Michael Bloomberg is most famous today as the post 9/11 mayor of New York City, but he began his career with the reputable Wall Street firm Salomon Brothers and quickly rose in the ranks until he was a rising star buying and selling blocks of stock sold by large institutions.
But Bloomberg’s star only shot so high at Salomon. He excelled as a trader, and he was made partner and then given responsibility for all equities.
But in 1978, just as abruptly, he was demoted to run the information technology division of the company, where he was still stationed in 1981 when Salomon Brothers decided to merge with the commodity trading firm Phibro. Bloomberg was given a pat on the back and a severance check of $US10 million.
The company he’d worked for since graduating from Harvard Business School — the company he has said he would never have left — was letting him go.
Bloomberg was thirty-nine years old when this happened and couldn’t imagine going to work for a different Wall Street firm. He took a chunk of the $US10 million and created a business that merged the two skills he had developed at Salomon Brothers — knowledge of the securities and investment business, and of the technologies that assisted in the deals.
“When it came to knowing the relative value of one security versus another, most of Wall Street in 1981 had pretty much remained where it was when I began as a clerk back in the mid-1960s: a bunch of guys using No. 2 pencils, chronicling the seat-of-the-pants guesses of too many bored trades,” Bloomberg has written about the state of investment data at the time.
Bloomberg imagined that he could build a system that took information about a mass of different investment types — stocks, bonds, currencies — and reveal a firm’s position and show what was moving where so traders could see investment opportunities previously hidden by too much (and too inaccessible) data. Bloomberg hired four former Salomon people, including his Performer complement Tom Secunda, who wrote the first analytics programs, and got to work selling and dealing the as yet-uninvented Bloomberg terminal.
Merrill Lynch’s Capital Markets Division was the first prospect. As Bloomberg tells it, he went alone to a meeting with Ed Moriarty, he division head, and pitched the nonexistent product to him and his team as if it were established.
When Bloomberg finished, Moriarty turned to Hank Alexander, the head of his software department, and asked his opinion. Alexander said he thought they should build it themselves — a not uncommon response in the “build it here” world of investment banking technology.
When Moriarty asked how long it would take, Alexander reportedly said, “Well, if you don’t give us anything new to do we’ll be able to start in six months.” With that opening, Bloomberg said, “I’ll get it done in six months and if you don’t like it, you don’t have to pay for it.”
Bloomberg and his team had little more than an idea of what could help the traders at one of the country’s most respected commercial banks. But he made a deal on that idea as if it existed already. Bloomberg used his persuasive capacity to sell the vision and then he went to work building a custom terminal that brought in proprietary data and analytics.
“It wasn’t elegant,” he said of the first Bloomberg terminal they delivered. “It was laughably simplistic by today’s standards. But we did it, and it worked.”
Reprinted from “The Self-Made Billionaire Effect: How Extreme Producers Create Massive Value” by John Sviokla and Mitch Cohen with permission of Portfolio, a member of Penguin Group (USA) LLC, A Penguin Random House Company. Copyright (c) PricewaterhouseCoopers, LLP, 2015.
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