An Insanity That Pays

I recall the moment before I entered the alternate universe of finance. I was in a job interview, pondering whether to leave a job I loved as a reporter for The Wall Street Journal, for a job I knew next to nothing about at Morgan Stanley. As we reached the end, my interviewer asked what I was earning at the world’s most influential financial publication.

My $85,000 annual take was a point of pride for me, but the look on her face told me what a pitiful soul I was. “You have to take this job, Neil,” she said, collecting herself. “If only for your family.” I had a good laugh at that one. Who picks a career merely according to what’s best for his family? My friends mostly were other reporters. We were taught to follow our bliss, to pursue careers of consequence.

As I weighed the offer, I cloaked myself in the blanket of moral superiority. Now, something like my personal morality play is on the public stage, as crusaders like Michigan Senator Carl Levin fan the flames against the deputized villains of Wall Street. It is, of course, natural for those who don’t make much money to despise those who do, particularly when the latter are the ones who screw things up.

We are still trying to make sense of the financial crisis. Over the next weeks, the Senate and House will try to reconcile their reform bills, and regardless of what happens, the profit-making and risk-taking infrastructure of Wall Street will remain intact.

This I know in part because for 16 years, first as an equity research analyst and then as a hedge fund manager, I lived in the alternate universe called Wall Street, where each day I went to work with the single intention of making money. What is your goal when you go to work in the morning?

Perhaps there was a time when Wall Street’s job was to to help companies grow and yield a prosperous America, but that quaint notion died long ago. There is a rock-ribbed oath in finance to make money by any legal means necessary; profits are their own justification. This notion is still hard for many to understand.

Consider Senator Levin’s evisceration last month of Goldman Sachs CEO Lloyd Blankfein. How strange the two men, though both graduates of Harvard Law, must appear to each other. Mr. Levin was once general counsel for the Michigan Civil Rights Commission; after that, he was chief appellate defender for the city of Detroit, and for the past 45 years, he has been a politician. As a senator, Mr. Levin earned $162,100 last year. This is not a man who appears to have ever taken a job “if only” for his family.

What about Mr. Blankfein? He grew up poor, became a tax lawyer, then quickly shifted his sights to Wall Street. Everything I know about Mr. Blankfein tells me he is an honorable man. But by all appearances, from a very young age, he was professionally motivated to make money, and he’s done a phenomenal job of it, with a net worth according to public filings of more than $700 million. To Mr. Levin, that must seem obscene. But to Mr. Blankfein, whose parrying made him a hero to the Wall Street rank and file, he has just been doing his job, and doing it well.

Back in 1993, before reporting to work, I sheepishly requested a $5,000 advance against my bonus so I could buy a new wardrobe. On my first day, I confessed to my boss, a brilliant and a 100 percent moral individual, that I wasn’t motivated by money. “Then you will fail here,” he said. “It is the way to keep score. It is the only way we are measured.” The wisdom of this message was only revealed over time.

My first year, both the firm and I did well, and they doubled my guarantee, with encouraging words about the future. My mind reeled from the possibilities, and while I discussed it with no one outside my family, not a day would go by when I wouldn’t think of my year-end bonus. I had a fine 1994, won more autonomy and made vice president, in record short time. But 1994 was a tough year for Wall Street; Morgan Stanley’s earnings fell and so did mine, by 10 percent. The euphoria of my rookie year had long vanished. My managers tried to be encouraging. This was a cyclical business, and things would get better quickly. But I could not contain my indignation, and I said some things I would later regret. That evening, over dinner with my wife, I realized something. “Honey,” I said, “it has taken me exactly a year and a half to become a Wall Street asshole.”

Left to its own devices, Wall Street has repeatedly shown it will devise products that are mind-bogglingly profitable when they work but ruinous to the rest of society when they don’t. Shorn of their own propaganda, these firms are nothing more than coldly efficient moneymaking factories. But don’t expect to hear that from them. If you live in a bubble long enough, it is the rest of the world that seems insane. How many times, during my finance days, did I hear the line, “If he’s so smart, why isn’t he rich?”

 

Mr. Barsky retired from the hedge-fund business in 2009.

 

An Insanity That Pays