Note: While reading a book whenever I come across something interesting, I highlight it on my Kindle. Later I turn those highlights into a blogpost. It is not a complete summary of the book. These are my notes which I intend to go back to later. Let’s start!

  • An opposite comment might be directed at an intern who was too aggressive and who alienated all the people on a desk, making them say, “Who does this guy think he is?” There’s a famous story about a Harvard Business School summer associate who went up to a partner, the head of Government Bond Trading at the time—a small Chinese American woman who was renowned as the most vicious trader on the floor—and said, “Would you mind if I shadowed you?” The intern must not have known about the partner’s reputation—you wouldn’t have known it to look at her, but everyone was scared of her. What he certainly didn’t know was that the moment he had chosen to make his request, 8:30 A.M., on a specific Friday in July, was the exact moment when the nonfarm payrolls number (economic data) was coming out, which was effectively the biggest day of the month for this trader. She absolutely flipped out on him. “Who the fuck do you think you are? Don’t you know that the economic data are coming out? Get away from me!” The guy eventually got reprimanded. The way they do the math on Wall Street is to think, Well, this guy has bad judgment. He should’ve known about the market data. On the other hand, maybe he learned a lesson, and maybe his judgment was just fine. In any case, he didn’t receive a full-time job at Goldman Sachs. What I learned was that success at Goldman, in the internship program and afterward, depended much more on judgment than on knowledge. You’d see the smartest kids in the world—they might have gotten a 1600 on the SAT, they might have graduated number one at Harvard—​go to Goldman Sachs and be absolute disasters, get fired within the first year. It happened all the time. This was because simple matters of judgment cannot be taught.

  • My little claim to fame as a junior analyst sprang from an observation I’d made soon after arriving at the firm. Anytime a company reported earnings, everyone on the trading desk wanted to have the numbers at his fingertips—was this earnings figure a good number or a bad number? When I got to Goldman, I noticed that everybody was scrambling to find the research reports, to see what the numbers were. So I came up with the idea of writing a simple five-line e-mail before the earnings came out, and I sent it to all the sales traders and traders on the forty-ninth floor. It read something like “This morning, Apple is releasing its earnings. This is what we expect; this is what it did last quarter; this is how many iMacs it sold; this is how many we predict it will sell.” It was like a little cheat sheet that all the traders had in front of them ahead of time. This was the kind of thing a junior analyst could do before passing the Series 7. It may seem silly and small, but when people saw you doing it, they thought, This guy is resourceful. He’s trying to think of ways to help us. Another part of my day consisted of learning how to leave good voice mails for clients. This was my apprenticeship, the way I learned how to talk about stocks. Every day, I would practice getting the form down: the voice mail had to be no longer than ninety seconds, and it had to hit four or five key points for the day. What were the big market-moving events? What did the client need to know? What was our view? I learned by listening to a master of the art: Rudy. The reason my rabbi was called the Beast was because he could bang these calls out to more clients than anyone else, always with enthusiasm and thorough market knowledge. The Beast had a reason for delivering these mini-reports by voice mail instead of e-mail: he felt that the tone of his voice could convey exactly the right emphasis on any given point. Later on in my career, frankly, I started thinking voice mails were stupid. When a client receives a hundred of them in a morning, what are the odds he’s going to listen to yours? And in any case, once I started getting to know my clients well, my relationship with them became good enough that they would pick up my call when they saw my number on their Caller ID.

  • Rudy was a culture carrier. And he was sufficiently impressed with the gravity of the occasion to want to commemorate it in classic Wall Street fashion: by cutting the trader’s tie in two and hanging the snipped-off piece from the ceiling.

  • Almost all the partners and managing directors, however, wore expensive but understated suits that came from stores such as Brioni, or that had been custom-tailored on Savile Row or in Hong Kong. Hermès or Ferragamo were the standard when it came to ties, scarves, and accessories for men and women. The unwritten rule about how Goldman Sachs partners and MDs were expected to dress: make sure it was understated, in neutral colors, and not too flashy, but also make sure people could tell it was expensive.

  • Another colleague on the floor pulled me aside that day and gave me some unsolicited advice that stuck with me for a long time. “Change is scary,” he said. “But often change is good. It can lead to new and interesting experiences. Keep your head up and keep an open mind.”

  • Stevens was an associate who carried himself like someone much more senior: that is to say, with great style and a certain air of mystery that fell just on the cordial side of aloofness. He was an intensely private guy. Well groomed and suavely dressed at all times, he favored custom-made suits and shirts; business casual held no allure for him.

  • Daffey was about six foot two and lightly balding, with an athletic build and a friendly, open face. A friend of mine called him the Curiously Tall Guy, for his tendency to slouch in his desk chair and then surprise you with his height when he stood up. He was probably the most charismatic guy on the whole trading floor, universally liked and respected. A Daffey story: Once Gary Cohn—then the global cohead of the Securities division, later the president of Goldman Sachs—walked onto the trading floor while Daffey was at his terminal, in conference with a genius strategist named Venky, a twenty-five-year-old who’d graduated from the legendary Indian Institute of Technology (IIT). The subject of his and Venky’s discussion was a crazy spreadsheet Venky had created: the spreadsheet tracked, in real time, every possible statistic of every player at that year’s Masters Golf Tournament. Daffey, who loved to bet on the Masters, was in golf nirvana. “Gary, come over here!” he yelled to Cohn. The floor went dead quiet. It was like one of those moments in a Western when someone calls out the big gun in the middle of a saloon. Few people would have had the familiarity or the guts to yell an order at Gary Cohn. But Gary went over. “Gary, meet Venky. Venky, meet Gary,” Daffey said. Towering over the diminutive strategist, Gary shook Venky’s hand. “Venky is smarter than you and me combined,” Daffey told Gary. Venky lit up. Daffey had just made his year. Venky then demonstrated to Gary how the algorithm on his spreadsheet worked. Gary was also impressed. “Send me a copy,” he said. (Venky would go on, a couple of years later, to be the main brain behind the reinvented VIX volatility index on the Chicago Board Options Exchange. The VIX is widely followed and traded as a gauge of fear in the marketplace.) A lot of Daffey’s popularity stemmed from senior management’s sheer awe at his client base, which consisted of the biggest, smartest macro hedge funds in the world. Hedge funds are investment funds that can undertake a wide range of strategies, both going long (buying an asset with the view that it will rise in value) and getting short (selling an asset without actually owning it, betting it will go down in value). Because these funds are not highly regulated, they are open only to very large investors such as pension funds, university endowments, and high-net-worth individuals.

  • Daffey developed a strong rapport with these four clients, becoming not only their buddy—he had a high-stakes fantasy football league with all of them for a long time; the proceeds went to charity—but also, in effect, a common link among men who were essentially competitors. Because these clients knew how smart Daffey was, and understood that he was in the center of this high-powered information flow, it wasn’t hard for him to persuade any one of them to do a trade he liked—in massive size. It sometimes took him less than two minutes. He had turned it into an art.

  • Clients and colleagues alike respected Daffey because he was a rare combination: a charismatic guy’s guy with a deep understanding of people, who also happened to be the smartest guy on the floor. Typically at Goldman, people were either very smart and not so adept socially, or they were politicians and schmoozers. Daffey blended all these qualities perfectly, hence his rapid rise to power. I would learn more about his legend later on. At the time, all I knew was that he was an Aussie, a newly minted Class of 2002 partner, and the head of U.S. Derivatives Sales.

  • When I first met with Daffey, I expected to find a Very Important Person who’d be glancing at his watch as he asked me a few pointed but perfunctory questions. This was how I’d always found very senior Goldman people to be: at best, displaying short attention spans; at worst, inattentive. Instead, Daffey seemed to have all the time in the world for me; he chatted with me as if I were one of his buddies, shutting out the rest of the world—he never checked his BlackBerry or lost focus once. I later realized that he was a kind of social genius: he could be comfortable with absolutely anybody. He passed a test I would learn about years later, in a Goldman Sachs leadership program called Pine Street: the Onstage/Offstage Authenticity test measures to what extent someone acts and talks the same with the CEO of a corporation as with the mailman or the security guard. Onstage/offstage authenticity is a trait that truly admired leaders display. I was ten levels below Michael Daffey, yet he didn’t really seem to care. He asked me how the Stanford basketball team was looking. He threw a few gibes at me about how much better Australia was than South Africa in rugby and cricket—the rivalry in both sports is ancient and intense. Warmed to the occasion and the company, I teased him right back. “You guys got lucky winning the last cricket World Cup,” I said.

  • I got in at 5:30 that morning, an hour early, to deal with orders from our Asian offices, where it was the end of the trading day. There were at least twenty e-mails in my in-box from my counterparts in Tokyo, Hong Kong, and Sydney, many with messages such as “For the Sydney Teachers Retirement Fund, I need you to buy 250 NASDAQ futures on the close.” I shook my head. Which close? The U.S. close? The Asian? The futures? The cash market? Corey and I had tried to train these guys to be very specific about what they meant, but they didn’t always stick to the script. And he had taught me that if they could hold an error against you, they would, because they wanted to offload all their risk on you. I would wake these guys in the middle of the night if necessary to get them to clarify their instructions. Better to get it right than to be sorry later.

  • It happened in the spring of 2005, a turning point on Wall Street. The recession was ending; the housing market was beginning to percolate. Moods around the financial markets were beginning to pick up. On the Goldman Sachs trading floor, Daffey’s boss, Matt Ricci, a former Yale basketball player and a very gung-ho partner, was leading the charge. Every Friday morning, Ricci used to stand up at the podium on the edge of the trading floor and give these sometimes rousing, sometimes cheesy pep talks to the troops. There was a microphone on the podium that broadcast into the Hoot, so if you were somewhere on the outskirts of the huge trading floor and couldn’t see Ricci, you still couldn’t escape his voice. And he was very fond of catchy abbreviations: a favorite of his was one he’d borrowed from David Mamet’s Glengarry Glen Ross—ABC, or “Always Be Closing.” (I don’t think he quite realized that Mamet’s play was a dark satire of unethical business practices.) He also relished GTB, or “Get the Business.” And then there were the sports analogies: “Let’s give it the full-court press.” “Let’s bring this one across the line.” “Let’s all raise our game into the end of the quarter.” “Let’s play through the whistle.” He also coined some terms that became widely used around the franchise: one of them was elephant trades, trades that netted the firm over $1 million in revenue. An imposing figure, tall and always dressed in a suit, even on casual Fridays, Ricci used to love to stand at the podium and say, “Let’s go out and find some elephants today! Let’s go get the biggest trades to the tape!” People had mixed opinions on the guy. Some people found his stuff inspiring; others, not so much.

  • Ricci called us all into a room, the entire Equity Derivatives Sales force, and said, “I know a lot of you are upset. If you want to know who you should be upset at, it’s me. I’m the one who made the decision.” And he looked everyone in the eye. It was a strange moment, but I was impressed with his lack of bullshit. Yet it was also a sad moment—it’s very rare to have a boss you like as much as everyone liked Daffey.

  • After Connors made it through his rough early days at the firm, it was clear that he had some significant skills. He was about as good as anyone at getting to know clients, showing dedication to them, understanding their problems, and helping them work toward solutions. Clients loved him. Sometimes the solutions he found were very profitable for the firm, but Connors would have to work hard and long to get these trades to the tape. They were not quick wins. Hedge funds may be able to trade “on the wire” (immediately) in response to an idea you give them, but as a general rule, institutions such as pension plans (both corporate and state), sovereign wealth funds (governments such as Abu Dhabi, China, Hong Kong, Norway, Qatar, Saudi Arabia, and Singapore), insurance companies, and mutual funds (e.g., Fidelity, Wellington, T. Rowe, Vanguard) take much longer to work toward executing on a solution or investment idea. Sometimes this is because they are being thoughtful and have a long-run horizon. Other times their slowness could be a result of bureaucracy and the size of their organization; at worst, it could be because of lack of sophistication. Connors had great success servicing clients that many people within the firm had thought were dead ends: particularly sleepy state pension plans all over the country, which no one ever thought could do any business with Wall Street. The managers of these funds really appreciated his patience and focus on them. Connors was primarily a big-picture guy: his working habits when it came down to the nitty-gritty were idiosyncratic. He had a reputation for disappearing from the desk at odd hours. It was my job, as his backup, to cover for him—to help out whoever was looking for him so it wouldn’t be a big deal that he wasn’t there. I never asked where he’d been. The etiquette at Goldman was that you didn’t inquire why someone more senior than you wasn’t on the desk. If internal people or clients asked, I would just say, “Connors is off the desk. Can I help?”—even if it was 4:30 P.M. on a Friday and he had clearly left for the weekend.

  • On one of our first days at Goldman, Phil pulled me and a couple of other junior analysts aside and gave us some advice that I’ve never forgotten. “Everyone here is a salesman,” he said. “It doesn’t matter if they’re a trader, if they’re a quant, if they’re a salesperson. Everyone is selling something.” His point was: never assume that people are not trying to advance their own agendas. He opened my mind to being a little bit skeptical (as opposed to being cynical), to giving a hard (but not necessarily harsh) look at what might be behind requests and compliments. He advised me to be alert to people, even people senior to me, trying to win my favor. You can never be sure where people are coming from, Phil said.

  • Lloyd had become the golden boy of Goldman Sachs. Within the firm, he had developed an aura of being a prescient genius who just couldn’t put a foot wrong. People admired him, feared him, respected him. He was equal parts intimidating and self-deprecating, but he came across as a regular guy with a good, sharp sense of humor. When you met him you were won over by him. Hank, on the other hand, was an old-school banker: a little gruff, straightforward, and conservative, even abrupt at times. (Rudy once played Hank in a prank video for the Goldman holiday party; they resembled each other very closely in height and appearance. Ironically, they were not completely dissimilar in personality, either.) You wouldn’t catch Hank getting loose at a company party; he was a teetotaler—and a bird-watcher, ardent environmentalist, and exercise fanatic. I had worked out next to him in the company gym, watched him put up some pretty impressive weight on the incline chest-press machine. (My one other experience with a Goldman CEO in the gym was the time I saw Lloyd “air-drying,” that is, walking around the changing room au naturel to dry off from his shower. But this was not uncommon among a generation slightly older than mine. I don’t think it was a show of power.)

  • Gary was a brilliant trader—legend had it that he’d single-handedly cornered the aluminum market—with an interesting background. Severely dyslexic, he’d been continually told as a child that certain doors would be closed to him, but he made it his business to open them all. At six foot three and 220 pounds, he looked imposing and determined. At American University, he found he liked financial markets a lot more than he enjoyed studying; he literally talked his way into his first job on the commodities exchange by sharing a cab to the airport with a commodities trader and persuading the trader to hire him. He succeeded there on cunning, instinct, and emotional intelligence. Trading is a human business. When you’re in the pit, you see the fear in people’s eyes. (This was what Gary had seen when he started buying up aluminum.) The guys who get to the top are the ones who are book-smart enough, but who have an instinct about what motivates other people. Gary Cohn was a genius in that regard.

  • Gary had a very distinctive signature move, one he had become famous for within the firm; I must have seen it ten or fifteen times in action. It didn’t matter if the person he was talking to was male or female; he would walk up to the salesman or saleswoman, hike up one leg, plant his foot on the person’s desk, his thigh close to the employee’s face, and ask how markets were doing. Gary was physically commanding, and the move could have been interpreted as a very primal, alpha-male gesture. I think he just thought it was comfortable. And what came out of Gary’s mouth was not what you’d expect. He was friendly. He was low-key. He’d say, “How are you doing? How is your day going?” All in very soft tones. What I began to notice as he stopped by the desk was that he almost never talked about business. Instead, it was chitchat of the “How ’bout those Yankees?” variety. In later years, when I heard Gary speak about leadership at Pine Street, Goldman Sachs’s leadership-development program, he would always emphasize the importance of walking the floors, letting your people know who you were. He also talked about consistency of mood, needing your people to know you were even-tempered—you weren’t going to flip out every two minutes—and predictable. To his credit, this was how I always saw Gary—and Lloyd, for that matter: always upbeat, never negative or intimidating. They were (and are) very skilled at human interaction. They understood how to win people over, how not to scare people, how to put on the pressure when they needed to. It made them great leaders. Now that Hank had gone to Treasury, Lloyd and Gary were the future.

  • It was an interesting day if you were a student of human nature. The bonus meetings were much like the firings. People were called into a partner’s glass-walled office, and everyone outside could see exactly what was happening. The difference with Bonus Day was that the meetings usually proceeded from the most senior people to the most junior. The partner in charge of your group would sit in his office and, outside, at around 6:45 A.M., the phone lines would start ringing. The most senior person’s line rang first. He’d go into the room and then emerge ten minutes later with a poker face. The next person would go in and then, ten minutes later, come out with a poker face. And so on, down the line. There was an absurd amount of emphasis placed on these meetings. For many people, the session determined a person’s entire self-worth. In many cases, the meeting inflated (or deflated) an already exaggerated ego. But however arbitrary the number handed down by the partner might be, there was also a real poignancy to the bonus meeting. Many people had spent the year working eighty-five-hour weeks, killing themselves for the firm. They expected something in return.

  • The summer of 2007 was highly unnerving. What is happening here? everyone wondered. This market makes no sense. Colleagues canceled vacations, afraid to be away from the desk until the volatility died down. Wall Street likes predictability, and all at once predictability had gone out the window. Confidence evaporated. Clients stopped trading. It was sad to see the order flows of clients such as Global Alpha decrease slowly but surely, and significantly. Some of these quant funds went from being among the biggest commission payers on the Street to the smallest, with annual commissions plummeting from the millions of dollars to the thousands. The business environment after the summer of 2007 was tough. We were all looking for ways to keep the lights on. One solution, according to management, was to go elephant hunting. In quarterly internal “town hall” meetings conducted by the heads of the division, there was often an entire segment devoted to giving kudos to salespeople who had done elephant trades. In good times, transparent, flat-fee commission business was steady and paid the bills; it was a volume business. But if the register wasn’t ringing, as was now the case, new types of business had to be found. What could make up the fastest for lost revenue? Products that were quick hits, that had very high margin embedded in them. As a general rule on Wall Street, the less transparent a product is, the more money is in it for the firm. Over-the-counter derivatives (OTC, meaning not listed on an exchange) and structured products (complex, nontransparent derivatives with all sorts of bells and whistles) were the trades to go for. As I’ve mentioned, Matt Ricci, my boss’s boss, had coined the term elephant trades to signify those trades where Goldman made $1 million or more in discretionary profit. When you executed one of these trades, the revenue would go next to your name in the form of a gross credit, or GC, another favorite Ricci term. (Matt Ricci had left the firm by early 2007 to go to another bank, but many of his catchphrases remained.)