Because Twitter Has Character Limits

Hi, I'm Max. I'm an entrepreneur, a proud New Yorker, and I like to write. This blog is an outlet for my thoughts, rants, and ruminations. Check out my book Walking Away From Wall Street and my company's site: CityRover.

[maxvishnev-blog]

Gotta Love Groupon

This afternoon, I got a call from Alex at Groupon.  Here is the full transcript of the voicemail:

"Hey Max, it's um, Alex from Groupon.  I just wanted to...uh...really quickly touch base and talk to you a little bit about that...ah...offer we ran with you last summer...uh...for the walking tours and just hear how it went and talk to you a little bit about the customers that did come in and what their experience was like and just see...yeah...just overall hear how it went for ya.  Um, so we can look forward and see if there is something else we can...um...do this year.  My number is (312)--------.  Give me a call back whenever you get a chance.  Again, uh, my name is Alex and I'll hopefully talk to you soon."

I didn't bother calling Alex back, but if I did, my response would be: "Hey Alex, this is Max from CityRover.  First, I don't run a bar, restaurant, coffee shop, or spa, so customers don't 'come in' for a walking tour -- they actually come out for one.  Second, yeah, um, we never actually ran a deal last summer for the...uh...walking tours.  You see, we signed the paperwork and you guys promised to run the deal by a certain date, but you never actually ran it.  Then you guys promised you'd run the deal before a second deadline, but that never happened either.  It's not your fault, though.  You probably just joined a month ago.  I was dealing with a salesperson named Victoria, who probably jumped ship before you started.  So yeah, um, I don't think I will be running anything with you guys -- this year or like um, ever."

Now, sarcasm and sentence fillers aside, I thought this voicemail was the perfect proof of the kind of mire Groupon is in.  It's an example of Groupon's right arm (sales) not knowing what the left arm (editing/scheduling) is doing.  But the fact that Alex from Groupon actually thought we ran a deal last summer doesn't really come as a surprise, given my own experience with Groupon last year and all the recent headlines about the company.  Pre-IPO, Groupon was criticized for using aggressive accounting metrics, including counting the merchant revenue portion of a deal as their own revenue, which essentially doubled their top-line figures (what drugs were they taking when they thought that would fly with the SEC and the markets?).  And just this week, Groupon restated its fourth quarter earnings and reported "material weakness in its internal controls."  No surprise there, and Alex just confirmed the announcement for me personally.

In my book, Walking Away From Wall Street, I devoted an entire chapter to my experience dealing with various deal sites and the lessons learned when I first launched my walking tour business.  Here is an excerpt from that chapter about my interaction with Groupon specifically: 

A chapter focused on deal sites wouldn’t be complete without a Groupon story, so I would like to share mine.  In late May, 2011, I received a call from a Groupon sales representative namedVictoria.  She told me she noticed I had run a couple of deals with some of Groupon’s smaller competitors recently and was wondering if I would be interested in doing something with Groupon.  She stressed the company’s enormous scale and the potential benefits for my brand.  I was hesitant at first because I didn’t want to flood the market with too many CityRover deals, but since this was before CityRover broke into the Top 10 on TripAdvisor, I figured a deal with the dominant player in the daily deal space had the potential to generate a lot of exposure going into the peak travel season.  I figured if I could negotiate a favorable revenue sharing arrangement and set a ceiling on the maximum number of vouchers available for sale, then it would make sense.

I was able to get Victoria to agree to a 60/40 revenue split, as opposed to their normal 50/50 split, and to cap the number of available vouchers at 500.  Another important caveat that I gave was that I wanted the deal to run no later than mid-July.  She said that it was doable.  We got the paper work out of the way quickly and I sent Groupon the required copy and images.  The pending step was for me to approve the final deal copy the day prior to the scheduled run date.

June passed without a confirmed run date for our deal, as did July.  Finally, on the 8th of August I received an email from Victoria, in which she apologized for the delay and informed me that she was trying to get the deal slotted in the next few weeks.  I responded the same day:

From: Max

To: Victoria

Subject:  Re: Groupon Update

Hi Victoria,

This delay is not a good reflection on the way Groupon conducts business.  We had discussed a mid-July time frame at the latest.  Now, we are looking at late Aug (if that).  Your shop’s priority seems to be on cramming the pipeline with offerings rather than on fulfilling agreements with individual merchants. If we are to still run a deal, we’ll need to review the offerings, because I’ve adjusted pricing/duration on my end a bit.  And to be honest, the 60/40 split after the 50% discount looks a lot less appealing to me now, given that business has been booming for me in the last couple of months. Regards, Max 

Victoria responded with an apology and a statement about how Groupon was trying to figure out ways to run more quality deals per day without bombarding their subscribers.  She promised a run date of August 27th and against my better judgment, I agreed. 

I never heard from Victoria again.  The deal we agreed on back in May never ran, and I vowed never to do business with Groupon.  And what did they care?  There were thousands of spa and manicure deals to replicate and plenty of bars and restaurants desperate for foot traffic.

-- End of excerpt --

In short, I am not surprised that Groupon, at yesterday's close of $14.18, is down 30% from its IPO price of $20 and 46% from its first day's close of $26.  Putting aside consumer-facing issues like deal fatigue and inbox competition, Groupon clearly can't even get the merchant side of the business right, and they are nothing without merchants willing to sacrifice the bulk of their gross margins to run a deal with the "Deal King."  But Groupon, with its remaining valuation of $9 billion, has to know that kings sometimes lose their crowns (and occasionally, their heads).

[maxvishnev-blog]

An Hour In Washington Square

   On a sunny 75-degree afternoon in late March, Washington Square was the place to be.  I entered the park through the recently renovated southwestern corner, passing chess players beckoning me with their hands and shouts of "next player!"  I resisted the urge to join them, continuing along my route and observing the NYU kids lying on the patches of grass.  They formed a hodgepodge of exposed legs and feet, flowing hair, youthful energy, and unrequited sexuality.  They read, slept, and frolicked on their multi-colored blankets.  A bit farther north, on a much larger swath of grass, a couple of guys tossed a football, while others practiced frisbee throwing.

   I took a seat on a bench in the shade in front of the popular dog run, which lies just west of the fountain.  A jazz trio was belting out a groovy rendition of "When the Saints Go Marching In."  I flipped open the book I was reading, but found it hard to focus on the text.  The bench afforded an ideal spot for people watching, and on this gorgeous day distractions abounded.

   Paul the Pigeon Man held court on his usual corner bench diagonally across from mine, feeding pigeons as he does daily.  One pigeon was perched atop his head, while another sat in his lap.  Several other birds pecked around his feet and a couple more found comfortable stations on his arms.  A young lady with short black hair wearing a white dress sat next to Paul and assisted him with the bird feeding.  A drunk and/or high hobo with a mop of red hair hung around Pigeon Man and his young apprentice, chatting with them amicably and greeting random passersby.

   In front of them, mothers pushed strollers, tattooed Village denizens walked their dogs, students with large backpacks rushed to their next class, and pretty young ladies in summery dresses greeted each other with smiles and pecks on the check by the neatly landscaped tulip gardens.  Tourists with heavy Nikons and Canons happily snapped away at the happening scene, as the "business casual" crowd found brief respite in the shade but couldn't resist the urge to respond to a couple of emails.

   When one jazz band's playing temporarily stopped, the syncopated rhythms of another band came from the western flank of the central path.  A couple of skateboarders zoomed by, made a left, and disappeared behind the Washington Memorial Arch.

   The positive energy on this beautiful spring day was palpable.  It was as if the vibrancy and individual vibes of all the participants in this impromptu and ongoing public "play" was collected in a communal cloud from which we all drew some invisible breath.

   During that late afternoon hour, I did not want to be anywhere else.

[maxvishnev-blog]

Ripping Faces Off

In light of Greg Smith's very public resignation from Goldman Sachs and his references to "ripping faces off," I thought I'd post a chapter from my book fittingly titled "Ripping Faces Off" (my book was published 10 weeks prior to Greg's Op-Ed piece in the New York Times).  Many of the things Greg writes about are not specific to Goldman, so when I read his piece, I immediately thought of my experience working on a Morgan Stanley trading desk and some of the reasons I left the firm and the industry almost three years ago.   

Ripping Faces Off (chapter excerpted from Walking Away From Wall Street: From Corporate Bull to Building a Business)

Let’s back up a little.  2006 was a great year for me.  I had successfully gotten out of Ops and made it onto a trading desk in a hot area.  I was learning a tremendous amount and I felt challenged.  I was highly motivated, and at the end of the year, I received a bonus that was far larger than any I had received in my prior three years with Morgan Stanley.  But 2007 would prove to be a very different year for many reasons, not the least of which was the bursting of the credit bubble and its market ramifications.

Market forces aside, 2007 was an eye-opening year for me for other reasons as well.  I began to realize that I was never going to be a hot-shot trader.  I looked at my direct boss, and I realized that I was never going to be like him.  It takes a certain personality and wiring of the brain to be a successful trader, and I didn’t have it.  I didn’t eat, drink, and sleep bonds, and I really didn’t care enough to read incredibly boring, hundred-page long deal prospectuses.  I also had no interest in schmoozing with dull or obnoxious institutional clients, which was a mandatory “relationship-building” exercise.  These were not the kinds of relationships I wanted to cultivate.

More importantly though, not only did I realize I couldn’t be like my boss, I didn’t want to be like him.  There were many reasons for this, but one particular event drove the point home for me.  On a relatively quiet afternoon, my boss leaned back in his high-backed, ergonomic chair, ripped another piece of tape from his tape dispenser, and, while swapping the sticky tape between his thumb and index finger, he turned towards the trading desk’s piñata, the guy from Yale (let’s call him “Derek Shoemaker”), and asked him what his vacation plans were (he was planning on taking a few days off work):

Boss:  “Shoemaker, so where are you going?”

Derek:  “I’m going up to Maine with my family.”

Boss:  “What are you gonna do in Maine?”

Derek:  “Well, we like hiking, so we go to Acadia every couple of years.”

Boss:  “Shoemaker, you like hiking?” he asked rhetorically with a mocking laugh, “Why would you want to walk through the woods, or up some hill for no good reason?” 

At this point, another Managing Director (and fellow piñata-swatter) chimed in:  “Yeah, Shoemaker, that’s so you.  You know, we have cars these days to take us uphill.”

The piñata just sat there in his equally expensive ergonomic chair, squinting at his screens, his expression contorted into a semi-permanent, embarrassed smile.  But a minute later, he asked a very pointed question:  “Hey, boss, what’s your favorite hobby?”  Our boss was silent for a few seconds, then responded:  “You know, I thought about it recently, and realized I don’t really have any hobbies.  My hobby is coming in here every day, trading bonds and making money.”  Boom!  I was a row away, but that comment hit me in the back of the head like a thrown rock.  My boss just admitted that he has no outside interests aside from the pure drive to trade bonds for the sake of making money.  He wanted to “rip faces off” because it was the pursuit of trading profits, and the financial and reputational rewards those profits brought, that got his blood pumping.  I didn’t want to rip anyone’s face off, nor did I want to sleep with my Blackberry under my pillow or pop prescription pills to control my blood pressure.

As 2007 progressed, I was spending more and more time on my outside interests and less and less time thinking about work.  I had also just recently abandoned the shores of Brighton Beach for the comforts of the Upper West Side.  I was living in Manhattan for the first time in my life, paying $1,600 a month for a 400 square foot studio apartment on the third floor of a pre-war walkup.  Since the apartment was really small and didn’t get much natural light, I spent as much time out and about as possible.  I took up photography and looked forward to the weekends when I could happily wander through the winding paths of Central Park or the bustling grid of the City, taking photos, and absorbing the city’s many faces, smells, and sounds.  I was also taking guitar lessons and expanding my song repertoire.  I decided to purchase an awesome road bike as a present for myself after a nice bonus check, and was cycling more and more miles every week – sometimes in Central Park, sometimes along the Hudson River.

I felt like I was finally starting to discover who I was, what I liked, and what my passions were.  It became increasingly evident to me that high finance was not one of my passions, despite my interest in financial markets, securitization, and the inner-workings of investment banks.  I liked this stuff, but I didn’t love it.  I knew that in order to succeed in this business, you either had to love it, or you’d be miserable.

The seeds of disenchantment were firmly planted, but where was I going to go?  I had a relatively safe job.  My role was unique and necessary, and I had no real backup.  Many people would kill for a stable well-paying position at a highly regarded, global investment bank.  I certainly appreciated what I had and was not stupid enough to make any sudden changes, but I had to think long-term and the future wasn’t looking too bright.  I had gotten myself pigeon-holed into a position where I was so indispensable in my operations-centric role that the desk’s managers had no incentive to promote me or move me into a different role.  Besides, the only other real possibility was to assume a trading role, which definitely didn’t suit my personality or my strengths.  I didn’t want to be stuck in my role indefinitely.  I knew I had the potential to do greater things, even if they didn’t involve trading bonds.  I didn’t want to end up one day like those guys in the movie Office Space, in a field somewhere with a bat and a couple of company-owned flat-screen monitors, unleashing blows that their warranties weren’t going to cover.

Until I could come up with a plan, I’d just have to sit tight.  Plus, not only was I collecting a steady paycheck, I was also getting a free ride in the MBA program at NYU.  It was too good of a financial arrangement to even think about leaving.

And then shit hit the fan.

---

On Sunday, September 14, 2008, the Fed orchestrated a last-minute deal for Merrill Lynch to be acquired by Bank of America.  The next day, they let Lehman Brothers file for bankruptcy.  Credit markets seized up, banks stopped lending to each other, and the global financial markets were in freefall.  Panic was in the air. 

Meanwhile, Bear Stearns had already been swallowed up by JP Morgan several months earlier.  This only left two large stand-alone investment banks – Morgan Stanley and Goldman Sachs.  The market was guessing we were going under too.  Our stock, above 50 at the start of 2008, was now rapidly inching towards single digits.  Meanwhile, the cost of insuring our bonds was going through the roof in that darn credit default swap market.  We were all glued to the CNBC screens, waiting with bated breath to see how this would play out.

On November 20th, 2008, Morgan Stanley’s stock closed below $10 per share prompting fears of our imminent collapse.  Maybe my exit plans would be accelerated by market forces after all.  John Mack, Morgan Stanley’s then-CEO,  had to beg the New York Stock Exchange to put a temporary halt on short sales.  I, like everyone else at the Firm, was at my wit’s end.  The weeks before and after Lehman’s collapse were some of the most stressful in my adult life as my bosses pressed me to summarize our counterparty exposure to all of the previously unsinkable market players.  I remember leaving the desk one day to get coffee with a friend, and I couldn’t even control my racing heart beat.  My hands were shaking, my eyes felt blood-shot, and I just wanted to get out.

To read more, click on the book link below: