Worth the Wait
Seth Klarman’s whole life has revolved around numbers, usually business numbers as a financial boy genius who became a self-made billionaire as CEO and president and portfolio manager of the Boston-based Baupost Group, a private investment partnership he founded in 1982. He also, as a minority owner of the Boston Red Sox, knows all of baseball’s analytics.
In Thoroughbred racing, a natural fit for him growing up three blocks from Pimlico Race Course in Baltimore, he’s put up great numbers since becoming an owner in 1993, first in partnership with Jeff Ravich as Klaravich Stables before Ravich opened his own stable on the West Coast. Klarman held on to the stable name and found a new partner in 2006 in William H. Lawrence, the CEO and chief investment officer of Meridian Capital Partners in Albany, N.Y.
Klarman’s precociousness in business was absolutely extraordinary. When he was four, he redecorated his room as a retail store, putting price tags on all his possessions. In the fifth grade, he gave his class a presentation about buying a stock. To supplement his personal income, he had a paper route, a snow cone stand, a snow shoveling business and sold stamp and coin collections. He bought his first stock at the age of 10, purchasing one share of Johnson & Johnson because he had gone through a lot of band-aids growing up. The stock split three-for-one, allowing Klarman to triple his investment. By the age of 12, he was calling his broker regularly to get stock quotes.
He intended to major in mathematics when he enrolled at Cornell University, but switched to economics. He graduated magna cum laude in economics with a minor in history in 1979. He worked for the Mutual Share Fund, where he had interned in the summer of his junior year, for a year and a half before going to business school at Harvard, where he was a Baker Scholar. When he graduated in 1982, he co-founded the Baupost Group. In 2008, he was inducted into the International Investors Alpha’s Hedge Fund Manager Hall of Fame.
His philanthropic endeavors are legendary.
William H. Lawrence, who is on the Board of Overseers for the Wharton School of Business, was born in North Dakota, but his family moved to Albany, N.Y., when he was young and his family enjoyed going to Saratoga. He was 12 when he visited Saratoga Race Course for the first time, and he subsequently went back with friends many times. They told each other that if any of them wound up with the capital to buy Thoroughbreds, they would do that. A few decades later, after Lawrence had graduated from the Wharton School of Business at the University of Pennsylvania and made his fortune as the founder and CEO of Meridian Capital Partners, his friends reminded him of that, saying “You’re the guy.”
So he stepped up to the plate and joined forced with Klarman. He did so with no pretensions. “If you find people who are actually making money in this sport, then please let me know,” Lawrence told Tim Hyland in a 2013 story in The Wharton Magazine. “For me, being from Wharton; for Seth, who is a great investor, this business is very incongruous to how we would normally think otherwise.”
Regardless, Klaravich Stables has some 100 horses, most of them with Chad Brown. Many have had financial names, including Currency Swap, Balance the Books, Economic Model, Takeover Target and Cloud Computing. One can only imagine the thrill Klarman had when Klaravich Stables and William Lawrence’s Cloud Computing won the 2017 Preakness Stakes in his hometown.
Through October, 2018, though, there was one number that Klaravich hadn’t reached: one. They had not had one victory In the Breeders’ Cup. Klaravich was 0-for-16 and Klarman 0-2 on his own heading into the 2018 Breeders’ Cup, an oh-fer that ended in exultation when their unworldly two-year-old filly Newspaperofrecord upped her perfect record to three-for-three with a dominant 6 ¾-length victory in the Breeders’ Cup Juvenile Filly Turf. “We never won a Breeders’ Cup race, so that’s special,” Klarman said. “I think she’s our most spectacular horse. We’ve never had somebody that emerged so quickly in their career—showed so much promise and fulfilled it.”
Economics be damned because, as Lawrence pointed out, “Winning a horse race is one of the greatest feelings in the world.”