A new book about Steve Schwarzman that’s being pitched as an antidote to the Blackstone founder’s infamous Hitler comment and the $3 million dollar birthday party is out, and it has an interesting anecdote about Jimmy Lee and JPMorgan’s “rubber room.”(The new book shares the same title as the book about Sandy Weill and the rise of Citigroup, which is also called King of Capital.)
Steve Schwarzman tried to poach Lee and bring him to Blackstone to be his #2 back in 2003.
To make him stay, JPMorgan busted out the “rubber room,” torture in the form of forced loyalty to make you stay forever.
Remember the Addams Family kids at Camp Chippewa, when they’re sent to a small isolation cabin and forced to watch Disney movies and play with stuffed bunnies all day?
The rubber room is kind of like that.
When Lee told them he was leaving for Blackstone, JPMorgan brought him to “rubber room,” where they made him listen to sweet memories of his life at the firm until he caved and agreed to stay with JPMorgan.
An excerpt from King of Capital tells the story of how Schwarzman tried to poach Jimmy Lee and “The Rubber Room,” where JPMorgan’s top men took Lee to try to convince him not to leave:
Lee was pushed aside when Chase absorbed the M&A boutique Beacon Group to fortify its investment banking business…
Peterson and Schwarzman offered to give him a substantial stake in Blackstone and to make him vice chairman and the hands-on day-to-day manager of the firm. By November they had hammered out a lengthy agreement, a press release had been drafted, and Lee was ready to make the move. Lee had informed Harrison that he was talking to Blackstone, but Lee told Schwarzman that he wanted to tell Harrison face-to-face that he was taking the Blackstone job before he signed on the dotted line.
One day that month, Lee sent word to [Chase chairman Bill Harrison, his mentor] that the two of them needed to speak. Harrison broke out of a meeting with the bank’s board of foreign advisers to hear what he had to say.
“I said, ‘Hey, it’s been a great run. I loved it. This is my favourite place in the whole wide world. But this is something I want to do and I’m going to say yes to it,’ ” Lee recounts. “He said, ‘Would you please wait a day and let us circle the wagons and try to talk you out of it?’ “
Harrison pulled out all the stops, yanking on all the emotional cords. “They gathered together directors and other senior people,” Lee says. “They put me in what I like to call the rubber room, where you take the employee who is about to go away and bombard him with, ‘Oh! I remember you when you were just a kid.’
The old guys play on your loyalty. ‘This is your life, Jimmy Lee.’ “
It worked. In the end, Lee couldn’t bring himself to jump the Chase ship.
All thanks to the rubber room.