Poker at Lepercq

Lepercq did a good business selling mortgage-backed securities to state pension funds. We would buy many home mortgages from banks and other lenders and form them into securities that paid higher yields with less credit risk than corporate bonds. They were more complicated to manage. In some cases we provided educational and advisory services for free, or if you preferred, as part of the profit on the bond deals. In other cases we managed the portfolio for the fund in return for a fee.

To pitch these products and work with customers, I visited over half the state capitals in the United States over four years. Unless you have done this, it may not occur to you how small many state capitals are. In the older states this was done for military protection-the big cities were located on ports and other transportation routes, and thus were too easy to attack. In the newer states rural interests usually prevailed with the argument that having the state capital would make a large city too powerful. Anyway, I had to make the rounds to pitch our bonds to the funds, to lobby for modernized financial management rules, to teach courses, and to deliver performance reports. When I went, I didn't just represent the mortgage department, of course; I was also carrying briefs for Lepercq's other financial products and services.

Many games players find that trading removes the urge to play. Trading and other forms of finance use the same skills as poker and give the same satisfactions. Before I got interested in finance, poker helped me live fully: I often felt dull and slow if I hadn't played recently. A good game charged me up and burned off the accumulated frustrations and minor humiliations of life. I played mostly recreational poker in business school-for the company, not the money. I didn't have the urge to find the best players and the biggest stakes. I didn't feel like staying up all night, even when the game was good. My financial studies and projects were sufficient stimulation. Once I moved to Prudential, and especially when I got to the trading floor, I pretty much stopped playing. Once I started trading, a poker game after work felt like working late. I needed to relax from games, not switch games. The only exception was when an old poker friend would come into town and want a game.

I had played poker for recreation, for money, and for companionship. Now for the first time, I played poker for business. As Mr. Dixie had taught me, I had kept a careful record of opponents, and swapped names and addresses at every opportunity. I didn't have names for most state capitals, but I generally had one for a larger city in the state. That contact could get me invitations to the power games at the capital, where reporters, lobbyists, legislators, and administrators played.

A poker game wasn't directly useful for selling bonds or for getting the rules changed so our products could compete. I never ran into someone directly connected with any matter I was in town to deal with, and if I had, we wouldn't have discussed it at the poker table. In most cases I would have left the game. But in sales and lobbying, knowing someone is much better than knowing no one. It's incredibly valuable to pick up the mood of a place and to schmooze with knowledgeable insiders. If I flew in Saturday, played poker Saturday night, and enjoyed some local activity with one of the players on Sunday, I had a huge edge walking into the meeting on Monday over the banker who flew in that morning. We might both be snake oil salesmen from a dishonest business in the most corrupt city in the world, but I had a few local friends and had demonstrated some skill at something more respectable than finance. Word travels fast in a small town.

There was also a political angle to our activities. Not a large one- Lepercq is a reputable firm selling high-quality products (at a premium price, like most investment banks, but not out of line with anyone else). Still, an in-state bank might feel it should get preference for the business, or a labor leader might argue that state assets should be invested in local businesses that employed union members rather than securities issued in New York, funding who knows what. Someone might feel that legislation helpful to our products would open the door to corruption or excessive risk taking. You always get a better slant from the press if you make yourself available, and you have to know the local ins and outs before you open your mouth. Taking the extra time to learn the nuances makes you more effective with politicians than if you show up with prepackaged boilerplate arguments.

This was a different kind of poker than I had played in the past. My goal was not to make a lot of money, but to pass a test. Part of that test was being a good poker player; part was genuinely enjoying the game rather than using it as a pure sales tool. I wanted to win, but without appearing too deceptively tricky and without hurting anyone. A very loose, hyperaggressive style is good for this. You're in a lot of pots, catching people and getting caught. People know you're in the game. You may be up at the end of the evening, but everyone's won a big pot or two from you.

The other reason to play this way is that you start at a significant disadvantage. The other players know each other, probably have played together for many years. You have to figure out everyone's style starting from scratch. That's a serious disadvantage for a passive player: If you react to other players, you need to know what you're reacting to. An aggressive player cares less about other players' styles-aggressiveness forces them to react to you. That turns your disadvantage into an advantage. Some poker experts advise starting out a new game carefully, playing tight poker until you figure everyone else out. I never understood that; it doesn't sound like poker to me. I recommend the opposite. Maximize your advantage that they don't know you. There's no point letting them nibble away your stack as their price for information about their style. Wait until they call some of your bad hands before you start playing only good ones. At all costs, keep the initiative. Shift your style around suddenly so they're doing the guessing, not you. With some skill and luck, you can do more than your share of the folding and raising, and encourage them into frequent calling.

When I was a finance professor, some students would argue that it was unethical to mix gambling with business, especially with public institutions. Didn't state pensioners have a right to expect that poker didn't influence investment decisions? Of course, the money flowing across the table creates suspicion. It would certainly be inappropriate for a bond salesperson to gamble with the head of the pension fund or the chief investment officer. But the ethics question ignores the very important human aspect of finance. Finance uses a lot of numbers and theory, but at the heart of every good deal is trust. Trust cannot be established by business dealings alone. Conversation, maybe over dinner or on a golf course, can help, but poker is a much better way to learn about someone.

Nevertheless, I wouldn't do this today. The financial and political worlds have changed since 1987, mostly for the better. Fond as I am of poker, it makes sense to avoid any unnecessary private exchanges of money anywhere near figures in positions of public trust. That's sad, but true. Since leaving Lepercq in 1988 (to become a finance professor), I've never played in a game associated in any way with business. I didn't make a rule one day; I just stopped, the way I stopped personal stock trading and giving political campaign contributions to individual candidates. It's not dishonest, but it's not worth the trouble to prove to everyone else that it's honest, and it's certainly not worth risking a firm's reputation over. Broad political organizations and mutual funds and poker with friends are good enough for me, at least until I retire from finance. Anyway, today you can play poker in public-on television even-so there's no need for closed doors.

CHAPTER 8

Дата добавления: 2015-10-26