws money at them. A great example was Bankman-Fried. Investors literally thought he was great and it was a sign of genius that he would sit and play League of Legends on a call, rather than paying attention. They deluded themselves in to believing that this meant he was such a genius he didn't need to pay attention and could not fail, rather than realize it was just a sing of extreme immaturity and that people who are really good at what they do pay attention carefully because they know it matters, and they can pick up on details that most can't.
 
westrock2000 said:
When I look at the stock market, VC, and bitcoin. I don't see people who give a shit about investing or products or services. I see people wanting to get as rich as possible with as little effort as possible. It's a tale as old as time. And we will continue to see in the future new ways that people dream up to become rich.

Additionally, Sam Altman is a hell of sales guy though. He has a knack for bringing people into the group. Is Effective Altruism™ a cult? The experts say "not exactly". So you can't really blame a young person for being swept up.
Click to expand...
^^^ This.

Everyone wants to be an Oligarch.

Just saw that Martin Shkreli now has a YouTube channel....I SMH.
 
"There are only three ways a smart person can go broke: liquor, ladies, and leverage.", Charlie Munger

He could end up having been all right all along, but margin call can kill you on your track. 4x leverage was really aggressive for that amount of capital.

They still have a 10 billion in private asset that are hard to sales and be forced to sales (about half in anthropic), the early investor that went throught the +1000% phase are probably quite good and just new money was wiped ?
 
LukeTbk said:
"There are only three ways a smart person can go broke: liquor, ladies, and leverage.", Charlie Munger

He could end up having been all right all along, but margin call can kill you on your track. 4x leverage was really aggressive for that amount of capital.

They still have a 10 billion in private asset that are hard to sales and be forced to sales (about half in anthropic), the early investor that went throught the +1000% phase are probably quite good and just new money was wiped ?
Click to expand...
Risk management could have saved him.

The problem with private assets is that they're really hard to sell. Yes, he took a 10% hit on his public position when selling to Citadel, but that was better than the alternative. There could have been an information cascade, which would probably have triggered a circuit breaker, at which point his whole hedge fund is, let's just say, not in a good position (which is putting mildly).

He even stated before his hedge fund was to go against the big wigs on Wall Street, which was also not exactly a smart thing to do. Guess who were on the other end of his bets? (Not just Citadel, but you had Goldman and Morgan Stanley involved.) Now, I certainly don't think they were going to let his hedge fund collapse, as his investors are their investors also. This was more of a moment of teaching him an expensive lesson. He's still left with a healthy profit, but not what the profit was.

Now, there also is a conspiracy theory that the people on the other end engineered this collapse, although that can't be proven, but yeah, I don't think many people think of it as a conspiracy theory, and more of a given. Wall Street would NEVER manipulate the market for profit!

But there's also another lesson here that he needs to learn.

"The four most dangerous words in investing are: 'This time it's different'." - Sir John Templeton
 
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