Death of the real salesmen
The author of 'Liar's Poker', the best-seller about Salomon, mourns a bygone era
Sunday 05 October 1997
Since its rise to prominence in the late 1970s, Salomon Brothers has been the story of a band of renegades, less like conventional businessmen than any men who ever wore suits, dragged kicking into corporate America. People forget that there was a time in the early 1980s when Salomon Brothers was so much more profitable than the rest of Wall Street that it seemed to be in an entirely different business.
Its willingness to take risks in the bond market gave it something like a monopoly. But the firm was willing to take unusual risks because it was made up of unusual people.
The old Salomon Brothers was staffed by all those wonderful freaks: fat guys who refused to speak standard English, whippet-thin ulcer addicts as tense as steel rods. But every day men in grey suits from Harvard Business School seized a bit more control, leaving the odd balls with less room to manoeuvre. The 1991 Treasury-bond scandal accelerated a process well underway by the mid-1980s.
The firm that was sold to Travelers for twice its book value bore no relation to the firm I worked for and wrote about. Most of the characters have moved on: John Gutfreund and Lewie Ranieri and John Meriwether, but also a raft of lesser-known bond traders and salesmen who made the money: Larry Hilibrand, Tom Pura, Tom Bernard, Craig Coates, Mike Mortara.
The other way to understand the takeover is as a routine act of corporate madness: Investment bankers were never meant to be owned by larger corporations: they are too adept at taking advantage of their employers and putative shareholders. But the buyer of Salomon Brothers is to be pitied. Salomon's success has always hinged upon it remaining outside corporate culture. To be greatly profitable, the firm's traders must be allowed behaviour that no giant corporation would condone.
The one business in which Salomon retains its former money-making powers is proprietary trading. Trading the house account at Salomon Brothers is a bit like being striker at Manchester United: you are, by virtue of your position, destined for greatness.
Each year in the 1990s one of these traders (Larry Hilibrand, Rob Stavis, Victor Haghani, Hans Hufschmid, Shigeru Myojin) has made off with $20m- plus, and left Wall Street wondering about his peculiar gifts. His gifts were not peculiar. He was just permitted to bet the house on a hunch.
But there will come a time when Travelers chairman Sanford Weill will have to explain to his board that some geek dropped $400m in Chinese derivatives. And then what? This takeover is one of many transactions transforming global finance, so the buyer has the usual excuse that everyone else is doing it. But you can see where the creation of financial giants will end: with a financial market in which the biggest money is made, and the most interesting business is still done by people who are not in giant financial firms. With each day the most talented, ambitious (and lucky) traders are learning that the best thing they can do at Salomon Brothers (or Salomon Smith Barney) is to quit.
- 2 Company breaks open Apple Watch to discover what it says is 'planned obsolescence'
- 4 The most powerful passports in the world
- 5 Chinese student carries disabled friend to school every day for three years
Nepal earthquake: How you can help victims of the Kathmandu disaster
Nepal earthquake in pictures: Photos show devastation caused by 7.8 magnitude earthquake
Royal baby: Live updates as superbug closes ward at St Mary's Hospital in London where Duchess of Cambridge is due to give birth
Teaching profession headed for crisis as numbers continue to drop and working lives become 'unbearable'
General Election 2015: The photo of a tree that proves the Tories have an image problem
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
iJobs Money & Business
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...
£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...