Banking on Grace
There are many times in life when you must do what your heart tells you to do and let the chips fall where they may. Sometimes is all works out well.
It was 2004 and I had recently taken over the asset management area of the vaunted Bear Stearns. It was a return to Wall Street for me after a few years spent starting a venture capital business that was chugging along, but a bit on life support. Venture capital was not all that I thought it would be. I had visions of working with innovative young entrepreneurs and helping them launch and build their visions into commercially viable businesses. To me it was the potential to get at the essence of business in its purest and most noble sense. Unfortunately, and perhaps because I was coming in at the late stage in the cycle, what it quickly became was trying to shrewdly structure investments in young companies so that we could maximize our return and, wherever possible, exert control over these entrepreneurs to that end. Not what I had expected.
I have often said that there are two types of businesspeople. There are those that work to build businesses and there are those that specialize in cutting the melon such that they get the lion’s share. I loved the former and hated the latter. I understand the importance and value of the negotiator, the deal doer, the trader. It’s an important arbitrage function that makes markets efficient. I just don’t see myself as adding value in that way. It is probably the reason many considered me miscast on Wall Street. I thought it could be different and worked to that purpose.
I was asked to speak at a NYC function for my alma mater. I almost always took these requests and tried hard to give back where I could. A speech at noon in midtown Manhattan wasn’t even an inconvenience. After the talk I was approached by a 40-something graduate who told me a tale of woe. He had a brother who had recently graduated and then been hit by a car in London. He had been in the hospital recuperating for months and had lost his Wall Street post-MBA job offer. He had become depressed and gained weight in the hospital and was basically in need of a boost. I was assured he was smart and asked if I could give him an interview.
I agreed and set up the meeting. When I met Walid I saw what his brother had said. Walid was a big guy (not unlike me), but he had a sheepishness and naivete that overwhelmed his impression. As a pure act of kindness, I offered him a below-market job offer to join our risk management area as an analyst. It was an offer at 60% of the going rate for top MBA’s, but it was an offer nonetheless. The risk management area was rarely anyone’s first choice, but I truly believed it to be a great learning ground for the business.
Walid took the job on the spot, thanked me and told me I would not regret it. As soon as he joined he had a point of booking an appointment with me every three months. My assistant couldn’t understand why I always agreed to see him since I was running a 500-person business and this guy was a junior nobody. Nonetheless, I always gave him a half hour. His questions of me always had one theme asked in multiple ways, “How can I get ahead?”
I advised Walid to keep his head down and learn his craft. He did that. When he wanted to transition to the front office, I told him to make himself invaluable to one of the high-flying hedge fund teams he serviced. He did just that. He was soon drawn into one of those teams in the mortgage arena, always a hot and analytical space on Wall Street. He was the team grunt, working all hours and on all the rigorous and detailed risk-related analytics. He got noticed and his ideas started to resonate with the head of the team. He was given the chance to try his hand on trading, ever so slightly. He learned that craft equally well and started to show his capability. He kept coming to me every three months asking for advice on how to get ahead.
After I left the firm, Walid continues to prosper to the point where he left the firm to join another hedge fund that traded against him and saw his growing skillset. He was then a junior trader. Walid graduated from the quarterly to the semi-annual advice program with me. He still craved my advice on getting ahead even when I explained to him that he had made it and didn’t need my advice anymore. Walid always sent me a big fruit basket every holiday season and reminded me that I had been responsible for his success. It was an annual feel-good for me and I was happy for his success.
Once Walid had improved his chops to the point of being drafted to join a bigger hedge fund as a senior trader, we had moved to an advisory relationship on an as-needed basis, which translated into about once a year. The ask evolved from what do I do to get ahead to what do I do to get them to see the value I am adding? I gave Walid whatever general advice seemed appropriate and he was always very thankful.
About a year ago Walid called again and said he needed to talk. I agreed as always and we met near his office for a drink. He told me a tale of getting underpaid by his principal. He said he produced 120% of the firm’s profits and was only getting a fraction of the rewards. He had only gotten a bonus of $23 million and was quite disappointed. After a brief pause to consider how far my young acolyte had come, I gave him some basic advice which ended up netting him an added $7 million in compensation.
Before leaving he asked what I was doing. I told him I was running a scientific start-up that was very interesting and could be very big. He asked if he could invest. At first, I said no, not realizing that the trader in him wanted to invest even more after hearing that. Over the next several months he invested in the business twice at larger and larger amounts. He did so almost entirely out of respect and trust in me. I’m not sure it’s a wise investment methodology, but we will see.
I was once told by my mentor in venture capital that ideas and financials were only worth so much and that the only thing that meant a damn in the venture capital investing space was the people. He felt that betting on people was the ONLY investment methodology that worked. I would add that sometimes doing the right thing and showing a little grace ends up being one of the best investments you can make.
I had invested in Walid and now he was investing in me. I plan to make him as proud of his decision as I am in how he has performed in his chosen field. This year he was paid a bonus of $50 million, so I guess he will have more to invest in me.