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CHAPTER 1

"GREAT MEN"

Even among the great Wall Street firms--Goldman Sachs, Morgan Stanley, and Merrill Lynch--Lazard Frères & Co. stood apart, explicitly priding itself on being different from, and superior to, its competitors. For 157 years, Lazard had punched above its weight. Unlike other Wall Street banks, it competed with intellectual rather than financial capital and through a hard-won tradition of privacy and independence. Its strategy, put simply, was to offer clients the wisdom of its Great Men, the finest and most experienced collection of investment bankers the world had ever known. They risked no capital, offering only the raw Darwinian power of their ideas. The better the idea, and the insights and tactics required to achieve the result contemplated by it, the greater was Lazard's currency as a valued and trusted adviser--and the larger were the piles of money the Great Men hauled out of the firm and into their swelling bank accounts. The lucky few men--yes, always men--at Wall Street's summit have always been portrayed as ambitious and brilliant on the one hand and unscrupulous and ruthless on the other. But the secret history of Lazard Frères & Co., the world's most elite and enigmatic investment bank, twists parts of this conventional wisdom into knots of unfathomable complexity. The Great Men chronicled herein amassed huge fortunes--to be sure--but they refused to admit to anyone, least of all to themselves, that their pursuit of these riches led to relentless infighting. Instead they spoke, without irony, of being part of a Florentine guild and of advice whispered to heads of state and to CEOs of the world's most powerful corporations, while all the time attempting to preserve the mythical special idea that was Lazard. They also, to a person, craved an equally elusive chimera: the assurance that somehow, despite everything, they alone had remained virtuous.

But starting in the mid-1980s, the wisdom of Lazard's Great Men strategy began to show its considerable age, especially when Lazard was compared with its better capitalized and more powerful and nimble foes. The firm's numerous strategic missteps were exacerbated by the increasingly titanic generational struggle inside Lazard between the likes of Felix Rohatyn and Steve Rattner--superstar investment bankers and pillars of New York society--as well as by the bizarre behavior of the increasingly isolated and bitter Michel David--Weill, the French billionaire who controlled Lazard and fomented the struggle from his imperial lair. And at the climactic moment, Bruce Wasserstein, the supreme opportunist, came along to pick Michel's considerable pockets. The decades of internal turmoil and paternalistic management led ultimately to the once--unthinkable: a Lazard Frères free from its founders, as a publicly traded company just like any other, its operational flaws and obscene profitability open to the world--its special cachet lost forever.

The story of Lazard has always been one of internecine warfare, calamity, and resurrection, proving definitively that the forces of "creative destruction"--in the Austrian economist Joseph Schumpeter's famous observation--are alive and well to this day in American capitalism.