“There is no other reason for being in business but to count the money. If you don’t concentrate on counting the money people soon realize that money is not the focus of your consciousness, so they give you everything other than money-kudos, acclaim, praise, etc., and sooner or later you’ll be in trouble.”
Stuart Wilde, Author
In the mid 2000’s I worked at Merrill Lynch as a bond trader. At the time we were considered one of the premier investment banks in the world and to work there was really quite amazing. I worked with some really smart and remarkable people, but it had its price. At the end of every day, every trader from every area had to mark his book to determine how much money he had made or lost while the salesman had to tally their production credits to gauge how effective their sales were that day. Needles to say it was quite stressful to be measured each and every day to see how profitable we were. The fact is that Merrill Lynch counted the money each and every day and was always concerned about growing the bottom line.
However two events transpired during that time, well before the financial crisis hit, that I took as a signal that the firm was doomed.
The 1st event was the AIDS Quilt
I use to get to work at 6:45 am every day eager and ready to go when one day, I walked in the main building in lower Manhattan to see a huge AIDS quilt adorning the main lobby. All I could think of was “That is a really weird thing to display in the lobby of an investment bank.” The lobby should have had a monument to the all mighty dollar because every person in that place was there to make lots of money. But upon reflection, what Merrill Lynch wanted people to know is that even though we were an investment bank, they really cared about the gay community and people who had suffered from the AIDS virus. It was the cheapest form of self-promotion and self-aggrandizement I had ever seen.
The best use of a bank’s time is making money, increasing share holder value and managing risk. If Merrill Lynch had done that better they would not have gone bankrupt (nearly) and had to have been sold to Bank of America. Since Merrill Lynch was a premier bank, they thought their status would always be just that and thus turned their focus to improving their “corporate image.”
As a result of Merrill’s mismanagement of finances, thousands of employees were fired, pension funds were decimated and hundreds of thousands of people who relied upon their income from Merrill Lynch investments were adversely affected. So were the firm’s employees. When Merrill Lynch was focused solely upon the money, more lives benefited and the individual employees had more money to give to charities. Now in 2014,all of these former stakeholders have less money than they did in 2008 and their ability to give to charity has been greatly reduced. The irony is that when Merrill Lynch was focusing on helping the downtrodden less money, not more, actually flowed to them.
The 2nd Event was the hiring of Stanley O’Neal
At the time of his hiring by Merrill Lynch, Stanley Lynch was perceived to be as shrewd shrewd as he was tough at cost cutting. His grandfather was supposedly a slave and Stan’s upbringing and perseverance to land the top job at Merrill was roundly lauded. Stan had worked on the assembly line at GM, paid his way through college and eventually went to Harvard. He had a successful career at General Motors, as well as within Merrill Lynch, before he landed the top job. He ran the company between 2003 and 2008 and during that time he destroyed the company which was subsequently forced to merge with Bank of America.
Although Stan made some of the same mistakes that his counterparts did at Lehman and Bear Stearns, I want to focus on the part that always caught my attention. During his term as President of the firm, he always made it well known that the bank was the only one run by a minority and, specifically, an African-American. You would be hard pressed to scan the news archives between 2002-2004 without seeing that Merrill Lynch was run by a minority as well as the bank championing the cause of minorities in senior positions of responsibility. I believe Merrill Lynch’s laser like focus with the press, as well as within the firm, regarding the color of Stan’s’ skin masked and distracted from his deficiencies. The firm, the street and the general public wanted him to succeed because of what he represented. Instead of focusing on the person, the firm decided to focus on the persona and this is what doomed the firm. Once the firm realized what Stan O’Neal had done to the firm ( loading up on debt and not tending to the firm) it was too late.
I believed then, and still do today, that the firm’s misplaced focus on two political fantasies, corporate charity and minority hiring, sowed the seeds of the firm’s destruction. If Merrill Lynch had devoted more time to what it was created to do, maximize legitimate gain and less to the political correctness of its public image within the gay and black communities, more money would have flowed to its investors and onward to charitable causes.
That’s how uninterrupted capitalism actually works.