• “I was a bond salesman, on Wall Street and in London. Working beside traders at Salomon Brothers put me, I believe, at the epicenter of one of those events that help to define an age. Traders are masters of the quick killing, and a lot of the killings in the past ten years or so have been quick. And Salomon Brothers was indisputably the king of traders. What I have tried to do here, without, as it were, leaving my seat on the Salomon trading floor, is to describe and explain the events and the attitudes that characterized the era… Never before have so many unskilled twenty-four-year-olds made so much money in so little time as we did this decade in New York and London. There has never before been such a fantastic exception to the rule of the marketplace that one takes out no more than one puts in. Now I do not object to money. I generally would rather have more than less. But I'm not holding my breath waiting for another windfall. What happened was a rare and amazing glitch in the fairly predictable history of getting and spending.” - intro
• As I was reading this book, I kept thinking to myself this is exactly what NOT to do - as Munger says: invert always invert
• Munger: “Show me the incentive and I’ll show you the outcome…”

Michael Lewis Joins Salomon Brothers

• Michael Lewis found himself inside Salomon Brothers serendipitously, as he attended a charity event and was quizzed by an MD’s wife until she offered him a job: “I tried to keep calm. I was afraid that if I appeared too eager, it might dawn on the woman she had made a terrible mistake. I had recently read John Gutfreund's now legendary comment that to succeed on the Salomon Brothers trading floor a person had to wake up each morning "ready to bite the ass off a bear."
• The masses all wanted to go into an Investment banking life: “Forty percent of the thirteen hundred members of Yale's graduating class of 1986 applied to one investment bank, First Boston, alone. There was, I think, a sense of safety in the numbers. The larger the number of people involved, the easier it was for them to delude themselves that what they were doing must be smart.” - but when they asked why he wanted to be an investment banker, he responded to make money… “Never for a moment did I doubt the acceptability to an investment banker of a professed love of money. I had thought that investment bankers made money for a living, the way Ford made cars.”
• He was joining the Wall Street elite: “Man for man Salomon Brothers was, in 1985, the world's most profitable corporation. At least that is what I was repeatedly told. I never bothered to check it because it seemed so obviously true. Wall Street was hot. And we were Wall Street's most profitable firm.” → They got there by attacking overlooked markets: “The rest of Wall Street had been content to let Salomon Brothers be the best bond traders because the occupation was neither terribly profitable nor prestigious. What was profitable was raising capital (equity) for corporations. What was prestigious was knowing lots of corporate CEOs. Salomon was a social and financial outlier.”

They Have PhDs in Man’s Ignorance

• Salomon made money taking a small sliver of each transaction they facilitate (1/8th of a percent), but they kept persuading investors to trade more for the chance at a quick profit: “In this process, it helps if neither of the parties on either side of the middleman knows the value of the treasure. The men on the trading floor may not have been to school, but they have Ph.D.s in man's ignorance. In any market, as in any poker game, there is a fool. The astute investor Warren Buffett is fond of saying that any player unaware of the fool in the market probably is the fool in the market. In 1980, when the bond market emerged from a long dormancy, many investors and even Wall Street banks did not have a clue who was the fool in the new game. Salomon bond traders knew about fools because that was their job.” (Took advantage of man’s ignorance with their misaligned incentives!)
• Chasing excess: “One of the most remarkable things that happened in the 1980s was [the] sharp explosion in debt, way beyond any historical benchmark. It was way beyond anything you would have expected relative to GNP, relative to monetary expansion that was taking place. But it came about, I think, as a result of freeing the financial system, putting into being financial entrepreneurship and not putting into being adequate disciplines and safeguards. So that's where we are. That is where we are: wild, reckless, and deeply in shock. We at Salomon Brothers were among the leading financial entrepreneurs. What Kaufman was saying is that we had helped create the problem.”

Fraternal Wolf of Wall Street Culture

• “Each year on the trading floor counts for seven in any other corporation. At the end of his first year, a trader or salesman had stature. Who cared for tenure? The whole beauty of the trading floor was its complete disregard for tenure. A new employee, once he reached the trading floor, was handed a pair of telephones. He went online almost immediately. If he could make millions of dollars come out of those phones, he became that most revered of all species: a Big Swinging Dick.” → reminding me of the fraternal and debauchery culture in The Wolf of Wall Street: “Most of the men were on two phones at once. Most of the men stared at small green screens full of numbers. They'd shout into one phone, then into the other, then at someone across the row of trading desks, then back into the phones, then point to the screen and scream, "Fuck!"
• During training, the new recruits heard from numerous people at Salomon, some who only had the word fuck in their vocabulary and others who had to yell asshole at traders until they got what they needed → (Talk about a crazy culture) “Each day as I leaped off the elevator onto 41 and sprinted head down for the cover of my MD, I had to decide whether to walk through the mortgage trading desks. And each day I decided I had better not. The mortgage traders emitted such evil vibes that I carved a wide loop around them every afternoon. Even then I felt uneasy. They were known for hurling phones at the heads of trainees and were said to have installed extra-long cords to increase their range.”

Dog Eat Dog World of the Trading Floor

• The trading floor: “Because the forty-first floor was the chosen home of the firm's most ambitious people, and because there were no rules governing the pursuit of profit and glory, the men who worked there, including the more bloodthirsty, had a hunted look about them. The place was governed by the simple understanding that the unbridled pursuit of perceived self-interest was healthy. Eat or be eaten. The men of 41 worked with one eye cast over their shoulders to see whether someone was trying to do them in, for there was no telling what manner of man had levered himself to the rung below you and was now hungry for your job. The limit of acceptable conduct within Salomon Brothers was wide indeed. It said something about the ability of the free marketplace to mold people's behavior into a socially acceptable pattern. For this was capitalism at its most raw, and it was self-destructive”
• “The firm was a bunch of fiefdoms. People in the other departments were more concerned with protecting their own business than with developing this new business."