One source of investor due diligence information, especially for less well-connected investors, is the business press. Too many times, though, the investor profiles you find in the major magazines focus on the subject's lifestyle, the heartwarming narrative from penniless childhood, the social swath he cuts, etc., and not nearly enough about his/her business methods and investing style. In other words, to quote Warren Buffett during a boring tour of William Randolph Hearst's palatial San Simeon estate: "Don't tell us how he spent it. Tell us how he made it!"
So you have to train yourself to find what's valuable when reading the press. How did this person really make their money? What is their personal "business model"? Are they smart or lucky, simply in the right place at the right time? Will their methods survive the next market downturn? Are they a--holes and if so, is it the good kind or bad kind of a--hole? Are they seducing the writer or you the reader into believing their bulls--t (some version of "I am rich. I live like you want to live. I am supremely confident. Eminent people love me and tell you they love me. Therefore clearly I know what I am doing. Therefore if you knew what you were doing you'd be like me. Or give me money)? Perhaps most subtle of all, what is the writer of the piece trying to tell you without actually being able to tell you? Remember, reporters are seldom in full control of their destinies when they write a profile: They've probably had to pre-negotiate what's off-limits before getting access; they have to worry about continued access to their subjects and his friends, who are a phone call away from blacklisting the reporter and his/her publication; they have to worry about their editors and publishers, who want to attract the largest possible audience, which rules out including things that are thought to be "too complicated"; they may even have to worry about libel lawsuits, especially overseas; they may even be unwittingly telling you more about themselves and their own agenda than about the subject of the profile.
As a little case study, check out these two articles about famous New York venture Alan Patricof and his company. I don't know much about him, but my curiosity was piqued when I saw that he was one of the signers of a letter to House Speaker Nancy Pelosi urging her to reconsider some comments she made about how the superdelegates should vote. The last paragraph of the letter struck me as so clumsy and stupid in its obvious threat (trust your consigliere on this one: when you send a letter like that, in public, to a Sicilian like Speaker Pelosi, there is zero chance she will do what you want) that I had to ask myself "How could you be both that rich and that dumb?" So I did a little searching and found these two articles. As I read them I asked myself: If Patricof were raising a fund, would I invest in it and why?
How would you answer this question? Let me know what you think.