Leson 3: Make friends

Today I received an e-mail from a friend of mine named Steve. He was, of course, commenting on the demise of Bear. [To bring those of you who didn't know, today, March 16, 2008, Bear Stearns accepted an offer from JPMorgan to buy it at $2 per share - a rescue, really, from imminent bankruptcy due to its lack of liquidity.]

Steve worked "upstairs" at 245 Park. He was one of the really talented (read "smart") people that Bear hired to help them develop the technology, etc. that kept them competitive and gave them an edge in the market. There was a whole group of guys that worked upstairs - and every one of them was really smart.

Anyhow, Steve and I developed a friendship while we were there at Bear. Steve was not an "insider" at Bear - at the time, there was a lot of political maneuverings going on and steve just liked to do his job and didn't try to endear himself to the more Machiavellian players. He was liberal in sharing what he knew of finance with others - unlike many of the other people who guarded everything they knew as if the calculations of finance were their proprietary knowledge and their guarantees of success. Steve worked at Bear maybe two years, at most, but during that time we struck up a friendship that has lasted nearly 20 years.

During either the winter of 1988 or 1989 I remember inviting Steve over to my home in New Jersey. We were going to celebrate the Christmas holidays, etc. and since Steve wasn't married, I thought that I would share my expansive family with him.

I knew it would be an interesting visit because Steve is Jewish... at the time he was not extraordinarily religious, but he was still very much Jewish. I (as some of you might know) have been Mormon all of my life, and fairly active for most of it (and for those who don't recognize this, Mormon = member of The Church of Jesus Christ of Latter-day Saints).

So Steve came for Christmas... and we had a great time. Steve met my wife, my kids, and we just began to converse about a broader range of topics. I, in turn, started visiting Steve in New York. I met some of his family, had the priviledge of meeting his uncle, etc. We did some things together in the City - like that Concert in the Park series - and generally became good friends. Steve had the uncanny ability to quote virtually anything that Robert De Niro ever said in a movie - and I have always treasured my memories of him excitedly introducing me to the 1986 movie, "The Mission." I still love that movie.

Now, some 20 years later, I am happy to get an e-mail, or to chat online with Steve. He was kind enough to have me into his home to eat with his family. He keeps a kosher home, so I nearly ruined his dishes one time when I tried to help by clearing the table. He and his wife and kids have always been of interest to me.

What is really curious, is that I don't look at my friendship with Steve as something that will ever result in additional business or somehow make me rich. He and I probably will not have the opportunity to work together again - or, if we do, it won't be for anything that will pay off in money. He went on into the doctoral program at NYU in finance. He has modest needs and he isn't going to go out and take over the world. But, Steve is a good guy; my life has been better because I made friends with him. Friendships are, after all is said and done, one of the few things that you really treasure.

So, one of the best things you can do, not for personal gain in a monetary sense, but for real personal gain in a people-to-people sense, is to get to know some your co-workers. Stay in touch with them, make friends. Become rich in friends - that is what is really valuable.

Those that you work with, especially in a competitive market like the New York financial markets, are often among the highest quality people you will ever meet. They make great friends.

Lesson 2: Where your bread is buttered...

The second lesson that I learned at Bear Stearns came from an unlikely source – and I’ll attribute it to Anthony Zioudas.

When I first started at Bear, Blaine Roberts introduced me to his right-hand guy, Peter Cherasia, and it was actually Peter that introduced me around and showed me where to sit that first day. I don't think that I had 30 minutes of interaction with Blaine within the next 3 months.

Peter was the head programmer of the FAST (Financial Analytics and Structured Transactions) group at the time. He had made himself indispensable in pulling together the technical team and resources required for the implementation of Bear Stearns’ mortgage analytics systems. Chuck Ramsey had built a great niche in the market around “specified pools” of mortgages, and selling these specified pools required a lot of database information and the ability to model mortgages based on the specific prepayment expectations of each individual mortgage pool – which all required knowing the location of the loan originator and looking at the composition of actual loans in the pool. Peter was Blaine’s implementation guy – the guy who could make everything work.

Anyhow, Peter showed me where I sat, gave me a brief introduction to what was going on, and basically left me alone to get started. I began to figure out the position I had been hired for mostly by asking questions of people around me and by generally finding out what others were working on – hoping that I would soon see exactly where I could contribute most.

I think that it was that first day on the job, or maybe it was the second day, but a very impressive looking guy with dark hair and meticulous grooming came up to me and introduced himself as Anthony Zioudas. He explained that he was working on some presentations for the Kingdom of Sweden, and that he needed me to help him put together an analysis. This was great, I thought, I’m already contributing.

I did all of the work I could to support Anthony as quickly as possible and in just a day or so had a great presentation that I proudly gave to Anthony. I worked long nights (my family was still in Texas, and there didn’t seem to be much need for me to go to my lonely apartment any earlier than 10:00pm) and started early. Anthony was often traveling to Europe to meet with clients and I was able to provide him with all sorts of analytical help and quite a bit of support. Before and after each trip, Anthony would come by and make sure that I had plenty to do – using our Asset-Liability Model (ALM) or coming up with new analytical tools to measure the “efficient frontier” of certain debt instruments, etc. Anthony kept feeding me project after project to do, and I gladly produced anything I could to help out.

A few weeks into my work with Anthony I started listening to what people were saying. Anthony was spending a lot of money on his travel, he stayed in nice hotels and some said his deals just didn’t close. This, of course, made me start worrying a bit. I had come to realize that the only way you made money at Bear Stearns was to work on deals that closed and that were profitable. I also came to the realization that despite what I had assumed, I didn’t work for Anthony. In fact, I didn’t really work for any specific person (other than Blaine, who hired me).

The organization of the FAST group at Bear Stearns (at least at that time) was really informal, you were hired as a resource, and just thrown into a pit. You were expected to find some way of making yourself valuable. You were expected to form little teams to do deals. You could find a deal team yourself (meaning that you could find a corporate finance person or a trader that knew of some assets for sale, you could add value by creating a profitable deal, find a trader that would give you pricing and that would hold those assets in inventory, and find a sales team that would sell your deal), or you could join someone else’s deal team – and basically work for them.

It was these deal teams that fought over the spoils won through doing deals. Each part of the team would argue how much of the profit that they deserved, and then the leader of that part of the team would divide up their part with the critical pieces of the team. It was about as organized as a pack of dogs tearing at a carcass. But this is how things worked at the time.

Here, I had spent several weeks thinking that I worked for Anthony, when in reality, I didn’t really work for anyone… I was like a free agent looking to hook up with other people to do deals. Once I had that liberating realization, I was able to break free of the tasks that Anthony would come to me to do. I could tell him that I had other things that I was working on and that I didn’t have time to do his work.

Fortunately for me, I was able to find some really productive areas and was able to get involved in putting some really nice deals together. Even that first bonus, earned at the beginning of 1988, was big enough for me to pay off most of my remaining Texas real estate loans and move my family to New Jersey.

Unfortunately for Anthony, he really hadn’t been that successful in bringing home mandates – and he had run up quite a lot of expenses. Whether he was asked to go, or whether the paltry bonus he picked up for the work of 1997 was the message, it didn’t matter. He left Bear at the beginning of 1988.

For me, I was just extraordinarily happy that I had realized that I didn’t work for Anthony. He was a nice guy, but he wasn’t going to get things closed. My bread was going to be buttered elsewhere.

The lesson I summarize from all of this? It is learn to recognize quickly who can help you get where you need to be. Even if the projects are fun and interesting – drop them quick if they aren’t going to pay off. You need to focus your time and your energy working with the small team that is going to make things happen. People that can’t contribute are distractions and should be avoided. You’ve got to figure out where your bread is going to be buttered.