In order to illustrate how successful firms have adapted their structures to changing
economic conditions, we will look at Merrill Lynch, Morgan Stanley, and Salomon
Brothers. Each of these firms has been a leading firm in the industry for fifty years
or more and has a unique identity in the industry. Merrill Lynch has been a leading
innovator and a dynamic force in the industry since the 1940s in both retail and
investment banking. Its size alone dominated the industry from the 1940s through
the early 1980s. Yet it has been one of Wall Street's great mysteries. No other firm
can boast such strength and diversity in revenues while having so much trouble in
consistently bringing them to the bottom line ( Business Week, July 17, 1989, p. 122).

In many respects, Morgan Stanley has been the premier investment banker in the
industry since the 1930s. Among its longtime clients are many of this country's
largest firms, including General Motors, Standard Oil of New Jersey, IBM, Mobil
Oil, Texaco, U.S. Steel, DuPont, Shell Oil, and Standard Oil of Indiana ( Hayes,
Spence, and Marks 1983, pp. 102-3). The firm is an offshoot of the banking house
of J. P. Morgan and is sometimes described as patrician. It has managed to remain
highly profitable while making the organizational changes that turned the "classic"
investment banker into a firm providing a broad range of corporate and investor
services.

Salomon Brothers is the premier trading house on Wall Street. In the mid-1980s,
the firm was an overwhelming force in the industry: In 1985, it was the most prof-
itable publicly held securities firm in the world, with pretax profits of $760 million.
It was the top underwriter of corporate equity in the United States, with 30 percent
of the market share. It was also the largest underwriter of all securities and the largest
dealer in U.S. government securities; its total fixed-income trading transactions were
estimated to be more than those of its two nearest competitors. From its offices in
New York, London, Tokyo, Zurich, and Frankfurt, the firm helped raise more than
$150 billion for governments and corporations around the world ( Institutional Inves-
tor, March 1986, p. 68). Salomon's dominance has declined a little since those
halcyon days, but it continues to be one of the most important firms in the business.
Salomon has had a reputation for creating a rough-and-tumble atmosphere that comes
with a high-pressure trading environment. As one employee pointed out, "No one
holds your hand and tells you what to do. You have to live by your wits. And don't

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