Wall Street Career: Lesson 1 - Get A Job

UPDATE: 1/7/2008 - Gary Heuschkel & Andy Eudaly have pointed out that I had the address wrong for the old Bear Stearns location. It was 55 Water, not 45 Water as I previously posted. I'm not sure if the 45 was a typo that I made when I wrote the post, or if it was a subconscious mixing of the address we moved to at 245 Park. But fortunately I did pull up a photo of 55 Water - so some part of me was thinking corrrectly!

At the encouragement of someone whose counsel I value highly, I am beginning a blog about my life. I hope that it will be a help to someone, perhaps to someone young, and struggling as they develop their career. I’m not too sure of what the format will settle into, but for now I see it as a "lessons learned" sort of column. In each post I will try to address some lesson that I have learned about life or perhaps a lesson that affected my career, and discuss it in a way that helps to transfer some knowledge to someone just embarking on their career.

Lesson 1: Get A Job

I got my first Wall Street job with Bear Stearns & Co., back when they were at 55 Water Street. It was 1987 and the market was in chaos (does that sound like today?). Remember Black Monday – that was my first day on the Street.

So, how do you get a job with a Wall Street firm? The short answer to that question is, “Do anything it takes.” In my case, it took desperation.

The year 1987 started badly for me. I was a young (33/34 yr old) father of six children, living in Plano, Texas, married at 21 to my 18 year old sweetheart. I had gone to Texas just after I finished my Ph.D. to work at the Callier Center, part of the University of Texas at Dallas, at the Parkland Hospital campus. I worked there for several years, doing some speech and hearing research with some great guys, and teaching some of the statistics and decision science courses. I left that university job to start my own business in about 1985, and ended up doing some real estate and mortgage related businesses. I thought that I was on the fast track to success as an independent entrepreneur – but I was wrong.
It started in January of 1987 when I blew up the engine in my Jaguar – and it only got worse from there.

When the real estate world was finally rocked by the tax law changes of 1985, the real estate businesses we were involved in started to melt down. Real estate prices had plummeted; there was an oil crisis that killed off much of the Texas real estate market (especially in the “Oil Patch” parts of Texas). The things that were going to “make me rich” evaporated into thin air.

I also had a small mortgage company, and the March – April period of 1987 saw a huge change in mortgage rates. I had been a bit naïve in my mortgage business and had not hedged my pipeline at all – so the losses I suffered from the rate changes sucked up all of the remaining liquidity that I had and killed off what was left of any business I was doing. Everything that could go wrong did go wrong that year.

The short story is that by May, 1987 I was broke, I was working out of my garage and selling off whatever assets I could to keep ahead of the bill collector, and I still owed big-time on busted real estate deals. Life was pretty black, and finally, just as the fall weather became frigid, my dear wife came out to my little desk in the cold garage, put her arm around me and said, "Honey, I think it’s time to get a job." I couldn’t argue.

The desperation of that moment made me work both hard and smart. First, I knew that I was so far into the red ink that it would take a huge income for me to ever get solvent again. I couldn’t go back to academia – the paltry salary I could earn there would never let me pay off my real estate loans on my undeveloped residential lots, let alone support my family (remember, six kids…) and attempt to get ahead. The only thing that I could think of was to head to New York and work for a big Wall Street firm. I had heard that those guys made big salaries, and I needed a big salary.
The trouble was, I had never taken a business course in my life, I knew nothing of finance, and didn’t even know what I could do to contribute. Why would they even interview me? But I needed the big payouts that I had heard were available on Wall Street.

My preparation started by me buying a book, The Money Market, by Marcia Stigum. I found an old used copy of this book and devoured it. I tried to figure the equations out for every calculation mentioned in the book. I took the U.S. government yield curve, published in the newspaper, and made sure that I could calculate every price for every yield on every bill or bond issued. I tracked things for weeks, following the daily changes in the yield curve. I built spreadsheet models of every security I could find anything about using Lotus 123. I created mortgage and auto loan calculators in Pascal, in “C,” in Fortran and in Basic. In short, I gave myself a crash course in bond analytics, and I threw every quantitative and technical skill I could muster at the project.

Now I must admit that my previous real estate and mortgage businesses had already forced me to learn a bit about fixed-income calculations. Remember, I had already lost a lot of money with an un-hedged mortgage pipeline and I had made a couple of secondary market trades – but to be honest, I really had very little idea what I was doing. Like most young entrepreneurs I was mostly out of control – and that’s why I suffered so badly at the start of 1987. The only things I had going for me were that I was “energetic” and a risk-taking entrepreneur, I was well grounded quantitatively, and I was really, really good at programming a computer. All I had to do was to turn this into a Wall Street career… No problem!

When I finally felt that I could at least speak the language, I started making cold calls. For every firm I contacted - I started local. I called anyone I could think of, and asked if they knew anyone at one of the Wall Street firms or if they knew someone else that knew someone at a Wall Street firm. I got names, I got phone numbers. I said that I was interested in “the secondary markets” for mortgage and automobile loans and asked if they could put me in contact with someone from one of the New York firms. I’m not sure why I chose to ask about those markets, but I suppose I had picked up the buzz from my research and my calling around. Well, I got several names, and I got their phone numbers, but what was best, is I got the names of people that referred me to them.

I called every one of the people I could, and the phrase that got me through to them was, “______ ______ told me to call you.” I found that by using the name of someone they knew in the first line of my pitch, most everyone would talk to me.

I told them that I was going to be in New York on such and such a date, and wondered if they could visit with me. I told them what I was interested in (which I had refined from listening carefully to those I spoke with that were closer and closer to the New York markets). I set dates and set times, and actually scheduled four or five interviews, as I recall.

I ended up selling off personal items to finance a trip to New York. My family wasn’t quite starving, but we were getting pretty desperate. I arranged to stay with an old graduate student of mine in Murray Hill, New Jersey. H.S. Gopal had taken several statistics courses from me and had generally bonded with me while working on his Ph.D. at the Callier Center. I was pleased to see him again – but more importantly, he provided me with an inexpensive base camp to work the New York interviews.

I interviewed with most of the big firms (not, however, with Goldman Sachs – as even in my naïve state I knew that I was unwashed and unworthy to do so). I learned in my first interview with someone at First Boston (as I recall), that my two months of self-study on the money markets was worth absolutely nothing. That first interview and some painful self-reflection on the train ride back to Gopal’s house helped me to identify exactly what I knew (very little) and what I didn’t know (a lot). In my subsequent interviews I made certain that I could distinguish between areas in which I had real expertise and the areas in which I was just beginning to learn. The interviews seemed to get better through the week, but I had a limited number of opportunities, and even more limited resources. I didn’t have the luxury of making a second trip to New York, so this trip seemed to be one on which I was betting all of my marbles. Finally, the last interview of the week was the one that went best. That interview was with Blaine Roberts of Bear Stearns & Co. Since that was the interview that led to a job, I remember it most vividly.

Blaine had, like me, been an academic (Ph.D. from Iowa State, faculty at Univ. of Florida and Univ. of South Carolina). He probed very deeply in the interview, and like everyone else that week generally did his best to totally beat me up. Since I knew that he knew economics, there was absolutely no way that I could even attempt to bluff my way through anything that had to do with market analytics. So my strategy with him was to focus on my broader quantitative skills and my modeling ability. I did bring out my experience with my little mortgage company and my real estate dealings – but these were pitifully tiny things and I knew that they wouldn’t mean a thing to Blaine. However, I did have a demonstrable history of working with time-series data (because of my work in speech and hearing) so I focused on that. Since I knew this area cold, and could speak meaningfully about everything from Fourier analysis to linear predictive coding algorithms, I kept dragging these things out onto the table. I kept thinking that economists just have to love time-series data, don’t they?

I also knew the decision sciences really, really well, so I brought these up. I knew linear algebra and I knew all of the search-theory literature used in neural networks (a hot topic at the time). My dissertation had involved search strategy in some pretty unusual types of metric and non-metric spaces. I pulled these things into the conversation. I even started reaching for other areas that I knew well, but had no idea how they might apply – like non-parametric statistics, and non-metric multi-dimensional scaling. I tried very hard to trace out those things that I really did know very well, regardless of how weird they seemed at the moment.
At this one point in my academic rambling, Blaine had obviously heard enough. He turned to me and asked, rather point blank, “You know we can find some really talented people, just about anyone we want for these jobs; so why should we even consider you?”

Having been all wound up from my previous long-winded discourse, I took this as my unique opportunity. “Because I’m different,” I said. “You know exactly what you get if you hire another one of the MBAs from Harvard or MIT. But me, I’m totally different. I am going to bring a completely new perspective and a new set of skills that you just can’t get anywhere else.” And that was it.

To punctuate the end of the conversation, Blaine asked in a perfunctory manner, “So, if we did offer you a job, what would your salary requirements be?”

I thought I had last more chance to try to sway the conversation my way, so I did the only thing that I could think of – I tried bluster. With as much bravado as I could muster, in part to hide my desperation, I said, “I’ll work for peanuts. I’ll take what I earn on the come. Pay me $50,000 and I will prove my worth by the first bonus date. I’ll take my real compensation from what I produce.”

Blaine stopped the interview, he thanked me and as he stood up to show me out of his office he said, “I’ll call you in a couple of days.” I walked out of his office somewhat dazed at the abrupt end. I really did think that I had wound up to a crescendo at the end, and just as I was really letting go, the interview ended.

I slowly walked to the train station and thought long and hard about my week interviewing for a job in one of the most competitive markets in the world. I had no idea if anyone was even interested in me, or if I really had anything to offer. I honestly had no idea how things had gone. I just hoped that I could maintain a good attitude for my wife and six children who were counting on me to come up with something.

I got up in the morning and left from Newark airport to fly back to Dallas. It was great to get back to my family, and I spoke of all of the positive things that happened during my week in New York. I had all of the outward signs of a positive attitude, but inwardly I had this sick feeling in my stomach that absolutely nothing would come from the week I spent chasing after this hair-brained idea that someone like me could get a job on Wall Street.

On Monday or Tuesday of that next week, I got a phone call from Blaine. He asked me when I could start and he put me in contact with the people at the personnel office of Bear Stearns.

[On a very personal note, R. Blaine Roberts passed away this month on December 4, 2007, leaving his wife Jeannette and five children. Despite the differences that developed later in our careers, I have always appreciated the start that Blaine gave me in the business. I’m sorry that I wasn’t able to express that gratitude to him personally. - CMA]