January 26th, 2006

There was a lot on the team's calendar for Thursday, January 26th. From 11am to 4pm, all five of Lockwood's portfolio managers would be conducting their quarterly update calls for investors, and then from 6pm to 8pm, the marketing team was scheduled to have dinner with Eric Silverman at La Grenouille in Midtown. While Eric was "keynoting" the discussion, the real interest for Caroline, Margaux and me was that our two new colleagues would be joining the team for the first time. As Margaux had predicted, the new "new girl" had been offered a position, and apparently the Morgan Stanley guy had committed as well. None of us had any idea, of course, until Elizabeth had run back to the Pod the night before to share the news. She glowed as she announced that they would be joining us at our team dinner, and then they would both start in the office the following Monday. I noticed that Margaux pulled back a smile at the mention of Monday - that was the day she was planning on telling everyone she was leaving.

Around 10:15 that morning, Tim called me into his office. "Audrey - quick favor. We allow investors to email in questions for the portfolio managers in advance of their calls, but of course we don't have time or want to ask every single one of them. So we need to sort through the emails and pull out the good ones. I also jotted a few down on this pad for each PM that I think are fair to ask, so can you do me a favor and quickly type all this stuff up and print off a few copies and then we can walk through them together and get rid of the ones that we don't want to ask? We like softballs rather than hardballs around here, know what I mean?"

"Sure Tim, no problem."

I sorted the emails by which manager the question was for, and then typed up a list for each speaker with Tim's questions at the top and the investor questions in a separate section below. I printed the lists off and made my way back to Tim's office.

"Alright," he said when I put the list in front of him, "sharpies ready?"

Some of the questions were poorly written, some were redundant, and others were just negative. I could see why Tim wouldn't want to throw those out during a live call, but there were a few he removed that seemed pretty innocuous. One investor asked about why a new share class skipped over certain letters of the alphabet. It seemed a bit silly, sure, but it wasn't exactly a "hardball".

"Wait, so what is this question asking? I don't think I've really dealt with this kind of thing yet."

"Alright - history lesson. So every so often terms change, special situations arise, that type of thing and we have to open a new share class as a means of bucketing people who come into a certain version of a Fund. Essentially, performance might very a little depending on what share class you are in and this is a way to track people who all have the same 'parameters'. Typically the new classes just march right down the alphabet when an additional class opens: the first class is A, the next B, C, etc. But for the new series this year, the class jumped from H to K. It's not really a big deal, and few people pay attention to that type of thing. I'm surprised this guy even noticed."

"So then why did it skip?"

"Ha. Curious minds want to know huh? Well, the truth is... Charles doesn't like the letters I or J. I think there are a few others too - like Q and V - but those are further down the road."

"Tim - stop. Really. What if someone else asks me this? Come on - why did it skip?"

"Audrey, you know... if only I had a better reason. I am not kidding. Yes, it's ridiculous. Yes, it's confusing. And yes, from this year forward some poor kid crunching numbers over in accounting has to remember to skip I and J every time he writes down the list of share classes. But what can I tell you. It's Charles' name on the door. He says 'jump!' and we say 'how high?'"

Charles didn't like the letters I or J. I'd never heard anyone over 5 say anything like that before. This was really something.

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Listening to hour after hour of investor updates gave me a cloudy head pretty quickly. The portfolio managers rarely filled their full 60 minute time slot so there always a few breaks in between, but not more than enough time to get a new drink from the kitchen or relieve yourself of the drink you'd consumed during the previous session. By 3 o'clock it felt like I had been chained to my desk all day. And because I really wanted to learn the investment themes of each portfolio I decided to take notes on everything, so I couldn't even get other work done while I listened. I was going to have a lot of unopened emails to clean up before we left for dinner at 6.

Charles always went last, and when his booming voice came ringing through my headset as he announced the start of his call a few minutes after 3, I scrambled to turn the volume down a few clicks.

Each of the other Portfolio Managers had a strict set of guidelines from Elizabeth that outlined how they should structure their call. They were to start with a review of performance, discuss the drivers of performance at a sector level, and then move in to individual names and future investment themes. If time allowed after this, Tim - who served as the moderator of all the calls - would ask a few questions. For Charles, however, there were no rules. I'd heard that sports trivia and political commentary were popular tangents, and I was looking forward to seeing where he took the call this quarter.

"Alright everyone, thanks for dialing in - let's get this started. Now, I'm going to start with our performance for the most recent quarter. December is usually our sweet spot because we've got a really strong consumer team here at Lockwood and as everybody knows November and December are very consumer driven months given all the Holiday shopping. This year, we felt we were in a whole bunch of good consumer names that were really going to pop when it came to rolling out their products for holiday shopping. You know, products that become 'all the rage' and just close out the year with killer revenues. The problem is, I think we rested on our laurels a little bit here this holiday season. In other words, you know, we took our finger off the pulse - the consumer's pulse. So as it turned out, a number of the companies we loved didn't meet expectations that people had for them on Wall Street, and they paid a pretty penny for that in their share price. And unfortunately we paid a price as well."

He cleared his throat. Not once, but twice.

"So, we lagged the Index. And that really bothered me because I felt like we'd found some great names. So I took it upon myself to dig into the muck a bit and iron out what had been the catalyst for this underperformance. You know, what really went wrong; why didn't these companies do what we thought they were going to do. And it turned out we had missed a couple things. In some cases, we missed some really obvious things - memos and such outlining that the scenario might not be so great for these guys. That really drove me nuts. I'm been in this business too long to just miss things. I thought about how to prevent something like this from happening again, and I decided we needed to bring in some fresh blood to get some new opinions. Mix things up a a little. Don't get me wrong, the team was great, but for so long there hadn't been any changes, and I felt like it was time. So with the help of our fantastic HR team, I scouted out some really... and I mean really... top notch talent and I am pleased to announce that starting the week after next we'll have a new VP on the team covering consumers. I'm not naming names because I want to make sure this person has all their ducks in row with their previous employer. The timing works out great too, because our own Maria Flynn is also going to be leaving us. Maria's been here for a long time but I think it's time..."

I could no longer hear Charles' call because Caroline and Margaux were whisper-screaming at each other across the Pod.

"DUDE - Maria is leaving? No way. A week before bonuses? WAIT. Did he just fire her???" Margaux asked Caroline.

"Elizabeth definitely didn't mention anything. So... yeah, I'm pretty sure he just did! Which is absolutely unreal. On the conference call? Jesus." Caroline opened her IM while she was saying this and started fiendishly typing away. "I'm going to IM Helen and ask her if she had any idea."

I didn't really know who Maria was or what was going on, but I did know that Helen was a young research analyst, and Caroline's friend from high school had been Helen's roommate in college. Margaux and I both got up to read Caroline's IM conversation over her shoulder.

CarolineCox: Helen! What the hell is going on? Is Maria seriously fired?

HelenBrown: OHMYGAWD. I think so! We are all flipping out and IM-ing like crazy people over here on the research floor. This is INSANE.

CarolineCox: So you had no idea?

HelenBrown: None. Nothing at all. I mean, Maria was like Charles' fav forever! By the way, sorry if I'm slow to reply... I have like 5 conversations open in IM right now. We are freaking out.

CarolineCox: So is she still there?

HelenBrown: No. So awkward. She was listening to the call like the rest of us, and then as soon as Charles said it, Ellen came SPRINTING in and pulled her out of the room. She's not back yet. I mean... is she coming back? WTF?

CarolineCox: So do you have any idea what happened?

HelenBrown: Honestly... not really. Maria was out for 2 weeks for her honeymoon in November and when she got back Charles was PISSED bc he felt she'd disappeared off the face of the earth. But it just seemed more like he was moody than permanently mad, you know? Plus, she called in like twice a week from whatever safari she was on in Africa, which seemed like more than enough to me. Anyway, that's the ONLY thing I can think of that would make him so annoyed at her. That woman has made that man a LOT of money.

CarolineCox: Geez. Remind me to never get married, right?

HelenBrown: Hah! This is going to be a mess. I'll let you know if I see Maria, but I would guess they'll just box up her stuff. And who is this new guy?? So random!!

CarolineCox: Alright, well good luck up there... keep me posted!

Margaux began, "Helen is so right. Maria made Charles a TON of money over the years. You'd think missing two weeks of company earnings calls and stuff wouldn't lead to this! Plus, I'm sure someone was covering that stuff for her. So why not fire that person??"

"Sorry - I'm sure I should know this, but which analyst was Maria?" I asked.

"Maria has been here forever," Caroline began. "I mean like... at least five or six years. And she is unbelievably smart. She covered consumer products and was totally in line to be a Managing Director in a year or two. Probably one of the last people I would ever expect to get fired period, let alone unexpectedly over an investor call! Elizabeth is going to freak, by the way."

"Hah!" Margaux blurted out. "Check your email..."

At the top of my inbox was an email with the subject line "Maria Flynn". It was from Charles Lockwood, despite the fact that he was still on his investor call. Clearly a lot of things were going on behind the scenes here.

The email read:

Lockwood associates,

It is with great sadness that I must inform you of the departure of our dear friend, Maria Flynn. After nearly six years of service here at Lockwood, today will be her last day. We hope she remains a friend of the firm and we wish her well in all her future endeavors.

Cheers,
Charles

I didn't feel like I knew enough about Maria to grasp the magnitude of this departure, but the email seemed rather inappropriate. Employees who hadn't been listening to the call live had surely heard the full story by now, and knew that Charles had just unexpectedly fired one of his most senior researchers suddenly and publicly. It wasn't exactly a brilliant PR move, but as Tim had said earlier - it was his name on the door.

I picked up my headset and put it back on my head to hear the end of Charles' call.

"...could be difficult. That said, I'm excited about how we are positioned. We did miss some things last quarter in some of those consumer names, but Wall Street - in my opinion - hit these companies harder than they deserved. So earlier this month when some of these stocks were getting crushed and trading at the very low end of their historical averages, I took the opportunity to add a little bit to our positions. Not a lot, but just enough to take advantage of this low pricing. It's kind of the same thought as - sure, your wife has nice jewelry, but if you walk by Tiffany's and see a sign that says "20% off" well, you might take advantage. I mean, even if your wife doesn't need anything new, you can sell it on Ebay and snatch that 20% right back, you know?" He laughed. "Oh my. Anyway, so that's more or less what I'm thinking right now. I look forward to reporting next quarter's results to everyone, and I hope you all had a wonderful Holiday season with your families and a very Happy New Year. Thank you for your continued support of our firm and our products."

Tim then came on, "That concludes our calls today, everyone. As Charles said, thank you for your support and please contact the marketing team at any time with additional questions. Enjoy the rest of your day." The line then went to a light Jazz song. Charles' call had lasted only about 25 minutes. And he had taken no questions. And he had just fired one of his most senior researchers. Not exactly the signs of a "good day".

The problem was that when Charles had a bad day, Elizabeth had a bad day; and when Elizabeth had a bad day, the Pod had a bad day. It was all just a matter of time.

I got in about 15 minutes worth of addressing the issues that had piled up in my inbox over the course of the calls when Elizabeth saddled up to the Pod and sat down in the empty chair. She was almost obsessively twirling the large diamond earring in her left year as she made this statement - not a good sign.

"Well. That was something, now wasn't it? I can't believe I didn't know that that was about to happen. I'm pretty sure Charles just decided - on a whim - to go through with it. It's certainly not every day you publicly fire someone, let alone when that public is your most engaged investor base. I can't even tell you the number of phone calls I had waiting for me on this. But, you know, that is Charles' prerogative. And, [sigh], to be honest, I support the decision. He has spent the last 25 years perfecting his ability to read people and he has built an incredible organization that could change the face of the hedge fund industry. It's truly incredible. He knows what he is doing and if Maria had to go, she had to go. I just think with all this stress that he's been dealing with as of late, he probably wasn't able to see that there might be a better approach to getting that achieved." She sighed again. "Anyway, it's done. And I wanted to let you know that if anyone contacts you about this, just act natural and review the same reasons Charles did on the phone - a need to improve the team and replace someone who wasn't the ideal fit. It's really not a big deal in the grand scheme of things. And the week after next we can circulate information on the background of this new hire to anyone who is interested. Sound good?"

We each nodded.

Elizabeth had just talked herself down from being terribly frustrated at Charles. It was an incredible act of self-medication, and she seemed in a much better mood. She even smiled at us. "And are you guys excited for dinner tonight? I just love La Grenouille - the souffles are incredible. Eric really made a great choice for our team and it will be refreshing to hear what he's thinking. Why don't we all meet up by my office and head over together around 5:45 or so, ok?"

Again, we nodded.

------------------------

At 6:08pm, Margaux, Caroline, and I were standing outside Elizabeth's office waiting for her to get off the phone. Tim and Eric had gone over to the restaurant twenty minutes earlier to check in for our reservation, but given her pep talk earlier in the day, the three of us felt compelled to wait for Elizabeth. At this point though, it was getting a bit old. Standing outside her office holding out for her to wrap up a phone conversation was a pretty embarrassing exercise. There is enough traffic by her door that people who are running errands within the office typically see you standing aimlessly on the way to wherever they need to be, and then again on the way back. Your time appears to have very little value - at least to Elizabeth. This time, the situation was a bit less awkward because there were three of us and we could keep ourselves entertained.

"You guys are going to have to take notes on the new team dynamic once - you know - I can't," Margaux requested with a smile. "Two new people is a lot around here."

Caroline responded, "Yeah, this will be interesting. Since she's a Charles connection, this woman could be useful or a total dud. And him, I'm not sure what his story is. My guess is that he's a broker recommendation if he's coming directly to us from Morgan. That usually doesn't happen unless someone over there gives their blessing. Elizabeth did just say in a meeting I was in that he's kind of an expert in dealing with institutional clients, which isn't really our investor base. Could be great for him, but I'm sure there are also a lot of expectations. Who knows?"

Margaux glanced at her watch. "Uhm, it's almost 6:15. Tim and Eric are probably downing drinks at the bar right now. So not fair. Though maybe with Eric it will loosen him up a bit for this 'chat'."

"I just can't wait for the souffle!" I threw out there.

Margaux started to shake her head in agreement. "Audrey - this place is amazing. Everything on the menu is heaven. We went there for a baby shower for Charles' old assistant a year or so ago and it was one of the best meals I've ever had. I'm kind of glad today was such a zoo because I barely touched my lunch which now means I've got extra room for dinner!!"

At that point, we could tell Elizabeth was finally winding down her 30+ minute phone conversation.

"Great, great. Yes, absolutely. I couldn't agree more." Pause. "No, thank you for your time. I'll be in touch. You too. Good bye." The phone went down on the receiver. "Ladies! I am SO sorry - have you been waiting long? I really couldn't help it - that was the head of the country's second largest state pension office. They make huge allocations - that could be a few hundred million for us!! Very exciting! Charles will be so pleased to hear about this. Actually, I should call him - just one more minute..."

We looked at each other knowing it would not be just one more minute.

"Elizabeth, you know what - I think we should head over. Tim and Eric went over to hold down the reservation but they could probably use a few more bodies. Why don't you just meet us there?" Margaux was emboldened by her forthcoming departure; I'd never heard anyone suggest the rationale choice to Elizabeth like this before. I turned quickly to see what she would say.

"Well... actually, you know what, that's probably right. What time is it, 6?"

"It's almost 6:20," Margaux kept on holding her ground. Impressive.

"Oh dear. Alright, let's do this. Let's all head over and I can either call Charles on the way or after dinner. Right? He's probably about to have dinner himself!"

At 6:30 - 30 minutes late - we finally walked in the door of the restaurant. Fortunately with all kinds of baby and bridal showers for employees hosted there, the firm was a good client of La Grenouille so the faux pas was overlooked.

As we approached the table I caught my first glimpse of the two new hires. They were both much older than me - she was probably about 30 and he had to be at least 35. I had a feeling I was still going to be called "new girl".

We all then took the time to introduce ourselves. The new hires names were Rachel Darby and Scott Johnson. Rachel, as it turned out, had gone to UCLA just like Elizabeth though there was no mention of them overlapping. She had previously worked at another hedge fund that was mostly debt focused so she was "really excited to get more exposure to equities". Scott - as we had been told - had come from Morgan Stanley. He worked on the Pension Services team there, which seemed to imply that he had covered this type of client's investments. He had a JD/MBA from the University of Chicago, and - like me - he had attended Stanford as an undergraduate.

After the official introductions, we ordered, and as that happened conversation broke down to a more local level. I was sitting between Tim and Caroline. I was of course more comfortable talking to Caroline, but Tim had started to engage Rachel and Scott - who were to his left - in conversation and curiosity got the best of me.

"So, really, I'm going to set you up with this friend of mine," Rachel started to say to Scott. I had forgotten that Rachel, Scott, Tim and Eric had spent 30 minutes together at the table while waiting for us. "How old are you, can I ask?"

"Thirty seven," Scott replied.

"Oh perfect. She's thirty seven too. You just remind me of her so much!"

"Sounds good to me. Starting next week you'll know where to find me." Scott laughed. Then he turned to me. "Hey so Audrey - you said you went to Stanford, right? And you just graduated? So you're an '05? Geesh, that makes me feel old. I'm just a few years shy of graduating in the 80s. What was your major?"

"Econ. You?"

"Education and Italian. Odd, yes. Let's just say I had a long route to figuring out what to do with myself for a career." He laughed again. "So where did you live each year?"

"Freshman year was Roble, then Suites, then I was abroad and off-campus, then Senior year I was over in the Cowell Houses. Again, you?"

"Ok, so Suites was being built as I was leaving just so you know how old I am. I was in all the big dorms - Branner, Toyon, then Trancos and finally Casa Italiana. Part of the reason I started taking Italian classes was to get into that house. Lots of cute girls and definitely some of the best food on campus." Scott laughed - again - and at this point I could tell that we were losing Tim. Tim certainly liked carcasm and depreciating humor, but he was always put together and Scott's approach was much more casual. Almost goofy. I decided to change the focus.

"So Rachel. Speaking of colleges in common, you now that Elizabeth also went to UCLA right? You guys didn't overlap did you?"

Rachel smiled. "Actually, funny you should ask. Elizabeth was a senior when I was a freshman so I didn't really know her. But I ended up joining the sorority that she had been in, and we wound up in the same 'lineage'. So eventually we crossed paths at an event here in New York. My 'big sister' is her 'little little sister' and that is who introduced us since we were both 'hedge fund girls'. Crazy right?"

"Wow," I said. "What a small world!" I couldn't believe that Elizabeth had hired her sorority sister for a job at Lockwood that didn't even exist. We had all assumed that she had been a Charles connection and that was why she had had an abnormal interview path, but this was even better. I really hoped that at some point I'd have the pleasure of catching the two of them doing their secret handshake.

At that point, Eric cleared his throat.