In an Uncertain World (12 page)

Looking back at that episode, I realize that we hadn't really been reevaluating our positions as the economic and market outlook changed. Holding an existing investment is the same as making it again. When markets turn sour, you have to forget your losses to date and do a fresh expected-value analysis based on the changed facts. Even if the expected values remain attractive, the size and risk of your portfolio must be at levels you can live with for a long time if conditions remain difficult. Praying over your positions—a frequent tendency in trading rooms during bad times—isn't a sensible approach to coping with adversity.

   

AROUND THE TIME L. Jay Tenenbaum retired from Goldman Sachs in 1976, Ray Young, who was in charge of equities sales at the firm, gave me some advice. He said that now that L. Jay was leaving, I had to make a choice. I could continue to act in the manner I had developed working in a trading environment—focusing intently on my business, being short with people, and projecting an impersonal attitude. If so, Ray predicted, I would continue as a successful arbitrageur. But as an alternative, I could start thinking more about the people in the trading room and in sales—about their concerns and views—and how to enable them to be successful. In that case, Ray said, I wouldn't be limited to arbitrage but could become more broadly involved in the life of the firm.

Ray Young's advice pointed me toward a whole new world that I hadn't thought much about. My tendency to be abrupt and peremptory—characteristic of Wall Street traders of that era—is exemplified by a typical episode: a colleague from investment banking came to ask me about the market impact of a deal she was working on. She had trouble explaining the deal to me, and I told her I was busy and didn't understand how someone could work at Goldman Sachs and not understand some basic corporate finance. I dismissively suggested she go back upstairs and return when she was properly prepared. Ray made me understand that that kind of attitude limited how far I would go at the firm and how interesting my career there would be.

My general experience in life has been that most people can change only within a narrow range, if at all. Many people can acknowledge criticism and advice, but relatively few internalize it and alter their behavior in a significant way. Sometimes someone can change in one respect but not in another. I was involved in many discussions at Goldman over the years that centered on the question of whether a person who was highly capable professionally, but limited in some way, could grow to assume broader responsibilities. Often the limitations revolved around the ability to work effectively with colleagues and subordinates.

I've often asked myself why this advice affected me so much. Perhaps I simply responded when someone whom I respected, who clearly had my best interests at heart, raised a problem I hadn't thought about and opened up new vistas. Judy's view was that the harshness of manner Ray critiqued was a superficial attribute. Most likely, both reasons were true. In any case, my mind-set did change and I began to listen to people better, to try to understand their problems and concerns, and to more appropriately assess and value their views. And as I've since said to others, this not only had the effects in my business career that Ray had suggested but gave me something I hadn't expected, a new satisfaction in the accomplishments of others.

I also connected what Ray told me with a comment that Richard Menschel, another more senior colleague who took a supportive interest in my career, had made a couple of years after I arrived at Goldman. Dick said that early in your career you may be concerned about bringing strong, younger people into your world. For some, that feeling remains; they continue to think that bright, more junior people threaten to outshine them in some way. But after a certain point, Dick predicted, I would become comfortable enough in my own position to eagerly seek out extremely capable young people for the arbitrage department.

He was right. Initially I felt uneasy about bringing a strong junior associate into the arbitrage department. But soon that changed and I wanted effective, aggressive people working with me in order to get the job done better. Moreover, as I found in everything I did thereafter, sharing credit with others didn't mean less credit for me. To the contrary, I got credit not only for the results being better, but also for sharing the credit. I also enjoyed the recognition given to people I worked with. Dick was right that a lot of otherwise successful people never figure this out. They view smart junior associates as a threat rather than as a reflection of their own capabilities as managers.

I'd never given one second of thought to management as such. Once I began to think about these issues, however, I found them engrossing. How do you get people to work well with one another? How do you attract and keep strong people? How do you motivate them to do their best? How do you get a whole organization to be strategically dynamic and to act on difficult issues? I'd never been to business school or even read any books about management, but I developed views on all of this through experience.

   

JUDY CONTINUED in the theater and became a member of the actors' union—Actors' Equity Association—when she was cast in an Equity production. But she ended this nascent career when she became pregnant with our first child. Thanks to Judy we went to quite a bit of theater and dance, and I particularly enjoyed ballet. (Concerts and opera she did on her own.) Sherwin Goldman, who had been at Yale Law School with me, had become deeply involved with American Ballet Theatre (ABT) and had seen us at a number of dance performances. So he assumed I liked dance and asked me to join the ABT board. At that point I wasn't in a position to raise much money, but I think Sherwin was trying to create a younger cadre on the board for the future.

Earlier, I said I thought you could draw a line from my election as fourth-grade president to the cabinet, showing how large a role chance and incident play in life. You can draw an even straighter line from my joining the board of ABT to subsequent opportunities, because being on the board of an arts organization caused people to view me as someone who was involved in civic activities. Soon thereafter, Gus asked me to help raise money for Lincoln Center, where he was treasurer. After Gus died in 1976, Bunny Lasker, who was always promoting my interests, got me on the board of Mount Sinai Medical Center. And so it went, with one involvement leading to another. The key was to get in motion to begin with. Also, at least for me at a number of critical junctures, some other person—for example, my fourth-grade teacher or Bunny—provided the critical impetus.

From the beginning, I had hoped to get involved outside the firm, and that desire never flagged. I wasn't bored or awash in spare time, especially after our sons, James and Philip, were born in 1967 and 1971. But outside involvements added other dimensions to my life, providing a glimpse of what other people's jobs and lives were like and an opportunity to contribute to purposes beyond my work. What's more, outside involvements helped my Goldman Sachs career, as I met well-established people who were also clients or potential clients of our firm. Finally, these outside activities began to create a place in the community for me—though I may have set that back slightly at ABT when I suggested, at a time when the company was facing a 10 percent deficit, that nobody would notice if
Swan Lake
were performed with 10 percent fewer swans.

My real desire, however, was to get involved in politics. I'd done some work in a few New York campaigns, but that didn't amount to much. An avenue for larger involvement opened in 1969, when Henry Fowler, who was Secretary of the Treasury under Lyndon B. Johnson, joined Goldman Sachs. “Joe,” as everyone called Fowler, was a courtly Virginia lawyer whose ancestors had come to America in the seventeenth century.

Many people at Goldman were not that interested in what Fowler had done in government. But to me, Joe was a fascinating figure—someone who had gone to Washington during the New Deal and served in every Democratic administration thereafter. I took every opportunity to talk politics with him and at some point mentioned that I would like to become involved. Joe called Robert Strauss, who had recently become treasurer of the Democratic National Committee.

Strauss had a different kind of charm from Fowler. Rather than flattering you, Bob insulted you. When I met him in New York in 1972, he told me that if I wanted to be involved in policy, I was of no use to him. But if I wanted to raise money, we should talk. He said that Nixon was going to be reelected, so he was focusing on senators and congressmen to make sure the Democrats retained control of Congress. Then Strauss said something I took to heart: in politics a lot of people promise to do something, but very few actually do it. If you don't want to do what you're asked, just say no. But if you say you're going to do something, following through will set you apart. Then Strauss told me, “You know, you look good on paper. But now that I've met you, I don't think you'll amount to much. So you better work hard.” That seemed an odd way to get somebody to help you, but, in fact, it was the beginning of a great friendship.

I took off a week from work to call on people I knew and ask them to contribute to Bob's effort. While I don't have the personality ordinarily associated with fund-raising, I was determined to do it anyway. I called mainly on people in and around the arbitrage fraternity, only a few of whom were in any way sympathetic to the Democrats. I didn't raise more than $25,000. But in those days, that wasn't a bad start.

Even in his eighties, Bob has a magnetism that reminds me of Gus and Bunny. When he walks into a room, the effect is electric. With a twinkle in his eye, he continues to win people over through effrontery. “You must be the stupidest person alive,” began a letter he recently sent me about a business matter. He's shrewd yet somehow the least cynical of cynics. I remember some of his early political advice: “Let me tell you about Washington, Bob. I could call President Carter once a week and just say anything—even talk about the weather. And after that, I could walk around town telling people that I had just been talking to the President today and, while it would mean nothing substantively, it would have meaning in Washington. That's just the way this city works.”

From time to time others in the financial world have asked me for advice on how to get involved in politics. You can most readily acquire a place at the table by raising money, I tell them. And once you have a place at the table, you get to know people who work on campaigns. If those people think you have useful thoughts on politics, message, or policy, you can develop a broader involvement, at least informally. But there are actions and attitudes that can militate against crossing that line. One is if you appear to be trying to use politics to further your business or financial interests. Another is an attitude of self-importance. Many people assume that business success qualifies them to opine authoritatively about politics, but while business experience can be useful, politics and government differ in many ways.

Toward the end of the Carter presidency, Josh Gotbaum, who worked for Alfred Kahn, President Carter's “inflation czar,” approached me about directing the Council on Wage and Price Stability, administering the price guideline program. Few notions were more appealing to me than seeing the world from inside the White House. But after going to Washington to meet the relevant people, I was left with the impression that that job wasn't positioned to work, in terms of either its staffing and authority within the administration or its conceptual approach. In addition, I had a great deal to lose by leaving a partnership at Goldman Sachs.

In any case, the issue was academic. Shortly before this, I had been playing tennis in Westhampton when, for the first time in my life, my back started hurting. Instead of getting better, it got worse, and I went to see the chief of orthopedics at Mount Sinai, Robert Siffert. He looked and looked and couldn't figure out my problem. Nor could others he referred me to. Nothing appeared on the X-rays. After a while the pain was so severe that I couldn't sit up or stand for any length of time.

I was intent on not letting my back pain interfere with either Goldman or my outside activities, so I did everything I could to keep functioning. For many months, I'd have to lie down at the office on a couch. Some days, people at work would have to help me into a car to go home at two or three in the afternoon because the pain was so severe. I was in the hospital three times—for bed rest and diagnostic procedures—and each time I ran the arbitrage business from my bed. I was on the board of Studebaker-Worthington, and I participated in one meeting lying on the conference table. Once, the chief executive officer of the company, Derald Ruttenberg, called and asked me to meet him at his office on a Saturday to talk about selling the company. I thought,
If I don't go, he'll hire Felix Rohatyn
—the renowned investment banker from Lazard whom Ruttenberg had also mentioned. I couldn't walk for more than a few yards at the time, or even sit, but I went to Ruttenberg's office and lay on his window seat. We got the business, though much to my dismay, Ruttenberg gave Felix part of the fee. (It's more than twenty-five years later, but I still remember the amount.) Ruttenberg said he wanted Felix to be satisfied, given his importance in the world. Since stress is not good for a back problem—as my doctors reminded me from time to time—trying not to miss a beat by working from a horizontal position probably wasn't the ideal way to get better.

On the one hand, I was concerned the condition would remain undiagnosable and I wouldn't get well. On the other hand, I woke up every morning hoping and almost expecting that that day would be better. The then chief of neurosurgery at Mount Sinai wanted to operate on what he thought was a disc problem. But Bob Siffert wasn't sure he was right and told me to hold off. Months went by. Eventually, Siffert took another kind of X ray and found a barely discernible crack in a vertebra, the result of a genetic defect, which is apparently quite rare except in Eskimos. I had to have a spinal fusion, an operation in which bone from elsewhere in your body is used to mend the crack in your vertebra.