"I’VE NEVER been afraid of hiring people smarter than myself". (Photograph by Thomas Hart Shelby.)

The book, two and a half years in the making, reads in part like an insider’s history of Wall Street since the late 1950s, and in part like an encouraging, though cautionary, tale about the professional and personal rewards—and costs—of assembling, growing and managing a leading business.

Most of the events Weill relates are well known to those who even casually follow the financial industry. While he is clearly out to give his side of these stories—he pulls no punches in his portraits of his former protégés Peter Cohen and Jamie Dimon (now CEO of JPMorgan Chase) and his clashes with Jim Robinson at American Express and John Reed at Citigroup—he is refreshingly frank about his own missteps in managing those relationships.

But Weill remains convinced that the scale and diversification he doggedly pursued, originally through the purchases that created brokerage powerhouse Shearson Loeb Rhoades (which he sold to American Express in 1981) and then through the 12-year M&A spree that brought Primerica, Travelers, Salomon Brothers and Citicorp (among others) under the mantle of Citigroup, remain legitimate objectives. He acknowledges that open architecture has changed the business dramatically, making cross-selling a less compelling motive for building a multiproduct financial conglomerate (which is one reason Citigroup recently traded its asset management division for Legg Mason’s brokerage force). But international scale and product line diversification, he argues, remain justifiable goals because they protect the firm from downturns in any one market.

"The more diversified you are, the better position you are in to handle changes. If there’s a problem in one area, you’ll have offsetting businesses."

However, his enthusiasm for diversification has not been embraced as wholeheartedly by investors. Citigroup’s stock price has meandered between about $45 and $50 for the three years since Weill relinquished the CEO role to Chuck Prince, while the stocks of purer-play financial firms like Goldman Sachs, Lehman Brothers and Bear Stearns have skyrocketed, gaining between 50 and 150 percent over that same period.

Scale and Control
Weill’s memoir also can be seen as a study in the difficulties that arise when trying to manage an increasingly large institution. Indeed, it was at the apex of their institutional girth that both of Weill’s creations started to suffer from serious management issues.

After he sold Shearson to American Express, clashes with Robinson and Cohen undermined Weill’s effectiveness, and he eventually resigned. The firm underperformed and ultimately split up; Lehman Brothers, its investment bank, went public, and Shearson, the business Weill built, was purchased by his new company, Primerica. (“I felt like MacArthur returning to the Philippines!” he says.)

Citigroup managed to stay together, despite equally titanic initial clashes among Weill, Citibank chief Reed and Dimon—both of whom were eventually forced out. But even with Weill’s trusted lieutenants in charge, Citigroup has been fraught with management and control problems. Its nadir came in 2004, when its private bank was thrown out of Japan for regulatory infractions and its London-based prop desk roiled the markets and drew European regulators’ ire with its “Dr. Evil” bond trade.

Concerns about the effectiveness of the firm’s internal controls led to an unprecedented setback the following year, when the Federal Reserve barred Citigroup from further acquisitions until it cleaned up its act. But perhaps justifying Weill’s faith that the leviathan is, in fact, governable, Prince’s efforts at reform satisfied the Fed, which lifted the ban earlier this year.

Worth: Why did you write the book?

Weill: A lot of people have told me for a long time that there could be a lot of good lessons for young people, or people in business, fr    om what I was fortunate enough to have happen to me during my career. And I also thought that it would be a good thing for me to tell my story in a way that I remember it happening rather than how other third parties had written about it.

We wanted to do something that would be factual, balanced and, hopefully, with a lot of lessons. We also wanted to talk about the importance of partnerships and relationships, and my relationship with my wife, who is a very important partner in the whole story of what happened and, I think, important in the success.

Worth: In your book, you discuss your efforts to identify, hire and retain the best minds. What are some of the important lessons you’ve learned?

Weill: Well I’ve never been afraid of hiring people smarter than myself. I think that the person who is afraid of hiring somebody because that person may take his job will never be very successful. I think a great example of that was when Travelers merged with Citicorp to form Citigroup. John Reed and I were trying to work together, and it was not easy. John suggested bringing Bob Rubin in; I thought it was a phenomenal idea—no one knew global markets as well as Rubin, and it was a pretty good thing for Citigroup to have done at that time.

We also tried to build a company in which family was important; spouses were important and were included at important events. We’re in a volatile business; we’re in a business where one day you can feel very good and another day you can feel terrible. And if the spouse understands why these emotions go so high, high, high and low, low, low, that spouse will end up being a better partner to that person, and they would be a lot more understanding at home.

I think one of the most important things is to find individuals who look at change as really a time of opportunity, rather than fear that change, as most people do.
 
Worth: You write that you expect more consolidation in the banking sector. Do you foresee banks merging with banks, or situations that are more along the lines of the Citigroup model, in which institutions come together and offer more than one type of service?

Weill: We’re going from a period where it was an opportunity and an advantage to manufacture the products you sell, to a period where it’s an advantage to have distribution, but with the ability to buy and distribute third-party products. With open architecture, you might not even sell your own products. So that’s why we’re getting out of the asset management business, by and large, from the perspective of manufacturing, although not from the perspective of managing people’s assets.

If you believe in globalism, like I do, then a company has to be a low-cost producer of good, quality services and products, and that will lead to consolidations among companies within countries, and it will lead to consolidations across countries. You need to be able to reach the ultimate consumer with the lowest possible price.

Worth: Talking about consolidation, one of the ways you can look at the last third of your book is as an account of your experience learning to control a large, sprawling organization with a lot of moving parts, while undertaking mergers and experiencing other sorts of turmoil.

Weill: I don’t think mergers are turmoil. Mergers need a good leader who can make decisions and who is fair, to end up with the best quality management. Nobody knows better who is a good manager than the people operating out in the field. If they think you can’t make up your mind, if there are two people sharing the same job and they think one is awful and they think one is unbelievably good, I think that causes a lot of other people to leave. I think you’re better off making decisions soon, even though some of them will be wrong, because you can move forward.

Worth: Is there any limit to the size of an organization that can be overseen effectively?

Weill: There may be, but I don’t think we’ve come anywhere close to that point. If you think about the growth opportunities, when our market share is 2, 3, 4 percent in some countries that are growing at double the rate of growth of the U.S. and four times the rate of Europe, there’s the opportunity to get much bigger.

Worth: You write that after buying Salomon Brothers, it was a learning process to understand the firm’s hedge fund business. Is there some point at which one person or a trusted group of individuals has a hard time getting to the bottom of such complex, large-scale businesses, especially when you’re adding businesses, and especially adding businesses in different countries?

Weill: I think there’s no question we didn’t understand the complexity of some of Salomon’s trading businesses. And we bought the company just as the Asian crisis exploded and Korea and Indonesia and Thailand had real troubles. We needed to learn how that affected the liquidity of markets and how many funds were doing the same thing. And when the bell rang, there were no exits. So we got out of that business pretty fast. Now, nine years later, from Salomon Brothers we have one of the great franchises in the business. A lot of the leadership of the whole corporate side of the business came from Salomon Brothers.

Worth: You’ve always seemed to focus on client business. Do you think prop trading has value in a firm like Citi?

Weill: Sure, it has a big value. I think the knowledge base that companies get from operating all around the world and investing for your own account is very important, and offering clients the ability to invest alongside you is important. The world is changing. Having managers who understand those types of markets and who understand balance sheets and derivatives is important. The more diversified you are, the better position you are in to handle changes. If there’s a problem in one area, you’ll have offsetting businesses.

Worth: You will now focus on your philanthropy?

Weill: Between my wife and myself, we’re chairman of five not-for-profits. This is not new—it is something I’ve done for 25 years. We are very busy. She’s told me more than once that shrouds don’t have pockets. We should think about—as long as we’ve got our brains and health—how best to give to the organizations where we think we can make a difference.

Worth: How do you decide which groups to support?

Weill: We believe in concentrating, so it’s not $1,000 or $5,000 to 100 different things. We decide to give to things we feel passionate about in the areas we care about—the arts, health care, education and society.

So tell your readers we’re not looking for any more good ideas! 

Dwight Cass is editor-in-chief of Worth.