Liar's Poker

by Michael Lewis

  Classes at Salomon Brothers were held on the twenty-third floor of its building on the southeastern tip of Manhattan. I made my way there to begin, at last, my career. At first blush my prospects looked bleak. The other trainees appeared to have been in the office for hours. In fact, to get an edge on their colleagues, most had been there for weeks. As I walked into the training area, they were gathered in packs in the hallways or in the foyer behind the classroom, chattering. It was a family reunion. Everyone knew everyone else. Cliques had gelled. All the best lockers had been taken. Newcomers were regarded with suspicion. Already opinions had formed of who was “good,” meaning who was cut out for the Salomon trading floor, and who was a loser.

  One group of men stood in a circle in a corner of the foyer playing a game I didn’t recognize but now know to be Liar’s Poker. They were laughing, cursing, eyeing each other sideways, and generally behaving in a brotherly, traderly manner. They wore belts. I think I gave up the idea of feeling immediately at home at Salomon Brothers when I saw the belts. I had taken the opportunity to break out a pair of bright red suspenders with large gold dollar signs running down them. Time to play investment banker, I had thought. Wrong. Later a well-meaning fellow trainee gave me a piece of advice. “Don’t let them see you on the trading floor in those things,” he said. “Managing directors are the only guys who can get away with wearing suspenders. They’ll take one look at you and say, ‘Who the fuck does he think he is anyway?’”

  I remember also that as I walked into the foyer that first morning, a female trainee was shouting into what must have been a fuzzy phone connection. In the midst of a scorching July, the pudgy woman on the phone was stuffed into a three-piece beige tweed suit with an oversize white bow tie, which I probably would not have given a second thought had she not herself called attention to it. She placed one hand over the receiver and declared to a tiny group of women: “Look, I can do six full suits for seven hundred and fifty bucks. These are quality. And that is a good price. You can’t get them any cheaper.”

  That explained it. She wearing tweed only because she was selling tweed. She guessed rightly that her training class represented a market in itself: people with money to burn, eyes for a bargain, and space in their closets for the executive look. She had persuaded an Oriental sweatshop to supply her with winter wear in bulk. When she saw me watching her, she said that given a bit of time, she could “do men too.” She did not mean this as a bawdy joke. Thus the first words spoken to me by a fellow trainee were by someone trying to sell me something. It was a fitting welcome to Salomon Brothers.

  From the foyer’s darkest corner came a tiny ray of hope, the first sign that there was more than one perspective on life at Salomon Brothers. A fat young man lay spread-eagled on the floor. He was, as far as I could determine, asleep. His shirt was untucked and badly wrinkled; his white belly pushed through like a whale’s hump where the buttons had come undone. His mouth was opened wide as if awaiting a bunch of grapes. He was an Englishman. He was predestined for the London office, I later learned, and not terribly worried about his career. Compared with most trainees, he was a man of the world. He complained incessantly of being treated like a child by the firm. He had been in the markets in the City of London for two full years and found the whole idea of a training program absurd. So he turned Manhattan into his sporting ground at night. He convalesced during the day. He drank pots of coffee and slept on the training class floor, from which he made his first, indelible impression on many of his new colleagues.

  The 127 unholy members of the Class of 1985 were one of a series of human waves to wash over what was then the world’s most profitable trading floor. At the time we were by far the largest training class in Salomon’s history, and the class after us was nearly twice as large again. The ratio of support staff to professional (we were, believe it or not, the “professionals”) was 5:1; so 127 of us meant 635 more support staff. The increase in numbers was dramatic in a firm of slightly more than 3,000 people. The hypergrowth would eventually cripple the firm and, even to us, seemed unnatural, like dumping too much fertilizer on a plant. For some strange reason management did not share our insight.

  In retrospect it is clear to me that my arrival at Salomon marked the beginning of the end of that hallowed institution. Wherever I went, I couldn’t help noticing, the place fell apart. Not that I was ever a big enough wheel in the machine to precipitate its destruction on my own. But that they let me—and other drifters like me—in the door at all was an early warning signal. Alarm bells should have rung. They were losing touch with their identity. They had once been shrewd traders of horseflesh. Now they were taking in the all the wrong kinds of people. Even my more commercially minded peers—no, especially my more commercially minded peers, such as the woman selling the suits—did not plan to devote their lives to Salomon Brothers. And neither did I.

  Nothing bound us to the firm but what had enticed many of us to apply: money and a strange belief that no other jobs in the world were worth doing. Not exactly the stuff of deep and abiding loyalties. Inside of three years 75 percent of us would be gone (compared with previous years when after three years, on average, 85 percent of the class was still with the firm). After this large infusion of strangers intent on keeping their distance the firm went into convulsions, just as when any body ingests large quantities of an alien substance.

  We were a paradox. We had been hired to deal in a market, to be more shrewd than the next guy, to be, in short, traders. Ask any astute trader and he’ll tell you that his best work cuts against the conventional wisdom. Good traders tend to do the unexpected. We, as a group, were painfully predictable. By coming to Salomon Brothers, we were doing only what every sane money-hungry person would do. If we were unable to buck convention in our lives, would we be likely to buck convention in the market? After all, the job market is a market.

  We were as civil to the big man addressing the class as we had been to anyone, which wasn’t saying much. He was the speaker for the entire afternoon. That meant he was trapped for three hours to the ten-yard trench in the floor at the front of the room with a long table, a podium, and a blackboard. The man paced back and forth in the channel like a coach on the sidelines, sometimes staring at the floor, other times menacingly at us. We sat in rows of interconnected school chairs—twenty-two rows of white male trainees in white shirts punctuated by the occasional female in a blue blazer, two blacks, and a cluster of Japanese. The dull New England clam chowder color of the training room walls and floor set the mood of the room. One wall had long, narrow slits for windows with a sweeping view of New York Harbor and the Statue of Liberty, but you had to be sitting right beside them to see anything, and even then you were not supposed to soak in the view.

  It was, all in all, more like a prison than an office. The room was hot and stuffy. The seat cushions were an unpleasant Astroturf green; the seat of your trousers stuck both to it and to you as you rose at the end of each day. Having swallowed a large and greasy cheeseburger at lunch, and having only a mild sociological interest in the speaker, I was overcome with drowsiness. We were only one week into our five-month training program, and I was already exhausted. I sank in my chair.

  The speaker was a leading bond salesman at Salomon. On the table in the front of the room was a telephone, which rang whenever the bond market went berserk. As the big man walked, he held his arms tight to his body to hide the half-moons of sweat that were growing under his armpits. Effort or nerves? Probably nerves. You couldn’t blame him. He was airing his heartfelt beliefs and in so doing making himself more vulnerable than any speaker yet. I was in the minority in finding him a bit tedious. He was doing well with the crowd. People in the back row listened. All around the room, trainees put down their New York Times crossword puzzles. The man was telling us how to survive. “You’ve got to think of Salomon Brothers as like a jungle,” he said. Except it didn’t come out that way. It came out: “Ya gotta tink a Salomon Bruddahs as like a jungle.”


  “The trading floor is a jungle,” he went on, “and the guy you end up working for is your jungle leader. Whether you succeed here or rot depends on knowing how to survive in the jungle. You’ve got to learn from your boss. He’s key. Imagine if I take two people and I put them in the middle of the jungle and I give one person a jungle guide and the other person nothing. Inside the jungle there’s a lot of bad shit going down. Outside the jungle there’s a TV that’s got the NCAA finals on and a huge fridge full of Bud…”

  The speaker had found the secret to managing the Salomon Brothers Class of 1985: Win the hearts and minds of the back row. The back row, from about the third day of classes on, teetered on the brink of chaos. Even when they felt merely ambivalent about a speaker, back-row people slept or chucked paper wads at the wimps in the front row. But if the back-row people for some reason didn’t care for a speaker, all hell broke loose. Not now. Primitive revelation swept through the back of the classroom at the sound of the jungle drums; it was as if a hunting party of Cro-Magnon men had stumbled upon a new tool. The guys in the back row were leaning forward in their seats for the first time all day. Oooooooo. Aaaahhhhh.

  With the back row neutralized, the speaker effectively controlled the entire audience, for the people sitting in the front row were on automatic pilot. They were the same as front-row people all over the world, only more so. Most graduates of Harvard Business School sat in the front row. One of them greeted each new speaker by drawing an organization chart. The chart resembled a Christmas tree, with John Gutfreund on the top and us at the bottom. In between were lots of little boxes, like ornaments. His way of controlling the situation was to identify the rank of the speaker, visualize his position in the hierarchy, and confine him to his proper box.

  They were odd, these charts, and more like black magic than business. Rank wasn’t terribly important on the trading floor. Organizational structure at Salomon Brothers was something of a joke. Making money was mostly what mattered. But the front row was less confident than the back that the firm was a meritocracy of money-makers. They were hedging their bets—just in case Salomon Brothers after all bore some relation to the businesses they had learned about in school.

  “… a huge fridge of Bud,” said the speaker, a second time. “And chances are good that the guy with the jungle guide is gonna be the first one through the jungle to the TV and the beer. Not to say the other guy won’t eventually get there too. But”—here he stopped pacing and even gave the audience a little sly look—“he’ll be reeeaaal thirsty and there’s not going to be any beer left when he arrives.”

  This was the punch line. Beer. The guys in the back row liked it. They fell all over each other slapping palms, and looked as silly as white men in suits do when they pretend to be black soul brothers. They were relieved as much as excited. When not listening to this sort of speech, we faced a much smaller man with a row of Bic fine points in a plastic case in his breast pocket—otherwise known as a nerd pack—explaining to us how to convert a semiannual bond yield to an annual bond yield. The guys in the back row didn’t like that. Fuck the fuckin’ bond math, man, they said. Tell us about the jungle.

  That the back row was more like a postgame shower than a repository for the future leadership of Wall Street’s most profitable investment bank troubled and puzzled the more thoughtful executives who appeared before the training class. As much time and effort had gone into recruiting the back row as the front, and the class, in theory, should have been uniformly attentive and well behaved, like an army. The curious feature of the breakdown in discipline was that it was random, uncorrelated with anything outside itself and, therefore, uncontrollable. Although most of the graduates from Harvard Business School sat in the front, a few sat in the back. And right beside them were graduates from Yale, Stanford, and Penn. The back had its share of expensively educated people. It had at least its fair share of brains. So why were these people behaving like this?

  And why Salomon let it happen, I still don’t understand. The firm’s management created the training program, filled it to the brim, then walked away. In the ensuing anarchy the bad drove out the good, the big drove out the small, and the brawn drove out the brains. There was a single trait common to denizens of the back row, though I doubt it ever occurred to anyone: They sensed that they needed to shed whatever refinements of personality and intellect they had brought with them to Salomon Brothers. This wasn’t a conscious act, more a reflex. They were the victims of the myth, especially popular at Salomon Brothers, that a trader is a savage, and a great trader a great savage. This wasn’t exactly correct. The trading floor held evidence to that effect. But it also held evidence to the contrary. People believed whatever they wanted to.

  There was another cause for hooliganism. Life as a Salomon trainee was like being beaten up every day by the neighborhood bully. Eventually you grew mean and surly. The odds of making it into the Salomon training program, in spite of my own fluky good luck, had been 60:1 against. You beat those odds and you felt you deserved some relief. There wasn’t any. The firm never took you aside and rubbed you on the back to let you know that everything was going to be fine. Just the opposite, the firm built a system around the belief that trainees should wriggle and squirm. The winners of the Salomon interviewing process were pitted against one another in the classroom. In short, the baddest of the bad were competing for jobs.

  Jobs were doled out at the end of the program on a blackboard beside the trading floor. Contrary to what we expected when we arrived, we were not assured of employment. “Look to your left and look to your right,” more than one speaker said. “In a year one of those people will be out on the street.” Across the top of the job placement blackboard appeared the name of each department on the trading floor: municipal bonds; corporate bonds; government bonds; etc. Along the side of the board was each office in the firm: Atlanta; Dallas; New York; etc. The thought that he might land somewhere awful in the matrix—or nowhere at all—drove the trainee to despair. He lost all perspective on the relative merits of the jobs. He did not count himself lucky just to be at Salomon Brothers; anyone who thought that way would never have got in in the first place. The Salomon trainee saw only the extremes of failure and success. Selling municipal bonds in Atlanta was unthinkably wretched. Trading mortgages in New York was mouthwateringly good.

  Within weeks after our arrival the managers of each department had begun to debate our relative merits. But the managers were traders at heart. They couldn’t discuss a person, place, or thing without also trading it. So they began to trade trainees, like slaves. One day you’d see three of them leaning over the fat blue binder that held our photographs and resumes. The next day you’d hear that you had been swapped for one front-row person and one draft choice from the next training program.

  The pressure mounted. Who was overheard speaking of whom? Which trainees had cut deals for themselves? Where were jobs left? Like any selection process, this one had its winners and losers. But this selection process was wildly subjective. Since there was no objective measure of ability, landing a good job was one part luck, one part “presence,” and one part knowing how and when to place your lips firmly to the rear end of some important person. There wasn’t much you could do about the first two, so you tended to focus on the third. You needed a sponsor. Befriending one of the 112 managing directors was not enough; you had to befriend a managing director with clout. There was one small problem, of course. Bosses were not always eager to befriend trainees. After all, what was in it for them?

  A managing director grew interested only if he believed you were widely desired. Then there was a lot in you for him. A managing director won points when he spirited away a popular trainee from other managing directors. The approach of many a trainee, therefore, was to create the illusion of desirability. Then bosses wanted him not for any sound reason but simply because other bosses wanted him. The end result was a sort of Ponzi scheme of personal popularity that had its parallels in the markets. To build i
t required a great deal of self-confidence and faith in the gullibility of others; this was my chosen solution to the job problem. A few weeks into the training program I made a friend on the trading floor, though not in the area in which I wanted to work. That friend pressed for me to join his department. I let other trainees know I was pursued. They told their friends on the trading floor, who in turn became curious. Eventually the man I wanted to work for overheard others talking about me and asked me to breakfast.

  If that sounds calculating and devious, consider the alternatives. Either I left my fate in the hands of management, which, as far as I could tell, did not show a great deal of mercy toward anyone foolish enough to trust it, or I appealed directly to the ego of the managing director of my choice. I had friends who tried this tactic. They threw themselves at their dream boss’s feet, like a vassal before a lord, and said something unctuous and serflike, such as “I am your humble and devoted servant. Hire me, oh, Great One, and I will do anything you ask.” They hoped that the managing director would respond favorably, perhaps say something like “Raise yourself up, young man, you’ve no need to fear. If you are true to me, I shall protect you from the forces of evil and unemployment.” Sometimes this happened. But if it didn’t, you’d shot your wad. You were remaindered goods. Within the training class a dispute arose over whether, under the circumstances, groveling was acceptable. As if the whole point of the Salomon system were simply to see who wilted under the pressure and who did not.

  Each trainee had to decide for himself. Thus was born the Great Divide. Those who chose to put on a full-court grovel from the opening buzzer found seats in the front of the classroom, where they sat, lips puckered, through the entire five-month program. Those who treasured their pride—or perhaps thought it best to remain aloof—feigned cool indifference by sitting in the back row and hurling paper wads at managing directors.