Who invented hedge funds: 7 iconic phrases Fortune coined

Sure, Fortune is outdated. The “93-year-old startup” is technically a member of the Silent Technology, predating the invention of not simply the web but additionally zip codes and crash check dummies, to not point out many of the Fortune 500 firms we cowl. In truth, we’ve been overlaying monumental enterprise occasions and the tradition of capitalism for thus lengthy that we’ve forgotten a few of our contributions to it. Take the phenomenon of “groupthink” or the curious midcentury funding automobile “the hedge fund.” Fortune didn’t invent both of these items, however we had been first to call them.

However how does one invent a phrase or a phrase, anyway? 

With the flick of a wrist and copious time spent round copious time spent in nook workplaces, on manufacturing unit flooring, and wherever else enterprise leaders congregate, Fortune has been producing timeless phrases in our world vernacular for many years. Based within the wake of the Nice Despair, the journal has continued by way of 16 presidents, 5 up to date market crashes, and a world pandemic. That makes us just some months senior to Warren Buffett, the Oracle of Omaha himself, whose in style nickname might even have originated in Fortune—it was bestowed by former Fortune senior editor-at-large Allan Sloan. Nonetheless, Sloan is fairly certain that he coined the moniker whereas writing a June 1985 article for considered one of our distinguished opponents.  

In a 1929 prospectus for the journal, founder Henry R. Luce outlined Fortune’s model, proclaiming that “precisely, vividly and concretely to explain Trendy Enterprise is the best journalistic task in historical past.” Here’s a sampling of a few of the most iconic descriptions that Fortune editors have minted over the previous 9 many years:

Groupthink: 1952

Chances are you’ll recall out of your Intro to Communication Idea 101 course one vocabulary time period that was to be starred, highlighted, and underlined as a result of it could seem in your closing examination: Groupthink. 

In our March 1952 concern, editor William H. Whyte Jr. launched the time period, impressed by the phrase “doublethink” in George Orwell’s just lately launched masterpiece, Nineteen Eighty-Four. Set in a dystopian future model of London, the novel hit bookshelves in 1948 with a robust warning in opposition to totalitarianism.

Whyte would go on to a protracted profession as an influential sociologist and would carry the voices of many socially minded writers into Fortune’s pages, together with early work by the good urbanist Jane Jacobs. He described groupthink as a “perennial failing of mankind” wherein we copy our buddies, household, coworkers, and acquaintances, and fail to hearken to dissenting opinions.  

Whereas Whyte used “groupthink” to explain American tradition and the examine and apply of administration within the Nineteen Fifties, the phenomenon continues to be alive and properly in our present-day office. Look no additional than the second-biggest banking collapse in American historical past, the demise of Silicon Valley Financial institution, which featured a as soon as unthinkably quick model of an old-school financial institution run, powered by social media however actually by groupthink at hyperspeed. It solely took 36 hours for regulators to shutter SVB after the primary rumblings of bother began.

The hazard with groupthink, Whyte explains, is just not solely that the typical individual will likely be influenced by the “social engineers” of the group, however that they’ll turn out to be one other puppeteer themselves and “embrace groupthink because the highway to safety.”  

The “groupthinker is taught that one wins by being directed by others — and that crucial factor on this planet is to be a workforce participant,” Whyte writes. Who in your office is a sufferer of groupthink, or is it even you?

Group Man: 1953

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Do your coworkers make their jobs their whole persona? That’s removed from a brand new development in company America. 

For our Could 1953 concern, Whyte was at it once more, finding out the rising class of managers who had left their hometowns to begin careers in large cities earlier than settling in suburban communities that match their life. These employees exuded a robust dedication and loyalty to their employers, and offered the “sharpest image of tomorrow’s administration,” he writes.

“Although it might be the auto supplier and the proprietor of the native bottling franchise who drive the Cadillacs, it’s the group man who now makes the selections that the majority have an effect on the lives of others,” Whyte explains. 

Merely put: Their private life is closely influenced by the corporate that they work for, and the person feels a really robust ethical obligation to suit into that company tradition. 

Whyte warned that this cohort was changing into an more and more dominant power in American society and prophesized a soulless tradition missing in independence, risk-taking, and progress. 

“The longer term will likely be decided not by the impartial entrepreneur or the ‘rugged individualist’ whom our folklore so venerates; the longer term will likely be decided by Group Man,” Whyte writes. The idea was such successful that Whyte would go on to additional discover the subject within the bestselling guide of the identical title. Within the literature on managerial tradition within the aftermath of “Taylorism,” which launched the idea of scientific administration, Whyte’s guide was a key pivot level spanning James Burnham’s 1941 work, “The Managerial Revolution,” and John and Barbara Ehrenreich’s coining of “the professional-managerial class” in 1977.

Whyte’s speculation stands true as we speak, as America continues to be dominated by massive firms with management concentrated within the fingers of the nation’s elites. The COVID-19 pandemic and Nice Resignation ushered in a brand new tradition of hybrid work with an emphasis on worker happiness and selection, permitting workers to reinvent their each day schedules, parenting duties, and work environments, however return-to-office mandates on the largest firms, together with Goldman Sachs, Disney, and Amazon, reveal the prevalence of that pressure between particular person selection and organizational conformity. 

Fortune 500: 1955 

Fortune

Editor Edgar P. Smith referred to as it a “lightbulb second,” saying on the time: “I believe that our readers simply could be on this checklist.”

The Fortune 500 checklist has catalogued the rise and fall of America’s greatest firms ever since, however the iconic nature of the checklist is evident from how the rating itself has turn out to be synonymous amongst enterprise leaders and publishers as a shorthand for large and profitable. 

First gracing our cowl within the July 1955 version, the “Fortune Industrial 500”—later shortened to Fortune 500—was first printed at a time when the U.S. economic system was “colossal in dimension and the envy of the world,” based on the legendary Carol Loomis, who was then a rookie reporter on the journal’s employees. 

Through the years, greater than 2,200 firms have graced the Fortune 500 checklist. This 12 months’s rating collectively generated a document $16.1 trillion in income and $1.8 trillion in earnings.

Hedge fund: 1966

{Photograph} by Marvin Newman

Carol Loomis gained many awards all through her lengthy and illustrious profession, and even served as the professional bono editor of Warren Buffett’s annual letter to Berkshire Hathaway’s shareholders, however her greatest contribution to the language might have been when she coined the phrase “hedge fund.” In April 1966, Loomis profiled the millionaire investor Alfred Winslow Jones (who would later turn out to be a Fortune contributor himself), and whereas he’s credited for being the daddy of the hedge fund business, Loomis turned the one that named a whole sector.  

By pooling traders’ cash and short-selling shares, hedge funds use leverage to maximise their returns, however additionally they threat intensified losses. As she chronicled Jones’ prosperous life-style and profitable profession, Loomis outlined this type of fund because the engine of his success. Such funds use capital that’s each leveraged and “hedged,” which places the investor ready that “partially shelters him if he misjudges the overall development of the market.”

The principle benefit to those funding automobiles, based on Loomis, is that the hedge fund investor’s quick place allows them to make choices with “most aggressiveness.” 

After a crash within the Nineteen Seventies, hedge funds benefited from a resurgence within the go-go ‘80s and subsequent increase within the ‘90s as managers developed new methods for investing. Driving the excessive of a bull market, the business grew from $38.9 billion in 1990 to $536.9 billion in 2001, based on Hedge Fund Analysis (HFR). 

In the present day, hedge fund managers are navigating macroeconomic and geopolitical challenges from rate of interest hikes and Russia’s invasion of Ukraine, however the business total has surged from Jones’ day to ours. Jones’ agency launched with $100,000 in belongings whereas the business was $3.83 trillion in dimension as of the fourth quarter of 2022, based on HFR. That 12 months additionally noticed the best revenue in hedge-fund historical past: $16 billion from Ken Griffin’s Citadel. And to suppose, as soon as it was a twinkle in Alfred Jones’ eye and a tickle in Carol Loomis’ mind.

Trophy spouse: 1989

It’s probably not okay to explain somebody as a “trophy spouse” anymore. Typically a derogatory phrase, it could actually simply suggest {that a} lady married to a rich, profitable partner has little to no private advantage apart from her bodily look. 

Within the late Eighties, throughout a time of rising acceptance of divorce amongst company America’s energy elite, Fortune senior editor Julie Connelly not solely coined the phrase however outlined its rise.

As Connelly writes within the August 1989 concern, “it took the roaring Eighties to make divorce absolutely respectable.” In spite of everything, the last decade started with the election of America’s first divorced president, Ronald Reagan, who was remarried to his second spouse, Nancy Reagan, when he moved into the White Home.

“If the CEO of the US may shed and rewed, why not the CEO of a Fortune 500 firm?” Connelly posited. 

Connelly surveyed the rising prominence of a partner “a decade or two youthful than her husband, typically a number of inches taller, stunning, and fairly often completed.”

This associate “certifies her husband’s standing,” Connelly stated, however she was certain to notice: “this trophy doesn’t cling on the wall like a moose head—she works. Exhausting.”

Trophy husband: 2002

Fortune

Because the outdated adage states: “behind each nice man is a good lady.” However that quote wants some updates. 

After coining “trophy spouse,” Julie Connelly later documented the rising variety of girls leaders climbing the company ladder whereas sharing parenting duties with a “trophy husband” at dwelling. 

“Name him what you’ll: househusband, stay-at-home dad, home engineer,” Connelly writes. “However credit score him with setting apart his personal profession by dropping out, retiring early, or going part-time in order that his spouse’s profession may flourish and their household may thrive.”

Progress for working girls is gradual however measurable: This 12 months, for the primary time in historical past, girls CEOs ran greater than 10% of firms on the Fortune 500

Co-parenting duties are nonetheless evolving, too. In the present day, most People don’t assume working moms will keep at dwelling with their youngsters, based on a current survey of greater than 2,000 U.S. adults carried out by The Harris Ballot on behalf of Fortune.

As a substitute, greater than half (55%) of respondents imagine the father or mother making much less cash needs to be the one who stays dwelling with the youngsters. 

Moreover, the variety of stay-at-home dads has elevated barely in recent times, based on the U.S. Census Bureau, although that definition doesn’t absolutely encapsulate the total scope of fathers together with those that are single or determine as LGBTQ+.

Based on Pew Analysis Middle, an estimated 2.1 million stay-at-home dads had been residing within the U.S. in 2021. That’s up from 1.1 million stay-at-home dads recorded in 1989, the identical 12 months Connelly coined “trophy spouse.”

HENRYs (Excessive Earners, Not Wealthy But): 2003

How about that $4 cup of Starbucks?

It’s a spending selection symbolic of a selected demographic: The one that spends cash as quickly because it hits the checking account, resides in a metropolis with a excessive price of residing metropolis, and normally neglects their month-to-month funds. Should you earn six figures however don’t have sufficient in financial savings or investments to be thought of “wealthy,” then this could be you.

You’re a HENRY, a “Excessive Earner, Not Wealthy But.” 

Fortune author Shawn Tully, who continues to be on employees as we speak, having first been employed as a researcher in 1978/79, first launched the world to the “HENRYs” in 2003, and revisited the topic in an article within the November 2008 concern that described people incomes over $250,000 yearly however getting taxed to “excessive heaven.”

On the time, then-presidential nominee Barack Obama and different congressional Democrats incessantly referred to those excessive earners because the “wealthy” and the “wealthiest People” in a push for extra tax will increase, however that’s debatable, as Tully explains. 

“In contrast to thousands and thousands of People, most HENRYs don’t want to fret about making the subsequent mortgage or bank card cost,” Tully explains. “Nonetheless, HENRYs are getting a nasty rap from those that lump them in with America’s conspicuously rich.”

Principally members of two-income households, HENRYs interviewed by Tully stated they had been strapped for money primarily on account of rising federal, state, and property taxes, “plus the knife of the [Alternative Minimum Tax].” They blamed the squeeze on investments of their kids, together with paying for personal faculties, day care, and personal classes, like “dance, tennis, or gymnastics.”   

HENRYs are nonetheless alive and properly as we speak, and are additionally nonetheless feeling the strain from falling dwelling costs from a world correction along with rising rates of interest, similar to the early 2000s. Nearly all of as we speak’s HENRYs are millennials, who’re saddled with unprecedented ranges of scholar debt and have weathered two historic recessions earlier than the oldest of them reached the age of 40. However who can actually resist a Starbucks in a time of stress?

The "paypal mafia" photographed at Tosca in San Francisco, Oct, 2007.

Photograph by Robyn Twomey for Fortune

Earlier than America’s richest individual constructed rocket ships destined for Mars, designed implants for the human mind, and nicknamed himself “Chief Twit,” Elon Musk was a member of the “PayPal Mafia.”

Fortune’s Jeffrey O’Brien profiled the leaders behind the net funds firm’s monumental rise within the November 2007 concern, introducing the world to not simply Musk however different future tech luminaries similar to Peter Thiel. Whereas O’Brien reported this coinage, he didn’t create it; the supercharged roster of founders and builders together with the likes of YouTube cofounders Steve Chen, Chad Hurley, and Jawed Karim gave themselves the title “PayPal mafia.” Like American organized crime within the postwar interval, the merger of a number of rival cost startups made all of them richer, and the title of “don” on the then-fledgling firm was reserved for enterprise capitalist Peter Thiel. 

Now a Fortune 500 firm, PayPal was as soon as a “brainchild” of Max Levchin and Thiel that “would change the course of the Web.”

After promoting out to eBay for $1.5 billion in 2002, most of PayPal’s key workers left the corporate however stayed in contact.

Altogether, these PayPal veterans have gone on to work with unicorns, startups, and Fortune 500  firms together with YouTube, Affirm, Tesla, Twitter, LinkedIn, Yelp, Palantir Applied sciences, SpaceX, and Yammer. 

“Lots of PayPal’s early hires matched a selected profile: extremely smart workaholics who had been good at math. No frat boys, MBAs, or, God forbid, jocks,” O’Brien writes.

Extra just lately, nevertheless, financial headwinds have halted PayPal’s historical past of breakneck development, leading to layoffs, slumping shares, and a CEO exit. 

Bonus: Fortune’s First Cowl

Fortune

The very first concern of Fortune that was distributed to subscribers starting in February 1930 featured the Roman goddess Fortuna together with her wheel on its cowl. 

Nonetheless, that wasn’t our first-ever cowl.

In a letter to advertisers in September 1929, Time co-founder Henry Luce proposed a brand new journal (trace: Fortune) and included it in a prototype concern,  “Quantity One, Quantity 0.”

The remainder is historical past. 

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