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Does Wall Street Rip Off Your Clients?

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Wall Street traders are a nasty lot, out to beat you at a zero-sum game. Seth Klarman, founder and president of the Baupost Group, who should know, has said, “I know Wall Street will always try to rip our eyeballs out.” Now, a new book confirms that view from close quarters. How, then, do investors avoid being these traders’ victims?

The remarkable Mr. Polk

Reading Sam Polk’s new book, For the Love of Money, leaves you thinking that the author is a remarkable person – and that his whole family is remarkable too.[1] Not because he is remarkable in the ordinary sense, that is, distinguished or even necessarily highly praiseworthy, but because his life navigated such tumultuous twists and turns, and somehow ended up right, or so it seems. How did he do this, and why did this happen to him? Part of the credit appears to be due to an unusual therapist, who lacked a conventional certification but gave very good advice.

Polk burst on the scene with a New York Times op-ed piece two and half years ago that highlighted the idea that the love of money is like any other addiction, one that afflicts most of the people on Wall Street. As he cured himself of other addictions with the therapist’s help, Polk finally wound up freeing himself of the Wall Street money addiction.

His recently published book focuses less than the earlier article did on the idea that Wall Street employees are suffering from an addiction; perhaps the connection is clear from the context. Most of the book is a tell-all autobiography, chronicling Polk’s many stupid mistakes and failures before he was even 25 years old. They are the failings of an addictive personality, beginning with a bout of bulimia. He also suffered alcohol and drug addiction, as well as an inability to control his tendency to react too aggressively when he felt slighted or insulted by another person – resulting in losing at least one good job.

Nevertheless, by dint of covering up his past failures and persistence – and having attended Columbia University – he managed to get a job on Wall Street and then a series of exponentially increasingly well-compensated Wall Street positions over the next five years. During that time he went from his first bonus of $40,000, which made him blissful because he could at last stop living hand-to-mouth, to one almost a hundred times as large, which caused him to protest angrily that it should be at least twice as big (with, it would appear from his account, some justice, given the gains he had made for the hedge fund firm where he worked).

Is this background typical of a Wall Street employee?

While reading this, I wondered if this was an unusual history for someone who wound up working on Wall Street – serendipitously, but also through aggressive perseverance and a very strong desire – or if it wasn’t unusual at all. Polk notes that he was told, as a 22-year-old intern at CSFB, that whether or not you were hired full-time after an internship was not based on how smart you were. It was a question of whether the traders liked you.

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