Editor's Note: This article was published on 3/31/2005
As someone who was at Morgan Stanley (MWD) from ’91—my first interview was with John Havens—through ’97, I have a unique perspective as I watch the sands fall through the hourglass. My first experience at the firm was during the summer between my junior and senior year at Syracuse. I “placed” into an MBA honors program that offered internships abroad and, after some stealth maneuvering, found myself in Morgan’s London office in the summer of 1990. I worked in “operations control” which basically meant that I was the guy who brought trade breaks to the big hitters only to get screamed at for wasting their time.
Upon return to the states, I networked and established a relationship with Chuck Feldman, who founded their powerful equity derivative desk, and was hired three short days after my college graduation. I remember looking up and down the floor-wide trading desk in amazement, the smell of money everywhere as the machine printed profits at a feverish pitch. It was as good as it got for a Wall Street shot and we all wore MORGAN across our chest like a badge of honor. It was us vs. Goldman (GS), the two titans on the Street, in a rivalry that made the Yanks and Sox look like high school sweethearts.
As I climbed my way up the Morgan totem pole, I took tremendous pride in what I did and how I did it. We all did. The equity floor was a financial juggernaut and the derivatives team was at the center of it all. I got my first taste of corporate politics when I was promoted to Vice-President. At 26, I was the youngest VP in the firm and that didn’t sit well with older associates. Suddenly, coming into work hung-over was no longer cute and the weekend stories were viewed as a symbol of immaturity.
We had several regime changes in my department during my tenure and I saw bad things happen to good people. The steady stalwarts—the guys who came to work and consistently performed every day—were passed over for promotion in favor of the politically savvy (and often sneaky) players. I learned a lot during those years, particularly when I was perceived as a threat to the establishment. That never made sense to me as I was a producer on the desk and an ambassador of the firm. Individual agendas abound when there’s money around and they’re not always consistent with the corporate mandate.
I’ll never forget where I was when I heard the news that Morgan took over Dean Witter (or so we thought). There was a palpable distress in the air as the once-impenetrable fortress had seemingly adopted an open door policy. The angst wasn’t centered on the private client services group although, clearly, they’re the ones who immediately lost their cache. It was firm-wide and it ran deep as we sat there and digested the sudden status shift. To this day, I would swear that I heard the Goldman traders laughing all the way from their downtown digs.
While this occurred eight years ago, I believe it was the seed that has sowed into this week’s drama. John Mack, a trusted trader, assumed the number two role to Phil Purcell and the board reflected that peculiar pecking order. It slowly became apparent that we weren’t digesting Dean Witter—it was the other way around. To his credit, I’ve seen few executives maneuver through the concrete jungle like Mr. Purcell has and this week’s events are further proof of his deft demeanor. It was always assumed on the trading floor that Vikram Pandit would one day run the show. He was smart, savvy and had the respect of his troops. His departure, along with other chieftains, has opened a lot of eyes around the Street.
What do I think happens at the hallowed halls from here? I don’t think we can answer that question without also looking at the financial industry as a whole. There is a tremendous amount of overcapacity that will weed out in the years ahead and the sell-side faces a particularly tough road. As the research side of the equation can no longer be justified by investment banking revenues, I sense that we’ll see more outsourcing and less internal dependence. The “commoditization of information” is inevitable and will redefine the Wall Street product mix as we know it.
As for Morgan, a “Michael Price type” situation wouldn’t shock me as activists look to unlock hidden value. Consolidation was likely in the cards regardless of this latest seismic shift but may be fast-tracked by the powers that be. Whether the stock price reacts favorably in the years ahead belies the true story here. Morgan Stanley, once a proud leader in the financial community, has become a pawn in a power play. That may be a sign of the times but it has lain to rest a once vibrant corporate culture.
Good luck today.