This episode examines the history of hedge funds, beginning with Alfred Winslow Jones, their founder. Jones's innovative "hedged fund" strategy, combining leverage and short selling, and his unique system of incentivizing stock pickers, led to unprecedented success. The book then explores the evolution of hedge fund strategies, contrasting Jones's approach with those of later prominent figures like Michael Steinhardt and George Soros. Steinhardt's success stemmed from block trading and contrarianism, while Soros's "reflexivity" theory emphasized the interplay between market perception and reality. The text concludes by discussing the 1987 market crash and its implications for efficient market theory, highlighting the impact of hedge funds on market dynamics and the ongoing debate about their role in economic stability.