The conflict between Elon Musk and Scott Bessent has become public, and their shouting match in the White House corridor is now known worldwide. Initially, Musk had recommended Howard Lutnick as Treasury Secretary, but Trump chose Bessent instead, disregarding Musk's suggestion and, in effect, humiliating him. Musk had also proposed Gary Shapley for IRS Commissioner, but just three days into the role, Shapley was removed by Trump under Bessent's influence. All these incidents reveal the intense power struggle between Musk and Bessent.
The so-called "reciprocal tariffs" of Trump that stirred global controversy were primarily driven by two people: Peter Navarro and Scott Bessent. Navarro has long been known for advocating this policy, but Bessent, through behind-the-scenes maneuvering, has recently overtaken him in influence. Bessent has now become the central figure in Trump's tariff agenda. This shift reveals Bessent's prowess in internal politics, that he is highly skilled at undermining others, elevating himself, and achieving his ambitions at the expense of others.
Bessent hails from the American South and graduated from Yale University, where he was already known as a highly active and skilled socialite. In 1991, he joined Soros Fund Management (SFM), eventually becoming a partner and head of the firm's London office. In 1992, Bessent played a key role in the team that bet against the British pound on "Black Wednesday", causing its collapse and earning over USD 1 billion in profits for Soros's firm.
In 2000, believing he was ready, Bessent left SFM to start his own USD 1 billion hedge fund. However, he vastly overestimated his abilities, and the fund shut down just a few years later in 2005. Bessent later admitted that one major lesson he learned was not to change his investment style or firm structure just to please investors. This reflection also reveals that Bessent was still quite inexperienced in the investment world at the time, and that his thinking remained at a beginner's level.
After the failure of his own fund, Bessent had no choice but to take on advisory roles at various funds, though with mediocre results. From 2011 to 2015, he managed to return to Soros Fund Management (SFM), this time as chief investment officer. In 2013, he seized an opportunity to generate some extra profits by shorting the Japanese yen.
Bessent saw this as the moment he had finally proven his own abilities, believing that the earlier success in shorting the pound and yen was not just due to Soros, but to his own skills. Riding this renewed confidence, he left SFM once again in 2015 and co-founded Key Square Group with Michael Germino, who had been global head of capital markets at SFM. Soros's success in leveraging geopolitical events for investment gains sparked a broader trend in the financial world, causing a number of macro-strategy investment firms to emerge, aiming to profit through the manipulation of geopolitics and economics. Bridgewater's Ray Dalio was also inspired during this period, though unlike Bessent, he took a more methodical approach, spending years writing detailed briefs and building insights through careful observation and accumulation of experiences.
Unlike his previous solo venture, this time, Bessent's new endeavor had a strong start. He secured a USD 2 billion anchor investment from Soros himself. For a while, things looked promising. By the end of 2017, Key Square's assets had reached USD 5.1 billion. Bloomberg, often criticized for its lack of foresight in market analysis, reported in May 2018 that Key Square was outperforming most of its macro investment peers and was likely to continue attracting strong investor interest. Interestingly, Soros did not share this optimism. Just as the firm was riding high, Soros found an excuse to pull out and withdrew his original investment. In contrast, other investors drawn by Bessent's reputation, including Australia's sovereign wealth fund, stepped in and injected capital into Key Square.
Bessent's true ability soon became apparent. While his firm achieved a 13% gain in 2016, the years from 2017 to 2021 were marked by underperformance, with either losses or marginal returns each year. It was not until the market dislocations caused by the COVID-19 pandemic in 2021 through 2023 that Key Square finally saw notable gains. Even so, the erratic track record took a toll, leading to a steady outflow of clients. Key Square's assets under management shrank dramatically, from USD 5.1 billion in 2017 to just USD 577 million by 2023. The number of institutional investors collapsed from 180 to only 20. By then, the firm's performance was widely regarded as disappointing. This sharp decline likely explains Musk's public rebuke of Bessent, labelling him as "a Soros agent" who ran a "failed hedge fund". Within Wall Street circles, Bessent's reputation owes more to his past ties with George Soros than to any notable prowess of his own.
Bessent is adept at leveraging powerful figures like George Soros and Donald Trump to serve his personal interests. He exemplifies the smooth-talking opportunist, using proximity to real power to inflate his own importance. A classic example of his political maneuvering came during the 2000 U.S. presidential election, when he hosted a fundraising event at his East Hampton home for Democratic candidate Al Gore. He also made political donations to prominent Democrats, including Barack Obama and Hillary Clinton.
In 2016, Bessent donated USD 1 million to Trump's 2017 presidential inauguration committee. On Wall Street, that amount was neither insignificant nor particularly notable, certainly not enough to place him among the major political donors. In 2023 and 2024, he again contributed over USD 1 million to Trump's 2024 campaign. However, these donations paled in comparison to contributions from figures like Musk.
In February 2024, Bessent hosted a fundraising event in Greenville, South Carolina, raising nearly USD 7 million for Trump's 2024 campaign. In April 2024, he hosted another event in Palm Beach, Florida, where he helped raise USD 50 million for Trump's team. Clearly, these were other people's money, not his own, and he was merely assisting with the fundraising efforts.
On November 22, 2024, Trump announced his intention to nominate Bessent as the Secretary of the Treasury for his second term. The nomination was confirmed by the Senate on January 27, 2025, making Bessent the first openly gay person to hold the position. Bessent is known for being cunning, but Trump is evidently fond of his tactics. In reality, Bessent is using his connection with Trump as a way to build his own brand and image in the capital markets. If things go as expected, after leaving the Trump administration, he will likely find a way to raise more funds and start his own macro-investment firm once again. His time as Treasury Secretary is, in fact, an opportunity and a springboard for him to raise capital. This is the main way of Bessent in using Trump. While all these appear to be quite obvious, Trump, who thinks he is always right, has yet to figure it out.
Final analysis conclusion:
There is little doubt that as U.S. Treasury Secretary, Bessent will continue to seize the opportunities provided by Trump's "reciprocal tariffs" to showcase and advance his own agenda. However, his political career will likely peak with this role. When Trump inevitably needs someone to take the blame for any fallout, Bessent will be the first choice to step into that role.
