Separation : Part 8

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

(Page 8 of 9)

Mirroring my professional growth, our family and lifestyle were also maturing. My success at Burnham gave Joanie and me the means to afford a larger two-bedroom apartment in our building. The expansion came just in time for the birth of our daughter, Jessica. We were proud parents but followed traditional roles with Joanie staying home to take care of Marc and Jessica while I was the breadwinner. Unlike most of our friends, we didn't benefit from a wealthy parental support system, a fact which I resented since I never asked for a lot. Without any extra financial help, it felt like we were in a titanic struggle to make a place for ourselves. In hindsight, I wish I had been able to spend more time with my kids in those years, but I felt that the majority of my time and energy had to go toward building my business. It was a matter of basic survival.

In early 1959, Burnham & Company celebrated its twenty-fifth anniversary, an event which had a profound impact on me. With my father's businesses, I had never seen such longevity, and the notion of building something which would be bigger than any one person seemed awesome. By this point, Arthur Carter and I already were thinking of starting our own firm, and that celebration spurred us on. I even figured Tubby might back us if I appealed to him and used his story as an example of what we wanted to accomplish.

We had already spent nearly four years fantasizing about opening our own business. Our ruminations had begun shortly after we first met as across-the-hall neighbors in our East Rockaway apartment. Arthur and his wife, Linda, had moved in a month before us and also had a newborn child. Arthur and I used to talk about the stock market at every chance we could get. We had plenty in common and quickly became good friends. We'd rarely allow much time to go by without cooking dinner for one another, and as time went on, we vacationed together as well.

Arthur was a year and a half older than I and clearly brilliant. The son of an IRS agent father and a mother who was a French teacher, he had grown up in Woodmere and graduated from Brown where he had studied French and music. His father once had him tested to determine what sort of career would most suit him, and the results showed a remarkable breadth of aptitude. He considered a career as a classical pianist before aiming his sights on becoming an investment banker. As I'd see more in later years, his multiple talents imparted an impatient nature and an eagerness to experiment with new things.

Commuting together into Manhattan each morning, Arthur and I compared notes on our companies, the brokerage industry, and stocks we liked. We were not sophisticated, but that didn't stop us from thinking otherwise. We were both young and idealistic, and we soon began to dream about what we might create if we were to start our own business. It was fun thinking out loud together, but our planning was premature, as Arthur soon decided to quit Lehman and enroll at Dartmouth for his MBA. While he was there, I managed his investment account. I'd come up with stocks to buy; and, just as often, Arthur would tell me what he liked, and I'd go off and research the idea and determine whether we'd buy it. It was a great collaboration and all the more fired our ambitions to team up one day.

Upon obtaining his degree, Arthur went to work for an investment bank other than Lehman but realized the job wasn't for him. It was now late 1959, and the stock market was enjoying a terrific year. I was thriving at Burnham and gaining self-confidence. Arthur and I were commuting together once more, and we redoubled our talk about starting our own firm. We quickly settled on our business plan, which would take the best of Allen & Company and its investment banking focus and combine it with retail brokerage services which might cover our overhead. We each felt we weren't good at big-company politics and believed we could make a decent living with our newly conceived business model. I reasoned that if we took the plunge and it didn't work out I could always go back to working for Tubby.

Filled with enthusiasm, we decided to run our idea past Arthur's father-in-law, Peter Schweitzer, who was a successful and wealthy entrepreneur making cigarette paper. Schweitzer did not discourage us, but he made us realize that we lacked enough customers to make a viable venture and recommended we bring in additional partners. Arthur suggested we approach his childhood friend Roger Berlind. Roger had a passion for songwriting. An unsuccessful attempt at writing for a career had brought him to the Wall Street firm Eastman Dillon as a broker instead.

Perhaps Roger had already been thinking of going off on his own as he quickly warmed to the idea of joining us. However, he insisted we also bring along his friend and Eastman colleague Peter Potoma, who was the son-in-law of publishing magnate George Delacorte. We accepted the idea as we figured Peter's family connection might come in handy. As I got to know Roger, I realized he hid his being Jewish well, and Arthur and I assumed he wanted Potoma to be included so that we wouldn't be seen to the outside world as a Jewish firm. After all, in the 1950s, Wall Street firms were clearly classified by their ethnicities. In that regard at least our new firm would surely break the mold.

Coming together, the four of us must have sounded awfully arrogant for our young ages. We all agreed there was little good investment research around and that we could do much better by pooling our collective intelligence. The Dow Jones Industrial Average had surged over 50 percent in 1958-59 all the way to 680. No doubt those robust market conditions made us all feel particularly smart even if we knew the old adage on the Street never to confuse brains with a bull market.

The group assembled, Arthur went back to his father-in-law and asked him to help us buy a seat on the New York Stock Exchange in order to get our business up and running. In addition, each of us agreed to kick in what we could out of our own savings. For Joanie and me, that meant contributing $30,000, which was virtually all we had-we only held back $1,000 in case of an emergency.

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.