Separation : Part 7

The Real Deal: My Life in Business and Philanthropy
by Sandy Weill, Judah S. Kraushaar

(Page 7 of 9)

I was just getting my feet wet working when I received a notice from the air force that it was time to report for duty. Since more than a year had now passed since my last physical, I was told to go first to Mitchell AFB on Long Island for the required checkup. Unexpectedly, I failed the exam because of a cavity that required root canal work. By the fall of 1955, the administration of Dwight Eisenhower was beginning to reduce the military's manpower requirements, and before I knew it, I was given the option to change my mind on my service obligation.

Ever since I crashed a T-33 flight simulator during my summer boot camp experience a year earlier, I had begun to have second thoughts about becoming a pilot, and now my positive experience at Bear Stearns encouraged me to think about a different career. I ended up asking my boss whether he thought I could make it in the brokerage business. With his encouraging reply, I decided to turn in my air force bars. It's funny how events had conspired to change my destiny: First, my parents' divorce forced me to graduate late, thus delaying my service obligation, and now, a simple physical exam steered me in an entirely different direction.

During late 1955 and early 1956, I plugged away at my job while studying for my broker's license at night. By June, I passed the required exam. Bear Stearns moved me to the brokerage office at One Wall Street. I was excited by my rapid progress and the move to the heart of the financial world. It felt great receiving the license and having the chance to run what felt like my own business. I worked hard as a young broker. Since I was still given to shyness, Joanie helped me immensely. She'd push me to make cold calls and to touch base with my clients each day. Her words still ring clearly: "Did you call So-and-So today? Be sure to follow up!"

I never had a sophisticated calling program; rather, I took every referral I could get, first concentrating on family friends and then soliciting waiters and ma?tre d's in the restaurants I frequented. Early on, probably a fifth of my clients worked in restaurants. Once in a while, there were some pleasant surprises as when the ma?tre d' of Jimmy's Lagrange Restaurant gave me an account which included $100,000 worth of AT&T stock.

My first year had its ups and downs. I vividly remember losing sleep because I had made some bad stock calls and lost money for my clients. For a while, I was afraid to go out to eat since I knew I'd have to confront my waiter clients. Still, working hard to master the firm's investment research, I soon began to excel. By September 1956, I was doing well enough that Joanie and I could afford to take an apartment of our own and thankfully get out from under the discomfort of living with her parents. Our new apartment in East Rockaway cost $135 a month in rent, or half my income, but the independence was well worth it. Just as we were set to move, Joanie gave birth to our son, Marc. I loved being a new father, though the sense of responsibility now pushed me all the more to excel at work.

I continued to increase my production and generated $25,000 in gross commissions in 1957, which meant I was bringing home $7,500. I was doing well enough, but 1957 was a difficult year for the market. President Eisenhower's heart attack reversed investors' prior surge in confidence, and the Dow Jones Average dropped nearly 13 precent that year as trading volume flattened. I was still nervous at the start of 1958, and one of my uncles encouraged me to consider moving to a small brokerage operation named after its owner, Frank LaGrange. This was only a three-person firm, but what appealed to me was the offer for a guaranteed $7,500 in base pay plus profit sharing. Conservatively, I believed the pay structure would insulate me against the risk of a poor market.

Working for LaGrange was generally unpleasant. My boss had a love affair with railroad and sugar stocks (this was pre-Castro), while I was drawn to start-up and technology-oriented companies. I used to hang out at lunch with analyst-brokers from neighboring Unterberg Towbin and share stock ideas. Tommy Unterberg and I soon became good friends-he'd often sleep on the sofa in my apartment so that we could get an early start the next day going out to research companies in the area. Frank LaGrange didn't approve of my hanging out with technology analyst friends and insisted that I should concentrate instead on more staid companies. Not helping matters any, he hated my smoking and constantly harped that his wife didn't like the smell of tobacco on his shirts. Before I knew it, I felt whipsawed as the market recovered vigorously in 1958. It surged 34 percent for the year and had undermined my original reason for leaving Bear Stearns. Thinking I'd receive a healthy bonus, I felt entirely misled at year end when La- Grange announced there were no profits to share.

Fortunately, I saw a way out. For weeks, the sales manager at Burnham & Company had been calling trying to get me to jump ship. He'd play on everything I didn't like about LaGrange by advertising Burnham's family-like culture, its emphasis on a wide range of stocks, and its paternalistic founder. The sales manager assured me that with my skills and Burnham's support "you'll triple your production, I guarantee it." Usually words like that should make anyone suspicious, but I took the bait and, sure enough, my commissions zoomed to the point where I brought home $25,000 in 1959. Of course, those were years when commissions were regulated and actually maintained at very rich levels. For instance, commissions then approximated 7 percent of clients' assets, or ten times the rate typically earned forty years later. However I earned it, my pay put me in the elite of all retail brokers at the time.

Burnham & Company was a terrific place most of all because of its founder, I. W. "Tubby" Burnham. Tubby was one of the most down-to-earth and nicest men I have ever known. The grandson of the distiller I. W. Harper, Tubby had earned his nickname as a child when he was forced to gain fifty pounds as part of the cure for typhoid fever. He opened the firm's doors in 1935-I was impressed that someone could build a firm that could stand such a test of time. Tubby was the perfect mentor: He was a consummate retail broker and always enjoyed working with young employees with whom he shared his accumulated wisdom. He'd constantly walk around the fifty-person firm and ask employees for their ideas. He demonstrated his humanity by treating his employees as though they were family and imparted to each the sense that they were all equally important. It was a style so lacking elsewhere on Wall Street. Tubby may not have been a rocket scientist, but he taught me the importance of focusing on the basics in running a business, especially the need to respect and value one's employees.

Copyright © 2006 by Sanford I. Weill

About the Author

Sanford I. Weill is Chairman Emeritus of Citigroup Inc., the diversified global financial services company formed in 1998 through the merger of Citicorp and Travelers Group. Mr. Weill retired as CEO of Citigroup on October 1, 2003, and served as Chairman until April 18, 2006.

Judah S. Kraushaar, the former director of the Global Financial Services Equity Research team at Merrill Lynch, has been consistently ranked as the banking industry's top securities analyst by investor surveys from The Wall Street Journal, Institutional Investor, and Fortune. He and his wife, Michele, and their three children live in Westchester County, New York.