Situational Awareness

Leopold Aschenbrenner enrolled at Columbia at 15 and graduated valedictorian at 19 with a B.A. in economics, mathematics, and statistics. He is a notably smart person with interesting ideas.

In 2024, at age 23, he wrote a viral manifesto on the future of AI and used that as a white paper to launch a hedge fund. By October of 2025, Fortune had written a lengthy profile of the new wunderkind, and the fund grew exponentially.

But being smart and having interesting ideas did not prevent him from losing $35 billion dollars last week when his hedge fund, Situational Awareness, was forced to liquidate its positions in response to margin calls.

There is a lot to be written about the details of the blow-up, but for the purposes of this note, I’ll simply emphasize that his trading ideas were not the problem and his long-term projections for the stocks he selected may prove to be perfectly correct over the next ten years.

However, by using 400% leverage on a concentrated set of positions, he severely narrowed his fund’s range of survivability. And being right in the long term never matters if you can’t survive all the short-term events along the way.

So while the AI trade is novel, and the fund’s gains and losses are staggering in size, we’ve seen this story before. The lesson Leopold learned last week is no different than the one homeowners learned in 2008.

Just because the bank is willing to lend you money doesn’t mean it is a good idea to take it.

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Personal Note:

The kids are back from camp, and we all survived. This is their last weekend of summer, and then it is back to school.