Byrne Hobart, the unlikely oracle
How the hedge fund analyst turned writer makes the future look clear, even without a crystal ball.
Written by Shreeda Segan
Photography by Justin Cook
In early 2020, Byrne Hobart was convinced COVID-19 would change the world. He was perplexed that so few felt the same. On January 27th — just seven days after the first confirmed case in America was found in Washington State — he tweeted that he believed the virus had already made its way to his then home state of New York. He was afraid the spread of the virus would be an economic disaster for every kind of business, down to his own employability as a freelancer.
So, with the goal of attracting enough buzz to help him land writing gigs, he doubled down on writing his newsletter, then a substack on tech and finance, with an audience of around 1200, largely made of tech and startup employees. He never anticipated that it would eventually grow to a loyal 50K+ following. He definitely did not expect the shoutouts from some of the tech industry’s most admired leaders like Stripe founder and CEO Patrick Collison, writer Patrick McKenzie, and Susa Ventures’ GP Leo Polovets.
Though he was wrong about some of his pandemic predictions — the biggest impact the pandemic had was on the human lives it took, not mainly, as Hobart once believed, on Chinese manufacturing — he was still one of the first to anticipate the virus’ global spread.
Then a similar thing happened earlier this year. Hobart tweeted that he did not expect Silicon Valley Bank (SVB) to undergo a bank run. He said that “banks don't technically *need* equity, they just need depositors to have a good reason not to flee, and an equity cushion is a great reason.” But he did observe that the bank was technically insolvent. And he shared his findings with his Twitter and newsletter audiences.
When you see something like that, your instinct should be that you're wrong. It is just pretty rare for a company to be insolvent and for no one to be talking about it — or for the only people talking about it to be people who are shorting the stock. You shouldn't expect that. But I couldn't find any reason that it wasn't true.
A few weeks later, SVB indeed underwent a bank run. Tech journalist Evan Armstrong would go on to tweet “pretty much every VC I know reads this newsletter,” referring, of course, to The Diff by Byrne Hobart. He speculated that Hobart’s observations “potentially caused” the entire run. Due to Hobart’s findings, Armstrong theorized, enough VCs must have paid close attention to SVB’s earnings and, eventually, emailed their portfolio companies to suggest founders pull their funds.
It’s impossible to say what precise role Hobart’s article did or did not play in the events leading up to the bank run. Even if Armstrong’s theory was right, it’s not obvious how someone like Hobart could have such an influence. Hobart does not sport a diploma from an Ivy League education. He does not have a degree at all. Nor does he have the reputation of a serial founder or venture capitalist with a track record of winning bets on outlier companies. Armstrong himself refers to Hobart as “one overly prolific dude in Austin.”
So how would “one overly prolific dude in Austin” go on to possess a trusted voice of reason, a voice that sometimes has the potential to influence the inner circle of tech elites?
Hobart was born in St. Louis to a mother in nursing and a father who ran a business selling group health insurance. He boasted high standardized test scores though he frequently argued with teachers, skipped homework, and had “intermittently okay” grades. It was enough to get him into his hometown’s most competitive high school, a Jesuit school called St. Louis University High School. As we sit at the kitchen table of his house, he reflects warmly on the experience, sharing how the Jesuits have a centuries-long tradition of arguing and have been in education for a long time. “It was good for me to get brutally shut down from time to time by a Jesuit priest who knew vastly more about a given topic than I did.”
A few years later, when Hobart arrived at Arizona State University (where he earned a full-ride), he started questioning whether attending school at all was the best use of his time. He’d pretty much always been a self-learner, most often through the guidance of books. When he was 10 years old, the children’s mystery book The Westing Game by Ellen Raskin planted the seed that would define much of Hobart’s life trajectory.
“One of the book’s characters starts playing the stock market. For whatever reason, that was just very interesting to me. This was also during the mid-90s, so the dot-com boom was just getting started and there was a lot of discussion about the stock market. I think it was probably a short-term peak in the average person's interest in stocks.”
A year later, at age 11, Hobart bought his first stock: Southern Union Gas. Two years later, the 13-year-old opened his first brokerage account. He even became an owner of Nasdaq shares early on, just when it started becoming available for public trade. By the time he was in high school, his father started bringing him along to quarterly visits with a stockbroker. “We would talk about portfolios and I’d bring along little write-ups. They weren’t very good, but I’d bring them,” he remembers.
These were the experiences that led Hobart to decide on his dream job — hedge fund analyst — and to, at age 18, drop out of college, pack his bags, and head to New York City in search of a more direct path to the coveted role.
When I ask Hobart what he attributes his crystal-clear and persistent love of stocks and markets to, he says “it’s hard to say. It looked like the kind of field where you could just do your own thing. You were either right or wrong. It didn't really matter if someone disagreed with you if you were right and they were wrong.” It was a place where Hobart didn’t have to argue in order to prove his merits.
Once he arrived in New York in 2006, it did take Hobart a few years to finally land that hedge fund position. Along the way, he found himself working jobs in online marketing, including building the SEO strategy for Yahoo’s news, sports, and finance verticals. But in 2012 a friend connected him with a hiring manager at SAC Capital (now Point72). The manager was initially wary of betting on unconventional talent, but Hobart made the cut. Here he focused primarily on “internet companies” like Shutterfly, Vistaprint, Ancestry.com, and WebMD (and even Google and Amazon).
“What's great about working at a hedge fund is that I had to do the research to validate my trade ideas. And the people who are the recipient of the pitch have a very strong interest in the truth. They don't want to win an argument for the sake of winning an argument. They want to make money, so hopefully they're right,” says Hobart.
He recalls having to do so much reading — on news, filings, trends, what investors talked about, figuring out what the default thesis is on the market at any given time. And he recalls having to formulate a variant view. This required even more reading. He’d have to validate the view with sound evidence and put a confidence interval around it. He says it all ultimately came down to four pieces of information: the current price, an idea of where the price should be, why there’s a gap, and what would close that cap.
“That is a very high standard to get to. And doing that regularly and repeatedly is extremely hard.”
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In 2014, Hobart got laid off from SAC due to team restructuring. He started applying for new roles, but focused only on positions with hedge funds. However, a position at 21.co, then led by would-be Coinbase CTO Balaji Srinivasan, caught his eye. He moved with his wife to the Bay Area where he would lead their marketing and BD efforts, often collaborating with Srinivasan directly. Shortly after, his wife got pregnant. They decided it would be better for them to raise their first child in New York City, so they once again packed up their things and moved back.
Hobart would go on to work a few more analyst roles, but writing started to emerge as a viable alternative path — something that pleased his mother, an avid reader who valued writing and often told a young Hobart that she’d love to see him grow up to become a writer.
It was 2018 when Hobart started to write and publish online in earnest. First on Medium, where he wrote on everything from his own experience of getting hired at a hedge fund without an undergraduate degree to the economics of boomers to understanding WeWork’s IPO. Then — at the request of Substack (which was in its early days of recruiting quality writers to bring both their work and audiences to their platform) — on Substack as The Diff. Though Hobart was never narrowly focused on pursuing a career in writing, as his mother had imagined, he did care about building and nurturing his network. It was easier for him to write, and to meet interesting people that way, than to network in person. These interesting people could then, he hypothesized, point him to interesting jobs. It was the same motivation that pushed him to publish even more aggressively at the start of the COVID-19 pandemic.
In February 2020, as his worries about the pandemic grew, he made the decision to turn on the Substack paywall. It would be one of several experiments to find ways to supplement his income.
“I [had] put together a spreadsheet of all the ways I could make money. Originally, I thought Substack would be a small piece of recurring income, offsetting the variability of freelancing. Within five months, my Substack earnings were bigger than all the other numbers I had pulled in for June of 2020. Some of my other work was working, some was not, but it was clear that the newsletter was the winner.”
As he continued to write and win subscribers, he quickly became one of Substack’s first celebrated writers. The company would use his success story as evidence of the viability of writing independently online for full-time work. His success encouraged other writers to start writing on Substack.
He partly credits this success to his experience at SAC Capital. Apart from the due diligence and rigor the work required, he says “part of what you're trying to do at a hedge fund is you're trying to understand the company and understand the situation well enough that you are the first person to correctly interpret the next piece of news. And that's where a lot of money is made.”
It turns out, things are not so different for newsletters. “There are times when a question like ‘how good is the next NVIDIA GPU and who gets them’ becomes the most important question in the industry. Let’s say there’s someone who has been writing about the chip industry steadily when fewer people were paying attention (like Doug O’Laughlin or Dylan Patel). If you’re asked about what someone should read to be up-to-date on the industry now, everyone’s going to recommend that person. They’re less likely to recommend someone who heard the tip for a big deal only three months ago.”
So Hobart doesn’t just mindlessly chase the next most trending piece of news. He tries to stay ahead of things across the finance and technology sectors. Every morning he wakes up to a couple hundred new articles in his RSS feed and a few hundred more in his inbox. Every morning he scans all of these headlines to select the most interesting ones to read. Then he reads them. And then he continues his ongoing reading on some of his longer-term research projects. All this before he even begins to work on his writing itself.
To him, it all comes down to “building up this ability to be in the right place at the right time, because industries are all cyclical to some extent, and so the right time does come for you eventually.” That means he has to still care about an industry when no one else cares.
But the strategy works. He has the readership and earnings to prove it. In the end, Hobart and his mother both got what they wanted.
Earlier this year, while making his morning rounds of skimming headlines, a headline from The Financial Times (FT) caught Hobart’s eye. It read “Silicon Valley Bank profit squeeze in tech downturn attracts short sellers.” Hobart clicked and skimmed through. In parallel — as his hedge fund experience had taught him to do — he ran a search himself on SVB’s financials. He discovered SVB had a “huge unrealized loss in bonds.” From there, “it was just subtraction of here’s their equity, here’s what their bonds are worth on the books, and here’s how much the bonds were worth when they sold them,” Hobart says.
“I was like, well, that adds up to zero pretty much. It was actually slightly above zero. When you see something like that, your instinct should be that you're wrong. It is just pretty rare for a company to be insolvent and for no one to be talking about it — or for the only people talking about it to be people who are shorting the stock. You shouldn't expect that. But I couldn't find any reason that it wasn't true.”
Despite his finding, Hobart felt that banks are not meant to always be solvent on a mark-to-market basis, himself writing on February 23, 2023, that “one reason banks aren't required to mark assets to market is that they can hold them indefinitely as long as they have deposits.” Only a few paragraphs later, however, is a disclaimer that Hobart was shorting SIVB (now SIVBQ).*
When I ask him why people like Armstrong credit his newsletter — not FT — to informing VCs about SVB, he says “in that case, it was literally that I have a different audience. I write up pieces for an audience that is more like 50/50 tech and finance, whereas the FT's is definitely more finance.”
Hobart also credits this audience with holding him accountable. Knowing that there’s at least always someone in his audience who knows what he’s writing about better than he does, he never tries to overstate his understanding of any given topic. It’s perhaps why he steers clear of making such bold claims, i.e., that SVB will have a bank run, and ultimately leaves his readers to decide things for themselves.
These days, Hobart writes to the order of a half million words a year. He employs two contractors to help him manage The Diff’s operations. One helps research and edit pieces and handles all inbound inquiries to The Diff’s recruitment arm; the other is a programmer who helps maintain the actual site and builds interactive data and visualization tools for some of Hobart’s articles, now that the site is self-hosted.
Though Hobart’s hedge fund years certainly shape his work today, he likens The Diff’s long-term goal more to a merchant bank.
“That's a bank that does some kinds of investment banking type stuff, but also invests off its own balance sheet and participates in deals. I do some of that where I have an AngelList syndicate and I will find interesting companies and write them up and raise money through the syndicate. The syndicate's members basically all come from The Diff's audience.”
Despite pioneering success as a new type of builder in a niche industry, Hobart struggles to fully identify as a startup founder. He acknowledges that he has a company with employees. Unlike a startup, however, his company is cash flow positive and the bulk of the output comes from his own manual effort. “So is it really a startup or is it closer to a service business? Or is it evolving more towards a merchant bank?” he wonders.
What he’s more clear on is who he is writing for. His readers include characters like “engineers at big tech companies who also trade currency futures on the side,” “someone who works as an investment banker but also invests in seed-stage startups,” and “hedge fund analysts or venture capitalists who don’t have enough time to chase down every rabbit hole.”
Why this unique blend of finance and tech? The Diff homepage rather beautifully answers this question: “First, they're very meta industries, like layers over the rest of the economy. They're rich with insights into how a lot of the world and economy works. And they also influence a lot of things about your life.”
Even if Hobart gets some insights on the world and economy wrong, his ability to foretell notable, yet often overlooked, parts of the future is manifest. He anticipated AI’s ability to actually increase demand for labor in 2020, pre-ChatGPT or today’s AI boom. He aptly pointed out that, in spite of AI’s labor-saving promise, the process of implementing AI is very labor-intensive and could drive a resurgence of economic growth — a thesis counter to Tyler Cowen’s well-respected great stagnation theory.
Still, he doesn’t see himself fitting into the fortune teller or guru archetype that some investors eventually fall into.
“I don't think I will ever be the first person to realize something important about the state of the world, and I will probably generally not be the first person to talk about it, but I can hope to be the first person to come up with the model that people end up using. And also probably to come up with the one-liner that people cite a lot. I think I have decent odds of that.”
*Hobart exited the position early when he saw on the news that SVB was raising additional capital, which was just a few days before it collapsed.
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