Liar's Poker

by Michael Lewis

  Of course, there were exceptions to these patterns of behavior. A handful of people fell between the cracks of the Great Divide. Two or three people cut deals with managing directors at the start of the program that ensured them the jobs of their choice. They floated unpredictably, like freemen among slaves, and were widely thought to be management’s spies. A few trainees had back-row hearts, but also wives and children to support. They had no loyalty. They remained aloof from the front row out of disdain and from the back row out of a sense of responsibility.

  I considered myself an exception, of course. I was accused by some of being a front-row person because I liked to sit next to the man from the Harvard Business School and watch him draw organization charts. I wondered if he would succeed (he didn’t). Also, I asked too many questions. It was assumed that I did this to ingratiate myself with the speakers, like a front-row person. This was untrue. But try telling that to the back row. I lamely compensated for my curiosity by hurling a few paper wads at important traders. And my stock rose dramatically in the back row when I was thrown out of class for reading the newspaper while a trader spoke. But I was never the intimate of those in the back row.

  Of all exceptions, however, the Japanese were the greatest. The Japanese undermined any analysis of our classroom culture. All six of them sat in the front row and slept. Their heads rocked back and forth and on occasion fell over to one side, so that their cheeks ran parallel to the floor. So it was hard to argue that they were just listening with their eyes shut, as Japanese businessmen are inclined to do. The most charitable explanation for their apathy was that they could not understand English. They kept to themselves, however, and you could never be sure of either their language skills or their motives. Their leader was a man named Yoshi. Each morning and afternoon the back-row boys made bets on how many minutes it would take Yoshi to fall asleep. They liked to think that Yoshi was a calculating troublemaker. Yoshi was their hero. A small cheer would go up in the back row when Yoshi crashed, partly because someone had just won a pile of money, but also in appreciation of any man with the balls to fall asleep in the front row.

  The Japanese were a protected species, and I think they knew it. Their homeland, as a result of its trade surpluses, was accumulating an enormous pile of dollars. A great deal of money could be made shepherding these dollars from Tokyo back into U.S. government bonds and other dollar investments. Salomon was trying to expand its office in Tokyo by employing experienced locals. Here was the catch. Japanese tend to spend their lives with one Japanese company, and the more able ones normally wouldn’t dream of working for an American firm. In joining Salomon Brothers, they traded in sushi and job security for cheeseburgers and yuppie disease, which few were willing to do. The rare Japanese whom Salomon had been able to snatch away were worth many times their weight in gold and treated like the family china. The traders who spoke to us never uttered so much as a peep against them. In addition, while Salomon Brothers was otherwise insensitive to foreign cultures, it was strangely aware that the Japanese were different. Not that there was a generally accepted view of how they might be different. The Japanese could have rubbed noses and practiced the Ki-wanis Club handshake each morning, and I’ll bet no one would have thought it out of character.

  Still, in the end, the Japanese were reduced to nothing more than a bizarre distraction. The back row set the tone of the class because it acted throughout as one, indivisible, incredibly noisy unit. The back-row people moved in herds, for safety and for comfort, from the training class in the morning and early afternoon, to the trading floor at the end of the day, to the Surf Club at night, and back to the training program the next morning. They were united by their likes as well as their dislikes. They rewarded the speakers of whom they approved by standing and doing the Wave across the back of the class.

  And they approved wholeheartedly of the man at the front of the room now. The speaker paused, as if lost in thought, which was unlikely. “You know,” he finally said, “you think you’re hot shit, but when you start out on the trading floor, you’re going to be at the bottom.”

  Was that really necessary? He was playing so well by telling the hooligans what they liked to hear: Being a winner at Salomon meant being a he-man in a jungle. Now he risked retaliation by telling the hooligans what they didn’t like to hear: In the jungle their native talents didn’t mean squat. I checked around for spitballs and paper wads. Nothing. The speaker had built sufficient momentum to survive his mistake. Heads in the back nodded right along. It is possible that they assumed the speaker intended that remark for the front row.

  In any case, on this point the speaker was surely wrong. A trainee didn’t have to stay on the bottom floor more than a couple of months. Bond traders and salesmen age like dogs. Each year on the trading floor counts for seven in any other corporation. At the end of his first year a trader or salesman had stature. Who cared for tenure? The whole beauty of the trading floor was its complete disregard for tenure.

  A new employee, once he reached the trading floor, was handed a pair of telephones. He went on-line almost immediately. If he could make millions of dollars come out of those phones, he became that most revered of all species: a Big Swinging Dick. After the sale of a big block of bonds and the deposit of a few hundred thousand dollars into the Salomon till, a managing director called whoever was responsible to confirm his identity: “Hey, you Big Swinging Dick, way to be.” To this day the phrase brings to my mind the image of an elephant’s trunk swaying from side to side. Swish. Swash. Nothing in the jungle got in the way of a Big Swinging Dick.

  That was the prize we coveted. Perhaps the phrase didn’t stick in everyone’s mind the way it did in mine; the name was less important than the ambition, which was common to us all. And of course, no one actually said, “When I get out onto the trading floor, I’m going to be a Big Swinging Dick.” It was more of a private thing. But everyone wanted to be a Big Swinging Dick, even the women. Big Swinging Dickettes. Christ, even front-row people hoped to be Big Swinging Dicks once they had learned what it meant. Their problem, as far as the back row was concerned, was that they didn’t know how to act the part. Big Swinging Dicks showed more grace under pressure than front-row people did.

  A hand shot up (typically) in the front row. It belonged to a woman. She sat high in her regular seat, right in front of the speaker. The speaker had momentum. The back-row people were coming out of their chairs to honor him with the Wave. The speaker didn’t want to stop now, especially for a front-row person. He looked pained, but he could hardly ignore a hand in his face. He called her name, Sally Findlay.

  “I was just wondering,” said Findlay, “if you could tell us what you think has been the key to your success.”

  This was too much. Had she asked a dry technical question, she might have pulled it off. But even the speaker started to smile. He knew he could abuse the front row as much as he wanted. His grin spoke volumes to the back row. It said, “Hey, I remember what these brown-nosers were like when I went through the training program, and I remember how much I despised speakers who let them kiss butt, so I’m going to let this woman hang out and dry for a minute, heh, heh, hen.” The back row broke out in its loudest laughter yet. Someone cruelly mimed Findlay in a high-pitched voice, “Yes, do tell us why you’re sooooo successful. ”Someone else shouted, “Down, boy!” as if scolding an overheated poodle. A third man cupped his hands together around his mouth and hollered, “Equities in Dallas.”

  Poor Sally. There were many bad places your name could land on the job placement blackboard in 1985, but the absolute worst was in the slot marked “Equities in Dallas.” We could not imagine anything less successful in our small world than an equity salesman in Dallas; the equity department was powerless in our firm, and Dallas was, well, a long way from New York. Thus, “Equities in Dallas” became training program shorthand for “Just bury that lowest form of human scum where it will never be seen again.” Bury Sally, they shouted from the back of the room.
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  The speaker didn’t bother with an answer. He raced to aclose before the mob he had incited became uncontrollable. “You spend a lot of time asking yourself questions: Are munis right for me? Are govys right for me? Are corporates right for me? You spend a lot of time thinking about that. And you should. But think about this: It might be more important to choose a jungle guide than to choose your product. Thank you.”

  The room emptied immediately. There was a fifteen-minute break until the next speaker began, and two separate crowds rushed as usual for the two doors out of the classroom. Front-row people exited front, back-row people exited back in a footrace to the four telephones with the free WATS lines.

  The powers of Salomon Brothers relied on the training program to make us more like them. What did it mean to be more like them? For most of its life Salomon had been a scrappy bond trading house distinguished mainly by its ability and willingness to take big risks. Salomon had had to accept risk to make money because it had no list of fee-paying corporate clients, unlike, say, the genteel gentiles of Morgan Stanley. The image Salomon had projected to the public was of a firm of clannish Jews, social nonentities, shrewd but honest, sinking its nose more deeply into the bond markets than any other firm cared to. This was a caricature, of course, but it roughly captured the flavor of the place as it once was.

  Now Salomon wanted to change. The leading indicator of the shift in the collective personality of our firm was the social life of our chairman and CEO, John Gutfreund. He had married a woman with burning social ambition, twenty years his junior. She threw parties and invited gossip columnists. Her invitations, the value of which seemed to rise and fall with our share price, were wrapped in a tiny bow and delivered by hand. She employed a consultant to ensure she and her husband received the right sort of coverage. And though she did not go so far as to insist that the employees of Salomon Brothers were made as presentable as her husband (whom she stuffed into a new wardrobe), it was impossible in our company for some of this indulgence and posturing not to trickle down.

  Despite the nouveau fluctuation in our corporate identity, the training program was without a doubt the finest start to a career on Wall Street. Upon completion a trainee could take his experience and cash it in for twice the salary on any other Wall Street trading floor. He had achieved, by the standards of Wall Street, technical mastery of his subject. It was an education in itself to see how quickly one became an “expert” on Wall Street. Many other banks had no training program. Drexel Burnham, in what I admit is an extreme example, even told one applicant to befriend someone at Salomon just to get hold of the Salomon training program handouts. Then, materials in hand, he should work for Drexel.

  But the materials were the least significant aspect of our training. The relevant bits, the ones I would recall two years later, were the war stories, the passing on of the oral tradition of Salomon Brothers. Over three months leading salesmen, traders, and financiers shared their experiences with the class. They trafficked in unrefined street wisdom: how money travels around the world (any way it wants), how a trader feels and behaves (any way he wants), and how to schmooze a customer. After three months in the class trainees circulated wearily around the trading floor for two months more. Then they went to work. All the while there was a hidden agenda: to Salomonize the trainee. The trainee was made to understand, first, that inside Salomon Brothers he was, as a trader once described us, lower than whale shit on the bottom of the ocean floor and, second, that lying under whale shit at Salomon Brothers was like rolling in clover compared with not being at Salomon at all.

  In the short term the brainwashing nearly worked. (In the long term it didn’t. For people to accept the yoke, they must believe they have no choice. As we shall see, we newcomers had both an exalted sense of our market value and no permanent loyalties.) A few investment banks had training programs, but with the possible exception of Goldman Sachs’s, none was so replete with firm propaganda. A woman from The New York Times who interviewed us three months into our program was so impressed by the uniformity in our attitudes toward the firm that she called her subsequent article “The Boot Camp for Top MBA’s.” Like all newspaper articles about Salomon Brothers, it was quickly dismissed. “The bitch don’t know what she’s talking about,” said the back row. The class Boy Scouts were mercilessly hounded for saying in print things like “They—Salomon—don’t need to give us a pep talk, we’re pumped up,” which, you had to admit, was a little much.

  The article was revealing for another reason. It was the only time someone from the outside was let in and permitted to ask the most obvious question: Why were we so well paid? A back-row person, who had just taken an M.B.A. from the University of Chicago, explained to the readers of the Times. “It’s supply and demand,” he said. “My sister teaches kids with learning disabilities. She enjoys her work as much as I do, but earns much less. If nobody else wanted to teach, she’d make more money.” Say what you will about the analysis. The Times readers certainly did. The same article had mentioned more than 6,000 people had applied for the 127 places in the program. Paychecks at Salomon Brothers spiraled higher in spite of the willingness of others who would, no doubt, do the same job for less. There was something fishy about the way supply met demand in an investment bank.

  But there was also something refreshing about any attempt to explain the money we were about to be paid. I thought it admirable that my colleague had given it the old business school try. No one else ever did. The money was just there. Why did investment banking pay so many people with so little experience so much money? Answer: When attached to a telephone, they could produce even more money. How could they produce money without experience? Answer: Producing in an investment bank was less a matter of skill and more a matter of intangibles—flair, persistence, and luck. Were the qualities found in a producer so rare that they could be purchased only at great expense?

  Answer: yes and no. That was the question of questions. The ultimate expression of our dumb compliance was in not asking at the outset why the money flowed so freely and how long it would last. The answer could be found on the Salomon Brothers trading floor, perhaps more easily than anywhere on Wall Street, but many never bothered to work it out.

  Each day after class, around about three or four or five o’clock we were pressured to move from the training class on the twenty-third floor to the trading floor on the forty-first. You could get away with not going for a few days, but if not seen on the floor occasionally, you were forgotten. Forgotten at Salomon meant unemployed. Getting hired was a positive act. A manager had to request you for his unit. Three people were fired at the end of our training program. One was assigned to Dallas and refused to go. A second disappeared mysteriously, amid rumors that he had invited a senior female Salomon executive into a menage a trois (the firm tolerated sexual harassment but not sexual deviance). And a third, by far the most interesting, couldn’t bear to step off the elevator and onto the trading floor. He rode up and down in the rear of the elevator every afternoon. He meant to get off, I think, but was petrified. Word of his handicap spread. It reached the woman in charge of the training program. She went to see for herself. She stood outside the elevator banks on the forty-first floor and watched with her own eyes the doors open and shut for an hour on one very spooked trainee. One day he was gone.

  On braver days you cruised the trading floor to find a manager who would take you under his wing, a mentor, better known to us as a rabbi. You also went to the trading floor to learn. Your first impulse was to step into the fray, select a likely teacher, and present yourself for instruction. Unfortunately it wasn’t so easy. First, a trainee by definition had nothing of merit to say. And, second, the trading floor was a minefield of large men on short fuses just waiting to explode if you so much as breathed in their direction. You didn’t just walk up and say hello. Actually that’s not fair. Many, many traders were instinctively polite, and if you said hello they’d just ignore you. But if you happened to step on a mine, then
the conversation went something like this:

  ME: Hello.

  TRADER: What fucking rock did you crawl out from under? Hey, Joe, hey, Bob, check out this guy’s suspenders.

  ME (reddening): I just wanted to ask you a couple of questions.

  JOE: Who the fuck does he think he is?

  TRADER: Joe, let’s give this guy a little test! When interest rates go up, which way do bond prices go?

  ME: Down.

  TRADER: Terrific. You get an A. Now I gotta work. ME: When would you have some time—TRADER: What the fuck do you think this is, a charity? I’m busy. ME: Can I help in any way? TRADER: Get me a burger. With ketchup.

  So I watched my step. There were a million little rules to obey; I knew none of them. Salesmen, traders, and managers swarmed over the floor, and at first I could not tell them apart. Sure, I knew the basic differences. Salesmen talked to investors, traders made bets, and managers smoked cigars. But other than that I was lost. Most of the men were on two phones at once. Most of the men stared at small green screens full of numbers. They’d shout into one phone, then into the other, then at someone across the row of trading desks, then back into the phones, then point to the screen and scream, “Fuck!” Thirty seconds was considered a long attention span. As a trainee, a plebe, a young man lying under all that whale shit, I did what every trainee did: I sidled up to some busy person without saying a word and became the Invisible Man.

  That it was perfectly humiliating was, of course, precisely the point. Sometimes I’d wait for an hour before my existence was formally acknowledged; other times, a few minutes. Even that seemed like forever. Who is watching me in my current debased condition? I’d wonder. Will I ever recover from such total neglect? Will someone please notice that the Invisible Man has arrived? The contrast between me standing motionless and the trader’s frenetic movements made the scene particularly unbearable. It underlined my uselessness. But once I’d sidled up, it was difficult to leave without first being officially recognized. To leave was to admit defeat in this peculiar ritual of making myself known.