Monday, June 6, 2011

Harrison, The Other Side of Wall Street

Long-time readers of this blog may recall my rather lukewarm review of Barton Biggs’s novel, A Hedge Fund Tale of Reach and Grasp. By contrast, Todd A. Harrison’s The Other Side of Wall Street: In Business It Pays to Be an Animal, In Life It Pays to Be Yourself (FT Press, 2011) is a gripping autobiographical tale of reach and grasp. And, unlike Biggs’s novel, of self-styled redemption.

Harrison, the founder of Minyanville (the redemptive part of the tale), recounts his days at Morgan Stanley, the Galleon Group, and Cramer Berkowitz from 1991 through 2002. These were heady times, and Harrison eventually became a prime player—and, in the process, a fractured soul.

He started on the derivative desk at Morgan Stanley. “There I was—6’1”, 215 pounds of muscle, straight A’s in my back pocket, and so scared that I could barely move. It was precisely where I wanted to be, rubbing elbows with the big hitters who wore Armani suits and had fat wallets. I remember thinking that one day, that would be me; at whatever the cost and no matter the price….” (p. 29)

He didn’t wear Armani suits or have a fat wallet his first year. He got a base salary of $28,000 and no bonus. The second year was more of the same. At bonus time he was told that “this may not be the business for you.” (p. 39) Finally, in 1993, his third year, when he worked harder than he ever had before, the twenty-four-year-old Harrison made “more money than [he] knew what to do with”: $75,000. “Things had really started to come together. I built the bank’s pad into one of the biggest on the Street, and word quickly spread about the kid from Morgan with steely nerves and a penchant for making aggressive markets.” (p. 43)

What Wall Street gives it can just as easily take away. Harrison’s disastrous First Interstate trade, where he was on the wrong side of an eight-figure overnight swing, didn’t cost him his job but it certainly shook his confidence. He bounced back, however, and by the age of 26 became one of the youngest vice-presidents at Morgan with a $300,000 compensation package.

Harrison’s position at Morgan became tenuous when Mark Neuberger took over the equity derivative trading operation, and soon enough he left for Galleon. Life at Galleon was not smooth sailing. He managed the derivative risk for Galleon’s flagship fund and had his own small trading account. His compensation was based on the performance of his own account, and—as at Morgan--for two years in a row he received no bonus. The third year, when he was sure it was “his year,” he was expecting a huge bonus, a million or three. Instead, he got $50,000 and was told that he didn’t have what it took to be a partner in the fund. “I beat myself up pretty badly after that meeting, questioning why I wasn’t good enough, asking myself why I couldn’t take that final step to stardom. It would be years later before I realized that not making partner at Galleon was the single best ‘failure’ of my professional career.” (p. 71)

So on to Cramer Berkowitz in 2000, a much smaller fund, where Harrison would run the entire trading operation and would receive a “nice percentage of the profits.” (p. 73) And would reel when the towers fell and the market imploded.

Harrison writes with intense passion about his time at Cramer Berkowitz where he not only traded but wrote ten to twelve columns daily for “When I wasn’t trading, I wrote, and when I wasn’t writing, I thought about what to trade or what I should write.” Especially after 9/11 “I was emotionally terrorized, although at the time I had no idea how damaged I was. … I was sleeping three or four hours each night, if that, but given my persistent nightmares, I wasn’t sure that was a bad thing.” (p. 116) Those who follow Jim Cramer, for whatever reason, will be especially interested in this part of the book.

Todd Harrison, who was diagnosed with ADHD as a kid, now had a host of other problems to overcome. The fund remained positive in the wake of 9/11 but “the slow, steady grind of the fourth quarter took its toll, both on the fund and its stewards.” (p. 121) Harrison resigned from But soon enough he missed his column and “craved a new beginning—something, anything, to stop the intense pain that had suddenly consumed me.” (p. 122)

Enter Minyanville, home of Hoofy and Boo. “The specter of Minyanville rose like a phoenix from the scorched earth and rescued me from realities I didn’t want to face. … It was an escape, a corridor from a very painful place to a bright, animated world without terror or acrimony or politics or agenda.” (p. 125) And, finally, exit Cramer Berkowitz.

In his “easier and more relaxing existence” he would manage a smaller fund, build Minyanville, and run a foundation he had established. (p. 141) Naturally, life never accommodates. “The hedge fund that was supposed to underwrite the collective costs of my various endeavors instead lost large sums of money, and while I had some cash stashed away, most of it, including my entire retirement account, was at risk alongside my investors.” (p. 143) In the end, Harrison writes, “I closed the doors, returned the remaining money, and booked the largest loss of my professional career. … The road to recovery would be long and hard, and I had to power the engine with a small reserve fuel tank. If I ran out of gas, there would be nobody left to tow me home.” (p. 151)

Harrison didn’t run out of gas, though he was tested again and again. The Other Side of Wall Street is a tale of perseverance in the face of failure, of recalibration despite success. It’s one of those books you read in a single sitting (helped by the fact that it’s only about 170 pages long). A riveting story.

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