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Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg

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Speaker 1: Radio this week on the podcast. I know I say

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Speaker 1: it every week, but I have an extra special guest.

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Speaker 1: His name is Doug Brounstein. You may recognize the name

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Speaker 1: from his years at JP Morgan Chase, where he not

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Speaker 1: only served as Chief Financial Officer, but he was also

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Speaker 1: head of Investment Banking Global M and A a member

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Speaker 1: of JP Morgan's executive committee. Doug is currently founder and

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Speaker 1: managing partner of Hudson Executive Capital. UH. They are, for

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Speaker 1: lack of a better word, an investment firm, private equity firm,

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Speaker 1: a little bit of an activist firm. They manage about

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Speaker 1: one point six billion dollars UH, and they have recently

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Speaker 1: become quite the active spack underwriter. Their first spack UH

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Speaker 1: did really well. It's up about twenty eight percent or so. UH.

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Speaker 1: Their second spack launched last year, and their third spack

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Speaker 1: is coming out shortly. Dog has just a unique background

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Speaker 1: in the world of finance and M and a um

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Speaker 1: an incredible network. He's from First Boston to Merrill Lynch

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Speaker 1: to more recently JP Morgan Chase. Just just an incredible

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Speaker 1: network of of people in contacts and company executives and

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Speaker 1: finance people. Gives him just a unique perch to look

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Speaker 1: out at the world of what companies are attractively priced,

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Speaker 1: where can mid sized companies find a way to obtain

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Speaker 1: capital to turn around UH their fortunes, and how does

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Speaker 1: the spack structure work in in those areas. Really just

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Speaker 1: a master class on the intersection of of corporate finance

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Speaker 1: and company management and how to produce value for shareholders.

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Speaker 1: I found this to be absolutely fascinating, wonky, UH and informative,

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Speaker 1: and I think you will also so, with no further ado,

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Speaker 1: my interview with Hudson Executive Capitals managing partner Doug Bronstein.

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Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio.

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Speaker 1: This week I have an extra special guest. His name

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Speaker 1: is Doug Bronstein and he is the founder and managing

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Speaker 1: partner of Hudson Executive Capital, a private investment firm that

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Speaker 1: engages in private equity, public offerings activist investing, managing about

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Speaker 1: one point six billion dollars. Previously, Doug was the chief

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Speaker 1: financial officer for JP Morgan Chasing Company. Doug Bronstein, Welcome

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Speaker 1: to Bloomberg thanks, Berry. Good to be with you. So,

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Speaker 1: in addition to being CFO of a major public bank,

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Speaker 1: you were you were head of JP Morgan's American Investment

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Speaker 1: banking group, you were head of the Global M and

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Speaker 1: A group, you're a member of the executive committee. Tell

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Speaker 1: us a little bit about where you began your career

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Speaker 1: and how you rose to those positions at JP Morgan. Yeah, So, Barry,

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Speaker 1: in some sense, it was a little bit circumstance. I was.

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Speaker 1: Actually I went to law school and I had planned

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Speaker 1: actually be a law school professor. That was my objective.

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Speaker 1: And UM, I read this remarkable article in the New

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Speaker 1: York Times Sunday Business Sunday magazine section on lawyers becoming

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Speaker 1: investment bankers. In it, it sparked my interest, and UH

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Speaker 1: that year was the first year. UH First Boston came

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Speaker 1: to campus to recruit directly, and I dropped my resume

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Speaker 1: into a box because that's what you did back in

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Speaker 1: the ninety eighties, and UM, and I interviewed with a

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Speaker 1: bunch of bankers in the M and A group at

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Speaker 1: First Boston thought it sounded incredibly exciting, and so that's

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Speaker 1: where I went. I spent close to eight years at

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Speaker 1: First Boston, working originally for Bruce Wasserstein and Joe Prell

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Speaker 1: in the M and A Group and UH, and just

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Speaker 1: had an extraordinary start to my career. Yeah, you could

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Speaker 1: do a lot worse than cutting your teeth with with

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Speaker 1: those two gentlemen. How did you end up at JP Morgan? Well,

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Speaker 1: I took a my boss at the time at first Boston,

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Speaker 1: who's running NAM and A Group, brought a bunch of us,

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Speaker 1: about six senior bankers to Merrill Lynch to help build

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Speaker 1: out their M and A practice. And I was there

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Speaker 1: for you know, four very good years. UM. But I

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Speaker 1: got a call actually from from the the late Jimmy

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Speaker 1: Lee and UH. He was at Chase and they wanted

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Speaker 1: to build out their investment banking businesses and he and

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Speaker 1: Bill Harrison convinced me that UM I could come and

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Speaker 1: make a difference. So I joined that organization UH in

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Speaker 1: UH in early to run at the then time their

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Speaker 1: their healthcare investment banking practice and UH to co head

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Speaker 1: their M and A group. And I think the year

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Speaker 1: before I joined UM, the Chase M and A Group's

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Speaker 1: revenues were about thirty five million dollars UM. Yeah, I think,

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Speaker 1: I think, actually Joe's Pizza Shop and M and A

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Speaker 1: group probably ranked higher in the league tables. Um, and uh,

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Speaker 1: you know, we we I had a wonderful We'll talk

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Speaker 1: a little bit about it. I had a wonderful, close

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Speaker 1: to twenty year career at JP Morgan. But you know,

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Speaker 1: when when I left the role of the head of

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Speaker 1: M and A, the business was doing about a billion

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Speaker 1: six M about seven or eight years later. So it

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Speaker 1: was a remarkable run in building out that business with

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Speaker 1: the firm. Yeah, say to say the least. And you know,

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Speaker 1: it's funny coming from a legal background. You you went

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Speaker 1: to Harvard Law and then you spend time doing banking.

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Speaker 1: That's not the usual career path to CFO at a

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Speaker 1: publicly traded company. Usually it's some combination of accounting and

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Speaker 1: m b A and and that side of the company.

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Speaker 1: How did you end up at as JP Morgan Chase's CFO. Yeah, well, um,

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Speaker 1: my first to be fair, my first exposure to Jamie

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Speaker 1: was was I was helping Bill Harrison as advisor to

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Speaker 1: JP Morgan in the merger discussions with Bank One and uh,

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Speaker 1: actually I can I can remember distinctly, uh A quite

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Speaker 1: a quite forceful conversation around the exchange ratio at a

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Speaker 1: conference room table with what I knew would be my

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Speaker 1: future boss, and you know, I think we UH we

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Speaker 1: got to know each other quite well during that process. UM,

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Speaker 1: I was fortunate enough to be UH in addition to

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Speaker 1: the advisor to the company, I had the opportunity to

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Speaker 1: run a number of the important businesses in the investment

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Speaker 1: banking business. So at the time I was running both

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Speaker 1: M and A and the coverage units. UM. I later

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Speaker 1: took on responsibility for running UH number of the capital

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Speaker 1: markets businesses, and I think during that time frame, the

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Speaker 1: businesses I was working with did very well. You know,

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Speaker 1: I think we had the opportunity to demonstrate a fairly

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Speaker 1: high degree of rigor as a business matter, and I

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Speaker 1: got to develop an even stronger relationship with Jamie and

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Speaker 1: quite a number of the members of the Operating Committee

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Speaker 1: and so UM I think when I was approached to

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Speaker 1: do the CFO job, as you might expect, I spent

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Speaker 1: a lot of time talking actually to my Kavanaugh, who

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Speaker 1: was my predecessor in the role, speaking to literally all

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Speaker 1: of the operating Committee members UM before deciding that it

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Speaker 1: would be a great opportunity for me and hopefully the

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Speaker 1: right decision for the bank. Huh. And I assume it

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Speaker 1: turned out to be your CFO not only of a

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Speaker 1: giant company, but of a publicly traded one. What is

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Speaker 1: that like? Being public gets a bad rep these days.

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Speaker 1: What was it like being JP Morgan Chase's chief financial officer? Yeah,

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Speaker 1: you know it. I mean, to be Fairberry, I think

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Speaker 1: it was in aggregate are remarkable privilege to be the

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Speaker 1: CFO JP Morgan. It is a I think one of

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Speaker 1: the world's great companies, and obviously I got to work

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Speaker 1: directly for what I believe is one of the world's

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Speaker 1: great business leaders in Jamie. Um. You know. It was

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Speaker 1: The remarkable part about it is the what I believed

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Speaker 1: was this in this awesome sense of personal responsibility because

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Speaker 1: the company had, you know, two hundred and fifty thousand employees,

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Speaker 1: and while we had you know, bankers and deal doers,

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Speaker 1: you know, we had literally thousands of people in alert

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Speaker 1: jobs and back office jobs, and the security teams that

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Speaker 1: you know greeted you on your way into the office,

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Speaker 1: and so you just you you came in every day, uh,

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Speaker 1: with this feeling of responsibility to make sure that the

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Speaker 1: company was both safe and secure in a good place.

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Speaker 1: For them to work. We had millions of consumer customers,

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Speaker 1: you know, millions of small business customers, and obviously we

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Speaker 1: were you know, banked to many of the largest businesses

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Speaker 1: in the world. And then of course you have a

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Speaker 1: two trillion dollar balance sheet and at the then time

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Speaker 1: six independent lines of business. So it was you know,

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Speaker 1: it was a privilege to serve in that role. Um.

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Speaker 1: You know, you worked every day to make sure that

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Speaker 1: we were maintaining a Fortress balance sheet. Obviously, my responsibility

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Speaker 1: in communicating with the external investors was to make sure

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Speaker 1: that what we said was accurate, transparent, that we were

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Speaker 1: clear and consistent with that reporting, both to the public

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Speaker 1: and obviously to our regulators. UM. And the last thing

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Speaker 1: that was really fascinating about the job was, you know,

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Speaker 1: I took on that role right on the heels of

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Speaker 1: the implementation of Dodd Frank. So, you know, at the

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Speaker 1: early days of you know, a post global financial crisis,

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Speaker 1: if you will, you mentioned the Fortress balance sheet. JP

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Speaker 1: Morgan Chase probably came through the financial crisis better than

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Speaker 1: any other bank, certainly better than any major money center

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Speaker 1: bank you want, the CFO during the crisis. But I

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Speaker 1: assume because of your role in M and A. Um,

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Speaker 1: you were witnessed to what you know, that quick bear

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Speaker 1: Sterns deal, did you pure? And what on earth was that? Like? Yeah,

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Speaker 1: so it was it was Actually I did get to participate.

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Speaker 1: It was an extraordinary experience. At the time I was,

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Speaker 1: I was in my role of running banking and M

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Speaker 1: and A, and so I ended up doing the what

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Speaker 1: was a very short lead advisory assignment for our work

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Speaker 1: at the company. So we knew, you know, midweek that

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Speaker 1: you know, bear Stearns was having uh what ended up being,

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Speaker 1: you know, a devastating liquidity crisis, and um, we originally,

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Speaker 1: as you may recall, we're called by the said to

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Speaker 1: provide bear Stearns alone and then literally over the course

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Speaker 1: of that you know, Friday, Saturday, Sunday, we I helped

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Speaker 1: to organize and lead teams around diligence and then obviously

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Speaker 1: helped Jamie and the senior management in the negotiation of

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Speaker 1: the actual transaction. So, you know, the process itself, given

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Speaker 1: the time constraints and the risks involved, was you know,

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Speaker 1: one of the most fascinated ones I've been involved with.

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Speaker 1: I can imagine and then I assume a similar shotgun

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Speaker 1: romance a year later with Washington Mutual. I assumed that

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Speaker 1: was sort of similar, although given the overlap between regulators,

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Speaker 1: I would imagine you're going into that with a little

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Speaker 1: more confidence that there were no surprises than perhaps you

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Speaker 1: saw at bear Stearns. Yeah, I mean bear Stearns obviously

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Speaker 1: we had you know, we had this weekend they had

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Speaker 1: there were businesses we were quite familiar with. But but

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Speaker 1: we knew in part that if we didn't act over

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Speaker 1: the course of the weekend and bear Sterns filed for bankruptcy,

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Speaker 1: which they were preparing to do, UM, that there would

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Speaker 1: be this cascading effect that could potentially impact many others.

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Speaker 1: So were it was a counter party, right, Yeah, it

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Speaker 1: was less, Yeah, there was, but that was less at

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Speaker 1: issue actually for us um UH again because of the

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Speaker 1: Fortress balance sheet and the vast amount of liquidity we had,

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Speaker 1: you know, it had others incurred problems. We you know,

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Speaker 1: we we thought we would be fine, but it wasn't

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Speaker 1: necessarily a good thing for both UH, the economy and

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Speaker 1: the country. And so at the time there was there

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Speaker 1: was a real sense that, you know, if we could

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Speaker 1: do something that was good for our shareholders and also

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Speaker 1: good for the for the country that we would do

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Speaker 1: that Washington Mutual was was a different set of circumstances

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Speaker 1: and a different process and different regulators, as you said, Barry,

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Speaker 1: and is it is it? It turned out we had

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Speaker 1: taken a hard look at Washington Mutual previously and it

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Speaker 1: was also, to be fair, a simpler business um and

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Speaker 1: a less complicated balance sheet. And so that process was

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Speaker 1: you know, less time constrained, though obviously important, and it

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Speaker 1: was really run in a very different way. Interestingly at

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Speaker 1: the time, if I'm recollecting correctly, the f d i

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Speaker 1: C which round that process, they actually required you to

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Speaker 1: bid over a fax machine, which you know, even even

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Speaker 1: at the time was was unusual um. And so we

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Speaker 1: actually had to put our bid bid letter in over

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Speaker 1: the fax machine. UM. And you know, both of those transactions,

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Speaker 1: obviously the opportunity set arose because you know, we were

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Speaker 1: a fortress balance sheet and we were able to take

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Speaker 1: on those businesses and I think in hindsight both have

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Speaker 1: created you know, a lot of value for the JP

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Speaker 1: Morgan shareholders. Yeah, quite quite interesting. Let's talk a little

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Speaker 1: bit about Hudson and what they do. What what motivated

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Speaker 1: you after working in a series of giant banks, to

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Speaker 1: launch your own from UH, thanks for asking, Barry. It Actually, UM,

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Speaker 1: it was a function of some of the most extraordinary

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Speaker 1: people I had met over a thirty year career on

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Speaker 1: Wall Street had been successful entrepreneurs. In fact, my wife

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Speaker 1: had been a very successful entrepreneur, and and I thought

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Speaker 1: that it would be an exciting and invigorating opportunity to

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Speaker 1: to launch out at you know, and start my own

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Speaker 1: business and UM and I wanted to do something different

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Speaker 1: and exciting and energizing. And I came up with the

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Speaker 1: idea of building an investment firm around the notion that

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Speaker 1: I could tap into this remarkable network of current and

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Speaker 1: former chief executive officers and other senior executives that I

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Speaker 1: had built over that thirty year career and try and

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Speaker 1: offer that wisdom and expertise and mentoring and judgment UH

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Speaker 1: two small and MidCap companies where we could make an

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Speaker 1: investment and and try and help those companies to improve

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Speaker 1: their performance. So that was really it was. It was

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Speaker 1: the excitement of doing something entrepreneurial and um and and

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Speaker 1: really sort of leveraging those capabilities and relationships I had

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Speaker 1: built over three decades. So so when I think of

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Speaker 1: Hudson capital. I kind of think of it as one

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Speaker 1: part private equity, one part underwriter, one part activist investor.

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Speaker 1: Am I oversimplifying that? How would you describe it? You know?

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Speaker 1: I think the way to think about it is, I

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Speaker 1: think we try to take a private equity like approach

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Speaker 1: to public market investing. And what I mean by that

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Speaker 1: is we we invest in companies where we think we

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Speaker 1: can add value by helping them from an operational standpoint.

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Speaker 1: We can add you by helping them allocate capital efficiently.

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Speaker 1: And that doesn't, by the way, means share repurchases are dividend.

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Speaker 1: That means for small companies, you know, how do I

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Speaker 1: put a dollar of investment to work in my business

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Speaker 1: to optimize my return on investment for my shareholders. We

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Speaker 1: we look at how to help the company reposition themselves

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Speaker 1: in the capital markets, attract better long term investors, get

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Speaker 1: better coverage from research analysts, tell their stories succinctly and clearly,

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Speaker 1: and then perhaps the most important thing we end up

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Speaker 1: doing is helping the company position themselves strategically. For a

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Speaker 1: lot of these small companies, you know, they participate in

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Speaker 1: businesses where scale ultimately can be a real competitive advantage

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Speaker 1: and and oftentimes our investments, and the companies we invest

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Speaker 1: in end up being acquired by a much larger strategic partners.

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Speaker 1: So that's the that's the way our philosophical approach. It

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Speaker 1: is very active, UM, but much of what we do,

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Speaker 1: almost all of what we do is typically behind the scenes, UM,

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Speaker 1: you know, out of public view, UH, consultative with both

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Speaker 1: the CEO and the management team and the board UM.

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Speaker 1: And we find if we can do that, it usually

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Speaker 1: gets to the the place we want to get too

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Speaker 1: faster UM and more efficiently, and it ends up working

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Speaker 1: out much better for the shareholders. Interesting. So I'm going

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Speaker 1: to guess with your background and your experience doing M

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Speaker 1: and A for all these you know, August companies that

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Speaker 1: have fantastic reputations, you develop a sense for what makes

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Speaker 1: for a good acquisition and what deals work out well.

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Speaker 1: Where is the value hidden that perhaps the market um

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Speaker 1: is missing. But the thing that makes it even more

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Speaker 1: interesting these days is then you then take that background

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Speaker 1: and say you use this spack structure as the shell

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Speaker 1: to make acquisitions. Hopefully that brings unlocked some of that

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Speaker 1: value from the marketplace. Why SPACs. Yeah, it's it's a

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Speaker 1: great question, Barry, And you know I began Hutson a

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Speaker 1: little under six years ago, and we were simply you know,

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Speaker 1: investing principally in public companies. Companies are already public where

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Speaker 1: we could go and acquire their their shares, and and

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Speaker 1: I was to be fairer. Over the last several years,

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Speaker 1: I was somewhat skeptical of SPACs. The history for me

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Speaker 1: with spacks was, you know, one that typically involved very

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Speaker 1: troubled companies. And and UM, some very dear banker friends

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Speaker 1: of mine worked very hard to convince me that this

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Speaker 1: market was changing and that the skills that I just

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Speaker 1: described that we use in Hudson to help position public

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Speaker 1: companies would be directly applicable to these private companies and

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Speaker 1: the spack structure um in going public. So UM, we

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Speaker 1: launched our first spack in June of so right on

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Speaker 1: the heels of you know, the turnaround in the markets

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Speaker 1: following the pandemics, uh, you know, initial impact, and UM,

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Speaker 1: we've been very fortunate. We we announced a merger for

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Speaker 1: that first spack early in January with a company H

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Speaker 1: called talk Space, which we're really excited about right that

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Speaker 1: that deal is now up more than since uh spack

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Speaker 1: was launched. Talk Us through the experience. What is the

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Speaker 1: process like looking to emerge a company into a SPAC

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Speaker 1: compared to the traditional M and A type of transaction. Yeah,

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Speaker 1: it's it's actually remarkably similar in many ways to a

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Speaker 1: traditional emit a transaction. So the the the important part

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Speaker 1: of UH ultimately finding a successful transaction is identifying businesses

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Speaker 1: in our view that have long term sustainable competitive advantage, right,

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Speaker 1: because you're going to be merging with a company that ultimately,

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Speaker 1: for us, we think we want to we want to

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Speaker 1: look out and be successful shareholders not just at the

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Speaker 1: transaction but two years, five years, ten years out right.

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Speaker 1: So it's important as part of an M and A

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Speaker 1: process to identify companies that you think are going to

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Speaker 1: create long term value. The second piece of it is

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Speaker 1: you actually have to find a great management team right

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Speaker 1: to help execute that vision um. And then the third

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Speaker 1: piece is is this a business that you can be

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Speaker 1: an effective partner with? Right? And do you do you

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Speaker 1: share a common vision, do you share a common mission?

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Speaker 1: Do you think about how to build that business and

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Speaker 1: create value for shareholders consistent with the management team? And

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Speaker 1: you know in talk space, we you know we found

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Speaker 1: each of those three opportunity sets were fantastically filled by

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Speaker 1: the company. Both it's it's management, the core business, which

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Speaker 1: I'll happily talk a little bit about, and UM, you know,

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Speaker 1: and our shared vision of what the opportunity said is

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Speaker 1: for the shareholders over time. So so you mentioned, um

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Speaker 1: the first SPAC h g I one was filed in June,

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Speaker 1: the second version, a g I two, came out later

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Speaker 1: in the year, and you just filed for h G

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Speaker 1: I three for a five million dollars back. Is there

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Speaker 1: something to the rhythm of this, uh to keep a

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Speaker 1: full pipeline of future SPACs tied up? Or is this

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Speaker 1: just you know, a land rush these days and everybody

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Speaker 1: is uh looking to do what they can do. Yeah,

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Speaker 1: you know, I it is. Certainly there's a lot of activity.

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Speaker 1: I can't speak to the logic behind others. For us,

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Speaker 1: you know, one of the things that we have found

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Speaker 1: is that our business model has created uh really even

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Speaker 1: for me, I thought it would be a good level

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Speaker 1: of transaction flow, it's been an extraordinary level of transaction flow.

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Speaker 1: And we we source the businesses from really a multitude

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Speaker 1: of sources. We have this network of my founding CEO

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Speaker 1: partners almost thirty five executives that are out looking for

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Speaker 1: opportunities for us to to merge with. In the back,

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Speaker 1: we have a full research team that's doing bottoms up

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Speaker 1: work UM that's part of the Hudson Executive Investment Team.

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Speaker 1: We have what turns out to have been, you know,

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Speaker 1: the benefit of thirty years on Wall Street is, you know,

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Speaker 1: we've got wonderful relationships with the m and a banker

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Speaker 1: community on Wall Streets, so we are getting more than

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Speaker 1: our fair share of opportunities that we look at. And

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Speaker 1: then my partner and I, Doug Burger on we've we've

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Speaker 1: got you know, longstanding historical relationships on both the East

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Speaker 1: and the West coast into the venture community, in the

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Speaker 1: private equity community. So for us, raising capital is really

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Speaker 1: reflective of the opportunity set we see in front of us.

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Speaker 1: And we've been very purposeful in sizing those two SPACs

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Speaker 1: quite differently to reflect the different size of the opportunities,

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Speaker 1: so that we've got you know, the appropriate level of

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Speaker 1: sponsor capital UH to really help effectuate you know, smaller

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Speaker 1: and larger transactions. So for us, you know, we think

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Speaker 1: this is this is a new and I think long

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Speaker 1: lasting corporate finance tool that private companies are going to

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Speaker 1: look to utilize. It won't be perfect for all companies,

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Speaker 1: but it will be really an excellent capital market solution

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Speaker 1: for many. And we think we're going to be you know,

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Speaker 1: we're we're built to be successful in this asset class.

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Speaker 1: So so I have two more questions on SPACs. The

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Speaker 1: first is, I think it was last month I saw

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Speaker 1: a column on tech Front that asked, could giant SPACs

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Speaker 1: be next? Raises the question how big spacts get? Are

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Speaker 1: we going to see a billion or a multibillion dollars

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Speaker 1: spack coming down the pipe? Yes, so Verry, there have

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Speaker 1: already been several that are a billion or multi billion

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Speaker 1: that have have been launched, and there is no question

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Speaker 1: that there's the investor appetite for that, you know. To me,

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Speaker 1: it's it's you want to have the right tool in

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Speaker 1: your tool kit for the right opportunity set. And what

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Speaker 1: what's really exciting for us is, you know, SPACs in

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00:29:32,400 --> 00:29:38,880
Speaker 1: that too fifty to seven fifty range plus the ability

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Speaker 1: to raise capital through pipe gives you an enormous flexibility

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Speaker 1: to really optimize the number of potential UH merger partners

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Speaker 1: out there. You know, the larger you get, the shorter,

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Speaker 1: the list comes of eligible transactions, and so we'd matter,

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Speaker 1: you know, to us, it's less about the headline you grab,

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Speaker 1: and it's more about finding really good businesses that generate

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Speaker 1: a lot of value for our investors and for the shareholders.

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Speaker 1: And that leads to the related question, at what size

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Speaker 1: does an I p O make much more sense than

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Speaker 1: a speck? And you sort of hinted at that a

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Speaker 1: little bit. Yeah, it's it's honestly, it's less about size.

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Speaker 1: And it's so let me, let me just step back

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Speaker 1: for a second, and you know, from our perspective, what

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Speaker 1: I've I've come to firmly believe is there are some

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Speaker 1: very significant competitive advantages of a spack over an I

402
00:30:41,440 --> 00:30:46,600
Speaker 1: p O. Right, it's a faster process, so speed can

403
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Speaker 1: sometimes be important. It's actually a more certain process in

404
00:30:51,520 --> 00:30:56,800
Speaker 1: terms of pricing, because you don't actually end up announcing

405
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Speaker 1: the transaction, the actual merger, until you've raised the pipe

406
00:31:01,600 --> 00:31:06,040
Speaker 1: and the pipe confirms the price. Right, so you've pre

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00:31:06,200 --> 00:31:10,720
Speaker 1: sold at that given price, um, and so you know

408
00:31:10,840 --> 00:31:13,480
Speaker 1: in a relatively short period of time, not only you're

409
00:31:13,560 --> 00:31:17,040
Speaker 1: going to effectuate the with the go public, but you

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Speaker 1: know the price structurally. The spack gives you, I think

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00:31:23,040 --> 00:31:28,600
Speaker 1: a greater degree of flexibility to raise both more primary

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00:31:28,640 --> 00:31:32,440
Speaker 1: and secondary capital in most instances. And then the last

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Speaker 1: piece is the actual disclosures of a proxy. A merger

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00:31:38,560 --> 00:31:42,920
Speaker 1: proxy versus an I p O filing means that you

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00:31:42,960 --> 00:31:48,840
Speaker 1: can actually provide your investors with projections and it allows

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00:31:49,320 --> 00:31:54,200
Speaker 1: particularly for growth companies, it allows them to tell a

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00:31:54,320 --> 00:31:58,360
Speaker 1: much more fulsome story to the investor and and the

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00:31:58,440 --> 00:32:02,640
Speaker 1: corresponding popper tunity as the investor gets a lot more

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00:32:02,720 --> 00:32:10,080
Speaker 1: information when making that investment decision. So those characteristics are

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Speaker 1: offset by a SPACK can be marginally higher in terms

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00:32:15,360 --> 00:32:17,240
Speaker 1: of its cost of capital than an I p O.

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Speaker 1: And you're actually a SPAC means you're choosing a partner

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00:32:22,720 --> 00:32:24,640
Speaker 1: and in an I p O you don't have to

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Speaker 1: do that. So you know, each company that goes through

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00:32:29,200 --> 00:32:34,880
Speaker 1: this evaluation has to decide to the benefits outweigh the cost.

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Speaker 1: For Hudson, what we articulate to our SPAC partners, and

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00:32:40,480 --> 00:32:44,920
Speaker 1: we did this with talk Space quite effectively, is our

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00:32:45,120 --> 00:32:50,440
Speaker 1: partnership because of this network of executives and our experiences,

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00:32:50,760 --> 00:32:57,640
Speaker 1: actually accelerates growth and adds value to the company. And therefore,

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00:32:57,680 --> 00:33:01,880
Speaker 1: over time, you know, the shareholders should be better off

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00:33:01,920 --> 00:33:06,200
Speaker 1: with that partnership. So we we think that's you know,

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00:33:07,000 --> 00:33:09,600
Speaker 1: and I go back to you know, the your question

433
00:33:09,640 --> 00:33:14,040
Speaker 1: about is a spack like a merger. At the end

434
00:33:14,040 --> 00:33:19,360
Speaker 1: of the day, many many mergers are successful or fail

435
00:33:20,360 --> 00:33:26,480
Speaker 1: on the chemistry and interaction of the two companies. So

436
00:33:26,640 --> 00:33:31,640
Speaker 1: this partnership concept actually matters as much, if not more,

437
00:33:31,760 --> 00:33:36,040
Speaker 1: oftentimes than the underlying economics of a deal. So, Doug,

438
00:33:36,120 --> 00:33:38,520
Speaker 1: I was reading a quote of yours that I really

439
00:33:38,560 --> 00:33:42,760
Speaker 1: am intrigued by. You had said, quote, we like to

440
00:33:42,840 --> 00:33:49,040
Speaker 1: apply a private equity approach to investing in public markets. Unquote.

441
00:33:49,480 --> 00:33:56,800
Speaker 1: Explain what you mean by applying private equity to public markets, Yeah, Barry,

442
00:33:56,960 --> 00:34:01,280
Speaker 1: it's it is a combination at the front and of

443
00:34:02,520 --> 00:34:06,520
Speaker 1: rigorous due diligence. So before we make an investment, um

444
00:34:06,520 --> 00:34:10,400
Speaker 1: it oftentimes it takes us, you know, four to six

445
00:34:10,480 --> 00:34:13,880
Speaker 1: months to complete our work. So we'll we'll be following

446
00:34:13,880 --> 00:34:17,160
Speaker 1: a company for a long period of time and we

447
00:34:17,160 --> 00:34:21,840
Speaker 1: we try to dig in as deep as possible to

448
00:34:22,000 --> 00:34:26,759
Speaker 1: that business. Now, we're aided by the fact that, you know,

449
00:34:26,840 --> 00:34:31,920
Speaker 1: we have this network of current informer chief executive officers

450
00:34:32,000 --> 00:34:37,400
Speaker 1: that have you know, lifetimes of experience and domain knowledge

451
00:34:38,080 --> 00:34:41,279
Speaker 1: in the industries in which we invest, and so we

452
00:34:41,360 --> 00:34:46,719
Speaker 1: often rely on them and their networks to help us

453
00:34:46,880 --> 00:34:50,880
Speaker 1: analyze the businesses that we invest in. We you know,

454
00:34:50,920 --> 00:34:55,319
Speaker 1: we only make three to five investments per year. We're

455
00:34:55,800 --> 00:35:00,120
Speaker 1: very concentrated, and so we have to make sure know,

456
00:35:00,960 --> 00:35:02,960
Speaker 1: when you make very few bets, you want to make

457
00:35:03,000 --> 00:35:07,880
Speaker 1: sure that those bets are are good ones. Um. The

458
00:35:07,960 --> 00:35:13,520
Speaker 1: other piece is after we've made the investment, how involved

459
00:35:13,760 --> 00:35:17,480
Speaker 1: we are with the companies. So um, we will be

460
00:35:17,680 --> 00:35:24,720
Speaker 1: involved assisting the management, providing advice, mentoring as it relates

461
00:35:24,800 --> 00:35:29,120
Speaker 1: to their operational execution, as it relates to the how

462
00:35:29,200 --> 00:35:33,400
Speaker 1: they position themselves in the capital markets, as it relates

463
00:35:33,440 --> 00:35:38,400
Speaker 1: to how they allocate the shareholders capital to optimize value

464
00:35:38,400 --> 00:35:42,839
Speaker 1: and returns, and ultimately how they position the company strategically,

465
00:35:42,880 --> 00:35:46,600
Speaker 1: and so we will often get our We we will

466
00:35:46,640 --> 00:35:49,839
Speaker 1: often go on boards of the companies that we invest in,

467
00:35:50,480 --> 00:35:55,600
Speaker 1: will often make recommendations for board members we think bring

468
00:35:56,719 --> 00:35:59,759
Speaker 1: lots of value to the company. We will, in many

469
00:36:00,400 --> 00:36:05,760
Speaker 1: is actually sign n d as nondisclosure agreements and actually

470
00:36:05,840 --> 00:36:09,080
Speaker 1: work side by side with the management for periods of time.

471
00:36:09,880 --> 00:36:14,080
Speaker 1: We presented to all of the company boards that we

472
00:36:14,239 --> 00:36:18,440
Speaker 1: invest in UM to give the board members of perspective

473
00:36:18,520 --> 00:36:21,680
Speaker 1: on how shareholders view their companies. So we're, you know,

474
00:36:21,760 --> 00:36:25,319
Speaker 1: we're kind of roll up your sleeves kind of investors.

475
00:36:26,480 --> 00:36:30,480
Speaker 1: I will tell you it's it's not. We think it

476
00:36:30,600 --> 00:36:33,440
Speaker 1: not only creates a lot of value, but it's actually

477
00:36:33,719 --> 00:36:38,360
Speaker 1: personally quite rewarding to work with some of these companies

478
00:36:38,680 --> 00:36:43,480
Speaker 1: and you know, see them doing a better job delivering

479
00:36:43,600 --> 00:36:48,160
Speaker 1: for their customers, for their employees, and ultimately for their shareholders.

480
00:36:49,880 --> 00:36:55,280
Speaker 1: Very very interesting. You have mentioned several time your limited

481
00:36:55,360 --> 00:36:59,319
Speaker 1: partners and your the investors. Tell us a little bit

482
00:36:59,520 --> 00:37:03,320
Speaker 1: about out these folks. It sounds like you have not

483
00:37:03,480 --> 00:37:08,480
Speaker 1: only a network of ready sources of capital, but what

484
00:37:08,680 --> 00:37:13,680
Speaker 1: I only could describe as smart money. Yeah, it's it's

485
00:37:14,000 --> 00:37:18,560
Speaker 1: I would actually say, you're you're if you met these folks, UH,

486
00:37:19,000 --> 00:37:24,600
Speaker 1: smart wouldn't do justice to the extraordinary capabilities of these individuals.

487
00:37:25,040 --> 00:37:29,840
Speaker 1: So I had, you know, the the remarkable opportunity having worked,

488
00:37:30,480 --> 00:37:32,960
Speaker 1: you know, running banking at JP Morgan is I got

489
00:37:33,040 --> 00:37:38,160
Speaker 1: to work with many of the world great companies UM,

490
00:37:38,560 --> 00:37:43,680
Speaker 1: and I developed relationships over those uh you know, thirty

491
00:37:43,800 --> 00:37:49,200
Speaker 1: years with UH a lot of chief executive officers CFOs

492
00:37:49,239 --> 00:37:55,879
Speaker 1: who became CEOs, heads of corporate development and UM. When

493
00:37:55,920 --> 00:38:00,600
Speaker 1: I started Hudson, the first two fifty million capital that

494
00:38:00,760 --> 00:38:08,759
Speaker 1: I raised was principally from that group of executives and UM.

495
00:38:09,840 --> 00:38:12,960
Speaker 1: What I asked of them was not only for their capital,

496
00:38:13,440 --> 00:38:17,840
Speaker 1: but I asked them to help UH to identify opportunities

497
00:38:17,880 --> 00:38:22,440
Speaker 1: to invest, to help provide mentorship and guidance to the

498
00:38:22,520 --> 00:38:27,200
Speaker 1: companies that we invested in, to make recommendations for board

499
00:38:27,280 --> 00:38:30,800
Speaker 1: members or for management team members, and really to be

500
00:38:30,920 --> 00:38:35,680
Speaker 1: actively involved. And so we use that group. They've been

501
00:38:35,719 --> 00:38:40,520
Speaker 1: with me for six years as an investor. We use

502
00:38:40,640 --> 00:38:46,960
Speaker 1: that group for all aspects of identifying opportunities and diligence

503
00:38:47,680 --> 00:38:51,759
Speaker 1: and then execution and UM. You know, we've talked a

504
00:38:51,840 --> 00:38:55,880
Speaker 1: little bit about our our new and growing spack business.

505
00:38:56,800 --> 00:39:00,759
Speaker 1: They are all UM actively involved than that as well.

506
00:39:00,920 --> 00:39:06,719
Speaker 1: So it's it's an extraordinary group of professionals. And you know,

507
00:39:07,040 --> 00:39:12,239
Speaker 1: literally many of them have have helped build and run

508
00:39:12,480 --> 00:39:16,960
Speaker 1: and create some of the world's best companies. So, so

509
00:39:17,120 --> 00:39:21,279
Speaker 1: let's talk about some of your other non spack investments. UH.

510
00:39:21,880 --> 00:39:24,760
Speaker 1: At one point in time, you owned a nine steak

511
00:39:25,320 --> 00:39:30,200
Speaker 1: in card Tronics to where where is that investment are you?

512
00:39:30,280 --> 00:39:33,880
Speaker 1: Are you still active with them? Uh? And that's a

513
00:39:33,920 --> 00:39:36,600
Speaker 1: pretty substantial chunk. Tell us a little bit about that

514
00:39:36,719 --> 00:39:40,160
Speaker 1: deal it is and and maybe I'll actually step back.

515
00:39:40,200 --> 00:39:44,160
Speaker 1: So we we and we still do own that steak. UM.

516
00:39:44,480 --> 00:39:49,520
Speaker 1: We acquired that steake a little over three years ago. UM.

517
00:39:50,280 --> 00:39:54,759
Speaker 1: And the logic behind it card Tronics is it's one

518
00:39:54,800 --> 00:39:58,439
Speaker 1: of these, you know, interesting small companies that many people

519
00:39:58,480 --> 00:40:01,560
Speaker 1: have never heard of, but have a marketable market position.

520
00:40:01,680 --> 00:40:06,400
Speaker 1: They are the leading provider of a t M machines

521
00:40:06,600 --> 00:40:11,000
Speaker 1: independent a t M operators UM in the world. They

522
00:40:11,040 --> 00:40:14,520
Speaker 1: don't make the machines, they actually run and manage a

523
00:40:14,600 --> 00:40:19,080
Speaker 1: network of almost forty thousand a t M s in

524
00:40:19,880 --> 00:40:24,320
Speaker 1: the United States and many outside the United States. And

525
00:40:24,520 --> 00:40:30,040
Speaker 1: what's unique about them is that they're in seven of

526
00:40:30,200 --> 00:40:33,600
Speaker 1: the ten largest retail locations. So if you go into

527
00:40:33,680 --> 00:40:38,799
Speaker 1: a CBS or Walgreens, or a Target or a speedway

528
00:40:39,080 --> 00:40:41,400
Speaker 1: and you see an a t M in there, that

529
00:40:41,520 --> 00:40:44,920
Speaker 1: a t M is owned and operated by Cartronics. And

530
00:40:46,200 --> 00:40:50,600
Speaker 1: the company at the time we invested was struggling. They

531
00:40:50,680 --> 00:40:55,239
Speaker 1: had just made two very large acquisitions, levered their balance sheet,

532
00:40:55,400 --> 00:41:02,399
Speaker 1: operating performance had gone south. They had lost their largest customer, UM,

533
00:41:03,280 --> 00:41:08,239
Speaker 1: and you know, we invested in the company based on

534
00:41:08,480 --> 00:41:12,960
Speaker 1: again months of diligence, using our network of chief executive

535
00:41:13,000 --> 00:41:17,400
Speaker 1: officers and our relationships and obviously my own personal background

536
00:41:17,840 --> 00:41:24,359
Speaker 1: UM in the banking industry, and worked with the then

537
00:41:24,560 --> 00:41:29,080
Speaker 1: new CEO to help reposition the company and change its

538
00:41:29,760 --> 00:41:34,520
Speaker 1: strategic focus. And over the last several years that CEO

539
00:41:34,960 --> 00:41:39,160
Speaker 1: and his management team have done an extraordinary job in

540
00:41:39,400 --> 00:41:47,080
Speaker 1: repositioning the company in the In the pandemic, the stock

541
00:41:47,840 --> 00:41:53,680
Speaker 1: UH took a very significant hit, despite the fact that

542
00:41:53,760 --> 00:41:59,759
Speaker 1: the company operated exceptionally well through the pandemic, and as

543
00:41:59,800 --> 00:42:03,960
Speaker 1: a result of what I thought was a ongoing long

544
00:42:04,160 --> 00:42:10,280
Speaker 1: term opportunity but a short term disruption, UM I partnered

545
00:42:11,080 --> 00:42:17,760
Speaker 1: with Apollo Global Management UH private equity firm and actually

546
00:42:18,239 --> 00:42:23,040
Speaker 1: made an offer which was ultimately accepted by the board

547
00:42:23,160 --> 00:42:27,160
Speaker 1: to take the company private. And when you made when

548
00:42:27,239 --> 00:42:30,719
Speaker 1: you had made that offer, it attracted the attention I

549
00:42:30,920 --> 00:42:35,160
Speaker 1: believe of one of the big manufacturers of a T

550
00:42:35,440 --> 00:42:39,319
Speaker 1: M S N c R who got involved. How did

551
00:42:39,560 --> 00:42:44,080
Speaker 1: their role UM come about and how did that resolve? Well?

552
00:42:44,480 --> 00:42:47,200
Speaker 1: As you know, Barry, I mean in UH both card

553
00:42:47,239 --> 00:42:53,480
Speaker 1: Tronics is headquartered Uh. In the UK, UM. You know,

554
00:42:53,680 --> 00:42:58,200
Speaker 1: public company boards have a fiduciary responsibility when selling a

555
00:42:58,320 --> 00:43:07,520
Speaker 1: company to demise value, and and after our transaction was announced, UM,

556
00:43:08,360 --> 00:43:12,960
Speaker 1: the board received a series of inbound inquiries from a

557
00:43:13,040 --> 00:43:18,480
Speaker 1: whole host of companies, and at the end of a

558
00:43:18,640 --> 00:43:22,759
Speaker 1: process that they ran, the board made the determination that

559
00:43:23,080 --> 00:43:29,360
Speaker 1: the NCR offer, which was nine dollars versus our thirty

560
00:43:29,440 --> 00:43:35,239
Speaker 1: five dollar offer, was superior and they therefore recommended that

561
00:43:35,360 --> 00:43:39,680
Speaker 1: to the shareholders and that transaction. Now the vote and

562
00:43:40,680 --> 00:43:44,440
Speaker 1: the transaction remains pending. Let's talk a little bit about

563
00:43:44,960 --> 00:43:48,920
Speaker 1: the pandemic and the opportunities the market crash might have

564
00:43:49,040 --> 00:43:55,720
Speaker 1: created last year. Uh. Normally, when you get a crash

565
00:43:55,840 --> 00:44:00,640
Speaker 1: like we saw in the value, investors get a opportunity

566
00:44:00,680 --> 00:44:04,120
Speaker 1: to go out and pick their favorite targets on the cheap.

567
00:44:04,640 --> 00:44:07,840
Speaker 1: But it seemed like this was over. If you blinked,

568
00:44:07,880 --> 00:44:13,160
Speaker 1: you missed it. How was last year as an environment

569
00:44:13,400 --> 00:44:20,120
Speaker 1: to find either discounted or distressed assets that looked attractive? Yeah? No,

570
00:44:20,480 --> 00:44:26,759
Speaker 1: it actually is remarkably different in tone nature, and I

571
00:44:26,760 --> 00:44:32,880
Speaker 1: would argue over time, UM, the impact of the pandemic

572
00:44:33,160 --> 00:44:37,399
Speaker 1: on the way companies do business. I think it will

573
00:44:37,680 --> 00:44:42,800
Speaker 1: will be far long, far more long lasting, um and

574
00:44:43,120 --> 00:44:48,720
Speaker 1: different than the global financial crisis. So the the speed

575
00:44:48,800 --> 00:44:53,200
Speaker 1: at which the market recovered I think created a very small,

576
00:44:53,800 --> 00:44:57,360
Speaker 1: brief opportunity for folks brave enough to step in. In

577
00:44:57,520 --> 00:45:01,080
Speaker 1: some sense, it's it was similar to you know, March

578
00:45:01,280 --> 00:45:05,120
Speaker 1: nine of UH two thousand and nine, right, if you

579
00:45:05,400 --> 00:45:07,600
Speaker 1: if you put money into the market on the tenth

580
00:45:08,120 --> 00:45:13,080
Speaker 1: and walked away, you would have done extraordinarily well. But

581
00:45:13,200 --> 00:45:16,399
Speaker 1: investing isn't you know, there are some folks who are

582
00:45:16,560 --> 00:45:22,480
Speaker 1: market timing investors. We really are focusing on, you know,

583
00:45:22,960 --> 00:45:28,759
Speaker 1: fundamentals of businesses that have that long lasting, sustainable competitive advantage.

584
00:45:29,480 --> 00:45:36,760
Speaker 1: And what is clear is that the pandemic has accelerated

585
00:45:36,840 --> 00:45:43,880
Speaker 1: and highlighted trends that will make for different winners and

586
00:45:44,040 --> 00:45:47,600
Speaker 1: losers in the market going forward. So on a long

587
00:45:47,800 --> 00:45:51,160
Speaker 1: term basis, I think it has really changed the nature

588
00:45:51,440 --> 00:45:56,920
Speaker 1: of how companies will compete effectively and be successful. And

589
00:45:57,080 --> 00:46:02,440
Speaker 1: you see that for example in healthcare, in the digital

590
00:46:02,640 --> 00:46:06,280
Speaker 1: delivery and acceleration of digital healthcare. So, Barry, we talked

591
00:46:06,280 --> 00:46:11,040
Speaker 1: about our investment in talk Space, which is a digital

592
00:46:11,239 --> 00:46:16,160
Speaker 1: behavioral health company that business in many ways is now

593
00:46:16,360 --> 00:46:20,880
Speaker 1: the future of behavioral healthcare, whereas pre pandemic it was

594
00:46:20,920 --> 00:46:24,680
Speaker 1: an important vehicle but not but it wasn't as clear

595
00:46:24,800 --> 00:46:28,120
Speaker 1: that it will ultimately be a winner as it is today.

596
00:46:28,920 --> 00:46:35,239
Speaker 1: And so I think it's really the pandemic I think

597
00:46:36,560 --> 00:46:43,640
Speaker 1: forces value investors and individual stock pickers to reassess the

598
00:46:43,760 --> 00:46:47,799
Speaker 1: strategic positioning for many companies. And that's what I think

599
00:46:47,840 --> 00:46:50,040
Speaker 1: the long term consequence is going to be of the pandemic.

600
00:46:51,080 --> 00:46:55,319
Speaker 1: So so let's talk about a specific company. Hudson took

601
00:46:55,400 --> 00:47:01,120
Speaker 1: a three point one stake in German banking giant Deutsche

602
00:47:01,200 --> 00:47:05,960
Speaker 1: Bank back in October. Tell us a little bit about

603
00:47:06,080 --> 00:47:10,360
Speaker 1: what attracted you to Deutsche Bank. They've had a recent

604
00:47:10,560 --> 00:47:16,120
Speaker 1: history of some regulatory problems going back to library and

605
00:47:16,160 --> 00:47:18,359
Speaker 1: a whole run of things. What what makes them an

606
00:47:18,400 --> 00:47:24,120
Speaker 1: attractive investment here? So Deutsche Bank is a really interesting

607
00:47:24,640 --> 00:47:28,040
Speaker 1: um investment. And when we made the investment back in

608
00:47:29,680 --> 00:47:32,560
Speaker 1: you know, we were clearly quite the contrarian investor. But

609
00:47:33,239 --> 00:47:35,719
Speaker 1: you know, with the benefit now of two years of execution,

610
00:47:35,800 --> 00:47:40,480
Speaker 1: in hindsight, I think the management continues, the new management

611
00:47:41,000 --> 00:47:44,080
Speaker 1: continues to take this company in the direction we think

612
00:47:44,239 --> 00:47:48,120
Speaker 1: is going to create lots of value for shareholders. Today.

613
00:47:48,960 --> 00:47:52,960
Speaker 1: What was compelling about Deutsche Bank is it is, you know,

614
00:47:53,120 --> 00:47:57,480
Speaker 1: the largest bank in one of the world's largest economies

615
00:47:58,040 --> 00:48:01,960
Speaker 1: UM and and viously one of the most important economies

616
00:48:02,040 --> 00:48:10,680
Speaker 1: in Europe, with a number of businesses that, if executed properly,

617
00:48:12,160 --> 00:48:15,680
Speaker 1: were leaders in their in their space, and the bank

618
00:48:16,640 --> 00:48:23,520
Speaker 1: was troubled by a variety of shortcomings and mistakes of

619
00:48:23,600 --> 00:48:30,879
Speaker 1: prior managements UM, a lack of cultural focus, a lack

620
00:48:30,960 --> 00:48:39,359
Speaker 1: of investment and leadership, and ultimately trying to compete head

621
00:48:39,440 --> 00:48:43,440
Speaker 1: to head on all fronts with companies like JP Morgan

622
00:48:43,520 --> 00:48:48,440
Speaker 1: when that wasn't really their strategic direction. And so um

623
00:48:48,640 --> 00:48:54,000
Speaker 1: I invested. After Christian Seething was named the new chief

624
00:48:54,080 --> 00:49:00,080
Speaker 1: executive officer, we were actively involved with the company in

625
00:49:00,280 --> 00:49:06,120
Speaker 1: helping them think through their strategic repositioning UM and we

626
00:49:06,280 --> 00:49:09,160
Speaker 1: have been working actively with the company for the last

627
00:49:09,200 --> 00:49:13,200
Speaker 1: several years as they have both rolled out that repositioning

628
00:49:13,520 --> 00:49:19,200
Speaker 1: and now UM executed on it. And what Deutsche Bank

629
00:49:19,760 --> 00:49:25,800
Speaker 1: UM really focuses in on from an investor standpoint is,

630
00:49:26,960 --> 00:49:30,279
Speaker 1: in a world in which the macro environment is very

631
00:49:30,440 --> 00:49:36,960
Speaker 1: challenging for banks, much of the operating performance improvement of

632
00:49:37,040 --> 00:49:42,400
Speaker 1: Deutsche Bank is driven by self help, and we believe

633
00:49:42,960 --> 00:49:47,520
Speaker 1: that Christian and his management team, who have now successfully

634
00:49:47,680 --> 00:49:51,279
Speaker 1: executed on their plan for close to two years, is

635
00:49:51,480 --> 00:49:55,640
Speaker 1: really on a path to returning this company to both

636
00:49:56,480 --> 00:50:02,520
Speaker 1: substantial profitability and UM generating a lot of excess capital

637
00:50:02,600 --> 00:50:05,839
Speaker 1: they can ultimately be returned to the shareholders. So that's

638
00:50:06,360 --> 00:50:11,279
Speaker 1: for us UM in an environment that's otherwise challenging for

639
00:50:11,480 --> 00:50:15,280
Speaker 1: large banks given the interest rate environment we live in today.

640
00:50:16,719 --> 00:50:21,279
Speaker 1: Much of this opportunity set is driven by self help

641
00:50:22,000 --> 00:50:27,359
Speaker 1: UH for Deutsche Bank, meaning management knows what they need

642
00:50:27,480 --> 00:50:30,439
Speaker 1: to do to get the bank on the right path.

643
00:50:31,400 --> 00:50:35,040
Speaker 1: You are clearly not the only one who sees Deutsche

644
00:50:35,080 --> 00:50:38,640
Speaker 1: Bank this way. Capital Group just took a three percent stake.

645
00:50:38,920 --> 00:50:42,640
Speaker 1: There are rumors of other people kicking around taking a chunk.

646
00:50:43,160 --> 00:50:46,279
Speaker 1: Do you like to be early or do do you

647
00:50:46,360 --> 00:50:49,960
Speaker 1: not think in those terms of UM having to be

648
00:50:50,120 --> 00:50:53,239
Speaker 1: the first one to turn over the rock and see

649
00:50:53,280 --> 00:50:58,759
Speaker 1: all the critters underneath. Yeah, well, sometimes, unfortunately you you

650
00:50:58,920 --> 00:51:02,200
Speaker 1: realize that and the rock is turned over. There are

651
00:51:02,280 --> 00:51:05,359
Speaker 1: lots of critters. This one, the critters had already been

652
00:51:05,440 --> 00:51:09,680
Speaker 1: released UM. The question was whether or not the management

653
00:51:10,520 --> 00:51:15,120
Speaker 1: was up to the task, and that's where the work

654
00:51:15,239 --> 00:51:17,600
Speaker 1: that I talked about that we do on the front

655
00:51:17,719 --> 00:51:23,200
Speaker 1: end leads us to you know, make investments based on

656
00:51:23,360 --> 00:51:28,040
Speaker 1: the confidence of that deep due diligence and domain knowledge

657
00:51:28,600 --> 00:51:33,560
Speaker 1: and expertise. So we don't we don't want to be

658
00:51:34,880 --> 00:51:37,040
Speaker 1: we don't need to be the earliest, We don't need

659
00:51:37,120 --> 00:51:41,799
Speaker 1: to be the first. What we don't know is whether

660
00:51:41,880 --> 00:51:46,360
Speaker 1: we'll pick the bottom. But because we're long term investors, Barry,

661
00:51:46,560 --> 00:51:49,600
Speaker 1: where we know when we're investing, we're not taking the top.

662
00:51:50,280 --> 00:51:53,600
Speaker 1: And that to us is the important part. So you

663
00:51:53,680 --> 00:52:00,360
Speaker 1: know this, this is a big, complicated global institution that

664
00:52:00,560 --> 00:52:05,920
Speaker 1: had to go through a fundamental change, uh in leadership,

665
00:52:06,120 --> 00:52:11,200
Speaker 1: in management and culture, and in strategic positioning. And that

666
00:52:11,360 --> 00:52:15,360
Speaker 1: takes time. But if you're a patient and you've made

667
00:52:15,480 --> 00:52:18,600
Speaker 1: the right bets in you know, the early parts of

668
00:52:18,640 --> 00:52:22,239
Speaker 1: an investment, it ends up being, uh, you know, a

669
00:52:22,440 --> 00:52:27,120
Speaker 1: very rewarding experience. So so let me stay with your

670
00:52:27,520 --> 00:52:34,160
Speaker 1: expertise at Giant Money Center banks. UH. Clearly, JP Morgan

671
00:52:34,280 --> 00:52:39,319
Speaker 1: Chase is a Siffy is a systemically important financial institution.

672
00:52:39,960 --> 00:52:45,080
Speaker 1: I have to imagine that in Germany they're perceived as

673
00:52:45,480 --> 00:52:49,120
Speaker 1: their version of Ciffy or a national champion or whatever.

674
00:52:49,160 --> 00:52:54,080
Speaker 1: You wanna call the hometown giant money center bank. Um,

675
00:52:54,800 --> 00:52:58,960
Speaker 1: what is going to happen across the globe with with

676
00:52:59,120 --> 00:53:01,360
Speaker 1: these sorts of banks? So are we going to continue

677
00:53:02,000 --> 00:53:06,640
Speaker 1: to see consolidation? We I look in France at Society

678
00:53:06,719 --> 00:53:10,400
Speaker 1: General and BNP, I look in at Switzerland at Credit

679
00:53:10,480 --> 00:53:13,440
Speaker 1: Swiss and ubs. Are we just going to end up

680
00:53:13,560 --> 00:53:17,960
Speaker 1: with a handful of giant banks in each and every country.

681
00:53:19,440 --> 00:53:22,160
Speaker 1: It's it's a great question, Barry, and I want to

682
00:53:22,200 --> 00:53:25,320
Speaker 1: step back and say one of the real you know,

683
00:53:25,440 --> 00:53:27,840
Speaker 1: if there are benefits that came out of the global

684
00:53:27,920 --> 00:53:32,840
Speaker 1: financial crisis, is the standards that were put in place,

685
00:53:33,000 --> 00:53:37,239
Speaker 1: whether it was you know, the FED stress tests and

686
00:53:37,840 --> 00:53:43,760
Speaker 1: capital requirements, the Bossel three requirements, all of these designations

687
00:53:44,600 --> 00:53:49,120
Speaker 1: that you mentioned, you know, systemically important financial institutions. Means

688
00:53:49,239 --> 00:53:56,120
Speaker 1: that today those large banks start from a position of

689
00:53:56,600 --> 00:54:00,640
Speaker 1: relative strength both in terms of their capital and liquidity.

690
00:54:01,400 --> 00:54:04,200
Speaker 1: So the good news today is the in the in

691
00:54:04,320 --> 00:54:08,080
Speaker 1: the course of what has been a very challenging economic

692
00:54:08,200 --> 00:54:13,239
Speaker 1: environment and the pandemic, the banking system is far stronger,

693
00:54:13,560 --> 00:54:16,839
Speaker 1: far more resilient um than it was a decade ago.

694
00:54:18,239 --> 00:54:24,920
Speaker 1: Having said that, there is no question that there remains

695
00:54:25,239 --> 00:54:31,360
Speaker 1: what I would characterize as excess capacity or suboptimal returns

696
00:54:32,480 --> 00:54:37,160
Speaker 1: UM that could certainly be enhanced through mergers. And so,

697
00:54:37,840 --> 00:54:41,759
Speaker 1: you know, my expectation, I think others expectation is is

698
00:54:41,880 --> 00:54:47,680
Speaker 1: that there will be another round of consolidation UM and

699
00:54:47,840 --> 00:54:50,560
Speaker 1: that may very well, uh, you know, it may take

700
00:54:50,680 --> 00:54:53,960
Speaker 1: some time to get there, but there is no question

701
00:54:54,120 --> 00:54:59,120
Speaker 1: that for a number of these large banks, gaining more scale,

702
00:55:00,280 --> 00:55:05,960
Speaker 1: creating more efficiencies will ultimately over time both you know,

703
00:55:06,200 --> 00:55:11,040
Speaker 1: improve returns for the investors and actually build capital from

704
00:55:11,080 --> 00:55:14,719
Speaker 1: a regulatory standpoint to keep these banks safer. So yes,

705
00:55:14,800 --> 00:55:20,240
Speaker 1: so I'm not sure last today, but we will see it. Interesting.

706
00:55:20,400 --> 00:55:24,319
Speaker 1: So so that makes me think of two specific things. Well,

707
00:55:24,400 --> 00:55:30,279
Speaker 1: we'll go backwards and and currently um, currently there's a

708
00:55:30,440 --> 00:55:34,520
Speaker 1: ton of consolidation going on on the asset management side.

709
00:55:35,000 --> 00:55:39,080
Speaker 1: We have SWAB taking over t d H, Morgan Stanley

710
00:55:39,160 --> 00:55:43,400
Speaker 1: doing a few acquisitions, Franklin Resources and invest go. What

711
00:55:43,520 --> 00:55:47,000
Speaker 1: are your thoughts on that side of the finance sector.

712
00:55:47,800 --> 00:55:52,560
Speaker 1: Are the same forces driving consolidation on the asset management half?

713
00:55:55,000 --> 00:55:58,960
Speaker 1: Street Berry is unique and different, and I think the

714
00:55:59,120 --> 00:56:02,520
Speaker 1: forces that are driving consolidation in the asset management side

715
00:56:02,719 --> 00:56:07,520
Speaker 1: is really the prevalence and the amount of capital that

716
00:56:07,760 --> 00:56:15,520
Speaker 1: has gone to passive investing with far lower cost structure.

717
00:56:16,320 --> 00:56:20,719
Speaker 1: And so the traditional asset management model of active management

718
00:56:21,080 --> 00:56:26,239
Speaker 1: and fees associated with active management has been squeezed. And

719
00:56:26,360 --> 00:56:30,280
Speaker 1: when profits and margins are squeezed, one of the things

720
00:56:30,400 --> 00:56:34,000
Speaker 1: that a company can do is look to improve that

721
00:56:34,400 --> 00:56:39,560
Speaker 1: profitability or margin by merging and taking out excess costs.

722
00:56:39,600 --> 00:56:43,080
Speaker 1: So what you see happening in asset management is that's

723
00:56:43,120 --> 00:56:46,719
Speaker 1: a different driving force than what we talked about for

724
00:56:46,800 --> 00:56:49,680
Speaker 1: the global financial institutions. By the way, you know, if

725
00:56:49,719 --> 00:56:53,759
Speaker 1: you think about the investments that I make in some

726
00:56:53,880 --> 00:56:58,959
Speaker 1: of these small or mid sized businesses, they all they're

727
00:56:59,320 --> 00:57:04,560
Speaker 1: they're targets of larger companies because there is a driving

728
00:57:04,800 --> 00:57:10,000
Speaker 1: force that benefits through scale. So we've owned a number

729
00:57:10,040 --> 00:57:15,279
Speaker 1: of medical device companies, great product, but it costs an

730
00:57:15,440 --> 00:57:17,920
Speaker 1: enormous amount of money to run a sales and marketing

731
00:57:18,080 --> 00:57:23,960
Speaker 1: organization globally, and large medical device companies have those sales

732
00:57:24,000 --> 00:57:27,240
Speaker 1: and marketing organizations in place, so they're able to take

733
00:57:27,320 --> 00:57:31,040
Speaker 1: a great product and put it into their channel and

734
00:57:31,200 --> 00:57:35,520
Speaker 1: distribute it. So, you know, and what I will say

735
00:57:35,720 --> 00:57:39,560
Speaker 1: is asset management is no different than large financial institutions

736
00:57:39,640 --> 00:57:44,000
Speaker 1: is no different than medical device which is these businesses

737
00:57:44,080 --> 00:57:49,880
Speaker 1: over time are increasingly global and the benefits of scale matter.

738
00:57:51,000 --> 00:57:53,960
Speaker 1: And quite frankly, if you you know, you want to

739
00:57:54,040 --> 00:57:58,840
Speaker 1: take the paradigmatic example of the benefits of scale, you know,

740
00:57:59,040 --> 00:58:02,520
Speaker 1: my old employer, JP Morgan is the perfect example of that.

741
00:58:02,760 --> 00:58:05,920
Speaker 1: They are, you know, they're a dominant player in the

742
00:58:06,040 --> 00:58:09,120
Speaker 1: space in part because of the scale. It makes a

743
00:58:09,160 --> 00:58:13,600
Speaker 1: lot of sense since you were at JP Morgan during

744
00:58:13,640 --> 00:58:16,960
Speaker 1: the crisis, and we talked about Washington Mutual, we talked

745
00:58:16,960 --> 00:58:20,480
Speaker 1: about bear Stearns. I feel like I would not be

746
00:58:20,640 --> 00:58:24,560
Speaker 1: completing the whole set of collectibles if I didn't ask

747
00:58:24,640 --> 00:58:28,440
Speaker 1: you about either Lehman Brothers or a I G. Tell

748
00:58:28,560 --> 00:58:31,560
Speaker 1: us a little bit about what you might have seen

749
00:58:32,640 --> 00:58:36,200
Speaker 1: late oh nine when everything was on fire. Did you

750
00:58:36,280 --> 00:58:38,840
Speaker 1: guys look at either of those companies and what was

751
00:58:38,880 --> 00:58:45,080
Speaker 1: your takeaway? Yeah? So, I think because JP Morgan was

752
00:58:45,800 --> 00:58:48,360
Speaker 1: you know, a bank, if you will, to so many

753
00:58:48,400 --> 00:58:53,120
Speaker 1: other banks, UM, we had you know, the either the

754
00:58:53,280 --> 00:58:57,880
Speaker 1: benefit or the challenge of being you know, having a

755
00:58:58,400 --> 00:59:02,720
Speaker 1: front row seat to almost every large financial institution and

756
00:59:02,840 --> 00:59:07,040
Speaker 1: how they went through the financial crisis. Um, we actually

757
00:59:07,200 --> 00:59:10,960
Speaker 1: were called to to to evaluate Lehman and that was

758
00:59:11,080 --> 00:59:14,280
Speaker 1: a you know, a short discussion. It really didn't fit

759
00:59:14,840 --> 00:59:18,040
Speaker 1: what we were doing strategically. A I G. On the

760
00:59:18,120 --> 00:59:22,960
Speaker 1: other hand, actually called us to help them try and

761
00:59:23,200 --> 00:59:25,920
Speaker 1: find a solution. And you know, it was one of

762
00:59:26,000 --> 00:59:29,840
Speaker 1: those examples during the financial crisis. I was actually, you know,

763
00:59:29,960 --> 00:59:32,160
Speaker 1: happily on my way to work one morning and I

764
00:59:32,240 --> 00:59:34,680
Speaker 1: got a call from Jamie and he asked me to

765
00:59:34,800 --> 00:59:38,800
Speaker 1: reroute downtown to A I G. S offices. And you know,

766
00:59:38,960 --> 00:59:43,840
Speaker 1: we spent quite a few weeks working with the management

767
00:59:43,880 --> 00:59:48,160
Speaker 1: team and the board to try and find a private

768
00:59:48,280 --> 00:59:51,720
Speaker 1: market solution. Ultimately, we weren't able to do that in

769
00:59:51,800 --> 00:59:54,560
Speaker 1: the government, as you know, had to step in. But

770
00:59:55,160 --> 00:59:59,280
Speaker 1: you know, we were we were both looking at businesses

771
00:59:59,400 --> 01:00:03,880
Speaker 1: as a potent to acquirer and we were actively engaged

772
01:00:04,320 --> 01:00:07,439
Speaker 1: um with businesses as an advisor to try and help

773
01:00:07,480 --> 01:00:11,680
Speaker 1: them manage through the crisis. See I see A I

774
01:00:11,840 --> 01:00:16,479
Speaker 1: g Um as having some real value outside of their

775
01:00:17,160 --> 01:00:21,000
Speaker 1: financial products division. That blew up The question with Lehman

776
01:00:21,080 --> 01:00:25,720
Speaker 1: Brothers always seemed to be that everybody who to use

777
01:00:25,840 --> 01:00:29,720
Speaker 1: my private to use my previous metaphor everybody who flipped

778
01:00:29,760 --> 01:00:33,560
Speaker 1: over that rock said, oh, these this is just a disaster.

779
01:00:33,720 --> 01:00:36,760
Speaker 1: We can't get involved in this. And it sort of

780
01:00:37,320 --> 01:00:41,760
Speaker 1: looked like the FED had the same attitude. They were

781
01:00:41,840 --> 01:00:44,520
Speaker 1: comfortable in letting them, you know, do the full face

782
01:00:44,640 --> 01:00:49,880
Speaker 1: plants into the pavement. What what was your perspective on Lehman? Yeah,

783
01:00:50,120 --> 01:00:52,920
Speaker 1: you know, to be fair, I was busy. Lehman and

784
01:00:53,160 --> 01:00:55,520
Speaker 1: an A I G. Kind of those bombs went off

785
01:00:55,600 --> 01:00:59,920
Speaker 1: at about the same time. So so, uh, it was

786
01:01:00,080 --> 01:01:04,600
Speaker 1: quite an interesting period of time because there was a

787
01:01:04,720 --> 01:01:08,000
Speaker 1: group down at the FED trying to find a solution

788
01:01:08,160 --> 01:01:12,640
Speaker 1: for Lehman, and and many of those individuals weren't aware

789
01:01:13,480 --> 01:01:16,200
Speaker 1: um that you know, literally a block or so away

790
01:01:16,280 --> 01:01:20,040
Speaker 1: there was another, you know, quite frankly larger financial institution

791
01:01:20,120 --> 01:01:26,840
Speaker 1: that was also in massive distress. UM. I think you know,

792
01:01:27,040 --> 01:01:39,040
Speaker 1: in hindsight, UM, the markets. The Lehman bankruptcy UM obviously

793
01:01:39,240 --> 01:01:45,000
Speaker 1: sent the markets into a material tail spin, which accelerated

794
01:01:45,160 --> 01:01:47,840
Speaker 1: the issues at A I G. And a number of

795
01:01:47,920 --> 01:01:51,560
Speaker 1: other companies. UM. And and you know, at the end

796
01:01:51,600 --> 01:01:55,240
Speaker 1: of the day, uh, you know, the Federal Reserve decided

797
01:01:55,320 --> 01:01:57,840
Speaker 1: to and the Treasury decided to step in an A

798
01:01:57,960 --> 01:01:59,920
Speaker 1: I G. To try and put the finger and the die.

799
01:02:00,680 --> 01:02:07,160
Speaker 1: It ended up being very important. Um and ultimately uh

800
01:02:07,400 --> 01:02:12,600
Speaker 1: you know, financially uh uh, not necessarily successful, but at

801
01:02:12,680 --> 01:02:20,160
Speaker 1: least financially neutral to the government. UM. But you know,

802
01:02:20,400 --> 01:02:23,120
Speaker 1: part of the lesson Barry in all of this is,

803
01:02:24,200 --> 01:02:29,200
Speaker 1: you know, financial institutions run it's financial institutions are a

804
01:02:29,240 --> 01:02:32,880
Speaker 1: little bit like marathoners right there in you know that

805
01:02:33,280 --> 01:02:37,919
Speaker 1: they're in great shape, and that shape is their capital base,

806
01:02:38,160 --> 01:02:42,520
Speaker 1: right how how how prepared are they to weather a crisis,

807
01:02:43,640 --> 01:02:48,440
Speaker 1: But they also need liquidity and matching the duration of

808
01:02:48,560 --> 01:02:51,760
Speaker 1: your assets and liabilities is critically important. And for a

809
01:02:51,840 --> 01:02:55,760
Speaker 1: marathon runner, it's the oxygen they take in in the race.

810
01:02:56,600 --> 01:02:58,480
Speaker 1: And you know, you could be in the best shape

811
01:02:58,520 --> 01:03:00,840
Speaker 1: of your life, but someone puts a pillow over your

812
01:03:01,200 --> 01:03:03,480
Speaker 1: head at night and you can't breathe. It's not going

813
01:03:03,520 --> 01:03:07,720
Speaker 1: to end well. And for many of these financial institutions,

814
01:03:08,640 --> 01:03:13,280
Speaker 1: they they believed capital was sufficient and in the engineed

815
01:03:13,400 --> 01:03:19,600
Speaker 1: both capital and liquidity, and you know, they the system

816
01:03:20,440 --> 01:03:23,240
Speaker 1: starved them of the oxygen they needed at the time

817
01:03:23,320 --> 01:03:26,600
Speaker 1: they needed it most. Yeah, that makes sense that the

818
01:03:26,680 --> 01:03:30,320
Speaker 1: world looks differently um at mile one than it does

819
01:03:30,360 --> 01:03:36,240
Speaker 1: at right. The world looks differently during normal times than

820
01:03:36,320 --> 01:03:41,880
Speaker 1: it does in a liquidly crisis exactly. And if you

821
01:03:42,080 --> 01:03:46,120
Speaker 1: aren't prepared for both, you know you're not going to

822
01:03:46,160 --> 01:03:48,200
Speaker 1: be successful in the race. And I get back to

823
01:03:49,120 --> 01:03:54,960
Speaker 1: you know, the the remarkable position and seat we all

824
01:03:55,040 --> 01:03:58,320
Speaker 1: sat in a JP Morgan is you know we had

825
01:03:58,400 --> 01:04:01,360
Speaker 1: both the capital and the liquid d to manage through this,

826
01:04:01,640 --> 01:04:05,440
Speaker 1: and you know the our ability to try and help

827
01:04:06,400 --> 01:04:10,560
Speaker 1: the system through the financial crisis was you know for me,

828
01:04:11,600 --> 01:04:14,680
Speaker 1: you know one of the parts of my career I'm

829
01:04:14,760 --> 01:04:18,520
Speaker 1: most proud of. Huh. Quite quite interesting. I know I

830
01:04:18,640 --> 01:04:21,960
Speaker 1: only have you for a limited amount of time. Let's

831
01:04:22,200 --> 01:04:25,880
Speaker 1: jump to our favorite questions that we ask all of

832
01:04:25,920 --> 01:04:30,000
Speaker 1: our guests, starting with tell us what you're streaming these days?

833
01:04:30,080 --> 01:04:33,080
Speaker 1: What are you doing to keep yourself entertained with either

834
01:04:33,240 --> 01:04:36,840
Speaker 1: Netflix or podcasts? What do you what do you um?

835
01:04:37,280 --> 01:04:42,480
Speaker 1: What's entertaining you? What's entertaining me? So um I am.

836
01:04:43,200 --> 01:04:46,760
Speaker 1: I will tell you to be fair, I am happiest,

837
01:04:47,480 --> 01:04:51,440
Speaker 1: happiest at work, and I will tell you that I

838
01:04:51,680 --> 01:04:56,760
Speaker 1: spend the vast preponderance of my time, uh looking for

839
01:04:56,840 --> 01:05:01,600
Speaker 1: SPAC candidates and investment opportunities. Now having at that, when

840
01:05:01,680 --> 01:05:07,360
Speaker 1: I do have a moment Um, I loved the Queen's

841
01:05:07,440 --> 01:05:12,200
Speaker 1: gambit and my my children would be very upset if

842
01:05:12,240 --> 01:05:14,880
Speaker 1: I didn't also say that I kind of have a

843
01:05:14,960 --> 01:05:20,640
Speaker 1: hankering for the Great British Baking Show. So that's that's, that's,

844
01:05:20,960 --> 01:05:24,320
Speaker 1: that's what I do watch in moments of relaxation, you know,

845
01:05:24,480 --> 01:05:27,200
Speaker 1: and on the on the podcast side, Berry, you know,

846
01:05:27,760 --> 01:05:33,480
Speaker 1: I love your show. Um. I am a sucker for

847
01:05:34,200 --> 01:05:37,640
Speaker 1: Michael Symbolists. I on the market from JP Morgan. I

848
01:05:37,760 --> 01:05:41,560
Speaker 1: think he just he has a really innovative approach to

849
01:05:42,040 --> 01:05:45,840
Speaker 1: uh two big global questions. So when I do have

850
01:05:45,960 --> 01:05:47,600
Speaker 1: a moment here or there, that's what I try to

851
01:05:47,680 --> 01:05:51,840
Speaker 1: listen to. Good stuff. Let's talk a little bit about

852
01:05:52,440 --> 01:05:55,600
Speaker 1: your mentors and and dear lord, that's quite a list

853
01:05:55,640 --> 01:05:59,440
Speaker 1: you've already mentioned already. Tell us who helped to shape

854
01:05:59,520 --> 01:06:04,440
Speaker 1: your career. Yeah, so, um, I'm a big believer by

855
01:06:04,520 --> 01:06:09,400
Speaker 1: the way, the for young people, the importance of mendership.

856
01:06:10,200 --> 01:06:13,320
Speaker 1: I think, but for the mentors I had, you know,

857
01:06:13,480 --> 01:06:15,800
Speaker 1: my career in life would have been really different. I

858
01:06:15,880 --> 01:06:19,520
Speaker 1: actually go back to college. I had an extraordinary professor

859
01:06:19,600 --> 01:06:22,320
Speaker 1: in college. Guy's been the name of Sam back Iraq,

860
01:06:22,920 --> 01:06:30,480
Speaker 1: who really changed the trajectory of my academic and uh development.

861
01:06:31,480 --> 01:06:33,360
Speaker 1: I worked for him for a number of years in

862
01:06:33,640 --> 01:06:38,520
Speaker 1: research and it was just it was great training. Um.

863
01:06:39,120 --> 01:06:42,000
Speaker 1: And then when I you know, went to First Boston,

864
01:06:42,800 --> 01:06:46,080
Speaker 1: I had the privilege of actually working for both Bruce

865
01:06:46,120 --> 01:06:52,560
Speaker 1: Wasserstein and Joe Perella, my longtime boss who ran the

866
01:06:52,720 --> 01:06:56,000
Speaker 1: M and a group Mike Konicky. I think all three

867
01:06:56,080 --> 01:07:01,280
Speaker 1: of them gave me great advice and more importantly, they

868
01:07:01,400 --> 01:07:04,600
Speaker 1: kind of put me in positions where uh, you know,

869
01:07:04,680 --> 01:07:08,080
Speaker 1: I had a swim on my own, and every once

870
01:07:08,120 --> 01:07:11,000
Speaker 1: in a while they would, you know, give you a

871
01:07:11,160 --> 01:07:13,120
Speaker 1: nudge one way or the other. But they just gave

872
01:07:13,160 --> 01:07:18,240
Speaker 1: me great opportunities to develop as a professional. And obviously

873
01:07:18,320 --> 01:07:21,040
Speaker 1: I've talked a little bit of JP Morgan about, you know,

874
01:07:21,160 --> 01:07:24,920
Speaker 1: the extraordinary experience of working with Jamie. But you know,

875
01:07:25,080 --> 01:07:29,120
Speaker 1: I started my career working for Bill Harrison, and you know,

876
01:07:29,520 --> 01:07:33,520
Speaker 1: I think he had an enormous influence on on my

877
01:07:33,680 --> 01:07:37,919
Speaker 1: development professionally. So I've had a I've had a string

878
01:07:38,000 --> 01:07:41,680
Speaker 1: of great folks to work for. Yeah, that's that's an amazing,

879
01:07:41,840 --> 01:07:44,520
Speaker 1: amazing list. Let's talk a little bit about books. What

880
01:07:44,600 --> 01:07:49,520
Speaker 1: are you reading currently and what are some of your favorites. Yeah,

881
01:07:49,680 --> 01:07:53,240
Speaker 1: so right now. Actually, I haven't read a book in

882
01:07:53,440 --> 01:07:56,760
Speaker 1: the last couple of months. It's just been really busy,

883
01:07:56,840 --> 01:08:00,480
Speaker 1: I would say on the favorites front, Um, probably my

884
01:08:00,600 --> 01:08:03,920
Speaker 1: all time favorite book is UM Team of Rivals by

885
01:08:04,200 --> 01:08:11,880
Speaker 1: uh Uh Doris Kern's Goodwin. I love the story behind

886
01:08:12,040 --> 01:08:16,719
Speaker 1: Lincoln building out the cabinet. It's just it's extraordinary lessons

887
01:08:17,320 --> 01:08:20,439
Speaker 1: in leadership. I have to give a shout out to

888
01:08:20,920 --> 01:08:25,040
Speaker 1: UM Andrew Sorkin for Too Big to Fail. Um. You know,

889
01:08:25,120 --> 01:08:28,559
Speaker 1: we spent a lot of time talking about the global

890
01:08:28,640 --> 01:08:32,080
Speaker 1: financial crisis, and having had a front seat to most

891
01:08:32,120 --> 01:08:37,160
Speaker 1: of it, I think Andrew did a remarkable job with that.

892
01:08:38,040 --> 01:08:40,600
Speaker 1: And then I am kind of a sucker for, you know,

893
01:08:40,800 --> 01:08:44,360
Speaker 1: a bunch of Michael Lewis books I love. I love

894
01:08:44,479 --> 01:08:51,360
Speaker 1: Moneyball for example, and Uh. I try to read uh

895
01:08:51,600 --> 01:08:57,479
Speaker 1: periodically books that my children are are are reading so

896
01:08:57,600 --> 01:09:00,640
Speaker 1: we can have some interesting discussions. So you know, I

897
01:09:00,720 --> 01:09:02,439
Speaker 1: probably have to give a shout out the Lord of

898
01:09:02,479 --> 01:09:06,840
Speaker 1: the Rings. That's one of those. So that's a that's

899
01:09:06,840 --> 01:09:11,200
Speaker 1: a good list, and you could add to your list.

900
01:09:11,240 --> 01:09:14,400
Speaker 1: I believe Michael Lewis's book on the Pandemic comes out

901
01:09:14,479 --> 01:09:17,080
Speaker 1: in May or June of this year. That'll be interesting.

902
01:09:17,240 --> 01:09:20,120
Speaker 1: I'm excited. I'm excited to read it. I have to

903
01:09:20,280 --> 01:09:22,920
Speaker 1: be fair. I have a pile of book sitting next

904
01:09:22,920 --> 01:09:26,960
Speaker 1: to my bedside that I haven't cracked in about four

905
01:09:27,080 --> 01:09:34,680
Speaker 1: or five months. I there's lots of uh downside, but

906
01:09:34,960 --> 01:09:41,320
Speaker 1: the ability to be active and efficient remotely has really

907
01:09:41,479 --> 01:09:45,840
Speaker 1: changed the work day in a way, no doubt, doesn't

908
01:09:45,920 --> 01:09:48,479
Speaker 1: let me get to very many books these days. Right.

909
01:09:48,600 --> 01:09:50,800
Speaker 1: There was a study out not too long ago that

910
01:09:50,920 --> 01:09:56,519
Speaker 1: showed that the average white collar professional is working something

911
01:09:56,720 --> 01:09:59,479
Speaker 1: like two hours more a week or a day. I

912
01:09:59,520 --> 01:10:01,439
Speaker 1: don't remember it was, but it was a big uptick

913
01:10:02,000 --> 01:10:06,479
Speaker 1: in time. When when you don't have to commute, shower,

914
01:10:06,600 --> 01:10:08,800
Speaker 1: get dressed, you just roll out of bed and you're

915
01:10:08,960 --> 01:10:12,600
Speaker 1: at your desk. It's a whole different, uh experience. It

916
01:10:12,760 --> 01:10:16,320
Speaker 1: is a different experience, you know, And in the other pieces,

917
01:10:17,600 --> 01:10:22,880
Speaker 1: the typical boundaries between you know, work and home get eroded. Yeah.

918
01:10:23,080 --> 01:10:26,080
Speaker 1: So was no complaints though, because it's you know, obviously

919
01:10:26,120 --> 01:10:29,160
Speaker 1: a lot of fun for me. Um. What sort of

920
01:10:29,200 --> 01:10:33,000
Speaker 1: advice would you give to a recent college graduate who

921
01:10:33,160 --> 01:10:38,519
Speaker 1: was interested in a career in either h M and

922
01:10:38,600 --> 01:10:42,599
Speaker 1: a finance underwriting. What would your career advice be to them?

923
01:10:43,000 --> 01:10:46,160
Speaker 1: So so I would you know, obviously, at JP Morgan,

924
01:10:46,240 --> 01:10:50,920
Speaker 1: we literally recruited hundreds of college grads and graduate school

925
01:10:50,960 --> 01:10:55,000
Speaker 1: students every year. You know what I would say, First

926
01:10:55,040 --> 01:11:00,560
Speaker 1: of all, I think the training and experience uh that

927
01:11:00,800 --> 01:11:05,200
Speaker 1: you get in any of these large programs I think

928
01:11:05,320 --> 01:11:09,280
Speaker 1: is extraordinary and and and I think that is true

929
01:11:09,640 --> 01:11:13,519
Speaker 1: of you know, many many of the large companies UM

930
01:11:14,200 --> 01:11:21,400
Speaker 1: in both in finance and healthcare, in technology. I really

931
01:11:21,560 --> 01:11:25,560
Speaker 1: encourage young people to spend a couple of years in

932
01:11:25,720 --> 01:11:31,640
Speaker 1: one of these well run companies, to learn the processes

933
01:11:32,200 --> 01:11:36,559
Speaker 1: that make these companies successful UM, and to be around

934
01:11:37,320 --> 01:11:41,840
Speaker 1: senior talent that they can train and develop behind. But

935
01:11:41,960 --> 01:11:45,280
Speaker 1: then ultimately, I think you to be successful, you have

936
01:11:45,479 --> 01:11:49,840
Speaker 1: to do things that you're passionate about. UM. You know,

937
01:11:50,000 --> 01:11:53,920
Speaker 1: work is hard, and you want to do something that's

938
01:11:54,160 --> 01:11:58,160
Speaker 1: not only hard, but what you enjoy doing. So really,

939
01:11:58,560 --> 01:12:02,040
Speaker 1: you know, spend the time I'm figuring out what makes

940
01:12:02,080 --> 01:12:05,200
Speaker 1: you happy, because that that allows you to put your

941
01:12:05,320 --> 01:12:09,160
Speaker 1: very best foot forward. And then the last thing I

942
01:12:10,120 --> 01:12:14,280
Speaker 1: encourage people to do is look to go to organizations

943
01:12:15,720 --> 01:12:22,960
Speaker 1: that reward performance. UM. You know, I think it's really

944
01:12:23,080 --> 01:12:27,599
Speaker 1: important that you know, young people work hard, put their

945
01:12:27,640 --> 01:12:31,320
Speaker 1: head down, do do as good a job at the

946
01:12:31,400 --> 01:12:35,640
Speaker 1: things they're asked to do. And but the the reciprocal

947
01:12:35,880 --> 01:12:39,519
Speaker 1: requirement is that you know, the companies they work for

948
01:12:39,760 --> 01:12:44,720
Speaker 1: recognize that and you know, promote UM and compensate them

949
01:12:44,800 --> 01:12:48,360
Speaker 1: for that performance. So and that's not true across the board.

950
01:12:48,439 --> 01:12:50,400
Speaker 1: And you know, you want to be in an environment

951
01:12:50,560 --> 01:12:57,759
Speaker 1: that you know rewards that strong performance. And our final question,

952
01:12:58,200 --> 01:13:01,120
Speaker 1: what do you know about the world of testing, mergers,

953
01:13:01,280 --> 01:13:04,320
Speaker 1: M and A today that you wish you knew thirty

954
01:13:04,400 --> 01:13:07,320
Speaker 1: years ago or so when you were first getting started.

955
01:13:08,320 --> 01:13:14,599
Speaker 1: UM Well out on the on the investing front, UM,

956
01:13:18,280 --> 01:13:22,719
Speaker 1: I'm gonna go back to the duration of your capital

957
01:13:24,080 --> 01:13:28,519
Speaker 1: can be a remarkable competitive advantage. And and the reason

958
01:13:28,640 --> 01:13:31,320
Speaker 1: I say that is, you know what I've learned over

959
01:13:31,360 --> 01:13:36,920
Speaker 1: the last thirty years is it often takes time to

960
01:13:37,640 --> 01:13:43,639
Speaker 1: build a successful company. It's hard to really manage these

961
01:13:43,760 --> 01:13:47,320
Speaker 1: businesses and build them and grow them and you know,

962
01:13:47,600 --> 01:13:54,280
Speaker 1: create competitive advantage. And capital needs to be long in

963
01:13:54,439 --> 01:14:00,960
Speaker 1: duration in order to to see that. Why cycle through

964
01:14:01,920 --> 01:14:06,360
Speaker 1: UM And so for me, it's it's all about matching

965
01:14:06,560 --> 01:14:11,160
Speaker 1: the asset and liability duration in In this particular instance,

966
01:14:11,720 --> 01:14:14,519
Speaker 1: you know you're investing in companies is the asset and

967
01:14:14,640 --> 01:14:18,040
Speaker 1: you want to have capital um that's long a duration

968
01:14:18,200 --> 01:14:22,000
Speaker 1: to match the life cycle of that investment. Thanks Doug

969
01:14:22,120 --> 01:14:24,679
Speaker 1: for being so generous with your time. We've been speaking

970
01:14:24,760 --> 01:14:28,439
Speaker 1: with Doug Bradstein. He is the founder and managing partner

971
01:14:28,600 --> 01:14:32,599
Speaker 1: at Hudson Executive Capital, which runs about one point six

972
01:14:32,840 --> 01:14:37,280
Speaker 1: billion dollars in assets. If you enjoy this conversation, well

973
01:14:37,520 --> 01:14:39,879
Speaker 1: be sure and check out any of the other previous

974
01:14:40,080 --> 01:14:44,120
Speaker 1: three hundred and seventy two such discussions we've had over

975
01:14:44,200 --> 01:14:47,160
Speaker 1: the past seven or so years. You can find that

976
01:14:47,439 --> 01:14:51,559
Speaker 1: at iTunes or Spotify or wherever you feed your podcast fixed.

977
01:14:52,160 --> 01:14:55,680
Speaker 1: We love your comments, feedback and suggestions right to us

978
01:14:55,880 --> 01:15:00,080
Speaker 1: at m IB podcast at Bloomberg dot net. Please le

979
01:15:00,160 --> 01:15:04,000
Speaker 1: give us a review at Apple iTunes. You can sign

980
01:15:04,160 --> 01:15:07,679
Speaker 1: up for our daily Reads. You'll find that at dhlts

981
01:15:07,760 --> 01:15:11,439
Speaker 1: dot com. Check out my weekly column at Bloomberg dot

982
01:15:11,479 --> 01:15:15,439
Speaker 1: com slash Opinion. Follow me on Twitter at rid Halts.

983
01:15:16,160 --> 01:15:18,040
Speaker 1: I would be remiss if I did not thank the

984
01:15:18,160 --> 01:15:21,240
Speaker 1: crack staff that helps with these conversations together each week.

985
01:15:21,720 --> 01:15:26,880
Speaker 1: Reggie Brazil is my audio engineer. Michael Boyle is my producer.

986
01:15:27,160 --> 01:15:31,000
Speaker 1: Attica val Brun is our project manager. Michael Batnick is

987
01:15:31,080 --> 01:15:34,920
Speaker 1: my head of research. I'm Barry rid Halts. You've been

988
01:15:35,000 --> 01:15:38,200
Speaker 1: listening to Masters in Business on Bloomberg Radio.