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Sunday, May 31, 2015

Richard Fuld

Dick Fuld, the former head of Lehman Brothers, was in the news a couple days ago for having given a speech in New York City, his first public appearance in six years. Ever since 2008, Fuld has been regarded as one of the bad actors of the financial crisis.

He insists to this day that the Fed and the Treasury Department allowed Lehman Brothers to collapse for doing what everyone else was doing, and that they could have saved Lehman the same way they saved Bear Stearns and Merrill Lynch.

I suspect Fuld is right about this, though I'm not sure Lehman deserved to be saved -- any more than Bear Stearns or Merrill Lynch did. All of these firms allowed themselves to get way too leveraged in the midst of an overheated housing market, ignoring fiscal prudence in an attempt to maximize short term profits.

In any case, Fuld was widely reviled after the Lehman bankruptcy, not only by the public but also by many of his former employees at Lehman.

I met Fuld once, in 1984, when he interviewed me for a job at Lehman. It was the most memorable interview I ever had. He was already widely known on Wall Street (at that point he was head of fixed income at Lehman), and had a somewhat scary reputation, which his intense manner gave credence to.

Fuld asked me three questions at the beginning of the interview. The first was, "What's one point on a million?" I wasn't sure what he meant, and asked, "Point?"

"A percent, one percent," he replied impatiently.

"Ten thousand," I replied.

He then asked me another mathematical question, which I answered correctly.

Then he asked, in a somewhat pretentious tone, "What is the relationship between math and music?"

This question completely befuddled me. I stumbled, "Math and music? Uh, let me see….um, is it that the timing between the beats in music can be measured mathematically?"

I looked at him for some sort of response, but he remained stone-faced. I shrugged and said, "Honestly, I don't know, I'm just guessing." I then furrowed my brow and asked, "What is the relationship?"

He ignored my question, and the interview proceeded. At the end, he asked me, "What were the three questions I asked you at the beginning?"

I was able to repeat them back to him.

I left the interview feeling unsure about how I'd done, especially given the way I'd stumbled over that third question. It wasn't until the next day that it hit me why he had asked that: he wanted to know if I was a bullshitter. There is no relationship between math and music, so any sort of glib response would have been a wrong answer.

(Wall Street bond departments don't want someone who pretends to know more than he does; people like that can cause a lot of damage.)

I later got a message from Fuld through an intermediary: "Tell him to give me a call if he wants to come work for me." The intermediary explained that that was Fuld's way of offering a job.

I didn't take the job, and went to Goldman instead, though, given my mediocre career there, that was probably the wrong decision. Then again, who knows how a career at Lehman would have turned out.

Anyway, as a result, I've always had a soft spot for Dick Fuld. (If Ted Bundy had offered me a job, I'd probably stick up for him, too.) I was grateful for the offer, but mostly I was impressed by how clever his interviewing technique was.

Fuld was testing me, in a way I didn't even realize I was being tested. He was a smart guy, with good insight into human nature. In the end, he may not have had enough insight into his own nature, and that was his -- and his firm's -- downfall. But the little snapshot I got of him was very impressive.


Spychiatrist said...

John, that reminds me of some of the questions that Google and Apple ask potential recipients for jobs.

Some of those software and math/logic related questions floor me. Guess that's why I don't work in knowledge related industries. I admire you guys with good heads on your shoulders like that. On a related note....I've always thought that you're either born with a high math aptitude or not: what's your opinion on that? Is math nature or nurture?

My guess is that people are hard-wired for a math aptitude from birth genetically.

Steven said...

I don't know about Wall Street but it seems like he had a good run and his interview does sound impressive, sort of an IQ test. He kind of looks like a villain in that photo though, doesn't he?

John Craig said...

Spike --
I am a firm believer in the genetic nature of IQ, and I tend (a little more vaguely) to believe in the g factor, so, yes, to a certain extent, aptitude for math is a matter of hardware, not software. But on the other hand, people who are fascinated by statistics are going to have an advantage since they've played with numbers their entire life. I got fixated on competitive swimming at an early age, and did a lot of playing around with times (i.e., converting meters times to hard times etc.), and may have had an environmental advantage that way.

I'm a little surprised that you say you're not particularly numerate, give your realistic social and political outlook, since I also think that there's a strong positive correlation between being conservative and being numerate. (Since people with facility with numbers are able to look at the statistics on IQ, crime, and so on and sort out the bs from the truth for themselves.)

John Craig said...

Steven --
He had an amazing run, he was the head of Lehman Brothers for a long time, and from what I understand made off with a lot of money himself despite his role in Lehman's demise…..I have to admit, I chose that picture because it made him look villainous. (Though there were plenty of pics to choose from in that regard, though.)

Jokah Macpherson said...

"What is the relationship between music and math?" is a pretty broad, open-ended question that could be answered a number of ways. For example, the pitch of a musical note is determined by the frequency of the sound waves and combinations of pitches in certain ratios sound very pleasing compared to others that sound dissonant. Pitches related by powers of two (e.g. 220, 440, 880 Hz) are perceived by humans as having a quality of sameness even though they are separated by some distance on the frequency spectrum. Logarithms are considered "math", right? That is just one line of argument you could take.

I don't think giving an answer like this would be considered true bullshitting since it is technically true and you were given a very broad, open-ended question.

It also annoys me when interview questions get elevated to such lofty status in pop culture. I'm not an expert on the subject (not going to bullshit you - heh) but my general perception from what I have read over the years is that no interview method has been shown statistically and practically to be an improvement over random selection from a pool of qualified candidates.

Have you considered that maybe this guy just liked you based on the rest of the interview in spite of your answer to that question?

Jokah Macpherson said...

"People with facility with numbers are able to look at the statistics on IQ, crime, and so on and sort out the bs from the truth for themselves."

Ironically, Michael Moore was partially responsible for me becoming active in the Steve-osphere since Bowling for Columbine sort of leaves the central question of gun violence in the USA unanswered. I found my way to blogs like the Audacious Epigone, did a little research of my own, and realized that Charlton Heston was actually right.

John Craig said...

Jokah --
You're right, the way you answered the question couldn't be considered bullshit. But, that's sort of the point: how many people in their 20's would actually be able to come up with that answer on the spur of the moment?

I wonder about that interview question conclusion. In general I'd agree with what you say, but there are clever tricks that interviewers can use, and Fuld used one of them. I do think that the rest of my interview with him was what counted, but I also think that question was a potential disqualified: if I had shown myself to be a bs artist, that would have been a disqualified.

Here's what i wrote about numeracy and political outlook once:

Anonymous said...


I'm George Keim. I challenge you to a duel.

John Craig said...

George --

A duel? For what?

So how did your life turn out?

Anonymous said...

Just an old fashioned duel. Physical, as I cannot complete with your your beautiful mind.

John Craig said...

George --
Well that leaves us at an impasse then since as I recall I could never keep up with your beautiful body.

This is actually quite a coincidence as I was just telling my son (who's into macho stuff) about you the other day. I told him a story (I'd heard about secondhand) about the time you were in Central Park with one of our teammates (I think Myles Standish, but I'm not sure), and you two were waiting in line for pretzels or something like that at a food kiosk, and a couple of black guys cut in line in front of you. As I explained to my son, most of us on the swimming team were pretty much oversheltered upper middle class prep school boys, and would have been too intimidated to do anything about it, but this guy grew up as the son of a longshoreman, so he had a different attitude about things. He told the black guys to get in the back of the line, and when they didn't, and mouthed off to him, he grabbed one of them by the lapels and sent him sprawling. When the black guys saw who they were dealing with, they decided not to make an issue of it.

…..which is pretty much my attitude towards a physical competition with you. (Unless it's a 200 fly -- nothing shorter.)

How have you been?

Anonymous said...

No that was Princeton University after Easterns 1974. And you are correct, I coulda been a contender, I coulda have been somebody.

John Craig said...

George --
OK, I stand corrected. But I think the essence of the story holds.

Yes, you could have been, and I also remember that "On the Waterfront" was your favorite movie. (Don't know if you saw the post, but my parents actually met Eva Marie Saint recently.)

By the way, were you the one who wrote in a while back and said that I had made fun of you in front of my parents? And how did you happen to find this blog?

Anonymous said...

I'm embarrassed. You actually had Wes Raffael at your house for dinner? The rest of the company is sterling. Anyway, the challenge stands.

John Craig said...

I'm embarrassed too.

I generally accept (actually, mostly issue) challenges on pull-ups, a 50 yard kick on a board, or (with several months' notice) a 200 meter run. What are you doing for workouts these days? My guess is, you've gotten into lifting and have turned into the physical monster you were always meant to be (which is why I won't challenge you on incline press or anything which isn't bodyweight-adjusted).

Anonymous said...

The kind of duel I was referring to occurs in a cubed 8 foot space. No doors. No windows. No ropes. No weapons. No spectators. Otherwise, no rules.

John Craig said...

No doors or windows, how do you get in?

Not quite use why you're holding a grudge against me; I remember more times you made fun of me than vice versa. But I'm going to pass on this fight.

Anonymous said...

Don't need doors or windows to enter a space. Anyway, I been reading your blog for a few years and I just think you are a pompous ass.

John Craig said...

Why keep reading it if I'm such a pompous ass?

One of my most vivid memories of you is you making fun of me -- in front of our teammates -- for studying for something or other at some team function, and then coming to me a few weeks later asking me to give you a paper for you to copy and turn in for some course.

Anonymous said...

I'm impressed with the story that you told your son about George and the black guys. If I'd seen that, I would have smiled. Good going. George!

- Susan

Anonymous said...

This is creepy. Do you think George is in jail? 8x8 space and all that and what seems to be a 40+ year one sided feud. Sounds like the story you told your son has a somewhat different moral than you intended.

John Craig said...

Anon --
I have no idea what he's up to, but I doubt he's in jail, inmates don't have access to computers as a rule.