Morgan Friedman: Hey everyone, welcome to the latest episode of Client Horror Stories. We have a very exciting episode that’s about to start. A man of many stories and many lives, like a cat. Ed Hajim, it’s an honor to have you here with us.

Ed Hajim: Morgan, it’s my honor to be here.

Morgan Friedman: It is fun. So, Ed, of your many different crazy client horror stories, we’re ready to jump into your favorite.

Ed Hajim: I have my coffee with whiskey in hand. I’ve spent time as an engineer, a naval officer, and fifty, sixty years on Wall Street. I guess my best stories are Wall Street stories, although if you get a couple of naval officers together, you can tell naval stories all night long. I was the managing partner of a medium-size investment bank, and we grew the bank from about twenty million in revenues to half a billion in revenues, and we sold the company twice — first, after five years, to Xerox, and then we were part of Xerox for five years, and five years after that we sold it to ING. Right before I came aboard, the two partners of the firm decided they didn’t really want to run the firm, so they brought me aboard when the firm was worth about twenty million. I decided at that point I was going to really grow the firm, and I grew it very rapidly, and some people thought that was great and others thought it wasn’t so great. About four years in, one of the senior partners — actually a name partner, a terrific guy, a smart analyst — came into my office and said, ‘You’re doing all the wrong things, you’ll end up drowning the firm in red ink.’

Morgan Friedman: A quick question — you said he’s a name partner, and I know nothing about the investment banking world. Does that mean his name is in the firm’s name?

Ed Hajim: He was on the door. Yes, and he was a founding partner. Smart guy. He came into my office and told me I was going to drown the firm in red ink. He was a great big guy, and I hated to lose him because he was a good analyst and a good guy. So I said to him, ‘Jim, you do what you want to do, but I think we’re doing the right things.’ Twelve months later — we’d had a very good year — Xerox, for whatever reason, came in and paid three times book, over a hundred million dollars, for the firm. Everybody who was a partner, and he would have been a partner, did well. So I’m all smiles, the checks are coming in a couple of weeks, and all of a sudden I get sued by this wonderful friend of ours, this name partner — Jim sues us. He claimed that we took his stock back when we already knew we were going to sell the firm, and that’s why he didn’t get the benefit of the huge markup, because people owned the firm at book value, and this was three times book, so he lost out on three times what he thought his stock was worth. I said, ‘No — you told me you were quitting. We didn’t fire you. I’m not going to pay it.’ Then Xerox called me and said, ‘We’re not buying the firm unless you clear up all your lawsuits.’ So sure enough, Jim didn’t get all his money, but he got quite a bit of it. It really irritated me, and it shows you one of the lessons of these stories — no good deed goes unpunished.

Morgan Friedman: Before we jump into the second story, a few questions about that. His public story was that you knew you’d sell the firm and that’s why you did this to him — but privately, he’d told you he was resigning, and that was a different story. Was that just a case of a lawyer telling him he could try to get more money, or was there something more to it?

Ed Hajim: A lot of money was involved and therefore he took a shot. I guess one of his lawyers probably told him he could do this, and he did it. This wasn’t just between him and me — it went to our executive committee and a whole bunch of people, so it was very well documented. But Xerox’s lawyer said, very simply, ‘We’re not going to buy your firm unless you’re clean of lawsuits.’ And I could understand that. The money we paid him, divided among the twenty-five or thirty partners we had, wasn’t that much — but it was quite annoying and disturbing. First of all, he was wrong — the firm didn’t drown in red ink, we sold it for a very fine price. So I think there are a few lessons from that story worth articulating. One is obvious but powerful to repeat: when the numbers get big, when there are lots of zeros after the number, even nice guys become less nice. I have to take some blame too — we probably should have documented it more carefully. We should have had him sign a release that said he was quitting the firm, but we didn’t, because he was a name partner and we were friendly. It wasn’t terribly acrimonious — he just disagreed with everything I was doing. And that’s the lesson: I didn’t know we were going to sell the firm, so I didn’t think about it. When Xerox actually came in and said they wanted to buy the firm, I couldn’t believe it — one of my partners even asked, ‘Why do they want to buy us?’

Morgan Friedman: So, I like stretching each story for a few lessons. One lesson is that when there’s big money involved, nice people become less nice. Another lesson you just mentioned is that you need to document these things — you thought you’d documented it well because he signed the release, but you didn’t get him to sign something saying he was quitting for these specific reasons, and that ambiguity let him change the story later.

Ed Hajim: That’s right, exactly right. 

Morgan Friedman: One of the points of this podcast is to teach younger professionals — and younger versions of ourselves — these lessons, because had we known, we would have avoided a lot of headaches and kept more hair today.

Ed Hajim: I’m a bit of an executive who delegates quite a bit, and once this got going, I delegated it to our legal counsel. We were a small firm, so we didn’t spend a lot of money on legal, and he was a friend of the firm, so we paid him off. He did get a nice payday — just not three times the payday.

Morgan Friedman: Another lesson: when you delegate things, because there are only twenty-four hours in a day, you don’t have time to look at every little thing — but for important things like legal contracts, it’s worth putting in the extra time yourself. There are two other lessons I want to mention before I forget. It’s interesting that you didn’t even think you’d be selling to Xerox, so you didn’t prepare for it — but it’s such a good example of how unexpected things happen all the time.

Ed Hajim: Yeah, exactly right. They happen all the time. And in this case it was a great experience — but again, another lesson is that we could have kept fighting this. Taking the experience into context, paying him off got the deal done. If I’d let my ego take over and said, ‘Damn it, he lied to us, what he’s doing is illegitimate, we’re going to fight him to the end,’ Xerox may have lost interest — who knows. This was a deal nobody believed would happen — we were a little tiny firm being bought by this wonderful big firm, and people kept questioning it. In fact, a big magazine wanted to come into the office and write a story on it. One of my partners liked publicity, but I said, ‘Get those guys out of here right away — the story isn’t how great we are, it’s why are they buying this little firm,’ because if the publicity came out, we might lose the deal. So the big lesson on my mind was: get it over with, get the deal done. That’s the number one thing — always think about what the biggest job is. If some little thing down here is causing problems, get rid of it, even if it costs you some money, because otherwise you’ll end up fighting wars you shouldn’t fight.

Morgan Friedman: That’s such an underrated lesson, because I know too many people myself who get stuck fighting minor wars and don’t even see that the big war is happening at the same time.

Ed Hajim: That’s exactly right.

Morgan Friedman: I remember a few years ago on this podcast I interviewed a lawyer, and something he said really stood out to me — he made the observation that lawyers get rich from people fighting things on principle. His point was similar to yours: people say, ‘No, I’m right and they’re wrong,’ and they spend huge amounts of money to fight it, and the lawyers benefit, but really they’re not fighting for a practical benefit toward the big goal—

Ed Hajim: —Keep your eye on the objective, and don’t let minor things get in your way. 

Morgan Friedman: I love it. 

Ed Hajim:  And within — unfortunately, we got our check on October 1st, 1987. Three weeks later the market crashed, and it was unbelievable — we might never have been able to sell the firm for five years, maybe never. I was among Xerox executives in December, and David Kearns, who was the chairman, pointed at me and said, ‘Here’s Ed Hajim, our newest acquisition — don’t ask him why he’s smiling.’

Ok, What do you want to do next?

I can give you another one of those stories, about employees, if you like.

Morgan Friedman: Yeah, let’s go for it.

Ed Hajim: No good deed goes unpunished. We had a fixed-income division that wasn’t doing well, and I was thinking about closing it because it didn’t fit our strategy. Xerox had actually given us the division and asked if we’d take it, and I did — I probably shouldn’t have, but I did. The guy running it was a nice man, worked hard, but he couldn’t make a profit — maybe it was our fault, maybe his. Anyway, we decided to close the division, and we were going to find something else for him to do at the firm because he was a good guy. Then he got into some kind of difficulty — family or something — and he came to me and said he wanted to leave and wanted his stock purchased. I said, ‘The way we do it is, if you leave, you get a piece of paper — a three-year note where every year you get one-third of your money back plus interest.’ We had to protect the firm, because if half a dozen people left at once, it would take the firm’s capital right out the door. He came back about a week later and said, ‘I can’t do this, I really need the money now, all of it.’ I said I couldn’t do it — here are the documents, if an employee quits, this is what he gets. I felt sorry for him, because he gave me a story I don’t want to disclose, so I called my CFO and asked if there was any way we could give him his money. He said no — but there was one way: if we fired him, we’d have to pay him off. So I called him and said, ‘The only way I can do this is to fire you — do you want to be fired?’ He said, ‘Oh yeah, fire me, it’s okay, as long as I get all my money.’ So I fired him, we put a piece of paper together, and this time we were more careful and got it all nailed down. Everything went well, and like the last time, about a year later ING came in at six times our book — a really big number, and by then we’d grown into a large firm, so that went through fine and I got my checks. But he goes to arbitration — not a lawsuit this time — arguing that we knew we were going to sell the firm and that’s why we took his stock back, and that his division was being closed down and we should have done something for him. We went to arbitration, which turned out to be as bad as any legal situation — we were there for three or four weeks with piles of documents. At one point they said, ‘Look how much money you got out of this,’ because I was the largest shareholder in the firm. We argued for three or four weeks, the arbitrators were old-timers who didn’t seem too excited about what they were doing, there were three of them, and eventually, after three or four weeks of piles of documents, the legal costs were almost as much as what the guy wanted — because by then I could afford to fight it. It wasn’t money out of my own pocket; we were fighting it from the position of being part of another firm, and they were going to pay anyway. So anyway, the arbitrators came back and cut the baby in half — they gave him half of what he wanted. But again, no good deed goes unpunished, and there’s very little you could learn from that, because we really did everything we could to protect ourselves, and even then, fighting it only got us down to paying half of it. He also wanted a bonus, but the arbitrators gave him no bonus because we proved his division wasn’t making any money — he did get a payment for part of his stock. It’s one of those things you live with. We really did everything we could to protect ourselves, and even then we fought it and still ended up paying half. I never saw the guy again, even though we’d been friends — he was one of my managers, we’d have beers together regularly. But that’s what business is all about — Wall Street is Wall Street, you’re there because you want to make money, and you attract those kinds of people. They’re not bad people, that’s just what they like in life, and you have to live with those sorts of things.

Morgan Friedman: So, what’s interesting about that story compared with your first one — someone working and leaving in a healthy, positive way, but then coming back with dollar signs in their eyes when it happens again — one time is random bad luck, but two times is a pattern.

Ed Hajim: Well, very few people sell a firm twice in a lifetime — I sold my firm, bought it back, and five years later sold it again, so you rarely have that. And surprisingly, the multiple we got both times was pretty big — the second time it was six times, and we were a big firm by then, eight hundred people. So where do you want to go from here? How about my boss at the major prestigious firm?

Morgan Friedman: I would love to hear the story about your boss at the major prestigious firm. I love the three-minute stories, Wall Street style — you’re very to the point, and I appreciate your directed storytelling style. But before we go to the third story, I want to see if there are any other, less obvious lessons we could extract from the second story. You threw out a line I find interesting — you said, ‘We were friends, but I never spoke to him again.’ I find that a little sad–

Ed Hajim: — he just disappeared and you never saw him again. I’m trying to think of a lesson. I suspect the lesson, again, is more documentation — though this was ten years after the first story, and in this case we paid him off and he got all the money he wanted. I don’t know if we could have documented it any better, because he wasn’t quitting, he was being fired. So in order to help him, we basically told a little white lie to allow him to get his money, in a situation where we really had no legs to stand on, because the only document we had said we’d fired him.

Morgan Friedman: I think the way you began the story is actually the lesson — you gave it away at the start, when you said, ‘No good deed goes unpunished.’

Ed Hajim: By the way, The lesson learned is: don’t break the rules. If I didn’t break the rules — if I’d said, ‘Frank, you’re stuck, I don’t care, that’s the way the ball bounces, you’ll just have to take your piece of paper’ — I don’t know what he would have done.

Morgan Friedman: By the way, that is such a good, subtle lesson: the rules are there for a reason.

Ed Hajim: Protection, exactly. And nothing would have happened — you probably wouldn’t have sat through arbitration for seven months, which was a good chunk of six figures in legal costs. And putting on your blue suit and white shirt and tie, three months of listening to these arbitrators who really aren’t that knowledgeable about your business — you have to sit and explain what everything means. I had my CFO with me, and I was living in Connecticut and had to come into New York for it. So — don’t break the rules. You want to be a nice guy, don’t be a nice guy.

Morgan Friedman: I love it, a subtle, great lesson. There’s a variation of that which might be useful for our listeners — G.K. Chesterton, the early twentieth-century British thinker and writer, has an insight I’ve long found useful, sometimes called Chesterton’s Fence. He observed: don’t take down a fence between two houses until you first understand why the fence was put up in the first place. You want to break the rule — don’t break the rule until you understand why that rule exists, because the nice guys you want to help can turn around and act like this.

Ed Hajim: Well, the rule was put in place to prevent mass liquidation — it wasn’t put in place for one person, but it probably did prevent one person from coming back to us. Again, I had no idea we were going to sell the firm in twelve months. If we’d sold the firm three years later, we would have been fine, but it was really only about eight months later that we sold it — one of those crazy experiences. By the way, we did the whole deal in less than sixty days, in 1997.

Morgan Friedman: There’s one other psychological insight I want to extract from this before we move to your third story — something in common between both stories is that these people, who turned out not to be so nice, both imputed motives to you that you didn’t have — they claimed you knew you were going to do this. What’s interesting from a psychological perspective is that a lot of bad-actor behavior involves assigning motives to the other side that were never there in the first place.

Ed Hajim: Another problem is people’s vision of me — I was never a killer. There are certain people you don’t mess around with, where if you did to them what they did to me, you might end up with someone coming for your knees. They knew I wasn’t that kind of person — they knew I was nice. Maybe a little softer than I should have been. So there are always two sides to it.

Morgan Friedman: Interesting — I love the admission that you were a little bit softer, and as a result, they could take advantage of that.

Ed Hajim: But being softer allowed me to run the firm the way I wanted to run it. It was a very successful firm, and I figure being the kind of person I was was one of the reasons the firm did as well as it did. I could tell you about horrible banking deals, or I could tell you about my horrible boss.

Morgan Friedman: Let’s see if we have time for both — let’s talk about your boss first.

Ed Hajim: Okay — this was a very prestigious firm, the kind of place where you’d go to the dining room and there’d be white-gloved staff standing behind you, and the Fed chairman or the King of Spain might be there for lunch. I remember one conversation with one of our partners in Italy — I asked, ‘Mario, where are you?’ and he said, ‘I’m on the Pope’s plane.’ It was that kind of firm. The guy who ran it was the number two guy when I got there — he and the number one guy hired me away from the place I was operating at, Hutton. The only negative about moving to this firm was that this guy was well known to be a tough guy. But given my background — orphanages, foster homes, difficulties — I thought I could get along with, or at least handle, anybody. The deal they made for me was second to none — they made me a partner, put me on the board, paid me well, and gave me all the responsibility I wanted. I asked to be totally responsible for the whole securities area — stocks, bonds, trading, sales, research, the international part, the retail part, the institutional part — and they gave me the whole thing. It was a step up from where I’d been, running only one part at the other firm. It was hard to hire people because everyone knew about this guy’s reputation. At first he kept saying, ‘I’ve got fixed income, you’ve got equity, we won’t mix,’ and for about three years I actually got the place turned around. There’d been a merger where the two sides didn’t get along, and I finally got them to work together, and after three years we went from almost nowhere into the top ten or fifteen firms. He was making good money too. Then, during a three-month period, he had some really bad trading problems, so he called me and said, ‘I’m cutting back some of my staff, and I want you to bring four of your people to my office so I can fire them.’ I thought to myself — if that happened and he fired four of my people, I’d never be able to hire anybody else on the Street, because it would be out there the next day. But he’s my boss, and I understood why he was doing it, because the firm had to make money and he’d lost a bunch of it. So I went to his office, and he looked at me and said, ‘Where are the four people?’ I said, ‘Joe, you’re looking at them — if you want to fire four people, why don’t you just fire me?’ He thought about it for a while, but he didn’t. The lesson was to show someone that what he’s doing is completely out of the question, and that you’re willing to put your business, your life, your job — everything — on the line to prevent it, because I really had no choice. If I’d fired four people, my business would have gone down the drain, because the word would have gotten out that I’d taken three years to build this up and it was still the same old firm that couldn’t keep people. So in a sense it looked like a very difficult decision at the time, but looking back, I had no choice — I had to show him this was the wrong decision, that it was a life-or-death situation for my business, and that even though the org chart said he was responsible for my business, he wasn’t really.

Morgan Friedman: That’s a great and powerful story. A couple of lessons — first, I love that you said he wasn’t really in charge of my business even though the org chart said he was. That’s subtle but important, because sometimes the org chart says one thing, but the power dynamics say something very different, so you need to pay attention to that. Another good lesson is that when you push back against difficult people or difficult bosses, sometimes you just need to put yourself on the line — and putting yourself on the line is the most important way to show you’re serious about it. I feel like a lot of people are scared to do that, but it’s often the best strategy.

Ed Hajim: Well, he could have fired me — he was strong enough to do that. But I’d just built this division, and if he’d fired me, the whole thing would have fallen apart, and because I was big enough on the street by then, it would have come out in the papers the next day, and that would have been a bad deal for him. I actually used that same tactic a couple of times later, when we merged with another major firm and he tried to fire me again — I told him if he brought another guy in to run that division, the division would walk out Monday morning. So he let the other guy go instead, and later told me, ‘I don’t like you, but I liked him less than I liked you.’ So I stayed in my business. But he came after me again, because he wanted to take over my business, and he was strong enough to do it. He convinced the executive committee and the board that I was on that our money management business — which had gone from three billion to a billion and a half under management and was having a lot of trouble — needed me, because I was the only guy with experience in that business, having come from a money manager in California. So he pushed me out of my position into running that instead. I did get a lot of concessions — I got to run it a hundred percent my way, and they’d leave me alone, plus a car and driver and a few other things, which made things easier since I was living in Connecticut. But it was a sidebar for the whole firm — if I was ever interested in becoming more important there, this basically ended my career path. Much to his dismay, within two and a half years I’d raised seven and a half billion dollars, and we became a profitable part of the firm without using any of the firm’s capital. I was a minor hero, because it had been an embarrassment for the firm and I turned it into a business that was growing like gangbusters. So he came to me at that point wanting to push out the chairman, who was a genuinely good guy — someone who could talk to almost anybody. I worked with him on things where he’d have a senator on the phone, or the Fed chairman on hold. He’d actually been a cabinet member, I think in Nixon’s cabinet, and later became a billionaire. This guy came to me and said there were only nine people on the board and he needed my vote to push the chairman out because he thought he wasn’t good for the firm. I said, ‘No, you don’t understand — this guy puts his tuxedo on four nights a week, you don’t like to do that. He does things you can’t do, you do things he can’t do, the two of you run the firm together, great.’ He said, ‘You’re either going to back me or else,’ and I said, ‘I’m not backing you, sorry.’ He was mad. About a month later I got a call, and I thought maybe they were going to put me on the executive committee, since I’d turned the money management business around and it was making money. Instead, they told me they were going to move me from my present job to become a banker, because they supposedly needed someone good at bringing in clients — which of course was all nonsense. He just wanted to move me out, because by then I had a division with two hundred people and ten billion dollars under management. So he pushed me out, and the chairman I’d been supporting didn’t back me either. It’s actually written about in a book called The Greed and Glory of Wall Street, and everyone said what happened to me was crazy, that pushing me out was ridiculous. Anyway, this is a personal lesson I tell people — in fact, I just finished another podcast earlier today where they asked what’s the most important lesson I’ve learned in life, and I said: never be a victim, no matter what it is. This situation wasn’t my fault at all, and I could have fought him, because I was chairman of several outside mutual fund boards and could have gone to the press, and probably could have taken the division out of the firm entirely. But instead, I focused my energy, as I’ve done my whole life, on what’s next. I took the energy I could have spent being a victim — hating people, criticizing this guy — and focused on what came next. And I found — actually, they found me. When word got out that I was available, two partners from a small investment bank called and said they wanted me to run the firm, which is what I’d really wanted to do all along. I could have forced my way into staying at that place and spent the next ten years miserable with those people. Instead, I found my dream job — to be the senior officer of a small firm where I could put my passions, my principles, find my partners, and build my plans — do the thing I’d always wanted to do. I didn’t have enough money to just quit, so this was an easy decision, but it happened because I focused on what’s next. As soon as I found out I was going to just be a banker, I put my feelers out, and these two guys came in right away and said, ‘If you’re free, we’d love to have you come run the firm.’ That was a real break. I could have spent a lot of time with lawyers and boards trying to figure out how to fight this guy, but instead I focused on what’s next, and it changed my life for the next twenty years. I ran that small firm and had a ball — it was a great pivot in my life. So the whole lesson is that sometimes when things are ridiculously difficult and wrong, a great shot may come out of it. I’m a bit of a fatalist about it. By the way, the firm went bankrupt seven months after I left — he started doing some trading, lost some money, there was some disruption, and they sold out at a very low price to another firm.

Morgan Friedman: That’s an amazing story. I really like your insight — no matter what happens, never be a victim. I think you’re making a subtle variation on that point, which I’d reframe like this: you have a limited amount of energy, and if you expend it being a victim, you won’t have enough energy left to move ahead.

Ed Hajim: You’re quoting me — that’s exactly what I said. Use the energy you’d spend being a victim to find out what’s next. You only have a limited amount of what I call psychic energy — you just run out.

Morgan Friedman: I read your mind — I knew you were going to say it, but I like your phrase, psychic energy.

Ed Hajim: It is, because you need to create, and there are books written about this — you have maybe two hours a day of that energy. Use it up being a victim, and it’s gone, and you can wear yourself out. You could use that creative energy figuring out what lawyer to hire, how to get this guy for the statements he made — but forget it, focus on what’s next. I think early in my life the same thing happened to me, only a little more my own fault, and focusing on what’s next, I changed careers, met a guy who made me a senior vice president of a firm, and off we went — I didn’t look back.

Morgan Friedman: Your insight that you only have about two hours of creative or psychic energy a day, so don’t spend it being a victim — use it on moving ahead. We can also apply this to the first two stories you told at the start of our podcast, because having to put on a suit and go to the courthouse every day drains your psychic energy. 

Ed Hajim: And you have to put a price on that.

Morgan Friedman: Completely. Do you have time for one final quick story before we wrap up?

Ed Hajim: The idea, in business, of having certain tenets that let you make decisions a little earlier is a principle that helped me enormously on Wall Street. I’ll give you a couple of quick ones. A young banking partner came to me and said, ‘I’ve got a fabulous deal — probably one of the biggest deals the firm has ever done.’ I said, ‘Tell me about it.’ He said, ‘The client is a Russian, a Cyprus citizen.’ Check — don’t do that. I asked, ‘What’s the business?’ He said, ‘Used cars.’ Check — not such a good business. ‘Where are the cars?’ ‘They’re bought in Europe and sold in Africa.’ My antenna went up, and I started thinking, I’ve got to find something else wrong with this so I can reject it. I said, ‘Bring the client in, let’s talk.’ The client came in — very well-dressed, well-spoken, obviously Russian but spoke brilliant English, probably went to Harvard. He told me the deal — how he was going to buy these cars, which I suspected were probably stolen, and sell them in various African countries. I said, ‘That’s a bad idea. How are you going to pay for our services?’ He reached into his pocket, pulled out a little bag, and poured diamonds out onto my desk. I said, ‘Excuse me,’ took the banker into the next room, and said, ‘Get this guy out of here right now and never bring him back.’ So that’s one story where you only need one more strike to reject something — that was an obvious one. Even quicker than that — one day, I was the chairman, so I didn’t do many banking deals myself, I just looked over them. One of my partners, a very good banker, had a couple of guys he wanted to do a big movie deal with, since we were in the media business. I was a little late getting to the lunch, and when I walked in, I smelled marijuana — these guys were smoking pot in our corporate dining room. I said, ‘This is not for me.’ We went through the whole process, and some of the numbers weren’t quite right either, so I talked my partner out of the deal. He was pissed — they were good guys, he knew them well. Somebody else raised the money for them instead, and they went belly-up in a very short period of time. Over a lifetime you pick up little indications like that, where you say, that’s not a good idea, I’ve been there, done that, and I don’t want to make that mistake again. That’s a real lesson learned — what you should do in any business is build up a series of tenets, almost second nature, about what to stay away from. I’ve mentioned a couple of obvious ones — there are much more subtle ones too, like certain accounting principles people use that aren’t quite right, where you have to stop and ask, ‘Wait a second — what about that deferred maintenance, what about that tax situation?’ Those are much more complicated and not nearly as fun. These two were fun ones that told me right away I was in deep water and needed to be careful.

Morgan Friedman: I love that. I also like your word ‘tenets’ — I do the same thing, but in Morgan-language I call them rules of thumb. I’m a big fan of defining rules of thumb for everything, for the reason you were hinting at when you started this portion of the commentary — making decisions is cognitively intensive, but if you have rules of thumb, you’re in a default situation where you already know what to do, and there’s a high bar to justify making any non-default decision to change your mind. It takes so much of the cognitive load off, so you can focus your mind on newer and different questions.

Ed Hajim: Because you get somebody with a bad track record, or a thing that isn’t perfect, and you should stay away from it — there’s always another deal out there. I always tell my bankers there’s plenty of things to be done in the world — find something that doesn’t have hair on it, or if it does, make sure you’ve dealt with the last of the hair.

Morgan Friedman: I’ll add an interesting footnote to that, though — I’ve found a lot of these rules of thumb change depending on the context. For example, I now live in Argentina, and I’ve bought and sold a few houses there — I bought one from the former vice president of Argentina. Here’s an interesting fact about Argentine real estate: a hundred percent of it is bought and sold in U.S. dollars, physical dollar bills. I’ve bought multiple houses for more than a million dollars with piles of cash. As an American, in a world where everything is a wire transfer, that would normally freak me out — that’s what drug dealers do — but in the context of Argentina, that’s just how the real estate industry works.

Ed Hajim: The same thing happens in Wall Street environments — when things get really hot, the next deal keeps coming in, and you’ll let a deal slip by because you’ve got too many things going on. It’s like everything else — everything’s contextual. Life is contextual. I tell people, find your passions — but your passions in Kyiv are different from your passions in New York City. Everything is contextual, in my mind, and you have to pay attention to that.

Morgan Friedman: I love it. Ed, it’s been wonderful having you on the podcast — great getting to know you, some interesting, new, and surprising lessons. Thank you very much for your time here.

Ed Hajim: My publisher told me to make sure I tell people to follow me on Instagram and check out my website, or I’ll get in trouble if I don’t say it — and if you read my book, please give it a rating and a review. You can listen to it too, if you don’t like buying it — it’s out on tape as well.

Morgan Friedman: And in the show notes, we’ll put links to everything, just to make your publicist happy. 

Ed Hajim: Thank you so much, this has been fun. Thank you. 

Morgan Friedman: Thank you for your time. And everyone who’s made it to the end, thank you for watching. We hope you’ve enjoyed it as much as we did. Until next time.