Alfred R. Berkeley III, a 6 feet 3 inch former rugby player, once shouldered a cow onto the roof of a university building.
That college prank, however, does not compare with a much weightier matter now on his shoulders supporting the world's second-largest stock market, arguably through the most tumultuous period in its history.
Even so, Berkeley does not underestimate a challenge, including that now infamous prank 32 years ago at his alma mater, the University of Virginia, where a 250-pound black Angus was summoned to action.
"Oh, no," Berkeley recalled in an interview with Traders Magazine, "it was a lot heavier than that."
The Hot Seat
Berkeley is no longer playing pranks, and life is much busier. Berkeley, in fact, hasn't had many slow days since he became president of Nasdaq in June 1996. "I don't know that I fully comprehended how much of a hot seat it would be," he said. "But I'll tell you, I'm absolutely convinced we're doing the right thing."
Well, he proved that before. "He was always very much a deep thinker, and very sure of himself," said Mike Murphy, a former equity trader and partner at Alex. Brown & Sons, who worked years ago with Berkeley, then an analyst at the blue-blooded Baltimore-based firm.
Murphy, now head of trading at New York-based buy-side firm Kerns Capital Management, added that like many people at the firm back in the 1970s, Berkeley wore many hats. "He was even involved in institutional marketing," Murphy recalled. "He was smart and he helped turn Alex. Brown into a national-type firm."
The challenge today is different. The National Association of Securities Dealers is being remade from the ground up, and one of Berkeley's first jobs when he arrived was to implement the Securities and Exchange Commission's order handling rules.
More recently, Nasdaq's plan for a consolidated limit-order book was announced in December 1997, soon followed by what many traders considered another bombshell a proposal to weld Durango, Colo.-based OptiMark Technologies' trading system to the Nasdaq platform.
No Trading Background.
On the face of it, Nasdaq is in the throes of a revolution. And in the middle is a man who's the first to admit he has no trading background no experience making markets, running a Nasdaq desk or executing orders.
If ever a job description guaranteed headaches, sleepless nights and early burnout, this sounds like the one.
So how come Berkeley seems to be having the time of his life? And who is he?
Born in 1944, Berkeley grew up in Charlotte, N.C., and graduated from the University of Virginia in 1966 with a degree in English. He added a master's degree from the University of Pennsylvania's Wharton School of Business in 1968, then served four years in the U.S. Air Force, discharged with the rank of captain. In 1972, he took a job as a research analyst at Alex. Brown.
Berkeley's military duties had given him some familiarity with Univac computers, and he became one of the first analysts in the country to grasp the potential of the budding software industry. He started Alex. Brown's very successful high-technology group, and became managing director of mergers and acquisitions in 1987, specializing in technology companies.
In 1989, Berkeley took a leave of absence to join Safeguard Scientific in Wayne, Pa., and helped to turn around a number of its troubled computer-network and data-management software subsidiaries. He returned to Alex. Brown in 1991 as a managing director and senior banker in the corporate-finance department, again focusing on the sector now known as information technology.
Berkeley also served on Nasdaq's board of directors from 1986 to 1991, and on its Industry Advisory Committee, which advises Nasdaq on technology development.
So Berkeley wasn't a total stranger when the NASD came calling in 1996 with a bigger job.
Alter Ego
To be sure, he has impressive credentials, but on the surface they might make him just another bright guy in a suit with an accomplished career in investment banking. A closer look, however, provides a glimpse of a man who might have a surprise or two to offer. Hardly a wild Butch Cassidy alter ego, but perhaps one informed by its own drummer.
Last summer, the world learned of a secret that had been closely guarded for more than 30 years. At a reunion of his college class, Berkeley was coaxed into admitting his role in a prank that caused quite a stir on the Charlottesville campus back in the spring of 1965.
He and three confederates had somehow managed to get a cow up onto the domed roof of the Rotunda, the historic campus building designed by the university's founder, Thomas Jefferson. Local authorities were able to get the animal back down, with considerable difficulty.
(The animal, sedated with the tranquilizer sodium pentothal before being led down about 100 stairs, perished later from stress and heat exhaustion.)
The culprits had never been caught.
The school's alumni magazine, the UVA Alumni News, ran an article about Berkeley in its summer 1997 issue, and naturally enough, included this anecdote. Among the readers was George Bailey, the retired county sheriff who had investigated the matter in 1965.
"So he wrote me a letter," Berkeley said, "and I called him up, and he was interested in my side of the story. I hadn't known he had a side of the story until he told me." It turned out the sheriff's office had spent $1,755 on the investigation. After talking it over, Berkeley sent a check for the same amount to Bailey, who donated it to a volunteer ambulance squad.
The story made its way into the Washington Post, and outwards to the farthest reaches of the global media, perhaps causing Berkeley a twinge of regret that he ever mentioned it.
Actually, the fallout may not be that bad, if the comment of one institutional trader is a clue. "I always thought Berkeley was an interesting guy, but I thought, Geez, that's a cool thing to do.'"
In any event, since the cow was already out of the barn, Berkeley decided to set the record straight.
Early accounts, for example, said the animal on the roof was a calf. "It was actually a little older than a calf," Berkeley told Traders Magazine, "it was almost a yearling."
And how exactly did he get it up there? "It took four of us, four big strapping guys, to get that thing to go up the stairs. Mr. Jefferson built some steps into the wall of the Rotunda," Berkeley said. "The thing is, those steps were exactly one cow wide. Our premium was on silence, so we actually treated that cow very, very gingerly. We could not afford to have a cow go moo in the night."
Is it true that Berkeley was only trying to outdo the collegiate antics of his father, Dr. Alfred Berkeley Jr., Virginia class of 1936 and noted prankster? "It actually started out as just a good idea, and the interpretation that it was to one-up my father has become more pronounced than it actually was. It was just a good prank, kind of like climbing the mountain cause it's there," he said.
Thanks, Al.
What happened afterward? "We just laid low for 32 years. The great part of the thing was lying low." Berkeley added. "And watching other students try to take credit for it? Of course, we got a great grin at that."
His Heroes
The cow story not only makes a colorful anecdote, but points to the basic incongruity in Berkeley's nature. It was a stunt people remembered 30 years later, which is no minor accomplishment to an English major whose favorite author is Mark Twain, and who still calls Tom Sawyer and Huck Finn his heroes.
What really stands out is that the ringleader of this escapade was such an Eagle Scout.
"It never once dawned on me that Al was involved," said Steve Hopson, Berkeley's classmate and Delta Kappa Epsilon fraternity brother, now head of career planning and placement at Virginia's law school. "He was very bright, highly motivated, and had a real presence about him. Whenever there was a problem in the fraternity house, Berkeley was the kind of guy who would handle it," Hopson said.
"Al liked to have a good time," added Strother Randolph, a collaborator in the cow-on-the-roof caper, "but he knew where to draw the line when the rest of us didn't. We would go over the nickel bridge in Richmond and try to get away with not paying the nickel. But even this small amount of dishonesty bothered Al."
Backing these character testimonials are some of Berkeley's extracurricular activities. He was a resident advisor to younger students, a member of the U.S. Air Force ROTC and vice president of the University Union, a role that took him around the country talking to audiences about the school's honor code.
Needless to day, a college kid with squeaky-clean tendencies risked being so boring he could give virtue a bad name. Young Al was lucky. His extracurricular activities also included working on the Daily Cavalier, Virginia's student newspaper (everyone knows journalists are a cynical lot), and playing rugby, slamming into people just for fun, presumably helping to counter a choirboy image.
Above all, Berkeley had a hereditary streak of mischief. He communed with his inner Huck.
Other Incongruities
There are other incongruities in Berkeley's nature. William Patternotte, a managing director at Alex. Brown, who's known him since the 1970s, was struck by Berkeley's intuitive skill as an analyst.
Patternotte said research professionals often are so immersed in numbers and details that they risk loosing sight of a much bigger picture.
"Al was exactly the opposite. He actually was not particularly strong on the financial details of analysis, but he was terrific at seeing the big picture. He has the ability to look further than most into the future," Patternotte said.
Patternotte describes Berkeley as a man of relatively simple tastes, but with a passion for cutting-edge technology. Picture a guy in the 1980s, he suggests, "driving probably an early 1970s-model station wagon, with a cellular phone on the front seat, and this is when cell phones were pretty new."
Lives in Baltimore
Berkeley still lives in Baltimore with his wife Muriel, commuting to work each day in Washington when he is not on business outside the Beltway. The Berkeley's have three daughters, but so far none have shown an interest in finance. One teaches in inner-city Baltimore, another is studying law at Yale University, and the youngest is a freshman at Georgetown University.
His rugby days are over, but Berkeley still tries to find time for outdoor activities long walks with his wife, jogging or bike riding with his brother and fly fishing whenever he can. "My latest exercise kick is rowing," he reported. His daughter at Georgetown, who rows crew, spurs him on.
"She challenges me to what she calls power hours.' A power hour's grueling I typically do about a power half-hour on my rowing machine. But it's great exercise in the winter."
Berkeley admits to being a chronic dabbler. "I've got a closet full of every kind of sporting equipment in the world, and I'm an expert at none of it," he said.
Many of the same traits a low-key personal style, high-tech fluency and an eye for the big picture have been evident since his arrival at Nasdaq, some Berkeley watchers say.
"I don't want to say how I'm doing," Berkeley responded when asked to assess his performance. "I think you have to look at this as a team effort. I stepped into a new organization in June 1996. [NASD Regulation President] Mary Schapiro was here, and [NASD Chief Executive] Frank Zarb was on his way."
Of course, that would be the politically correct thing to say, but Berkeley does get credit as a team player from observers in the industry.
"He admits flat-out that he doesn't have a trading background," said Holly Stark, head trader at New York buy-side firm Dalton, Greiner, Hartman, Maher & Co. "But he knows enough about the industry to know the questions to ask."
Berkeley recruited people with important expertise. "It was very smart of Al to realize he needed some other top management. There's a lot of nitty-gritty stuff that he had to deal with," Stark said.
John Tognino, president of the Security Traders Association, said that Berkeley and Nasdaq have been extremely helpful and generous making themselves available, participating in STA-sponsored roundtables.
Nice compliments, but being accessible and team-oriented aren't the only issues at stake. Given the number of changes swirling about Nasdaq, a lot of people on trading desks wonder if things are getting out of control.
Berkeley and others certainly seem receptive. "But you can't really tell if they're paying lip service or not until results are shown," said Michael Barone, head of Nasdaq trading at William Blair & Co. in Chicago.
Barone said most of his colleagues in the trading community had suggested that Nasdaq detatch its proposed consolidated limit-order book from its order-delivery and execution system. "Of course they didn't do that, they just went right ahead," Barone said.
"Berkeley's willing to listen," said Tony Broy, president of Jersey City's Hill, Thomson, Magid & Co., "but I don't know if it does any good. I don't think there's anybody at the NASD who's going to be responsive now to market makers. They're on a mandate from God."
The controversies over the limit-order book and OptiMark have left many traders feeling out of the loop. "Most of the people in the trading community were surprised," Tognino said, adding wryly that "the NASD, Nasdaq and OptiMark ought to get very high marks for confidentiality."
"It's very inappropriate for OptiMark to be partners with the NASD," said Kenneth Pasternak, president of Knight Securities in Jersey City. "[OptiMark is] interesting and I welcome it as a competitive participant in the marketplace. I just think it's inappropriate for Nasdaq, owned by the self-regulatory organization, to compete with the market participants."
Added Barone: "There are certainly market makers out there who feel that there's some agenda within Nasdaq to kind of shut them out of the picture."
Berkeley takes the criticism in stride. "It's very risky to assume that any entrepreneurial community like the market makers is threatened," he said. "If you go back to the improvements the SEC ordered in 1975 [on May Day, when fixed commissions ended], those changes caused a lot of pain and agony in the short term."
Berkeley added that the results were wonderful. "In 1975, the institutional investor could trade at 25 cents a share. They're now trading at what 2.5 cents a share? That's a 90-percent reduction. And we have 50 times the volume in our markets.
"We believe those trends are iron laws of economics. About 450 firms went out of business after May Day, but the ones that adapted, the ones that invested, the ones that innovated, are larger than they ever dreamed of being."
Looking Ahead
Looking ahead, Berkeley says his priorities are to find more balance in the market's structure and to keep promoting technology. The focus in 1997, he said, was to put in place the many changes meant to benefit investors. This year it's getting SelectNet fees and other costs down, "so that the pendulum, which has swung over to the investor's favor, leaves room for the market-maker system to exist and profit."
At press time, the possible merger of Nasdaq and the American Stock Exchange made his agenda even busier.
Inevitably, the changes at Nasdaq have profoundly influenced opinions about Berkeley. "Al brings an entrepreneurial approach to running Nasdaq, which is not all bad," one top Nasdaq trader said, "but I think he's crossed the line here. Until OptiMark, I would have given Al Berkeley good grades. I don't think there's anything wrong with making dough. But, you know, go start a company, Al. Don't take my fees."
Berkeley is making no apologies. "I'm actually finding this totally engrossing," he said. "After 24 or 25 years doing the same thing, this is really energizing, to be doing something new on a national scale.
But he may have a hard road ahead.
"Finding balance among many, many constituencies is going to be difficult," Stark said. But, she added, Berkeley is very smart. "I wouldn't short him."
