Spitzer: Self-Destruction

The downfall of Eliot Spitzer certainly generated a lot of joking on Wall Street, Twitter, and elsewhere yesterday. I plead guilty to a private email with a "client #9" joke myself.

But mostly I feel pained by this whole story. I've met Eliot a few times and although I wouldn't call him warm, he did strike me as earnest and committed to public service. I know his wife Silda much better and I feel so much for her and their lovely daughters.

This story is a tragedy of Shakespearian proportions. How does a man with so much going for him do something so stupid and self destructive? Why do people self destruct and what can we learn from it?

I am no psychologist, not even the armchair kind. I don't know what deep dark issues lead to self destructive behavior. But I've seen enough of it in the 20+ years of investing and sitting on boards that I know a few things.

Most of the people that I've seen self destruct over the years have a drive that is almost overwhelming. They have a desire to succeed that takes them far. But they also have huge blind spots. They usually have someone or a group of people that protect them from the blind spots. But as they start to achieve their goals and rise beyond the people that helped them get where they are, they distance themselves. And then they are at the top - but all by themselves, and they get caught up in their greatness and then the downfall comes.

I suppose we could see it coming with Spitzer. The arrogance and the fits of expletive-producing rage seemed to be on display more and more. Could those close to him have helped him? Could the downfall be avoided or was it inevitable?

What can we all learn from this?

Well, first and foremost, there are no messiahs. Nobody is perfect and when we put people on pedestals, they mostly fall and let us down. That's one reason that Barack Obama concerns me. I want him to be better than the rest. But is he? Is that even a reasonable expectation?

In the more mundane world of startups and startup investing, we have to be careful with the people we hire and back. I've backed a few founders with messianic tendencies. It's a problem. On one hand, they bring incredible drive and charisma to the startup equation. They can hire and raise money like no others. But they don't build great teams around them and many times they self destruct and their companies suffer

I think, but I am not sure, that self destructive tendencies can be managed. I have become a big fan of coaching and counseling over the years. We all have our demons and blind spots. The first step in dodging them is to identify them, stare them down and become self aware. I know a few really good people who coach founders and CEOs and if you are looking for someone to help you or someone you've backed or love, send me an email and I'll hook you up.

Watching a man like Eliot self destruct is too painful, and I hope something good can come of it.

Comments

[JosephMcSpadden]

I think this is a great article. It goes so far beyond finance and hits at the very core of human nature. Thank you for writing such a great piece.

[notsosmart]

ct,nj,&now ny. how is it that these people cant figure out that public life has no private area?so smart & yet so stupid. how sad for them & the people of these states.

[mixter]

What goes around, comes around, especially to ASS HOLES!

[lovegcc]

Another man falls...he had too much power, tried to make people think he was holier than them, yet he was covering up a dark area in his psyche that many of us have, yet few of us act upon. The problem here is that the people of the US are provincial: Spitzer should NOT have had to cover up his sexual proclivities. Prostitution should not be illegal, and we should care less about what politicians do in bed than what they achieve in their JOBS. As long as the people of the US are more interested in whether Brittany should have custody of her kids, if Spitzer should be allowed to do a bondage thing, or if Obama is a secret-Muslim than issues like the fact that $400 million a day is being squandered in a war we cannot win rather than being used to reduce poverty, illiteracy and find cures for major health problems and solve environmental problems, then the US will never reach its potential..........suc... waste!!!!!!!

[irondoor91]

Most of those with big egos are not going to put up with anyone who referrs them to counseling for self-destructive tendencies. They don't see that they need it and avoid anyone who might find their weaknesses.

It is only after the fall that they come crying for the attention that they crave, and believe me they will blame it all on someone else.

[Regulate]

Truly a stupid decision that will end the guys promising career. I highly doubt however, that this would ever have come to light had Spitzer not been involved in investing crimes committed in the markets. He started his career bringing down the mob and the syndicates have moved into the financial and market sectors. It appears that they now own the entire country.

[bleumangue]

I appreciate what you wrote because you address the issues that create the people whom we might choose to lead us. Being 62, I've lived through enough to see the spectrum of human leadership behaviors on display and long enough to be wary of "charismatic"... types. It would be nice to separate the man from actions that have no real bearing on job performance, but unfortunately in this case you can't just uphold the LAW for some people. Spitzer got tangled in his own web by lies of omission and convenience. He would not have gotten elected had he revealed his core beliefs. That's the really sick underbelly of all leadership positions. To place yourself in a position to do the next right thing you really get nudged into doing a lot of wrong things first. I guess the trick is to know WHEN to STOP. He should have watched "Cool Hand Luke". "A man's gotta know his limitations."

[awcabot]

Why do people care whether he paid to have sex? The only person who should be involved is his wife, other than that, it is not our business what he does during his free-time.
Acres of explaining why Spitzer should go does nothing to explain why it is OK for Bush to sit in the White House after gross incompetence.

[User 104410]

It seems to me that this is a lot more than just "whether he paid for sex." Think of the ongoing deception, lies and disregard for his wife, family and the people of NY that was associated with these actions. Is that the kind of man that you would trust? One that is that hurtful to those who have trusted him?

[SomeSUVGuy]

At least the guy was doing it out of town & not at the Governor's
Mansion. She was most likely an expensive hot babe. Spitzer's
Wife & Daughters seem very pleasant, too nice for him. Contrast
that to Bill's affair at the oval office with the cheap fat
intern & ugly lesbo wife.

The only thing worst than inappropriate cigar behavior
is screwing an expensive whore on Valentine's Eve.
Of course, We New Yorker's already knew Spitzer was
screwing the New York State Taxpayers.

[CarlosSlim]

Eliot Spitzer needs a sternly worded lecture about Family values from David Vitter.

That should be punishment enough!

[BGnyc]

I am pleasantly surprised to see such enlightened and insightful comments, as well as by the simple depth of the original article. Pleasantly surprised, against the benchmark of (stereo)typical American financial industry people. It is a disappointment at a personal level indeed. However, it is irrefutable that few people would do better in his past and present jobs. Politics is such low-class business and the requisite compromises are intellectualy disgusting. Given typical constituencies, in game theory terms, one faces a heartbreaking and irresolvable conundrum, that is if one maintains the same explicit positions in personal and professional contexts -- which in real life can be not always possible and should not of course be required. Greater plurality can somewhat solve this issue, but that certainly isn't the greatest hallmark of the American political system.

[Roggg]

Naive much?

[8k]

lol, this is so blown out of proportion. Attn. all MBA's and law students dissecting this incident and drawing grand conclusions: write a thoroughly reasoned thesis explaining how that one ethical dilemma in Europe, at a party, or at a club has grand implications about your fitness as an ethical actor in your profession, then invite over your friends for a Powerpoint presentation. I actually think this is a good idea for a cocktail party.

[CarlosSlim]

The only reason this has anything to do with "finance" is because Eliot Spitzer went after after-hours traders on Wall Street...

...and this article is "payback".

[zenalgorithm]

If he did this in Nevada it wouldn't have been against the law. He upset some very powerful people who had the power to tap his telephone line "legally". That's more of a concern to me than the minor crime he committed. Soliciting a prostitute is a misdemeanor...transpor... a woman across state lines for sexual purposes is a felony...that never sticks.

Look at the symbolism of his act: right around Valentines day. He's unhappy in his marriage. That's all.

Study Carl Jung's 16 personality types to gauge and understand what led to this scenario playing out.

[8k]

Pretty reasonable post there, zenalgorithm. The feds hate Spitzer for pushing into their jurisdiction like such a cowboy. And they sure as hell got him back with this one. In 10-20 years these kinds of tactics won't work, because all the full-time morality beacons will be too senile to have any influence on public opinion.

[KSTHANE]

Nobody actually cares about the fact that he got with a prostitute, they care about the fact that Spitzer vigorously prosecuted prostitution rings as a DA and then turned around and participated in one. I think the hypocrisy is more daunting than the fact that he wanted to get his di*k wet.

[Gob]

Truly enlightened individuals understand that breaking your marriage vows, humiliating your wife, and f*cking your kids over for a bit of expensive ass on Valentine's Day is NO BIG DEAL.

Besides, Boosh lied and people died and WHAT ABOUT THE CHILDREN?!

[8k]

I can understand the hypocrisy debate, but in every article I've read so far this is not really addressed with any teeth. Instead, you get editorials about how the writer feels personally let down by someone else's sex life.

[Gob]

I DON'T CARE!! I DON'T CARE!!! HE CAN BREAK THE LAW ALL HE WANTS BECAUSE GEORGE McCHIMPEROR HALLIBURTON BUSH IS ALLOWED TO BE IN OFFICE SO WHO CARES?!!!

YESTERDAY I STOLE TWO SNICKER BARS FROM BP! SO WHAT?!! GEORGE BUSH KILLS IRAQI BABIES AND BESIDES F*CK BIG OIL!!!!

[the_Bird]

It's pure shadendfreude, compounded by the fact that Spitzer has probably made more enemies than anybody else in politics. Everyone that I talk to is pissed off about the hypocricy; if he weren't so in-your-face about his moral purity, he might have been able to survive this.

[8k]

Just to clear up any confusion, my last post was directed to ksthane.

[GUY FOX]

Little head was doing naughty because big head was doing hypocrisy.

[zenalgorithm]

Gob,

People make mistakes in their life. Some people choose the wrong spouse. Some people live in denial - they hate, yet rationalize their problems on a daily basis and then sublimate their anger typically at questionable, sexually immoral targets...then get caught in their own sex scandal (ex. Rudolph Giuliani - closing strip clubs/having multiple mistresses)

People like this still haven't a true sense of identity - they've neglected something they should have overcome when they were teenagers. They never took the time to introspect deeply and decide who he or she is and what he or she truly wants, thus the frustrated sexual anguish.

It might be a good thing for the Spiters to split. If not, their daughters might learn from their parents that a dysfunctional relationship is a normal relationship.

Are you living in denial about anything, maybe your parents were dysfunctional?

[Pent updemand]

Forget the sex. Dear old Eliot is a career politician. How is he able to afford to drop 5 grand on a prostitute?

So, zenalgorithm, Spitzer discovered too late in life that he'd really rather screw high class pros instead of being the devoted family man he marketed to the voting public? How tragic for him.

[jaytrade]

The sexual behavior of a mature individual should be his private business unless he or she harms somebody else, as in the cases of incests or pedophiles. In the business or working world he should be known only by his work . In this subject matter USA behaves shamefully backward.

More harm is being done to young Americans by internet pornography.



So, let us get off his back, and let him continue his good work !!

[WingNPrayer]

Good point. He should have went to Wall St. instead. Christ... if a story like this came out about a big banker, he'd be laughed out of the room for consorting with low class hos. Everyone knows that true talent goes for $3,000/hr and up.

[Pent updemand]

jaytrade, if this was just an affair I could agree with you. But paying for it is illegal. Not that it makes any difference, but Spitzer sure as hell knew it was illegal. He has to go, and I hope he faces a criminal charge for it as well. This is a "government of laws not government of men" thing.

[EdThePilot]

The issue is not prostitution per se, but rather that a criminal act was committed that crossed state lines making it subject to Federal jurisdiction...the hypocrisy is just gravy.

To paraphrase Robin Williams, “paying $5,000 for a callgirl is God's way of saying you're making too much money.” As "Loss of Equity" said, there's not too many people (let alone that have been in public service most of their adult life) that can afford to drop $5k for just a couple of hours of sex. Either he had amassed his own personal fortune, or NY is paying their governor too much.

[Gob]

Get off his back he doesn't have to follow the laws he prosecutes others for!!!!

LEAVE HIM ALONE PEOPLE MAKE MISTAKES AND THE ONLY WAY TO GROW FROM THEM IS TO NEVER BE HELD ACCOUNTABLE!!!!

[Gob]

people make mistakes and no one's perfect and so you shouldn't judge because the bible says something about THAT!!!

And besides George Bush!!! See?!

[VP ofCommon Sense]

Let's see, his "career" was little more than a lark as his family is worth a reported $500mm. And his career, between troopergate and his 30% approval rating, may well have been shot anyway. So what exactly did he lose here? Some dignity, and a laundry list of family/personal problems. Seeing as his father holds most of the family wealth I imagine the Spitzers are out a couple million bucks and a public black eye. Sob sob.

[8k]

Dear Gob,

Your dad's computer is not a toy.

HTH

[SomeSUVGuy]

O'Contraire mon ami......It does matter when you are a Top Dog
engaging inappropriate behavior. I knew it would be a matter of time before a liberal suck up would blame George Bush for Elliot's
sexual excursions. This is a "You" problem......Hope his Wife rakes his
financial ass, but hey it's only sex right?

[Rajiv Sethia]

What's this got to do with SeekingAlpha, or investing? Is scandal mongering in line with the editorial policies for this site?

[Cherylcotterill]

Remember the ramifications Joe Wilson faced after his op-ed "What I Didn't Find in Africa" was published in the New York Times?

Well, more people should read Eliot Spitzer's column published in the Washington Post less than a month ago entitled "Predatory Lenders' Partner in Crime." We need to applaud and support those like Eliot Spitzer who aren't afraid to stand up and tell the truth because there aren't enough of them. Yet.

Predatory Lenders' Partner in Crime
How the Bush Administration Stopped the States From Stepping In to Help Consumers

By Eliot Spitzer
Thursday, February 14, 2008; A25

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.

What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

The writer is governor of New York.


www.washingtonpost.com...

[FootballGeek]

There are alot of smiles on wall street today, and they are not all from the big rise in the Dow. Nice to see that his arrogance can't save him. What a jerk, he has as much charisma as a coffee table. Don't let the door hit you on the way out.

[SomeSUVGuy]

Great article....
few things you left out, like the Feds & State Governments forcing Lending companies to loan monies to people who could
never afford to pay back. It was and is a Catch 22.
Most of these individuals couldn't balance a checkbook if they tried,(wonder how many illegal's invovled).
Student loans in default(but free monies available to foreigners to NY State Universities)...240,00... over bloated NY state workers(20 billion payroll)..CSEA extortion..60 billion for medicaid..several fees & taxes on licenses, utilities, etc...NYS budget total 120 billion...Not much left for Roads, Bridges & infrastructure crumbling apart....

Again a "You" problem.....

When the Dust settles....Is it just Kinky $5,500per hr Sex? or Just plain Bad judgement from an egotistical rich boy from Long Island.

When history tells the story of the Spitzergate sex crisis and recounts its devastating effects on the lives of so many innocent New Yorkers, the Spitzer administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the politicians who went to any lengths in their quest for sex. So willing, in fact, that it used the power of the state government in an unprecedented assault on state & federal laws, as well as on state taxpayers and anyone else on the side of what's right.

Sound familiar?

[Jonnygadget]

Interesting article...it was published on Valentine's Day, probably written the day before...what do you think he used for inspiration?

[Gob]

OTHER PEOPLE DO IT TOO!! THERE WAS THAT WIDE STANCE GUY LARRY CRAIG AND SO WHAT ANYWAY BECUAESE REPUBLICANS AND BOOSH ARE RUINING THE WORLD!!!

YEARRRRRGGGGGGGGGGGG@@...

[User 138549]

The Feds were looking for a high profile government connection in all of this investigation. Sounds like the Governor was simply trying to upgrade his cash reserves.
Did I miss something - wasn't Elliott Spitzer involved in the ring. ie helping to run it as opposed to simply using the ring's services?

[User 162923]

Only in the US could one make such a big brouhaha about something so silly. Prostitution should be legal and there is nothing wrong with it. It is legal in half the world. The woman wants money, the man wants sex. When people go to clubs, get drunk and have sex, there is no hue and cry about immorality. When Rudi Guiliani has affairs and dumps one woman for another, no problem. Somebody has sex for money and hell breaks loose. This is so silly. The main reason prostitution is illegal unlike everything else is that men do it more than women. It is just a feminist driven agenda to make this illegal.

[Simple Simon]

On a site called 'elephant-donkey' - a 'get in the frey' kind of blog site, I pointed out that none of the candidates are addressing moral decline. A mistake in my view, which vastly underestimates the fervor of tens of millions of voters who never attend political caucuses or rallies of any kind, yet vote in enormous numbers, with decline in integrity and morals much on their mind. Add to this 'formula' a kind of avarice and arrogance of the power elite, usuallly lawyers in congess, etc. who lose sight of reality in such high positions -namely that the laws they write don't really apply to them, but to the 'servile class'. It's how we see a lion campaigning to round up white collar criminals but never think of themselves as belonging to that group. Hence, we have over a million prostitutes in this country-not an exaggeration-, and one in four teens with STD's -not an exaggeration, The epidemic of porn and the opportunity to gamble at every convenience store ( lottery supposedly for schools, yet the schools are constantly in need of funds! What's wrong with that picture?) One of my opponents on said site told me plainly, "Morality is not important any more; this is 2008". My response was "Isn't it sad when cousins marry?" The next couple days after my comment both the stories broke about Spitzer and the Teens. Morality and decline in morality IS the issue...to wit, the avarice and arrogance that led to the credit crisis, and a prolonged recession...the auto industry and the arrogance and greed there is now dragging them down...and it won't be over for a long time. It won't kill us all to clean up our act...starting at the top.