CHAPTER ONE
BEFORE THE BEGINNING

You play it the company way.1

- Frank Loesser, How to Succeed in Business Without Really Trying

In a speech of less than one-minute told repeatedly over more than two decades at innumerable client meetings and every office holiday party, Greenhill, the man, would describe the founding of Greenhill the business in a few phrases. He wanted to spend all his time with clients rather than managing people. So he launched a new firm with only "a secretary and driver and Gayle [his wife] hanging pictures in the office." Then "people started showing up." Thereafter, as he repeated the story to Dealmaker magazine many years later, "We got lucky. Things just kind of happened."2

But there is a simplifying myth to the origin story of almost all enterprises. There is some truth to such stories but not the whole truth. Likewise, the story of how Robert Greenhill (the man) became Greenhill & Co. (the business) amid a spectacular albeit tumultuous period of expansion on Wall Street and developed into a global publicly traded enterprise of some renown, is more complicated and interesting. It is perhaps even instructive.

As a starting point, it is critical to recognize that the business that exists in financial capitals around the world but is universally referred to as "Wall Street", is a hypercompetitive one. Smart, extremely ambitious people are drawn to that business. There is the potential to create a sizable personal fortune, although those ambitious people routinely overestimate the probability of doing so for themselves. To maximize the money generated for participants, leverage in various forms is utilized, elevating risk. That risk is further exacerbated by the need for each firm continually to evolve to address technological innovations, changing government policies, economic cycles, fluctuating markets and new competitors.

Success in this realm is typically short-lived, and failure can be both sudden and brutal.

The combination of aggressive people who are free to withdraw their talents whenever they choose, high leverage, constant change and volatile markets explains why history is littered with stories of even the most highly regarded firms ultimately collapsing into liquidation or falling into the arms of a rival. Relative to the few dozen significant firms in this business today, many more have disappeared or been swallowed up by the survivors. In one way or another, the success of each of the survivors is born from the failure of others.

Competition within Wall Street firms is often every bit as ferocious as the competition among the rival firms. Just as in the case of star athletes, very few senior executives "go out on top." Even among those few who achieve great success, most end up later failing. Some falter when wrong-footed by a shift in markets or a cleverer competitor. Others are brushed aside by people underneath them who believe they have made a strategic mistake, not kept up with markets, aren't pushing their firm hard enough or have simply held onto their leadership post too long. And even for those whose careers do not end in quiet failure or public humiliation, there are almost inevitably harsh setbacks along the way from which they must attempt to rebound.

"There are no second acts in American lives,"3 Great Gatsby author F. Scott Fitzgerald famously said. That's not completely true of Wall Street, although successful second acts are very rare indeed. It was Robert "Bob" Greenhill's attempt at a second act that led to the creation of Greenhill the firm.

His first act played out at the storied Wall Street firm Morgan Stanley, which was carved out of the esteemed J.P. Morgan bank in 1935 in response to the Depression-era Glass-Steagall Act. That law required the separation of investment banking (various activities related to stock and bond markets) from commercial banking (principally the collection of deposits and making of loans). Morgan Stanley, thus, inherited at birth a commanding position in the investment banking business - the smaller but more dynamic of the two businesses that were separated.

From the start it benefited from being a prestigious brand, yet for many years it remained a remarkably small firm. As the firm was approaching its twenty-fifth anniversary, business writer Martin Mayer noted in the revised edition of his book, Wall Street: Men and Money,4 that Morgan Stanley had a single office, fewer than a dozen partners, ninety-five total employees and only $4.5 million in capital.

The firm's genteel culture was one characterized by integrity, understatement and restraint, rather than the aggressive salesmanship that would come to define Wall Street in the years that followed. Yet its distinguished heritage led it to expect, quite justifiably for many years, to repeatedly win business from America's leading corporations. Its simple mantra was the phrase J.P. Morgan's son Jack uttered not long before Morgan Stanley was created in describing his bank's strategy in Congressional testimony: ".first class business in a first-class way."5 The belief among Morgan Stanley's partners and staff was that, if they did business in that manner, new opportunities would continue to flow to the firm, thereby solidifying its preeminent position. And indeed, it was the firm, not the individual banker, that was paramount in the Morgan Stanley ethos.

Bob Greenhill was somewhat of an outlier relative to the historic Morgan Stanley culture - one of several men who sought to drag the firm into a new era characterized by increasingly intense competition. As historian Ron Chernow put it in his weighty volume The House of Morgan, "Greenhill was that Morgan rarity - a partner who emerges as a distinct personality in the public mind."6

Bob joined Morgan Stanley straight out of Harvard Business School in 1962, having earlier graduated from Yale and served in the US Navy. He came from a modest Midwestern background and was not at all a physically imposing man. But his extraordinary energy, indomitable will and love of competition made him a memorable fellow who stood out from the crowd.

The firm of which Bob became a prominent part remained highly prestigious and discreet to the point of secretiveness, as demonstrated by the fact that even decades later (and unlike the two other firms that descended from the original banking house of J.P. Morgan), it refused to sanction a single interview with Chernow for his definitive history, nor even to answer his written inquiry as to why.7 These characteristics helped secure for Morgan Stanley a position on Wall Street that remained far out of proportion to its size - there still being only thirty-four partners after Bob's class was promoted in 1970. At that time, the firm's perceived importance remained such that the election of new general partners merited a story in The New York Times. And so that July Bob and five others, including his Harvard Business School (HBS) classmate and fellow Baker scholar (signifying top 5% of the HBS class) Richard Fisher were profiled in connection with their election to the partnership.8

If the world of investment banking has always been a tumultuous one, then the era in which Bob made partner was no exception. What was at stake was later clarified by the ultimate fates of what Chernow identified as that era's three leading firms alongside Morgan Stanley: Kuhn Loeb, which later got swallowed up by Lehman Brothers, which in turn later collapsed into bankruptcy, and First Boston and Dillon Read, which were each later acquired by large Swiss banks and ultimately saw their once respected brands disappear.9 The major strategic issue of that day, and for the few decades to follow, was the importance of the traditional investment banking business (which involved raising capital by executing stock and bond sales for major corporations and therefore depended on the number and quality of longstanding firm relationships with blue chip clients) versus the trading business (which required more capital, involved greater risk and was seen as less prestigious, even as it rapidly grew in parallel with increasing capital markets activity).

The rivalry between those two businesses originated from the fact that their respective participants tended to be very different sorts of people. Only rarely did an individual move over the course of their career from one business to the other. Bankers tended to think those on the "sales and trading" side of the business were less educated, not particularly hard working, generated revenue only by using copious quantities of firm capital and were prone to taking risk recklessly. In turn, traders tended to think bankers were overeducated elitists who benefited from their social connections and toiled in a business that was neither as profitable nor as scalable as trading. A banker might be scorned as "a good knife and fork man" - in other words, skilled at dining with clients but not useful for much else. Speaking of entertainment, those on the sales and trading side were more likely to bring clients to a sporting event or strip club, while bankers were more likely to bring clients to an exclusive golf club or London's Royal Opera House. Thus bankers and traders were two very different animals that did not always coexist peacefully.

Beyond the growth in the relative importance of the...