Speaker 1: You're listening to Bloomberg Business Week with Carol mess Here
Speaker 1: and Tim Stenebek on Bloomberg Radio.
Speaker 2: All right, let's get to our guests, because I'm so delighted.
Speaker 2: We are so delighted to have back with us Marcushdow,
Speaker 2: president and CEO at Alt Finance here in our studio.
Speaker 3: So great to have you here. How are you, Carol,
Speaker 3: I'm doing fantastic. Thank you. Good to see you again.
Speaker 2: Yeah, it's great to see you. What I was thinking about,
Speaker 2: I kind of was going back. It was about a
Speaker 2: year ago or so, the Equality Summit, you and John
Speaker 2: O'Brien and we talked about, you know, more diversity, certainly
Speaker 2: in the financial world. There were some really dismal statistics
Speaker 2: that are out there, and I think I shared them
Speaker 2: with you and everybody who was there. Are we getting better?
Speaker 2: You got you have some good news we're going to
Speaker 2: get into But are we getting better?
Speaker 3: We are getting better at the margin, But I do
Speaker 3: believe we can't take solace in just getting better, right,
Speaker 3: We've got to continue to improve. What we're really working
Speaker 3: towards is improving several generations of deficit that we've built
Speaker 3: in terms of UH investment acum in wealth building and
Speaker 3: really creating new opportunities for generations that come after us.
Speaker 3: So we're working doubly as hard to try to make
Speaker 3: up for lost time.
Speaker 4: Yeah, I think it's incredibly important. And you know, we've
Speaker 4: covered this story for a long time. What you're doing
Speaker 4: now is you're helping kids that graduate from historically black
Speaker 4: colleges and universities to get jobs in finance. And as
Speaker 4: Carol pointed out, they're drastically underrepresented. Underrepresented even when you
Speaker 4: look at you know, the breakdown of wherever you are locally.
Speaker 2: Statistic, here's one. Yeah, diverse owned financial firms control just
Speaker 2: one point four percent of the eighty two trillion dollars
Speaker 2: of US investment fund assets. This was a foundation as
Speaker 2: of late twenty twenty one.
Speaker 4: I mean, but it's even a problem if you just
Speaker 4: look at the breakdown of employees that's big banks, right,
Speaker 4: especially on the like on the levels where people earn
Speaker 4: real money, like investment bankers.
Speaker 3: And it's critical because in this economy and our in
Speaker 3: our economic system, investing of capital and the return that
Speaker 3: you benefit from that is one of the critical ways
Speaker 3: to build wealth. I mean, there's a statistic that I
Speaker 3: heard at a conference a couple of weeks ago, it said,
Speaker 3: if you go back to nineteen seventy and you look
Speaker 3: at real GP growth since nineteen seventy, you're talking two
Speaker 3: to three percent annualized. If you look at return on
Speaker 3: investments or return on equity in that same period of time,
Speaker 3: you're talking five to six maybe seven percent, depending on
Speaker 3: how you're accounting for it. The punchline here is you
Speaker 3: cannot work your way to wealth in this country. Investing
Speaker 3: has to be a part of your strategy for building wealth.
Speaker 3: And if you're not involved in the investment economy, if
Speaker 3: you're not making those investments directly, you can work your
Speaker 3: butt off for years and you will just get by.
Speaker 4: Right.
Speaker 3: Education helps, it helps you get a better job, but
Speaker 3: once you're in that better job, the growth rate for
Speaker 3: your personal wealth and the wealth of your family will
Speaker 3: likely not outpace growth in this country.
Speaker 1: Well, tell us.
Speaker 2: About this program that you guys are doing at your company,
Speaker 2: and you've got what you know or your institution, your organization.
Speaker 2: You've got backing from some really well known firms, certainly
Speaker 2: in the alt investment space. We're talking about Apollo, we're
Speaker 2: talking about areas, we're talking about Oak Oak Tree, oak
Speaker 2: Tree rather Oak MARSK. But I'm just thinking about you know,
Speaker 2: they want a more diverse group, They've talked about it.
Speaker 2: How has their involvement made a difference.
Speaker 3: Well, it's critically important that you have some of the
Speaker 3: biggest names in the industry making a commitment to this
Speaker 3: issue of diversity in the workplace in the investment world.
Speaker 3: I believe what's most critical is that these three firms
Speaker 3: that are competitive in many elements of this business have
Speaker 3: recognized that this is a systemic problem. Therefore, we need
Speaker 3: a systemic solution. They have to work together. All of
Speaker 3: those firms, all the way from leadership down to analysts,
Speaker 3: have been a part of volunteering, mentoring, and creating networks
Speaker 3: for students who are incredibly bright. But these schools had
Speaker 3: not had these companies on campus previously, so we hadn't
Speaker 3: built multiple generations for recruiting these students through all finance.
Speaker 3: We've got seventy three students in our program in eight
Speaker 3: historically black colleges and universities across the country that have
Speaker 3: built the skills, the networks, and most importantly, the confidence
Speaker 3: that they can be successful in this industry. And we're
Speaker 3: graduating fourteen of them this year.
Speaker 2: But one of the things it's tricky, and you talked
Speaker 2: about this when we did the panel a year ago,
Speaker 2: is being, you know, at an organization where you are
Speaker 2: rare and one of the lone individuals, a black individual
Speaker 2: among companies that are still largely white. So how do
Speaker 2: you think about that? Get folks ready to be in
Speaker 2: that environment. You yourself were in that environment.
Speaker 3: I was in that very environment when I came out
Speaker 3: of business school in two thousand and five. I was
Speaker 3: an equity research analyst and I was one of the
Speaker 3: only black people in the entire division Bank of America,
Speaker 3: a Bank of America. And you know, times have changed,
Speaker 3: but that was less than twenty years ago, almost twenty
Speaker 3: I'm not that old yet, but almost twenty years ago.
Speaker 2: The easy right.
Speaker 3: Not not easy at all. It requires a level of
Speaker 3: self assuredness that I think people don't fully appreciate. Right
Speaker 3: to be able to go into work in a place
Speaker 3: where you're the only person that looks like you, there's
Speaker 3: not a ton of shared experience, and to be able
Speaker 3: to perform and outperform every day requires a level of
Speaker 3: grit that's not rewarded all the time. And so one
Speaker 3: of the things that we're working with in all finances,
Speaker 3: we're creating a community of students that are coming from
Speaker 3: similar schools HBCUs that have incredible academic performance, intellectual acumen,
Speaker 3: and building a network of them so that when they
Speaker 3: go out into the workforce, they have people that they
Speaker 3: can call and talk to, and then that gives them
Speaker 3: even greater confidence to operate when they're the only person
Speaker 3: that looks like them in the room.
Speaker 4: That's brilliant, And it's got to be a huge jump
Speaker 4: also from an HBCU into one of these private equity firms.
Speaker 4: Like you went to Duke for you, so that must
Speaker 4: have also been pretty You must have also been pretty
Speaker 4: lonely in that MBA program, right, well.
Speaker 3: I will say that, And this comes full circle around
Speaker 3: what's happening in alternative investments. There are other industries that
Speaker 3: have tried to recognize the importance of diversity and inclusion
Speaker 3: early on, and I think the banks started this really
Speaker 3: back in the late eighties early nineties in the investment banks.
Speaker 3: Did business schools have done well? My experience at Duke
Speaker 3: was actually pretty diverse. They did a great job. Dean Breeden,
Speaker 3: who's the Dean during my time in Dean Bolding now
Speaker 3: have done a great job at the Fucal School of
Speaker 3: Business in terms of building diverse classes. But education, I
Speaker 3: think was leading the private sector in a lot of
Speaker 3: these places. And the reality is the alternative investment industry
Speaker 3: is give or take, really forty or fifty years old.
Speaker 3: I mean, the main principles are still alive, The founders
Speaker 3: of firms are still alive. So it's you know, we
Speaker 3: were in the early stages of the industry. I think,
Speaker 3: what's happening now and this is where you know, Howard
Speaker 3: and Tony and Mark Rowan from from Oak Tree Areas
Speaker 3: and Apollo respectively, and Mike Herregetty and all the guys
Speaker 3: at those firms have said, we want to fix this
Speaker 3: while we're still here, right, and we want to take
Speaker 3: an active role in doing that, and we want that
Speaker 3: to permeate throughout our companies. So I can say in
Speaker 3: full honesty that these firms have made a commitment from
Speaker 3: the top all the way down to the analyst class
Speaker 3: that diversity has got to be a part of their
Speaker 3: by the way.
Speaker 4: Not not entirely out of altruistic reasons, I assume, right,
Speaker 4: because if you have more diversity, you can also make
Speaker 4: more money. You can generate more revenue, you can fatten
Speaker 4: your margins. You need have people who think differently.
Speaker 3: Basic tenont of capitalism. Okay, more people doing good work
Speaker 3: creates more profit, right, And if you believe in GDP
Speaker 3: growth right, more people being productive increases GDP. So it's
Speaker 3: to the benefit of these companies. It's to the benefit
Speaker 3: of this country that every man, woman and child that's
Speaker 3: in the country operates at their highest potential and their
Speaker 3: highest place of potential.
Speaker 2: Diversity of thought is one thing, but this is what
Speaker 2: you and I were talking about. And because I get
Speaker 2: a little you know, cranky, that we've got these really
Speaker 2: wealthy companies and yet not everybody is benefiting in terms
Speaker 2: of workers that are there. Well, I know we'll get
Speaker 2: into this little bit later. When you think about you
Speaker 2: raise everyone up, you think about you grow the economy.
Speaker 2: There's more people who have money to put to work, right,
Speaker 2: And as far as society, I want to get back
Speaker 2: to Marcus Shasta with US President and CEO of Finance,
Speaker 2: still with us in studio. I want to throw it
Speaker 2: over to you, Matt, because I feel like you had
Speaker 2: you were thinking about financial literacy, you were thinking.
Speaker 1: So, I think they're two separate things.
Speaker 3: Right.
Speaker 4: One thing that the market is that you've done is
Speaker 4: you've got fourteen kids from these HBCU schools that are
Speaker 4: now going to advance into private equity.
Speaker 2: First graduating class, first graduating.
Speaker 4: Class, which I think is amazing. So you're you're placing
Speaker 4: these kids. Another thing that's separate is financial literacy, which
Speaker 4: may not just be a racial inequality problem. I never
Speaker 4: learned anything about right how to run my money and
Speaker 4: tell us forty and as a result, I have.
Speaker 1: A lot less than I probably should.
Speaker 4: But just but so are you doing both because you're
Speaker 4: helping these kids also in a sense be financially literate
Speaker 4: by getting them ready to recruit for these jobs. And
Speaker 4: that's you know, going to an interview is something that
Speaker 4: a lot of kids aren't just aren't ready to do
Speaker 4: if they haven't gone to business school.
Speaker 2: Like you have.
Speaker 3: Right, So I will say for the kids that are
Speaker 3: in our program directly, we want to imbue them all
Speaker 3: with a sense of investment acumen and a healthy sense
Speaker 3: of where they feel comfortable taking risk. Right, That's what
Speaker 3: largely I believe twenty first century financial literacy is about
Speaker 3: It's no longer about how to set up a checking
Speaker 3: account in a savings account, but it's about you know,
Speaker 3: how do you think about managing your tax liabilities? Right?
Speaker 3: How do you think about establishing your retirement accounts? You know,
Speaker 3: if you're five twenty nine counts, if you want to
Speaker 3: have kids, how do you think about financial planning and
Speaker 3: managing your risk? Knowing when to be liquid, knowing when
Speaker 3: to be illiquid, all of that just with comfort and
Speaker 3: confidence and so but it.
Speaker 4: Goes back to the investment point you were investing earlier.
Speaker 4: You can't really build wealth through work. I was just
Speaker 4: walking down the street and I saw a sign for
Speaker 4: a certificate a deposit that earns you five and a
Speaker 4: half percent. And then I got back to my computer
Speaker 4: and saw that wage growth is only four and a
Speaker 4: half percent. So you can money makes more money than.
Speaker 3: What you got to invest. You know. The point that
Speaker 3: we're talking about is it's very hard to earn your
Speaker 3: way to wealth. You can, you know, get different levels
Speaker 3: of education and you make these step function increases. Right,
Speaker 3: you get an undergrad degree, you're gonna have a better
Speaker 3: job than you did if with a high school diploma.
Speaker 1: You get a graduate degree.
Speaker 3: Hopefully you'll have a better job than you would with
Speaker 3: an undergrad degree, But as you stay in that role,
Speaker 3: the growth of your wages over time is not going
Speaker 3: to allow you to earn real wealth. You've got to
Speaker 3: find ways to invest, You've got to find ways to
Speaker 3: increase your personal returns. And so the first step is
Speaker 3: getting comfortable with having that conversation. One of my favorite
Speaker 3: things with our fellows is just, you know, we'll invite
Speaker 3: them to dinner and we'll have conversations about everything. We'll
Speaker 3: talk about music, we'll talk about sports, we'll talk about politics,
Speaker 3: and then the same level of confidence, we start having
Speaker 3: discussions about investing and things that they're thinking about doing,
Speaker 3: things that they're seeing in there in the workplace during
Speaker 3: internships for full time. And so, if you can create
Speaker 3: a dialogue right where students feel is comfortable talking about
Speaker 3: the best new album from Beyonce or Drake, or you
Speaker 3: know what's happening in the National Football League or you
Speaker 3: know what piece of art they like, as they have
Speaker 3: about the financial decisions they're making, then you have true
Speaker 3: ownership and true confidence. And that's what it takes to
Speaker 3: build true you know, personal financial literacy.
Speaker 1: By the way.
Speaker 4: The best financial literacy conversation I ever had was an
Speaker 4: interview with ray Lewis on the floor of the New
Speaker 4: York Stock Exchange during the draft. He was in town
Speaker 4: to help these kids not blow you know, the millions
Speaker 4: of dollars they were getting there, which a surprising number
Speaker 4: of them actually do, right.
Speaker 3: I mean, I look at Tom Brady. Tom Brady's made
Speaker 3: a small mint playing football. He is going to make
Speaker 3: more money being a broadcaster than he ever made playing football.
Speaker 3: But that conversation started with what do I do next?
Speaker 3: How do I properly price myself in that market? Is
Speaker 3: that something that I can return on? And ray lewis
Speaker 3: a great job, I mean, one of my favorite all
Speaker 3: time football players. But he's also built a brand for himself,
Speaker 3: you know, as part of a part of color commentating
Speaker 3: for the NFL.
Speaker 1: And what's and he's a hugely successful investor.
Speaker 2: Right. No, But it's tragic how many athletes, professional athletes,
Speaker 2: to end up with no money ultimately. And so that's
Speaker 2: a whole other other chapter. What I'm curious is going
Speaker 2: back to the firms Apollo, aras O Tree that are involved.
Speaker 2: Why weren't they reaching out beforehand helped me out there.
Speaker 2: Because they understood the importance of diversity of thought or
Speaker 2: diversity investments, why weren't they doing it beforehand?
Speaker 3: It's a great question.
Speaker 2: It's a conversation around that, and.
Speaker 3: I think I think it's rooted in a couple of things.
Speaker 3: Number One, these firms grew very, very fast. And so again,
Speaker 3: they started off small, largely in the nineties, right, started
Speaker 3: off small, did not have full fledged HR departments. Right,
Speaker 3: They were recruiting from schools that they're current employees, and
Speaker 3: investors spent different Right. So you know, when you're working
Speaker 3: at an investment firm, and I've been there, you don't
Speaker 3: want to spend a ton of time on hiring because
Speaker 3: you need to get people in place, trained up so
Speaker 3: that they can, you know, put money at risk and
Speaker 3: they can earn returns. And so if you can say, look,
Speaker 3: i've had four people from this school, go back to
Speaker 3: your school and recruit some more people like you, Right,
Speaker 3: Because if I can minimize the risk around who the
Speaker 3: investor is, I can maximize the value of some of
Speaker 3: the returns that I would expect to get. I think
Speaker 3: where that fails is number one, you don't fully understand
Speaker 3: what you're leaving on the table because guess what, there
Speaker 3: could be a better class of investors out there. Right.
Speaker 3: They could be kids at HBCUs, they could be women,
Speaker 3: they could be folks overseas. So at a certain point
Speaker 3: in time, once you scale, you say I need to
Speaker 3: find the best talent that I can find, even if
Speaker 3: it takes a little bit more effort after you scale,
Speaker 3: after you start, right, and so the key is right,
Speaker 3: that's the generation where we are now. What I do believe,
Speaker 3: and I see it in new firms that are starting up.
Speaker 3: People are starting to think right off the bat, I'm
Speaker 3: gonna spend a little bit more time and effort in
Speaker 3: building my team more diverse so that I don't have
Speaker 3: to do it down the line. And that's just part
Speaker 3: of evolution, right. We went through generations where people said,
Speaker 3: I'm going to start a team and it's not gonna
Speaker 3: be diverse, and I'm gonna grow it as fast as
Speaker 3: I can and it's not going to be diverse, and
Speaker 3: I'm gonna end up with ex returns. And I'm happy
Speaker 3: with that because all I'm benchmarking and against is people
Speaker 3: doing the same thing right exactly. Now, we're in an
Speaker 3: era where it's been proven you bring a diverse workforce
Speaker 3: in I mean, McKenzie's done the sties, a lot of
Speaker 3: the consultants and academia has done the studies. More diverse
Speaker 3: teams generate higher risk adjusted returns is the bedrock of
Speaker 3: investing diversification, right, It's right there. And so what people
Speaker 3: realize is now now that we've kind of stabilized and
Speaker 3: we know what the firm is going to survive and
Speaker 3: we know where it's going, we need to make sure
Speaker 3: that as we move into the next generation that we
Speaker 3: have the most competitive workforce imaginable.
Speaker 1: And people need to be greedy enough to overcome their biases.
Speaker 3: Greedy enough to overcome their bias. That's exactly right.
Speaker 2: We're gonna get t shirts printed out.
Speaker 1: I like it.
Speaker 2: No, it's like it's brilliant. Like you think about the
Speaker 2: biasedness that's been in recruiting, right, and you've really changed
Speaker 2: it dramatically. We've run out of time. You're always welcome, Errol,
Speaker 2: Thank you. Love to hear more as the graduates continue
Speaker 2: and how they're doing, so come back soon.
Speaker 1: Yeah, I want to follow their careers. It's so exciting.
Speaker 1: It is pretty cool stuff.
Speaker 3: Hopefully you'll have some of them on in years to come.
Speaker 2: Actually, that would be great.
Speaker 3: I think there'll be folks that are moving the needle
Speaker 3: in this industry of finance. I agree.
Speaker 2: All right, Marcus, thank you be wow, thank you so much.
Speaker 2: Marcus Shaw's chief executive officer at All Finance. Here in
Speaker 2: our interactive broker's studio, you are listening and watching Bloomberg BusinessWeek.
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