Memoirs of a Minyan: An Officer and a Gentleman
The purpose of the journey is the journey itself.
Chapter 5: An Officer and a Gentleman
Following the Letter I fiasco, management watched the way I traded like a baseball manager watches a slugger beaned by a fastball. It took a while to regain my confidence but after a few solid strokes, I found my rhythm.
I've never figured out if A.D.D. people made good traders or if the assimilation of a sensory overload environment made traders A.D.D. Either way, the Letter I debacle quickly faded in my rear-view mirror.
When bonus season rolled around a few months later, my compensation again doubled to $300,000. I was also promoted, becoming the youngest vice-president in the firm at the age of 26.
I couldn't help notice the symmetry. At 13, I was standing behind a counter serving bagels to affluent classmates from the other side of town. Thirteen years later, I could afford to buy the bagel store.
Todd A. Harrison, Vice-President, Global Equity Derivatives, Morgan Stanley.
My business card became my favorite possession. That was the way I was programmed; my net worth dictated self-worth and money defined success. I wasn't arrogant or cocky but in hindsight, my sensibilities were surely skewed.
Outside the office, I had the type of fun you might expect a twenty-something making a lot of money to have. I summered in the Hamptons, treated myself to a few Porsches and migrated from one girlfriend to the next, keeping an eye out for a wife but not looking particularly hard.
Inside the office, I noticed a subtle shift in the general perception. Older salesmen and traders who were passed over for a promotion adopted a different attitude. The mornings I rumbled in with a hangover were no longer cute or funny. I was an officer of the firm that took home a larger slice of the bonus pie; it was suddenly considered unprofessional.
It was my first real taste of Morgan Stanley (MS) politics, the nasty sub-culture that exists in most big companies. I knew if I continued to produce, the critics would be silenced. The innocence was gone but it was replaced with power and that was a trade I was willing to make.
After years of reaching for the brass ring, my grasp around it firmed and I liked the way it felt. I upgraded my wardrobe, dined at fine restaurants and took care of my family. Life was good, or so I thought, as I had the types of things I was conditioned to aspire to.
Perhaps I was blinded by the promise of bigger and better things but I didn't care.
As 1996 rolled around, I was certain they were right around the corner.
Welcome to the Jungle
As I climbed the Morgan totem pole, I took tremendous pride in what I did and how I did it. The equity floor was a financial juggernaut and the derivative desk was the center of it all.
We wore MORGAN across our chest like a badge of honor. It was us against Goldman (GS), two titans on the Street in a rivalry that made the Yanks and Sox look like high school sweethearts.
During the several regime changes in my department, I saw bad things happen to good people. The steady stalwarts-the guys who came to work and produced every day-were passed over for promotion in favor of politically savvy players.
I learned a lot during those years, particularly when I was perceived as a threat to the establishment. That never made much sense, as I was a producer on the desk and an ambassador of our institution.
I was asked to recruit on behalf of the firm. They sent me to UCLA and North Carolina, put me up in swanky hotels and told me to interview college co-eds. Morgan's blue blood flowed through my veins and I did what I could to further our cause.
Agendas abound when money's around and they're not always consistent with the corporate mandate. I never kissed up or played the game and that didn't sit well with Mark Neuberger, the man who deftly navigated the changing landscape to become a Managing Director in 1996.
After the second management shake-up of my tenure, Mark was slated to run the equity derivative trading operation. He stepped over a lot of people to get there but did what he had to and got what he wanted. Unfortunately, his plans didn't include room for an up-and-comer with plans of his own.
When several high profile traders defected to other firms, Mark put his thumbprint on the operation. He took the most active tech stocks such as Dell (DELL), Intel (INTC), Microsoft (MSFT) and Cisco (CSCO) and assigned the less liquid stocks to others on the desk.
His strategy was simple-trade the names trafficked by the largest commission paying customers and leave the other, more difficult trades for others. There were times when one of our customers entered an order in an illiquid stock and Mark instructed me to facilitate the transaction.
"One firm firm," he said as he passed the risk, knowing full well that my P&L would bear the brunt of the damage.
Sometimes I facilitated the orders, other times I refused. One time, when I took down a chunk of calls that moved against me for a six-figure loss, he laughed and said. "There it goes!"
The writing was on the wall at that very moment.
One afternoon, towards the end of 1996, I was summoned to human resources high atop our new tower at 1585 Broadway. When I walked into the conference room, several people were seated around a large oak table. Mark Neuberger sat at the far end.
They informed me I was being put on probation for conduct unbecoming a Morgan Stanley professional. I studied the room and when my eyes met Mark and he looked away, I knew precisely what was happening.
They handed me my annual review and there, on a single piece of paper, it said the other desk heads-the men who ran the listed and over-the-counter operations-didn't trust me.
Odd, I thought. Jon Olesky, the managing director of the listed stock desk, was in charge recruiting and personally picked me to represent the firm. David Slaine ran the OTC desk and was my big brother on the Street. It was a power struggle pure and simple, and Mark didn't want me around to challenge his authority.
I protested to his boss, Tom Clark, and was told not to rock the boat. He wanted me to sign the review as we were required to do and take one for the team.
I was upset but didn't want to leave the only firm I had ever worked for.
I didn't want to leave my brothers.
I didn't want to leave the cash register.
The Good Ship
Slaino didn't like what he was seeing; he knew I was being sandbagged and protested in kind. As he was in a different department-and as the equity division suffered another wave of defections-his protests fell on deaf ears.
I refused to sign the review. It was fundamentally false and I knew that as soon as I put pen to paper, my days at Mother Morgan would be numbered.
Seven years, I thought to myself. Seven years of blood, sweat and tears. I wasn't going out like that.
A few months earlier, Raj Rajratanam and Gary Rosenbach, formerly of Needham & Company, created a powerful new hedge fund. The Galleon Group opened for business with roughly $500 million under management and they were the talk of the town.
Slaino and Gary were close friends after years on the Street and David made the introduction. I began to facilitate some of Gary's option trades and we developed a healthy rapport. As we made money together, the conversations increased in frequency.
I didn't want to leave Morgan but I was fighting a losing battle. Every few days, Tom Clark asked me to sign the review and each time I declined. I knew that I couldn't put it off forever.
With David's endorsement, I began discussions with Galleon about moving to their shop; they didn't have a derivative specialist and it was an intuitive fit. As pressure continued to build, I found myself delving deeper into the potential opportunity.
We agreed that I would join them as the Managing Director of derivatives. I would receive a token salary and derive the lion's share of my compensation as a function of performance.
I walked into Tom Clark's office and shut the door behind me. I expressed reservations about the falsities contained in the review and he assured me that I would be taken care of.
"Will I really be taken care of?" I asked with great concern.
"You have my word," he said, pushing the review directly in front of me as he uncapped his pen.
I signed the review, putting my better judgment aside. When bonus time arrived, I was paid $500,000 for one year's worth of work.
I thanked them and waited patiently for the check to clear. Once it did, I walked into Tom's office and tendered my resignation.
They were stuck-not only had they just paid half a million dollars to a departing trader, I went to work for the most respected new hedge fund on the Street.
Vikram Pandit ran the equity division and called me to his office to offer congratulations. He said that if there was anything I needed, he would be happy to oblige.
I gathered my belongings and said goodbye to the only professional family I ever knew. I felt like I out-traded the best desk on the Street; the power shoe was on the other foot and I liked the way it fit.
Click here for the next chapter of Memoirs, "Trading Places."
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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