Memos from the Chairman
Greenberg's own memos; the cost culture Bear ran on before it broke.
Summary
This is a collection of the internal memos Alan Greenberg wrote to Bear Stearns employees while he was chairman, from 1978 through the mid-1990s. They are short, most under a page, and they were circulated to everyone in the firm.
The recurring subjects are cost control, hiring and personal conduct. Greenberg pushed relentlessly on expenses, including a famous instruction about reusing paper clips and rubber bands, and the point was not the money saved but the signal that no expense was beneath examination. He instructed that employees should hire people with what he called PSD degrees, meaning poor, smart and a deep desire to become rich, and he was explicit that credentials were not what he wanted. He required that all bad news reach him immediately and made clear that concealing a problem was the one unforgivable act. He set a rule that every senior employee must give four percent of pre-tax income to charity, and enforced it.
Many of the memos quote a fictional sage, Haimchinkel Malintz Anaynikal, whom Greenberg invented so that he could deliver instruction as maxim rather than as order. The book takes an hour to read and functions as a short course in how a firm's culture is transmitted by repeated specific written communication rather than by values statements. The obvious complication is that Bear Stearns failed in 2008, a decade after these memos, and readers should think about which of Greenberg's practices survived his tenure and which did not. The collection has no analysis and no context beyond brief introductions.
Key takeaways 7
- Cost control should be applied to trivial expenses precisely because the amount saved is small, since the point is to establish that nothing is exempt from scrutiny.
- Hiring should favour people with strong motivation and no advantages over people with elite credentials, because the first group works harder and stays.
- Bad news must reach the top immediately, and concealing a problem should be the one offence that ends a career.
- Repeated short written communication from the top, on specific concrete matters, transmits culture more effectively than any formal statement of values.
- Selling a losing position quickly is a rule to be enforced institutionally, because individuals will not do it reliably on their own judgement.
- Requiring senior staff to give a fixed percentage of income to charity is enforceable and changes behaviour, where encouragement does not.
- Complacency after good results is the specific risk a profitable firm faces, and it must be attacked while results are good.
Who should read it
Managers and founders interested in how culture is transmitted through repeated specific communication, in a very short primary-source collection.
Where it sits in the reference 2
Who recommended it 2 · 1 direct
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