Sunday, June 24, 2007

Book Review: The Last Tycoons

William D. Cohan's "secret" history of Lazard Freres & Co was a hugely detailed but slightly heavy read. The historical aspects of the firm's founding and the various crisis it faced during the period of its history from founding in New Orleans in 1848 (as a dry goods store) through to its IPO in 2005 were the more interesting parts of the book.

The story is dominated by four themes:

1. the "Great Men" strategy where the firm set out to attract, cultivate and rely on a succession of "Great Men" to drive its advisory business and set it self apart from other investment banks. With Andre Meyer and Felix Rohatyn being among the greatest investment bankers of their respective generations it was a strategy that for a long period of time enabled Lazard Freres to differentiate itself from competing firms. However, this strategy ultimately contributed to the failure of Lazard Freres to evolve and maintain its top tier investment banking rating;

2. the wealth that a successful investment banking business can generate for those sufficiently high in the profit distribution chain. Even the comparatively unsuccessful partners (a very relative term) were earning staggering sums of money;

3. the level of political infighting and squabbling that came close to destroying the firm and was a major contributor to the seemingly endless state of crisis that the firm experienced in the years leading up to its IPO;

4. the ownership structure that made Michel David-Weil and a few others phenomenally wealthy but ultimately doomed the firm to existence outside the ranks of the elite investment banks for a number of reasons.

In short the book was an interesting insight into the lives of successive generations of investment bankers and their cut throat world.

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