|by Alexandra Lebenthal
William “Stick” Stickley, it was said, could make money from a pile of napkins.
As a child, he earned more than a few dollars from anyone foolish enough to bet against his quick mind. In fourth grade, three of his friends handed over their allowances for a month to him after he said he could prove there was a correlation between what superheroes were featured in new Marvel comics and the performance of the Yankees on a given week.
In his sophomore year of college Stick started a small business in his dorm room refurbishing old refrigerators, ultimately selling the franchise to another student after graduation and pocketing $25,000 on top of the $75,000 he earned over the three years of running it.
Stick also started trading stocks in college. His return in his first year was 27%. He knew it was his calling. He missed more than a few classes to stay in his room and watch the computer screen. He especially loved trading micro-cap stocks. More often than not, institutional investors focused on companies where they could make larger investments. Some of the companies Stick was investing in were so small that an investment from a fund could be larger than the market capitalization of the company.
After graduation, rather than going into the training program at one of the big investment banks, Stick went to work for the notorious corporate raider, Burl “BP” Pineson. He was on his way to the wedding of a cousin and ended up sitting next to BP after he had somehow convinced the gate staff to upgrade him to first class. (It wasn’t the first time he’d manage to do that.) Burl was so impressed with Stick that as the plane touched down in Dallas he offered Stick a job on the spot.
|Stick spent seven years in Texas. Wherever BP went, he was right by his side. What Stick didn’t intuitively know, he learned from BP.
Ultimately though, he was bored and pretty sure he didn’t want to spend his life surrounded by big hair, oil, and the Dallas Cowboys. New York was where he’d rather be — and back with the Jets.
With BP’s blessing, not to mention a seed investment of $50 million, Stick moved back to New York City in 2006 to set up shop, snapping up 10,000 square feet at the GM building for $175 a square feet.
|He could have paid $167 a few floors down but to Stick, the higher the better. The big guys always liked to be on top – in real estate of course. Within short order, William Stickley Partners, called “Wisp” for short, had raised an additional $1 billion. Wisp had all the other touches, gorgeous receptionists (in fact, it was an unwritten but clear rule that all the women who worked there had to be gorgeous), amazing views of Central Park, expensive modern art, and a lot of smart guys that were paid well to make money.
He added all the expected accoutrements outside of work as well.
Fabulous apartment: check.
Country mansion: check.
Bidding on outrageous items at the Robin Hood gala: check.
Most of his comings, goings and purchases were documented in the press. Along with a select few, Stick had achieved rock star status.
To make more money though, meant having an edge. Hard work automatically went with the job description. And Stick, of course, had that incredible intellect that made him one of the smartest in the business. And one of the most envied. His investment style varied. He’d short stocks, use massive amounts of leverage, or focus on “momentum,” riding the wave of any given market or company as far as he could. Of course, taking advantage of market inefficiencies at all times, was a must. In short, he did whatever it took to make money.
Above all, the message Stick conveyed to his employees was all cylinders ahead. 24/7.
His returns were impressive and assets continued to come in the door.
Until they didn’t.
|After a while, it didn’t seem to be enough. Stick was hearing about other guys with better returns. They’d found the edge he now appeared to be losing. It crushed his ego. His investors started asking tough questions. He needed to get back on top. It was like a drug to him and he was addicted.
If he couldn’t find it, he would create it.
So, he set out to make that happen. Coming up with the idea was easy. Finding the right people to help him took a bit longer, until one day, one of his newer employees who’d joined the firm after Lehman went down mentioned a friend who worked at another company. Apparently they could structure whatever a fund wanted.
Once he structured the fund, he bought credit default swaps so there was no way he wouldn’t make money.
Stick could see this being huge. If the market was up 8%, his incremental return could be an additional 5%. That was some alpha! None of the other guys on the elevator bank in the building would be as smart as him.
For a brief moment, Stick had a passing thought that while what he was doing wasn’t wrong, it might not be right. That feeling quickly passed. His business was making money. It didn’t matter how he did that as long as he wasn’t breaking the law, even while some might say it was a fine line.
It worked and Stick was back on top.
At the end of this story, does it matter whether Stick got in trouble or his fund blew up? Rents may no longer be $175, but there are still dozens, if not hundreds of Stick Stickleys out there with high IQs and morals a bit lower on the scale, managing an alphabet soup of funds that are designed to do one thing — make more money than anyone else.
This story isn’t about what happened last week but it’s about the inexorable desire to out-earn, out-perform and out-spend everyone else. In and of itself that isn’t a bad thing, to a certain extent it’s what Capitalism is all about. But I wonder if we finally have gotten too far in front of ourselves.
Some of us deal with people’s investments. We manage your children's education funds, handle your retirement accounts and carefully invest your divorce settlements. Some of us deal with institutions selling securities to banks, insurance companies, foundations and mutual funds that in turn help to support those companies.
I've spent my life working on Wall Street and love dealing with clients; the adrenaline of getting new business; and being a part of the capital raising process. I still am and always will be intensely proud of what I do, as know many others who feel the same.
Wall Street is lucky enough to have some incredibly smart people who are great leaders who believe that winning is important, but who also are passionate about making our world and industry in a better place than they found it. Many of us are a part of helping to right the wrongs that were done.
As proud as I am, I am mad and sad at those who are on “the other side of the trade,” and who have forgotten that for every win, someone loses. Right now, I fear that may be all of us.
|Alexandra Lebenthal learned from her father, Jim Lebenthal, and grandmother before, about the basics of finances and investments. Today she is the CEO of Lebenthal & Co., LLC and its wealth management division, Alexandra & James Co.|