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We care deeply about our employees, their families, our community, and of course our clients.”
Dan never imagined he would end up on Wall Street. At Stanford, where he dual majored in English and biology, he thought about becoming a doctor or a researcher for a biotech company in his native California. Later, after excelling at Harvard Law School and clerking for Justice Anthony Kennedy on the U.S. Supreme Court, he set his sights on becoming a corporate tax partner at a white-shoe law firm. Six years later, he was ready for a change, and change is what he got, starting at the bottom as a research associate at Alger. His intense focus on in-depth fundamental research yielded both investment results for the firm’s clients and recognition by his peers and by Wall Street. As Alger’s head of technology, he led Alger’s early investments in internet, ecommerce, and technology companies in the 1990s. Dan’s dedication to investing “the Alger Way” prepared him to assume the role of Chief Investment Officer and President and lead the rebuilding of the firm after the 9/11 terrorist attacks. He became CEO of Alger in 2006, as part of the firm’s transition of ownership to the next Alger generation. As the leader of Alger, Dan still picks stocks and leads the firm’s investment team while also hiring people who are passionate about investing and whatever else they pursue in life. Aside from investing, Dan’s passions range from collecting art and 1960s cars to biking, skiing and environmental conservation. He’s a board member and former chair of the New York State chapter of the Nature Conservancy.
Your father was a Stanford professor and you grew up around the campus. What was that like?
I was extraordinarily fortunate to grow up in a place that was like “The Wonder Years.” It was a magical California suburban environment. There was a lot of farmland and orchards around Stanford back then. And there was also this great intellectual community. I remember one night when two professors won the Nobel Prize. A group of us rode our bikes to the parties for them. Who doesn’t want to grow up in a place like that?
You were on the fast track as a lawyer. Why did you get off it?
I quickly learned that I didn’t like practicing corporate law, which was highly repetitive. Through law, however, I did learn about Wall Street and the financial aspects of the clients we advised, many of whom were institutional investors or their advisors. So, I started looking at making a change, interviewed with some investment firms and had a couple offers. One night at dinner, I asked my new father-in-law, Fred Alger, for some advice, in particular on whether to accept an offer I had received from Merrill Lynch. He said, “Come down to my office. This is the best business to be in.” Months later, I visited Fred at his office and he began, in effect, a determined campaign to get me to join the family business. I eventually decided to join Alger because of a long talk with my mother, an extraordinary woman who was ahead of her generation in many ways. I expressed my reservations about joining a “family business,” but she countered with many reasons why family businesses are often the best.
Were they both right?
I love what we do. I’m interested in many subjects and I get to combine them here. We do both quantitative and qualitative research. You have to crunch numbers, but you also need intuition to say, “This CEO and management team are better than those.” I also like having a scorecard that measures performance objectively. As Fred told me when I started: “If you are good, people will know you are good and they won’t argue with it.” I also think my mom was correct in that, as a family business, we can run the business and express values that are very different than “corporate”-run firms. We care deeply about our employees, their families, our community, and of course our clients.
Hiring people is a big part of your job. Have you hired people who don’t have an investment background?
Plenty. I look for people who are bright, not just academically, but people who are curious and driven to understand and excel. I hired a young woman who was an art history major. In her interview we talked mostly about her thesis, which was about a single painting. I thought that if she could do such detailed research about a single painting and could synthesize it for me in 15 minutes, she had the drive we are looking for.
The 9/11 terrorist attack resulted in Alger losing 35 employees—nearly the entire investment team. You were fortunate enough to be out of the office on that day. As a newly minted Chief Investment Officer after the attack, you worked to rebuild the firm. To what do you attribute your success in this role?
I decided to recruit former Alger portfolio managers and senior analysts. They often got their first job in the industry at Alger, knew the Alger investment process and indeed had gone on to success at other firms using it. With a few senior Alger “alums” as committed to rebuilding Alger as I was as a result of having been given opportunities, we could then hire young, new associates to train and rebuild the rest of the investment team. In taking this approach, I rejected the advice–well-intentioned and probably sound for most–that I should hire “star’ portfolio managers from competitors, have them bring their teams to Alger, and that this would reassure clients that their money would be taken care of. However, I immediately recognized that this approach would not rebuild Alger; it would (perhaps) allow us to survive as a business, but we would become a collection of strategies, with different investment philosophies and processes, as “star” managers from other places would not bring the Alger way of investing with them, but their own. That would not honor the memory and work of David Alger and our lost colleagues, in my view. I was trained to believe, by both David and Fred, that if we hired hardworking, smart people, we could train them in the Alger investment philosophy and process, and that such a team could beat our competitors who more often are built on a “star” or “personality” cult of their top people. I think we proved that as well in our rebuilding Alger after Sept 11th.
You pick stocks based on Alger’s own fundamental research. Do you think you have an edge on the rest of the market?
It is hard to get an edge, but we are growth investors focused on highly innovative and emerging companies. Most of the value in these companies isn’t based on past performance, but on possible future outcomes that are highly uncertain. We still think making those tough decisions about stocks requires human judgment. While the amount of data available increases exponentially, it is all still backward looking, but when researching innovative companies, dynamic industry subsectors and challenging macroeconomic environments, I believe human judgment by individuals who are trained, experienced and organized to collaborate yet also allowed to express their individual insights, will always win out over the long term over mechanical or inflexible investment processes. That is what Alger does best.
The Alger office has striking art displayed. What kind of art excites you?
Contemporary artists are basically commentators on the world around us who express their ideas through art. I gravitate toward idea-driven art. I don’t have too many still lifes or landscapes. I like to meet the artists whose works I buy; I want to understand the artist’s thinking. But truly, I personally enjoy art from many periods and styles, and love spending time in museums learning about history and society through art.
What explains your love of cars?
It is probably because we never had a nice car in my family. When we went car shopping, we looked at cool cars but my mom would write a check for a white Pontiac with no options. It’s also because I never had a car in high school and worked a lot of hours as a waiter, pizza delivery guy and gas station attendant to buy my first motor vehicle. It was a motorcycle. My mom found out and decided it was way too dangerous, so she helped me buy my first car (and forced me to sell the motorcycle back to the older kid I bought it from). My first car is considered a classic American muscle car; it was a 1968 Pontiac GTO.
I’m guessing you have cooler ones today.
I have some iconic ones for sure. An American muscle car, a 1966 Shelby GT350, that I bought from an old college roommate. A 1963 Jaguar E-type, once called the most beautiful car in the world by Enzo Ferrari himself. To me, a car is like art in motion. I like the technology, the beauty and the culture. Many collectors buy cars as investments and never want to get a scratch on them. I like to drive them.
You’ve been very active in The Nature Conservancy, an environmental group. What sparked your interest?
I love the outdoors. Most of the time, if I could, I would be on a bike, a pair of skis, hiking or camping. I see so many opportunities to protect what we have but also foster a more sustainable way of running our economy. It is not political. We could change a lot of things and it is not going to ruin the American way of life. In fact, it can move us to a much better place. I should also say that my father was hugely influential–he loved the outdoors, hiking and was an early environmentalist. I have his copy of Rachel Carson’s “Silent Spring,” a seminal book from the early 1960s on the environment that helped spark the movement then.
I understand that you’ve tried to get the rest of your company into the great outdoors as well.
One of the best things we have done is take the investment team hiking and biking. We’ve been to several places. Most recently we spent four days in New Mexico. It would have been a lot cheaper to have an offsite meeting somewhere and do corporate team-building exercises, but I hate those things. This enabled us to show people places they may have never seen and get them out of what they normally do. I liked sharing all that with the people here.
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