In the recently released film "The Big Short," actor Christian Bale portrays a brilliant but awkward loner named Michael Burry. Burry was one of the first people in the world to predict the subprime mortgage crisis that sent the U.S. economy reeling starting in 2007.
Based on his own unique analysis, Burry wagered more than $1 billion of his hedge fund's money against mortgage bonds (or "shorted" them) starting in 2005. Of course he ended up being dead on, and made incredible profits, which is why there's a major Hollywood movie about it.
The true story of Burry, though, has a melancholy side. His investors disliked his methods and personality so much -- Burry was often defiant and abrasive in the two-plus years it took for his bet to hit -- that many of them left him even after he made some a 400 percent profit. Most never even said thank you. Despite incredible profits, the fund was closed without ceremony.
When Burry set up his investment he had perfectly read the market, but he didn't have a perfect way to manage his investors for all those miserable days before everything reached fruition. In the early days, his investors had to watch their balances shrink as others won. He was more convinced in the outcome of the timeline than anything in his career, but that line of time itself turned sharp. Burry developed a bleeding ulcer.
It's in this phase that Burry and Philadelphia 76ers general manager Sam Hinkie would find odd kinship. Like Burry, the studious and highly intelligent Hinkie was resolute about precisely how to tear down and rebuild the 76ers not just so they'd be decent again, but so they'd play the long game to maximize the likelihood of championships. Neither of them came to the decision without exhaustive study.
Also like Burry, Hinkie appears to have struggled to find backers with similar pain thresholds for that line of time that he dubbed "the process."
The last two weeks have seen parts of Hinkie's half-painted masterpiece scrubbed away. The highly respected, old master Jerry Colangelo, hired to be Hinkie's boss last month, has made two apparently anti-Hinkie deals, and more are surely coming. First Colangelo traded two draft picks to acquire Ish Smith, who isn't just scheduled to be a free agent at the end of the season, but is a player the Sixers recently cut twice. Then Colangelo talked Elton Brand into joining the team and waived Christian Wood, a young prospect, to make roster room.
The results have been immediate. With improved point guard play from Smith, the 76ers' offense has looked better and the team has won three of its past seven games after previously winning only one of its first 31. Coach Brett Brown hailed the arrival of the 36-year-old Brand as if he'd just found an oasis in the desert and immediately assigned him to troubled rookie Jahlil Okafor's hip. Adding Brand and deleting Wood moved the 76ers from being one of the youngest teams in league history -- a fact Brown frequently referenced -- to not even being the youngest team in the league right now by average age (it's the Milwaukee Bucks).
When Smith made a few baskets to finish off a victory over the Minnesota Timberwolves on Monday night, the crowd gave a standing ovation. By the accepted standards, Colangelo, it seems, is already fixing the 76ers. But then by the accepted standards, Burry's investment against home prices always and forever rising was perceived as lunacy by many 10 years ago.
It is certainly against the Hinkie plan. The concept of trading two picks for a rental player and slicing off a young, developing player for someone who no longer has a future playing in the league is the opposite of value investing. It's the antithesis of plucking Nerlens Noel, Joel Embiid and Dario Saric in the lottery because they were undervalued by teams who wanted immediate returns on draft picks.
Trading for Smith would've been like Burry investing in the stocks of mortgage banks in 2006. It might've pleased his investors in the short term because Lehman Brothers and Bear Stearns were valued at the time, but it would've been an undercutting of what Burry believed.
The difference between Burry and Hinkie, though, is Burry had ironclad agreements with his investors that enabled him to have total autonomy. All they could do was make threats, and their frustration during "the process" was generally known only to a small community. Hinkie serves at the pleasure of his bosses, men who could be mocked nationally and personally after every embarrassing loss by the 76ers.
As Burry was winding down his position and getting out of the business in 2008, a brash investor named Joshua Harris was buying up the debt of failing investment banks. Just like Burry, some thought Harris was out of his mind for going against what was a bold-faced, obvious grain. Why buy trash that was literally killing the economy at any price? And like Burry, Harris believed he was uniquely positioned to know what he was doing.
By leveraging a mountain of debt bought from desperate banks, Harris found a way to get a large stake in a languishing chemical company called LyondellBasell. Harris saw value and long-term possibility. And as it turned out, LyondellBasell was positioned to be at the forefront of the shale revolution. This was later called one of the greatest private equity investments of all time by Forbes. By 2013, Harris was personally earning nearly $400 million a year, according to SEC filings.
Harris used this money and confidence to invest in some other distressed assets, namely buying the 76ers with some partners for $280 million in 2011 at a time when team prices were badly sagging (Harris' partner Leon Black, meanwhile, bought the painting "The Scream" for $120 million). Conservatively, the 76ers investment has already at least tripled. It was Harris, a noted contrarian investor, who backed Hinkie's radical plan when he hired him in 2013.
But it was also Harris -- whose company, Apollo Global Management had a bad 2015 with the stock falling more than 25 percent -- who ultimately pulled the plug on Hinkie. Though Apollo took a beating from the analysts and ratings agencies after a few bad quarters, it was only at 76ers games where Harris actually got booed.
Harris has waited out plenty of risky investments longer, but the short-term results didn't show up on SportsCenter and he didn't have to give news conferences about them. Hinkie didn't so much run out of time as see his boss get swallowed up by the brutal thump of the timeline.
Though Hinkie has stayed on as GM, Colangelo's opening moves make it seem the plan has surely changed now that Harris' support has shifted. Colangelo has built winning teams several times before and perhaps he's on his way to doing it again. As for whether or not Hinkie's foresight and planning could've yielded the type of results that would've eventually made for a holiday movie release, unlike Burry, we'll never know.