Having A Huge Multiplier – Barton Biggs & Morgan Stanley

Remembering back to my years in the financial industry (Morgan Stanley 1997-2003) every business unit was always looking for the “multiplier” that can have a significant impact on their business. In the failed Mortgage Bond business it was the leverage multiplier – borrow huge sums of money to invest in mortgages with the goal of “super sizing” your returns. It the Private Equity business it was the pricing multiplier that you were seeking when you were able to roll smaller companies into one larger company by shedding redundancies (i.e. layoffs) and less pricing pressure from less competition. One of my other lessons on the importance of the multiplier came within my first few weeks of joining the Firm’s MBA New Hire Training Program. The teacher was one of the Firm’s legendary Global Markets Strategists, Barton Biggs.

Barton Biggs - Morgan Stanley

Barton Biggs – Morgan Stanley Global Markets Strategist died Saturday, July 14, 2012, at the age of 79.

Truth be told, the training program was three months long (an incredible investment in new employees when I think back on it) and while I had learned a lot about banking and the Firm, few things had stuck with me as long as the lesson that Biggs had imparted on the entire class, “If you can bank your bonus and live off of your base, you will be in a very good place.” I had just spent the last summer as an MBA intern at Morgan and knew that his suggestion would be quite the challenge for anyone living in the city with the expense of cabs, rent, and bar bills. I didn’t quite understand the multiplier effect that it would have later in life but at the time it seemed like great advice. I had chosen to live in New Jersey and commute into the city each day giving me a little more of an expense buffer but not much. At the time I remember looking around the room and thinking that I would have wagered that 90+% of the audience would go on to ignore his advice instead choosing to live for today and up to the lifestyle expectations of someone working on Wall Street.

Well Bigg’s advice wasn’t lost on me. Soon I had used those bonuses to pay off any remaining student loan and car debt. Within a couple of years we were actually able to continue banking my wife’s entire salary. I cannot overstate the impact that Biggs’ advice has had on my life, it has been ENORMOUS! I was recently being interviewed for a story from my business school and I was asked what advice I would give current students. This was one of my two suggestions. Having my bonus money in the bank has allowed me to take more risk in my career choices and allowed me to walk away if I ever needed to. I refer to it as my “walk away money” and it was my safety net. Years later I had read Nassim Taleb‘s The Black Swan where he refers to it as “F* YOU money” suggesting that it allows one to scream the words into the telephone receiver “before” hanging up.

Thank you Barton Biggs – I am forever indebted for the wisdom that you shared and I promise that I will continue to spread the word. Live off of your base and bank your bonus!

2 replies to “Having A Huge Multiplier – Barton Biggs & Morgan Stanley”

  1. Nabil Bejjani | Jul 21, 2012, 5:02 pm

    It’s interesting that Barton Biggs had such an important lasting effect on your financial savvy. My biggest enlightenment came from Dean Witter himself who said “live this year with last year’s salary”! I think it sees Barton and raises him one since, whether you had a bonus or not, if you apply what DW said you’re always ahead of the game, especially after 2008 where bonuses started dwindling.

    On a lighter note, when you mention “f u $$” it reminded me of the Caribbean in the 80’s where when a girl went out with a guy she always kept $20 with her that they called “vex money” or enough money to take a taxi home if the date went sour and they didn’t want to get stranded. Financial freedom for 1 night I guess 🙂

  2. Matt Hunt | Jul 21, 2012, 6:12 pm

    I admit that I like Dean Witter’s suggestion even better… and as for “vex” money… I swear that it wasn’t any of my dates. 🙂

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