For the Love of Money (17 page)

CHAPTER
32

The Mad Max Scenario

¤

P
ateras Capital was founded in 1995 by Eldrick Frost and Peter Conroy, when they were both around my age (twenty-nine). Peter was a distressed trader and Eldrick was a research analyst, and they started Pateras with $4 million. Now, they managed $20 billion. They were both billionaires.

Eldrick and Peter made an unlikely pair. Eldrick had an Ivy League pedigree, and he looked more like a professor than a hedge fund manager. He was bald, save for a few wisps on top, and he wore frumpy sweaters and wrinkled khakis over his soft, pudgy body. He looked like a mole with glasses. But it didn't matter what he looked like; his brain was all that mattered.

People whispered about Eldrick's brain as if it were a national treasure. He was one of those guys you could envision having his brain cryogenically frozen, so that he might bring it back online a hundred years in the future, atop a wheeled robot with a microprocessor heart. It was widely believed he could have cured cancer, or fixed the situation in the Middle East, if only he'd focused on it. But he didn't—he focused on investing, and he was a legend. His job was to know everything about everything, and he did.

Peter was the
CEO
of the firm and handled the hiring and
firing. He was trim and tan, and his hair looked as if it had been clipped that morning, every day. His ties were worth more than I'd paid in monthly rent down in Charlotte.

And then there was Sean. He was ten years younger than the two managing partners, and not yet a billionaire. But with his talent, intensity, and instincts, he would likely ascend to that esteemed rank.

For the first six months I was there, I loved Pateras. I loved how library-quiet the trading floor was—like a church, but for the worship of money. I loved the freedom I had to focus on any sector, any company. I let my curiosity lead me. Sometimes I'd go into an empty office and read for hours. I couldn't believe I was paid millions to do that. What I loved most of all was how close I got to sit to two billionaires and Sean, the kind of men I'd been reading about my whole life.

But after I returned from Fire Island, things started to look different to me.

If the market crash in 2007 had been a thunderstorm, the 2008 crash was like an earthquake and then a tsunami. In the first quarter of 2008, Countrywide (the largest US mortgage company), Northern Rock (the largest UK finance company), and Bear Stearns (a major US investment bank) all failed.

It's difficult to explain how surreal it was when Bear ­Stearns went down. Bear Stearns was one of the most prestigious, well-respected institutions on Wall Street; it dissolved over a single week. At the same time, a headline announced that Eliot Spitzer, New York's moralizing governor, was part of a prostitution ring.
Is the world going mad?

Things got really crazy when Lehman Brothers went down. Lehman was much bigger than Bear Stearns, as powerful as Goldman Sachs, a derivatives behemoth. Because of Lehman's massive derivative exposure, the Lehman bankruptcy roiled the
CDS
market. Every firm with
CDS
trades
with Lehman suddenly lost all those positions overnight. For the first time in history, there was an emergency derivatives trading session on a Sunday. I received a text that morning from Sean asking me to come to the office. Across Wall Street, trading desks were fully staffed. Billions of dollars' worth of derivatives traded that day.

For the next several months, I worked fourteen-hour days and both days on the weekends. Work was exciting but terrifying. Market dislocations meant opportunity, but now the market wasn't just dislocating; it was disintegrating. I'd come home from work exhausted and fall asleep immediately, waking six hours later, still exhausted.

I was also exhilarated. Almost everyone on Wall Street got killed, except for us. Pateras was positioned defensively, and so we were actually making money during the crash. From a safe vantage, I watched the unmasking of Wall Street. What a rising tide conceals, a falling tide reveals.

I knew the name and biography of every major
CEO
on Wall Street. I knew the investing style and track record of each manager of the top ten hedge funds. To me, these guys were legends. But in 2008, they all lost money. The average hedge fund was down 20 percent, and almost every investment bank had to be saved from bankruptcy.

It wasn't that I felt superior because I was profitable during the crisis. What bothered me was what the widespread losses said about the nature of the business.

The careers of all these Wall Street legends had spanned one of the greatest bull markets in history. Maybe their returns over that time were less about individual skill and more about the fact that the market had done nothing but go up. Maybe what I'd thought was talent was simply being in the right place at the right time. Wall Street started to look less like a bunch of smartest-guys-in-the-room and more like a group of men who'd secured a seat in a ring of chairs surrounding
a huge pile of money, a pile that was growing not because of their skill, but because that's what money did. The system was structured—through monetary policy, carried interest deductions, corporate tax breaks, and industry lobbyists—to ensure it.

That might not sound like a crushing realization, but for me it was. I knew Wall Street wasn't about doing something meaningful with your life, but I had seen it as a great coliseum for my young ambitions. Now it looked less like a meritocracy than an oligarchy.

People were referred to not
by their accomplishments but by the size of their bank accounts. People would say, “That guy's worth fifty million dollars,” or “That guy has twenty-five million dollars in the bank,” without referring to what they had done to earn that money. Because it didn't really matter. Wealth was their only distinguishing feature; guys get rich on Wall Street without doing anything different than the people who came before them.

Near the end of 2008, people started talking about that year's bonuses. Because of the federal bailouts, there was talk about the government limiting bonuses on Wall Street, and many traders were livid.

I empathized with the frustration of traders who'd been profitable that year. They'd made a ton of money for their firms. On the other hand, given that if the government hadn't stepped in they'd be bankrupt, it seemed hard to justify a big bonus. But traders were furious. These were guys whose faces would turn purple talking about the sense of entitlement of union workers who demanded pension payments even when their employers were struggling.

But it was when I heard guys who
lost
money complaining about their bonuses that I started to see the truth about Wall Street. Wall Street wasn't a talent-based meritocracy; it was more like an addiction. Doing whatever you had to do—­
rationalizing, lying—to get the money to fill that empty hole inside.

In the spring of 2009 it looked like every financial institution—J.P. Morgan, Citibank, Bank of America—might go down. At Pateras, we often talked about the Mad Max ­scenario—what life would be like if civilization as we knew it ended. What skill sets would be valued (mechanics, surgeons) and which would be obsolete (derivatives traders). It wasn't just talk. My trading partner flew to Vermont to take a survivalist course. Sean Mallory bought a gun. And like many other paranoid Wall Street traders, I withdrew a chunk of money from the bank so that if things got bad, I would have cash on hand.

That day I walked down to the nearest Bank of America branch. When I asked the teller for $7,000, she asked me what it was for. I immediately felt guilty. If the world collapsed, I only wanted to save myself.

“Vegas,” I said.

On the way back to work I stopped to pick up the usual lottery tickets for the guys at Pateras. Whenever the Mega Millions jackpot got above $100 million, we'd buy four tickets, with the potential winnings to be split between us. Sang Kim, a distressed-loan trading specialist (also obsolete in a Mad Max scenario), was about as senior as me. The other two guys were a few years younger and earned less, but their career paths stretched safely in front of them. They, too, would be rich.

We loved buying lottery tickets, because we got to spend the rest of the day talking about what we'd do with the money. The first thing, we all agreed, was quit. While Pateras was a dream job, it was still a job. We all woke up to the screech of an alarm clock, we all spent more time at work than we did with people we loved, and we all resented our bosses.

We talked about what we'd do when we quit, the houses
we'd buy in the Bahamas, or Jackson Hole, or Charleston. But it wasn't the houses we cared about—it was what life would look like when we were living in them, doing whatever we wanted to do. What we were really talking about was freedom.

Each time we bought lottery tickets, one issue would be hotly debated.
When
would we leave? What if we won the lottery in October? Some of us said we'd leave immediately, but others said that they would wait four months to receive their yearly bonus from Pateras. “Let's not forget,” I sometimes said, “that even if you are a multimillionaire, one million dollars is a lot of money.” We'd argue back and forth, and then someone would make a joke about high-class problems, and how pissed the rest of the world would be if four hedge fund guys won a $100-million jackpot. We'd laugh and then go back to talking about what we would do with the money.

That afternoon I went into an investment meeting with four people and Eldrick, four lottery tickets and a thick wad of hundreds in my front left pocket. The topic of discussion was the beaten down bonds of a struggling media company. As the meeting wound down, we started discussing the new financial regulations being discussed in Congress, which would be very restrictive to hedge funds. Everyone in the room thought they were a bad idea.

“But don't you think,” I said, “the regulations make sense for the system as a whole?”

Eldrick shot me a withering glare. In a measured tone he said, “I don't have the brain capacity to think about the system as a whole, Sam. All I'm concerned with is how it affects us and our business.”

He looked scared. That year, I would undoubtedly make millions—Eldrick would make
hundreds
of millions. But when I saw the expression on his face, I realized that the only
difference between Eldrick and me was twenty years and a billion dollars. We were both afraid and were toiling under the delusion that the next million—or, in his case, hundred million—would make us feel safe. I chuckled as I ran my hand over the Benjamin Franklins in my pocket.
I'm pretty sure that this won't keep me safe if civilization as we know it ends
.

CHAPTER
33

Fear, Love, and a Billion Dollars

¤

T
he next morning when I walked into the office kitchen to pour myself a cup of coffee, I saw Jake Delancey, a shrewd analyst and one of the more powerful people at the firm, at the counter, making himself a protein shake. He ­nodded.

“Morning, Sam,” he said.

“Morning, Jake.”

“You look tired,” he said. “You get laid last night?”

I can only imagine what my face looked like. No, I hadn't been laid. It had, ahem, been a while. And no, I didn't want to be asked that by a senior guy in the firm. I was sick and tired of what passed for conversation on Wall Street.

“No,” I said.

“Too bad,” he said. “When I was your age, I killed it. Like shooting fish in a barrel.”

I tried to fake a smile—Jake would have a say about the size of my bonus—but I'm sure I betrayed some of my annoyance.

“It's never been that easy for me,” I said, and walked out with my cup of coffee.

That comment was only the beginning of what would turn out to be a very long day with senior people at Pateras Capital.

Earlier that summer, Peter Conroy, one of the two billionaire founders, had announced a series of staff dinners. Each Wednesday, Peter would take eight analysts and traders out, and over the course of a meal he would share his knowledge of specific industries and his contacts with the team. That night was my dinner. I was dreading it.

Peter Conroy was the apotheosis of a thousand liberal nightmares. He brought his own wine to dinner parties so he wouldn't have to taste inferior swill. He mentioned the names of his rich and powerful friends two to three times a conversation. He seemed to believe that his vast wealth was the direct result of his innate superiority.

I'd started to see Peter as emblematic of Wall Street's hypocrisy. But Peter had something I wanted, had always wanted. Peter was as high as it got on Wall Street. When Peter walked into a room, conversation stopped. He became the center of the room. People listened eagerly to his stories, laughed at his jokes, orbited around him. He was The Man.

But being in Peter's presence could be grueling. He was always asserting his dominance—he was the boss; we were mere underlings. It was like spending time with Napoleon.

That night, Peter sat at the head of the table and opened the discussion with a story about how before everyone arrived, the waiter came in and saw him sitting at the head of the table and had commented that he must be the boss, because he clearly was comfortable in a leadership position. Then Peter started around the table, asking each analyst or trader about their sectors and telling them what he knew about those industries.

I had endured hundreds of business dinners with people I didn't like—that was just part of the job—but this dinner was different. Peter would focus his attention on one person, and while he was talking, the other traders and analysts would sit quietly and listen. But every few seconds, one of
them would glance toward me and almost imperceptibly widen their eyes, as if to say wordlessly,
How ridiculous is this?

I started to think about what Peter really had. He definitely had power. Our presence and our closed mouths attested to that. The moment Peter turned his attention to someone new, that person would bloom under his gaze. Suddenly they'd smile, listen attentively, and nod. It was like watching a table full of puppets. I did the same when Peter's attention was on me.

But Peter's power came from his position. It came from his wallet. I wasn't here because I admired Peter's character. As I watched him cut into his $50 steak, I realized how gravely I'd miscalculated. I didn't want what Peter had. I didn't want to be respected for the size of my wallet, or the name of the firm on my business card. I wanted to be respected for my character, for some real contribution.

Suddenly, I saw in full clarity the structure of the fantasy I had toiled under my whole life. If I achieved enough, made enough money, then someday in the future I would no longer be afraid and would get all the love I craved. That's what I thought a billion dollars would get me. But I had seen the fear in Eldrick's eyes, and that night, surrounded by sycophants, Peter looked to me like the loneliest person in the world. Somewhere inside of him, I think he knew that.

I didn't know whether Peter was seeking the same thing I was, but I could see that he was still seeking. And that went against my whole fantasy of becoming a billionaire. I'd thought that once I became a billionaire, I could finally rest. But that hadn't proved true for Eldrick and Peter. And that meant it wasn't about the money.

I had already known that, I realized; that was why the debate about whether it made sense to work for four or five months
after
winning the lottery
to secure the next year's
bonus had seemed reasonable. Winning the lottery wasn't going to be enough.

In a very real sense, with over a million dollars in the bank, I had
already
won the lottery. At that moment it finally hit me that I already had enough to do whatever it was I wanted to do. Freedom wasn't about the money. It was a state of mind. Yes, a million dollars in the bank helps. A lot. But there are plenty of people with much more who are prisoners in their own lives. All my life I'd felt handcuffed to a treadmill, sure that the next achievement or bonus would allow me to stop running. Now I realized the keys to the handcuffs had been in my pocket, not Peter's, the whole time.

After dinner, the analysts and traders milled about on the sidewalk, waiting for a cab and talking about how painful the dinner was. An analyst sidled up to me and said, “Wow, Sam, I'm impressed. You didn't smile at one of Peter's bad jokes.” I felt a flash of pride, but it quickly faded. When Peter's attention was on me, I had sucked up like all the rest.

Over the remaining few months of that year, I met Marshall for coffee a dozen times. He had taken a job running trading for a boutique investment firm that was looking to grow into a power player.

Marshall and I would meet at a Starbucks between our two offices, and I would mostly talk about work at Pateras. When I first mentioned to Marshall that I was thinking about leaving, he was aghast.

“Sam,” he said, “I am not sure you fully understand the position you are in.”

I laughed. “Sure I do, Marshall,” I said. “That's what makes this so hard.”

“Look,” Marshall said. “You are the head distressed trader at one of the biggest hedge funds in the world. You are on the cusp of one of the great careers on Wall Street. If you keep
your Pateras seat for two or three more years, investors will be calling you to start your own hedge fund.”

I smiled. Marshall had a tendency toward the dramatic, but his pronouncement was nice to hear.

“That's the thing, Marshall,” I said. “It's always two years out. Everything I've ever wanted has been two years out. First I wanted to be a trader, then I wanted to be a
CDS
trader, then I wanted to be a distressed trader, now I'm
at
a hedge fund, and what I want is to
run my own
hedge fund. And to do it, I need to work in a place I don't much like, doing work that doesn't bring any value to the world.”

Marshall was waiting for his turn to speak what for him was gospel. “In a few years
you
can be the boss and hire whoever you want. And you can use the money to do whatever you really want to do.”

This had been Marshall's strategy, and it seemed a good one. He owned houses in Sun Valley and Charleston. He belonged to Winged Foot and Kiowa, two of the most prestigious country clubs in the nation. He owned two of the most popular restaurants in Charleston, and bars in Tribeca and East Hampton. He'd used his money to create the kind of world he wanted to live in, restaurants and bars where everyone knew his name.

I wanted that, too. Over the years my younger brother Daniel had become an accomplished chef, and we often talked about starting a restaurant together. There were other things I wanted to do—start a social enterprise, build an affordable alcohol and drug rehab center—and Marshall knew that, too.

“Whatever good things you want to do in the world will only be helped by the potentially hundreds of millions of dollars you can make,” he said.

Marshall had just enunciated my biggest fear about leaving. I had put myself into a position that few people in the
world experience. I had a real shot at attaining unimaginable wealth. I could use that money to do a lot of good. But there was something disconnected about having millions in the bank and going to work every day with the sole purpose of accumulating
more
. It reminded me of the way I used to drink. The way I used to eat. Making money just to give it away seemed like some form of financial bulimia.

One day in late summer, I emerged from a subway station at Union Square and ran into an old friend from college. Tara, a glowing redhead, had dated my friend Francisco in college, and we'd all spent many nights together. I'd lost touch with her over the years.

“How have you been?” I asked, after we had stepped to the sidewalk.

She told me about graduate school, a romance that had blossomed into marriage, about buying a house.

“And you?” she asked.

I stood looking at her while I searched for words. The last few years of my life had been an epic struggle, a knight's quest. But Tara didn't know Wall Street. She wouldn't understand what it meant to be the head distressed trader at Pateras. I could tell her I was up hundreds of millions of dollars, by far my best year ever, but that seemed a little gauche. I realized that all the drama in my life over the past eight years could be reduced to a single word.

“Work,” I said.

I looked up at Tara and found her looking at me quizzically.

“Sorry,” I said, and laughed. “I was having a moment.”

“You okay?” she asked.

“Yeah,” I said. “I am.”

“Were you thinking about Sloane?” she asked.

I looked at her, surprised. It had been months since I thought about Sloane Taylor.

“No,” I said.

“Oh,” said Tara. “I thought you might be. I have been wondering how you were taking the news.”

“What news?” I asked.

“Sloane is getting married,” Tara said.