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When Ron was putting together his Vail fundraiser for the rescue
workers of 9-11, he got a number of the local leaders and long-term
residents to help: Vail mayor Rod Slifer and his business partner Harry
Frampton (slifersmithframpton.com; eastwestpartners.com); skiing legend
Pepi Gramshammer (www.pepis.com);
Vail co-founder Dick Hauserman, etc. He even approached President
Gerald R. Ford. Unfortunately, President Ford couldn’t attend, but Ron
was invited up to his house in Beaver Creek to visit. (The secret
service must have missed the fact that Ron was a well-known short
seller when they cleared him. Or perhaps they decided to overlook it,
since Ron was co-chairman of President Ford’s re-election campaign
during Ron’s sophomore year at Yale.) During his visit, they talked
about the President’s career, and how it was that he wound up going
into public service after graduating from Yale Law School. Ron related
that he had considered doing the same after graduating from Harvard
Law, but that he went to Wall Street instead. Still, Ron wondered
whether or not he should someday, perhaps when he retired from the
hedge fund business. President Ford then gave Ron some fatherly advice:
“Don’t. Instead, just enjoy your children, make a lot of money, and
keep giving to charity.” It’s advice that Ron took to heart.
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We sat down with Ron Pollack, short-seller and hedge fund manager of
the former Dancing Bear (net short) Fund, and asked him about some of
his experiences as a short seller. Ron recounted a story of a company
that he said was an example of a “technology hype story”. Years ago
there was a laser company that supposedly had developed a better
ophthalmic laser for correcting various vision disorders. This type of
product had been the subject of a lot of controversy at the time due to
the relatively low sales volume of the industry leader. One question
had to do with the entire product category: since the industry leader
had only been given FDA approval for certain limited indications, it
was too early to say whether the category would ever live up to
expectations that it would become the solution-of-choice for
nearsightedness, farsightedness, astigmatism, etc. For the laser
company, however, there was an even bigger question: Did they have a
viable product? They said that they did: one that was smaller, less
expensive, safer and more effective than those of the industry leader
and other competitors. But, in spite of the hype, the laser company
had yet to provide clinical data that supported their claims. In fact,
at one of the meetings of ophthalmologists, the company was openly
chastised by skeptical doctors tired of hearing all sorts of promises
from the company with no proof. The company had said that they had
widespread success with their laser in China. Well, Ron’s analyst found
a leading Chinese doctor who sat on key government councils, and got a
much different story. The Chinese doctor told the analyst that many of
the company’s lasers that had been sent to China were either sitting in
boxes, unused and unpaid for, or were being sent back. To top it all
off, the laser company was being sued by the industry leader and
another competitor for patent infringement. It took a while for the
hype to yield to truth; but eventually it did, the stock cracked and
the company was delisted.
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