Greed and Glory on Wall Street by Ken Auletta - Book Report/Review Example

Running Head: Greed and Glory: Analysis Greed and Glory on Wall Street: Analysis address> The following paper analyses the book titled Greed and Glory on Wall Street by Ken Auletta. The paper begins by capturing the gist of the book and discusses Auletta's style of writing. Hardly dogmatic in approach for a work of non-fiction, it is an absorbing narrative of the collapse of Lehman Brothers. For business reporting, Auletta's narrative is exemplary, though it does slow down the pace of the book. It recounts details gathered from interviews with key characters in the story. The paper then discusses the main theme of the book, which revolves around lust for greed and glory and how it spells the doom of Lehman Brothers. It shows how even in a corporate setting human emotion and relationships override financial transactions and can impact the fall of a business institution that is more than hundred years old. It highlights the changes occurring in the marketplace in investment banking and the pressure it imposed on the bygone style of functioning. The paper examines the impact of class resentment, which makes individual ambitions larger than company mission and destroys the very institution, which creates wealth for its members. That for an institution to sustain itself money cannot be the basis, a common purpose and shared vision is indispensable. Introduction Greed and Glory on Wall Street, narrates the downfall of Lehman Brothers, one of the most prestigious business houses in the US and its take over by Shearson/American Express. It covers the period from July 1983 to April 1984. The story is about the very conservative Lehman Brothers which began speculation on Wall Street and with greed dictating every financial transaction, the famous investment banking house spelt its own doom. The battle for wealth and glory is the pivot that governs this business story. Based on interviews with the principals Pete Peterson and Lewis Glucksman, the co-CEOs of Lehman Brothers, the book unfolds the battle for power between the chief adversaries. It brings to spotlight the atmosphere pervading Wall Street and its forceful impact on the rival communities of the traders and the bankers.The changes happening in the investment banking profession forms the backdrop of the story. Given the context of this book and considerimg that Auletta is quite an advocate of capitalism, from a socialistic standpoint it is a story of the inabilities of ruling class and their never ending desire to hoard. Auletta, K. (1986) describes his story succinctly. He writes:" It is a story about life and death of Lehman Brothers, and one of irreconcilable conflict between two men. It is a story of poisoned partnership; of cowardice intrigue and deceit. It is a story of greed for money, power and glory."(p. 4). Narrative Greed and Glory on Wall Street is an absorbing narrative and not a story told by an advocate fraught with dogmas. For a non-fiction, business subject it makes excellent reading.The narration is almost on an epic scale and characters are sketched so vividly that business transactions fade in the reader's memory and what stays is the human element. The reader gets an insight into the psyche of the characters and their personal relationships which becomes the a reason for Lehman Brothers collapse. The narrative is based on interviews with the two central characters of the story Peterson and Glucksman and getting it straight from the horse's mouth, reveals the paradigm in which Wall Street operates.In the introduction to the book Auletta, K.(1986) writes: I have tried to put together the pieces of the Lehman puzzle without resorting to journalistic shortcuts and the air of omniscience that infects much of the new journalism. At the risk of 'slowing the narrative'. . . . I have used only the words actually given to me directly in interviews. . . . I have invented no dialogue. (p. front matter) Auletta's narrative acknowledges that perception of events differ from person to person and no where has Auletta tried to change the facts that he has gathered, even at the cost of risking contradictions. In this sense, his book, thronged with footnotes in paragraphs offering contradictory messages, serves as a model for reporting by business journalists.Though one appreciates Aulleta's reporting methodology nevertheless it dulls the reading of the story. Business writing had received a fresh approach with books like In Search of Excellence.Now Auletta's Greed and Glory on Wall Street is a step in the ever evolving business reporting. It has set a benchmark for business reporting with its keen intelligence in understanding the subject, exploring and honouring the human psyche and how it impacts make or break decisions in businesses. Auletta's narrative also very deftly captures the irony in the behaviour of the story's characters. This is discussed in more detail later. Theme Auletta demonstrates that what causes the downfall in businesses is not so much the profit and loss accounts but human ambition, motives, psyche, interpersonal relationships and politics.One can see that Auletta's explanation of financial technicalities is weak and what sets the pace of the book is the people factor.Aulleta, K. (1986) writes, "Human folly and foibles--not the bottom line of profits, not the business acumen, not scientific management or the perfect marketing plans or execution--often determine the success or failure of an organization."(p. 4). According to Auletta this was the fundamental cause of the collapse of Lehman Brothers. The beginning of dissenssions at Lehman Brothers which finally causes its downfall is caused by the changes in investment banking profession in the marketplace. The business dealings were taking a new shape.The old way of business was too comfortable for the stakeholders and snobbish elitist bankers swarmed the profession. Soliciting business was hardly a necessity.Clients remained clients for a lifetime. Auletta, K. (1986) writes: Investment banking had been changing from a business based in large measure on personal relationships to a business based on a variety of transactions and an instinct for gambling on interest rates in stock market shifts and the invention of new financial instruments.(p. 28). It was becoming tougher and was no more about managing client relationships alone and assuming that a client would stick with the investment banker for a life time.The marketplace had become more demanding and investment banks had to either change with the times or perish in the new paradigm. The tension that this new environment created finally boiled down to a clash of classes. Auletta begins his book with the pointer to this class resentment. Auletta, K. (1986) points out: For years the resentment had been building.And now at luncheon at the Equitable Life Assurance Society on July 12, 1983 they began to erupt within Lewis L. Glucksman, the co-chief executive officer of Lehman Brothers Kuhn Loeb. That a short rumpled man with the face of a Russian general, whose shirt pocket often bristled with pens, who wore garish ties and short socks that slipped to his ankles, who was disparaged by Wall Street blue bloods as a lowly "trader"- that he would try to oust Peter G. Peterson, his imperious co-chief executive officer and the chairman of the venerable investment banking house, astonished his partners at Lehman and all of Wall Street.(p. 3) A new breed of professionals - the traders were now dominating the marketplace and the elite investment bankers who had always looked down upon these professionals were now being forced to respect their presence. At Lehman Brothers, the tussle and tension between the traders and bankers reached disproportionate levels.Resentment and jealousy pervaded the organisation and while the profit mostly came from the traders it was the bankers who hoarded senior positions in the company.The trader community felt that it slogged to make profits jump but never got a piece of the pie and the bankers' bank balance kept mounting despite no hard work. Class resentment also surfaced in how the jewish traders, especially Glucksman felt about the snobbery pervading the enterprise even though it was Jews who founded the firm. Peterson narrated to Auletta how difficult it was to get the bankers to share the same office space with the traders. Until 1980, the two divisions had operated out of different quarters. Auletta, K. (1986) narrates:"They [the bankers] found them [the traders] a lower form of species", "Those guys over there were referred to as 'animals,' as crude.' . . ." (p. 38) The biggest snag was that Lehman Brothers, though a partnership organisation, showed no signs of partnership or fairness. Everyone was preoccupied with his bonus and his share.Each banker worked as an independent entrepreneur concerned with only his profit. The organization did not compete with other organizations but had its bankers compete among themselves. There was no sense of "our organization" but obsession with I, me and myself. Auletta K. (1986) writes, "The knock on Lehman Brothers was that it placed too much emphasis on individual greed-"blood money," former partner Eric Gleacher calls it -and too little emphasis on common purpose. As long as profits expanded, partners worked." (p. 31). Such state of affairs was further compounded by the tensions between the top two- Peterson and Glucksman. They both lacked managerial competence and vision to pull the enterprise together. Animosity between the two only fanned the flame to fire and intensified dissensions. Auletta beautifully captures the irony in the situations. Peterson represented those belonging to the upper echelons. He was a friend of Henry Kissinger,author for New York Review of Books, alumnus of Kearney State Teachers College and a self made man.Glucksman managed the trading operation and considered Peterson snobbish though he himself began his life quite comfortably. Peterson claimed that he was in touch with his subconscious but was clueless about his own pomposity and how he could demean others. Glucksman won in the power struggle with Peterson and in his effort to pull the firm together demoted bankers and promoted traders.Proficient in his work as a trader, Glucksman was limited by his own resentments which rendered him incompetent to run the firm.He neither wanted to merge nor sell once he took control, but as circumstances would have it, the sale of the firm was inevitable. The final irony was that Peterson, warned of federal pension benefits and greedy federal workers, almost brought down the Shearson-Lehman Brothers merger by refusing to bring down the huge sums he had negotiated for himself. Greed is what brought the downfall of Lehman Brothers. It is shocking and absurd to see that bankers who made huge sums of money still felt that they were not rich enough. Their only scale of measurement being a comparison with how much the other made. Auletta, K. (1986) gives a sense of money floating in this environment. He writes: Glucksman's bonus jumped from $1.25 million in 1982 to $1.5 million (and since Peterson's severance agreement guaranteed him the same bonus as his former co-CEO, that was his bonus as well); Richard Fuld, whose trading operation attained record profits, also received $1.5 million, down from $1.6 million the previous year. (Glucksman thought it would look unseemly if his protege received more than he did.) Shel Gordon went from $400,000 to $1 million (according to Bob Rubin, Gordon complained when his bonus did not match Fuld's); Bob Rubin's rose from $700,000 to $900,000; Jim Boshart's went from $300,000 to $400,000 and Henry Breck's from $250,000 to $325,000. (p. 130) Even when Lehman Brothers was falling apart Glucksman did not appeal to any shared vision among its bankers and traders. What he appealed to was "self pity". Auletta, K. (1986) states, "that despite the hefty sums each received, many partners complained of being cash poor; they could not afford expensive Manhattan co-ops or second homes in the Hamptons." (p. 134). With such a mindset, saving Lehman Brothers was an impossibility. The bankers could only focus on multiplying their bank balance and cash in on any opportunity that came their way. An insight into the goings on at Lehman Brothers and the obscene ambitions for money at the cost of human values makes one wonder if Lehman Brothers was really the great institution that one talks of.Great institutions have a binding vision and a synergy that overrides individual ambitions. The institution is after all a sum of its people. What happened to Lehman Brothers was a natural consequence and one that it deserved. The organisation had done enough to dig its own grave, finally it jumped into it. Auletta however grieves the disappearance of Lehman Brothers.He writes:"One does not have to romanticize the robber barons of the last century to recognize the rootlessness, the frequent absence of a sense of tradition in today's high-overhead, transactional world of Wall Street." He adds, "the death of Lehman signals the passing of a way of life--of a handshake as solid as a contract, of mutual respect between client and banker, of fierce but respectful competition, of a belief in something larger that self--in this case, The Firm.' (p. 241). To conclude one admires Auletta for the details that he has captured, the imagery and presentation of the Lehman Brothers downfall as an emotional drama. The story is a lesson in the worth of robust company culture. That for a healthy culture, a sense of shared vision and pride in the common goals is needed. Money cannot solve all problems. It cannot replace tradition and culture. Reference Auletta, K.(1986). Greed and Glory on Wall Street, New York,New York: Warner Books Edition. Read More