Advertisement
YOU ARE HERE: LAT HomeCollections
(Page 3 of 3)

The State | COLUMN ONE

The Man Behind the Land

David Gelbaum has shunned publicity while giving millions to preserve California wilderness and teach youths about nature.

October 27, 2004|Kenneth R. Weiss | Times Staff Writer

Gelbaum, who reads the Spanish-language newspaper La Opinion and is married to a Mexican American, said his views on immigration were shaped long ago by his grandfather, Abraham, a watchmaker who had come to America to escape persecution of Jews in Ukraine before World War I.

"I asked, 'Abe, what do you think about all of these Mexicans coming here?' " Gelbaum said. "Abe didn't speak English that well. He said, 'I came here. How can I tell them not to come?'

"I cannot support an organization that is anti-immigration. It would dishonor the memory of my grandparents."

Born in Minneapolis, the second of four sons, Gelbaum moved to California when his father, Bernard Gelbaum, became founding chairman of the UC Irvine math department.

David Gelbaum showed early prowess in math, taking calculus at UC Irvine while still in high school. Months before he graduated from UCI in 1972, he was hired by math professor Edward O. Thorp to help with a business that needed a math researcher.

Thorp, who wrote the book "Beat the Dealer," about how to count cards and win at blackjack, was applying mathematical wizardry to the largest crap game in the world: Wall Street.

His formulas, which later appeared in his book "Beat the Market," led him to launch the nation's first market-neutral hedge fund -- one intended to make money for investors whether the market goes up or down. From 1970 to 1989, the fund never had a losing quarter and increased investors' money more than 13-fold.

Gelbaum was one of his first math researchers hired to track and exploit the price discrepancies between a company's stocks and its options, warrants and convertible bonds.

"He was smart. He was idiosyncratic. He was always looking for more," Thorp said.

Thorp recalls a conversation with young Gelbaum about his salary.

"I said, 'I think we can multiply your salary by five times in five years.' He came back to me five years later with the same question. I said, 'I think I can multiply your salary by five times in five years. But I don't think I'll be able to do that again.'"

The firm, called Princeton-Newport Partners, was dissolved in 1989, when five of the firm's stock brokers based in Princeton, N.J., were convicted of scheming to create illegitimate tax losses. The convictions were overturned on appeal. Neither Thorp nor Gelbaum was implicated in the scandal.

Gelbaum emerged from the wreckage as a principal in a new investment firm, operating a new hedge fund using math formulas pioneered by Thorp.

Gelbaum declined to talk about the firm, Sierra Enterprises Group, from which he retired a few years ago. His business success, he said, "was all a matter of chance. It certainly wasn't because I worked 5,000 times as hard as the average person or was 5,000 times smarter than the average person."

He was more forthcoming about his venture into the cattle business. In the mid-1990s, he bought a pair of ranches "to run in an environmentally sensitive manner."

The Kane and Two-Mile ranches are in northern Arizona, a place Gelbaum learned about in a college ecology class. This is where Theodore Roosevelt once hunted mountain lions to reduce predators and increase the number of deer. The deer population soared and then starved in what became a textbook case of disrupting nature's balance chronicled by America's foremost ecologist, Aldo Leopold, in "A Sand County Almanac."

"It caught my imagination," Gelbaum said. So he bought the ranches and arrived with a message. "I told people when I came to Arizona I wanted to be good to the land and good to the people."

He won praise for removing cattle from wilderness areas and for raising wages of the cowboys and providing them housing and health care. He recently agreed to sell the ranches to the Grand Canyon Trust, a conservation group, for $4.5 million.

The ranches cover about 1,000 acres and control grazing rights on 900,000 acres of surrounding federal land.

Four years ago, President Clinton turned a large swath of these grazing lands into the Vermillion Cliffs National Monument, and Gelbaum won the admiration of then-Interior Secretary Bruce Babbitt.

Babbitt's plan provoked the ire of local ranchers, who complained that it would run ranchers off good grazing land. At the height of the protests, Gelbaum's ranch manager stood up in a packed meeting hall and explained that his boss controlled all of the grazing rights in the area and considered the monument perfectly compatible with his ranching operations.

The speech hushed the protesters and allowed the monument to go forward.

"I half-thought about recommending to the president to name the national monument after David Gelbaum," Babbitt said. "Without David Gelbaum, it might well not have happened."

*

Times researcher Maloy Moore contributed to this report.

Advertisement
Los Angeles Times Articles
|
|
|