In an Uncertain World

by Robert Rubin

  In a high-level business job, stepping down can create many problems that have to be managed, but a cabinet-level departure in Washington is even more complicated, with possible ramifications one wouldn’t face in the private sector. I thought about my departure as yet another process that needed to be managed thoughtfully. To create a seamless transition, I needed a savvy adviser. So I asked Tom Donilon, a former assistant secretary of state and a political pro I’d known since the Mondale campaign, to come over to talk to me in confidence about my announcement and how to manage what was likely to be a five- or six-week period between it and Larry’s Senate confirmation. Talking to Tom, I made pages and pages of notes about what I was going to say internally, what I was going to say externally, whom I was going to speak to, when I was going to speak to them, what the hard questions would be, and so forth. I tried to anticipate every difficulty.

  The first thing Tom told me was to quit worrying about the lame-duck issue. “This kind of departure is different,” he told me. “Until you leave, you are Secretary of the Treasury. You won’t be a lame duck, because the outside world will continue to view you as having the authority of that position until the day you step down.” In fact, I was more concerned about my informal role sitting around the NEC table or the chief of staff’s table, where your influence doesn’t depend merely on the authority vested in your office. But here, too, Tom felt I wasn’t going to have a problem, possibly because I had been in the administration since the beginning, had a well-established role in fact as well as in title, and retained the authority of my cabinet position until I left. And Donilon was right. In this and all other respects, my departure and Larry’s assumption of the job went as smoothly as I could have hoped.

  The other major issue I faced was what to do next. To help myself think through the issues, I took a yellow pad and began to write down questions for myself: What do I want to be doing with my time after I leave? Do I care about being in the financial world again? About remaining involved in public policy? About being involved in Democratic politics? About making money?

  During my six and a half years in Washington, I had remained focused on markets, but from the outside. I was concerned that despite the many years I’d spent on Wall Street, I might have lost some of the feel for markets that comes from working in New York. To answer the question of what to do next, I needed to wander around Wall Street a bit and speak to people more candidly than was possible as Treasury Secretary. The financial environment had clearly changed since 1992 and, before I could make an informed decision about my own future, I needed to have a better sense of what was going on. I also had to decide where to put my personal assets. During my time in Washington, my assets had been in a blind trust. A friend who served in the Nixon administration told me that he had lost half of his net worth under such an arrangement. Not wanting to lose what I had and not being able to play any role in choosing investments or even in protecting myself if I became uneasy about the market, I had directed my trustee to invest very conservatively. But now that I could be personally involved in the markets again, I faced the question of whether I should invest more aggressively. In many ways, my career and personal financial issues were linked. Only by reimmersing myself in the financial world in New York and fleshing out my view of markets could I determine whether I wanted to participate in them at any level.

  Back in New York during the summer of 1999, I set up shop at the Council on Foreign Relations, which had offered to take me in during my transition out of government. I spent the next several months in a garretlike office with a view over the backs of East Side town houses. Using that pleasant attic space as my temporary base, I visited with all sorts of people I’d known over the years—from hedge fund managers, private equity fund investors, and investment and commercial bankers to Henry Kissinger and Warren Buffett. I took copious notes about people’s views on the economic outlook, the geopolitical outlook, the state of markets, the changing structure of the financial sector, and my own job options and personal financial issues.

  The first decision I made was to become chairman of a national not-for-profit organization called the Local Initiatives Support Corporation, whose work I had developed tremendous respect for when I was at Treasury. I knew I wanted to stay involved with issues relating to the inner cities, and LISC, which provides funding and technical assistance for urban and rural community development, seemed a great opportunity for doing that. I also returned to the boards of Mt. Sinai Hospital Medical Center, which I’d had to resign from in late 1992 when I had first joined the Clinton administration.

  Beyond that, I knew I wanted to stay active in public policy issues, but I didn’t quite know how. Now that I’d left Washington, how could I continue to be sufficiently well informed as to remain relevant? Would anybody care what I had to say now that I was an ex–government official with no power? When I put that question to him just before I left Washington, Bob Strauss answered me with characteristic candor:

  “You’re a grape now, and you’re going to become a raisin,” he said. “The only question is how long it takes.” It struck me that grapes can also become fine wines, but I had the feeling that Bob would quickly have ridiculed that notion.

  MY FORMER GOLDMAN SACHS colleague Steve Friedman told me there were two basic career models for someone in my position: I could put together a menu of different involvements I wanted to have. Or I could have one central job, as I had at Goldman Sachs, with various additional involvements on the outside.

  As I continued talking to people and making notes, the second model seemed to suit me better. I decided that I wanted to go back into the financial world. At some level, perhaps I was just returning to familiar ground. I liked that world and could apply what I knew best most effectively there. But working in the financial sector would also give me an opportunity to stay current, to have the knowledge and insight that come from being engaged. That would help provide a basis for my involvement with the public policy issues I cared about and make my efforts to contribute to them more valuable. I wasn’t pressed financially, but I am also a reasonably commercial person, and I felt that I wanted something that would be financially rewarding. And finally, for whatever reason, I actually find the management issues of large organizations interesting. (Most of my friends view this as a personality problem that I should try to work out in some other way.)

  But some of my other job criteria complicated the picture. I was extremely cognizant of the difference between being the deputy and being the Secretary, of having great responsibility within an organization as opposed to having the ultimate responsibility. I’d had the ultimate responsibility both at Goldman Sachs and at Treasury, and I didn’t want that again. I was at a stage in my life where I wanted to try to live a little differently, with more time and focus for my family, fishing, reading, and whatever I might care about or find interesting. So I wasn’t going to be a CEO.

  But I did want to be part of the central management structure wherever I went. A colleague who had left the Clinton administration and taken a very attractive, highly paid position at a financial firm had a big influence on my thinking. He visited me at Treasury and said, “I’ve got a terrific job, but I’m never going to be in the inner management. And if you’re not in the inner management, it lacks something. You don’t feel like you’re a central part of the place.” When he said that, something clicked with me. People with outsized résumés are often viewed from outside as being importantly involved in a company, when in fact they have no real role in management. From that point on, I added that criterion to my job search.

  Having a former Treasury Secretary as a kind of elder statesman—though I didn’t think of myself as either elder or a statesman—to provide advice and deal with clients, as Henry Fowler had been hired to do at Goldman Sachs, would probably appeal to almost any financial institution. But creating a role in central management was more of a challenge. Fitting someone like that into the top level of an organization can be awkward. He’s
not going to be CEO or COO or CFO or have decision-making authority with respect to any of the company’s activities. So what does he do and where does he fit in?

  What I was really trying to create for myself was some type of consigliere position, or to become a minister without portfolio who lends a hand in many areas. At one point, I had been interested in finding an adviser to play this role for me at Treasury—someone who was deeply experienced but had no agenda of his own, who could serve as a sounding board for me and for other people around the department. Now I was looking for that kind of role for myself in a private-sector context. This is a good management idea in theory. Many CEOs would probably benefit greatly from the advice of someone loyal to the institution but without a personal stake in major decisions. But for various reasons, this is almost unheard of in practice. Most executives probably don’t want a figure with independent standing within their own organization. And coming in from the outside, such a figure could easily seem threatening to others within a company. There also aren’t many people who have had the requisite responsibilities and experiences who would be satisfied simply to provide advice—advice that might well be ignored.

  I wasn’t sure anyone would be amenable to creating the kind of role I was looking for. But almost every organization I talked seriously with did develop a solution, each in a slightly different way. Their answers were all unconventional, because the situation was unconventional. Most of the possibilities involved variations on being a nonexecutive chairman of the board or part of a chairman’s office. One company proposed that I run a kind of internal think tank. Another suggested that I focus on guiding a generational transition among senior management. Each represented a potentially attractive opportunity, but they all raised some level of doubt about their workability.

  I was close to deciding where to go when Judy threw a “Welcome Back to New York” party for me at the Metropolitan Museum of Art (this may have been her clever way of trying to ensure that I didn’t take another job in Washington). Sandy Weill, the co-CEO of Citigroup, was there, and while we were chatting, he invited me to come by his office for a talk.

  I said, “I’m happy to talk to you, if you’d like. But I can tell you I am fairly close to accepting something else and I just don’t think working at Citigroup is what I want to do.” I didn’t want to meet with Sandy under false pretenses. But Sandy still wanted to talk, so I went to see him at his office.

  Sandy is known for being a good salesman. He made Citigroup sound like a fascinating place. He told me it operated in 102 countries and had a huge diversity of activities: investment banking, insurance, retail and commercial banking, credit cards, asset management, a private bank, and a whole range of emerging-market involvements. We ended up talking for a couple of hours. Citigroup had joint CEOs: Sandy and John Reed, who had been brought together as a result of the Citicorp-Travelers merger. This was an unconventional structure, and press accounts indicated that there were some issues between them. What I didn’t understand until sometime after I got there was that, while Sandy and John’s personal relationship was very good and both were extremely able, their working relationship was not commensurately effective.

  After meeting with Sandy, I met with John. Then I met with Sandy again. It seemed as though he called me almost every day for a month. I started to develop a sense that despite his reputation as a large, dominating personality, Sandy was someone I could work with. And after about my fourth visit, I said to Judy, “You know, I’m not going to do it, but this place is really remarkably interesting.”

  And she said to me, “You know, this is the first thing you really seem excited about. Shouldn’t you do it?”

  And I did. Shortly after the announcement, Al Hunt wrote a column in The Wall Street Journal criticizing my decision to take a high-paying job in the private sector. He was disappointed that I was going back into commerce and said I could do more good elsewhere. I have great respect for Al, but I didn’t see why I shouldn’t do what I wanted to do or why I had to become a monk just because I’d spent time in public service. Also, I did intend to stay involved in public policy and social endeavors—in fact, my contract with Citi specifically recognized that part of my time would be spent that way and that I would be expressing my own, independent views on issues. If Al’s position became the standard, I thought to myself, people in the business world would be discouraged from going into government—to the detriment of both sides. You’d have something more like the European system, where civil servants and politicians rarely have any experience in the private sector and the private sector has relatively few people who understand how government works.

  I also think Al missed an important point about my ability to be useful on the very issues he cared about. My contribution could be far greater if informed not only by my understanding of issues based on the experience I’d had in government but also by a current engagement with financial matters and markets around the world. In Bob Strauss’s terms, I’d shrivel into raisinhood much more quickly if I didn’t immerse myself in the business and financial world again.

  FOR THE REASONS I’ve discussed, working in government was more preoccupying than anything else I’d ever done. It’s always with you. You’re in the public eye. Your role is never entirely clear. You can have the rug pulled out from you at any moment. You can have similar experiences in the private sector, especially when an issue blows up unexpectedly, but, except at extraordinary moments, the degree and constancy of the pressure are not the same. In my new capacity at Citigroup, I was hoping to have much more control over my own time—both to be freer to do whatever I felt like doing and also to have a greater feeling of freedom.

  I remember talking about this with Sam Nunn, who had retired from the Senate a few years before I left Treasury. Sam told me to be careful, because I’d find myself overcommitted very quickly. He said that’s what had happened to him since leaving the Senate. I said, “Sam, I understand you may have that problem, and that’s a shame. But I actually understand myself pretty well, and I know I can handle this.” Though I tend to invest myself very deeply in whatever I do and find almost everything interesting, I thought I had the self-knowledge and discipline to develop a reasonably balanced life, to manage a little bit differently this time.

  But I quickly found myself in precisely the situation Sam Nunn had described. Partly I misjudged myself, but I also underestimated the influx of opportunities outside Citigroup as well as the sheer size and range of Citigroup, the largest financial company in the world, which does everything from conducting the industry’s biggest emerging-market trading operation to running the world’s largest credit card business. From the outside, it’s very difficult to have any sense of what this kind of scale and scope in businesses of this complexity mean. Goldman Sachs had 6,000 people when I left, and that had seemed immense to me. We had made one acquisition in all the years I was there, when we took over the commodity-trading firm J. Aron. Citigroup had 180,000 employees when I joined and typically made several acquisitions every year—one or more of them major.

  I tried to get a handle on Citigroup’s activities in my usual way: I took out my yellow pad and went around talking to various people about their businesses. Michael Froman, who had been my chief of staff at Treasury and was also moving to Citi, went around with me. What we found was nothing like what I had expected. For example, I assumed that the credit card business was an office filled with clerks who kept track of payments. In fact, it’s an actuarial business that uses highly sophisticated statistical models developed and constantly experimented with by a large team of people with graduate degrees, including twenty-seven with Ph.D.s in areas related to “decision management.” They use computer simulations to test credit decisions and model how minor adjustments in credit card terms or marketing may affect consumer behavior and thus the business’s rate of return.

  I was soon learning about other areas of finance I’d never had much direct involvement in: commercial lending, consumer ban
king, asset management, private banking, subprime lending, and a range of emerging-market activities. I took the better part of a year just to gain a rudimentary understanding of Citigroup and its various businesses. In the course of that year, I began to feel much more personally invested in the company than I ever thought I would be.

  Shortly after I arrived, I was drawn into issues related to Salomon Smith Barney, the investment bank that had come into being when Travelers had merged its subsidiary, Smith Barney, with Salomon in 1997. Before I arrived, a major New York financial figure told me that Salomon, which had always been a major force in fixed-income trading, was no longer a first-tier firm. I quickly realized that this comment wasn’t correct. Despite having weathered a series of setbacks in the late 1980s and early 1990s, Salomon was still a force and seemed very focused on moving forward. Having both the capabilities of the old Salomon Brothers firm, especially its place as the world’s premier fixed-income house, and credit extension abilities gave Citigroup multiple ways to meet a client’s needs. But the firm did face a number of substantial strategic challenges, one of which was establishing itself more effectively in Europe. Toward that end, Citigroup had been negotiating to acquire an established British firm, Schroders PLC, as a platform for European expansion. The merger ran into trouble over the Schroders people’s concerns that Salomon might still resemble the Salomon Brothers of the era of Liar’s Poker, the book by Michael Lewis that famously described the Salomon of an earlier time as rather rough-and-tumble. The Schroders people asked me to fly to London for a Saturday night dinner to discuss the Salomon culture with them and to satisfy themselves that Salomon now functioned in a more civilized, client-focused manner—all of which I was comfortable doing.

  Perhaps the most difficult issue at Citi was its management structure. I assumed that Sandy’s desire to hire me was driven in part by the feeling that I might be able to help him and John reach decisions more readily. The complexities and potential of the co-CEO structure interested me, based on the very good experience Steve and I had had as co-COOs and co-CEOs at Goldman Sachs. I thought that I might be able to draw on that experience to help the two of them develop processes that would work more effectively.