A White Belt’s Theory of Everything.
Good decisions come from experience.
Experience comes from making bad decisions.
Bad decisions make for good stories.
If you’re a regular listener, you’ll know we’ve made plenty of shitty decisions in our time. On the other hand, we also gained an understanding of action and consequence; how to deal with folks in the big city; some feeling for how the world actually spins.
As a result of that, in the real world, people often ask us for career advice.
Now I can’t tell them what to do, only they know that, but I can help them figure out what they know.
This is because, at the most basic level, what most of us need is just to refine our target… then we need to put that target up on a wall and start throwing shit at it to see what sticks.
One technique I use to help people focus is simply ask them what sorts of companies they most respect. Then I tell them to list these firms in a spreadsheet. Finally, to rank them in some sort of order of preference.
On average, I’d estimate candidates can name two or three companies the first time I ask them this question. But remember the financial sector is 10 percent of the US economy; there are many, many firms out there.
And so your first task is just that - go out and make a focus list of where you want to build a career. Then refine that list.
Now, if I was new on Wall Street I might start throwing out names like Goldman, JP Morgan, that sort of thing. These are Tier One firms. And good ones. But if you’re early in your career, that’s the wrong list. All things equal, if you want a job in finance, you should aim for the top of the second tier: Cowen, Evercore, Raymond James, Piper Jaffrey.
Why? Because, you’re probably never going to move the needle at a firm like Morgan. And also because you have to fish in the best waters - where the opportunity lies.
But this isn’t a self-help podcast, so let’s transition as always, into a story. You be the judge whether it proves our point or not.
During some recent travels, I caught up with one of my favorite colleagues. I’m going to call him Charlie.
Charlie’s mother was a stockbroker and started teaching him about the market when he was ten.
Charlie was also fortunate enough to go to the same school as a senior executive at McDonald. “Mick-D” was not a place to flip burgers, but a brokerage that has since been acquired by Keybanc. He pitched the firm on an internship and got a foot in the door. Eventually he was hired for a full-time position and assigned to cover the Southeast, because back then there were no important clients in that region… took a 20-thousand-dollar commission pad and turned it into $600k in five months.
By the age of 26 he’s the head trader.
So how did he get there? I don’t think even Charlie could tell you that. But he might venture that it was by making ‘small-c conservative’ choices.
You see, Charlie’s next-door neighbor worked for a bulge bracket and had a T&A budget close to 2 million a year. One time Charlie went around to a house party of his and saw cups of cocaine on every table. Hookers all over the show. Everyone is doing drugs he’s never seen before. Later in the night, he walks into a room and a bunch of women are trying to put a football up one of their friend’s vaginas.
He thinks this is pretty funny. Eventually the night regresses to dirtbikes and fireworks.
The next morning he wakes up and it’s like Jonestown in the living room; bodies lying everywhere. He packs his shit right up and leaves for his hometown to get married, put his head down to work, and to stay out of trouble.
Two years later? Head trader.
Isn’t that a nice story? Our hero sees all the bad behavior going on, avoids womanizing and drugs, chooses the Path of Light, and goes out and achieves success.
But having written that, I realize that’s not necessarily the point I wanted to make. Charlie’s experience, while instructive, proves nothing other than he’s a good example to his overachieving children.
No, we need another leg to this stool.
So let’s shift gears again.
I’ve recently gotten into jiu-jitsu and unfortunately probably spend an equal amount of time talking people’s heads off about it. Easy enough when you’re blabbing away to someone in person with a beer in your hand. Harder to put into writing.
But doing hard things can be constructive, so let’s try. I train three or four times a week, which is as much as my body can handle so far. I also started to study it and recently listened to a podcast where Lex Fridman interviewed an American hero named Dan Gable.
Turns out he has a book.
That seemed interesting, so I bought the book.
What I learned is, wrestling is hard.
As a competitor, Dan Gable’s goal was to train until he collapsed unconscious. He never achieved this, even though back then they’d deliberately keep the athletes away from drinking water, make them endlessly climb ropes, run miles in bad shoes, that sort of thing.
Later as a coach, one of his students was so devastated at losing a match that he tattoo’d the school mascot tearing out his own heart.
So yes, grappling with people is difficult.
That’s why it’s meaningful.
Fighting is intimidating - yet on a primal level all of us thrive on violence. Jiu-jitsu reconnects us to that, in a controlled situation. That’s why it helps with one of the most common problems in life, which is anxiety - it teaches you to find comfort in uncomfortable situations; the ability to solve problems with potentially bad consequences under stress.
In my mind, the worst part of fighting on the ground is in a position called half guard. In half guard, your opponent is on top of you and all you have is a single leg of theirs trapped. It’s a miserable place to be. Unlike other positions, you have very few ways of submitting your opponent; instead it’s seen as a more transitional phase.
In theory, the way to transition out of half guard is by getting your free leg up as a knee shield and then to charge in for a sweep. On the other hand, perhaps it’s a better idea to be more defensive - to maneuver your way back into full guard.
And that is the essence of jiu jitsu - it comes down to a series of 50/50 decisions with immediate realworld feedback. The narrower the margin of error the better you are doing.
One observation I have been able to make is the better you breathe, the better you are doing at jiu-jitsu. Breathing is the one thing everyone can do that is mastery over self. Once you learn how to control your oxygen intake, you can ramp yourself up, or bring yourself down; you can understand your own headspace, an important step to understanding proper technique.
For instance if something feels like a life or death decision, all you should do, as always, is stay calm and try to come up with a counter move. There’s always something to do, because jiu-jitsu (and life) is a complex puzzle that will never be solved.
So yes, jiu-jitsu comes down to training and patience, but how is that different from every other thing?
Jiu-jitsu keeps you honest. It allows you to stop worrying about things that don’t concern you and dedicate yourself to the things that matter most. It compels you to face your fears, requires you to connect to another human being, and forces you to face the consequences of your decisions today.
So that’s my advice. If you are worried about what is next in life, the first thing you should do is make the mental physical. And the physical mental. Exercise will help you do that, while also being a metaphor for life, a metatask, a path that teaches you to be accountable and humble while still being brave and tenacious.
Everything you want to know about your career and your life and yourself is somewhere to be found in jiu-jitsu, if you’re brave enough to look.
A few years ago we were at a function at the University of Colorado. It had been set up by an ex-mortgage trader and among the speakers was Dick Fuld of Lehman Brothers fame.
Dick was a big Hillary supporter and made this super-bearish speech about how Trump would crash the markets as soon as he took office. After he was done he fielded questions from the audience, which was a mixture of CFAs, professors and local students.
One student asks him, how did you promote diversity at Lehman?
And he answers that he invoked executive authority to hire 50 minority interns. After doing so, he then took top management aside and said,
“If the first minority student quits, your bonus gets cut by 25%.
Second one that quits your bonus is cut by 50%.
Third one quits… you’re fired!”
Now obviously Fuld just made the whole thing up to impress a bunch of douchebaggy college kids. But let’s put a pin in that for now and move on.
In the years before the Great Financial Crisis, the system lent too much money to people who could not afford such debts - primarily in the US and the UK, mostly for mortgages. This continued over a long period of time because easy money drove up prices, making us all feel richer than we were. Meantime the mortgage providers had less reason to worry about the risk of default, because they could sell their loans to investment banks like Lehman, which then chopped them up and repackaged them into ever more complex financial products. Asset managers were keen to buy them because central banks were keeping rates low and these new instruments offered better returns. For protection, the funds relied on the insurance giant AIG. In turn AIG trusted the credit rating agencies. As time went on the products became more complicated but the triple-A ratings kept coming. Meantime banks like Lehman kept some of these on their balance sheets or hid them in so-called “offshore tax havens”. The accountants failed to see these, or thought it was fine, or looked the other way, as did regulators and politicians.
Eventually it became clear that millions of Americans would not meet their financial obligations and the financial products that contained their mortgages began to lose value. Investors had to take big losses, but banks too had kept these products. The products had become mind-bogglingly difficult to value, as had the “vehicles” where the banks had placed them. The question was whether the banks’ buffers would be big enough to protect them. At Lehman they were not and when they had to announce bankruptcy other banks and institutions stopped lending to each other. The system was gripped with fear until central banks pumped unprecedented amounts of cash into the system and guaranteed the banks.
In the middle of this shitshow, Lehman called a big meeting at the Sheraton and there was a big contingent of former Neuberger Berman people there. Those guys were a class act, but sold with a 5-year lock on their shares. So a fair amount of wealth was being washed down the toilet at the time.
Dick Fuld is droning on about what good value the stock is right now and how everyone should buy more shares to support the price and show confidence in their company. So one Neuberger guy says to Fuld, ‘Hey! Show some leadership!! Why don’t you buy 30 million in stock if it’s such a big opportunity? ’
And Fuld replies that he’d have to ask his wife… to sell some art.
Now everyone already hated Fuld because he’d overruled the board on casual Fridays. He’s an easy target. Not necessarily a bad person; just horrible judgment, no limits and no consideration of others. Instead, I have a couple of other executives in mind for this story.
So where do we begin?
At the beginning.
Lehman was founded all the way back in the mid-nineteenth century, in Montgomery, Alabama by Henry Lehman, an immigrant from Germany. Originally just a dry-goods and general store, eventually Henry's brothers – Mayer and Emanuel – joined him, giving birth to Lehman Brothers in 1850. Skip forward to when this story takes place, let’s call it the mid-2000’s, and it’s the fourth largest investment bank in America. Lehman was on a roll; an exceptional place to work.
The first time I was in their new office, it was after two traders, let’s call them Dale and Brennan [ref], invited me to their annual St Paddy’s celebrations.
Dale was the Master of Ceremonies for St Paddy’s at Lehman and the sort of Wall Street character who doesn’t exist anymore; a real old-time Irish gent. Funny as hell but a rough sort of bloke. The sort of guy who would push you into the urinal if you didn’t have a hand up against the wall. Legend has it he once had a neighbor's house aluminum-sided as a practical joke.
Back then it wasn’t unusual to have an Irish-Catholic running risk; obviously that generation has long since been replaced by something smarter like an Asian or a computer [deadpan]. But Dale loved St Paddy’s - used to bring an Irish band in full guard through the trading floor. Just that level of effort impressed me, but in no time hip flasks are also out and his partner Brennan is pouring whiskey into red cups.
This is supposed to be an investment bank! A cornerstone of the financial system and everyone is losing their minds.
The only obstacle to chaos was a new MD from Morgan, but turns out he’s a lunatic too. An idiot savant. The sort of person who would reach over and take food off your lunch plate. Guy should have been selling Lamborghinis in Long Island but instead he has a silver cart bringing tea and cookies to him each day.
Anyway, Lehman had an MD-only café on each floor. Even if it was empty, you couldn’t go in there. Sort of like the private Bear Sterns elevator, except it didn’t smell like weed. With some of the other MD’s absent, Brennan sets up and starts passing out long pours of various miscellaneous booze and in no time we’re all wrecked.
Amongst the chaos, Dale’s phone rings off the hook.
I think this is odd, but Brennan says everyone knows not to call Dale on St Paddy’s Day.
An hour later the phone is ringing again. I nudge Brennan; surely it’s important? He rolls his eyes, staggers over to the phone, has a brief conversation and then comes back to the group. Dale glares at him, asks what they wanted.
“Kettering says sell a hundred Euros.”
Got it, says Dale. Wait what?! FX or Fixed Income?
Brennan tells Dale they say they didn’t say.
Dale thinks fuck that, it’s St Patrick’s Day.
An hour later someone is wearing a football helmet and we are testing water bottles on it. Throwing shit from the trash at anyone who has it on at the time, that sort of thing. Eventually I get out of there and I see Dale and Brennan arguing out by the elevators.
Voice 1: You don't know anyone named Johnny Hopkins anyway.
Voice 2: It was Johnny Hopkins, and Sloan Kettering. And they were blazin' that shit up every day.
Voice 1: Haha, That's so funny the last time I heard that, I laughed so hard I fell off my dinosaur!
Voice 2: You and your traders are hillbillies. This is a house of learning doctorates [sic].
Voice 1: You're not a doctor - you're a big fat curly-headed fuck
Voice 1: I’m warning you, if you touch my helmet again, I will stab you in the neck with a knife.
Voice 2: I was doing that because I love you. Fuck you.
Voice 1: I teabagged your turret.
Voice 2: Oh yeah, well my turret is a guy, so that makes you gay!
Voice 1: Hey, you know what's a good trading strategy? If you lick my butt-hole.
Voice 2: I'm gonna fill a pillowcase full of bars of soap and beat the shit out of you!
Voice 1: That client over here is going to eat your dick.
Voice 2: Client better not get in my face, cos I'll drop that motherfucker.
Voice 1: This office is a fucking prison!
Voice 2: On planet bullshit!
Voice 1: In the galaxy of “this sucks camel dick”!
Voice 1: Hey! I got an idea… Boats 'N Hoes!
Voice 2: Boats and hos, boats and hos
Voice 1 [singing] Boats and hos, boats and hos,
Voice 2: Gotta have me my boats and hos!
A simple way of looking at life, and your proper place in society, is just to follow The Rules of Stupid; Don't go to stupid places during stupid times with stupid people and do stupid things.
Yet it’s fair to say that my colleagues and I on Wall Street have been largely immune to the consequences of our stupid decisions.
For example, leading up to the financial crisis Goldman advised Greece on how to cover up their debts with derivatives. When everything inevitably fell apart, they then showed hedge funds how to profit from the chaos. Afterwards they got consulting work from the Europeans on how to fix the whole catastrophe.
That’s fine I guess.
Not long after that same crisis, JPMorgan discovered one of their employees had run up around $6 billion in losses from an errant trading strategy. They asked the executive, also known as ‘The London Whale’, how he intended to get them out of this mess and his answer was “Sell the forward spread and buy protection on the tightening move, use indices and add to the existing position, go long some risk on some belly tranches especially where defaults may be realized, buy protection on high yield in rallies and turn the position over to monetize volatility”.
When the Senate summoned JPMorgan’s executives to explain what this meant, nobody could do so. And yet JPMorgan is considered the best risk manager in the world.
That’s fine too I guess.
What astounded me through all of this was the astute way banks navigated the hostile political environment at the time. As our friends at Dealbreaker have noted; regardless of what you think of the government, a good rule of thumb is that if you are regulated by an agency, you probably don't want to go out of your way to unnecessarily anger them. In fact, to play it safe, you might want to just show complete and total deference, whether you're violating its rules or not.
But then you have Sheldon Maschler. The former head trader of Datek Online, who in 2003 paid a $29 million fine and was banned from the securities industry; well, he took a different approach.
For instance, one day he showed up to court in a T-shirt that read ‘NASDAQ SUCKS!’. The judge threw him out, telling him to come back in a different shirt the following day. Maschler did as ordered; this time wearing a T-shirt that read ‘NASDAQ SUCKS!’ in different colors. [short pause]
Regulators were soon crawling all over Maschler's office.
One day, a typical one in the market for Datek, traders sat staring at screens in Maschler's basement. Suddenly, they noticed an odd presence in the room: men in suits looming over the stairwell door.
"Who...the FUCK...are YOU!"
"We're from the SEC. We're looking for Sheldon Maschler."
"Who the FUCK let you in?"
"Ah, the door was open."
"If my fly was open, would you suck my dick?"
All the Datek traders crack up at that.
"Now get upstairs and RING THE FUCKING BELL!"
The two SEC officials crept back upstairs and rang the bell. Maschler then presses the intercom button.
"Hello, who is it?"
"Um, it's the SEC."
"Come on down, fucking assholes”
Now I’ve worked for a big hedge fund. And I’ve worked for a small one. There are pluses and minuses to both, but if you like having banks bend the rules for you, then working for a big firm is more fun.
I’ve seen heliskiing trips in Colorado. Fallen into pit seats at the Montreal Grand Prix. I’ve witnessed brokers buy a bottle of Blanton's that was so old it didn't have a letter on the cork, then leave it forgotten on the table as we all moved onto another club. All of these pushed the line with regulators but were ultimately small beer. They were tiny acts of rebellion, out of the public eye and fairly meaningless.
Sheldon Maschler on the other hand blatantly thumbed his nose at the big banks and the government… and was drummed out of the business by them. But it’s not exaggerating to say he and Datek democratized investing at the turn of the century; They’re the ideological heirs to today’s Robinhood, providing access to wealth creation that used to be the province of a lucky few.
He also stood up straight and fought back with a smile on his face - it’s my contention that there’s value to society in that. But let’s put a pin right there and circle back in a bit.
A British statistician once demonstrated more children were born in towns with storks, than in towns where there weren’t many.
That doesn’t prove storks deliver babies; there are just more storks in towns with a lot of chimneys, because that’s where they build their nests. A lot of chimneys means a lot of houses, which means a lot of humans, which means more newborns.
And yet adults are quite happy to tell children that storks deliver babies.
People will always choose a simple lie over a complicated truth, because the truth has to stick to what actually happened, whereas the lie just has to be easy to believe.
The simple lie in society today is the government cares about your safety.
The government does not care about your safety. For better or worse, the government is a vehicle for control of society.
Many of us believe our government has far exceeded its historical role; A massive expansion of the administrative and security state. Shutting businesses. Locking people down. Mandating vaccines regardless of risk profile. Masking two-year-olds in school.
All of these would have been unconscionable when we were told “fourteen days to flatten the curve” and yet in many states the regulations now seem almost normal.
As individuals we feel it’s time to push back.
How to do so?
A wiser man than me noted that one way of conceptualizing yourself is that you’re one speck of dust amongst seven billion. And when you conceptualize yourself that way, you might think, well what difference does it make what I say or do? And that’s actually quite convenient for you, because if it doesn’t matter what you say or do, then you don’t have any responsibility and you can do whatever you want. The price you pay for that is a bit of nihilism, but if you don’t have to shoulder any responsibility that’s a small price to pay.
The other way to look at it - and this is actually the accurate way of looking at it - is that you’re in a network. You’re a node in a network. And so, you can do a bit of arithmetic very rapidly and just see how powerful you are.
You know a thousand people. They know a thousand people. That means you’re one person away from a million people. And two persons away from a billion. You’re the center of that network. And the way networks work is that information propagates in a network manner.
So don’t underestimate the power of your speech. Don’t underestimate the power of truth. There’s nothing more powerful.
Now in order to speak what you might regard as the truth, you have to let go of the outcome.
You have to tell yourself, I'm going to say what I think; I'm going to state what I think as clearly as I can and I'm going to live with the consequences no matter what they are.
Now the reason you think that - it’s an element of faith; the idea is that nothing brings a better world into being than the stated truth. You might have to pay a price for that. But that's fine, you're gonna pay a price for everything you do and everything you don’t do.
You don’t get to choose to not pay a price. You get to choose which poison you're going to take. That’s it.
It’s not safe to speak right now… and it never will be.
But the thing you have to keep in mind is that it's even less safe not to speak.
It's a balance of risks. You either pay the price for being who you are and stating your motive being in the world. Or you pay the price for being a bloody serf; one that's enslaved him or herself. That's a major price to pay; that thing unfolds over decades; you'll just be a miserable worm at the end of twenty years of that.
No ability to voice your opinions.
Nothing left but resentment because everyone’s against you.
Say what you think carefully.
Pay attention to your words.
It’s a price you want to pay if you’re willing to believe that truth is the cornerstone of society.
In the most real sense, if you're willing to take that leap... then tell the truth and see what happens.
Rules of Civility
As we’ve alluded to in the past, this is not really a podcast about a single person’s experience in the Big City, but instead a composite character derived from a group of us.
While we were lucky enough to be on Wall Street during the golden years, we weren’t privileged in the normal sense of the word. None of us went to ivy league schools, none of us were trust fund babies, all of us worked crappy blue collar or sales jobs before making it here.
When we came to this town we had nothing; poor in everything but spirit. My own first month in the city was spent on a couch in Crown Heights. I knew no one, had no business contacts, no financial backing; my monthly budget started with a metrocard and then I worked backwards to figure out how many lunches I had to skip each week.
Furthermore, I’m from a temperate state and was clueless enough to leave it in winter… What I most remember is just being cold all the time. It was miserable. I trudged around Manhattan introducing myself to recruiting firms and spent my evenings by an electric heater posting out resumes.
And then I was struck by lightning. Invited into one of the most prestigious hedge funds in the world... to do the shittiest job there.
But the founder had a genuine soft spot for the downtrodden. He had created an entirely unique corporate culture, one where your benefits at the firm - if not your total compensation - increased the lower your status at the office. A junior staffer would have the best healthcare, commuter benefits, 401K matching program, free food, even a clothing allowance if I remember correctly. By comparison, a bigshot fund manager didn’t even draw a salary and had to eat what he killed.
And that’s when I knew things were finally turning for me in New York - the day human resources left a metrocard on my desk and it dawned on me that my budget could now accommodate lunch; a meal I didn’t have to pay for anyway. I’ll always be grateful for that moment - it washed away a pervasive sense of pessimism that had been weighing on me since I landed in the city.
I hadn’t ‘arrived’, but my toe was in the door.
That day, my confidence raised a notch, I headed down to the N train. Instead of staring at my feet, I met other people's eyes; my head was a little higher, my shoulders a little further back, and my stance a little wider. Then, at 57th Street, someone came into the subway car who would change my life forever. Around my height, but certainly better dressed, he settled across from me and I couldn’t help but stare at some dark grit smeared all over his forehead.
New-confident me said, hey mate, you’ve got shit on your face.
He started, then shot back at me, ‘that’s not shit. It’s a cross.’
What, you put it on yourself? Without a mirror? That’s not a cross.
Turns out it was a cross. Made of ash. Catholics apply it during a morning mass, often along with a small blessing: "Remember that you are dust and to dust you shall return." It’s meant to represent a penance for their sins and ironically enough this degenerate had gone out drinking all day and forgotten about it.
As far as I knew, there were no observant Catholics in the town I grew up in. I’m curious and start asking him questions about himself. Wide-eyed and god fearing, if not exactly free of sin, it turns out he works on Wall Street too. He lifts weights, likes chasing women, dinosaurs, monster trucks, toxic masculinity - all good things, made further evident by the obvious disapproval of the hipsters around us.
Just like that, now I have a job and a friend.
With those two things New York becomes a city where the improbable could be made probable, the implausible plausible and the impossible possible. This is because by yourself, you are literally an insane person. You need someone to laugh at your dumb ideas and encourage your good ones, moderate your madness but throw fuel on your better fires.
We all need another half to make one whole person.
Let’s call my new friend Tinker [ref]. Arguably Tinker had a poor ratio of intelligence to net worth. But we’re talking about an extraordinarily large denominator. This is because Wall Street was still paying 6 cents a share back then, while a recession had lowered stocks’ formerly-nosebleed nominal values.
Let’s pause there and explain exactly what I mean by that:
For the sake of argument, say the year was 2002.
Apple stock traded at $23.
If one of Tinker’s clients bought $10 million worth of Apple, not an unusual order for an institutional hedge fund back then, that was 434,000 shares.
434,000 shares at 6c is $26,000 commission.
Tinker ran a 40% payout, so a single trade like this would net him $10,000.
And Tinker traded a lot of Apple.
I was a buyside guy, even if I didn’t know what that term meant yet. Tinker was in sales.
He was the mirror image of me, saw the world differently and between us, over a long friendship, we both came to understand it better.
I tell Tinker I am poor and he says get over it. That New York is famous for rags to riches stories. He points out the Vanderbilt’s are actually descended from an indentured servant who sailed from Holland in steerage. He was known simply as Jan from De Bilt. Cornelius Vanderbilt built the family fortune and classed up the name a bit while he was at it. Good on him.
Tinker explains to me that most people think of life as a rambling journey on which we can alter our course at any given time, but for most of us life is nothing like that. Instead we have a few brief periods when we are offered a handful of discrete options. Do I take this job or that job? Chicago or New York? This circle of friends or that one? Does one make time for children now? Or later? Or later still? Or never? In that sense, life is less like a journey than it is a game of honeymoon bridge. In our twenties, when there is still so much time ahead of us, we draw a card and must decide right then and there whether to keep that card and discard the next or discard the first card and keep the second. Before we know it, the deck has been played out and the decisions we have just made will shape our lives for decades to come. Even if we wanted to retrace our steps and rekindle old acquaintances and opportunities, how could we possibly find the time?
I digress. Tinker was an early card and a well-chosen one.
We head off to Tinker’s local watering hole, a favorite amongst expatriates when they repatriate. An expensive place, but high end restaurants are the ultimate expression of ungodly waste, leaving you with the least to show for your money and therefore Wall Street loved them.
When I tell Tinker who I work for he has the good sense not to look greedy, but a few beers in he and his friend Lobster laughingly ask to touch my wallet for good luck. That’s when it really dawned on me I might actually amount to something on Wall Street. In any case, there would only be one way forward - because in New York you have no New York to run away to.
So I ask Tinker, what would he do if he was in my shoes?
And Tinker tells me I should follow a series of timeless rules. There are 110 of these, but in the interests of time he would leave me with five of them [ref].
Number One: Every trade you make in the market ought to reflect some sign of respect to those on the other side of the phone. Said differently, don’t cut your commission rates with people helping you make money.
Rule Number Two: When socializing at your firm, do not put your hands on any part of the body not usually discovered [sic]. Let’s class that one up a bit - if you’ve had a couple of drinks then stay away from the women you work with.
Rule Number Three: Try not to frighten your friends. You know that super-exciting, unique, adventurous idea you have? It’s actually stupid and dangerous. Bat it around in your mind for a while longer. Steelman it. Then strawman it. Only after you’ve squeezed all the dumb out, should you present it to your inner circle.
Rule Number Four: In the presence of others, don’t sing or hum, don’t drum with your fingers or feet. Stand up straight with your shoulders back. Look people in the eye. Don’t fidget, pay attention. Assume the person you are listening to might know something you need to know.
Rule Number Five: If you need to cough or sneeze, sigh or yawn, don’t do it loudly but in private.
These rules have served me admirably and indeed still do. I hope they serve you equally well.
I needed a little airplane reading recently and a friend suggested John LeFevre, best known for creating the @GSElevator Twitter handle. The account infamously satirized banking culture and accumulated enough press coverage that both Goldman and Citi launched investigations in an attempt to identify the source of the leaks. His book Straight to Hell is not Hemingway, but enjoyable. And believable.
Oddly, rather than inspiring any recollection of our own feats of obnoxiousness, it reminded me of one of my former CIO’s. Let’s call him The Abbot.
Now I always liked The Abbot, so I’ll say right up front that even if I knew anything damning I wouldn’t relay it here, but for whatever it’s worth… this is what I remember.
He was a good looking guy, super aggressive and most importantly understood markets. Respected them and loved working in the business. Uncomfortably direct at all times; If you asked about the financial sector, his answer might be, ‘who cares what I think? If the market goes up the banks will too. If the market goes down, so will they’.
That’s not the most sophisticated response, but happened to be the correct one at the time. And after all, there’s nothing stupider than a smart person who is wrong.
Once he was settled in the corner office, I set out to make a good impression and gave a lot of thought to our first proper interaction. At the time we had taken a large investment in Home Depot and I thought I had discovered something about their competitor Lowe’s. Something that mattered. I gathered my data, printed out the key points with supporting documentation, and finally carefully checked around the top analysts on the Street to make sure it was both on point and not widely disseminated. Then I gathered my courage, took a deep breath, and knocked on his door.
The Abbot’s voice boomed, “YEEEEES?!”
Hi, I don’t want to bother you but -
Well… that went well.
The next time we spoke I was just getting my things together to head home. Having new management in the office, I had been putting in extra hours rather than bailing right at the bell like normal. However, The Abbot was in London; it’s after 9 o’clock there and I suspected he liked his cups, so it should’ve been safe to make my exit. I’m walking off the desk and the trading line rings. Our overnight guy is literally jerking off somewhere, so I pick it up and The Abbot is already yelling,
“Hey, I’m in London with Nick and just heard about the Ruskie Wheat Fires”
‘THE. RUSSIAN. WHEAT. FIRES!’
"Godamnit, what kind of circus do you think we are fucking living in? Get an analyst on the phone right now and find out what the trade is!"
Now we had portfolio managers for almost every area of the business, each known as a ‘pod’. I doubletime over to the energy and commodity space and speak to one of the analysts there, let’s call him Luke.
Luke explains there's a lot of wheat in the world, no one cares about fires in Russia. Instead The Abbot should just buy cotton, because an enormous amount of cotton is traditionally picked by slaves. Modern day slavery is almost exclusively in China and the communists there are shipping their Muslim slaves, known as Uighurs, to a new area. This forced migration is a problem, since the Uighurs do all the cotton farming. He also points out that everything China does at scale causes inflation and generally turns poisonous for everyone involved. The play is to buy cotton, not wheat.
Got it I say.
Armed with my new sophistication in commodities I run back to the desk and call The Abbot. He picks up on the 2nd ring.
Hey, so I have your answer - we need to buy cotton
"Wow, you really need to be here."
You mean a transfer to the London office? That’s an incredible offer, I wa-
"No no, I mean at this bar. Art Laffer just punched someone in the face. It was awesome."
And then he whooped and threw the phone at someone.
Out of respect I’m going to leave The Abbot stories there for now. But thinking about him begs the question, what makes someone want to work for a person like that? Stockholm syndrome? What on earth would be the attraction??
Well, partly it’s because how easily offended you get is directly proportional to how stupid you are. I’m not stupid, so I wasn’t upset when he would speak to me in that manner. Mostly I’d put the phone down and we’d all just laugh.
Secondly, the presumption of friendliness is generally only found amongst people raised in the company of money and manners. I wasn’t brought up by parents who thought I was made up of fine china that would break at loud noises.
Thirdly, you don’t stop doing something because it’s hard, you stay because it’s hard. Most good things in life are harder than you want, but easier than you think.
However, there’s a final leg to this stool. Bear with me, because we’re going to go down a bit of an intellectual rabbit hole…
There’s a term called ‘sonder’ - the dawning realization that everyone around you has their own life, friends, backstory, and future. All of them are just as vivid and complex and remarkable and difficult as your own.
All of these lives swirl invisibly around you, an anthill deep underground, with elaborate passageways to billions of other souls that you’ll never know existed, in which you appear only once, as an extra sipping coffee in the background, as a blur of traffic passing on the highway, as a lighted window in the distance at dusk.
I think about that from time to time, especially while traveling, and it always feels like a bigger concept than I can grasp. Everyone protesting some perceived microaggression or flying a Trump flag, the homeless guy laughing on the corner or the frowning Upper East Side matron; they all have their own story too.
It’s a pretty earth-shattering concept. Thinking about it could help raise our awareness about the lives of other people. You are not the only one living with the weight of the world on your shoulders. All people's lives are unique, strange, chaotic, and complicated - just like yours. You're not alone. Reminding ourselves that a complex life story lies behind the faces of everyone we meet can help us connect with people in a more positive way.
You see, too much empathy is a problem in and of itself.
Ask yourself - are people today more or less offensive than they were 20 years ago? Much less, right? And yet this less-offensive generation appears way more likely to tell on each other over minor issues to the highest authority they can find. Informing on each other almost seems like a sport for them.
Now that I’m on the wrong side of 40, there’s a lot that perplexes me when it comes to younger people, but I still believe they should go out into the world and make mistakes to learn from. They should be offensive. They should challenge perceived wisdom. They should get into fights. That doesn’t mean being offensive or getting into fights are necessarily good. But for me that was part of growing up. You did bad things, you made mistakes, you learned and grew.
By contrast, the young today have clearly been emotionally and developmentally stunted by two decades of helicopter parenting. They’ve been taught to wind up every little issue into the worst possible outcome. A sexist joke is almost immediately related to rape and by not calling it out you’re enabling sexual assault. Any cultural joke is immediately related to the Klan and by not calling out said-joke you’re enabling racism. A comedian making even the mildest fun of trans must be immediately censored and to not do so you’re somehow enabling violence against trans people.
The worst thing about this New American Religion is how many people have been put onto a cultural slippery slope wherein they think that it’s their job to police the thoughts and words of others and they think every infraction is on par with the worst possible thing anyone could imagine. Social media is the biggest contributor to this. It empowers perpetually-offended zealots to constantly complain about things that bother them and ruin those things for the rest of us.
But a culture doesn’t work if it’s being controlled by the most fragile, most litigious and most offended amongst us. A culture works when it’s a melting pot of ideas where the best fight their way to the top within an intellectual marketplace that is as wide as it is diverse.
In short, everyone seems so worked up over the smallest things lately.
This is because you should believe things according to the evidence and not the opposite. And the evidence is overwhelming that everything in our world is getting better faster than ever.
For the most part, this is because over the last 40 years the world has been abandoning suicidal socialist policies and embracing individual freedoms. The productivity of our increasingly-interconnected global economy has led to inequality and there’s a lot of political unrest around that, but overall the tide has been lifting all ships.
So, if you’re not an optimist, you should be.
If you doubt this, you should escape the indoctrination in pessimism you’ve been subjected to by the media and instead take a look at some of the work by Marian Tupy. His key points are as follows:
Less than 200 years ago everyone lived in a state of what we’d consider abject poverty, but now fewer than 10% of the world does.
Rather than being depleted, the world’s resources are more abundant than ever - a basket of 50 key commodities that would take an hour of work to own is now available to the average consumer at a third of that.
Rather than being overpopulated, the world’s population is expected to peak and actually decline in 60 years.
Agricultural productivity has advanced so much that global famines are almost unknown and a glance around indicates obesity may be a larger problem than food insecurity.
In the past 40 years our net tree cover has increased by 900 thousand square miles, an area larger than Alaska and Montana combined.
Representative democracies make up 50% of nations and autocracies only 10%, almost the mirror image of a century ago.
Interstate war is now a rare event.
Global warming fears aside, the chances of actually dying in a natural or weather-related catastrophe has declined a remarkable 99% over the past century.
What about the future? In the past 200 years the global economy grew a hundredfold, versus a population growth of around eight times. The numbers are so large as to be almost meaningless, but the world economy today is nearly 100 Trillion US Dollars. If we just continue our average growth rate since 2000, it will be over a quadrillion dollars by the end of the century. That’s right - a thousand trillion.
Let’s conclude; yes, we are spoiled. We can’t even conceive of all the ways. My car starts every time, my seat is perfectly comfortable, I have a bar of soap in my shower where clean water is readily available, I have this word processor in the cloud recording each word as I type, I can have a customized coffee in minutes, I can ask the phone next to me to play Bach, Mozart or Soundgarden, I can walk to the store with 100% assurance that they will have plenty of food for me and thousands of other people, I can flip over to Netflix or YouTube and watch anything I want – it’s mind boggling.
But growing ever-more comfortable is not just true now. It’s been true for a millennium. So perhaps we should go easy on the young; perhaps there is nothing wrong with being spoiled.
That said, what’s different now as compared with the past is that we are losing intellectual consciousness as to the source of our prosperity. How else to explain debates when one side of our political class cannot seem to utter a single word of credit to private enterprise for all its incredible achievements?
What’s inexcusable to me is the ignorance that drives us to take it all for granted, and that we utterly fail to appreciate capitalism as the source of all the greatness in our lives.
We should be very, very careful about abandoning the mechanisms that have enabled so much progress to emerge in the first place.
The Merrill Lynch Xmas Brawl.
So this happened. It’s a decent story. And afterall it’s Christmas, so we thought we should share it.
After 9/11 but before the Financial Crisis, one of our people at Merrill asked if they could bring some traders in to pitch another part of our firm. I'm like, sure I’ll make introductions. The Merrill team heads off to some super-wop deli and turns up with this incredible spread of sandwiches, everything an Italian might imagine. I put them in a conference room and I’m being social as I wait for my colleague to arrive. While I’m there I try some of the food, it’s genuinely the best thing I’ve eaten all year. Anyway, the trader they want to meet at my firm wanders in late, is dismissive of their product and walks out again. It’s kind of rude, but not overly so for our business.
One of the Merrill sales guys, let’s call him Brit, is outraged though. Says “pack the food up, we’re leaving”. They put down bags and just begin throwing all the sandwiches back in.
I think this is hilarious. I never admired sales people who suck up to clients too much, so I decided I like Brit. After he stomps off towards the elevator with the food, I hang back with my contact and ask them about this guy who just threw his toys in the offices of one of the most important firms on Wall Street.
Turns out Brit’s girlfriend works in HR at Morgan Stanley. She’s in charge of the incoming intern program, which is full of these hopeful Masters of the Universe - young, dumb and full of cum. Brit however is kind of a jealous guy. He’d attend a lot of the orientations to keep an eye on her. This is back when they served alcohol at these things. At one of the events, an intern is getting a bit familiar with his girlfriend and Brit can really drink, so he challenges him to a competition. The intern is a big guy himself and they start doing shots. They go shot for shot until the intern gives up, walks outside and gets hit by a car.
Next event he sees another one of the interns grinding on his girlfriend, grabs him by the neck and lifts him into the air with his feet kicking. Apparently there are a couple more incidents like this; it’s an eventful year.
Brit and his girlfriend decide a ring on her finger might deter more suitors and keep him out of trouble, so they get engaged. A month or so later they’re in Hong Kong and his fiance is getting picked up on by some French guy. Brit takes the Frog and throws him onto the windshield of a taxi, shattering it and causing a mini riot outside the Mandarin Oriental. Unfortunately the guy speaks Cantonese and Brit gets thrown in jail.
This was on his honeymoon.
Anyway, my sales person at Merrill, who everyone loved, says it’s much appreciated that I keep trying to open doors for them at my firm and would I like to come to their Christmas Party? It’s not really for clients, but an exception could be made.
I say of course and that’s how I found myself at Harrys at Hanover during the Merrill Lynch Christmas Party.
Now this is after the bubble had burst but before Merrill was acquired by Bank of America, so there was still pretty retarded money going around. Sales was just about relationship management and lying your balls off, so jobs were plentiful and there were big trading floors, because coverage was split up between Listed and Nasdaq names. Basically twice as many people as you really needed. On top of that, Merrill probably had 40 people down on the New York Stock Exchange. Harry’s was their local spot, so the floor guys are there in force.
I’m up on the second floor of Harry’s and I reintroduce myself to Brit. I apologize for my colleague dismissing them earlier in the day; he scowls at me but we drink a beer and things are fine until he sees another Merrill guy trying to pick up on his Morgan Stanley girlfriend. He heads over and they have words. The other Merrill guy was a bit of a dick, would sell wholesale Vineyard Vines gear at full price to people around the trading floor. But it turns out he knows how to fight. Brit ends up throwing a wild round-house punch, gets jabbed in the face and hits the ground. He gets up, the Vineyard Vines guy tries a jab again, but Brit slips it and bodyslams him.
When most fights end up on the ground they look pathetic, like two old people fucking, so I figure this one is over.
But then Eddie McMahon turns up. Eddie ran the trading floor. No college degree, literally started his career in the breaks room, made his way up through operations and then learned how to trade. Eventually he reached the pinnacle of finance through sheer perseverance and grit. Eddie’s wearing a sport coat, red turtleneck, and everyone’s been busting his balls and calling him Steinbrenner all night. But he’s a rough and tumble guy from Queens. Gives as good as he gets.
Anyway, somehow Eddie gets popped trying to break up the fight and then he starts laying people out. With him hitting random punters, the fight spreads like mad. There’s this surreal Christmas music, decorations flying everywhere, silver bells exploding, trees falling over. It even spills into the kitchen, with the cooking staff getting knocked on their asses. I stood by drinking free beer and thanked God for being alive in such a remarkable age. It was truly an awesome sight to behold.
So this is a Thursday night. Friday everyone important took the day off, but the next Monday there are high level interrogations to try to get to the bottom of the brawl. Hundreds of people witnessed it, so everyone was pissing their pants. The interviews are in the Luncheon Club with all the little white men on the wall glowering at the staff as they nervously walk in.
The exception to the interviews, even though they were very much part of the fight, was the Merrill guys down on the floor. Remember this is before changes to Rule 92 inadvertently killed the NYSE business, so it was still a profitable arm of the brokerage. When the head office summoned them to give their side of the story, they just said they were too busy and management could go suck a bag of dicks.
One of these floor guys was a hysterical character. I think his name was Jimmy Reilly. He had a massive moustache and was a decent artist. As a floor broker he had a little handheld machine that would show you what the market was in a stock. Instead of putting the bid/ask in when the office asked for a look in a stock like SLB, he’d drawn photos of the head trader Eddie punching various other Merrill traders in the face. Everyone at Merrill and a ton of clients could see these cartoons just by asking for a look in any of Jimmy’s names.
Anyway, Jimmy did record business that day, management figured it was just Merrill on Merrill violence… and everyone got a pass. Merry Christmas!
Wake and Bake.
I like weed and have used it since I was a teenager.
In my 20’s I smoked as travel allowed.
When my career kicked in a bit more, I’d do my best to stay straight during the week, but generally found myself hammered from 4.01pm on Friday until 8.59 on Sunday.
By my 30’s, I came to understand that marijuana was a tool of sorts and should be used as such. To explain what I mean, let’s defer to an expert [ref] to explore exactly how weed works: Marijuana is a mind-altering substance that produces its effects by changing the rate of what is already going on in the brain. THC substitutes for your own natural endocannabinoids and mimics their effects - it activates the same chemical processes the brain already employs to modulate your thoughts. These specific neurotransmitters help us sort the relentless stream of inputs and flag the ones that should stand out from the torrent of neural activity coding stray urges and experience. By flooding the entire brain, as opposed to select synapses, marijuana can make everything, including the most boring activities, take on a sparkling transcendence. In short, it’s amazing.
After all that practice in my 30’s, I now consider myself to be “a high-functioning stoner”. More specifically, I use cannabis in a controlled situation to bring out thoughts and ideas that would not normally occur to me. I then take prolific notes, which is my way of stepping out of the flood and concentrating on a single concept at a time.
Try that sometime - pick up a pen and write a sentence down, while thinking of something else. You cannot do it.
So if you ever see me somewhere, furiously scribbling down gibberish on a restaurant napkin, this is what I am doing - I’m taking a previously-unseen string and pulling it with my full attention. It’s a life hack of sorts, because cannabinoid activity, by highlighting everything, conveys nothing. You have to focus, or that meaningful idea will be washed away.
The next morning I gather up my notes and 99% of them are admittedly incomprehensible. But now I have that 1% that I didn’t have before. And sometimes I find gems there. I have come up with some of my best ideas while stoned, as long as I reassessed and edited them later while I was straight.
With that introduction, let’s start this story off at PJ Clarke’s when it was run by a bowtie-wearing bartender named Doug. He was definitely a Doug; the sort of person who referred to himself in the third person all the time. We used to troll the shit out of Doug.
Tonight we planned to outdo ourselves by eating dye tablets and drinking until one of us threw up on his bar. The fluorescent vomit would make for a spectacle the likes that the guests wouldn’t have seen since their college days. Now one of our friends was not what you’d consider optimal aerobic condition and I had money on him to puke first. But just in case I intended to get really, really stoned because, amongst all its other wonders, marijuana also suppresses nausea. No way was I going to be the one who vomits all over the show. Don’t be that person. Handle your shit. Always wait until you get home to puke.
Anyway, it’s early evening, we’ve eaten our fluorescent dye packets and are just beginning to crack into shots of gin when my Blackberry Curve [ref] rings.
For a moment I look at it in puzzlement. I’d actually forgotten those things could be used as phones as well. I just used it for email and to defend the office Brick Breaker championship.
But here it is chirping away at me. Eventually I pick it up to snorts of derision and the trading desk assistant Rudy is yelling in an absolute panic. Apparently there’s yet another crisis in the third world, no overnight traders for whatever reason and the poor guy had called everyone down the emergency list until he arrived at my name.
Although I’m a senior trader at the firm, there’s a reason Rudy called me last. Nowadays a buyside trader has a multitude of roles - relationship management, operations, analyst, IR support, and yes they also occasionally trade. But back then all you did was execute - we were so busy that desks had to be separated by product type and I was just a stock guy. By contrast, the overnight desk mostly traded Foreign Exchange, which was open 24 hours.
Longer story made shorter and dumber, I am called into the office to deal with yet another Emerging Market crisis.
All EM crises are the same. Western investors see locals making money exploiting their own populace, try to get in on the grift, too much money floods in until the scams get so blatant no one can ignore them anymore, the press gets upset, everyone tries to pull their money at the same time, big crowds make for small exits, currencies collapse.
Still stoned off my tits, I stumble into the office, the assistant shares his Bloomberg screen with me and sure enough it’s a sea of red. But at a closer inspection, the currencies, while red, are all rising. What on earth does that mean?
It turns out when there’s a foreign exchange crisis and everything goes to hell, the currencies actually go up on your screens.
The trading assistant explained to me this is because they are quoted US Dollar first. So if the Yen for instance was priced at 100:1 and loses 10% of value, it is now 110:1 . That is, it takes more Yen to buy one US Dollar.
I’m then told there’s an exception to this rule. The Pound, Euro, Kiwi and Aussi are quoted indirectly - local currency first. So when they go up, they’re actually getting stronger.
I laugh at this, tell my assistant, who is from India, that going forward we’ll call those currencies the “GDWF” or “Good Decent White Folk” basket and he should remind me they trade in a proper sort of manner before we put any orders in. That’d normally crack him up, but he doesn’t even smile, telling me I need to concentrate. There’s a few more things I need to know about trading foreign exchange.
Firstly, he tells me the prices reflected on the screen aren’t actually trades but quotes. You don’t see the trades, they don’t print anywhere. Secondly in order to put up any sort of significant volume you need to call up a bank and they’ll buy or sell you the currency in a block out of their risk book.
I think this is stupid and have some suggestions on how the largest most liquid and sophisticated market in the world can be more efficient but my assistant tells me to the shut up and listen for another minute.
It turns out our preferred way to get exposure to emerging market foreign exchange is through options. Specifically, puts.
I’m like that’s fine, I know what that is; if you buy a put it means you want the product to go down.
Up, the assistant reminds me. When EM FX goes down, it actually goes up.
Got it I say.
One last thing, he says. We’ll probably want to sell the put.
And then the phone rings.
For the second time of the night, I stare at a telephone in confusion. I’m so stoned and all this foreign exchange stuff was so complicated, I had forgotten I was brought in to actually trade . I laugh a little to myself and the assistant looks at me in concern.
The person calling is the son of a billionaire, but the only one I’ve ever met who knows how much a movie costs and takes the subway to and from work.
He asks about puts in the Turkish Lira. I point out that they’re going down, which is actually up for us, but means the currency is going up, which is actually down, because that FX isn’t quoted normally like the Good-Decent-White-Folk basket.
He says, ‘like the what?’
I snort at that.
But then I notice something. The symbol for the Turkish Lira is TRYUSD. Try USD. Try the US Dollar. That’s hilarious. What a dumb currency. Stupid Turks.
I laugh, there’s silence on the other end of the phone, then he says he’ll call me back.
I’m making fun of other places that aren’t nearly as good as America and my assistant has his head in his hands when the billionaire calls me back.
Says let's buy Turkey…
Wait, no, let’s sell Turkey.
Wait on that… Let’s not buy or sell Turkey.
A satire in three parts.
’ll say this right off the bat; I don’t like the British.
In this at least I’m in good company. After all, the Duke of Wellington himself once said, “I don't know what effect these men will have upon the enemy, but, by God, they frighten me”. The Duke went on to rape two of Napoleon’s mistresses after defeating him at Waterloo.
A century later the filmmaker Alan Clarke showed the world all over again that to this day no one does scum like the British [ref].
Visiting London, I’ve experienced them up close; football fans storming through the tube hitting random foreigners and shouting “Two World Wars and One World Cup!”; like we didn’t bail them out of both conflicts and as if soccer is something to be proud about.
I saw Camden and Brixton, it was hard to know if it got worse north or south from there.
But as bad as the British working class are, the upper class are even more reprehensible.
My first go around in the UK I hardly met any. They were front office - considered rock stars, rainmakers, or BSD’s. Everyone else was a business blocker, a deal killer, a cost center.
But when I returned to London some years ago it was a different story. Now I was front office. I was the client. The shoe was on the other foot now. Things would be different.
The beginning of my trip went well. I connected through Amsterdam and I love the domestic firms there, all class acts. I met my counterparts as an equal, drank some beer, smoked a little weed and avoided the red light district for the most part, which they seemed to appreciate.
In London, at first things went according to plan; I dropped by four brokerages and just shook hands with my sales traders there. I always make a point of doing this - personal contact is underrated. Keep it short but show that you’ll make the effort to meet someone and look them in the eye, give them an unvarnished look at your firm’s prospects and ask them to take a gamble on you… explain why you like working at your firm and imply that you’ll remember who helps you succeed there.
That evening things took a turn for the worse.
My coverage at Lloyds had invited me to go to drinks at a private club named Annabel’s. I’d expected an old school hunting club owned by some old whore, but it feels like the top of a high rise casino in Atlantic City where they put retarded people from Philly after they blundered into a mega-jackpot. It’s got everything a dimwitted pathological gambler would identify with luxury down to a pink bar, velvet drapes and gold plated bathrooms. I arrived early and at first everything was fine because I like free drinks. But we’re soon ushered into a private room to discuss our market outlooks.
Now my view of the world has matured alongside my own education in hard knocks at the school of getting the shit kicked out of you. Having cut my teeth in early bear markets, I was a catastrophist of the first order until I tried to sell rallies into Gentle Ben’s quantitative easing experiment. There’s something special about losing money on a bearish position; you don’t sleep well. My career as a bear was soon over and I found out I was actually an optimist. I came to believe the world is improving so fast we probably can’t even wrap our minds around it. In financial terms this means you can buy just about anything, but most importantly - never sell new highs.
So I’m standing at the table, explaining my change of heart to a room full of asset managers and I’m greeted by a stream of upper class derision.
“Pronounce your t’s”
“Pronounce your g’s”
“Listen to yourself!”
“You pronounced it wrong!!”
Those blue-nosed pricks… shouting me down. I immediately point out if it wasn’t for Americans they’d all be speaking German. After that I make a jerking off gesture and shout over them that the Norman invasion means they’re all actually French. The brazenness of that response buys me time… which I use to explain that American accents are actually English ones. That their accent changed, not ours.
This is because when the settlers moved from England to the Americas from the 17th Century, their speech patterns stuck in place, on account of the colonies being so isolated. As a result Americans speak English with an accent more akin to Shakespeare’s than do modern-day Brits. This is also true of the Canadians west of Quebec for instance – a result of loyalists to the Crown fleeing north during the American Revolution. These colonial legacies of pronunciation are particularly obvious in remote areas of North America; hence the argument that Americans actually preserved Shakespearean English.
This shuts those fuckers right up. I take my seat and everyone stares at me like I’m an alien.
Then they laugh and the spell is broken. After this I’m largely ignored by everyone and fair enough. I get bored and leave for a while and when I return no one really notices or cares;
to be middle class in London is to be largely invisible.
When I come back someone is speaking from one of those white-shoe legal firms, where none of the partners have vowels at the end of their names. He takes out a book of polaroid photos, mostly women of questionable morals and men with a taste for the Roman Empire. Some of the members pull their own polaroids out to add to the collection and that’s about all I remember before I’m ushered out by my sales coverage.
Now I have no idea what else those Poms [ref] were up to, but it got me thinking. What makes people contribute to something that will almost certainly be used to blackmail them and their families in the future?
And this is what I’ve concluded.
If a stupid person is convinced by a corrupt system to support a stupid colleague, then a corrupt media outlet accurately reports negatively on the stupid colleague, should stupid people abandon the corrupt system to stay loyal to the stupid colleague, or abandon the colleague to stay loyal to the corrupt system?”
Since we’re talking about stupid people, I’m going to answer that they should do the stupidest thing possible, which is to maintain loyalty to the stupid colleague, who will eventually be exposed. But ultimately this would work to the benefit of smart people too, as it would mean that not only will the stupid colleague be gone, but the corrupt system will be exposed as well.
So stupid people doing stupid things at the urging of other stupid people only to reverse course to do something else stupid at the urging of an intellgent person actually works out for the best, meaning their last—and stupidest act—is actually their smartest. Of course the smart thing would be to abandon the system, which also would have the exact same effect. Given all of this, you might expect they will ditch their stupid colleague in loyalty to the corrupt system, which is the moderately intelligent choice, but also the worst possible outcome as it saves the system.
So being supremely stupid or supremely intelligent has the exact same result, while being only moderately stupid would have an objectively worst result.
I propose that we name this “Epstein’s Conundrum” so future social scientists and philosophers can have something to call it.
Towards the end of last year an old friend invited me to a client dinner. He worked for a cryptocurrency firm and it was ‘NFT Week’ in New York City, so it seemed auspicious.
The purpose of the dinner was to raise money for a separate NFT investment fund. Speculating on JPEG’s of monkeys throwing poop at each other sounded entertaining, so I walked in there so high it was ridiculous; I was drooling, briefly thought I was made entirely of glass, and wondered if there might be terrorists hiding in the bathroom. Then I spilled wine all over the place and generally made a dick out of myself as usual.
But credit where credit is due. Their crypto shop had been successful. They were a combination of Stocktwits & Web 2.0 guys, with some Goldman and Susquehanna thrown in. A powerful combination with impeccable timing, for an idea that might take over the world.
A lot of people know something is going on in NFTs and crypto, but don’t know what. This dinner opened my eyes a bit to it. Before we start, two things.
I don't own any NFTs. And I don’t own any Bitcoin either. The only advice I’ve ever given on crypto was to put 5 percent of your disposable income into it each month, but I didn’t even get around to doing that myself, so it will have to wait for the kids.
I don’t own any because I don’t care; most of the important financial decisions in my life have already been made.
Secondly, we’re going to revisit a little market history. I always thought the first stock trading was in Amsterdam when the Dutch East India Company raised capital, traded slaves and paid out dividends to investors back in the 17th century.
That’s actually not the case though. It turns out markets are much older than that [ref].
At the turn of the millennium, the west finally began to spring back to life after a hundred years of depression and a pandemic or two. One of the first trade hubs to emerge was in Champagne, a state that demanded independence from contemporary French royal oversight. The region became home to a series of trade fairs, each lasting six to eight weeks and protected by the local counts to ensure a fair process for resolving disputes and require debts be honored. The Champagne fairs soon attracted traders from hundreds of miles away, lured by the promise of a safe and fixed location where business could be done.
Initially attendees brought inventory and samples with them, but as time went on the fairs evolved into stock exchanges with currencies, credit and contracts changing hands and real goods being delivered at some future moment, with the business being done by specialist agents on behalf of wealthy companies, banks and governments. Champagne’s fairs were not the only marketplaces at the time, but they were the longest lasting and best known, a bellwether for a dawning age of international commerce.
The point of this little history lesson is that markets have been an abstraction for a millennia. And remain so today.
With that in mind, let’s get back to the dinner. I find myself opposite an equally skeptical punter and we bond over alcohol. He seemed to have had a similar career path to me, so I asked him how he originally got into our business. Turns out he worked downstairs from Standard Charter and got on well with some of the traders in the building. Eventually they invited him up to do an interview and he was asked what he thought of the market. He tells them it’s busy. Lots of client contact and personal time management was important. Also that he needed to stock up on apples and pears… because he worked at the fruit market downstairs.
Turns out that didn’t matter much because everything he was taught on the first day of his job retroactively became illegal anyway.
Anyway eventually the CEO starts talking about the ‘DeFi Summer’. How that was followed by the ‘JPEG Summer’. Crypto Punks. 8-bit avatars. How these online images basically started free to claim, the buyer just pays gas, but they ended up being sold out in two days.
Then Alien Punk [ref] came along - the Mona Lisa of his time.
The comparison isn’t as dumb as it sounds. For a start, much of traditional artwork providence is suspect at best most of the time. Whereas an NFT’s providence is known.
My new friend pipes up here and interrupts the dinner. Surely he can just right-click on an NFT and save the file? Fuck you boom now I own it?
They take the question in stride, point out enforceability is not the point. After all, we’ve all seen photos of the Mona Lisa haven’t we? Did mass replication of that image make it more or less valuable?
In any case, you’re buying the token, not the image. You want it to be shared. You may think it’s not important to own the chain behind the image, but if it allows the artist to capture residual income? Well it’s important to them.
What’s a Patek watch worth versus a Casio? A lot more, but do you want 20 of them? Probably not. A hundred people may see Snoop’s watch, but a hundred million might see his NFT collection.
Anyway, the CEO continues, it may have seemed weird to go down the NFT route from crypto, but it’s one that since came out to be true.
So far, as time goes on, people don’t want to sell their NFT’s, so supply is constantly coming out of the market.
Secondly, it’s a personal experience to own one.
And if you do want to sell some of your NFT? Well just sell a fraction. You can’t sell a share in a watch, but you can sell 49% of an NFT and still maintain control of it.
Finally he drops the hammer. Turns to the room and looks all of us in the eye. He points out every one of us probably spends 70% of our lives online and yet none of us own a thing there… isn’t it time that changed?
Let’s get to the crux of the issue - is this a hospital pass? Or are witnessing a massive shift in an addressable market and a brand new paradigm?
I’m not sure, because it’s unclear how helpful experience is when you’re talking about something so new; when technology is advancing so quickly you can’t even wrap your mind around it.
Let’s take cryptocurrency first. For a currency to be useful it has to fulfill certain requirements. It has to be fungible - you need to be able to buy everyday things with it. It has to be quick to access. It has to be stable.
Crypto is none of those things. Mostly it seems like a good vehicle for speculation and hiding money from the authorities.
And I’m fine with that.
But as you move to second derivatives like NFTs, there may appear to be just too many parallels between previous financial bubbles. On the other hand, most things that failed during prior technology bubbles weren’t wrong, they were just early. Yes, everything that was genius in 1998 was seen as complete lunacy in 2000 [ref], but most of those ideas are working today. Think of all the investment that was sunk into the communications space, underground cables and fiber.
What did PetsSmart buy Pets.com for?
All that speculative activity set the table for a profound revolution that enhances our lives in so many ways today.
Let’s conclude - Crypto and NFTs are like the mosquito at the BBQ that keeps buzzing your ears, that you can't quite catch. You know it's there and it's "real" but most of us just can't grasp it.
What I do know is this - NFT’s allow for portable, unseizable wealth. As well as a form of media that cannot be censored.
That sounds pretty good to me; I think I’ll sell some myself. So, if you want to own a piece of this podcast… well… our first NFT goes out the door for gas money
In a previous episode we referred to the European fairs that preceded formal stock markets, but we didn’t talk much about the participants.
As it turns out, the trade fairs also originated the use of brokers - basically middlemen of exchange - to introduce buyers and sellers. The word broker is derived from the French brochier, which describes someone that tapped or ‘broached’ a wine keg. The term was applied to the entrepreneurs that bought wine by the barrel from farmers and then sold it by the cup.
Before we continue, let’s throw out another historical footnote.
Manhattan's original inhabitants supposedly called the island Manahatta, which means either “hilly island.” or “wood for arrows”. A more cynical man might say this makes no sense, since Manhattan seems relatively flat and hardly an exclusive reservoir for getting wood.
A third theory goes something like this - When Henry Hudson first arrived in what we now know as New York, he was greeted by the local Indian tribes. The Indians brought tobacco and in return Hudson shared booze with them; then they got thoroughly wrecked together.
Some time after this historic party, the Delaware tribes called the island Manahachtaniernk, which means “the place where we all got drunk”. Europeans then abbreviated that to Manhattan. By 1650 the town of New Amsterdam had one of four buildings devoted to the sale of alcohol and well, we all know what it’s been like since.
Let’s get on with things.
Around 2006 a big theme driving many investment sectors was referred to as the "commodity super cycle". Much of this was based around China. Having abandoned communism in all but name, that country was a juggernaut and had a seemingly-endless demand for natural resources.
Meantime in the West, central bankers were expanding their nations’ money supply to immunize their equity markets from a series of catastrophic military decisions by the United States, sending oil to ever further heights. Hedge funds took the low rates and were piling into copper, crude, gold, silver, platinum, zinc… even wood.
And that’s where SinoForest came in. The company was listed in Canada and went under the symbol T.R.E. The firm told investors they would provide materials to the megacities that were popping up all over China, but management soon discovered their cash flows would look even better if they just clear cut the trees and didn’t bother replacing them. Better yet, just lie about the forests in the first place.
An early proponent of wood, the CEO of Sinoforest wore a cape and always had two hookers on his arm. The CFO was a cruise ship singer who wore a piano tie. And one of their brokers was a real character himself. He met the SinoForest team in Montreal. That city is a strange place. A whole group of us visited it once and within hours Tarzan hated a bar so much he took off his shirt just to get kicked out. One of the McKennas carried a 2lb bag of weed with him the entire night. That’s a felony there.
Anyway, around this same time the Canadian exchanges had begun listing some Kurdish fracking companies. The fact that Kurdistan was surrounded by enemies and wasn’t even a country was offset by the general bullishness tied to oil.
The Broker in question had done a few fracking deals in the past and fancied himself a bit of a cowboy. Unlike many of his colleagues back then, he never wore a tie; said it was just a leash your master cut for you to show that you’re going nowhere. Playing fast and loose with the rules themselves, the SinoForest executives appreciated his approach and soon agreed to a roadshow in New York to get a little more fuel for their ponzi scheme.
After a day listening to the SinoForest team talk to investors, our Broker smells a rat and abandons them at The West Garden, which was the McDonalds of Rub n’ Tug joints back then. After clearing out the pipes himself with the local specialist Bonnie, he decides to head off and explore the city, eventually ending up at the Minetta Tavern.
The two of us arrive at the bar around the same time and he asks for whisky. The waitress rolls her eyes and says they have quite a few different whiskeys. He says just bring the damn bottle.
We are introduced and I say one of my friends is running an investment from their satellite office in San Francisco. He points out there’s some really dumb money in California. Literally no end to it. Then he burps really loud. Everyone cracks up at that and the group of us get to properly talking. Someone asks how much to order and the Broker says, well that depends on how fat you want to be.
Eventually we’re joined by some women, but the Broker waves them away, warns us that some vampires have fangs in their vaginas. After all, think about poor Bubba Clinton.
After some aggressive drinking, one of my friends tells the Broker where I work and he says, Jesus a retard like you? They’re lucky you’re not shitting on their desks and walking around with your dick out.
In short order the Broker starts talking to a girl at the bar. She has dreads in her hair, but she’s as black as I am Italian… and I’m Scandinavian. After he figures out he’s never going to hook up, they get into an argument. He starts mocking her accent and pretending to be a gangbanger, “you know who I am? I’m from New Jersey. I know people. Bang-bang, you’re dead… I know people”.
Eventually she walks off in exasperation, muttering “fuck off, fuck that, fuck this and fuck you”.
Later that night, we’re at another spot and I ask him what his problem with women is. He says it’s not just women; he’s a very careful judge of character and has recently learned to distrust many well-meaning people.
I was a knee-jerk, New York Times-reading liberal back then and took exception to this, as well as his earlier dig at Hillary. I try to interrupt, but he talks right over me, pointing out that it doesn’t matter if you mean well, when you are hurting others and creating bad outcomes.
The combination of deep conversation and outrageous behavior gets us into even further heavy drinking and we soon get thoroughly wrecked together.
Eventually I’m so tanked that my friends get worried and decide to put me into a cab. As they do, the Broker jumps in behind me, reaches over to open the opposite door and the two of us head right back out down the street.
We try to track down women who are too stupid to know how dumb they really are. Crash a charity event and have someone else pay for the auction items we jokingly bid on. Empty an ice bucket over our heads at the Standard. We sign someone else’s check with “cunt” so they can’t expense it. Get chased out of SNAFU by an angry doorman. Confuse the Hellfire Club with The Vault… or perhaps the other way around. Energetically push ourselves to the limit of what we can handle and still function the following day.
Most of the night is a total blur, but I had the time of my life.
Some of my friends on the Sell Side are probably wondering which Broker I’m referring to in this episode and the answer is all of them.
You were all like this at different moments in time.
And I miss those days.
And I miss you.
In any case, hangovers build character.
I was at my local bar recently, spewing a lot of bullshit as usual, when I overheard a colleague exclaim; ‘I don’t give a fuck I’m Irish’.
At the time I was in a state of mind where I overanalyze everything. So that phrase went into a notepad, then into a list of aphorisms, after that it sat in my bag for a month before being pulled out and entered into a google doc; then a story was built around it, made it through editing to production and finally here it is… ringing in your ears.
‘I don’t give a fuck, I’m Irish’.
The travails of our immigrants from Ireland are pretty well known, but let’s recap them anyway.
Between 1820 and 1860, the Irish constituted a third of all new citizens in the United States. By the 40’s, they comprised half of immigrants to the nation. They left a rural lifestyle in a country lacking modern industry and found themselves totally unprepared for urban centers in the United States. Though they were not the poorest people in Ireland (the worst weren’t even able to travel), by contemporary standards they were destitute. They often had nothing beyond fare for passage and therefore settled in any port they happened to find themselves. They also bred like rabbits, so in no time New York had more Irish than Dublin.
Impoverished immigrants crowded into subdivided homes that were intended for single families, living in tiny cramped spaces. In some cases cellars and make-do spaces in alleys became home. A lack of adequate sewage and running water in these places made health care next to impossible. Disease of all kinds - cholera, typhus, tuberculosis, and mental illness - resulted from these miserable living conditions. On top of this, the Irish faced intense hostility from other ethnic groups and were regularly accused of spreading disease and crime.
The Irish were changed by America. But they also changed this nation. They and their descendants went on to make incalculable contributions in politics, industry, labor, religion, literature, music, and art.
That’s the official line anyway. It seems to me that recently the Irish have largely been assimilated into being simply “white people''. That being the case, I intend to sum up their contribution to this great country in a single expression - Saint Patrick’s Day.
The first recorded recognition of Saint Paddy’s in the US came in 1737 when the Charitable Irish Society met in secret, to discuss help and support for immigrants in the greater Boston area. The first ever parade in New York City took place in 1756.
Two hundred and fifty two years later, I found myself at a St Paddy’s in New York - and it was during this venerable celebration that I first met Billy.
Billy used to own St Patrick's Day and, quite notoriously, organized drinks at PJ Carney’s before and after the parade. I walk into the bar with a friend of mine who is, let’s say, ethnically ambiguous. Despite the fact that we are introduced as important clients, Billy takes one look at my friend and immediately launches into a joke.
‘Hey, you know what the difference between St Paddy’s and Martin Luther King Day is? On St Paddy’s everyone wants to be Irish!’
My buddy takes it in his stride, calls Billy a stupid potato-head and the rest of the night finds himself a “Fob” or “Friend of Billy”’; never without a drink in his hand. A couple of hours later my friend explains to Billy, yes he has very dark skin, but his ancestors aren’t from Africa; instead he’s Persian.
‘Persian??? What are you a rug??! The Persians were wiped out two thousand years ago’
Shortly after Billy meets a New Zealander, exclaims; ‘Like in Lord of the Rings?? You got hair on your little feet?’
Minutes later he points out to a nearby Bolivian she’s from the only country that has never won a war. Someone nearby with the mildest southern accent is christened “Pennsyltucky”. A Japanese guy, “Tojo”. A Korean girl is “mi-chin nyeon” and a Russian one, “suka”.
Every one of those people he insulted moved on with us to the next bar, charmed by his extracurricular excess and antisocial tendencies, his love for chaos and the dark side of human nature near the fringes of acceptable conduct.
They say madness is rare in individuals but the norm in groups - and indeed in no time a sort of supernova of stupidity occurred; a critical mass of bad behavior, ending up at 1am with most of us projectile vomiting deli sushi into the parking lot of a strip club, while the Bolivian girl laughed and flicked cigarettes at us.
Yes, Wall Street executives tend to be assholes and speak without a filter. The reason they get to be, is they work on Wall Street. Billy Irish himself is one of the most successful names in the business - he got there laughing his ass off and by being brutally honest with everyone - what could be better than that?
Billy may be the enemy of polite society, a menace to any happy trading desk, a security risk and a potential serial killer, but the man can sell. He’s an idiot savant with whom God has serious, frequent and intimate conversations. I just can’t imagine what the Big Man is telling him - or whether the message is getting garbled during transmission.
Sexist? Homophobic? Insensitive to the gorgeous mosaic of an ethnically diverse workforce? You might be right. But what the financial system seeks is people who can succeed without getting bent out of shape and taking things personally. To further paraphrase Anthony Bourdain; if you are easily offended by direct aspirations on your lineage, your circumstances of your birth, your appearance, the mention of your parents possibly co-mingling with livestock, then perhaps finance is just not for you.
At least for me, the curses, insults and taunts of my wildly profane crew are like poetry; beautiful at times, each tiny variation on a classic theme like some Beat-era jazz riff over and over again, making it new and different.
And your actual identity? It’s actually no impediment on Wall Street - we all spend too much time together to care about sex, race, or national origin. After your level of skills, it’s how sensitive you are to criticism and perceived insult - and how well you can give it right back - that determines your place in the food chain.
Of course this sort of advice is by definition a form of nostalgia. Dispensing it is a way of fishing in the past, wiping it off, painting over the ugly parts and recycling it for more than it’s worth. So be careful - Billy and I are part of a generation embedded in a culture where hard work and merit trump the fashionable nonsense of the Diversity, Equity and Inclusion crowd.
You probably aren’t in a similar position. Channeling us would more likely have self-righteous, virtue-signaling, authoritarian lunatics from Human Resources swamping your office with grief counselors, Kleenex, free N-95 masks, and participation trophies.
On the other hand, some stereotypes are just apt, that’s a reality. You and your friends are walking clichés yourself; stop taking yourself so seriously.
Exit Stage Left.
According to Hindu mythology the universe was created with the sound “Om”
The meaning and connotations of Om also span parts of Buddhism - varying across diverse schools and various traditions - but it’s really only important to know that it is considered the primordial sound.
The first sound.
It’s a syllable that contains within it everything that ever was and everything that will ever be.
Interestingly, when our most powerful telescopes point at the space between stars, they also hear a faint hum. Astronomers call that the ‘cosmic microwave background’ and it’s the residual radiation of the Big Bang, the explosion that created the universe fourteen billion years ago.
But perhaps you can also think of it as a barely audible reverberation of that original “Om”.
That syllable is so resonant that the night sky will keep vibrating for as long as the universe exists. So when we’re not listening to anything else out there, we’re hearing the voice of creation.
Let’s bring this back to earth.
As New York City fights off the residue of regulations set by the biggest hypochondriacs on the planet, our social scene is beginning to pick up. My network is repairing itself, albeit slowly, but it’ll never be what it was. Which is for the better. The world of finance and society has changed and I refuse to change with it. It’s time to let it go on without me. Family, travel, writing, and jujitsu - these seem like adequate challenges for the future - all of them complex problems that will never be solved.
Anyway, a colleague from the past popped unexpectedly back into my life and we decided to meet for a drink. She walks into my bar and I’m startled to see she is Asian; I remembered her as an Irish-Pollack who cooked like an Italian. I then recall she was also a killer video game player - we originally bonded over the arcade game Street Fighter, so let’s call her Chun-Li.
For those lacking a misspent youth in bars or pachinko parlors, Chun-Li was the first playable female character to appear in a fighting game and gain mainstream recognition; a trail-blazer for female fighters of all types.
Li sits down and orders tequila. I raised an eyebrow at that; didn’t know it was going to be that sort of night. But she says it’s good tequila - not 21-year-old-pass-out-drunk tequila. When it arrives I try some and am impressed.
I ask Li how she got into our business and it turns out she began at one of the first crossing networks.
On the buy side these were a big deal. For the first time you could place an order down on the New York Stock Exchange floor and also execute away with a clear conscience. I still remember the first time I used one - The Family had asked me to exit one of their legacy positions, a million shares of exposure in a stock that might trade 50 thousand shares a day. They’d asked me to use a specific brokerage to do it, but the problem with carrying out their instructions was that the head trader there knew how big our position was, for reasons I won’t get into. When I gave him his first 20,000 share order he told me not to be a pussy and just show him the whole amount, to which I responded he should go find me a bid if he wanted that sort of responsibility. In the meantime I put the other 980,000 shares into a crossing network called “ITG Posit” that went off every day around 10am.
A minute later, boom I’m done. A low-cost block that traded in the middle of the spread with no slippage.
A win for our investors.
A win for technology.
A very unhappy floor broker.
A sign of times to come.
Let’s get back to Li. When she got her first job on Wall Street it was as one of the first quantitative analysts or simply a “quant”. In fact her first day reads like the beginning of a joke: A Russian, an Indian and a Korean walk into a room. The other two quants look at her like they have never seen a female before. Remember these aren’t today’s Jeff Bezos quant, they’re 2006 quants. In no time they are following her around like puppy dogs and obeying commands with a commanding wave of her hand or raised eyebrow.
She makes her way up the Wall Street hierarchy until she’s sitting in front of me. A woman at the pinnacle of her career, seemingly in charge of it all - successful family life, a business assassin, and still hot on top of that. I’m intrigued by this - to be honest, I’ve never given much more than a passing thought to issues facing women on Wall Street, something I may have to face the music for when an angry daughter or two reads this sometime in the future.
Perhaps she has some advice for women in finance?
We’ll get to that. But first some context is in order. For a start, Asians truly are a privileged minority in America. Let’s demonstrate that with two salient facts; As an ethnic group, Asians - whether Taiwanese, Indian, Korean, or Japanese - make more money than white people. Last year Asian women actually made more than the average white man. If America is a racist patriarchal tyranny, well, we’re a very strange one indeed.
Secondly Asians make up 7% of the country and only 1% of the prison population.
But that’s not why Asians are privileged - that’s simply the output. They’re privileged because they appear to come from a culture that prioritizes diligence, hard work, respect for family and education.
So before we get to Li’s counsel, we need to fall back on the oldest advice of all - if you want to be successful you should stay in school, get a job, keep your family intact. Everything else will fall into place. And if luck isn’t actually the interaction of hard work and design? Well it doesn’t matter, because you can’t live your life differently anyway.
I’m a broken clock I know - better to hear from women themselves. Being somewhat of a compulsive personality I began calling up other female colleagues from my past.
From these conversations I discovered there used to be just two paths for successful women on Wall Street. The first was simply to bang your best client. [short pause] Business would pick up, worst case you walked away with a rich husband or a large work settlement.
That seems easy but it’s actually a trap; Sleeping with your client sets a poor precedent and therefore limits your options later on; Marry for money and you’ll end up earning every cent; Screw over your employer and it’ll be your last job in that sector.
The second path came from observation that many successful women tended to have had an older brother. Now obviously you can’t control when and where your father shot out his baby batter, nor what proportions of X or Y chromosomes were there to get splattered by it. Instead what they had in common was someone in their lives to say get the fuck up, we have a problem and we can solve it. Someone where there were no safe spaces. Someone who helped them see the world as it actually is, not how you wish it to be.
I planned to write more about women on Wall Street, but each podcast is a stream of consciousness to some extent - ultimately it’s for me. I write to know what I really think.
This is what I think: In the West over the past two years, many of us have had to confront death, either our own or our elders. Life and death being two sides of the same coin, we’ve also had to confront existence - mortality being a wake up to how we want to conduct ourselves in the world.
Life should be an adventure but people don’t take adventures - adventures take people. My own journey on Wall Street started long before I arrived, and was over before I left. I know exactly where and when it was over. Near Bethesda Fountain, at the end of Poet’s Walk at seven on a windy weekend morning, without warning or goodbye, my time on Wall Street went away and left me stranded. I tried to call it back, to catch up with it - a foolish and hopeless matter, because it was definitely and permanently over and finished. The road in finance became an endless ticker tape, market hours an obstruction, the offices gray blurs, the people simply moving figures with heads but no faces. I found myself slipping into afternoon naps at long, uneven intervals. The days rolled under me unacknowledged. I knew my business was important, but I didn’t feel it. I know the city must still be exciting but I didn’t see it. I bulldozed blindly through my Mondays, plunged into heavy drinking sessions on Tuesdays, and grooved into the weekend stoned and hungover. There was no night, no day, no distance. The way was a gray, timeless, eventless tunnel, but at the end of it was the shining reality of my future… family, travel, writing, and jujitsu.
And that’s how a trader comes home.
Chop Wood, Carry Water. [ref]
Last week someone told me Michael Jordan was cut from his high school basketball team.
The truth of that statement turns out to be more complicated. Jordan was not cut from the team, because he never made it in the first place. He played JV. That demotion made him more determined than ever and in no time people were packing the gym to watch him score 40 points a game.
I’m interested in failure because, after throwing myself into grappling last year, I discovered that simulating murder with sociopaths 30 pounds heavier than me is not the formula for success I had imagined.
Turns out, it was literally a staggering experience; I’ve been hurt many times, but I’ve never been injured. The difference is profound.
A minor operation, some rest and intermittent rehab later, I returned to the mat to drill and eventually to fight, which is known as “rolling” in the sport.
Oddly, despite the time off, my jiujitsu appears to have actually improved. I was relaxed for once. I kept my cool and breathed well. If a position wasn’t working? I just abandoned it and tried something else out.
I believe this is because I had taken the outcome out of rolling; after all, I had no expectations to do well after months off. Like standing up and hitting a great drive after not playing golf for months, it came easy and was even fun.
So mindset is important.
Learning something in juijitsu is consequential because it is a fundamentally honest activity. When you lose you must tap out or face injury, unconsciousness, potentially shitting yourself, perhaps all three. This forced honesty is instructive, and those lessons can be applied elsewhere in your life.
A second unique feature of juijitsu is the ability to build mutual trust quickly, alongside your own character refinement and development. It’s unforgivable to hurt your training partner - that’s part of the magic. We go to the point of harm, succeed or fail, learn and iterate.
Lastly, survival information exchanged in groups appears to have a comforting effect; it builds community. Whether that is true or not, when someone teaches you something that helps in hardship, it is a fine thing indeed.
So experience and reflection are powerful. But without analysis, useless. Napoleon’s horse fought in dozens of battles and several campaigns, but no one would describe him as an expert.
By contrast the Japanese hero, Miyamoto Musashi, fought 59 duels, then meditated on them for ten years before writing “The Book of Five Rings.” We are not him, yet we can learn and improve from his example.
I also realized I had never really enjoyed fighting before, it was just something you did if you had an older brother. Yet now a sort of joy for the sport has come over me. Recent training sessions have given me a better high than any drugs I’ve ever taken… and I’ve taken a lot.
My return to the gym made me interested in other examples of failure. Who else lost a battle but ended up winning a war? If defeat isn’t the opposite of success, but some sort of symbiosis with it, what exactly is the link between success and failure… and time?
Heraclea is a fine example here. At the Battle of Heraclea, the Romans were defeated. However, with discipline and superior organization they were able to rebuild and ultimately defeat King Pyrrhus, hence the term Pyrrhic victory.
Let’s run through some more recent examples.
Einstein's teachers labeled him ‘mentally slow’: He didn't speak until he was almost five and was later expelled.
Edison was told he was ‘too stupid to learn anything' but then went on to invent the light bulb.
Winston Churchill failed the sixth grade
Vincent Van Gogh only sold one painting while he was still alive.
At thirty Steve Jobs was fired.
Henry Ford had multiple businesses fail before mastering the assembly line. Beethoven was deaf. They wanted to have the man committed who came up with the idea of television. They called Nelson Mandela a terrorist, and perhaps they called Jackie Robinson worse.
It’s very tempting to look at all these examples and concentrate on the contemporary environment or public adversity the individuals faced. This is encapsulated nicely by pointing out that if you put a crab in a bucket it will crawl out, but if you put lots of crabs in a bucket they pull each other down every time one starts to escape. And if the first crab continues to try, the other crabs break its leg.
And that certainly used to be true. But it’s not the case today.
Today we live in a country that is essentially self-sufficient in energy, food and national defense, with a culture of individualism that has quite rightly dominated the world. You already won several improbable lotteries - after all, the chance of even being born in the first place is one in 400 trillion, but on top that you were born in a country where you can speak freely and own a gun.
Let’s say that again - you already won the biggest lottery of all. In poker terms you drew 153 million consecutive royal flushes for the right to fly through the universe on an organic spaceship 24 thousands miles wide with a nuclear explosion chasing you.
So if you’re worried about failing at something, you’re already losing. Take the outcome out of it - it’s all in your head. Reassess if necessary, but reboot. Get back on the mat. Ask those girls out. Go to work. Get some.
Every time I get a call from Northwestern or DB I think of the expression “bucket shop”.
I always wondered about that, so I decided to look it up. It turns out that in the London of Dickens, drunks would visit the public house with buckets in hand, begging the dregs from the bottom of each barrel of ale. When the buckets were full they’d gather in a room and systematically empty them. Those rooms became known as bucket shops and stock brokers were quick to accuse rivals of operating their offices in a similar manner. The term was quickly applied to pseudo-brokerages that sprung up in the United States and the great American speculator Jesse Livermore got his start in these establishments.
This may shock none of you, but disdain for the poor on Wall Street isn’t new. What does seem new is a detached sense of reality, combined with a more selective social circle and aspirations creating a lifestyle as precarious as any middle class one.
Conspicuous consumption wasn’t always like this in finance. For instance, before being acquired by Bank of America, there was no comma between the first two names of the title “Merrill Lynch, Pierce, Fenner & Smith”. This is because in the early days of their partnership an order of stationary came back with the comma missing between ‘Merrill’ and ‘Lynch’, but the economy-minded partners decided to use the letterheads anyway. Later one of the partners stated that if he had finished college he would have known more about punctuation.
By contrast, our generation of bankers hold competitions to see which of their girlfriends can keep their finger on a hot plate the longest and then ignore the homeless outside because they can’t possibly reward failure in good conscience.
All these little observations came to me as I noticed the impact of higher gas prices on the national zeitgeist recently.
Wall Street finds higher gas prices hugely entertaining.
Most importantly of course, it’s an opportunity to make money in the energy sector. But it’s also a chance to make fun of poor people. After all, what sort of schlubs actually look at the pump when they gas up? And who budgets for driving and groceries anyway?
Reprehensible? Sure, but every business has bad people. The following story reminded me of some of ours.
It’s been a slow social year, but on balance I’ve actually had a pretty great pandemic. Hybrid work has been more productive than expected, I saw the benefits of a renewed focus on my family, and put 30 thousand miles on my car on top of that. However, networking is part of my job and if people weren’t going to come back to New York, I figured I’d go to them; So that’s how I found myself in Florida.
When I organize a business trip I start off in an orderly sort of manner; most important broker I see first. Normally I arrange to meet them around 11am, which gives some time to get the US market open out of the way and also the option, but not the obligation, to do lunch if they feel like it. Depending on the city, I can see 3 or 4 more brokers in person, followed by a relatively sober dinner with another bank that’s actually interested in our business.
Day Two is a little different. For a start I’m not as sharp as I was, but the meetings are also less essential. So I work through them as fast as possible, until I get to the least important meeting of all, which is, inevitably, Deutsche Bank.
The week before leaving for Miami I didn’t even know who still covered me there. But it turns out they still have some US operations left, so I hit them up and a broker says that I should come meet him for beers after the close. That they’ll be at something called The Indigo near the Four Seasons.
Sounds classy to me, so I head right on over there at 4. Since my business is all but done, I lean into my one-hitter and I couldn’t have been more stoned by the time I walk into the hotel. I wander around in bemusement for a while until I see a group of well-dressed men by the pool. I track down my Deutsche contact, let’s call him Fritz, and ask what they are up to.
Turns out they’ve turned the Indigo into the sort of all-inclusive that your parents used to attend. Yellow wristbands that allowed them 15 drinks in 6 hours. Most of them had run through it by midday, so they were chatting up grandmas and having them buy the drinks.
Hey sexy, have you ever been hit on by a 22-year-old trader before? Buy me another beer, I’ll keep talking to you.
I gravitate to the older guys in the crowd but they’re equally hammered, something that couldn’t be more stark to me, because oddly I’m not actually drunk. It helps that they’re real people, made up of former power and utilities traders. I know a bit about that business, soon fit in, and in no time I’m hammered as well.
Eventually the youngsters have tapped the pensions out of the local geriatric talent and we pile out of the pool area with various plans for trouble. Everyone is wrecked, fighting in the elevator, bumping into walls, one guy even slips on his own vomit.
Four of us push each other into a car outside. Fritz takes the wheel and once we’re on the road, he turns to me and says what a coincidence it was that I reached out to him last week. That we actually knew each other back in the day. I’m like, watch the road dude. He swerves around a motorcycle, concentrates the mind a little, then turns back to me again.
Says he used to work at Blackstone - does that ring a bell?
‘SeaWorld? You remember fucking SeaWorld motherfucker? Fucking SeaWorld??’
At this point I’m thinking two things. Firstly, I made a big mistake reaching out to DB. Secondly, this is super weird. Like something that might happen to someone else.
I check my seatbelt as the other Deutsche Bank guys laugh.
It turns out Fritz used to work for Blackstone and was responsible for their investment in Seaworld. We on the other hand took the other side of that trade and generally were a pain in the ass.
Blackstone had the largest equity position in SeaWorld when they went public. They still had that position when the documentary Blackfish came out and the shares quickly tanked; Blackstone came to the conclusion that only PETA, Hippies and The Poors should be mad at them. To be exact, according to Fritz,
“Well fuck that shit The Poors can’t afford a trip to Alaska or anywhere else those murdery whales live so they should be thanking us they get to see them alive.”.
As he says this he’s swiping through Tinder with one hand and trying to angrily wave a finger in my face with the other. Hard to do while driving through Model City.
Seconds later, he rear-ends a pontiac firebird.
A couple of tough-looking guys emerge from the car, take one look at Fritz’s bloodshot eyes and exclaim, “Damn, these white boys are drunk as shit. We should call the cops”
Fritz just stares at him. Says, ‘dude you have a blunt in your mouth and I’m sure you’re on probation… are you sure you wanna call the cops or I can just buy your piece of shit Pontiac from you right now?’
Then a police car comes around the corner.
The pontiac takes right off, but the officer flashes his lights at us and Fritz holds his ground, while I back away into a gathering crowd. The last thing I hear is the cop wanting to know how the front of the car got totaled and Fritz observing, damn there’s a lot of deer around Miami at this time of night.
A wise man once said, an error doesn’t become a mistake until you refuse to correct it. And in a nod to this timeless wisdom, I will indeed no longer associate with Deutsche Bank traders. But the rich do make for more entertaining company.
Human see, human do
A lot of you may not know Gary; but he is a trans-woman.
He was born male, however he’s trans, so he became a woman, and - pay attention here - he now identifies as a heterosexual man.
Okay? So, biological male, turns into a woman - is now a trans-woman - but identifies as a straight man. So he’s like a lesbian but he identifies as a male.
As I’m increasingly pushed into a reactionary posture by people who have seemingly gone off the rails, you might think I oppose a lot of gender politics, but that’s actually not the case. I’m quite happy for people to identify however they want. It’s a free country, why would I care?
I am interested in why people believe things they know are not true. I’m fascinated by our collective illusions; to better understand how false assumptions drive bad decisions.
Let’s do an example.
One afternoon in August 2010 a small turboprop plane was flying above Kinshasa in the DRC when the attendant heard something rustling around in the rear of the passenger compartment. She went to take a look and found a live crocodile. The terrified woman rushed toward the cockpit, presumably to inform the pilot. An alarmed passenger, seeing her fear, jumped up and hurried after her toward the front of the plane. In short order, the other passengers did the same. Their combined weight destabilized the turboprop and forced it nose-down into a house a few miles from the airport. All but one person, who witnessed what happened, died in the crash.
Also the crocodile survived.
The simplest explanation for why this happened is that the passengers were morons. They were mindlessly copying those in front of them. They couldn’t see what was wrong, so when one person after another ran after the flight attendant, the remaining passengers felt compelled to do likewise. Assuming that so many people couldn't be wrong, the frantic passengers surrendered their private judgment to the authority of the crowd.
A more generous explanation is that modeling our actions on others can also be a matter of survival, particularly under time pressure or great uncertainty. If you are swimming with your kids in Cape Cod and see people rushing out of the water, it’s probably a good idea to hurry onto the beach too. Likewise in the long-running show Who Wants to be a Millionaire, the audience members choose the correct answer 91 percent of the time.
But real life rarely works like a gameshow, because the wisdom of the crowd requires each individual to make private decisions – if we’re merely copying each other, wisdom becomes stupidity in a hurry. It’s also very easy to start a cascade. Some modeling suggests the first person in a sequence always follows their private knowledge, as does the second. But the third person is much more likely to just copy those who went before, especially if the first two do the same thing. Once it begins, a cascade becomes enormously counterproductive and can lead to error on a massive scale [ref].
This might be a useful segue to discuss the futility of speculating on a 2023 recession, as if events between now and then have no influence. Or whether yields in the largest, most-liquid market in the world actually mean we’ll have higher rates next year, rather than the prices you see with your own two eyes right now. But let’s get back to a Gary.
Gary grew up in Cleveland and struggled in his youth. His high school teacher supposedly once told his parents that they should be happy if he became a garbage man.
He was always fascinated with Wall Street but never had the grades to make it to a major bank. Eventually he got his first job as a traveling salesman.
Gary was in upstate New York selling window frames when he decided to extend his trip into the weekend and see the city for the first time. Still interested in financial markets, he took a Friday to go to the floor of the commodities exchange at the World Trade Center.
Commodities trading looked nuts and Gary wanted part of it. While visiting, he overheard someone yell, “I’m late for a flight, I’ll call you when I land”. He ran over to them and said, “I heard you’re going to the airport, me too. Let’s split a cab”. Gary wasn’t really going to catch a plane, but figured he had an hour to convince the guy to give him a job.
In the cab, he explained how familiar he was with options trading and had always wanted a job on the Street. In fact, he knew nothing about options, but he did want a job on the Street. They exchanged details, he flew back to New York the next week, and ended up working as a commodities trader. He would later recount that he read Options as a Strategic Investment, the bible of all options trading, over the weekend.
This is perfectly timed bullshit: Gary has severe dyslexia and Options as a Strategic Investment is almost 1,000 pages.
But Gary Cohn went on to be the Chief Operating Officer of Goldman Sachs. This made him one of the most powerful men in the world. In 2017 he began serving as President Trump’s economic advisor and was considered to be one of the strongest voices in the administration. His severance package was estimated to be worth $300 million [ref].
Gary got his job on a Friday afternoon, in a taxi, by misleading someone about a trip to the airport and then dissembling to his employer about options trading.
So identify as whatever you want, if it serves your purposes; but you are male or female down to a cellular level - don’t lie to yourself.
Advice for Women on Wall Street
“Algorithm” is a word that actually dates back 900 years. It comes from the name of a Persian mathematical genius, who came up with a number system. Later he invented the decimal point, and even algebra itself. “Algoritmi” is the Latinized version of his name and itself the origins of the word algorithm.
In Latin, “algorismus” simply meant the decimal number system. By the 13th Century, it had become an English word.
By the late 19th Century, that algorithm came to mean a set of step-by-step rules for solving a problem.
In the early part of the 20th Century, Alan Turing worked out how in theory, a machine could follow algorithmic instructions and solve complex problems.
Now it is becoming a word that is gradually transforming our lives in so many ways we can’t even come to terms with it. Do you think you have an idea? You don’t have an idea - the idea has you.
With that introduction, let’s talk about six sisters who used to work on Wall Street. Denise, Doreen, Dorothy, Donna, Debbie, and Diane.
Some years back, I ran into Donna outside her office and couldn’t help but exclaim ‘Jesus, you look like a bitch when you walk out of there’. And she retorts, ‘what do you think this place does to you?’
It turns out Donna worked at Wachovia. When Wells Fargo bought them, they had the same problems everyone had back then - they could barely afford to fire people, and were oversubscribed for sales traders.
I ask Donna if she’d like to cover our account and she replies, “if I still have a job in an hour I’ll be thrilled”
My offer gave her a shot of confidence that helped her avoid the corporate woodchipper. Eventually Wells Fargo put her on commission and gave her a corporate card. She went out every night and met everyone she could. In part due to her efforts, Wells decided to keep the sales desk and even began to invest more in it.
She calls them halcyon days. Happiness, great success, and prosperity.
A few years later Wells Fargo sent a team to New York to build the desk out, so Donna set up as many meetings as she could for them. The Wells people eat and drink their way through the city and end up with a new appreciation for where a well-run brokerage could go with the right Fed support.
Eventually my firm meets up with everyone at the Ace Hotel. We walk in there and Donna has like eight guys in suits waiting for us. The waiter is nowhere to be seen and it quickly gets uncomfortable, so I head off to smoke weed and people-watch in the lobby. When I wander back I see a massive suckling pig in the middle of the table and like 40 orders of french fries around it.
No one is eating anything.
Donna looks relieved to see me, but I hate pigs and have to edge around the table to not get grease on my shirt, while all the suits have to get up around me. Donna’s like, the pig’s here you have to eat it and I’m like no, I want the fish.
You have to eat it.
No I don’t. I’ll just get the fish, don’t worry about it, I’m fine.
Look, everyone is here. It cost eleven hundred dollars.
None of that is my problem. We start making fun of her for not knowing her customer properly and then we make even more fun of her for trying to make someone like me eat pork.
She takes the slings and barbs like a champ, even laughing as it dawns on her this was the exact moment her career jumped the shark.
Last week I got back in contact with Donna to see what advice she would give a salesperson still dedicated to the Wall Street rat race. And this is what she said:
Cherish every moment, it goes too fast.
Secondly, don’t take things so seriously. It always really bugged her that she didn’t get to go to lunch with the guys but she was just envious of her sisters who did, the ones that owned it.
All day, the voice in her head said ‘they don’t like me, they don’t want me here’. But she was tough as nails. She could school anyone on that floor in hockey. Why not? As long as the stick is below the cross bar it’s any game you want it to be. At her best on Wall Street, she was like a professional in high-level sports, making plays and taking hits in stride.
She loved the game but sweated the small stuff too much. All the social drama felt like a big deal at the time but why worry about it? You’re on Wall Street, worry about your business.
Advice for Women on Wall Street (Part 2)
I was on a Diversity Equity Inclusion call recently, for reasons we don’t need to get into, when the host stated, “we are all the same inside”.
I had to immediately interrupt; No. That’s not actually true.
It is true when it comes to race or skin color. In fact, if you insist on breaking us into groups based on the level of melanin in someone’s skin, then you are a very superficial person indeed.
But it’s not true of men and women. This is because women have two X chromosomes, while men have an X and a Y. There’s no escaping that; we are our gender down to a cellular level.
I thought about this exchange recently when I was looking at the demographic of the podcast. One of my production platforms, Spotify, allows you a fairly sophisticated breakdown.
Think of yourselves as a massive bag of apples. If I divided you based on skin color first, then sexual preference, then identity, then named all the apples - is the bag more diverse, or have I just created more datapoints?
And what if I created my own datapoints?
Let’s do that.
I suspect we could divide you into one of three groups:
Firstly, there’s those of you that are new to Wall Street. You have a feeling that you’ve missed out on the golden years for the business, but this is where the money is and you know you can lose money chasing women but you can’t lose women chasing money. So welcome… and get some.
Secondly, there are those of you who were too junior to have seen that much before the financial crisis, after which everything remotely fun got cracked down on. You know the business used to be better, but ran into a timing issue. That’s a bummer, but this is objectively not your fault.
Lastly there are those who were there alongside us and for the most part listen with the detached ear of people who have just moved on with their lives.
I’m dividing by generation here and indeed age is a fairly useful criteria. But gender is more practical. If I divide our audience by gender, you are 93% male.
Which brings me full circle to say, we are going to talk about women on Wall Street again. The framework we’ve chosen thus far is to discuss six women; Denise, Doreen, Dorothy, Donna, Debbie, and Diane. This week let’s do… Denise.
Denise grew up sheltered even by today’s standards. She was in her teens before she even knew she was part of a vast crime family. The authorities used to come by to detain her grandfather once a year, in a sort of elaborate theater; the strange culture of an authoritarian state that had embraced capitalism but still had no idea how to deal with capitalists.
She was vaguely aware people treated her differently but it became undeniable when she turned 16 and a man came to the house, formally greeted the family and then slipped her a $10,000 check. She had $120,000 by the end of the week. When she brings this up with her grandfather, he says to keep the money but remember he’ll have to repay it somehow. An annoyance for a man who was arrested whenever the government wanted something from the Keiretsu. At one stage that week, her mother walked in with a $40k watch. Denise asks where she got it and her mum just says, ‘I dunno, some businessman’.
There was a dark side to this, so when she was sent to the US to study in college, she decided to stay here.
Her post-grad was at MIT, where she helped Jim Simon build flamethrowers out of water pistols. Then she found herself one of the only women in the quant revolution, mercilessly applying data to an analog business. Eventually she was backed by someone who had made so much money in FX they named their son Sterling and therefore able to experiment with market programs to make sense of the nonsensical; in short she was playing Russian Roulette with someone else’s head.
Suffice to say there’s zero reason for someone like Denise to be friends with a monkey like me.
When we met she was in spitting distance of being a billionaire; an elderly Korean who would be more at home talking about quarks and Markov chains. By comparison I was in my 20’s and getting in trouble at the office for inviting too many strippers to a party. But we did become friends, because as sophisticated as quants are, most of them back then couldn’t describe how a bid/ask worked.
So Denise was the second woman I decided to reach back out to. Eventually we reconnected and I asked her to give her fellow women on Wall Street some advice. This is what she had to say,
The first thing you should know is that, in terms of large-scale influence on the financial stage, whether sales, technology, trading, private equity or wherever else your individual talents or interests may lie, statistically speaking you are highly unlikely to make any noticeable difference whatsoever.
The world of finance is just too large, the competition too great, attention spans too short, and issues too complex and multi-faceted. This may sound like bad news. But it should actually come as a huge relief to you. Why place such a heavy burden on yourself?
When Denise looks back at her storied career, what she sees is an extraordinarily fortunate sense of timing; something she objectively had very little to do with. That aside, these are her other observations:
Diversification is everything. You get past this, by having lots of that.
No matter who you are on Wall Street, no matter what you do, no matter who your colleagues are; 30% of them will love you and 30% of them will hate you and 30% won’t care. Only worry about your own happiness, which doesn’t have to be limited by other people’s stupidity.
Lastly, luck is created by the prepared. If you have lots of ideas and don’t know which to concentrate on, then execute as many as possible, the right idea will pick you. [ref]
When she walks into the restaurant I’m happy to see Dorothy aged pretty well; a bit heavier perhaps, but she had mentioned kids in our email correspondence.
I stand up and wave her over. She greets me with a frown and a perfunctory peck on the cheek.
What, no hug?
That garners me a small smile, perhaps a grimace, interrupted by our waitress.
“Beer and some privacy please”
Dorothy backed up our account during the George W Bush years and is now a suburban mum. Wokists at her kids’ school are trying to cancel Rutherford B Hayes for his 19th century sins. Wikipedia says Hayes was a volunteer lawyer for the Underground Railroad, that he had helped fugitive slaves win their freedom and was known for trying to protect the rights of African-Americans in the South, but okay.
Dorothy hardly drinks anymore. Doesn’t smoke. Meditates. A Buddhist who rescues mice. According to her school board, she’s privileged because she has light skin but she’s really the child of communist refugees who didn’t even speak English. When they fled Bulgaria starving children littered the streets, so the family is still filled with a sense of awe and gratitude for being in America. She’s being punished now because her parents tried to understand and conform to the rules of the country they immigrated to.
A small town drama being played out in a hundred school districts around the country and of little interest to me.
Noting my impatience, Dorothy gets to the point. Says I’m not going to like what she has to relay about our past. That my audience won’t like it either. She doesn’t expect I’ll publish it.
And yet here we are.
Too few recognize it, but backing up accounts is one of the best tasks for a new person in sales. Senior executives are constantly moving around, often without notice, so if you do a good job covering their clients then that’s a path to building your own book of business. Dorothy understood this early in her career and when our sales trader at Bear Sterns went on his two-week leave she was excited to cover us.
She calls me up, all prepared and enthusiastic on her first day. Says they’re out as a seller in TJ Maxx. I’m like I don’t care, buy me some JetBlue.
That order works out, so I give her another. Her position trader ignores her while the S&P drops 40 points and eventually she buys it herself two percent below my arrival price. I’m ecstatic. Nice job. I give her another order.
She ends up doing record business for our account. Her peers sit up and take notice. It’s an amazing, successful first day.
After the market close she calls up to thank me and I tell her to come meet us at Union Square Café. She heads over and it’s a total circus. She can barely get two words in with me; thinks I have the worst ADHD she’s ever seen. But everyone seems friendly; more so when they find out she’s a sales trader at a bulge bracket firm. We do shots. One of my colleagues has a ton of Percocet on him and she thinks sure, Doctor Seuss would be on board with that, and takes four of them.
She gravitates towards the other women in the group. One named Jenny is a star. Beautiful and glamorous, she used to be a black jack dealer in Vegas. By comparison Dorothy feels plain and unsophisticated. She watches how Jenny interacts with clients and colleagues. A touch on the arm there, unsolicited hugs to people she has just met, constantly buying people drinks, shoulders-back chest-out, a wink here, the well-timed customer-laughs. Dorothy is enamored and when Jenny suggests they all move onto a strip club, she readily agrees.
At the club Jenny seems like a different person, contemptuous of all around her. She can barely conceal her disgust for the clients getting lap dances. Somehow Dorothy has been caught up in her contempt and realizes she made a mistake coming here. As she prepares to leave, one of the group introduces himself as Howard and commiserates with her situation. There is something strange but charming about him and she laughs when he says he can teach her to speak ‘Stripper Russian’.
“Ya hocho yeh buht tebya”
When we pile out of the club to the Lower East Side, Dorothy is surprised to see Howard come with us. Surely he’s a little old for that scene? She’s even more surprised when he gets into a cab alongside her. It’s uncomfortable how he presses up against her, his shoulder hurts her a little as she is squeezed up against the door. He grabs her leg and somehow she can’t push his hand away. She doesn’t know why. As he moves his hand up her thigh, she opens the window and sticks her head out, her mind escaping into the warm New York night.
Then we’re in the Lower East Side. More shots. More drinks. The bar gets more crowded while our crew begins going off on their separate ways. Somehow Howard is always there. He brings her a couple more drinks. He’s right outside the door when she comes out of the bathroom.
A pervasive sense of dread comes over her. She looks around for me, Jenny, anyone from Union Square Café, but nobody can be seen. New York suddenly seems overwhelming. She wishes her brother was still in the city. Her father.
Howard brings her another drink but she pushes it away. He tries to kiss her but she pushes him away. His expression changes from hungry to menacing.
Dorothy believes there are two warring parts inside of all of us. Some people think of this as Yin and Yang. She thinks of them as Love and Hate. Like two wolves inside of you; both of them are hungry, both are trying to eat. Hate versus Love, they're worst enemies and which one thrives is up to you - the one that survives is the one that you feed [ref].
Howard has fed his Hate over years. She is suddenly overwhelmed by the sense of his raw malice. She wants to leave but her feet don’t seem to work well. He grabs her arm. It hurts.
Paralyzed with fear, she allows him to push her out of the bar. A pleading look to the doorman goes unrecognized.
He leads her outside and down the street.
They’re heading east.
What could be east of here?
She can see lights on the bridge.
And the water.
Vaguely she wonders what the water would feel like to fall into.
And then suddenly I am there. Absurdly, she sees me talking to a homeless guy on the corner. The guy is doing the ‘heroin stand’, swaying back and forward, occasionally waking up to say ‘what’s up brotherrrrrrrr’, then seemingly back to sleep. His unresponsiveness doesn’t seem to bother me whatsoever and I am having an animated, albeit one-sided conversation with him. Howard doesn’t see me until it’s too late. She shouts out and evidently I’m happy to have a more receptive audience, because I cross the road to them with a skip in my step.
Ignoring her, I immediately begin making fun of Howard for being a mortgage trader. I’m swaying like the homeless guy on the corner, my slurs are ill-focused and clearly entertaining only to me, but it’s enough to distract him. He recognizes his quarry has slipped and he fades out of the picture.
Immediately Dorothy breaks down and cries. I just look at her with a blank expression on my face. I’m confused and entirely without empathy of any sort; she seems fine to me.
In some ways this hurts more than the brush with Howard’s malevolence.
I suspect this is a bit harsh of her given the time of night, not to mention the amount of drugs and alcohol ingested. But it does have the ring of truth. I am not an empathetic person.
Distinct from compassion, I consider empathy an entirely counterproductive sentiment. It's a capricious and irrational emotion that appeals to narrow prejudices. It muddles our judgment and leads to bad outcomes.
However, I have enough common sense to help her to a cab and the night is finally over.
After that she arranged to be unavailable at every other social event I suggested. Eventually she met a lawyer on a blind date and left the business. A year later she read that Howard beat a woman so badly she had to have one of her breasts reconstructed. [ref]
And this brings us to the advice she wants us to convey to women out there. She personally had no female mentor but it would’ve been useful to have one. At a minimum, stay close to women you want to emulate.
But most importantly, if she could do it all again she wouldn’t have gone to that strip club, wouldn’t have been at that bar at 2am. She put herself in unnecessarily precarious situations.
Don’t put yourself in precarious situations.
Fair warning, this story begins back when people used to drink Zimas with grenadine, when you could buy ninja spikes in Times Square, when Hooters had an airline… when testosterone levels were just higher [ref].
Those days I’d be out the door every day at 4.01 [“four oh one”] and heading straight to the gym. Then, once my reps were in, I’d take off to the bar to get aggressively drunk with other traders.
One day at the gym I found myself working-in with another guy. Let’s call him Bart.
Bart’s shirt has AK-47s and pineapples on it. We’re the only two straight guys lifting real weights at an Equinox.
He’s like you like Monster trucks?
Fuck yeah I like Monster trucks.
We become friends making fun of people curling in the squat racks.
Bart’s not a trader but I figure he’ll get on with my sorts of people, so I invite him out for beers and the first person I introduce him to ball-taps him, really hard. He’s like, ooooffffffffff.
Turns out they met each other the year before. All I’ll say about that guy is I suspect he has pissed on a lot of girls on the Upper West Side. Anyway, it’s all angry young man energy at the bar, until Doreen turns up. Back then Doreen was all Harlem, always wanted to do things on her time, lazy as fuck. She’s also good value and smart as a tack, as well as a decent bartender who can outdrink most of us.
A few hours later some of the group returned to her bar to do shots. There Bart and Doreen get to talking. He tries the standard pickup line on her that she should get into sales on Wall Street, and she takes him seriously - goes out and does just that.
She finds a role as an assistant at DLJ, then a sales job at Raymond James alongside Bart. Eventually she converts that experience to head of sales at another second tier firm, where she probably earned a couple of sticks [ref]. Not bad for a backpacker who originally settled in Williamsburg after buying a Time Out from some crackhead on the L Train.
Doreen and I were good when she was a bartender but some relationships don’t last the Wall Street crucible - in those days I unnecessarily agonized over whether someone was friends with me or my seat. I was insecure and also wanted to bang her I guess. Anyway, some years after we had drifted apart I got an invite to her wedding.
It turns out she and Bart were getting married. They were both party animals but my assumption was the event would be low key, in line with my own descent into middle-aged comfortable living.
Not the case.
I walk into Cipriani’s and the place is a zoo. Everyone is screaming and yelling. Guests have stolen bottles from behind the bar and techno music is pounding through the speakers. People are slam dancing in a makeshift mosh pit. It’s totally out of control and the staff all look shell-shocked. My partner is equally taken aback and to be honest so am I - this is supposed to be New York high society, but they all seem to have lost their minds.
Eventually Bart gets everyone calmed down enough to sit for dinner and his best man Jason gives a speech that is so uncomfortable I still can’t get over it. He stands up and says; Yes, Doreen isn’t like the other wildebeests Bart dated but she’s too short to give him strong kids, her parents don’t have enough money, and she could do a better job of waxing her top lip. It goes on like this entirely too long to be remotely funny until Jason concludes by saying he has a car waiting outside, a PJ on the tarmac, that Bart should get out of the marriage while there’s time - they can be at the Mandalay in 6 hours.
I’m horrified but Doreen just laughs and throws bread rolls at him. Then the meal is over and everyone turns back into Hill People. Tables are shoved aside to expand the dance floor. Someone smashes a glass and some of the bridesmaids are barefoot… turns out feet bleed a lot. It’s a wild scene.
I see Doreen only briefly as she is heading to the bathroom. She had thrown up all over her wedding dress. My partner goes to help her and later explains the bride had been starving herself for a month before kicking the day off by drinking at 8am. It’s just too much and she needed someone to hold her hair while she got the rest of her lunch out.
I’m waiting outside for them when she bounces out of there in a change of clothes, elbows past me, and skips back into the melee.
I’m in all kinds of trouble with my date, so I go home like a beta and that was the last time I saw Doreen in person. She was a force of nature, speeding relentlessly upwards as I slowed ever downwards into relative mediocrity.
Skip forward to the present day; it takes a while to get Doreen to call me back.
Yes, she knows about the podcast. No, she doesn’t listen to it. Bart and her are heading to Ibiza in a couple of weeks, maybe she’ll check it out on the plane, but it’s not like she’s flying commercial. She’d heard I work for a small hedge fund now; was sorry to hear things didn’t work out for me.
The condescension doesn’t sting at all. I’ve just moved on. But there is something I want to get at in our conversation. I can tell I only have a matter of minutes before her attention wanders to whatever it is she does on a weekday as a Master of the Universe.
This is what I want to know - how, at the highest levels of Wall Street, does she maintain a crew of maniacs that are still partying like we were in our 20’s? She’s surrounded by successful men at the top of their game, but fits in and even outstrips them in pure animalistic energy and enthusiasm. For women who want to take that approach to Wall Street, what would her advice to them be?
And this is what she said:
One of the things that's happened in our society, is that we seem to have concluded that strong men are a danger; that's partly because we think Western culture is a tyrannical patriarchy and the only reason you get to the top is because you misused power. So all the men who are at the top of the hierarchy are all misusing their power and they're all tyrannical. And all the guys who have the aim and ambition to achieve that are just tyrants in training. That's sort of the basic attitude that we have towards our own culture and towards men now. Everything about that is pathological… and inexcusable… and shameful [ref].
There are differences between men and women. As a woman in one of the last male-dominated white collar businesses, you need to accept that.
If you give a baby female chimp a soft toy it will carry it around for a week; males just tear it apart to see what’s inside. The best men, at the tail end of the curve, are aggressive and courageous and determined. They are decisive and clear about their goals - recognize that you get to be in partnership with those very admirable traits.
Mock strong men and you’ll find partners without chests; you’ll end up with neither virtue, nor enterprise.
Dylan really liked competition.
And she liked to win.
However she grew up in the 1980s, into a generation where America wasn’t using the resources of half its population properly. There were barriers for women everywhere. But her family knew, while individual sexism was the norm, America was not itself institutionally sexist. This distinction is best articulated by Martin Luther King, who didn’t want to tear down America but instead demanded his country live up to its best standards and ideals.
Dylan liked MLK. Another of her favorite Americans was George Washington. One of her earliest memories was her father taking her on NJ Transit to New York City to see the Washington Monument and having her recite the quote at the very top:
“Let us raise a standard to which the wise and honest can repair. The event is in the hand of God.”
Her father would then point out, for all their flaws or the flaws of their time that are only clear to us centuries later, the founding fathers set up a remarkable system; it falls to us to live up to it.
Dylan’s father saw sport as an important way to build self-confidence and, especially for women, a chance to learn to work with others to achieve a common goal.
All Dylan knew is she wanted to play Little League with the boys.
Dylan’s father didn’t demand a position be held for her - a predetermined outcome that would always leave an asterisk by her name - he wanted equality of opportunity. Just let the girl play! Let the cards fall as they might. This seems an archaic attitude today with the recent push towards ‘equality of outcome’, but was more typical of that generation.
After watching her throw and catch during her first tryout, several coaches wanted Dylan to play on their team. However, when her dad took off her baseball cap and they saw she was a girl, only one coach still wanted her. She didn’t care. She just wanted to compete. She was happy to have a shot. After playing for a season, it was a lot easier getting on teams because the coaches and boys realized she could help them win.
Athletics were a place where it was okay to be strong-willed, confident, to have your own individual opinions, and to be a leader, while also recognizing the importance of being a team player. The business world has been the same for Dylan in a lot of ways.
When she first got onto Wall Street it was as a clerk. Even as she advanced in her professional life, at most meetings she felt like a ghost in the room. To some extent men had been fleeing other professions for some time; after all, women started graduating college in larger numbers than men by 1990. Wall Street was the last bastion of male dominance and many of them wanted to keep it that way.
Dylan didn’t care. Dylan wanted to win.
And she did. She went on to become one of the most successful portfolio managers at the most famous hedge fund in the world. Only leaving, ironically enough, after a very public argument over the cost of capital with another woman who had reached the very pinnacle of our profession.
Onto advice for our female audience; what was her secret? Dylan tells me that dealing with things early saves you even more trouble later. At the median, men and women are more alike than different, but as a group women are more inclined to please others. You are taught to get on, taught not to ruffle feathers. Angst over confrontation is one of the most common fears among women. Whether it’s fear of being yelled at, concerns over someone not understanding or disagreeing with your point of view, or you simply don’t want to be “the bitch”, there are many reasons women have this worry. However, this inclination to be polite screws you in the long term.
While having the courage to face confrontation takes time, if you know how to prepare for engagement and tackle it, then facing your fear will become easier with time. Start small. Gradually face those things that scare you the most. Take baby steps and as you become more comfortable with those encounters, then move on to bigger ones. By breaking things down into smaller periods, it is much easier to manage confrontations as they arise.
There's nothing mysterious about what women want. They want everything. Just like men. What's interesting is what they'll settle for. What's interesting is they'll often settle for less.
So be respectful and calm, repeat yourself as necessary, but remember, if you can’t walk away from a negotiation, then you aren’t negotiating - you are just working out the terms of your slavery.
That’s all I’ll say about Dylan, because she’s really just a composite of the best women I have met in my career - whether 40-year veterans of Merrill Lynch, convertible bond portfolio managers, a sales trader at Morgan or Lehman or Susquehanna, I appreciate you all and I wish I had said so earlier, when we still worked together.
Let’s conclude with a broader picture. Is America perfect? No. It’s flawed and messy and unfair to men and women alike. What can we do about it?
Let’s go back to the words of our first head of state. In 1787 George Washington was president of the Constitutional Convention. The Declaration of Independence was then just two years old and his role was to help prepare a charter for the then-13 states of the former British colony.
While 39 men signed the final document, over 50 were alleged to have participated in the framing of the laws. Often the men disagreed strongly, and this gave rise to many compromise suggestions.
George Washington rarely participated in the debates, but one day, after several suggestions had been watered down by compromisers, he rose to his feet and changed the course of history. This is what he said,
''If, to please the people, we offer what we ourselves disapprove of, how can we afterward defend our work? Instead let us raise a standard to which the wise and honest can repair; the event is in the hand of God.''
According to some historians, this ringing statement caused the framers of our Constitution to be more radical and to avoid compromising statements.
These words have stood the test of time. So, if you are on Wall Street and you feel frustrated or, like Dylan, a ghost in the room, know that perseverance and courage are the answer to your problems - fall seven times and stand up eight. You’re already working in the greatest business at the most privileged juncture in history - have the wit to add hard work to good fortune.
Making the mummies dance.
It’s been said there are two rules on Wall Street. One for them and the other for everyone else.
Now people in finance don’t actually believe that, because of course it’s not true. But if it was true, there was one of us who fit the bill, voted consistently libertarian, unconvincingly claimed to hate everyone equally; let’s call him… Hoving. [ref]
I didn’t like Hoving much when I first met him.
He was one of those guys you meet who is always butting into everything and when a third party dares interrupt, works himself into a lather drinking five beers with shots before just having to get another word in about whatever he thought it was about to begin with.
But Hoving’s best friend likes football, so we head out and of course he’s immediately bored; at one stage just lecturing a bunch of kids behind us that he made one point five schmillion dollars last year. We all laugh at that and then he tells the mothers there that 90% of vehicle accidents are within three miles of home, and they should all move closer to him to be safer.
Eventually one of them comes down and starts having it out with the lot of us. We were wearing official US Women’s soccer jerseys and all. The balls on that kid. She’s like does everyone from your town have red hair? Is there really a bridge between Sydney and Auckland??”
Now Hoving was a totally amoral man, that much should be clear by now, but so am I. And while looking after children is not one of my virtues, I find it to be productive in others.
I carefully watch him engaging the children, to see how he talks to them. The younger kids are worried about aliens landing, wars and viruses and things like that. He tells them, "‘what are you really scared of? Because bothering aliens is a preposterous proposition; you don’t know enough to worry about that - god's truth.
Jesus Christ, who do you think you are that you should worry about aliens for crying out loud? You’re only twelve.’
Then one of the women’s players pushes another, kicks out in frustration and the soccer ball smacks a teammate right in the teeth. We all crack up but Hoving doesn’t miss a beat, says ‘hey kid go tell your mom we could watch balls hitting women all day’.
I’m researching an opportunity right now that appears to hinge on whether rapid technological change makes my experience and reputation (to the extent I still have one) redundant.
Do all the recent financial innovations, from algos to outsourcing to AI, make my professional background irrelevant? Or more important than ever?
Time will tell.
But that got me interested in the era of paper tickets; when traders would literally - gasp - speak to someone in person. Look them in the eye. Take an order on the telephone! Write it down using an actual pen or pencil! Shocking, I know.
I only saw a little of that Wall Street era; indeed I was part of the reason the business went digital, so I went looking for an OG to explore that analog time, to see whether all the progress we’ve made over the years has been progress at all.
And I soon found myself in front of a legend in the business, let’s call him Mac.
Mac was a cougar-hunter who was incoherent most of the time and whose principal interest in life was avoiding his wife, whose marriage was one of his more distinguished blunders but whom he couldn’t afford to divorce. He was Jewish, but had a whole lotta Irish in him so we meet at his favorite watering hole, which sported a neon harp outside
Mac tells me he was originally in media, but went on a cruise one day and realized it cost more to fill up the boat than he made all year. He asked what the owner did for a living and it turns out he was one of the letters in “DLJ”. Mac didn’t know what a DLJ was (sic) but figured he must be in the wrong business. When he found out DLJ was an investment bank he researched that industry and then just started cold calling trading desks.
He calls Bear Sterns, someone picks up, asks him some questions, and it turns out they went to the same high school as his wife. The Bear guy says to send in his resume and Mac finds himself with an interview. It turns out he was too qualified for trading and was sent to push paper around in Research Sales.
The woman in charge of Research was a real bitch. Mac tells me women in high positions on Wall Street are riddled with insecurities - this is because they had to gnaw their arms off to get there and think everyone else should too. His boss did a lot of vindictive things that year, but the one he remembers most distinctly was after he complained about his bonus, she gave him some cash… and then reported it to the IRS.
Mac started spending more time on the trading floor and eventually started running tickets for them to escape the research department. Back then Bear was the center of the world and he loved being a part of that. An open trading floor created accountability; you knew who was doing well, who was doing badly, and who was getting arrested.
Mac does well.
Some years later, he’s called into the C-Suite by senior managers and given marching orders to pick up Bear’s business in Boston. He heads up there to meet clients with another executive who we’ll call Ace.
Ace and Mac walk into a giant hedge fund called Putnam and Mac asks them what it will take to become their best client. The Putnam CIO says he wants a 200-million-dollar single stock line of credit, are you in or out?
Mac says no way that’s insane. But Ace says ‘we’re in’.
Next they walk into Wellington - same story; same question, same answer. State Street, Fidelity, etc. Ten firms in all and now Bear has created $2 billion in credit out of thin air.
As they walk back to the Bear Sterns office, Ace asks Mac who is in charge of those ten accounts, then says to fire them all and not to leave Boston until he’s found their replacements. That he can work with a 30% loss ratio for now.
Now let’s just unpack what you’ve just heard.
What Ace agreed to in that meeting is that big Boston clients could call up Mac and tell him they wanted to buy or sell $200 million of a single stock and Mac would have to take the other side of that transaction. If he lost more than 30% of the commission generated on it? Well, it was going to come out of his pocket. Let’s run through an example.
Bear wants to be involved in XYZ stock, which trades at $100 a share. Perhaps one of their clients has a 20 thousand share sell order on their desk, so they decide to advertise as a seller. If Puntam wants to buy XYZ, they call up and say Bear just sold them $200 million of it. $200 million of XYZ at $100 a share is, well, 2 million shares. So now Bear has to buy back their 2-million-share short, less the 20 thousand they already had to sell, which doesn’t help them one bit. Yes, they’ll generate 120 thousand in commission, but Mac can only afford to lose $36k of that to Ace.
In other words, Mac has a real problem on his hands.
The next morning Mac puts his best suit on and walks to the Bear office to fire some people. As he’s striding in one of the position traders yells over the hoot to the sales team, ‘we want to buy the drugs’.
It’s not even 7AM.
Mac starts to run.
Before he can turn on his computer, his phone is ringing and it’s Putnam.
[Boston accent, best effort] “Ok dumbass - You want to buy the drugs? You can buy 6 million Pfizer at 30, 4 million at 29-and-a-half, or 3 million up a quarter. Print them in London so no one knows.”
That month Mac felt lucky to end up with a 50-percent loss ratio. He sits down with top management, who wanted an explanation, and Ace says, “This was because of the Pfizer trade? You shoulda got out better than that - but take a block in this morning’s IPO at 60c per share and we’ll call it even.”
Mac walked out of that meeting knowing there was no safe space between the bid and offer, but with a fire in his belly and went on to turn our business upside down.
The rest of that conversation will stay between us, but let’s close this up with three quick lessons from my meeting …
Number one: Yes the world is moving so fast it makes your head spin, but if you’re willing to take some risks early you can be part of that change, rather than the victim of it.
Secondly: Success is going to be fleeting, so work itself will require a sustained meaning. Get yourself together so that people can rely on you, then find something you are interested in and apply yourself. Be humble - start small; just get your life to where it is functioning better. After that look around for something that bothers you… and fix it.
Lastly: Sometimes you need to sit down, shut up, and listen to those that came before you - you’ll never get an education like that again in your life.