My Time at Lehman

I started at Lehman Brothers on June 1st, 2007 as a first-year analyst. It was my first job out of college. Dick Fuld, the CEO at the time, publicly discussed “the road to two-hundred,” in which he would not retire until the stock reached $200 per share, almost three times the price when I arrived. Everyone at the firm believed this as though it were fact – that there was something special about Lehman Brothers stock – it always went up.

I joined Lehman for a few reasons. The first was personal. My mother worked on Wall Street and passed away when I was a teenager. I felt, somewhat misguidedly, as though following in her footsteps would bring me closer to her. The other reasons were simpler. I had been interested in the stock market as a kid (though I went to work trading bonds and credit derivatives), I wanted to make a good living, and I thought maybe, just maybe, it would be a bit of fun.

Investment banking was a default career of sorts in 2007, something for the over-achieving ivy-league kids who didn’t quite know what they hell they wanted to do, and there were plenty of jobs being given out back then. The startup community in NYC was nascent, and entrepreneurship as a career path was never something I was exposed to. I vividly remember walking into the career services office my junior year in college and being prompted with, “Well, which bank would you like to work for?” I was later told that of my class of 1400 graduates from Yale, forty percent took jobs in finance. No joke. I remember thinking even then (as many probably were), that while rising global powers such as China were positioning themselves to be the largest energy producers in the world, the United States was seemingly intent on producing the largest number of hedge fund managers. Fortunately, from my viewpoint at betaworks today, and after living in China for a year, I believe that innovation is alive and well in the United States of America, although much still has to be done to ensure that we’re competitive in the decades to come.

To make a long story much shorter, my experience at Lehman Brothers was not what I had hoped it would be.

Once I had started, It took me several months to figure out what the traders around me were actually doing, or for that matter, what I was supposed to be doing. We were tasked with both providing liquidity for our clients and trading the firm’s own book (money) in the corporate bond (and structured derivatives) markets. I worked alongside a number of PhD’s and rocket scientists. These were highly intelligent people moving around unthinkable sums of money and making huge gambles to boot.

In the early days, I learned important lessons on markets, liquidity, and how to value impossibly complex financial products. I would spend days attempting to understand the intrinsic value on structured bonds collateralized with physical jet engines or commercial real-estate scattered across various regions of the country. The reach of these products was real and the analysis could mean millions won or lost for the firm. This purely analytical slice of the industry was actually quite fascinating.

Unfortunately, what I eventually came to learn, and this took time, was that what was really happening was a simple transfer of wealth, more often than not from the less intelligent and informed to the more so. I worked in a highly opaque market. There was no price ticker scrolling across our screens telling us what these bonds and derivatives we traded were worth. In fact, no one really knew what any of this stuff was worth. Which, it turns out, is a trader’s field day. What this meant, in its simplest form, is that these traders (or salespeople) could buy bonds at the “market” price from intelligent hedge fund managers in NYC and sell this same crap at much higher levels to less sophisticated pension funds and insurance companies in middle America. What I discovered, quite starkly, is that the part of Wall Street that I worked in was simply transferring wealth from the less sophisticated investors, often teachers’ pension funds and factory workers’ retirement accounts, to the more sophisticated investors that call themselves proprietary trading desks and hedge funds. Of course, the traders had all sorts of excuses and jargon to deal with this truth. “Oh no,” they would say, “We are important providers of liquidity that create stable financial markets. We’re a crucial part of a system. And besides, if we don’t do it, someone else will.” These are the lies that people tell themselves so that they can buy larger homes.

Although it took some time, many months, the moment I realized this truth, I was done. To do that sort of work, you have to either really, truly love the money, or convince yourself that it somehow has worth. Otherwise, the hours, stress, and bullying will eat you alive. I remember taking the subway home each night asking myself “What have I done today? What have I created?” And it meant that I couldn’t sleep well, I was embarrassed to tell people what I did, and I felt as though I personally owed every single person that I mucked over in the markets each day. The experience reminded me of one as a child when I unfairly sold some worthless items to neighbors at a stoop sale in front of our house in Brooklyn. When my parents found out that night, they made me go from home to home on our block returning the money.

Apart from the actual work, I also came to realize over the course of the year that I was at Lehman (and Barclays), that a perverse and at times terrifying culture existed at the firm (and from conversations with friends most likely throughout Wall Street). The people around me measured themselves by one metric: The amount of money he or she made for the firm. Their bonus determined the respect they received. And yet, every last person felt poor. I remember during the first bonus season hearing that one reasonably successful trader was thinking about leaving the firm. I asked one of my colleagues why that was and he responded, “He made just under a million. They fucked him.” I was astonished. I had the incredibly good fortune to live a comfortable childhood. I received a wonderful education at a top public high-school in NYC and never really needed anything. But the lens through which the people around me at Lehman looked at the world was so distorted that I couldn’t figure out where they came from. In what possible reality can someone receive a million dollars and feel as though they got fucked?

What this bizarre reality really meant is that I couldn’t be myself. In Chris Sacca’s widely viewed commencement speech, he encourages graduates to go on and be their weird selves. When I heard this for the first time, it resonated deeply with me, because my time at Lehman was just the opposite. In the latter months of my time at Lehman, I found much solace in reading literature and novels that had nothing to do with my job. I read on the morning subway before sunrise and it calmed me. One day when I got to work, I left my book on my desk, The Corrections by Jonathan Franzen. My boss saw it and asked “What the fuck is this?” I told him that it was a book I was reading. He replied, “Well get it the fuck out of here. We’re here to make markets and money. And nothing else.” And he was right. There was no place for that book there. There was no place for my weird self.

And so a year after I started, after the largest bankruptcy in American history, after surviving six rounds of layoffs, I left Lehman (at that time Barcap) during the worst recession our nation had seen in decades. I had little idea of what I might do, of how I might earn the next paycheck, or of how I might eventually find a place to create real value in the world. And it turned out to be one of the happiest and most creative times of my life.


Now read this

The Current State of “Seed” Investing

After sharing a couple quotes about the seed VC ecosystem on twitter, I figured I’d write a longer post so that founders might better understand what they should expect from “seed” investors when raising their first institutional round... Continue →