You can no longer just hang out the shingle and hope to gain a competitive edge.
If you believe the words ‘anyone can do it' or ‘as seen on TV' or ‘with just these few tools.' chances are you're also heavily invested in mink-oil futures.
We have a rule here that you can't go out and sell a product unless you can explain it in 10 minutes. If it takes three days, you don't have something you can sell.
Do not buy what somebody tries to sell you. Do not borrow what you read other people are borrowing. Do not enter into these sophisticated transactions you read about in magazines, because it may not be appropriate for you.
Derivatives are much more of a high-volume, low-margin production business now. Once they were a labour of love, something that was crafted. Now it's about high volumes and high efficiency. Each year, you have to run to stand still.
Years earlier, as a cashier at McDonald's, I had been trained in the art of "suggestive selling." If a customer ordered a cheeseburger and fries, I knew to ask "Would you like an apple pie with that?" That strategy worked at Morgan Stanley. If a customer ordered a simple treasury bond, you asked "Would you like a leveraged derivative with that?"
The quants had just come up with a new deal structure that linked the U.S. government bond rate to, of all things, the Greek drachma. The point of this deal, if there was one, does not matter. What matters is that the salesman had to find investors to sell it to. And he did. Ringing up one of his best clients he talked up the merits of an instrument linked to the drachma exchange rate as if he had discovered gold. Interested but wary, the investor said 'Okay, tell me something about Greece.' Unable to think of anything about Greece on the spur of the moment, the salesmen went home that everning and saw his young daughter's school atlas lying on the living-room floor. Tearing out the page that showed Greece, he hurried into work the next morning and faxed it through to his client. Satisfied, the client bought the derivative."
Last updated: January 9, 2011