Chapter Ten:
Career Start
Goldman Sachs Summer of 1984
On February 17, 1984, I interviewed in the bond trading department at Goldman Sachs in New York City for a summer job for the summer between my two years of graduate business school.
The way the interview day was structured was that I interviewed with each of eight partners individually first. Then at the end of the day was a group interview: the eight partners and me.
Since I had gone to business school straight out of college, I really had nothing on my resume to speak of.
However, at the bottom of my resume, it stated, “spent summers as a tour guide and resident magician at the Houdini Magical Hall of Fame, Niagara Falls, Canada.”
During the group interview, one of the partners, Jon Corzine (who later became governor of New Jersey) said, “I see it says on your resume that you are a magician. Show us some magic!” I responded, “Well, I am here for a job in bond trading; you don’t want to see magic now.” He retorted, “Yes, I do. Show us some magic!” I looked around at the other partners in the room and gave them a look as if to say, please tell this guy to drop that idea and let’s get on with the interview. Their response, however, was, “Yes, we would like to see magic too.” I said it again, “You want me to show you magic right here and now?” and by now they were all nodding their heads, “Yes!”
I said okay, and I put my hand in my pocket and pretended to take out an invisible deck of cards. I shuffled the invisible cards and then fanned out the deck. I asked that partner to choose one of the cards. He looked around, puzzled, and I reiterated, “Go ahead, take one!” He played along with it and “took” a card. I told him he had taken two cards and I “took” one back. Then I said to him, “Show everyone else your card but don’t show me.” He “showed” everyone else his card. Then I told him that I was turning the cards face up and I wanted him to put his card into the deck face down, which he “did,” after which I pretended to put the deck of invisible cards back in the box and put the box into my pocket.
I then took a real pack of cards out of my pocket and said, “This is the same deck of cards we were just using, but now the cards are visible.” Then I said to him, “Now before I open the box, please tell us all, what was the name of the card that you took?” He responded, “The jack of clubs.” I asked, “Now did I in any way, shape, or form force you to take the jack of clubs?” He said no. I said, “You could have chosen the ace of spades or the queen of diamonds, but you chose the jack of clubs. Now before we open the pack of cards, would you like to change your mind?” He said no. I asked, “Are you sure?” He said he was sure.
I then opened the real pack of cards and fanned them out. Sure enough, the cards were all face up except for one card that was face down. I asked him to take out the face down card and show it to everyone, and he responded, “If that card is the jack of clubs, you have the job!” Well, it was the jack of clubs and I got the job.
I rented an apartment for the summer at 61 Jane Street in the Village at the corner of Jane and Hudson.
Actually, I wanted to work in equity trading, and I interviewed for that job with Robert Mnuchin, but I did not get that offer. That offer went to Paul Arango and Bob Ceremsak. Interestingly, they both not only took the offer, but after graduation went on to long careers at Goldman Sachs in that department. So, in the end, they really benefitted from getting the offer.
My job at Goldman Sachs was to go through dozens of pages of lists of home mortgages with the goal of packaging them as securities. That was in 1984. Twenty-five years later, that precise process is what ended up causing a great recession and almost destroying the US economy. (More about that hopefully in my next book).
My First Career Decision
In the fall of 1984, I got the offer to work at Goldman Sachs Fixed Income Trading full time after Business School. I had every intention of taking the job, but I did interview for positions at several other investment banks as well, particularly because I still preferred to get a job in equity trading.
As I was in that process, my father asked me to join him in his business instead of working on Wall Street.
The services were secured of a family business consultant out of Toronto named Michael Shulman. He was a partner at an accounting firm named Laventhol & Horwath. Harvey Hecker recommended Michael to us. Harvey was the brother-in-law of my mother’s good friend Beverley Blackstien and Harvey was the managing partner of Laventhol.
My biggest hesitancy in going into my father’s business was that he and I had diametrically opposed views on risk. He loved risk and I averted risk wherever possible. My father loved waking up in the morning not knowing what was going to happen to him that day. Interestingly enough, this is what caused his business relationship to end with his father, Opi. Opi took the risk of a lifetime handing that wad of cash to the consular at the Canadian Embassy in Prague in 1938, but in general, Opi was a risk averse businessman. My father, from the time he first started to have some success in the meat business, played the penny stock market and over time he “graduated” to commodity futures. By the early 1980’s, he was taking enormous positions in commodity futures, particularly pork bellies. Commodity futures are based upon huge leverage; for $1,500, one can purchase or sell the right to buy or sell $75,000 worth of product. Thus, a 2% move in the price of the commodity can lead to doubling one’s money, or losing it all.
My father had so many futures contracts open that he could make or lose a huge amount of money in any given day. This drove my grandfather – and my mother – absolutely crazy. They both begged my father to stop, but he would not. He had a direct connection to the commodities exchange on a screen on his desk and from the time the “Merc” (Chicago Mercantile Exchange) opened at 9:30 a.m. to the moment it closed at 3:30 p.m., he never took his eyes off the machine. If someone was in the same room as him, he would talk to them but not look at them. Even when I was in high school and college, Opi would always say to me, “Dodinko, talk to your father and get him to stop trading the bellies. You are the only one he will listen to”. Of course, this was absolutely without basis; my father would listen to me no more than he would listen to Opi or my mother, but Opi was asking me out of desperation and utter frustration.
The set-up of the office at the plant was unique as well. There was only one office. In the middle of the office sat my Dad, and he had a bank of windows in front of him, from which one saw the boning line and the packaging parts of the plant, as well as the receiving dock and the shipping docks in the distance. To the right of my Dad sat Opi and to the left of my Dad sat whatever manager was working for him at that time. Behind him sat a secretary and then my mother in a room just off that room connected by sliding glass doors.
Michael Shulman met with my parents, then he met with me, and then he met with all of us as a group. In preparation for writing this chapter, I reconnected with Michael – now thirty-five years later – and he recounted vividly for me my first meeting with him. Michael claims that I walked into the meeting with him and stated as follows: “Mr. Shulman, I am at the Stanford Graduate School of Business. I am being flown across the country first-class to interview with the most exciting companies in the world, I have the opportunity to move to Manhattan, the center of the world, I have the opportunity to work on Wall Street, the center of the center of the world, and you think you are going to convince me to work in a small meat packing factory in Niagara Falls, Ontario?” Michael says that he responded, “Okay, well let’s sit down and talk about it”.
I went on to tell Michael that I had no innate interest in the meat business. I understood that it was an unbranded commodity business with small margins, no cost advantage and no competitive advantage (a term I learned in business school and the title of a book by Michael Porter which was sort of the handbook for our B-school graduating class).
After much back and forth, I did say to Michael Shulman that out of familial obligation to my father, I would give up the Goldman Sachs offer, but that it was on the understanding that I was much more interested in the hospitality industry, and that given that we were in Niagara Falls, I wanted us to eventually ease out of the meat business and increase our hospitality footprint (which we had a small start at in the Cavalier Motel and the Houdini Magical Hall of Fame). But most importantly, I had to ask my father to stop trading commodities, because I would never be able to stand working next to him while he traded commodities for two reasons: one, that I could not stomach him taking the risk, and two, because I could not stand the fact that he would not turn his eyes away from the screen. (In fact, he would actually write down in a book next to him, every price change of every contract that he had open).
After several meetings as a group and more meetings individually, my father would not agree to stop trading commodities. His concession was that he moved them out of Muller’s Meats and into his own company, Henler Investments. His argument was two-fold: one, why should I stop doing something that I love, and two, why should David care if it has no financial impact upon him because I was buying into Muller’s Meats only, not Henler Investments.
In the end, I agreed to these terms and joined the business in the summer of 1985. I worked with my father for fourteen years, until 1999. It was not easy for either of us, strictly because the issue of risk-taking was always rearing its head. Firstly, he continued to trade commodity futures for the whole time I was with him. I tried everything to get him to stop, as did my mother, but to no avail.
For anyone who is thinking of going into a family business, or having their children go into the family business, I recommend first reading Should You Join the Family Business? by Judy Lin Walsh and Rob Lachenauer in the June 2018 edition of Harvard Business Review.
I believe that in my case, making the decision to go into the family business was not a good decision, especially straight out of school.
At the time, it seemed like the obvious decision. There were no other members of my generation who were going into the business, and it seemed that someone had to step up to perpetuate the legacy of the business. Subconsciously, or maybe consciously, I probably made the decision to go into the family business because it was the smooth, easy and risk-free path to take.
Looking back at it, I should have stayed at Goldman Sachs, at least for a few years, to prove to myself and others that I could make it without nepotism.
One of the reasons I think I made the wrong decision is that I did not have a non-family mentor who could have taken an intelligent outsider’s view and guided me. I now have come to know definitively, if I did not know at the time, that the paid family business counsellor, Michael Shulman, was specifically hired by my parents so that I would go into the family business. Thus, he did not have my independent needs in mind when we were having all those family meetings.
A couple of times a year, I speak to high school graduating classes. One of those speeches is paraphrased as the conclusion of this book. One thing I tell them is to think carefully before making the decision to go into your family business and to consider all other options first and discuss it with a non-family mentor.
The first reason that they might want to do what I did is that the business exists already, so one has a base from which to grow one’s empire. Most start-ups fail, so if one goes into an existing business, one avoids the risk of the failure of one’s own start-up.
The second reason is that one can move into a position of senior management without having to prove that one is better than the next person in the company who might otherwise get the job. By being the boss’s child or in-law, one can move up automatically because he or she wants you there.
A classmate of mine was the heir to a huge corporation. When we were in school together, everyone knew he was the heir to this fortune. After school, he went to work on Wall Street. After a short time, he couldn’t cut it and his parents brought him in to the family business. When his parents aged, he became the CEO of the corporation and then he bankrupted it. He will always be known, to himself and to others, as the one who took over his parents’ empire and destroyed it. Had he stayed on Wall Street, he could have made a decent something of himself, and he would have had his parents’ money as well. Even if he had failed on Wall Street, if the family business had been run by competent professionals, that business might still be around for him to benefit from financially. Now he has neither – bad decision all around.
The advice I give to anyone who will listen is to get yourself a non-family mentor. Find someone older than you who you like, who you respect, who you aspire to be like. Learn all about that person. Then approach the person, explain to them why you aspire to be like them, and ask them if they will volunteer to be your mentor: someone that you can bounce ideas off of about what you are thinking about yourself and your future. It is as simple as approaching someone and saying “I respect you. Would you mind if I occasionally ask you a few questions confidentially about decisions I am making?” Trust me, there are no adults worth their salt who would say no to such a proposition.
Your parents are the wrong people to be your mentors. Why are your parents the wrong people for this? Your parents have $300,000 invested in you so far, so they are thinking to themselves, well I want my kid to be able to make a living. But that’s not enough. Is your dream to become an accountant at KPMG and make $60,000 a year counting beans five years out of school? I hope not.