After a year in Israel, I returned to the United States ready to take on college at Tufts University outside Boston. Tufts was an expected part of my trajectory. My dad, uncle, and brother all went to Tufts, and I never contemplated other options. We call it “Merrin University.” But once there, I was unsure of what I wanted to do. I majored in political science, a common default major at the time. I didn’t prove to be much of a student and didn’t earn stellar grades.

I really liked computers, introduced to me by my uncle, who was one of the earliest and largest Apple dealers. It was the early 1980s, and I was the only one that I knew in college with a personal computer. It was an Apple IIe, which I used to play Space Invaders, Defenders, and Pac-Man, and occasionally I used its word processing software for a paper. I was mostly concerned with having fun and not really thinking about how my classes could relate to my future. I was excited about one course in my schedule, though—Introduction to Computer Programming; it was offered pass/fail. I enrolled and had to drop it because I was failing. I took an elective course in stocks and bonds. There, I got a solid B. I didn’t know where I was heading; I took those courses because they looked interesting, not because I believed they were a stepping-stone to a career. Similarly, the other classes I most remember—Byzantine history, art history, and Yiddish literature—were personal intellectual interests, not potential professional pursuits.

Four years went by incredibly quickly. Before I knew it, I was graduating. I had a plan to move back to New York. But that was the extent of the plan. As far as work, I had no idea what I would do.

In a way, it didn’t matter. I didn’t expect to stay in New York for too long. My real goal was to spend another year in Israel on the kibbutz with Anne, my girlfriend from my year in Israel. Therefore, I was only looking for a temporary job, something to make a little money—enough to save for the trip. I went up and down Columbus Avenue in Manhattan looking for a job as a waiter. I was rejected by every restaurant—at least twice.

While a college degree was not enough to land a job as a waiter, my father called in a favor with a buddy of his on Wall Street and secured an interview for an internship.

Nate Gantcher was a client of the gallery and a fellow trustee of Tufts University. At the time, he was the vice president of Oppenheimer & Co. (He later was the co-CEO.) I got the interview, not on my merit, but because of my father’s connections. But I went to the meeting prepared with knowledge about the company and an interest in the way Wall Street worked.

When Opportunity Knocks, Take It

I landed the gig at Oppenheimer and soon learned the internship was designed to expose me to many facets of the organization by cycling me through the many divisions at the company. My first job was in the back office of Oppenheimer. There I learned what happened after the trade was made. It involved at least 50 different steps; it was entirely manual; and it involved entering essentially the same information into multiple computer systems, and it was impossible to scale. In the 1960s and 1970s when the New York Stock Exchange (NYSE) was executing around 10 million shares per day, the inefficiencies of Wall Street’s back offices led to the closure of the NYSE on Tuesday and Thursday afternoons to give the back offices more time to process the trades. It also led to the demise of a number of brokerage firms—much of it due to errors associated with these manual processes. Not much had changed in the early 1980s. This is how it worked when I started: In order for the trading desk to execute an order on behalf of a client, they handed me a paper ticket. My job was to look up the accounts for whom that trade was executed and manually write a separate ticket for each of those accounts. These tickets then had to be entered into separate accounting and clearing systems. The account information was kept in a loose-leaf binder. It wasn’t even alphabetized.

It seemed inefficient—I definitely wondered WTF—and I wanted to change it, not because I was looking for any accolades, but just because I wanted it to work more efficiently—I wanted it to work in a way that made sense. I introduced alphabetizing the accounts by cutting and pasting the accounts back into the loose-leaf notebooks.

Believe it or not, this was seen as a big innovation since no one else had thought of it! But, of course, this small change, while helpful, hardly solved the overall problem, which was that capturing and organizing information manually was a ridiculous process that couldn’t scale. Not having the records automated in any way meant that it took hours to enter information into multiple accounting and clearing systems. It was mind-numbing, error-prone work. I hated it.

I thought the binder was archaic, but it was 1982 and this is how things were done. No one had experience with computers. The PC was still seen as a toy.

I went to see Nate and informed him of this backward process and time suck. Only years later did I realize what a privilege it was to have direct access to Nate. In a way, I was like a kid in a candy store, excited about everything around me and eager to share my thoughts with anyone who would listen. I think Nate liked my passion and appreciated the viewpoints. At the time I had no appreciation for how busy he was.

I also went to the head of the back office, complaining about how inefficient their process was and how a computer could solve this easily. There would be so many other benefits: you could calculate real-time positions, eliminate clerical time, provide more accurate information, eradicate multiple data entries, reduce errors, save money, and scale as volumes increased.

The people in the back office were very experienced in back-office operations, but they didn’t know much about computers. Therefore, they didn’t understand how computers could improve their processes. I even approached the head of the technology group with my ideas, but that didn’t go very far, either. At the time, mainframes or mini-computers were used to run back-office systems, and they were very expensive to program and create new functionality for, making them impractical. Additionally, there was a big disconnect between the business and technology units. At the time, business people didn’t understand technology, and technology people didn’t understand the business. That’s changed over the past 30 years as now everyone understands and appreciates (or at least takes for granted) the role tech plays in running and enhancing the business. But that was not the case back then.

In fact, at the time, the processes in place were simply how business was conducted. No one viewed inefficiency as a problem that needed to be solved. Wall Street was making so much money, the idea of using computers to make things more efficient and to save money was never really considered. The solution to the disorganized hassle was just to hire more back-office staff and have them take care of it.

In fairness to those managers, there was no need to change a system they believed was working. I learned that there are too few people who can see outside of what they know beyond how it is to how it could be. There was another complicating factor, too—entering data into a computer was seen as clerical work. It was not seen as “trading.” The paper tickets and the handwritten notes were considered the “art” of trading. As a newcomer with a different perspective, I saw little art in the process, only that it could benefit from a little more science.

It wasn’t long before my rotation in the back office was over and I was moved to the floor of the American Stock Exchange. On my first day, I was introduced to a guy who was assigned to train me. He went to lunch at noon—and he never came back. I didn’t know what happened, but I knew I was in the right place at the right time. I got his job. Not a bad first day of work.

Again, I had no idea what I was doing. I found it fascinating, exciting, and frustrating to see how Wall Street worked. In this particular job, my role was to pass orders received from Oppenheimer’s brokers to the floor traders to get them executed. An order got called to a clerk upstairs, and then it was sent to me. I figured out where the trade was supposed to go, gave it to the floor trader to execute, and I then relayed it back to the trading desk. If it sounds backwards, inefficient, and nonsensical, that’s because it was. It was also easy. No one would need more than an hour of training to do the job well.

I found the whole thing maddening. I was only an intern and probably had no business doing this, but every day after trading hours were over I went upstairs to Nate’s office and told him about everything that was wrong with this system and how I thought we could fix it.

If You Find the Problem, Find the Solution

Wall Street was hardly the only industry ripe for innovation. Many established industries had been at this precipice before—and found success in transforming their established ways. And though it can take time—sometimes decades—new ways are ultimately validated. One of the best examples comes from the story of W. Edwards Deming, an obscure American engineer, statistician, and NYU professor who became a preeminent expert on business management and process improvement.

Today, Deming is recognized as the father of the Total Quality Management (TQM) movement, a strategy for continuously improving performance at every level, and in all areas of responsibility. Back when he was first espousing these theories, the United States had emerged as the global industrial power after World War II and no one in the United States took him very seriously. But in Japan they did. Japanese industrial leaders were intrigued by research he did during World War II and in 1947 invited him to deliver a series of lectures on his quality-control principles. They knew that in order to succeed, they needed to sell products to the world.¹ But at the time, quality was an issue, as Japan’s products—from TVs to radios to cars—were known for their shoddiness. In fact, “Made in Japan” had such a negative connotation that some companies set up plants in the Japanese village of Usa, which allowed them to say their products were “Made in USA.”² True story.

Deming was tapped in the summer of 1950 to lead seminars where he trained hundreds of engineers, managers, and scholars. He spoke to top management, including the cofounder of Sony.³ His message: improving quality would reduce expenses while increasing productivity and market share.⁴ He rebuked management procedures like production quotas, performance ratings, and individual bonuses, calling them “inherently unfair” and “detrimental to quality.” He said customers would get better products and services when workers were encouraged to use their minds as well as their hands on the job.⁵

One of Deming’s principles was “Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.”⁶ That meant that any worker could pull the emergency stop when they saw a defect in the product or process or generally when something went wrong. Not only did they have the authority to do so, but they were expected to do so.

A number of Japanese manufacturers, including Panasonic, Sony, and Honda, applied these techniques and experienced previously unknown levels of quality and productivity. The improved quality combined with the lowered cost created new international demand for Japanese products, ushering in the “Japanese postwar economic miracle.” Japan became the second most powerful economy in the world in less than a decade.⁷

Deming didn’t receive renown in the United States until 30 years later when he was featured in a 1980 NBC TV documentary about the increasing industrial competition from Japan. Japanese products were taking market share. Sony and Panasonic TVs and stereos replaced Zenith and General Electric. Toyotas, Datsuns (now Nissan), and Hondas became more hip with younger people than GM, Ford, and Chrysler brands. Ford became one of the first large American corporations to look to Deming for help. Ford was hemorrhaging hundreds of millions of dollars per year in the late 1970s and early 1980s and losing market share. One of the first things Deming told them was that 85 percent of quality problems with the cars was the result of management errors.⁸ The executives were surprised, and egos were a bit beaten up when Deming asked them, “Do you have a constancy of purpose?”⁹ Deming explained that it was up to management to correct system problems and foster an environment that allowed workers to reach their potential. It was management’s job to incent workers to take responsibility in solving issues, quell fears workers had around identifying quality problems, and eradicate practices like numerical quotas, which he said were counterproductive.¹⁰

While Ford found itself struggling in the late ‘1970s, it had once been wildly disruptive. Henry Ford adopted the assembly line process to manufacture cars, which reduced the time it took to build a car from 12 hours to around 2½ and created an unfair competitive advantage in both cost and scalability. With that he was able to drive the growth of Ford Motor Company from 10,000 cars manufactured in 1908 to 472,350 cars in 1915 to 933,720 cars in 1920.¹¹

But as Ford kept cutting cost and price, it also stopped innovating. In the 1920s, GM, driven by consumer research, came out with a “car for every purse and purpose,” while Ford was still pumping out the same old things. When asked about available colors, Henry Ford famously said, “any color … as long as it’s black.” That unwillingness to change didn’t play well. In 1921, Ford sold about 66 percent of all the cars built in the United States; by 1926, only five years later, this share fell to approximately 33 percent; and in 1927, it fell to about 15 percent.¹² GM overtook Ford, and eventually the Japanese manufacturers did, too.

How did Ford turn things around? Deming. In 1986, Ford came out with the profitable Taurus-Sable line of cars, which the Ford chairman wrote “had their roots directly in Deming’s teachings.”¹³ That year, for the first time since the 1920s, Ford’s earnings exceeded those of GM, and Ford became the most profitable American auto company.

Companies that go about business as usual and don’t look for better ways of doing things, that don’t continue to innovate, are bound to decline. But with the right energies invested in change, things can be turned around. Ford’s story can give hope to any company in any industry.

After all, there are many other examples. In 1997, Steve Jobs took back the reins from Gil Amelio, who was running Apple Computer. The company had lost its edge and was running out of money. It was 90 days from going bankrupt. Apple’s market capitalization was $3 billion. When Michael Dell was asked what could be done to fix the company, he responded, “What would I do? I’d shut it down and give the money back to the shareholders.”¹⁴

But we all know that’s not how Apple’s story ended, not even close. Instead of being sold for scrap, it started innovating again and soon entered into consumer electronics, which now accounts for the vast majority of the company’s revenue. Apple, which, since the launch of the iPhone in 2008, has been one of the most valuable companies by market cap,¹⁵ shows us you can innovate in any industry, at any inflection point in a company. It all comes down to determining the big idea—and continuously coming up with new big ideas because things are ever changing. Or as Steve Jobs wrote in a company memo in 2006: “Based on today’s stock market close, Apple is worth more than Dell. Stocks go up and down and things may be different tomorrow, but I thought it was worth a moment of reflection today.”¹⁶

In another example, in the mid-1990s Marvel, the iconic comic book publisher, filed for bankruptcy. In an effort to turn the company around, Marvel decided to try leveraging their brands into movies. They sold licenses to other studios and they saw the X-Men and Spider-Man movies make fortunes for others. But the movies weren’t great, and Marvel thought it could do better. The concept had been tested—moviegoers were attracted to the titles. What would happen if Marvel were in charge and produced the movies themselves?

The company hired directors who were huge comic book fans, and unlike the licensed versions of the films, these adaptations didn’t take comic books as literally. They added twists and humor to the stories that were not in the series themselves. Marvel took more risks and applied more creativity in transferring comics from pages to screen. In 2008, Marvel released the first Iron Man movie. Although Iron Man was a much more obscure superhero, the movie was incredibly successful because of Marvel’s different approach. Seven years later, in 2015, the Marvel franchise had produced 12 films, grossing over $8.9 billion in the box office, and ranks as the highest-grossing film franchise in both the United States and worldwide, according to boxofficemojo.com.

Business Is Just a Set of Problems to Solve

In my early days at Oppenheimer, no one was receptive to the ideas I had—not the managers or even the computer department. But in my final rotation, through the risk arbitrage hedge fund, I found an interested audience. This rotation offered a very different environment than I had previously experienced. There weren’t that many hedge funds at the time, and Oppenheimer therefore had the pick of the best and brightest individuals to do this very sophisticated work. This wasn’t just about trading but about investing based on assessing probability of a merger or acquisition being completed. The incentive compensation for hedge funds has a lot to do with the receptivity to new ideas. If you can increase your returns and/or decrease expenses, it will have a direct impact on your compensation.

I found working in this division and working with these very bright people inspiring. I read everything I could find on the subject and worked long hours. I discovered something I was passionate about, and my life became very focused on work. I was still just an intern, but I was the first one at the office in the morning and the last one out at night. I was like a sponge trying to absorb knowledge from everyone and everything around me. When the head of the hedge fund cleared out his bookshelves, I took every book he wanted to toss. I read with great interest dense materials on the markets, risk arbitrage, how to read financial statements, and, of course, Security Analysis by Benjamin Graham and David Dodd—Warren Buffett’s bible.

While the people in the department were very smart, and I learned an incredible amount from them, the way the system worked, even in this special section, was still epically inefficient. We managed money on behalf of several accounts and everything was tracked on paper, in pencil. At the end of each day, I took all of the tickets and adjusted the positions in the portfolio by hand: if we bought a stock, I erased the amount and added it to our position; if we sold, I erased the amount and deducted it. Then, I went to the copy machine and printed out copies to distribute to everyone. We went through a lot of pencils, erasers, and paper. More importantly, risk arbitrage is very formula driven. It’s all about calculating the spreads between the deal price and the price of the stock being acquired, factoring probability of close and time for an expected internal rate of return. This was a perfect job for a computer, but calculating the spreads—the very core of the investment strategy—was done by hand.

There was only one computer in the firm, a Tandy RadioShack, which was kept in a back corner of the office. I knew that it would be fairly easy for the computer to calculate our positions in real time, and I also knew that if we could calculate the spreads faster than our competition, we could buy and sell stock faster and cheaper than they could, giving us an unfair competitive advantage, and boost our returns. I went to that one computer and taught myself Multiplan, an early spreadsheet program, which was developed by Microsoft. I used the program to generate real-time position reports, and I pitched the idea of using the computer to run analytics in real time. The head of the unit agreed immediately.

It worked. As the price of stocks changed during the day, spreads between the stocks made some trades profitable and others not. Tracking the spreads on a computer gave us many more opportunities to execute profitable trades than our competitors, who were still calculating the spreads manually. This gave us an unfair competitive advantage to produce greater returns for our funds.

It was my experience with automating one small piece of the risk arbitrage business that started me thinking about the potential for creating a more sophisticated “order management system” (OMS) and the impact that such a system could have on the industry. I started to believe it could revolutionize the way trading was done. But now, just as I found something I loved, when I was finally having some influence and was seeing progress, the rotation in the risk arbitrage department was over. In fact, the short-term job was coming to a close. It was almost time to leave for Israel. But before I left, the chief financial officer asked to speak with me.

“I thought you would just be a rich brat, but it turns out you have become indispensable,” he said. “We’d like to hire you when you get back.”

Surprisingly enough, I turned out to be indispensable because of something unexpected—seeing inefficiencies and working to solve them. I was being rewarded with a permanent job and responsibility because of all the times I said, “What the hell?” (or in today’s vernacular, “WTF?”) It was not only that, though; it was because I took the responsibility to fix the problems I saw. This is where I learned one of the most important lessons of my entire career: Problems that others saw as “the way its always been done” or as “the cost of doing business” should be questioned. Once investigated—and solved—these can open up big opportunities.

Saying WTF—and feeling the frustration that comes with inefficiencies around the status quo—is not something that should annoy you, but rather something that should excite you. You should look at it as the first step to your next breakthrough.