The world of finance always fascinated me growing up in the early 2000s. With two parents who worked on Wall Street — a father attached at the hip to his BlackBerry PDA and a mother who gave up her day job as a bond broker to raise two boys — I bombarded them each day with questions about the ins and outs of stocks, bonds and what it was like to launch their careers during the economic boom of the 1980s.
My hunger for the basics of how deals were structured, what exchanges did and other fundamental concepts continued through college and into adulthood, pushing me in the direction of business journalism. "Why not work in finance outright and just do what your parents did?" asked many concerned friends and family members wondering if I made the wrong choice.
For one simple reason: It's learning about the form and function of the deals that I always loved, not being the architect.
A mix of a desire to continue my education and general intrigue led me to Michael Lewis' "Liar's Poker." It's the book that launched Lewis' writing career and is celebrating its 35th anniversary this year. "Liar's Poker" is an oft-recommended dive into the highs and lows of Salomon Brothers, one of the most profitable investment banks of the time.
Lewis' firsthand account of his time as a bond salesman for Salomon from 1985 until he left in 1988 holds your hand through a period of relative inexperience as a trainee to entry-level salesman to multimillion-dollar dealmaker.
Despite the book's age, "Liar's Poker" retains its status as a must-read for anyone interested in the inner workings of Wall Street. The lessons it teaches about the true costs of success and the methods behind building an entity as dominating as Salomon once was remain true today. Many know the fate of Salomon — it was plagued by a scheme related to buying Treasury bonds and eventually sold to Travelers Group. The book ends before this period is covered but it still serves as a stark reminder that even seemingly indestructible companies can, in fact, be toppled, a lesson the industry can't afford to forget. (Note the banking crisis last year.)
Outside of a master's degree in economics from the London School of Economics, Lewis' major in art history combined with his experiences of bartending and skydiving left him at a disadvantage during a mass surge of students studying finance. But like many who landed jobs in the field, connections proved to be the high hand over pure experience.
A chance encounter with the wife of a senior Salomon Brothers managing director turned into breakfast with the firm's former head of recruiting Leo Corbett and, eventually, a seat in the training class of 1985. "Oddly enough, I didn't really imagine I was going to work, more as if I was going to collect lottery winnings," Lewis writes.
But with the paycheck came an ingratiation period into the culture that proliferated at Salomon and other firms of the era. After three months had passed, trainees spent the remainder of the program patrolling the trading floor to see how the company functioned and commence with selecting their "jungle guide," or the veteran who would take them under their wing. Thus began the "Great Divide" between those throwing themselves at the mercy of managing directors in the hopes of a desirable landing, and those playing hard to get.
Doing so garnered no relief, however. When it came time for job placement, managing directors became talent scouts, trading trainees based on appearance, individual merits and — once again — connections.
The first few chapters that recount Lewis' training, reflective of the firm's desire to brainwash its inductees into willing converts, are interesting enough, but it's the anecdotes of miniature finance lessons nestled between the tales of jilted clients and warring executives that really give the book its gravitas.
For someone whose day-to-day life doesn't directly involve bonds or mortgages (if yours does, see our sister publications), the walk through the rise and fall of the mortgage bond market would normally lead me to aimlessly thumb through the pages until I returned to Lewis' perspective. But given that his lens is through bond options and futures sales, this lookback into Salomon's mortgage business involves the man responsible for its growth — Lewis Ranieri.
Before earning his title as the "father of mortgage-backed securities," and his inadvertent hand in the 2008 financial crisis, Ranieri worked his way through Salomon's mailroom into a position trading public utility bonds. It was then, in 1978, that he was nominated by industry pioneer Robert Dall to become the newly created department's prime trader.
Over the next several chapters, Lewis uses the "loudmouthed and brash" Ranieri to provide an overview of the birth of the mortgage-backed securities industry and Salomon's role in its creation and subsequent domination for some time.
In addition to the historical significance of Ranieri's tenure, he's also representative of the hunger that allowed mostly men to succeed on Wall Street during that time. When the book's main narrative begins, in 1985, the barrier that was erected between the back and front office required traders to have a resume, graduate from college and most importantly "look like an investment banker," writes Lewis.
Equally interesting, and telling of the time, is the disparity in which jobs women were allowed to hold. The popularity of bonds in the '80s pushed many trainees toward the trading desks, but Salomon's "ordering of the sexes" dictated that within the firm, "men traded, [and] women sold."
"The immediate consequence of the prohibition of women in trading was clear to all: It kept women farther from power," Lewis writes. The banking industry has progressed since then. But there's still measurable work to be done given the dearth of women in the C-suite and other traditionally male-dominated jobs.
I parted ways with the book a bit wearier, albeit smarter, and was left thinking about all the stories my parents told me about their experiences. After what they've gone through to get me where I am in life, the least I can do is give them a temporary reprieve from my bombardment of questions.
