How Money Became Dangerous Quotes

“Tubbs sees poverty as the root of all Stockton’s challenges; reversing this longtime crisis is at the top of his goals as mayor. “Homelessness, trash, housing, violence, crime, third-grade reading—the real crux of all those problems is poverty. In a community where 25 percent of the people are in poverty, where the average median income is $46,000 for a household—not even for an individual, but for a family—where almost half the jobs in this county are minimum-wage jobs, all our issues make sense. They’re almost a byproduct.” One”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“Merrill Lynch had circulated internal memos about the risks in Citron’s portfolio as early as 1992, but those warnings didn’t stir action, let alone caution. Clearly, many senior people within the bank knew that what they were doing was wrong, yet they let it continue, selling him riskier and riskier derivatives and collecting their fees and commissions each time. Orange County had become one of Merrill’s top-five clients, as well as one of the largest purchasers of derivative securities in the world. The bank wasn’t willing to jeopardize the loss of that business, no matter how precarious and unsuitable Citron’s investments were. His own lawyer later argued that the sixty-nine-year-old Citron tested at a seventh-grade level in math, had a severe learning disability, and had long been suffering from dementia. Citron himself admitted that he lacked a basic understanding of what he had done and that he had simply been following the advice of his bankers. They’d held his hand and led him to the slaughter.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“I wondered how I would have felt about Disney’s other line back when I worked there, before the notion of VIP treatment existed at the park. I couldn’t decide. Part of me thought I would have been perfectly fine with it, appreciating the pay-for-value proposition that now seemed to infiltrate every part of Disneyland. But I mostly felt that my eighteen-year-old self would have been shocked. Equality seemed a core tenet of the happiest place on Earth. Would Walt have approved? I wondered. Is the VIP experience consistent with the values that Disneyland was created to exemplify and promote? Would I even come to Disneyland if I had to wait in line? What is my daughter learning each time we skip a line?”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“When my first summer arrived at Salomon Brothers, I kept overhearing colleagues asking one another an incomprehensible question: “Where’s your hamptonshaus?” I had no idea what that word meant; it sounded vaguely German. Then inevitably someone asked me the question—John, a second-year associate I’d known back at Wharton. “Sorry, John. What was that?” I hoped I might figure out a translation through repetition. “Your hamptonshaus,” he said. “Where is it?” I shrugged. “You do have a hamptonshaus, right?” he asked. “I don’t think so,” I admitted. He squinted at me. “Well, you do or you don’t.” I couldn’t avoid it. “What is a hamptonshaus?” I asked. “A hamptonshaus? It’s a goddamn house in the Hamptons.” “Of course! A Hamptons house.” He still seemed to be waiting for an answer regarding whether or not I had one. “What are the Hamptons?” I asked, surrendering all hope of saving face. “Are you fucking kidding me? The Hamptons, out on Long Island.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“It turns out that there was good reason to be skeptical. Thanks in large part to increased transparency, the financial services world is now unhealthily tied to an annual compensation cycle. The desire to be paid the most each and every year has created perverse incentives directly impacting almost every facet of the banking and investment world. As the focus on and opportunity for outsized compensation in the financial industry has shifted from investment banking to the investing world, the short-term compensation arms race has moved to the realms of private equity, hedge funds, and managers of public market securities. Given investment managers’ desire to boost their annual—and, in some cases, quarterly—compensation, they’re motivated to pursue strategies that maximize returns on an annual basis, rather than allowing for longer hold periods. As such, these annual compensation structures often lead to shorter-than-ideal investment horizons and lower relative returns, all at the expense of investors—and, arguably, at the expense of the long-term compensation of the investment managers themselves. This was not always the way things were done. Of course it happened, but much less when the investment strategy wasn’t so laser-focused on an annual bonus cycle.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“One day, not long after I relocated to California, I was driving to a meeting in Palo Alto when I spotted an amusing bumper sticker on the beat-up Porsche in front of me: PLEASE, GOD, ONE MORE BUBBLE BEFORE I DIE. The fallout from the dotcom crash was still fairly fresh. Was this someone who had missed out on the boom times, I wondered, or someone who had profited and then lost it all? Either way, the sticker highlighted a fascinating mindset that still pervades Silicon Valley: Are we out there just wishing that another bubble would come along, to boost our spirits and our bank accounts for as long as the party lasts? It’s a dangerous wish. Where would that leave us when the next bubble breaks? Many generations have seen true progress and growth, but not without moments when reality falls out of alignment with inflated bubble metrics. Hope, by its very definition, gets too far out in front of reality, and many of those hope-fueled companies don’t survive. The general formula in Silicon Valley is that there will be nine failures for every success—that high rate of failure is a necessary consequence of the freedom to take the risk to innovate. Even so, those failures leave damage and casualties in their wake. Part of the brilliance of startup culture is its dexterity and speed and conviction. Those same characteristics, however, can also manifest as vulnerability, as they frequently lead to shortsightedness, impatience, and volatility.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“There was a gold rush atmosphere in the fledgling days of the internet boom, and indeed it evoked memories of the first California gold rush, which was its own sort of bubble. Exactly a century and a half earlier, gold was discovered in the foothills of the Sierra Nevada by a former carpenter from New Jersey. Hordes of fortune seekers then invaded the state from every corner of the globe, striding into the hills with picks and shovels and pans—and nearly all of them ended up penniless. Yet there were some pioneers whose wealth and success endured, and typically they were the people not especially interested in pulling gold out of the ground. A famous maxim was coined: If you want to get rich during a gold rush, sell shovels.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“During the best of times, Silicon Valley brimmed with opportunity. It seemed that every kid with a laptop and a hoodie could slap the dotcom suffix on the end of almost anything—stamps.com, shoes.com, drugstore.com, webvan.com, eToys.com, garden.com—and become a millionaire overnight. Venture capitalists poured money into these companies, and their valuations soared. But there’s no piece of music in which the crescendo doesn’t eventually crash. Most people can’t recognize when they’re in a bubble—or they don’t want to recognize it. Markets and industries are cyclical by nature. During periods of significant innovation, bubbles form because expectations grow faster than reality, and hope gets too far out in front of a future that doesn’t currently exist. The problem was that the structures, timing, and valuations of these startups were all dependent upon assumed growth and the execution of ambitious business plans, and those assumptions and executions often weren’t reasonable or achievable.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“From his headquarters in Los Angeles, Bob Lorsch had entered the prepaid calling card space and built SmarTalk into a success. I was a VP at Salomon at the time and had heard stories about how crazy and fascinating Lorsch was, so I agreed to work with my colleague Mark Davis on a SmarTalk equity offering a year or so after the company’s IPO. We met at their Los Angeles offices at lunchtime. Lorsch burst into the room like a bad caricature of Danny DeVito, and even though I’d been warned that he was an unconventional CEO, I still wasn’t prepared for the encounter. We had put together the standard detailed presentation that analyzed the state of the public equity markets, how the SmarTalk stock had been performing, who owned it, et cetera. A young Salomon analyst who had been pulling all-nighters to assemble the books sat in a chair near the door. Mark and I passed around the presentation books. “So we’ve prepared a—” I started. “Just tell me,” Lorsch interjected. “Do we have Grubman or not?” Jack Grubman, Salomon’s famed equity analyst, had previously endorsed the SmarTalk IPO with a buy rating. “Yes,” Mark said. “We have Jack. We talked to him prior to the meeting and confirmed that he’ll continue to cover the company and support the offering.” “Then you’re hired,” Lorsch said with a smile, pushing his unopened book to the center of the table. “Let’s eat.” It seemed reckless to have made his decision on so little information, and I could only imagine how the analyst kid near the door felt, sleep-deprived and probably proud of his hard work, only to see the book tossed aside without so much as a cracking of the spine. While we ate the catered lunch that was delivered to the conference room, Mark mentioned that I was in the midst of planning my wedding for that summer. “Don’t get married!” Lorsch advised me. “Terrible, terrible idea.” He described a few of his own ill-fated unions, dropping in crude one-liners to punctuate the stories: “Why buy when you can rent? . . . If it flies, floats, or fucks, don’t buy it! . . .” Despite”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“Disruptors do have an important role within any company or industry that is dependent on evolutionary change to stay relevant to the society it serves. But was it possible to get the good that comes from disruptors without the accompanying negative behavior?”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“The committee brought forth a new set of rules and rewards that would affect promotion and compensation, adopted with a simple goal in mind: to make Citi a better place to work. We knew we couldn’t compete with the other big firms on the basis of compensation alone. Sandy Weill was too stingy. People were paid just enough to keep them around, enough that it wouldn’t be worth the hassle of switching to another firm for a moderate increase in money. It was evident that if the firm had nothing to offer other than comp, then comp would become the sole factor in determining whether or not someone was happy at Citi.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“The bureaucracy of a big company like Citi often led to bad policies. Such a large firm is basically forced to make decisions for a whole organization that don’t necessarily apply well to the individual business units. Is it better, one wonders, to have uniformity of authority in decision making at the expense of flexibility? It was a demonstration of the challenges of size, the difficulty of managing a large business with hundreds of disparate units. In the mid-2000s, for example, the firm developed new rules for air travel, insisting that employees reach their destinations on the cheapest fares available, even if that meant multiple connections to get to smaller cities. Saving money was not a bad inclination in an industry notorious for profligacy, but there was no flexibility in the rule, and so my assistant, Angela Murray, was engaged in frequent battles to make sure I could arrive at out-of-town meetings on time. If I had a ten o’clock morning meeting in Omaha to discuss a deal with a potential $6 million fee, Citi still insisted on saving a few hundred bucks by booking me on a flight that arrived in the afternoon, which meant I would miss the meeting unless I traveled the day before. And because those cheaper flights often required an overnight stay, more work hours were wasted as well as any potential savings, since the firm would have to pay for a hotel and meals. I knew for a fact that the policy was revenue-negative.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“Roman orator Cicero understood this more than two millennia ago, when he said, “It is not by muscle, speed, or physical dexterity that great things are achieved, but by reflection, force of character, and judgment.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“Often, no matter how careful you tried to be, sheer exhaustion would lead to errors that weren’t caught until it was too late. Sometimes it was due to what we called the F9 mistake. Back then, computers were very slow, so you didn’t want to wait for the spreadsheet program to recalculate automatically every time you made a change. You would instead turn off that feature, but then you needed to be careful to remember to hit F9 at the end, which would trigger the recalculation of data throughout the model. There were always stories about analysts who made a bunch of changes and then forgot to hit F9, printing the books with faulty numbers. They might realize during the client presentation, or perhaps after the meeting, that the wrong data had been utilized. The models were so complicated that usually no one would notice, but people were making big decisions based on erroneous information. How many deals were done, we wondered, or people laid off because some sleep-deprived analyst got a model wrong? Steve forgot to hit F9; ten thousand people got fired.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“The worst feeling was when, in the middle of the night, the numbers didn’t compute as you needed them to, or they didn’t support the arguments the senior bankers expected to make at the client meeting later that day. That would leave you with two bad choices. You could change the thesis of the presentation to match the numbers, or you could fudge the numbers to fit the thesis. A third option—worse still—was to wake your managing director with a phone call. That was never smart. So you would usually alter a revenue assumption here and a margin assumption there, just enough so that none of the changes seemed too aggressive but in totality got you to the profitability and earnings growth needed to justify the deal. Where is the line, you would wonder briefly, between subjective business judgment and manipulation of data? Then you’d yawn and look at the clock and reply, Who gives a shit?”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“I wasn’t privy to whether Meriwether was right or wrong that morning. But it didn’t really matter. His genius was based on a simple concept: that the market would eventually normalize. When spreads were wide, he would bet that they would tighten; when spreads were historically tight, he would bet that they would widen. And because he had Salomon’s huge balance sheet at his disposal, he had enough money to wait until he was ultimately right. The”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance

“I was fortunate to have begun my career in the jewelry industry, where character is the most important aspect of the game. Often the people who look and feel the most honest are not. They’re simply selling the perception of honesty. Diamonds have their own set of four c’s, as anyone who has purchased an engagement ring knows: cut, clarity, carat, and color. But that fifth unspoken c—character—also matters in buying a diamond. You want to trust the person selling you the rock, as it’s the most asymmetrical deal you’ll ever do, in which you have no information and they have it all. A salesperson can be masterful at smiling and putting you at ease and selling you whatever he or she wants, yet because buying a diamond is a rare and special occasion, with little or no opportunity to build a relationship of trust through repeat business, you want to believe in the salesperson’s quality of character.”
― Christopher Varelas, How Money Became Dangerous: The Inside Story of Our Turbulent Relationship with Modern Finance