Speaker 1: Masters in Business is brought to you by the American
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Speaker 1: for over ninety years. Learn more at a d R
Speaker 1: dot org. VI is Masters in Business with Barry Ridholts
Speaker 1: on Bloomberg Radio. This week on the podcast, I sit
Speaker 1: down with author and journalist Duff McDonald. He has written
Speaker 1: such seminal books as Last Man Standing, The Ascent of
Speaker 1: Jamie Diamond, and JP Morgan Chase. His second book was
Speaker 1: The Firm, The Story of McKenzie and its secret influence
Speaker 1: on American business. And what's shocking about that book not
Speaker 1: only that McKenzie is as influential as it is in
Speaker 1: government and finance and business in general, but given their
Speaker 1: storied history and their power and influence, this was literally
Speaker 1: the first book ever written on mackenzie. That that's pretty shocking.
Speaker 1: Full disclosure, I myself have referenced Duff's work, and about
Speaker 1: half a dozen years ago I wrote something called is
Speaker 1: Mackensey the Root of All Evil? And the answer turned out,
Speaker 1: in my opinion, to more or less have been yes.
Speaker 1: His book is really a deep and detailed UH read
Speaker 1: into the storied firm, and it's quite fascinating. His most
Speaker 1: recent book is The Golden Passport, Harvard Business School and
Speaker 1: the Limits of Capitalism and the Moral Failure of the
Speaker 1: NBA Elite. It is also a deeply researched and highly critical,
Speaker 1: UH look at one of the most significant institutions in
Speaker 1: the world of filling the blank, government, finance, business, etcetera. UH.
Speaker 1: What I love about Duff's work is that it's not
Speaker 1: just opinion or vis rule, like or dislike. These are
Speaker 1: really deep dives, richly researched pieces of work into an institution,
Speaker 1: the people involved, the impact it's had on not only
Speaker 1: the world of business and finance and government, but just
Speaker 1: how it fits into the overall um skew of society
Speaker 1: and including things like what's the impact of our business
Speaker 1: school on economic inequality? And he approaches this from a
Speaker 1: very very objective, nonpartisan approach. I found all of his
Speaker 1: books to be absolutely fascinating, and I think you'll find
Speaker 1: the conversation we had quite interesting as well. So, with
Speaker 1: no further ado, my conversation with dof McDonald's my special
Speaker 1: guest today is Doff McDonald. He is a contributing editor
Speaker 1: at The New York Observer. He has previously contributed as
Speaker 1: an editor at New York magazine, Fortune and other fine publications.
Speaker 1: He has written pretty much for every major business publication,
Speaker 1: from Fortune, Business Week, conde As Portfolio, g Q, Wired.
Speaker 1: He has won numerous national magazine awards and is the
Speaker 1: author of numerous books. The one that caught my attention
Speaker 1: was The Firm, The Story of McKenzie and its secret
Speaker 1: influence on American business. But he has also written Last
Speaker 1: Man Standing, The Ascent of Jamie Diamond and JP Morgan Chase,
Speaker 1: and his most recent book is The Golden Passport Harvard
Speaker 1: Business School, The Limits of Capitalism and the Moral Failure
Speaker 1: of the NBA Elite. Duff McDonald, Welcome to Bloomberg. Thanks
Speaker 1: for having me. Let's start out talking a little bit
Speaker 1: about your career in journalism. What attracted you to writing
Speaker 1: about out business? It's funny you should ask. I went
Speaker 1: to Wharton as an undergraduate a little unwittingly. I was
Speaker 1: from Toronto and I did not have a sense of
Speaker 1: Wall Street at the time. I was interested in, uh,
Speaker 1: being a businessman was which is what I told my
Speaker 1: guidance counselor. So he told me to go to a
Speaker 1: business school. So I did, and I did well enough
Speaker 1: there and got a job at Goldman Sacks out of undergrad.
Speaker 1: It's not that you wanted to, but it's the law.
Speaker 1: You come out of Wharton and there there's a line.
Speaker 1: You could go to Goldman Sacks. Here, you could go
Speaker 1: to McKinsey. There, there's a whole bunch of options exactly,
Speaker 1: although I kind of stumped to my classmates, I only
Speaker 1: got one job offer from a real Sacks and apparently
Speaker 1: if you get one from Goldman, you're supposed to have
Speaker 1: gotten one from everybody else too. But I worked there
Speaker 1: for two years in corporate finance, and while impressed with
Speaker 1: the quality of the talent and the you know, they
Speaker 1: know what they're doing there, it wasn't for me. And
Speaker 1: I actually tried to get a job in book publishing
Speaker 1: first and couldn't get hired. So there was nothing available
Speaker 1: in steam engines. You were looking into businesses that were
Speaker 1: soon going to collapse, exactly, So thank you publishing industry
Speaker 1: for not hiring me and merely hiring me later. And
Speaker 1: then a friend suggested journalism, and I looked into so
Speaker 1: you had never really been thinking about writing. Has there
Speaker 1: been previous authorship, any writing casually? Not on the side,
Speaker 1: like I was a capable writer, But I know, I
Speaker 1: don't think I ever once said I want to be
Speaker 1: a writer. And so back to your question, how did
Speaker 1: I get into business journalism, It's because to get into journalism,
Speaker 1: I need I needed to write about business. So that
Speaker 1: you and, UM, that's that's pretty fascinating. What does your
Speaker 1: process look like? How do you figure out what you
Speaker 1: want to write about and how do you begin covering
Speaker 1: a specific topic? The areas you have written about, both
Speaker 1: in print and in books is pretty broad cross section
Speaker 1: of American finance. Yeah. I basically tend to follow my interest,
Speaker 1: you know, wherever it lands. Um, you know, maybe I
Speaker 1: shouldn't say that my my choice of topic is somewhat random,
Speaker 1: but I after a point in my career, got to
Speaker 1: a point where I could, uh, you know, I knew
Speaker 1: enough editors that I could get assignments with good story ideas.
Speaker 1: So it was just about a good story and we
Speaker 1: were pitching ideas to them and most of the time
Speaker 1: they liked it. Yeah, and I and and in the
Speaker 1: other direction, So you know, it's following. Uh, just sort
Speaker 1: of my interest. But if you look at the three books, uh,
Speaker 1: they all sort of follow each other. Jamie Diamond was
Speaker 1: the first one because I had a cover story in
Speaker 1: New York Magazine after the fall of bear Stearns, which
Speaker 1: we we sold as a book, and then Mackenzie followed that.
Speaker 1: Because Jamie himself, who's uh and no notoriously anti consultant.
Speaker 1: It didn't resonate enough with me at the time that
Speaker 1: I thought, oh, that's my next book, but enough that
Speaker 1: it was in the book about Jamie and my editor said,
Speaker 1: what what what about what he said about Mackenzie? What
Speaker 1: do you think? And I looked into and I was like,
Speaker 1: I can't believe no one's written a book. I was
Speaker 1: about to say, it's astonishing that they've been around as
Speaker 1: long as they have been and are as influential as
Speaker 1: they are. No one has really called them to test.
Speaker 1: I think it's because they probably never cooperated and uh,
Speaker 1: did they cooperate with you? They did? They did not.
Speaker 1: At first We used the age old this book is
Speaker 1: happening anyway, thing that we use in magazine journalism. You
Speaker 1: could either help shape it or just come out and
Speaker 1: you can read it with everybody else, and I promise
Speaker 1: you won't be happy. And the shocker is that Mackenzie
Speaker 1: came around. And then you get to the third book,
Speaker 1: Harvard Business School, and that came about just because you know,
Speaker 1: Mackenzie and Harvard have been connected for a long time,
Speaker 1: for a long time, and they are the only one
Speaker 1: of the three subjects that refuse to speak to me
Speaker 1: at all. That's interesting is your process. I know some
Speaker 1: people research research, research, and then they finished the research
Speaker 1: and they write right right, and other people research right,
Speaker 1: research right. How do you approach covering a subject I
Speaker 1: mean broad like McKinsey and Harvard Business School to fairly
Speaker 1: giant subjects. I'm more of the former, where I sort
Speaker 1: of try to frontload the research. I found through the
Speaker 1: three books that the hardest part of writing a book,
Speaker 1: at least for me, is the middle part, organizing what
Speaker 1: you know and getting ready to write. Because reporting, if
Speaker 1: you enjoy it and have a whatever capability at it's
Speaker 1: not that hard. You're just talking to people and you're
Speaker 1: doing a thousand words and it's a fairly clear structure.
Speaker 1: On the other hand, a hundred thousand words so like,
Speaker 1: so the first time I did that it nearly you know,
Speaker 1: broke my mind. I was like, I don't even know
Speaker 1: how to like take this word file and start cutting
Speaker 1: and pay. Like the sort of just manual challenge was
Speaker 1: was uh so terrifying. But um and you know, so
Speaker 1: I I do do research at first organization than writing.
Speaker 1: But you know, you by the time you're writing is
Speaker 1: when you know the most about the subject, So you know,
Speaker 1: you do go back and look into things that you
Speaker 1: stumble on at that point in the process. How how
Speaker 1: much of Harvard Business School is part of that group
Speaker 1: that the national populist movement around the world is tilting against.
Speaker 1: Before I looked into it, I would have I I
Speaker 1: think I if you'd asked me, I would have guessed
Speaker 1: that HBS was, you know, dominant in both business and
Speaker 1: government leadership positions. One of the things that's really interesting
Speaker 1: about them, as opposed to say Harvard Law School or
Speaker 1: or other places, is there are precious few Harvard m
Speaker 1: b A's that ever have a career in government. You know,
Speaker 1: they go in at the top, like Hank Paulson or
Speaker 1: something like that. But like, if you look at the
Speaker 1: top one thousand people in the federal government, you'll probably
Speaker 1: find five Harvard NBA's. Yeah, so they are not. They
Speaker 1: are not part of the governing elite, except if you, uh,
Speaker 1: business that corporations are essentially ruling this country well to
Speaker 1: a large degree they have, Yeah, so in that regard
Speaker 1: they are. I think the FT came out with a survey,
Speaker 1: its latest survey of the five thousand largest companies in
Speaker 1: the world or the thousand or something, and MBAs were
Speaker 1: not dominant as c as a percentage of CEOs, But
Speaker 1: of those CEOs that were MBA's, Harvard was totally dominant.
Speaker 1: They had more than twice as many as the closest one,
Speaker 1: which I think was Stanford or Inciot. So uh. They
Speaker 1: have a long history of accelerating people's climb to the
Speaker 1: top of whatever greasy pole they're climbing. Let let me
Speaker 1: throw a quote of yours at you and see what
Speaker 1: you have to say about this. Harvard Business School has
Speaker 1: not only proven an enormous failure, but it's very success
Speaker 1: has made it positively dangerous discuss. I think that one
Speaker 1: of the things that they have consistently failed to do
Speaker 1: is to teach their students that hierarchy and success does
Speaker 1: not equal. That does not mean that you are right
Speaker 1: and does not mean that you are wise. And part
Speaker 1: of that as to do with the fact that you
Speaker 1: can't pitch yourself as a graduate school of Harvard where
Speaker 1: your where, your mission is to make boatloads of money.
Speaker 1: So what they sell themselves as as educating enlightened leaders,
Speaker 1: and these enlightened leaders are convinced of their own destiny
Speaker 1: as leaders from the get go, and they confuse all
Speaker 1: sorts of other inputs for their essential correctness and rightness,
Speaker 1: and then you know, make decisions based on that. And
Speaker 1: it's uh, it's like they've confused the ability to make
Speaker 1: money with wisdom. So let me throw another of your
Speaker 1: quotes back at you. Harvard Business School has contributed to
Speaker 1: pretty much every bad thing that has happened in American
Speaker 1: business and the economy over the past century. Now is
Speaker 1: that a fact or a slight execut Uh? That's that's
Speaker 1: on paraphrases. Okay, So I wouldn't want to like, you know,
Speaker 1: a couple of reviewers have said that I blamed the
Speaker 1: recent financial crisis on them. I did not. Yeah, And
Speaker 1: in the book what I took issue with was Dean
Speaker 1: Jay light in the media aftermath of the crisis saying, uh,
Speaker 1: we won't. We don't want to spend time looking to
Speaker 1: fix blame. That's not interesting. But we must be part
Speaker 1: of the solution. And if you look at the list
Speaker 1: of HBS grads who are in positions of authority in
Speaker 1: the lead up to the crisis, you have George W. Bush,
Speaker 1: you have Christopher Cox, you have Hank Paulson, you have
Speaker 1: Jamie Diamond, you have down whoever. I'll take Coldman sax
Speaker 1: So Lynch, John Thayne, John Paulson. So you have it
Speaker 1: like that. In no way was I like it's their fault.
Speaker 1: But it's like, wait a second, when we're making a
Speaker 1: list of people to figure out how to not do
Speaker 1: this again, I don't think you have earned the right
Speaker 1: to be uh at the head of that line. You
Speaker 1: were at the head of it leading into this thing.
Speaker 1: The metaphor I I like is when a surgical procedure
Speaker 1: is botched, you always send in a fresh surgeon to
Speaker 1: fix it, who is not looking to cover up the
Speaker 1: previous snaffo. He's just going in or she's just going
Speaker 1: in to do what they need to do. When you
Speaker 1: send somebody to fix something where they may have had
Speaker 1: hand a hand in the creation of the problem you're
Speaker 1: not going to get And and that's been a pretty
Speaker 1: fair criticism of having Geithner and Larry Summers as part
Speaker 1: of the clan up crew. Are they there to clean up?
Speaker 1: Are they there to clean up their reputation? It's hard
Speaker 1: to tell. Yeah, And Hank Paulson, you know, credited with
Speaker 1: stabilizing a clearly precarious situation, but he that was not
Speaker 1: his only motivation at the time. He was motivated to
Speaker 1: save Goldman sacks. He was motivated to Uh, there were
Speaker 1: sweetheart deals with gold all over the place. So again,
Speaker 1: was it their fault? Who's you know who? We can't
Speaker 1: really blame anyone, but they certainly weren't without fault to say,
Speaker 1: to say the least. So here's a question that I'm
Speaker 1: curious about. So you you reference Stanford, you went to Wharton,
Speaker 1: There's the Booth School at Chicago, Columbia, talk at Dartmouth.
Speaker 1: You go down the list of high ranked MBA programs,
Speaker 1: it seems like there's a lot of competition. Is is
Speaker 1: Harvard Business School still it or have some of these
Speaker 1: other really well regarded entities cut a little bit into
Speaker 1: their space. I can answer that question with a quote
Speaker 1: that's in the book. I can't remember who said it,
Speaker 1: so i'm I apologize to its source now. But they said, um,
Speaker 1: if you want your grandparents to be impressed, uh, go
Speaker 1: to Harvard Business School. If you want your grandkids to
Speaker 1: be impressed, go to Stanford. That makes a lot of sense. Yeah,
Speaker 1: I read recently there are seventy six thousand Harvard NBA alumni,
Speaker 1: with a third of those living outside of the US.
Speaker 1: That's a pretty potent network of for any graduate school
Speaker 1: has Has Harvard Business School graduates become the new Illuminati?
Speaker 1: H I think I I'm I say in the book
Speaker 1: that it may be the most powerful alumni network that
Speaker 1: ever has been right. They are uh uh. They have
Speaker 1: significant representation among the world's wealthiest and among leadership at uh.
Speaker 1: In the corporate world overseas, they are in more government
Speaker 1: positions because that, you know, people tend to send their
Speaker 1: kids to the States to get that snamp of credibility.
Speaker 1: So let's talk a little bit about Jamie Diamond. Warren
Speaker 1: Buffett has described him as one of his favorite CEOs.
Speaker 1: What what's your take on Mr Diamond. Readers of the book,
Speaker 1: we'll see that I was impressed with him Uh, he's
Speaker 1: one of the most charismatic CEOs I've ever met. He
Speaker 1: clearly endears people to him, and you know, loyalty is
Speaker 1: one of his strong suits. I think his management of
Speaker 1: JP Morgan Chase pretty much, you know, stands for itself.
Speaker 1: I know that you haven't always you know, you've been
Speaker 1: a critic in the past, but as as far as
Speaker 1: as as managed as if your job is not so
Speaker 1: much a critic of him as the banking industries begging
Speaker 1: to be bailed out? How fortuitous was it that they
Speaker 1: had their big sub prime disaster years before the financial crisis?
Speaker 1: It so when they had a liquid date, there was
Speaker 1: a bit there for them to get out. It wasn't
Speaker 1: selling into the panic or am I giving them too
Speaker 1: much credit? You know. One of the things that I
Speaker 1: criticized the case method of teaching at HBS four is
Speaker 1: that they allow corporate executives to claim foresight when it
Speaker 1: was just circumstance and luck. I think, uh, in Last
Speaker 1: Man Standing at talk about the fact that they were
Speaker 1: just they were trying to get the pieces of the
Speaker 1: conveyor belt all moving at the right time, and uh,
Speaker 1: we're a step behind. Uh. Some of the other players
Speaker 1: like Meryl and uh uh so, yeah, there was luck there.
Speaker 1: But at the same time, I had numerous people tell
Speaker 1: me from inside the company that Jamie and and the
Speaker 1: people who work with him had sort of suddenly feeling
Speaker 1: on alert a little before everyone else. Well, I'm doing
Speaker 1: this from memory, and in my book, when I was
Speaker 1: researching bailout Nation back America was a disaster, Merrill Lynch
Speaker 1: going down less countrywide Morgantown. Notably missing from the parade
Speaker 1: of terribles was JP Morgan. And when you do the
Speaker 1: deeper dive, you find out, well, they had a derivative
Speaker 1: snaffoo when they had these problems with C d O s.
Speaker 1: But it wasn't right in the middle of the O
Speaker 1: eight oh nine where the bids went away. I want
Speaker 1: to say it was three or five years earlier. So
Speaker 1: when they had to clean that up, the housing market
Speaker 1: was still there. They were able to go out to
Speaker 1: the market and work their way out of whatever it was.
Speaker 1: And I apologize if I'm getting that wrong of doing
Speaker 1: this for memory, but clearly their derivative snaff who predated
Speaker 1: Bear and Lehman and A. I. G. And everybody else.
Speaker 1: It's always better to sell into an upmarket than into
Speaker 1: a panic. And also you know and their their next
Speaker 1: derivative snaffoo, the London Whale was after and I think
Speaker 1: it might be out of a little nivete on my part,
Speaker 1: But what Jamie said, and what Sandy while had said
Speaker 1: before him, is their focus on the Fortress balance sheet
Speaker 1: to be able to stand anything to or buy when
Speaker 1: the streets are running with blood or whatever it is. Uh,
Speaker 1: it's you know that that was a stated intention long
Speaker 1: before they did so. And look what they did. They
Speaker 1: picked up bear Sterns Sterns for a song, originally two dollars,
Speaker 1: ultimately ten dollars a share. They ended up getting that
Speaker 1: brand new bear Sterns building, which was probably worth at
Speaker 1: that point more than the rest and and and Washington
Speaker 1: Music if you remember was it was it city. Someone
Speaker 1: was maneuvering to get WOMBO and somebody who had a
Speaker 1: let's call it a dubious balance sheet, And when JP
Speaker 1: Morgan showed up, it was yeah, you guys are done.
Speaker 1: We're going there. And I will tell you from personal
Speaker 1: experience at the time, we had a Washington Mutual account,
Speaker 1: my a t M credit card where I used to
Speaker 1: get charged a dollar or two dollars that chase. I
Speaker 1: want to say the deal took place on like a
Speaker 1: Saturday or Sunday. By Tuesday or Wednesday, the fee was
Speaker 1: gone from you. It was in forty eight hours, and
Speaker 1: they were often running. It was a pretty seamless transition,
Speaker 1: and that was a pretty substantial purchase. And that was
Speaker 1: when in October it was like it was still in
Speaker 1: you know, Lehman frenzy. A lot of people rained a
Speaker 1: lot of hate down on the guy as as as
Speaker 1: their favorite you know, boogeyman from the financial crisis, but
Speaker 1: as a manager and as a you know, just from
Speaker 1: what I know him as a person and stuff like,
Speaker 1: I couldn't be more impressed. A couple of people wrote
Speaker 1: online that how do I square a positive biography of
Speaker 1: Jamie Diamond with a searing critique of Harvard Business School?
Speaker 1: And it's simply not everybody who comes out of there
Speaker 1: is Yeah, that's the point. It's like, I'm not saying
Speaker 1: everyone out of there is evil, and everyone out of
Speaker 1: there doesn't know what they're doing. Is they're clearly very
Speaker 1: good at teaching people of things they need to do
Speaker 1: to get to the top. But as Henry Mintzburg at
Speaker 1: McGill says, getting to the top is what matters to
Speaker 1: the student and the school when it's selling itself to
Speaker 1: prospective NBA students. What matters to the rest of us
Speaker 1: is what they do once they're there. And in that
Speaker 1: group I'm in, clearly is a standout. How secret is
Speaker 1: Mackenzie's influence? Yeah, I got mocked and from a couple
Speaker 1: of quarters for that saying it's no secret, uh, to
Speaker 1: which I responded, Um, we're trying to sell books and
Speaker 1: and the two points were honest. The secret part about
Speaker 1: Mackenzie's influence is that when it is not for public
Speaker 1: institution or governmental body or something like that that has
Speaker 1: to disclose it, none of their work is disclosed by anyone,
Speaker 1: by the client, by Mackenzie. So uh, some of it
Speaker 1: comes to light when there is scandal or when people
Speaker 1: want to brag about it, but the large proportion of
Speaker 1: their work is happens in complete secret. And hence the
Speaker 1: Mackenzie mystique you write about. Absolutely. Yeah. So these guys
Speaker 1: are behind the scenes interviewer or behind the scenes consultants
Speaker 1: who I make a point in the book that they
Speaker 1: what they do is they sell credit to their clients
Speaker 1: for their ideas, right, So mckensey that again, they sell
Speaker 1: credit for their ideas. In other words, they'll give the
Speaker 1: client the idea and say, hey, you can take credit.
Speaker 1: They never claim credit for it, right because no CEO
Speaker 1: wants to hire them, say tell me to do acquisition
Speaker 1: A or B, and then they do A and mackenzie
Speaker 1: is over there saying that was our idea. Then that
Speaker 1: doesn't happen. But the trade off is that mackenzie says,
Speaker 1: we will take no credit, but we will also take
Speaker 1: no blame, no blames. So let's talk a little bit
Speaker 1: bit about that blame. You and I were chatting, Um,
Speaker 1: I not looking to sell books headlines. A column one's
Speaker 1: called from two thousand eleven is McKinsey and Company the
Speaker 1: root of all evil. I must have read something you
Speaker 1: had written before you had written the book. Tell me
Speaker 1: if this quote sounds familiar. McKenzie, the global consulting firm,
Speaker 1: has created dubious strategies for all manners of companies, ranging
Speaker 1: from Enron to General Electric. Indeed, wherever there has been
Speaker 1: a financial disaster in the world, if you look around,
Speaker 1: somewhere in the background, McKenzie and Company is nearby. And
Speaker 1: let me throw some of these out at you and
Speaker 1: you tell me your thoughts, side pockets and off balance
Speaker 1: sheet accounting, leading it to become known as the firm
Speaker 1: that built en Ron. Jeff Skilling was Mackenzie also, right, Yeah,
Speaker 1: before Enron, so he hit for the cycle. Yeah, hbs
Speaker 1: Mackenzie and then Enron and then Jail perfect right, that's
Speaker 1: the full foursome. So and and while he was at Enron,
Speaker 1: he continued to use Mackenzie to the tune of ten
Speaker 1: million a year in fees. They hired MBA's mostly Harvard
Speaker 1: NBA's and had Mackenzie consultants at right, fawning articles and
Speaker 1: books like The War for Talent and and uh stuff
Speaker 1: about their off balance sheet accounting, talking about how this
Speaker 1: new asset light company was the company of the future
Speaker 1: and they were cheerleading all the way. Mackenzie argued that
Speaker 1: New York City was losing derivative business to London and
Speaker 1: therefore should more aggressively pursue derivative underwriting. How did that
Speaker 1: work out? And in the firm I talked about in
Speaker 1: the fallout from the crisis, Mackenzie was advising almost every
Speaker 1: single institution that collapsed. So back to the secret part.
Speaker 1: We don't know what their advice was, but it certainly
Speaker 1: wasn't go in the direction of less not more. It's
Speaker 1: not just financial firms they've advised that collapsed. They gave
Speaker 1: some advice to British railway company rail Track. The advice
Speaker 1: was spend less on infrastructure, which led to a series
Speaker 1: of fatal accidents and eventually rail Track collapsed. Swiss Air
Speaker 1: implemented a m Z strategy, which was very helpful in
Speaker 1: eventually pointing them to bankruptcy. Now we could argue is
Speaker 1: that just a coincidence or not. All State did a
Speaker 1: auto claims payout reduction. It was a Mackenzie and Company strategy.
Speaker 1: It wasn't that they were helping them manage how to
Speaker 1: do their payouts. They were reducing their legitimate claimants payouts.
Speaker 1: And they lost a bunch of business over it, and
Speaker 1: and had some states. Look, I don't remember the outcome
Speaker 1: in the book, but there was states that had reviewed
Speaker 1: all States State and that I I talked about that
Speaker 1: in the book. That is that's probably the most disgusting
Speaker 1: piece of consulting I came across from. Well, the one
Speaker 1: that I think had the most the biggest financial impact
Speaker 1: and we'll come back to all state. So ge followed
Speaker 1: their advice before the crisis and lost a billion dollars.
Speaker 1: But the one that blows my mind a little company
Speaker 1: called Bell Labs out of a T and T. Eventually
Speaker 1: they changed their name to Loosen invented the cell phone,
Speaker 1: but they didn't pursue it because mackinsey advised them ain't
Speaker 1: no future in mobile phones. I mean, stop and think
Speaker 1: about that. How is that not justify a corporate death
Speaker 1: sentence When you managed to say to somebody like if
Speaker 1: your advice is this whole mobile future technology thing ain't
Speaker 1: going anywhere? Who would ever hire you again with that
Speaker 1: sort of expertise? It's a great question. I make that
Speaker 1: point in the book that there's there are ten reasons
Speaker 1: or to hire Mackensey. Only one of them is the
Speaker 1: advice that they give you. What are the other nine?
Speaker 1: Give us? Give us some highlight. Let me see if
Speaker 1: I have nine. One is to show that you can
Speaker 1: afford them, so they are a luxury good. Okay, it's
Speaker 1: a signaling. That's funny. If you are the CEO, uh
Speaker 1: and you aren't sure what to do, You're not gonna
Speaker 1: ask your number two or at least you're not going
Speaker 1: to display your level of uncertainty. They are a great
Speaker 1: use of corporate money for personal, you know, decision making help.
Speaker 1: If you are the CEO of a company who needs
Speaker 1: to get rid of your number two because you're feeling
Speaker 1: him getting a little close to you, they are a
Speaker 1: wonderfully effective way of having a knife stuck in their
Speaker 1: back that does not have your fingerprints on it. You
Speaker 1: can restructure that person out with McKenzie's advice. If you've
Speaker 1: made a decision, you need to get it by your board.
Speaker 1: Mackenzie told us to do it if you want to
Speaker 1: have the McKenzie works for everybody, right, so if you
Speaker 1: want the benefit of that knowledge that I'm sure they
Speaker 1: don't go around sharing one client stuff with another client, right,
Speaker 1: that would be we have some insight into They have
Speaker 1: insight because they're talking to everybody else. So if you're
Speaker 1: the only one who's not talking to them, you're the
Speaker 1: only one who's not getting the best advice to me.
Speaker 1: It sounds like if someone could say, as a corporation,
Speaker 1: like why do I feel that Apple and Amazon don't
Speaker 1: listen to mackenzie or am I technologically naive? Uh? No?
Speaker 1: You know, the companies that know what they're doing and
Speaker 1: or sort of know what their plan is. Yeah, they
Speaker 1: don't need them as much, except if you want to
Speaker 1: use them as the great in their most modern incarnation,
Speaker 1: which is the great rationalizers. They are the people you
Speaker 1: bring in to cut costs so that you can point
Speaker 1: your finger and say, I didn't want to do this mackenzie.
Speaker 1: Really Yeah, So as an investor, why would I want
Speaker 1: my company to spend all those millions of dollars to
Speaker 1: doing what the management has been hired. That's a good point.
Speaker 1: That was what I was saying that Jamie was talking
Speaker 1: about when he was criticizing general use of consultants. But no,
Speaker 1: it's what Mackenzie's business model is about personal relationships, right,
Speaker 1: They have relationships with the CEO. Uh. Yes, they burrow
Speaker 1: into companies, but it's very it's about personal things. So
Speaker 1: you're absolutely right that if you're a shareholder like I
Speaker 1: I say in the book, no CEO is an idiot
Speaker 1: for hiring them for all the reasons I just listened,
Speaker 1: Why wouldn't you somebody else's money? But yeah, shareholders, unless
Speaker 1: unless you know it's one of those situations where you
Speaker 1: need the hiring of Mackenzie to signal that you're serious
Speaker 1: about your reorganization or your cost cutting and you want
Speaker 1: the market and to know that you really mean it
Speaker 1: because you're gonna spend the money and then you're not
Speaker 1: just giving lip service. Hey, and this time we mean it. Yeah.
Speaker 1: So what's the relationship with Mackenzie and Harvard which goes
Speaker 1: back Harvard Business Review was where they were publishing early on.
Speaker 1: How how did that dynamic develop? Marvin Bauer, who was
Speaker 1: the you know, longtime spiritual godfather and leader of Mackenzie
Speaker 1: after James Mackenzie died, was the one who had the
Speaker 1: insight early on. Consulting firms hired experienced professionals. So if
Speaker 1: you're an airline company you want advice, they had like
Speaker 1: a retired airline CEO on the staff and you'd ask
Speaker 1: him because he knew what he was talking about, and
Speaker 1: v our his contemporaries. In the maybe forties or so,
Speaker 1: we're like, wait a second, why don't these NBA schools
Speaker 1: are popping up all over the place. Why don't we
Speaker 1: hire them? They're cheaper, way cheaper. We can mold them
Speaker 1: into our own image and create this army of whatever
Speaker 1: the case studies and we can have them learn on
Speaker 1: the clients dime, right, So why why wait till they retire?
Speaker 1: So mackenzie was one of the first companies to really
Speaker 1: hire out of HBS with in earnest and ever since
Speaker 1: then has been in some there is no company that
Speaker 1: has hired more B. S. Gradson, Mackenzie Goldman. I think
Speaker 1: would be second, maybe not, It might be like Ge
Speaker 1: or something, but Mackenzie's number one, and they hire them
Speaker 1: because the case method is the perfect education and preparation
Speaker 1: for being a consultant. You're supposed to stand up in
Speaker 1: front of a group of people and talk about something
Speaker 1: that you don't really know a lot about and sound convincing.
Speaker 1: We have been speaking with Duff McDonald's. He is the author,
Speaker 1: uh most recently of The Golden Ticket about Howeverard Business School,
Speaker 1: and previous to that the firm The Story of McKenzie.
Speaker 1: We love your comments, feedback and suggestions right to us
Speaker 1: at m IB podcast at Bloomberg dot net. Check out
Speaker 1: my daily column at Bloomberg View dot com. You can
Speaker 1: follow me on Twitter at Ridholts. I'm Barry Ridholts. You're
Speaker 1: listening to Masters in Business on Bloomberg Radio. If you're
Speaker 1: having a business dispute, the process can be slow and
Speaker 1: drawn out, especially if you rely on litigation. In the courts,
Speaker 1: you can wait for years before your case is resolved,
Speaker 1: and the longer your case proceeds, the more your case
Speaker 1: can cost. Not with the American Arbitration Association. Arbitration or
Speaker 1: mediation with the American Arbitration Association is faster. In fact,
Speaker 1: nearly fifty of our cases settled prior to hearings. Ad
Speaker 1: er dot org resolve faster. Welcome to the podcast. You
Speaker 1: know what question I forgot to ask you during the broadcast.
Speaker 1: If people want to find your work they could go
Speaker 1: to Duff McDonald dot com. Yes, as well as Amazon
Speaker 1: and find bookstores everywhere. Yes. So you have a list
Speaker 1: of all of your publications and everything else. I have
Speaker 1: my I have my books there and I have my
Speaker 1: greatest hits journalism wise. There you go. So let's let's
Speaker 1: go over some of the stuff, some of the stuff
Speaker 1: that we missed. You know what I didn't get to
Speaker 1: ask you that I wanted to chat about was the
Speaker 1: ascent of CEO pay and who would you blame for it?
Speaker 1: Is that Mackenzie as some people have said, and I
Speaker 1: have a quote from you somewhere here about Mackenzie, which is, uh,
Speaker 1: is Mackensey to blame for skyrocketing CEO pay? You go
Speaker 1: back to the early um pay consultants. It seems that
Speaker 1: Mackenzie was back part of that. Yeah, there was a
Speaker 1: consultant at Mackenzie who who did a CEO pay study.
Speaker 1: And it was post World War two. I think back
Speaker 1: when the ratio between CEOs and the lowest paid people
Speaker 1: on the factory floor. Yeah, yeah, in the double digits.
Speaker 1: And the one study that they did found that, ah, executive,
Speaker 1: over some trailing period five years or something, executive pay
Speaker 1: had had risen more slowly than worker pay. And suddenly
Speaker 1: that study was in very high demand by corporate boards,
Speaker 1: and that led to the Harvard Business Review publishing an
Speaker 1: annual study. And there you get your perpetual motion machine
Speaker 1: being built. And now we're up to four hundred or
Speaker 1: so to one, and you have UH compensation committees made
Speaker 1: up of fellow CEOs who think that they are worth
Speaker 1: fifty million a year. So they are for why shouldn't
Speaker 1: in this guy be and I call it in the
Speaker 1: Golden passport? Ah, And we may have to cut this
Speaker 1: for the censors. The one of the most intricately designed
Speaker 1: circle jerks in business history, because everybody is is log
Speaker 1: rolling for the future. Everybody is. I remember back in
Speaker 1: the day when Spy Magazine would show log rolling in
Speaker 1: our Time, and it's Duff McDonald says, Ridholtz's book is great,
Speaker 1: and Ridholtz says, Duff Duff McDonald's book must read. And
Speaker 1: they would always show the matching blurbs. And that has
Speaker 1: stayed with me for all these years. Log Rolling in
Speaker 1: Our Time. I'm old enough to remember when Spy Magazine
Speaker 1: was actually, you know, the Onion before the Onion was,
Speaker 1: so that that's kind of interesting. There's a really fascinating
Speaker 1: NPR Planet Money about how a Clinton tax basically change
Speaker 1: the dynamics of CEO compensation and led to people saying,
Speaker 1: all right, let's give a lot of stock options because
Speaker 1: that doesn't cost us anything. I talked about that in
Speaker 1: the in the Golden Passport too, as uh one of
Speaker 1: uh the greatest examples of unintended consequences ever. They tried
Speaker 1: to put a cap on ceo pay cash pay cash pay.
Speaker 1: Was it like a million dollars ten million and above
Speaker 1: that the taxes became onerous, right, So what two things
Speaker 1: happened from that? One is, uh, average CEO pay was
Speaker 1: not ten million at the time, but it quickly converged
Speaker 1: on a million and stock options, so which became enormous.
Speaker 1: Which became enormous. So a well intentioned moved by Clinton
Speaker 1: blew up in you know, the country's face. So you
Speaker 1: have the tax policy and then on top of everything else,
Speaker 1: you have the fast by accounting that basically says, well,
Speaker 1: stock options really aren't a cost. You know, just because
Speaker 1: you have to actually go out and buy it in
Speaker 1: the market doesn't mean it's a cost to the show.
Speaker 1: And if they are, you should you might be able
Speaker 1: to reprice them anyway after the fact. It's so that
Speaker 1: was just one of those things. And when people look
Speaker 1: at how CEO pay has run away, that's one factor.
Speaker 1: But there has to be. The consultants are one things
Speaker 1: that the tax changes is something else, the account and
Speaker 1: treatment is something else, any other factor H B. S M.
Speaker 1: I lay some blame at their doorstep for helping be
Speaker 1: build the CEO fame machine. Right, So the case method
Speaker 1: is teaches from the perspective of the CEO, what would
Speaker 1: you do how would you save this company? You? You? You?
Speaker 1: And then Fortune magazine Mackensey Harvard and and what we're
Speaker 1: about to say about Fortune, then Fortunate puts on their
Speaker 1: cover and tell you that you are the world's greatest
Speaker 1: person because you uh know how to price pharmaceuticals properly
Speaker 1: or something, right, You just crank them up towards a
Speaker 1: hundred times more what you paid for them. And there
Speaker 1: you go. Right, it's buy some patent protection from your
Speaker 1: got to modify the pharmaceutical every year, so you extend
Speaker 1: that your lipan you're and this is tricky stuff. So
Speaker 1: you deserve the fame for doing it if you Now,
Speaker 1: how do you explain that in Europe and in Asia,
Speaker 1: we don't see the same uh enormous pay packages. They
Speaker 1: might be starting to tick up, but they're noing near
Speaker 1: what we do here. And I think so, I think
Speaker 1: Martin Sorrel is overpaid. He's a w p P. Sorry sir,
Speaker 1: Martin Sorrow. Well, once you're united, then whatever you deserve
Speaker 1: it all. Uh. I think it's because, like as some
Speaker 1: historians business historians point out, one of the ones who
Speaker 1: I found particular incifles a guy named Robert Locke, who's
Speaker 1: been living in Germany for l C k E. And
Speaker 1: he talks about the fact that UH, the you know,
Speaker 1: there's there's there's two oppositional stances in American business. One
Speaker 1: is business versus government and one is management versus worker right,
Speaker 1: and uh um neither of those has to be and
Speaker 1: in other variants of capitalism, like Germany, neither of them
Speaker 1: is nearly as UH polarized as it is here, and
Speaker 1: management values the input of their UH employees, I think
Speaker 1: a little more than they do in the States, especially
Speaker 1: if they've gone through the fame machine of a place
Speaker 1: like HBS, where you're convinced that you are the reason
Speaker 1: for all six sess and you blame government or or
Speaker 1: unions for your failures. So UM, I think UH in
Speaker 1: at least the Japan as well as Germany, UM, they're
Speaker 1: a little calmer about what constitutes success in what its
Speaker 1: origins are, and they're not so obsessed with trying to
Speaker 1: take credit for it. So they they're easy, they're better
Speaker 1: at sharing it. That's that's that's quite fascinating. I know,
Speaker 1: I only have you till about six for another half hour.
Speaker 1: I'm gonna I'm gonna see what else we skipped before
Speaker 1: getting to my ten favorite questions. You know, we kind
Speaker 1: of blew through the journalism portion of of our first segment.
Speaker 1: Let's let's talk a little bit about journalism and you
Speaker 1: explain how you sort of serendipitously happened into into writing.
Speaker 1: What what are some of the things you really like
Speaker 1: about writing books? And what are the things that perhaps
Speaker 1: you are not so enthralled with. Uh. It's great for me,
Speaker 1: at least as a freelancer that this is a practical answer. H.
Speaker 1: Freelancing got really I had a I sort of had
Speaker 1: a nice three or four year run of freelance magazine
Speaker 1: writing before the crisis, and it was really fun. Uh.
Speaker 1: When money got tight, freelance got a lot more difficult. UH.
Speaker 1: And writing books UH is uh is easier on UH
Speaker 1: from a cash management persupative. So you you put out
Speaker 1: three books in ten years? Yeah, And what's the next
Speaker 1: book that's coming out? Where my agent is hounding me
Speaker 1: to get it to the publisher now, because the reviews
Speaker 1: for the Golden Passport are so good. You've been, by
Speaker 1: the way, you've been everywhere the past by the time
Speaker 1: this broadcast the past month or so, really nicely reviewed
Speaker 1: in all sorts of major public occasions. So they want
Speaker 1: to strike when the iron is hot. Is that the
Speaker 1: business side? Yeah? So so so financially it's been and
Speaker 1: it's worked for me. As far as what do I
Speaker 1: like about it? Um from the actual process itself. Uh.
Speaker 1: If there is a criticism of of the latter two
Speaker 1: books that I just don't care about, it's that they
Speaker 1: focus a little too much on the history. I love
Speaker 1: the history. Yeah, I think it's I think it's fascinating.
Speaker 1: Just tell me what happened Tuesday. Who cares? That's a
Speaker 1: different Yeah, that's Bloomberg right right, And but that's for
Speaker 1: two million companies, So it's it's a lot of volume.
Speaker 1: This is one company. You want it to be a
Speaker 1: mile deep. Yeah, and uh, I love uh, you know
Speaker 1: the reporting part of it. Uh, there was a point
Speaker 1: in my career I think it was at Money magazine.
Speaker 1: You know, when you're writing personal finance, it's hard to
Speaker 1: get that motivated for it. I remember when I would
Speaker 1: be when I would be calling people, I would actually
Speaker 1: be hoping they didn't answer their phone. That's a that's
Speaker 1: a warning sign that you're doing that. You're in their
Speaker 1: own job. Now it's like once I'm on to a subject.
Speaker 1: I like, just all you're doing is reading and talking
Speaker 1: to people who are introducing you to other people who
Speaker 1: are introducing to other people. It's great, Like, all you're
Speaker 1: doing spending your time learning stuff, and if you're interested
Speaker 1: in it, you know what a way to make a
Speaker 1: living writing the writing stuff. I've gotten more confident with
Speaker 1: each successive book. This last one is a little uh
Speaker 1: in places, uh in temperate, but uh that wasn't the
Speaker 1: firm somewhat intemperate throughout? Yeah, Although I was amazed, there
Speaker 1: were people who were confused about what my true opinion
Speaker 1: of mackenzie. It's like, do you the root of all evil?
Speaker 1: How confusing is that? When you say route? Do you
Speaker 1: mean like, have you never read between the lines? But
Speaker 1: for I thought it was pretty clear that it was.
Speaker 1: That's what I thought too. But so in this book,
Speaker 1: I try to make sure that didn't happen in this
Speaker 1: When you say they're terrible, do you mean they're like
Speaker 1: pretty good? Or what do you mean by terrible? I
Speaker 1: mean you did you really get pushed back on McKinsey boy.
Speaker 1: There were people who said he asked a question are
Speaker 1: they worth it or not? And he doesn't give a
Speaker 1: satisfactory answer and my response and bullet points as do.
Speaker 1: It's like it depends who you are, right, If you
Speaker 1: are the CEO, yes, If you're the shareholder maybe, if
Speaker 1: your society probably not unless you rate efficiency as the
Speaker 1: highest value of all. Is that really what they do?
Speaker 1: Are they really the efficiency masters? Yeah? All they do
Speaker 1: is come in and optimize stuff for you, regardless of consequence. Yeah.
Speaker 1: And you know they have a sort of a boilerplate
Speaker 1: approach to problem solving and thinking that works very well
Speaker 1: in process situation. And if you want someone to come
Speaker 1: in who is outside of your organization, so who doesn't
Speaker 1: come with baggage and can do stuff without uh you know,
Speaker 1: personal bias, no ties, no roofs, and move on. It's
Speaker 1: like hiring samurai to just okay, kill everybody their corporate samurai,
Speaker 1: right and then leave. Yeah, that that's pretty interesting. So
Speaker 1: journalism today, how do you feel about or think about
Speaker 1: the rise of fake news? And is there anything we
Speaker 1: could do about it? Ah? I think I think it's
Speaker 1: horribly depressing that um ah, we are were able to
Speaker 1: elect a president who uh so willfully it's like trampling
Speaker 1: the press. That what just sort of the essence of
Speaker 1: like what is truth? Like, Yes, we can all have
Speaker 1: different opinions, right, but we should but not different facts.
Speaker 1: We should be able to agree at what day of
Speaker 1: the week it is, or what the temperature is outside.
Speaker 1: And the fact that we've ended up, you know, in
Speaker 1: a situation where nobody believes anybody who's they have decided
Speaker 1: is not trustworthy. It's horrible. There was just an interesting
Speaker 1: article I'm trying to remember who where I saw it.
Speaker 1: It was either a p or McClatchy that said his
Speaker 1: tweets have lost influence. The president's tweets, they no longer
Speaker 1: move markets, They no longer disrupt things. Even when he
Speaker 1: comes out as he did a month or so ago
Speaker 1: and said, yeah, we should break up the big banks,
Speaker 1: the market sputtered for about ninety seconds and then quickly
Speaker 1: recovered all its losses. At one point in time, his
Speaker 1: sort of free form, disruptive machine gunning had an impact.
Speaker 1: Because everyone's freaking out that we managed to elect him. Well,
Speaker 1: you know, it's if you look around the world, what's
Speaker 1: been happening. You have the Brexit vote, you have the
Speaker 1: Lapin vote, you have Donald Trump, the rise of popularism,
Speaker 1: populism around the world has ramifications. You've railed against the
Speaker 1: financial elite. Many voters both here and abroad are doing
Speaker 1: the same thing. And so what's kind of surprising is
Speaker 1: a lack of pivot from Trump once he's elected, to say,
Speaker 1: all right, I have the wind on my back, let's
Speaker 1: do ABC. And instead it's this sort of odd alright,
Speaker 1: let's check out Spicer gets great ratings, let's keep them.
Speaker 1: Wait that you haven't figured out what your new job.
Speaker 1: You have a new job, figure out what you're supposed
Speaker 1: to do, and try not to blow us all up.
Speaker 1: That doesn't that transition doesn't seem to have happened. I
Speaker 1: think it's because he never expected to win. Any couldn't
Speaker 1: agree with you more. That's why there are so many
Speaker 1: unappointed positions. Normally you go in with a list of
Speaker 1: these three thousand people, and here are top hundred that
Speaker 1: didn't happen. I think he's as surprised as anybody, you know.
Speaker 1: Back to the journalism thing and the fake news thing.
Speaker 1: One thing that has occurred to me though, is like
Speaker 1: the Internet has allowed us to be aware of more
Speaker 1: people's opinions than the media's opinions, which you know, historically
Speaker 1: or whoever was on TV and stuff. What does that
Speaker 1: do for us? Well? It oh my My point is
Speaker 1: just we might not have actually gone through such a
Speaker 1: significant change with fake news, that we may have been
Speaker 1: in this state before but didn't really realize it. So
Speaker 1: you have more opinions, some of which are paid hills
Speaker 1: for one side or the other um, some of which
Speaker 1: are just clearly click hungry Macedonian teenagers but putting up
Speaker 1: and websites, and some you know not every when two
Speaker 1: people are having an argument, one says, well, the earth
Speaker 1: is an obliq s vieroid. Any other person says, no,
Speaker 1: the earth is flat. That's not a credible debate. And
Speaker 1: on top of everything else, our cognitive systems are set
Speaker 1: up so that even when someone is wrong, they don't
Speaker 1: and you correct them, they don't remember the correction. If anything,
Speaker 1: it hardens. There are erroneous view and there's all sorts
Speaker 1: of crazy. You know, it's funny. Is on that point
Speaker 1: I say that one of my points in the Harvard
Speaker 1: book is that they have spent so much time telling
Speaker 1: themselves that they have moral righteousness to their leader there
Speaker 1: as an aspect of their leadership. It's like you telling
Speaker 1: the story of something that happened so many times that suddenly,
Speaker 1: like on your fiftieth telling a thing that you weren't
Speaker 1: sure that sure about the first time you told it,
Speaker 1: you're suddenly it's a fact now because you've been to
Speaker 1: my wife. She doesn't understand how the story gets better
Speaker 1: each telling, And I'm like, that is editing, of course,
Speaker 1: and in all seriousness when they do studies on memory
Speaker 1: and witnesses. When you tell a story to the cops
Speaker 1: or whoever becomes your truth right the second time you
Speaker 1: tell that, you're not recalling what you witnessed. You're recalling
Speaker 1: the previous discussion. And so the more you tell it,
Speaker 1: the further and further gets away from the original experience,
Speaker 1: which is why you're supposed to take contemporaneous notes and
Speaker 1: blah blah blah. So I could talk about this sort
Speaker 1: of stuff forever. Let's let's get to my favorite questions
Speaker 1: so you don't end up keeping you here all night. Um,
Speaker 1: all right, so you told us what you did before
Speaker 1: working as a journalist. You were Goldman Sacks for two years,
Speaker 1: nothing in between. From there, you went straight into writing.
Speaker 1: My first job after Goldman was at Derivatives Week so
Speaker 1: you're covering derivatives as a journalist, as a journalist during
Speaker 1: the U when I think it was air products or something,
Speaker 1: one of the first big deritives blow ups in ninety four. Yeah,
Speaker 1: and I the guy there said to me, um, what
Speaker 1: are you doing? Uh? Every all of our the people
Speaker 1: who work here want to work on Wall Street. You're
Speaker 1: the first person who's ever come from Wall Street to Yeah.
Speaker 1: And and then he said, he said, how do I
Speaker 1: know You're not going to go back to Wall Street?
Speaker 1: And I said, I'm not going back to Wall stret
Speaker 1: Six months later, I left for Money magazine and he
Speaker 1: which was a Dow Jones publication, time in so he
Speaker 1: pulled my Yeah, he pulled me into his office. He said,
Speaker 1: you told me you weren't going to leave. And I said,
Speaker 1: I told you I wasn't going back to Wall Street.
Speaker 1: I didn't tell you I wasn't going to go to
Speaker 1: a better publication. Um. So I then was at Money
Speaker 1: for five years and realized it was time to quit
Speaker 1: when I had written the exact same story twice. Because
Speaker 1: service magazines, if if you're actually good at what you
Speaker 1: do with a service magazine, you should write the same
Speaker 1: story Price Jason's wife that his job is to write
Speaker 1: the same story weekend, week out and not let his
Speaker 1: readers or his editors know that he's doing totally. I
Speaker 1: worked with Jason and uh uh at that point I
Speaker 1: got uh an offer. Red Herring Magazine was growing during
Speaker 1: the nineties. Yeah internet one point oh, and they hired
Speaker 1: me as their New York bureau chief and um public
Speaker 1: markets editor because they were all VC in private equity.
Speaker 1: So so tell us about some of your early mentors.
Speaker 1: I can come up with three. One was a guy
Speaker 1: named Michael Civy at Money Magazine. Is familiar writer, writer
Speaker 1: slash editor, but he was sort of the central financial
Speaker 1: writer for years. Uh. Fascinating guy. Uh a uh and um.
Speaker 1: He his his method of writing. It could you know,
Speaker 1: could bore you two tears given its repetitive aspects, but
Speaker 1: it was very effective. So he was the one who
Speaker 1: taught me sort of the simplicity and clarity were key. Uh.
Speaker 1: The next one was Jason Ponton, who was the editor
Speaker 1: of Red Herring Magazine. He's at M I T. Tech
Speaker 1: Review now and he uh brought a flare to Red Herring. Uh.
Speaker 1: That was eye opening for me coming out of a
Speaker 1: service magazine like Money, and you know, he sort of
Speaker 1: prayed at the altar of the Economist, and um he
Speaker 1: made me realize when I just when I wasn't even
Speaker 1: sure of it, that writing could be like a joyous
Speaker 1: experience as opposed to a mind numbing one. And then
Speaker 1: the next one was, uh, someone who just died. Actually
Speaker 1: Christopher Byron, who was he was at The Observer. I
Speaker 1: had the good fortune to follow in his footsteps writing
Speaker 1: a similar column in The Observer. I hired him at
Speaker 1: Red Herring to write for us because I thought it
Speaker 1: was so great. And he was the one who, um
Speaker 1: uh showed me how to write with attitude, when without fear,
Speaker 1: and taking aim at uh the right targets. You know,
Speaker 1: I spent most of my early career, uh, you know,
Speaker 1: doing positive stories. Here's something you should do, it's a
Speaker 1: great idea. And at red Herring, here's some great technologies,
Speaker 1: here's a great trend. These are all fascinating and awesome things.
Speaker 1: And it turns out it's just as fun to call
Speaker 1: people to account for fun. Yeah, it's more fun. And
Speaker 1: I don't I can't think of another writer who inspired
Speaker 1: me more with his writing than Chauser. Byronn't even comes close.
Speaker 1: That's that's really interesting. Um, tell us about what other
Speaker 1: journalists influenced how you write, Byron? It would be number one. Um,
Speaker 1: I'm not sure I have you know the guys who
Speaker 1: Grayden Carter has headed Vanity Fair doing business writing. It's
Speaker 1: used to used to be the publisher of Spy and
Speaker 1: that's where the phrase short fingered vulgarian was published. And
Speaker 1: that has to be years ago. Yeah, and and he
Speaker 1: is and it's a great like you know, it's like
Speaker 1: any publication has its ebbs and flows, but he is
Speaker 1: a great He's one of the great editors. And he
Speaker 1: hires great writers. I mean only fair as a monster. Yeah,
Speaker 1: you know, Michael Lewis is there, Bethany McClean is there,
Speaker 1: William Cohen is there, Brian Burrow is there. Uh you
Speaker 1: know what else? Who else? You need me? Great? And
Speaker 1: I'm available? Um so uh um. The way that they
Speaker 1: do business stories at Vanity Fair, I wrote for them all. Yeah,
Speaker 1: I did like a decade's worth of work with them,
Speaker 1: Gray and gave me, you know, it was awesome enough
Speaker 1: to give me a lot of work for a while
Speaker 1: when I was freelance. Um, that's how you do a
Speaker 1: good business story. Those guys do it better than anybody.
Speaker 1: They put a lot of I was quoted by them
Speaker 1: in something. I think three different fact checkers called me.
Speaker 1: It was nobody uses that does that sort of depth
Speaker 1: of And if you read that stuff and put it
Speaker 1: up side by side with fortune, like the people had
Speaker 1: fortune where I've been a contributor, they should be embarrassed
Speaker 1: of themselves. So you're not gonna be a contributor. Uh
Speaker 1: Like that's real storytelling, so Graydon. But then if there
Speaker 1: is like one name who I read, not with an
Speaker 1: eye too trying to write like him because it will
Speaker 1: never happen, but who I read just because it brings
Speaker 1: me a euphoric something is Adam Gopnik at The New Yorker.
Speaker 1: He is the greatest, in my opinion, He's the greatest
Speaker 1: writer all the journalists. No kidding, Yeah, I get the
Speaker 1: New Yorker. I've seen his. By the way, they have
Speaker 1: a killer line Ryan Leason and go down just right.
Speaker 1: The former Bloomberg person who just had the book out
Speaker 1: on hedgephone. Um sharks something I forgot the name predators something. Um, well,
Speaker 1: we'll figure out what that is. They just have a
Speaker 1: monstrous lineup. The problem is that the magazines don't stop coming.
Speaker 1: You can't. You can't get your vanity fair as monthly?
Speaker 1: Is that right? New Yorker is like every other day?
Speaker 1: It seems yeah, I used to, I used to. I
Speaker 1: had given. I stopped subscribing to the New Yorker because
Speaker 1: the piles would give me guilt. I just want the
Speaker 1: online access. Stop mailing me. Get that, get the um
Speaker 1: the app that you know. There's an app called Texture.
Speaker 1: It's amazing. It's fifteen bucks a month. You've got every
Speaker 1: magazine there is. Really Yeah, I'm done with getting don't
Speaker 1: get this straight up from them. Get it through Texture.
Speaker 1: It's awesome. Usually I hate the expedious slash you know,
Speaker 1: hotels dot com. I want to go directly. It's awesome.
Speaker 1: This is all right. I will definitely check out Texture.
Speaker 1: Um let's talk about since we're talking about writers, let's
Speaker 1: talk about books. That's Charlie Pellett, voice of the subway
Speaker 1: when you hear stand clear of the closing doors, that's him.
Speaker 1: Um let's uh, by the way, for people who are listening,
Speaker 1: we're in a glass uh terrarium the studio, and there's
Speaker 1: an endless parade of people walking by, and some of
Speaker 1: them wave and you. I'm trying not to be distracted,
Speaker 1: but you know, to famous people like us in right stairs. Um,
Speaker 1: so let's talk about books. What are some of your
Speaker 1: favorite books? Who are some of your favorite authors? By
Speaker 1: the way, this is the single most requested question. So
Speaker 1: uh um. Before I was a journalist, I would say
Speaker 1: the balance of my reading was probably ninety percent fiction,
Speaker 1: ten percent nonfiction. And even these days, if you don't
Speaker 1: include the reading I do for work, it's probably seventy
Speaker 1: thirty fiction. So give us some fiction names and give
Speaker 1: us some nonfiction. Uh fiction Eileen to people like Boorhs
Speaker 1: uh it, Tello Calvino, uh now some book titles. Borhes's
Speaker 1: book Labyrinths short Stories, It's fantastic it Tello Calvino's book
Speaker 1: If on a Winner's Night of Traveler, Invisible Cities, um, uh,
Speaker 1: Nabokov everything, Um. David Foster Wallace, I was a fan
Speaker 1: of I thought the sort of verbal pyrotechnics there were great. Uh.
Speaker 1: In recent years, I rediscovered Stephen King from when I
Speaker 1: just had a long conversation I read I took into
Speaker 1: under the Dome on a trip A couple of years ago.
Speaker 1: It's like his latest fat one, but like the size
Speaker 1: of the stand and stuff, he's still got it. Matt
Speaker 1: Wallert is a former principal at Microsoft Ventures and what
Speaker 1: he we were talking about Stephen King. He said he
Speaker 1: likes to every now and then find an author and
Speaker 1: just devour the entire I used to do that all
Speaker 1: the time straight. I used to do that with science fiction.
Speaker 1: My brother does that, right, We'll find an author and
Speaker 1: go all right, I've now read. I used to. I
Speaker 1: used to do that with fiction writers, and then I
Speaker 1: realized that I didn't want to do it anymore because
Speaker 1: it's like you use it all up and you want
Speaker 1: to save her some of it for later. I like, um, oh,
Speaker 1: there's a couple that are obvious ones that are what
Speaker 1: about what about nonfiction? I'm not, you know, considering that
Speaker 1: I've read a written a biography, I'm not a huge
Speaker 1: reader of biographies. I thought The Power Broker, uh was
Speaker 1: one of the greatest on Robert Moses. You know, it's
Speaker 1: a kind of composing book, but it is awesome. I
Speaker 1: planned literally decades, you know what. I It was on
Speaker 1: my shelf too, and then when I sold the Jamie
Speaker 1: Diamond book. I was like, I should read a biography,
Speaker 1: and I took that out to a friend's house and
Speaker 1: emiganst by myself for a weekend and read it. At
Speaker 1: the end of it, I was read that in a weekend.
Speaker 1: Uh no, sorry, I was out there for a couple
Speaker 1: of days a month and uh I was. As soon
Speaker 1: as I finished, I was like, oh my god, what
Speaker 1: have I done. I can't do that us. I can't
Speaker 1: write anything close to this won the Pulitzer Prize, it's
Speaker 1: been it's been lauded as one of the biographies of
Speaker 1: all all time. Yeah, I'm more. I do more like uh,
Speaker 1: I veer more into science and maths stuff than story
Speaker 1: or give us, give us a few books. Um, you're
Speaker 1: talking right in my sweet spots. I am you know
Speaker 1: stuff like um all the pop science stuff like the
Speaker 1: History of Zero or um. Did you read The Information
Speaker 1: by James Click? I have the Information by James Click.
Speaker 1: I haven't read it. Probably the best book I read
Speaker 1: in the past decade, uh, Consciousness, explained one of my
Speaker 1: favorite books, Daniel Donne. Best book I've ever read in
Speaker 1: the last decade was an Adam Gopnick book called Uh.
Speaker 1: I don't know if this is the name of it,
Speaker 1: but it's if Lincoln and Darwin or Darwin and Lincoln,
Speaker 1: and it is like a dual biography palle parallel lives,
Speaker 1: more like parallel thought and parallel uh. Changes in the
Speaker 1: way they helped the rest of us change the way
Speaker 1: we think through the way they did what they did.
Speaker 1: And I told people afterwards, I was like, I never
Speaker 1: would have read a biography of Darwin or of Lincoln,
Speaker 1: and I certainly wouldn't have read a joint one except
Speaker 1: it was Gothnick and it is one of the greatest books. Really.
Speaker 1: Oh well, I'm gonna add that to my list for sure.
Speaker 1: That's a decent number. Give me one more, because I
Speaker 1: see you're thinking, oh, my favorite I think multi book
Speaker 1: reading experience UH in the last twenty years or so
Speaker 1: was Neil Stevenson's Baroque trilogy, UH, with each of those
Speaker 1: books with a thousand pages long. And I was reading
Speaker 1: one of them when I moved UH at some point,
Speaker 1: and the book ended up in a box in the attic,
Speaker 1: and I forgot about it and found it a decade
Speaker 1: later and then finished the trilogy. And it is just
Speaker 1: picked it up where you left off, and just I
Speaker 1: don't know. I think I might have started again, but
Speaker 1: there was There's so much in it. He is a
Speaker 1: hilarious writer. Uh, it's all about money and the money
Speaker 1: book he wrote, he wrote cryptonomicon neuromanswerh uh. And but
Speaker 1: the Baroque cycle, the three of them, that is like
Speaker 1: it is uh. He he could have just set the
Speaker 1: pen down and retired. It is a piece of greatness.
Speaker 1: That's amazing. Let's let's move forward past books. Um, we've
Speaker 1: already spent enough time talking about journalism as an industry. Um,
Speaker 1: here's another reader question. Tell us about a time you
Speaker 1: failed and what you learned from the experience. You know,
Speaker 1: I was thinking about that one because you sent it
Speaker 1: to me. Um, these are the ones that require recall.
Speaker 1: This one doesn't require what's recall? I like, I don't
Speaker 1: really have too many uh like career failures. I failed
Speaker 1: in a marriage and I failed like I drank too
Speaker 1: much alcoholically at the same time. And no coincidence there,
Speaker 1: not not a random correlation. No no, And um, what
Speaker 1: did I learn that I better grow up? And like,
Speaker 1: you know I treated her I did not treat her
Speaker 1: well at the end of our marriage. And it was
Speaker 1: just a colossal personal failure on so many fronts about
Speaker 1: like responsibility and and doing the right thing and not
Speaker 1: blaming other people for the things that bother you. Luckily,
Speaker 1: my my ex wife is a forgiving person and um,
Speaker 1: so things things are okay. But it was like I
Speaker 1: just learned that how to not be a horrible person.
Speaker 1: And my last two and favorite questions, what sort of
Speaker 1: advice would you give to a millennial or a recent
Speaker 1: college grad who came to you and said, I'm thinking
Speaker 1: about being a writer. That's a good one. Um, you know,
Speaker 1: if you have you know you're not going to accidentally
Speaker 1: end up in the situation I have, you know, been
Speaker 1: lucky to end up in uh anymore because I don't
Speaker 1: think that happens again. And and and it's not because I
Speaker 1: can do something that I just think that the structure
Speaker 1: of the interstate everything's changed. You if you have a
Speaker 1: passion and a facility for writing, uh, you know, you
Speaker 1: got I think it's got. My advice would probably be targeted,
Speaker 1: you know, you how to figure out your thing? Uh?
Speaker 1: You know that hopefully the New York Times and and
Speaker 1: you know whoever will be around for a while. But um,
Speaker 1: the price paid per dollar spent or sorry. The price
Speaker 1: paid per word is in free fall, and the only
Speaker 1: thing that is going to um retain its value is
Speaker 1: a great scoops and be great writing and see great storytelling.
Speaker 1: So you got to refine to do great storytelling about
Speaker 1: any particular thing, you got to know enough about it
Speaker 1: to be able to do that. So, UM, you know,
Speaker 1: you got to figure out what your thing is and
Speaker 1: hone it. Although I don't think I should be in
Speaker 1: a position to be telling aspiring journalists what to do
Speaker 1: because I never was one, so I don't really UM,
Speaker 1: I don't know how they think, because I don't know
Speaker 1: how they thought back then. And a final question, what
Speaker 1: is it that you know about writing today that you
Speaker 1: wish you knew twenty or so years ago when you
Speaker 1: were first starting out? This is an easy one and
Speaker 1: and I could I could claim that I learned it,
Speaker 1: but my brother actually just said it to me. Uh,
Speaker 1: Like two years ago, I was getting ready to write
Speaker 1: the Harvard book and I was spewing out, you know,
Speaker 1: some endless rant about Elton Mayo, who was, you know,
Speaker 1: a father of human resources, also a fraud. Um, And
Speaker 1: I finished telling him the story and he said, he said,
Speaker 1: all right, don't take what I'm about to tell you
Speaker 1: the wrong way, please, and he goes, you should write
Speaker 1: less like you currently right and more like you speak.
Speaker 1: And the lesson there was I've been trying too hard.
Speaker 1: Not not that I've been trying to too hard to
Speaker 1: like sound smart or or right in a specific way.
Speaker 1: I just it wasn't coming out as easily and fluidly
Speaker 1: as loosen the grip a little. Loosen the grip, yeah,
Speaker 1: and and uh more natural, sound more natural? And storytelling
Speaker 1: tell stories the way you tell stories, and don't you know,
Speaker 1: um change it because you're you know, in putting it
Speaker 1: in written form, and you know, part of that has
Speaker 1: to do with the legacy of who you're writing for,
Speaker 1: like various publications will won't let you write in certain ways.
Speaker 1: But the main point was just like, relax, man, and
Speaker 1: say it the way you want to say it, because
Speaker 1: when you're effective that way and so find your true voice.
Speaker 1: Is that a good way to say it? Or uh yeah,
Speaker 1: or you know, just don't. It's not not take the
Speaker 1: job seriously. It's it's like, not get all wound up
Speaker 1: in what you're doing. Just do what you're doing and
Speaker 1: be easy about it. We have been speaking with Duff McDonald,
Speaker 1: contributing editor at The New York Observer and author most
Speaker 1: recently of the Golden Passport, Harvard Business School, etcetera, etcetera.
Speaker 1: If you have enjoyed this conversation, be sure and check
Speaker 1: out iTunes, SoundCloud, and Bloomberg dot com and you could
Speaker 1: see any of our other hundred plus conversations. I would
Speaker 1: be remiss if I did not thank my head of research,
Speaker 1: Michael Batnick, and our producer, Booker Taylor Riggs for helping
Speaker 1: us put these conversations together. We love your comments, feedback
Speaker 1: and suggestions right to us at m IB podcast at
Speaker 1: Bloomberg dot net. I'm Barry Retults. You've been listening to
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