1 00:00:00,080 --> 00:00:05,960 Speaker 1: M This is Mesters in Business with Very Results on 2 00:00:06,240 --> 00:00:10,880 Speaker 1: Bloomberg Radio this weekend. On the podcast, Boy Do I 3 00:00:10,920 --> 00:00:15,600 Speaker 1: have an extra special guest, John Mac, legendary CEO of 4 00:00:15,600 --> 00:00:21,120 Speaker 1: Morgan Stanley. Man. This is just a master class on leadership, 5 00:00:21,320 --> 00:00:26,760 Speaker 1: on team building, on understanding of business and understanding what 6 00:00:26,920 --> 00:00:30,120 Speaker 1: to do for your clients. So not only that they 7 00:00:30,160 --> 00:00:34,680 Speaker 1: give you business, but they give you their loyalty and 8 00:00:34,800 --> 00:00:38,560 Speaker 1: their ongoing respect. I don't know what else to say 9 00:00:38,720 --> 00:00:45,159 Speaker 1: other than my conversation with Morgan Stanley's John Mac. I've 10 00:00:45,159 --> 00:00:48,640 Speaker 1: been looking forward to this conversation for quite a while. 11 00:00:48,680 --> 00:00:50,479 Speaker 1: As soon as I saw the book came out, I 12 00:00:50,600 --> 00:00:53,680 Speaker 1: was I have to really get the inside dope from John, 13 00:00:54,200 --> 00:00:57,680 Speaker 1: and so let's start with the beginning. You started Smith 14 00:00:57,720 --> 00:01:02,600 Speaker 1: Barney in n was so compelling about a North Carolina 15 00:01:02,720 --> 00:01:06,880 Speaker 1: kid from Duke going to Wall Street. It was pretty simple. 16 00:01:07,040 --> 00:01:09,759 Speaker 1: So I was on a scholarship at Duke, an athletic scholarship, 17 00:01:09,920 --> 00:01:14,560 Speaker 1: and cracked C five in my neck. So my scholarship 18 00:01:14,640 --> 00:01:17,840 Speaker 1: was only valid for four years and I needed one 19 00:01:17,880 --> 00:01:21,280 Speaker 1: class to graduate. I had very little money I thought 20 00:01:21,319 --> 00:01:24,000 Speaker 1: had passed away when I was in college, so I 21 00:01:24,040 --> 00:01:26,880 Speaker 1: needed a job and I went down and knocked on 22 00:01:26,959 --> 00:01:31,160 Speaker 1: the door a company called First Securities of North Carolina, 23 00:01:31,280 --> 00:01:33,080 Speaker 1: and a guy named Bill Vannor said, look, you know 24 00:01:33,160 --> 00:01:35,080 Speaker 1: nothing about the business. I'll put you in the back 25 00:01:35,120 --> 00:01:37,760 Speaker 1: office and you can go to your one class every 26 00:01:37,840 --> 00:01:40,840 Speaker 1: day ahead and you go on your lunch out and 27 00:01:40,920 --> 00:01:42,560 Speaker 1: come back and go to work. So it was me 28 00:01:43,360 --> 00:01:45,840 Speaker 1: and nine women in the back office and they had 29 00:01:45,880 --> 00:01:49,800 Speaker 1: the old IBM computer punch cards. That's how long ago 30 00:01:49,840 --> 00:01:52,680 Speaker 1: it was. So I got a sense and a field 31 00:01:52,680 --> 00:01:55,080 Speaker 1: for the business. And I got to know a lady 32 00:01:55,160 --> 00:01:59,200 Speaker 1: named Fannie Mitchell who ran job placement for Duke University. 33 00:01:59,760 --> 00:02:02,000 Speaker 1: It's when people would come down and say, you know 34 00:02:02,440 --> 00:02:05,320 Speaker 1: Procter and Gamble or IBM, whoever it may be. She 35 00:02:05,360 --> 00:02:06,840 Speaker 1: would say, we've got you got to talk to his 36 00:02:06,920 --> 00:02:09,320 Speaker 1: John mac and I think you know. I would see 37 00:02:09,360 --> 00:02:11,919 Speaker 1: it in the cafeteria and most students would ignore. I'd 38 00:02:11,919 --> 00:02:13,600 Speaker 1: sit down, have a couple of coffee with her, or 39 00:02:13,680 --> 00:02:16,840 Speaker 1: have lunch with her. So that's how I got involved 40 00:02:17,120 --> 00:02:20,840 Speaker 1: with the securities business. And then Smith Barney was in 41 00:02:20,919 --> 00:02:24,280 Speaker 1: town and they were going to open an office in Atlanta, 42 00:02:24,520 --> 00:02:26,320 Speaker 1: and they ended up hiring me to go to their 43 00:02:26,360 --> 00:02:29,680 Speaker 1: Atlanta office. So I come up to New York in 44 00:02:31,080 --> 00:02:34,960 Speaker 1: and I'm working at Smith Parney and they decided because 45 00:02:35,160 --> 00:02:39,480 Speaker 1: of the explosion of volume the New York Stock has 46 00:02:39,560 --> 00:02:43,639 Speaker 1: change stopped all new branches from opening. So I got 47 00:02:43,639 --> 00:02:45,880 Speaker 1: a chance to go into the municipal behind apartment. That's 48 00:02:45,880 --> 00:02:49,120 Speaker 1: what I did. I was a trader salesman, and I 49 00:02:49,240 --> 00:02:52,560 Speaker 1: learned a lot about a risk and also learned a 50 00:02:52,560 --> 00:02:55,400 Speaker 1: lot about drinking at lunch. And you've got to be 51 00:02:55,480 --> 00:02:59,360 Speaker 1: very careful going out with clients having a couple of drinks. Hey, 52 00:02:59,400 --> 00:03:02,840 Speaker 1: you come back to the desk a little uh buzzed? 53 00:03:03,560 --> 00:03:06,239 Speaker 1: What happens? Can't you make a trading mistake that way? Well, 54 00:03:06,360 --> 00:03:09,040 Speaker 1: not only you can. I did. Uh. We went down 55 00:03:09,080 --> 00:03:11,519 Speaker 1: to say Van if you remember that years ago, down 56 00:03:11,520 --> 00:03:14,680 Speaker 1: to Walla Street. It was US Trust was my client, 57 00:03:14,720 --> 00:03:17,560 Speaker 1: a guy named Jimmy Dagnan, and US Trust was the 58 00:03:17,600 --> 00:03:20,239 Speaker 1: adviser for the State Employees of New York, which is 59 00:03:20,280 --> 00:03:23,360 Speaker 1: a huge pension giant. So we sat there and we 60 00:03:23,480 --> 00:03:26,800 Speaker 1: drank for at least three hours. Now, wait, are you 61 00:03:26,960 --> 00:03:29,440 Speaker 1: normally a drink or during lunch or if the client 62 00:03:29,560 --> 00:03:32,600 Speaker 1: is drinking, you gotta keep up. I'm a client guy. 63 00:03:33,560 --> 00:03:36,320 Speaker 1: No one wants to drink alone. So if he's drinking 64 00:03:36,400 --> 00:03:39,160 Speaker 1: or she's drinking, I'm drinking. And I came back and 65 00:03:39,160 --> 00:03:42,120 Speaker 1: I made a mistake, and uh, thank god they didn't 66 00:03:42,160 --> 00:03:47,000 Speaker 1: fire me. And over time we eradicated that and fixed it. Uh, 67 00:03:47,040 --> 00:03:49,160 Speaker 1: And then I learned be very careful when you go 68 00:03:49,200 --> 00:03:51,040 Speaker 1: out to lunch on Wall Street. So tell us a 69 00:03:51,080 --> 00:03:53,440 Speaker 1: little bit about the culture on the street in the 70 00:03:53,520 --> 00:03:56,240 Speaker 1: late sixties and early seventies. What was it like. It 71 00:03:56,320 --> 00:04:01,080 Speaker 1: was a crazy time. The thing of politically correct didn't exist, 72 00:04:01,520 --> 00:04:04,240 Speaker 1: to say the very least. All Right. So I'm I'm 73 00:04:04,320 --> 00:04:10,480 Speaker 1: two years old. I'm at Smith Barney. I'm a municipal trader. Uh. 74 00:04:10,640 --> 00:04:13,120 Speaker 1: Then I go into the corporate behind the market and 75 00:04:13,160 --> 00:04:17,520 Speaker 1: I hear about these crazy parties that Wall Street was 76 00:04:17,520 --> 00:04:20,120 Speaker 1: was throwing. And I only went to one and left. 77 00:04:20,839 --> 00:04:24,200 Speaker 1: I mean it was basically strippers and people getting drunk. 78 00:04:24,240 --> 00:04:27,359 Speaker 1: And you know, I came from a town of about 79 00:04:27,360 --> 00:04:31,880 Speaker 1: twelve thousand people in North Carolina, Baptist religion. Mainly, it 80 00:04:31,960 --> 00:04:34,080 Speaker 1: was a new or for me, but it taught me 81 00:04:34,120 --> 00:04:36,800 Speaker 1: a lot. You gotta pay attention and you've got to 82 00:04:36,839 --> 00:04:40,400 Speaker 1: make sure that you don't get drunk at lunch. And 83 00:04:40,440 --> 00:04:42,680 Speaker 1: you gotta make sure you tell the truth. Telling the 84 00:04:42,680 --> 00:04:44,880 Speaker 1: truth is certainly a key part, and that's a theme 85 00:04:44,960 --> 00:04:47,880 Speaker 1: that comes up again and again in your book. We'll 86 00:04:47,920 --> 00:04:50,680 Speaker 1: get to that in a little bit. You mentioned the 87 00:04:50,760 --> 00:04:53,919 Speaker 1: New York Stock Exchange didn't allow any new branches to 88 00:04:54,000 --> 00:04:58,159 Speaker 1: be open. I have a vague recollection of Wall Street 89 00:04:58,240 --> 00:05:02,240 Speaker 1: being closed on Wednesday days to catch up on the paperwork. 90 00:05:02,279 --> 00:05:04,760 Speaker 1: Tell us a little bit about that's correct. They closed 91 00:05:04,760 --> 00:05:07,920 Speaker 1: on Wednesday to catch up on the paperwork. And all 92 00:05:07,960 --> 00:05:10,720 Speaker 1: the firms, whether it was first of all Us and Morgan, 93 00:05:10,800 --> 00:05:13,520 Speaker 1: Stanley going Goldman, Sacks and Morgan at that time didn't 94 00:05:13,520 --> 00:05:16,280 Speaker 1: have a big secondary business. We had to clear up 95 00:05:16,320 --> 00:05:19,599 Speaker 1: the back office. So you'd shut it noon and try 96 00:05:19,680 --> 00:05:22,919 Speaker 1: to figure out these securities go to why, and these 97 00:05:23,320 --> 00:05:30,080 Speaker 1: securities go to Z literally paper certificates and delivering absolutely 98 00:05:30,160 --> 00:05:33,559 Speaker 1: talk about, you know, ancient technology. One of the things 99 00:05:33,640 --> 00:05:36,720 Speaker 1: you mentioned was that by the nine eighties there were 100 00:05:36,800 --> 00:05:42,360 Speaker 1: two key forces driving changes on Wall Street, deregulation and technology. 101 00:05:42,440 --> 00:05:45,720 Speaker 1: Corret tell us about that. Well, the markets were changing, 102 00:05:45,839 --> 00:05:49,560 Speaker 1: they were global, and as they became global and you 103 00:05:49,600 --> 00:05:52,919 Speaker 1: were competing around the world, it was clear that you 104 00:05:53,040 --> 00:05:56,120 Speaker 1: needed to free up our securities business to be more 105 00:05:56,160 --> 00:05:59,200 Speaker 1: active on a global basis. So we got rid of 106 00:05:59,240 --> 00:06:02,159 Speaker 1: a lot of regular sation. We got more oversight, but 107 00:06:02,360 --> 00:06:06,880 Speaker 1: not regulatory control. I mean, clearly reported the sec New 108 00:06:06,920 --> 00:06:10,840 Speaker 1: York Stock Exchange, etcetera. But it wasn't smothering. I mean, 109 00:06:11,040 --> 00:06:13,080 Speaker 1: you know, we were not used to it, but it 110 00:06:13,160 --> 00:06:15,680 Speaker 1: was the right thing for New York Stock Exchange to do. 111 00:06:15,760 --> 00:06:20,000 Speaker 1: There had to be more regulation. And uh, you know, 112 00:06:20,120 --> 00:06:22,880 Speaker 1: as as I said earlier, it's a global market, and 113 00:06:22,920 --> 00:06:24,920 Speaker 1: you wanted to make sure that we represented New York 114 00:06:24,920 --> 00:06:28,760 Speaker 1: Stock ex Change and really America the proper way. And 115 00:06:28,640 --> 00:06:32,280 Speaker 1: it worked, and the UK was much stricter than we were, 116 00:06:32,360 --> 00:06:35,320 Speaker 1: and in Germany they were stricter and we were, and 117 00:06:35,360 --> 00:06:38,880 Speaker 1: clearly the Japanese were stricter than we were. And over 118 00:06:38,960 --> 00:06:43,479 Speaker 1: time all these different regulatory areas from around the world 119 00:06:44,120 --> 00:06:46,200 Speaker 1: came up with a conclusion, we need kind of an 120 00:06:46,240 --> 00:06:52,240 Speaker 1: overall management system for risk and regulatory oversight. So if 121 00:06:52,279 --> 00:06:54,599 Speaker 1: you took a big risk in China and Japan or 122 00:06:54,640 --> 00:06:57,320 Speaker 1: in Europe, you needed to roll that up so the 123 00:06:57,400 --> 00:07:00,320 Speaker 1: US regulator or the UK regulator could see what your 124 00:07:00,360 --> 00:07:03,200 Speaker 1: overall risk was. I think that was a huge and 125 00:07:03,440 --> 00:07:06,800 Speaker 1: very important move. You spent the first part of your 126 00:07:06,839 --> 00:07:11,440 Speaker 1: career primarily in fixed income. First, you mentioned municipals in corporate. 127 00:07:11,840 --> 00:07:16,480 Speaker 1: What was the appeal of the bond side of the business. Well, originally, 128 00:07:16,480 --> 00:07:18,840 Speaker 1: when I joined Smith Barney, I was going to go 129 00:07:18,920 --> 00:07:21,880 Speaker 1: to Atlanta in the retail office and cover Florida and 130 00:07:21,880 --> 00:07:25,400 Speaker 1: other other southern states. And then I got to know 131 00:07:25,520 --> 00:07:28,000 Speaker 1: a guy named George Wilder who had been in the 132 00:07:28,080 --> 00:07:31,200 Speaker 1: municipal bond of business, and a guy named John McDougall 133 00:07:31,280 --> 00:07:34,720 Speaker 1: who was a municipal bond trader, and they convinced me, 134 00:07:34,800 --> 00:07:36,800 Speaker 1: you know, once you stay in New York, you're a 135 00:07:36,800 --> 00:07:40,720 Speaker 1: great salesman and you can sell and trade muntis with us. 136 00:07:41,480 --> 00:07:43,880 Speaker 1: And I like New York, and I like the business, 137 00:07:43,920 --> 00:07:48,880 Speaker 1: and I like the investment world of large pension funds, 138 00:07:49,240 --> 00:07:52,240 Speaker 1: money managers and things like that. So we did a 139 00:07:52,280 --> 00:07:56,320 Speaker 1: combination of things. We covered clients, and then we satisfied 140 00:07:56,440 --> 00:08:00,440 Speaker 1: the desire of retail salesman who wanted to buy UNI's 141 00:08:00,440 --> 00:08:03,640 Speaker 1: in New York state or in California of Florida. So 142 00:08:03,680 --> 00:08:06,000 Speaker 1: that's how I got into the bond business. What was 143 00:08:06,040 --> 00:08:09,960 Speaker 1: it like trying to build a team on a bond 144 00:08:10,000 --> 00:08:12,880 Speaker 1: desk that you described in the book could get a 145 00:08:12,920 --> 00:08:16,400 Speaker 1: little frenetic. Yeah it was, but you know, we built 146 00:08:16,440 --> 00:08:18,720 Speaker 1: it over the long period of time, and we all 147 00:08:18,800 --> 00:08:22,400 Speaker 1: grew up over that period of time. And you learned 148 00:08:23,080 --> 00:08:25,440 Speaker 1: that Number one, you had to be upfront. You had 149 00:08:25,440 --> 00:08:28,880 Speaker 1: to focus on your clients. You couldn't get drunk at lunch, 150 00:08:28,920 --> 00:08:32,040 Speaker 1: which occasionally we all got drunk at lunch and sometimes 151 00:08:32,120 --> 00:08:35,439 Speaker 1: made a mistake. And you learned to focus on your 152 00:08:35,480 --> 00:08:39,559 Speaker 1: client and uh, you know, it became a very personal 153 00:08:39,600 --> 00:08:41,599 Speaker 1: business and you got to know who they were. You 154 00:08:41,679 --> 00:08:44,920 Speaker 1: got to know their families. And I remember when I 155 00:08:44,960 --> 00:08:48,280 Speaker 1: was at Smith Barney invented IF. At Smithers, I was 156 00:08:48,360 --> 00:08:50,880 Speaker 1: given the worst accounts because I went from trading to sale. 157 00:08:50,880 --> 00:08:53,520 Speaker 1: So we'll dump all these accounts on John Mack. Give 158 00:08:53,559 --> 00:08:56,160 Speaker 1: it to the kid. You got it. And uh. There 159 00:08:56,200 --> 00:08:58,319 Speaker 1: was a gentleman named Dick Van Skoye at the Mellon 160 00:08:58,400 --> 00:09:02,920 Speaker 1: Bank who managed and advised that the state employees of 161 00:09:02,960 --> 00:09:08,040 Speaker 1: Pennsylvania teachers and retirement funds. It was huge, but he 162 00:09:08,120 --> 00:09:12,040 Speaker 1: was tough as nails, and you learned very quickly that 163 00:09:12,080 --> 00:09:14,400 Speaker 1: you better be on your toes when you dealt with Dick. 164 00:09:14,800 --> 00:09:16,720 Speaker 1: And I got to know him. He was a great mentor, 165 00:09:16,880 --> 00:09:19,720 Speaker 1: taught me a lot about the business, and I spent 166 00:09:19,760 --> 00:09:21,840 Speaker 1: a lot of time in Pittsburgh, even to the point 167 00:09:21,920 --> 00:09:23,640 Speaker 1: that my wife and I would go out. I mean 168 00:09:23,840 --> 00:09:26,959 Speaker 1: I remember going out to Pittsburgh with these huge funds. 169 00:09:27,000 --> 00:09:30,120 Speaker 1: It was probably it was probably the largest account in 170 00:09:30,120 --> 00:09:32,679 Speaker 1: the country. A Melon Bank at the time, and a 171 00:09:32,720 --> 00:09:37,079 Speaker 1: guy named Jackie Coogler at Solomon Brothers, and Solomon was 172 00:09:37,120 --> 00:09:39,120 Speaker 1: the dominant player in the bond market. They were the 173 00:09:39,200 --> 00:09:42,600 Speaker 1: number one broker banker for the pension funds for the 174 00:09:42,640 --> 00:09:46,959 Speaker 1: state of Pennsylvania, both in teachers and the employees. And 175 00:09:47,000 --> 00:09:49,760 Speaker 1: I just kept digging away, working hard at it, and 176 00:09:49,920 --> 00:09:54,160 Speaker 1: over time I became their number one dealer they dealt with. 177 00:09:54,800 --> 00:09:58,280 Speaker 1: And George Polochick, who came over from the Ukraine after 178 00:09:58,440 --> 00:10:01,720 Speaker 1: the Russians back then took over in World War Two, 179 00:10:02,600 --> 00:10:05,680 Speaker 1: was running it. He had been at sun Life in Canada, 180 00:10:05,880 --> 00:10:07,800 Speaker 1: and I got along with him well, and I did 181 00:10:07,800 --> 00:10:09,640 Speaker 1: a lot of business with the Melon Bank, to the 182 00:10:09,679 --> 00:10:14,440 Speaker 1: point I became their number one broker dealer. And policheck, 183 00:10:15,120 --> 00:10:19,280 Speaker 1: who loved martinis, walked onto the Solumna floor and screamed 184 00:10:19,320 --> 00:10:22,400 Speaker 1: out to Coogler. How does it feel to be number two? 185 00:10:23,360 --> 00:10:26,600 Speaker 1: That's the environment we're in And I'll tell you, I mean, 186 00:10:27,880 --> 00:10:32,760 Speaker 1: I think business it's personal and uh. We got to 187 00:10:32,800 --> 00:10:35,760 Speaker 1: know the people at Melan Bank, whether it was you know, 188 00:10:36,400 --> 00:10:39,559 Speaker 1: Sally's daughter who was in med school, at George policheck 189 00:10:39,640 --> 00:10:41,680 Speaker 1: who was going back over to Europe for a while. 190 00:10:42,640 --> 00:10:45,640 Speaker 1: We really worked at getting to know people in building trust. 191 00:10:46,320 --> 00:10:47,920 Speaker 1: And at the end of the day, it's all about 192 00:10:47,960 --> 00:10:50,880 Speaker 1: trust and it's all about delivering on what you say 193 00:10:50,920 --> 00:10:53,240 Speaker 1: you're gonna do. And with the help of a lot 194 00:10:53,280 --> 00:10:55,760 Speaker 1: of people, that's what we did. And of course my 195 00:10:55,880 --> 00:10:58,800 Speaker 1: partner in all this was Christy macken. As I said earlier, 196 00:11:00,040 --> 00:11:02,040 Speaker 1: my clients say, look, John, we don't we really don't 197 00:11:02,080 --> 00:11:06,559 Speaker 1: care about you. Send Christia your wife. Yeah, she was 198 00:11:06,600 --> 00:11:10,480 Speaker 1: awesome and it is awesome. So you eventually become head 199 00:11:10,480 --> 00:11:14,000 Speaker 1: of the fixed income department. And what was it like 200 00:11:14,160 --> 00:11:18,000 Speaker 1: to go from sales and trading to managing a whole 201 00:11:18,080 --> 00:11:21,960 Speaker 1: team of salespeople and traders. Well, it was very different 202 00:11:22,280 --> 00:11:25,160 Speaker 1: and I learned very quickly, thank God for Dick Fisher, 203 00:11:25,880 --> 00:11:30,320 Speaker 1: that you have to be more balanced and not as um. 204 00:11:30,400 --> 00:11:33,600 Speaker 1: I don't know if the word is aggressive, ruthless, uncouth, 205 00:11:34,200 --> 00:11:38,440 Speaker 1: all of those words. We used to sit in clusters 206 00:11:38,600 --> 00:11:43,800 Speaker 1: of four salespeople together, and we probably had five clusters. 207 00:11:44,840 --> 00:11:47,760 Speaker 1: And one of my rules were that the desk can 208 00:11:47,800 --> 00:11:50,600 Speaker 1: never be empty. You always need one person there because 209 00:11:51,320 --> 00:11:53,040 Speaker 1: you know, if no one's there in the photo rings, 210 00:11:53,200 --> 00:11:57,439 Speaker 1: no one's picking it up. Occasionally you know no one 211 00:11:57,559 --> 00:12:00,680 Speaker 1: was there, and I'd walk in and be really piste 212 00:12:00,720 --> 00:12:02,840 Speaker 1: off about it and reach over and I would just 213 00:12:03,200 --> 00:12:09,640 Speaker 1: clean the desk off everything. And thank God for Dick Fisher. 214 00:12:09,760 --> 00:12:12,080 Speaker 1: I mean, he said, look, John, you got the biggest 215 00:12:12,080 --> 00:12:14,439 Speaker 1: gun in the firm, in that division. Your job has 216 00:12:14,520 --> 00:12:18,240 Speaker 1: never used your gun. So I learned a lot from him, 217 00:12:18,280 --> 00:12:21,000 Speaker 1: and I calmed things down. I wasn't as aggressive, wasn't 218 00:12:21,000 --> 00:12:24,640 Speaker 1: as pushy, but I was still demanding. And look, it's 219 00:12:24,679 --> 00:12:28,520 Speaker 1: a great business with great opportunities, but you gotta pay attention. 220 00:12:28,880 --> 00:12:30,840 Speaker 1: You gotta pay attention to the people around you. Gotta 221 00:12:30,840 --> 00:12:34,880 Speaker 1: pay attention to your clients. And this idea of especially 222 00:12:34,880 --> 00:12:38,720 Speaker 1: at Morgan Stanley, the surest way to be fired at 223 00:12:38,720 --> 00:12:41,600 Speaker 1: Morgan Stanley is that the word got back. You've got 224 00:12:41,600 --> 00:12:45,559 Speaker 1: a client laid somewhere, you're gone, there's no debate, no discussion. 225 00:12:46,320 --> 00:12:49,800 Speaker 1: So we really focused on trying to get close to 226 00:12:49,840 --> 00:12:53,320 Speaker 1: our clients, give them what they needed, introduced them to 227 00:12:53,679 --> 00:13:00,760 Speaker 1: other clients that also had similar asset management responsibilities. And 228 00:13:00,880 --> 00:13:03,480 Speaker 1: Morgan Stanley at the time was really growing from a 229 00:13:03,559 --> 00:13:06,480 Speaker 1: pure investment bank that covered you know, A T and 230 00:13:06,600 --> 00:13:10,240 Speaker 1: t IBM, Southern cal you name it. They had at 231 00:13:10,240 --> 00:13:14,359 Speaker 1: the Government of Japan, and we really worked at imbuing 232 00:13:14,520 --> 00:13:18,120 Speaker 1: that culture of first class business in the first class 233 00:13:18,160 --> 00:13:22,600 Speaker 1: way into the Morgan Stanley sales and trading business. So 234 00:13:22,679 --> 00:13:25,200 Speaker 1: let's talk a little bit about some of the things 235 00:13:25,240 --> 00:13:29,240 Speaker 1: you discussed in the book. You describe how different Wall 236 00:13:29,240 --> 00:13:32,280 Speaker 1: Street is today from when you began. Tell us a 237 00:13:32,280 --> 00:13:37,559 Speaker 1: little bit about the process of finance being institutionalized and 238 00:13:37,640 --> 00:13:41,240 Speaker 1: how the culture has changed. Well, I think the biggest 239 00:13:41,320 --> 00:13:46,640 Speaker 1: changes the markets became so big and global that Wall 240 00:13:46,679 --> 00:13:48,480 Speaker 1: Street had to change. So if you go back and 241 00:13:48,520 --> 00:13:51,960 Speaker 1: when I started the business, basically your client base was 242 00:13:52,000 --> 00:13:55,400 Speaker 1: here in the United States, but over time, as globalization 243 00:13:55,720 --> 00:13:58,880 Speaker 1: took place, your clients would be all over the world. 244 00:13:59,480 --> 00:14:03,800 Speaker 1: And UH, people were more and more focused on what 245 00:14:03,960 --> 00:14:08,120 Speaker 1: are the maximum returns we can make in investing, and 246 00:14:08,360 --> 00:14:11,280 Speaker 1: it got to be a twenty four hours a day 247 00:14:11,280 --> 00:14:14,880 Speaker 1: trading whether you're in in China or Japan, or Europe 248 00:14:14,960 --> 00:14:17,560 Speaker 1: or US. So you had to be on your game, 249 00:14:17,640 --> 00:14:20,760 Speaker 1: and you also had to be available to do business 250 00:14:20,760 --> 00:14:23,200 Speaker 1: at night, and our traders oftentimes would stay up all 251 00:14:23,320 --> 00:14:26,880 Speaker 1: night to satisfy inquiries coming in from China or be 252 00:14:26,960 --> 00:14:30,880 Speaker 1: there early in the morning for London. So globalization was 253 00:14:30,920 --> 00:14:35,280 Speaker 1: the big change, and then technology added to it. Technology 254 00:14:35,320 --> 00:14:38,320 Speaker 1: allowed people to see markets and here we are at Bloomberg. 255 00:14:38,880 --> 00:14:40,920 Speaker 1: They were looking at machines. They could tell you what 256 00:14:40,960 --> 00:14:43,080 Speaker 1: was going on in in Hong Kong or what was 257 00:14:43,120 --> 00:14:46,880 Speaker 1: going on in Europe. So the markets became seven and 258 00:14:46,920 --> 00:14:50,280 Speaker 1: as a result, you had to staff. In my case 259 00:14:50,320 --> 00:14:53,440 Speaker 1: of fixed income division, you needed people around the world 260 00:14:53,560 --> 00:14:57,640 Speaker 1: to be able to satisfy clients who are investors and 261 00:14:57,720 --> 00:15:01,480 Speaker 1: at the same time satisfy clients who are raising money 262 00:15:01,480 --> 00:15:04,640 Speaker 1: through Morgan Stanley. So if a t n T was 263 00:15:04,680 --> 00:15:07,680 Speaker 1: doing a big bond deal, we want to make sure 264 00:15:07,800 --> 00:15:10,480 Speaker 1: that you know the Japanese, the Chinese, and just go 265 00:15:10,560 --> 00:15:12,960 Speaker 1: around the world the Middle East, London and back to 266 00:15:13,000 --> 00:15:16,000 Speaker 1: New York. That all of our clients got a chance 267 00:15:16,040 --> 00:15:18,680 Speaker 1: to see and talk to a salesman who had information 268 00:15:19,200 --> 00:15:21,680 Speaker 1: about the transaction we were doing for a T and T. 269 00:15:22,240 --> 00:15:25,800 Speaker 1: So globalization was the big change. Then add to that 270 00:15:25,920 --> 00:15:28,720 Speaker 1: and here we are at Bloomberg Technology. You know, when 271 00:15:28,760 --> 00:15:30,800 Speaker 1: I got into business, there was no technology. You had 272 00:15:30,840 --> 00:15:34,160 Speaker 1: a little machine that would do uh, interest rates for 273 00:15:34,400 --> 00:15:35,960 Speaker 1: you know, you'd put in a price and it would 274 00:15:35,960 --> 00:15:38,560 Speaker 1: give you what the yield is. But now you go 275 00:15:38,600 --> 00:15:41,120 Speaker 1: into Morgan Stanley, You're going to JP, Morgan or Goal 276 00:15:41,240 --> 00:15:45,760 Speaker 1: makes no difference. Every desks has a box with data 277 00:15:45,800 --> 00:15:48,720 Speaker 1: and information. And if you go back when I got 278 00:15:48,720 --> 00:15:52,040 Speaker 1: in the business in in the early early seventies. Uh, 279 00:15:52,280 --> 00:15:55,520 Speaker 1: matter of fact, in the late sixties, that didn't exist. 280 00:15:56,120 --> 00:15:58,760 Speaker 1: I mean people would go out for lunch and you know, 281 00:15:59,080 --> 00:16:02,680 Speaker 1: take a couple of hours, didn't miss anything. But today 282 00:16:02,960 --> 00:16:05,440 Speaker 1: you don't leave your desk, right, let's say the very least. 283 00:16:05,720 --> 00:16:09,160 Speaker 1: So you helped to build a very special culture at 284 00:16:09,200 --> 00:16:15,280 Speaker 1: Morgan Stanley. What goes into building a competitive investment bank? 285 00:16:15,320 --> 00:16:19,240 Speaker 1: How do you create and sustain that culture? Well, I 286 00:16:19,280 --> 00:16:22,600 Speaker 1: think by and large, people who come into the business 287 00:16:23,040 --> 00:16:25,920 Speaker 1: are competitive, They want to achieve and they want to 288 00:16:25,960 --> 00:16:29,400 Speaker 1: do well. What I was trying to do was to 289 00:16:29,440 --> 00:16:33,720 Speaker 1: take all this um I guess courage is the wrong word. 290 00:16:34,040 --> 00:16:37,760 Speaker 1: This aggressiveness, this ability to build business, and how do 291 00:16:37,800 --> 00:16:42,120 Speaker 1: you make it into a one firm versus the guys 292 00:16:42,120 --> 00:16:44,840 Speaker 1: in San Francisco they get an order, don't share it 293 00:16:44,840 --> 00:16:47,160 Speaker 1: with New York. If we do it, you know, we'll 294 00:16:47,160 --> 00:16:50,120 Speaker 1: get more more of a commission. So what I was 295 00:16:50,160 --> 00:16:52,200 Speaker 1: trying to do when I took over the fixed income 296 00:16:52,240 --> 00:16:54,800 Speaker 1: division is to create a one firm entity. I call 297 00:16:54,840 --> 00:16:57,760 Speaker 1: it the one firm firm. And I brought in a 298 00:16:57,800 --> 00:17:01,680 Speaker 1: guy named Tom DeLong, who I had met on an airplane. 299 00:17:01,720 --> 00:17:03,720 Speaker 1: So Christie and I were out in Utah. We were 300 00:17:03,760 --> 00:17:07,000 Speaker 1: looking at buying a house because we started picking up skin. 301 00:17:07,080 --> 00:17:10,840 Speaker 1: And by the way, I'm a terrible skier. Um, So 302 00:17:10,880 --> 00:17:13,040 Speaker 1: I'm talking to this guy on the plane, and I said, 303 00:17:13,359 --> 00:17:16,360 Speaker 1: what do you do. We said, I'm a professor at 304 00:17:16,359 --> 00:17:18,320 Speaker 1: b y U and I'm coming back to talk to 305 00:17:18,640 --> 00:17:22,119 Speaker 1: A T and T and their management group about you know, 306 00:17:22,240 --> 00:17:26,360 Speaker 1: managing people and evaluations, etcetera. And I said, well, look, 307 00:17:26,359 --> 00:17:27,920 Speaker 1: I'd like you to come in and see me when 308 00:17:27,960 --> 00:17:30,119 Speaker 1: you have time. I'd like to talk to you. So 309 00:17:30,200 --> 00:17:32,760 Speaker 1: Tom comes in and by the way, now Tom was 310 00:17:32,800 --> 00:17:36,399 Speaker 1: a professor at Harvard University, so Tom comes in and 311 00:17:36,480 --> 00:17:41,520 Speaker 1: he interviews my senior group. And he comes in. He said, well, 312 00:17:41,520 --> 00:17:45,640 Speaker 1: here's what people think. To get ahead at this division. 313 00:17:45,720 --> 00:17:50,399 Speaker 1: They have to be your friends exactly, that's right, and 314 00:17:50,440 --> 00:17:52,520 Speaker 1: if they're not your friend, they don't make it. And 315 00:17:52,520 --> 00:17:55,639 Speaker 1: he said that may not be reality, but that's what 316 00:17:55,680 --> 00:17:59,320 Speaker 1: they all believe. So he said, what you should do 317 00:17:59,440 --> 00:18:02,280 Speaker 1: is set up in an independent group of people, let 318 00:18:02,320 --> 00:18:05,520 Speaker 1: them make a presentation to you of the talent it 319 00:18:05,520 --> 00:18:08,119 Speaker 1: should be promoted. And you know, if you have a 320 00:18:08,160 --> 00:18:10,639 Speaker 1: strong objection, you can say that, but by large you 321 00:18:10,640 --> 00:18:13,199 Speaker 1: should accept what they put in front of you. So 322 00:18:13,280 --> 00:18:16,080 Speaker 1: that's exactly what they did. They took me picking who's 323 00:18:16,080 --> 00:18:19,200 Speaker 1: going to be promoted, and there was a promotion committee 324 00:18:19,720 --> 00:18:22,919 Speaker 1: and also a compensation committee, and then they would come 325 00:18:22,960 --> 00:18:25,959 Speaker 1: to me and make recommendations. And so you didn't favor 326 00:18:26,000 --> 00:18:29,160 Speaker 1: one person. You had somewhere between four and eight people 327 00:18:29,200 --> 00:18:31,679 Speaker 1: on these committees. And when they brought it to me, 328 00:18:31,760 --> 00:18:35,320 Speaker 1: unless I had something very specific that I'd say, well, 329 00:18:35,440 --> 00:18:38,560 Speaker 1: let me tell you why I disagree, I accepted their recommendation. 330 00:18:39,200 --> 00:18:42,240 Speaker 1: And that move really changed the culture of the division 331 00:18:42,400 --> 00:18:44,919 Speaker 1: and it came into you know, you don't have to 332 00:18:44,920 --> 00:18:47,760 Speaker 1: be Max's friend or anyone else. Is about being professional, 333 00:18:47,920 --> 00:18:52,240 Speaker 1: direct and honest. And your peers would do the evaluation 334 00:18:52,480 --> 00:18:55,199 Speaker 1: on how you're doing, what you're doing, and what you 335 00:18:55,200 --> 00:18:59,080 Speaker 1: should be doing. This is the full three and the 336 00:18:59,160 --> 00:19:04,680 Speaker 1: peers would all so anonymously review their managers absolutely and 337 00:19:04,760 --> 00:19:07,200 Speaker 1: what was the results from those sort of things. Well, 338 00:19:07,240 --> 00:19:10,760 Speaker 1: in some cases we found that managers were not setting 339 00:19:10,840 --> 00:19:14,320 Speaker 1: the right tone as far as being energetic and working 340 00:19:14,320 --> 00:19:18,640 Speaker 1: with them. Uh, they were reluctance oftentimes to go out 341 00:19:18,680 --> 00:19:21,240 Speaker 1: with salesman and help them entertain with the clients or 342 00:19:21,280 --> 00:19:24,240 Speaker 1: spend time with clients. So we really put more pressure 343 00:19:24,280 --> 00:19:26,520 Speaker 1: on managers to be involved and not just sit in 344 00:19:26,560 --> 00:19:28,720 Speaker 1: an office or on a training desk at the far 345 00:19:28,920 --> 00:19:32,840 Speaker 1: end and just you know, take advantage of people working 346 00:19:32,880 --> 00:19:35,480 Speaker 1: hard but they're not involved. So it got it more involved, 347 00:19:36,000 --> 00:19:38,679 Speaker 1: and it also got us to eliminate some of the 348 00:19:38,720 --> 00:19:42,480 Speaker 1: managers when you saw these three sixty reviews and some 349 00:19:42,600 --> 00:19:45,200 Speaker 1: of the data, and then you you would dive into 350 00:19:45,240 --> 00:19:48,280 Speaker 1: it and find out they're right, We're not going to 351 00:19:48,359 --> 00:19:50,959 Speaker 1: have people like that at this firm. So not a 352 00:19:50,960 --> 00:19:53,160 Speaker 1: lot of reduction at head counts, but a few people 353 00:19:53,200 --> 00:19:56,719 Speaker 1: we asked to leave and you talk about um the 354 00:19:56,720 --> 00:20:01,000 Speaker 1: willingness of senior management to assist with clients. You seem 355 00:20:01,080 --> 00:20:03,840 Speaker 1: to be ready to jump on a plane to go 356 00:20:04,000 --> 00:20:07,000 Speaker 1: anywhere in the world, China to Tokyo, and it didn't 357 00:20:07,040 --> 00:20:11,159 Speaker 1: matter if you could help close a deal. Uh, you 358 00:20:11,240 --> 00:20:14,720 Speaker 1: were there, that's true. I mean number one, I love 359 00:20:14,760 --> 00:20:18,800 Speaker 1: the business. I mean to go to China and build 360 00:20:18,800 --> 00:20:21,280 Speaker 1: the relationships we built in China and go to Europe 361 00:20:21,359 --> 00:20:24,360 Speaker 1: or it didn't make any difference where I went. I 362 00:20:24,440 --> 00:20:28,320 Speaker 1: loved the business. And you know, China was just opening up. 363 00:20:28,960 --> 00:20:31,399 Speaker 1: And one of the guys who used to be at 364 00:20:31,400 --> 00:20:33,600 Speaker 1: the World Bank said, you know, John, what China really 365 00:20:33,640 --> 00:20:37,399 Speaker 1: needs I think it was ed limb. It needs an 366 00:20:37,440 --> 00:20:41,600 Speaker 1: investment bank. So we formed a small investment bank owned 367 00:20:41,840 --> 00:20:44,919 Speaker 1: mainly by the Chinese, but Morgan Stanley on of it, 368 00:20:45,520 --> 00:20:48,040 Speaker 1: and we built a securities business with it with the 369 00:20:48,160 --> 00:20:51,960 Speaker 1: Chinese in China and why and she Sean who was 370 00:20:52,000 --> 00:20:54,560 Speaker 1: the vice premier, He was the gentleman I worked with 371 00:20:55,720 --> 00:20:58,359 Speaker 1: and Uh. It took a lot of time, but the 372 00:20:58,480 --> 00:21:01,359 Speaker 1: Chinese wanted to create their own capital markets. They wanted 373 00:21:01,359 --> 00:21:03,320 Speaker 1: to be independent, and they wanted the ability to go 374 00:21:03,359 --> 00:21:06,240 Speaker 1: around the world raise money. Because we do any American 375 00:21:06,240 --> 00:21:08,560 Speaker 1: infestment bank. And I tell one of the things that 376 00:21:08,600 --> 00:21:12,080 Speaker 1: really touched me. Uh, we're talking about China, but let's 377 00:21:12,080 --> 00:21:17,280 Speaker 1: say China communists, we're talking about die hard communists. Why 378 00:21:17,280 --> 00:21:19,719 Speaker 1: don't she Sean who was running the Central Bank at 379 00:21:19,720 --> 00:21:23,399 Speaker 1: the time, and then he was given the responsibility by 380 00:21:23,480 --> 00:21:27,879 Speaker 1: gron Gi to build a securities business. And I'm working 381 00:21:27,920 --> 00:21:30,159 Speaker 1: with him to do this joint venture. And he flies 382 00:21:30,200 --> 00:21:32,680 Speaker 1: over to New York and we're sitting in my office 383 00:21:32,800 --> 00:21:36,320 Speaker 1: on whatever floor at Morgan Stanley and we're never about 384 00:21:36,320 --> 00:21:38,960 Speaker 1: an hour and a half. We're making zero progress. We're 385 00:21:39,000 --> 00:21:43,160 Speaker 1: not getting anywhere. And i'd been in Europe with him 386 00:21:43,160 --> 00:21:45,400 Speaker 1: and talked to him over there. We're making progress there. 387 00:21:45,480 --> 00:21:47,840 Speaker 1: Now here he is in New York and it's like 388 00:21:48,720 --> 00:21:51,439 Speaker 1: there's like a big heavy stone on him. And I 389 00:21:51,480 --> 00:21:53,359 Speaker 1: look at him and I finally figure out he's a 390 00:21:53,440 --> 00:21:59,600 Speaker 1: chain smoker. I said, she Sean, light him up. He said, 391 00:21:59,600 --> 00:22:01,520 Speaker 1: I can't do that. I said, what do you mean 392 00:22:01,560 --> 00:22:03,639 Speaker 1: you can't do that? He said, in New York, he 393 00:22:03,680 --> 00:22:05,879 Speaker 1: can't smoke inside. I said to my office, you can 394 00:22:05,920 --> 00:22:09,360 Speaker 1: do anything you want to light them up? And he smoked, Luckies, 395 00:22:09,400 --> 00:22:12,280 Speaker 1: can you imagine smoking Luckies. He smoked Luckies, he lit 396 00:22:12,320 --> 00:22:14,679 Speaker 1: him up. We got the deal filter right, no filter, 397 00:22:15,119 --> 00:22:18,320 Speaker 1: We got the deal done. And I keep reflecting back, 398 00:22:18,760 --> 00:22:21,520 Speaker 1: you gotta pay attention to the person who's in the 399 00:22:21,600 --> 00:22:24,199 Speaker 1: room with you. But I'm impressed that he knows the 400 00:22:24,320 --> 00:22:27,960 Speaker 1: local rules and customs in New York. Very respectful. That's 401 00:22:28,000 --> 00:22:31,760 Speaker 1: really impressive. So you opened this joint venture in China. 402 00:22:32,240 --> 00:22:35,600 Speaker 1: Is Morgan Stanley the first US bank to open a 403 00:22:35,680 --> 00:22:38,560 Speaker 1: joint venture and it was I know, the UK banks 404 00:22:38,600 --> 00:22:43,680 Speaker 1: Hong Kong Bank at a UK ownership, but we were 405 00:22:43,680 --> 00:22:46,320 Speaker 1: the first bank. But you know, I'm sure JP Morgan 406 00:22:46,400 --> 00:22:49,680 Speaker 1: had some kind of outlet there, but more for banking 407 00:22:49,720 --> 00:22:54,800 Speaker 1: and taking deposits and doing traditional banking business, but from 408 00:22:54,840 --> 00:22:59,240 Speaker 1: a trading point of view, securities business. Thanks to Ed Limb, 409 00:22:59,280 --> 00:23:01,879 Speaker 1: who as I said, had worked at the U N said, 410 00:23:02,000 --> 00:23:04,840 Speaker 1: you know, China really needs capital markets and needs investment 411 00:23:04,840 --> 00:23:08,240 Speaker 1: banking business, and with his help, we started a small 412 00:23:08,280 --> 00:23:12,120 Speaker 1: investment bank there which continued to grow. So not just 413 00:23:12,520 --> 00:23:16,480 Speaker 1: the division in China grew, but all of Morgan Stanley grew, 414 00:23:17,040 --> 00:23:20,480 Speaker 1: and eventually you came to realize, hey, we have all 415 00:23:20,520 --> 00:23:23,560 Speaker 1: this investment banking and trading experience, but we don't have 416 00:23:23,600 --> 00:23:28,000 Speaker 1: a retail force the way somebody like Merrill Lynch does, 417 00:23:28,520 --> 00:23:31,760 Speaker 1: and lo and behold the long comes Dean Winner potentially 418 00:23:32,520 --> 00:23:37,159 Speaker 1: um a great merger candidate. Tell us a little bit 419 00:23:37,200 --> 00:23:41,080 Speaker 1: about why that seemed like a good idea at the time. Sure, well, 420 00:23:41,119 --> 00:23:44,280 Speaker 1: what we saw Mary Lynch, which traditionally had been a 421 00:23:44,320 --> 00:23:50,000 Speaker 1: pure retail firm because of their huge network. Number one, 422 00:23:50,040 --> 00:23:53,119 Speaker 1: they had better information not only from what's going on 423 00:23:53,200 --> 00:23:55,879 Speaker 1: in the retail market, but also from institutions. You know, 424 00:23:56,720 --> 00:23:58,600 Speaker 1: if you're in Des Moines, Iowa, and you knew the 425 00:23:58,640 --> 00:24:02,120 Speaker 1: local president of the First Bank of Iowa, you've got 426 00:24:02,200 --> 00:24:04,960 Speaker 1: better information. And if they were going to buy treasury 427 00:24:05,000 --> 00:24:09,280 Speaker 1: securities I medicipals, you got that order. So we saw 428 00:24:09,359 --> 00:24:13,480 Speaker 1: that we were getting limited information. And then um Sears 429 00:24:14,560 --> 00:24:18,359 Speaker 1: who had bought Dean Winter I think it was Ed 430 00:24:18,440 --> 00:24:22,919 Speaker 1: Brennan and Phil Purcell had been a management consultant I 431 00:24:22,960 --> 00:24:26,040 Speaker 1: think for Mackenzie, but not sure that. And he he 432 00:24:26,080 --> 00:24:28,760 Speaker 1: convinced ed Brennan that you know, if you really are 433 00:24:28,760 --> 00:24:33,440 Speaker 1: going to be in retail, you have Sears stores everywhere 434 00:24:33,480 --> 00:24:36,199 Speaker 1: every city of a hundred thousand people. There was a 435 00:24:36,240 --> 00:24:39,240 Speaker 1: Senior's store, and he said, you know, we ought to 436 00:24:39,280 --> 00:24:43,520 Speaker 1: open up Dean Winter offices and all these these serious stores. 437 00:24:43,520 --> 00:24:46,160 Speaker 1: And that's what they did, and it grew and grew, 438 00:24:46,200 --> 00:24:50,320 Speaker 1: and then they came to the point that Priscella convinced Sears, 439 00:24:50,400 --> 00:24:54,080 Speaker 1: let's spin it out and take this company public. So 440 00:24:54,240 --> 00:24:57,560 Speaker 1: Morgan Stanley was chosen to be the lead underwriter on 441 00:24:57,600 --> 00:25:01,320 Speaker 1: the spin out of Dean Winter from Sear US. So 442 00:25:01,400 --> 00:25:04,040 Speaker 1: if Dick Fisher calls me in, I meet priscell who 443 00:25:04,080 --> 00:25:06,919 Speaker 1: I liked, and I looked at their business and the 444 00:25:07,000 --> 00:25:11,240 Speaker 1: information they were getting from clients versus what we were getting. 445 00:25:11,320 --> 00:25:14,680 Speaker 1: They were in every well how many serious stores are there, 446 00:25:14,720 --> 00:25:17,000 Speaker 1: They were everywhere. At their peak, I think it was 447 00:25:17,040 --> 00:25:22,760 Speaker 1: like three, so they had better information. So UH, you know, 448 00:25:22,840 --> 00:25:26,959 Speaker 1: we talked, h and talked, and finally we came to 449 00:25:27,000 --> 00:25:30,080 Speaker 1: the conclusion on the handshake to do the deal. UH. 450 00:25:30,200 --> 00:25:33,600 Speaker 1: Sears and Dean Winter was much larger in market cap 451 00:25:33,680 --> 00:25:37,119 Speaker 1: than Morgan Stanley, so it was agreed upon. UH, and 452 00:25:37,160 --> 00:25:41,080 Speaker 1: he wouldn't do it without being uh the CEO. And 453 00:25:41,280 --> 00:25:43,520 Speaker 1: UH we had a couple of dinners in New York 454 00:25:43,560 --> 00:25:47,960 Speaker 1: with Dick Fisher and in him UH Ed Brennan and 455 00:25:48,320 --> 00:25:50,320 Speaker 1: to get the deal done, he had to be the CEO. 456 00:25:50,640 --> 00:25:53,680 Speaker 1: So Fisher says to me in a private meet in 457 00:25:53,720 --> 00:25:56,520 Speaker 1: his office, I'm not gonna let you do this trip 458 00:25:56,640 --> 00:25:59,600 Speaker 1: or do this management training. I said, well, Dick, no 459 00:25:59,680 --> 00:26:03,240 Speaker 1: one's on our firm, his shareholders firm. And for me 460 00:26:03,320 --> 00:26:05,720 Speaker 1: to say that, Dick Fisher, it was kind of ridiculous 461 00:26:05,760 --> 00:26:08,280 Speaker 1: because he was always teaching me about the business and 462 00:26:08,359 --> 00:26:11,520 Speaker 1: he was a wonderful man and a smart man. So 463 00:26:11,680 --> 00:26:15,480 Speaker 1: I said, look, this is what makes sense for shareholders. 464 00:26:16,080 --> 00:26:19,760 Speaker 1: I'll take the number two job. Feels a good guy. 465 00:26:19,800 --> 00:26:22,919 Speaker 1: I'll get along with him, and let's do this merger. 466 00:26:23,600 --> 00:26:26,480 Speaker 1: And we did. And what we also inherited when we 467 00:26:26,520 --> 00:26:29,280 Speaker 1: did that merger was Discover Card, which was also a 468 00:26:29,359 --> 00:26:33,320 Speaker 1: money machine. It was a money machine, but you know, 469 00:26:33,400 --> 00:26:36,480 Speaker 1: we clashed, and we clashed in the sense like I said, 470 00:26:36,600 --> 00:26:40,080 Speaker 1: I think earlier, if I were out in Sacramento seeing 471 00:26:40,080 --> 00:26:43,320 Speaker 1: the state funds of California and I had an extra hour, 472 00:26:43,400 --> 00:26:47,480 Speaker 1: I would drop by, you know, the local office of 473 00:26:47,480 --> 00:26:50,359 Speaker 1: the Morgan Stanley Dean Wood her office and go in 474 00:26:50,480 --> 00:26:53,360 Speaker 1: talk to a salesman. And clearly, you know, salesman who 475 00:26:53,359 --> 00:26:56,240 Speaker 1: are on commission by large do a good job, but 476 00:26:56,359 --> 00:27:00,400 Speaker 1: always have complaints. And I heard the complaints, came back 477 00:27:00,480 --> 00:27:02,639 Speaker 1: and I talked with the manager of All Retail, and 478 00:27:02,680 --> 00:27:04,960 Speaker 1: I talked to Purcell, and then Purcell said to me, 479 00:27:05,840 --> 00:27:07,760 Speaker 1: you know, Johnny can't do that. I said, what do 480 00:27:07,800 --> 00:27:10,120 Speaker 1: you mean, I can't do that. You can't just drop 481 00:27:10,160 --> 00:27:11,840 Speaker 1: into the office and talk to him. I said, well, 482 00:27:11,920 --> 00:27:14,639 Speaker 1: last time I checked. You know, you're the CEO, but 483 00:27:14,680 --> 00:27:18,439 Speaker 1: I'm preasling the firm. I'm in Sacramento seeing Safeway stores 484 00:27:18,480 --> 00:27:20,320 Speaker 1: and you're telling me I can't go into the office 485 00:27:20,320 --> 00:27:22,600 Speaker 1: and talk to him. He said, well, you know Ed 486 00:27:22,640 --> 00:27:25,600 Speaker 1: Brennan would never do that at serious And I said, 487 00:27:25,840 --> 00:27:30,359 Speaker 1: you know this is not serious, and uh so, right 488 00:27:30,400 --> 00:27:32,679 Speaker 1: then we knew we had an issue. Right He was 489 00:27:32,960 --> 00:27:36,840 Speaker 1: very risk averse and you were very hands on. It 490 00:27:36,920 --> 00:27:40,600 Speaker 1: seems like from day one a clash of the Titans 491 00:27:40,680 --> 00:27:44,520 Speaker 1: was teeing up. Yeah, but not from day one. I mean, look, 492 00:27:44,840 --> 00:27:47,840 Speaker 1: they had built a great business in retail. Uh at 493 00:27:47,880 --> 00:27:52,720 Speaker 1: Dean Winter they had brokers all over the country doing business. 494 00:27:52,760 --> 00:27:55,960 Speaker 1: They didn't have an international business. I think they thought 495 00:27:56,000 --> 00:28:01,119 Speaker 1: international was going to Canada. Um, it was just two 496 00:28:01,480 --> 00:28:07,919 Speaker 1: different cultures and no one challenged or spoke up either 497 00:28:08,280 --> 00:28:14,560 Speaker 1: two a guy named Jimmy who ran the the the 498 00:28:14,640 --> 00:28:18,520 Speaker 1: retail business are clearly per sale who ran both retail 499 00:28:18,600 --> 00:28:22,280 Speaker 1: institutional the credit card business, and my view at Morgan Stanley. 500 00:28:22,359 --> 00:28:24,280 Speaker 1: And I did this with Dick Fisher, and people did 501 00:28:24,280 --> 00:28:27,199 Speaker 1: it with me in my office. I don't care what 502 00:28:27,240 --> 00:28:30,520 Speaker 1: you say to me, I want to hear it. And 503 00:28:30,520 --> 00:28:32,520 Speaker 1: a Dean win or you didn't do that, and that 504 00:28:32,520 --> 00:28:37,240 Speaker 1: that was the big cultural change. So given the sort 505 00:28:37,280 --> 00:28:41,840 Speaker 1: of head to head in terms of culture, Purcel's team, 506 00:28:41,880 --> 00:28:44,800 Speaker 1: at least for a while, seemed to have won. You 507 00:28:44,880 --> 00:28:50,320 Speaker 1: eventually came to realize he was reducing your authority step 508 00:28:50,360 --> 00:28:52,360 Speaker 1: by step and at a certain point you're like, I 509 00:28:52,360 --> 00:28:54,880 Speaker 1: don't want to just be a figure head, and so 510 00:28:55,080 --> 00:28:58,040 Speaker 1: you you resigned. Tell us what that was like to 511 00:28:58,560 --> 00:29:01,400 Speaker 1: You've been at Morgan Stanley for quite a while. Yeah, 512 00:29:01,400 --> 00:29:07,120 Speaker 1: well it was difficult. But I couldn't stay there, um 513 00:29:07,240 --> 00:29:11,760 Speaker 1: under a philosophy or a management style where uh, you're 514 00:29:11,920 --> 00:29:14,320 Speaker 1: not allowed to go to your boss and tell him 515 00:29:14,360 --> 00:29:16,280 Speaker 1: you know, I think you're a jerk. And I had 516 00:29:16,320 --> 00:29:18,680 Speaker 1: a number of people say that to me, and I 517 00:29:18,720 --> 00:29:20,560 Speaker 1: didn't get even with him. I just changed some of 518 00:29:20,560 --> 00:29:24,200 Speaker 1: the things. Sometimes they were right. I wasn't jerk um. 519 00:29:24,520 --> 00:29:28,360 Speaker 1: Just two different cultures. I mean, Morgan Stanley built it's 520 00:29:28,760 --> 00:29:33,000 Speaker 1: it's business on telling clients exactly what they thought. They 521 00:29:33,000 --> 00:29:35,600 Speaker 1: didn't sugarcoat it, they didn't try to say, you know, 522 00:29:35,720 --> 00:29:38,040 Speaker 1: maybe a little of this, a little that. They told 523 00:29:38,080 --> 00:29:41,560 Speaker 1: the client these are the issues. And that's the way 524 00:29:41,600 --> 00:29:43,440 Speaker 1: I grew up and that's the way Dick Fisher was. 525 00:29:43,560 --> 00:29:47,160 Speaker 1: So as much as I tried to change, I just 526 00:29:47,400 --> 00:29:50,320 Speaker 1: I was miserable. I couldn't do it. And uh he 527 00:29:50,400 --> 00:29:54,280 Speaker 1: put me in charge of the retail system, but everything 528 00:29:54,640 --> 00:29:58,560 Speaker 1: was bounced through him before I could make any decisions. Look, 529 00:29:58,600 --> 00:30:01,960 Speaker 1: it's their style. They had been successful. The retail business 530 00:30:02,000 --> 00:30:05,760 Speaker 1: was important to the firm, and by putting retail and 531 00:30:05,880 --> 00:30:09,720 Speaker 1: institutional together we had tremendous cloud. But from a managerial 532 00:30:09,760 --> 00:30:12,080 Speaker 1: point of view, it's not a culture I wanted to 533 00:30:12,080 --> 00:30:15,760 Speaker 1: be in. Let's talk a little bit about a period 534 00:30:15,800 --> 00:30:19,280 Speaker 1: where you were just bored golfing. You leave Morgan Stanley, 535 00:30:19,560 --> 00:30:22,480 Speaker 1: you're really not sure what the next chapter in your 536 00:30:22,520 --> 00:30:24,520 Speaker 1: life is going to be, and then you get a 537 00:30:24,520 --> 00:30:28,640 Speaker 1: phone call about the mess that was credit Swiss. What 538 00:30:28,880 --> 00:30:32,080 Speaker 1: made you attracted to coming in and trying to clean 539 00:30:32,200 --> 00:30:35,400 Speaker 1: up Credit Swiss first Boston. Well, I got a call 540 00:30:35,440 --> 00:30:40,000 Speaker 1: from Lionel Pinkus and I assume they had a big 541 00:30:40,000 --> 00:30:42,200 Speaker 1: investment with the Swiss and they were not happy what 542 00:30:42,240 --> 00:30:45,680 Speaker 1: was going on. So I met with him, and um, 543 00:30:46,480 --> 00:30:49,000 Speaker 1: you know, I met some of the other people who 544 00:30:49,040 --> 00:30:52,400 Speaker 1: in the management of Credit Sweet and I said to Christie, 545 00:30:52,640 --> 00:30:56,280 Speaker 1: I would rather do this job and regret it then 546 00:30:56,360 --> 00:30:59,280 Speaker 1: not do this job and regret it. So that's how 547 00:30:59,280 --> 00:31:04,160 Speaker 1: I made the decison regret minimization framework exactly a good 548 00:31:04,200 --> 00:31:06,920 Speaker 1: way to think about it. We should talk more about 549 00:31:06,920 --> 00:31:10,200 Speaker 1: your wife because it seems like she regularly gives you 550 00:31:10,240 --> 00:31:12,920 Speaker 1: good advice and send you off to apologize for something 551 00:31:12,960 --> 00:31:16,480 Speaker 1: you said. And you talked about that in the book. Well, 552 00:31:16,520 --> 00:31:20,040 Speaker 1: we'll circle back to that later. So I'm amused by 553 00:31:20,080 --> 00:31:24,160 Speaker 1: the headline Wall Street fears big Mac attack. What was 554 00:31:24,200 --> 00:31:27,160 Speaker 1: the expectation post Morgan Stanley? What what did the Street 555 00:31:27,240 --> 00:31:29,760 Speaker 1: think You're gonna come in and do a Credit Swiss? 556 00:31:30,840 --> 00:31:33,560 Speaker 1: Well and Morgan Stanley, when I thought, especially in the 557 00:31:33,560 --> 00:31:36,520 Speaker 1: Thicks income division at that time, and somebody thinking Iran 558 00:31:37,560 --> 00:31:41,280 Speaker 1: that we we were too too fat, you know, we 559 00:31:41,320 --> 00:31:45,680 Speaker 1: need to do reduction. So I did. And this isn't 560 00:31:45,720 --> 00:31:49,760 Speaker 1: just head count. This is you describe some pretty egregious 561 00:31:49,840 --> 00:31:54,360 Speaker 1: spending going on a credit Swiss, Well, it was. It 562 00:31:54,400 --> 00:31:58,920 Speaker 1: was totally out of control. And no, the Swiss were 563 00:31:59,080 --> 00:32:03,400 Speaker 1: were kind of absentee landlords and they were used to 564 00:32:03,800 --> 00:32:06,320 Speaker 1: getting all this money on a Swiss bank account and 565 00:32:06,360 --> 00:32:09,160 Speaker 1: a lot of money coming I assumed from other parts 566 00:32:09,200 --> 00:32:11,480 Speaker 1: of the world. Said it was pretty easy when I 567 00:32:11,520 --> 00:32:14,080 Speaker 1: got there that we had to do some head count reduction. 568 00:32:14,120 --> 00:32:17,040 Speaker 1: When I got there, three of my bankers who would 569 00:32:17,040 --> 00:32:21,240 Speaker 1: work for me at Morgan Stanley, Um, we're big in technology, 570 00:32:21,280 --> 00:32:25,880 Speaker 1: Frank Watron and his team, and uh, when I saw 571 00:32:26,040 --> 00:32:27,800 Speaker 1: what kind of money they were making, it was it 572 00:32:27,880 --> 00:32:32,520 Speaker 1: was mind boggling. So uh, I flew out to see 573 00:32:32,600 --> 00:32:36,120 Speaker 1: them and uh, I said, look, guys, I'll pay you 574 00:32:36,120 --> 00:32:38,239 Speaker 1: a lot of money, There's there's no question about that. 575 00:32:38,360 --> 00:32:40,840 Speaker 1: But what you're doing and the amount of money you're 576 00:32:40,880 --> 00:32:44,200 Speaker 1: making now versus the rest of the firm and using 577 00:32:44,240 --> 00:32:46,920 Speaker 1: the balance use of the firm is unacceptable. So we're 578 00:32:46,920 --> 00:32:49,720 Speaker 1: gonna have to figure out a way. I want you 579 00:32:49,760 --> 00:32:51,120 Speaker 1: to make a lot of money. I think as a 580 00:32:51,160 --> 00:32:54,000 Speaker 1: great motivator, but this is totally out of control, and 581 00:32:54,040 --> 00:32:56,360 Speaker 1: I wish I could remember exactly some of the numbers, 582 00:32:56,720 --> 00:32:58,840 Speaker 1: but there were numbers like I've never seen before. It 583 00:32:58,960 --> 00:33:01,840 Speaker 1: was order of nacktitude's larger than than the rest of 584 00:33:01,840 --> 00:33:05,560 Speaker 1: the strip. They got a piece of every deal they 585 00:33:05,640 --> 00:33:12,560 Speaker 1: did personally, personally, so you know who. One of them says, uh, 586 00:33:12,600 --> 00:33:17,320 Speaker 1: you know, John, this is in our contract, but I 587 00:33:17,360 --> 00:33:22,120 Speaker 1: think this compensation is way out of kilter. And just 588 00:33:22,160 --> 00:33:25,080 Speaker 1: to add a little color to this, when I said 589 00:33:25,120 --> 00:33:27,320 Speaker 1: to them, I want to come out and I want 590 00:33:27,360 --> 00:33:29,280 Speaker 1: you to come to New York and we got to 591 00:33:29,320 --> 00:33:32,480 Speaker 1: talk about these contracts and this is after not eleven, 592 00:33:32,520 --> 00:33:34,800 Speaker 1: and they said, well, we're afraid to do that. I said, 593 00:33:34,800 --> 00:33:37,240 Speaker 1: well tell me you want Well after not eleven, we 594 00:33:37,280 --> 00:33:40,240 Speaker 1: don't go to New York. I said, okay, pick a city. 595 00:33:40,240 --> 00:33:42,400 Speaker 1: I'll meet you in the city. So I met him 596 00:33:42,400 --> 00:33:44,840 Speaker 1: in Denver. I think about that, how absurd that is. 597 00:33:45,360 --> 00:33:48,720 Speaker 1: So I flew out to Denver and I took Steve Volk, 598 00:33:48,760 --> 00:33:52,320 Speaker 1: who had been at Sherman and Sterling as the lead lawyer, 599 00:33:52,440 --> 00:33:55,160 Speaker 1: lead partner. He had joined me to help clean up 600 00:33:55,440 --> 00:34:00,600 Speaker 1: credits fees. So I sit with George Buttress uh trone 601 00:34:00,920 --> 00:34:04,560 Speaker 1: and I think a guy named Brady, and I said, look, guys, 602 00:34:04,600 --> 00:34:05,880 Speaker 1: I want you to make a lot of money. I 603 00:34:05,880 --> 00:34:08,799 Speaker 1: don't have any issue with that, but this is craziness 604 00:34:09,719 --> 00:34:12,879 Speaker 1: and I can't do that. And they said, well, look 605 00:34:12,920 --> 00:34:16,520 Speaker 1: at maybe craziness, but that's our contract. I said, it 606 00:34:16,560 --> 00:34:20,640 Speaker 1: may be your contract, and uh, I'll see you in 607 00:34:20,760 --> 00:34:23,239 Speaker 1: court and we'll fight it out. And they gave up 608 00:34:23,239 --> 00:34:26,760 Speaker 1: a contracts but I still paid them a line of money. 609 00:34:27,520 --> 00:34:30,560 Speaker 1: But you can't you can't create a culture when you 610 00:34:30,640 --> 00:34:33,880 Speaker 1: have one offs doing whatever they want to do. You 611 00:34:34,000 --> 00:34:38,000 Speaker 1: described it as anyone with a personal fiefdom is a 612 00:34:38,080 --> 00:34:41,640 Speaker 1: terrible idea for a firm. Absolutely, And they're good, they 613 00:34:41,640 --> 00:34:44,920 Speaker 1: were smart. You would you would like a room full 614 00:34:44,960 --> 00:34:48,600 Speaker 1: of Frank Latron's. You gotta be managed, You've gotta be 615 00:34:48,600 --> 00:34:54,200 Speaker 1: a team player. So someone said to you around this time, Hey, 616 00:34:54,200 --> 00:34:57,320 Speaker 1: we're giving up a lot of money. What about you, John, 617 00:34:57,360 --> 00:34:59,840 Speaker 1: what are you giving up? And what was your response? 618 00:35:00,040 --> 00:35:02,799 Speaker 1: Gave up the contract? So you gave up about a 619 00:35:02,840 --> 00:35:06,040 Speaker 1: third of yourself. That's a big chunk of cash. But 620 00:35:06,120 --> 00:35:08,719 Speaker 1: if you're going to ask people to go up their contract, 621 00:35:08,760 --> 00:35:12,160 Speaker 1: you can't be different than them. This term that I 622 00:35:12,280 --> 00:35:16,160 Speaker 1: run from from time to long, it's a one firm firm. 623 00:35:16,239 --> 00:35:18,759 Speaker 1: We all have to be in it together. So for 624 00:35:18,800 --> 00:35:21,759 Speaker 1: me to keep the contract, it's just not the right 625 00:35:21,800 --> 00:35:24,680 Speaker 1: thing to do. And also I learned so much from 626 00:35:24,719 --> 00:35:28,799 Speaker 1: Dick Fisher. I'm I'm looking way down the road. I'm 627 00:35:28,800 --> 00:35:31,719 Speaker 1: not looking about what's going to happen next week or 628 00:35:31,719 --> 00:35:34,680 Speaker 1: two weeks from now. Well, that's that's a good strategy 629 00:35:34,680 --> 00:35:37,840 Speaker 1: and investing. To say, Harry, the very least you wrote 630 00:35:37,840 --> 00:35:42,080 Speaker 1: in the book, the Swiss and Swiss bankers were unlike 631 00:35:42,200 --> 00:35:45,000 Speaker 1: any other bankers you work with in the UK and 632 00:35:45,200 --> 00:35:48,239 Speaker 1: China and Japan. What made the Swiss so much of 633 00:35:48,280 --> 00:35:52,080 Speaker 1: a one off? Well, they were very independent. Uh, they 634 00:35:52,120 --> 00:35:57,160 Speaker 1: had a lock on certain clients, whether it was leaders 635 00:35:57,200 --> 00:36:02,160 Speaker 1: out of the Middle East or out of oligarchs in Russia. 636 00:36:03,000 --> 00:36:05,000 Speaker 1: They got a lot of money coming in because they 637 00:36:05,040 --> 00:36:09,200 Speaker 1: were Swiss. They had a great franchise and they really 638 00:36:09,239 --> 00:36:12,280 Speaker 1: lived off their private banking business and in their investment 639 00:36:12,280 --> 00:36:15,120 Speaker 1: banking business. They had a guy who was very talented, 640 00:36:15,239 --> 00:36:17,400 Speaker 1: very smart, named Alan Wheat, and they had other people 641 00:36:17,440 --> 00:36:21,279 Speaker 1: that come in, but everyone was running it for their 642 00:36:21,320 --> 00:36:27,000 Speaker 1: own returned into their own pocket. And um, so when 643 00:36:27,040 --> 00:36:30,600 Speaker 1: I got there, I cut commissions. I got Frank and 644 00:36:30,640 --> 00:36:33,800 Speaker 1: his guys to give up some of their money. Um, 645 00:36:33,840 --> 00:36:36,759 Speaker 1: and someone said, you know, we're cutting commissions and getting 646 00:36:36,840 --> 00:36:38,799 Speaker 1: less when you give up your contract, and I did 647 00:36:40,040 --> 00:36:44,440 Speaker 1: so it just wouldn't being managed. And the Swiss, uh, 648 00:36:44,840 --> 00:36:46,960 Speaker 1: you know, they make a lot of money because they 649 00:36:47,000 --> 00:36:49,800 Speaker 1: get money from all the places that maybe J. P. 650 00:36:49,920 --> 00:36:52,440 Speaker 1: Moorey none others wouldn't take. They did a lot of 651 00:36:52,480 --> 00:36:54,920 Speaker 1: investing with that money. They got to carry on some 652 00:36:55,080 --> 00:36:58,760 Speaker 1: of it. Uh. It's a great it's a great um 653 00:36:59,040 --> 00:37:01,880 Speaker 1: system for running very profitable business. But the world was 654 00:37:01,960 --> 00:37:06,240 Speaker 1: changing and disclosure was becoming more and more open. People 655 00:37:06,280 --> 00:37:08,879 Speaker 1: want to know, you know, who has the money, where 656 00:37:08,960 --> 00:37:12,600 Speaker 1: is it going, how's money being transferred? And we finally 657 00:37:12,640 --> 00:37:18,200 Speaker 1: got that to start moving and changing in Switzerland. And uh, 658 00:37:18,239 --> 00:37:20,080 Speaker 1: I was pretty tough on them, and of course they 659 00:37:20,080 --> 00:37:22,160 Speaker 1: thought I was the most arrogant person they ever met. 660 00:37:22,800 --> 00:37:25,359 Speaker 1: I thought they were the dumbest people ever. And you 661 00:37:25,480 --> 00:37:28,560 Speaker 1: in the book you described actually saying that to their face. 662 00:37:29,239 --> 00:37:33,880 Speaker 1: Given how secretive they are and how less than team 663 00:37:34,000 --> 00:37:38,160 Speaker 1: focused they were, you knew this match wasn't gonna last forever. 664 00:37:38,440 --> 00:37:41,200 Speaker 1: How long did you last? The credits West, I think 665 00:37:41,239 --> 00:37:45,359 Speaker 1: I lasted at least two years, maybe three, long enough 666 00:37:45,400 --> 00:37:48,600 Speaker 1: to start showing a profit. We started making money. It 667 00:37:48,640 --> 00:37:52,160 Speaker 1: was great. I mean I remember the only on group 668 00:37:52,360 --> 00:37:54,000 Speaker 1: out of the Middle East said to me, and they 669 00:37:54,000 --> 00:37:56,719 Speaker 1: were a huge investor in credit. So he's Johnny doing 670 00:37:56,719 --> 00:37:59,480 Speaker 1: a great job. We're finally making money again. But I 671 00:37:59,480 --> 00:38:02,400 Speaker 1: can't take people telling me, you know, you don't have 672 00:38:02,480 --> 00:38:05,560 Speaker 1: access for this, you don't have access for that. My view, 673 00:38:05,920 --> 00:38:09,560 Speaker 1: which drove him crazy, was to open up their vault 674 00:38:10,200 --> 00:38:12,919 Speaker 1: and let the European Jews come in and see how 675 00:38:13,000 --> 00:38:18,200 Speaker 1: much money Credit Swiez took when World War two started? Right? 676 00:38:18,440 --> 00:38:20,840 Speaker 1: You know, how about the paintings they had? What's a 677 00:38:20,960 --> 00:38:24,359 Speaker 1: bank doing with our ren Wirin's in a safe? What 678 00:38:24,440 --> 00:38:28,560 Speaker 1: was the response to that? They didn't like it? I 679 00:38:28,640 --> 00:38:32,920 Speaker 1: can't imagine. So you end up leaving Credit Swiss not 680 00:38:33,040 --> 00:38:35,680 Speaker 1: long after. Well, they wouldn't renew my contract, right, So 681 00:38:35,719 --> 00:38:37,520 Speaker 1: it wasn't like you were out and I fired. It 682 00:38:37,640 --> 00:38:43,040 Speaker 1: was after your your contract ended. I was fired. So 683 00:38:43,040 --> 00:38:46,000 Speaker 1: so non renewal And what was the firing like? Tell 684 00:38:46,080 --> 00:38:48,920 Speaker 1: us a little bit about that. Was it relatively polite 685 00:38:48,960 --> 00:38:52,279 Speaker 1: and pleasant? The swisser they're not quite German they're not 686 00:38:52,360 --> 00:38:55,279 Speaker 1: quite French. Their customs are a little bit different than 687 00:38:55,320 --> 00:38:59,440 Speaker 1: the rest of Europe. Well, um, when I went, I 688 00:38:59,440 --> 00:39:02,400 Speaker 1: said I could pick someone that I liked and trusted 689 00:39:02,440 --> 00:39:03,959 Speaker 1: a friend to go on the board. And I asked 690 00:39:04,000 --> 00:39:06,719 Speaker 1: a guy named Tom Bell, who was a close friend 691 00:39:06,719 --> 00:39:09,399 Speaker 1: of mine. He used to run why in our advertising 692 00:39:09,480 --> 00:39:12,560 Speaker 1: agency and then he ran Cousins Properties in Atlanta to 693 00:39:12,560 --> 00:39:15,000 Speaker 1: go on the board. And he called me after there 694 00:39:15,040 --> 00:39:17,080 Speaker 1: means that John be prepared. They're gonna fire you tomorrow, 695 00:39:17,120 --> 00:39:19,200 Speaker 1: and I said, well thanks, so heads up. So I 696 00:39:19,239 --> 00:39:22,399 Speaker 1: went in they fired me, and uh, I sat and said, 697 00:39:22,400 --> 00:39:24,320 Speaker 1: you know, Walter or what do you think of this? 698 00:39:24,440 --> 00:39:26,239 Speaker 1: Trying to get them to talk that they didn't want 699 00:39:26,239 --> 00:39:31,280 Speaker 1: any part of talking. And look, you know, I don't 700 00:39:31,400 --> 00:39:33,400 Speaker 1: I don't have any issue with I don't have an 701 00:39:33,400 --> 00:39:35,360 Speaker 1: issue with him fire. But I was. I guess you 702 00:39:35,400 --> 00:39:37,919 Speaker 1: could say I was aggressive or obnoxious one or the other. 703 00:39:38,640 --> 00:39:41,320 Speaker 1: But we turned the place around, we started making money. 704 00:39:42,040 --> 00:39:46,480 Speaker 1: But um, look, I don't think in general, we have 705 00:39:46,600 --> 00:39:48,920 Speaker 1: to ask my friends and people who know me. I 706 00:39:48,920 --> 00:39:51,560 Speaker 1: don't think I'm arrogant, but clearly I came across as 707 00:39:51,680 --> 00:39:54,920 Speaker 1: arrogant know what all? And they shot me. So, you know, 708 00:39:55,440 --> 00:39:57,400 Speaker 1: but you have done a good job there. Let's let's 709 00:39:57,400 --> 00:40:01,319 Speaker 1: talk a bit about Mac and NiFe, right, So there's 710 00:40:01,400 --> 00:40:05,680 Speaker 1: chainsaw Al, there's Neutron Jack. I don't get the sense 711 00:40:05,840 --> 00:40:10,279 Speaker 1: that you were as blase about having to reduce headcounts 712 00:40:10,800 --> 00:40:14,480 Speaker 1: as some other CEO s were. It struck me that 713 00:40:14,719 --> 00:40:17,479 Speaker 1: Mac the Knife sort of rankled you a little bit, 714 00:40:17,760 --> 00:40:20,160 Speaker 1: and at least that's how it comes across in the book. Yeah, 715 00:40:20,760 --> 00:40:24,680 Speaker 1: I didn't mind it. I mean, being nuns back the Knife. 716 00:40:24,680 --> 00:40:27,440 Speaker 1: It kind of built a reputation for me. And you know, 717 00:40:27,480 --> 00:40:30,120 Speaker 1: people would I'd go to a bar somewhere, I'd go 718 00:40:30,200 --> 00:40:33,200 Speaker 1: to a Christmas party with a lot of wallster you guys, 719 00:40:33,239 --> 00:40:36,720 Speaker 1: and early someone to be pointing sis Mac the Knife. 720 00:40:36,640 --> 00:40:38,080 Speaker 1: You know, I kind of I have an ego. I 721 00:40:38,120 --> 00:40:41,480 Speaker 1: like that I am Mac the Knife. That's uh, that's 722 00:40:41,480 --> 00:40:44,480 Speaker 1: pretty good. So now you you get fired at Credit Swiss. 723 00:40:45,320 --> 00:40:50,160 Speaker 1: And meanwhile Morgan Stanley, run by the somewhat risk averse 724 00:40:50,600 --> 00:40:55,440 Speaker 1: Phil Purcell, starts falling behind all their competitors, and lo 725 00:40:55,520 --> 00:41:00,279 Speaker 1: and behold there is an agitation to uh have some 726 00:41:00,440 --> 00:41:03,759 Speaker 1: change at at Morgan Stanley. Dean Witter tell us what 727 00:41:03,800 --> 00:41:06,719 Speaker 1: happens next. Well, I'm at pe Quat, which is a 728 00:41:06,719 --> 00:41:09,319 Speaker 1: hedge fund, with Sam Mark Sandberg and having a good 729 00:41:09,320 --> 00:41:13,719 Speaker 1: time and Morgan Stanley is falling by, and then Parker Gilbert, 730 00:41:13,719 --> 00:41:16,200 Speaker 1: who had been the chairman of the firm, and I think, 731 00:41:16,800 --> 00:41:19,480 Speaker 1: going all the way back, his stepfather was one of 732 00:41:19,520 --> 00:41:23,360 Speaker 1: the original partners at JP Morgan spun out and started Morgan. 733 00:41:23,760 --> 00:41:27,080 Speaker 1: Wasn't he related to Henry Morgan? Also, I mean, Dad, 734 00:41:27,120 --> 00:41:29,959 Speaker 1: I don't know. I don't think so, but I don't 735 00:41:29,960 --> 00:41:33,920 Speaker 1: know that Charles Morgan was related to Henry Morgan, who 736 00:41:33,920 --> 00:41:36,120 Speaker 1: was not on the management committee. But there was a 737 00:41:36,160 --> 00:41:39,799 Speaker 1: relationship going all the way back to the Morgan's. Uh 738 00:41:39,840 --> 00:41:43,160 Speaker 1: So Parker got together with a number of retired partners 739 00:41:43,160 --> 00:41:46,640 Speaker 1: who owned a tremendous amount of Morgan Stanley slash Dean 740 00:41:46,640 --> 00:41:49,640 Speaker 1: with a stock now and they went on a campaign 741 00:41:50,160 --> 00:41:52,200 Speaker 1: to force Purcell out and at the end of the 742 00:41:52,280 --> 00:41:57,040 Speaker 1: day they were successful. And you get the phone call again. 743 00:41:57,360 --> 00:42:01,160 Speaker 1: Briefly thought about it. What does your wife stadium m Well, 744 00:42:01,239 --> 00:42:04,080 Speaker 1: she said, I had to do it, She said, John, 745 00:42:05,040 --> 00:42:07,359 Speaker 1: that firm is part of you, and you've done so much, 746 00:42:08,280 --> 00:42:10,400 Speaker 1: you've got to go back and do this. So the 747 00:42:10,480 --> 00:42:13,919 Speaker 1: two you return your first day of work, you walk 748 00:42:14,000 --> 00:42:18,080 Speaker 1: into the trading room to deliver just hey, I'm back. 749 00:42:18,680 --> 00:42:22,800 Speaker 1: What is that experience like? Well, I think, um, Christie 750 00:42:22,840 --> 00:42:26,360 Speaker 1: would say, who's my wife would say, other than having 751 00:42:26,360 --> 00:42:30,279 Speaker 1: our kids, it was the happiest moment of her life. 752 00:42:32,360 --> 00:42:37,399 Speaker 1: She would say that John, we grew up at More 753 00:42:37,440 --> 00:42:41,240 Speaker 1: in Stanley, we knew the culture. And to come back 754 00:42:41,719 --> 00:42:45,279 Speaker 1: and to have people just running to get to the 755 00:42:45,320 --> 00:42:51,200 Speaker 1: door to welcome us in, it was emotional. It was Um, 756 00:42:51,480 --> 00:42:54,040 Speaker 1: I guess a lot of it is. It is just 757 00:42:54,080 --> 00:42:58,439 Speaker 1: the circumstances they had been They hadn't't managed the way 758 00:42:58,520 --> 00:43:00,480 Speaker 1: I think they should have been managed. They didn't have 759 00:43:00,480 --> 00:43:03,359 Speaker 1: a connection with the leadership of the firm. They had 760 00:43:03,440 --> 00:43:07,759 Speaker 1: become risk of verse um and it's it was no 761 00:43:07,880 --> 00:43:11,359 Speaker 1: longer um, you know, the sense of you do well, 762 00:43:11,440 --> 00:43:16,280 Speaker 1: you get rewarded. So the meritocracy thing had just dissipated away. 763 00:43:16,920 --> 00:43:21,120 Speaker 1: So to walk in and have people scrambling to you know, 764 00:43:21,320 --> 00:43:24,719 Speaker 1: get to see me or or how to feel good, yeah, 765 00:43:24,800 --> 00:43:28,040 Speaker 1: it did. It did good. Um. And I never forget 766 00:43:28,040 --> 00:43:29,400 Speaker 1: when I got up into the water to him to 767 00:43:29,400 --> 00:43:32,960 Speaker 1: talk to people, and I said, you know, I always 768 00:43:32,960 --> 00:43:35,200 Speaker 1: wanted to see all of you again. But I never 769 00:43:35,200 --> 00:43:36,960 Speaker 1: thought I would see you by coming back and here, 770 00:43:37,160 --> 00:43:39,960 Speaker 1: back to Morgan Stanley and doing it. But it was 771 00:43:40,000 --> 00:43:42,359 Speaker 1: a thrill. I mean, you know, you don't get many 772 00:43:42,440 --> 00:43:47,640 Speaker 1: chances to redo or recorrect or change what had happened 773 00:43:47,640 --> 00:43:49,920 Speaker 1: and go back the way it was, and we were 774 00:43:49,920 --> 00:43:51,640 Speaker 1: able to do that, and it was it was a 775 00:43:51,680 --> 00:43:53,960 Speaker 1: high And you want to get Christiane here, I mean 776 00:43:54,239 --> 00:43:56,280 Speaker 1: to her other than as I said, other than kids. 777 00:43:56,880 --> 00:44:00,359 Speaker 1: That was the highlight of our marriage. So I gotta 778 00:44:00,400 --> 00:44:03,640 Speaker 1: work on it, do some other things. And I mentioned 779 00:44:03,640 --> 00:44:06,080 Speaker 1: when you first came in, and I'm sure you don't 780 00:44:06,080 --> 00:44:09,560 Speaker 1: remember this. The day you were brought in, you were 781 00:44:09,600 --> 00:44:12,279 Speaker 1: doing a media tour and I have a vivid recollection 782 00:44:12,719 --> 00:44:16,440 Speaker 1: of sitting in a makeup chair in the green room 783 00:44:16,520 --> 00:44:21,279 Speaker 1: at CNBCC and you and some other people blow in. Hi, 784 00:44:21,360 --> 00:44:24,080 Speaker 1: I'm John mc Nice to meet you. What was that about, 785 00:44:24,120 --> 00:44:26,400 Speaker 1: I asked, and someone said, oh, that's John Mack. He 786 00:44:26,560 --> 00:44:30,359 Speaker 1: just came back to run Morgan Stanley. I'm like, oh, 787 00:44:30,440 --> 00:44:32,840 Speaker 1: isn't that great? And that was I don't was it? 788 00:44:32,960 --> 00:44:38,680 Speaker 1: Oh five? Was like yeah, really really fascinating. Um and 789 00:44:38,760 --> 00:44:43,279 Speaker 1: you very quickly rebuilt the firm's culture. Tell us what 790 00:44:43,360 --> 00:44:46,719 Speaker 1: you did to bring back the one firm firm and 791 00:44:46,760 --> 00:44:50,880 Speaker 1: the meritocracy. How did you get Morgan Stanley back on 792 00:44:50,960 --> 00:44:53,440 Speaker 1: the straight and narrow again. Well, number one, you had 793 00:44:53,480 --> 00:44:55,960 Speaker 1: to return it to meritocracy, and we had a lot 794 00:44:55,960 --> 00:45:00,080 Speaker 1: of meetings either in big groups small groups. Christie and I. 795 00:45:00,719 --> 00:45:03,960 Speaker 1: One of the things we did early on if there 796 00:45:04,000 --> 00:45:07,200 Speaker 1: was a golf outing at Morgan Stanley with clients, if 797 00:45:07,200 --> 00:45:08,640 Speaker 1: you went to the out there to be all men, 798 00:45:10,120 --> 00:45:13,440 Speaker 1: and this occasionally they be one woman who played golf. 799 00:45:13,560 --> 00:45:16,480 Speaker 1: So Christie and I said, well, let's do things. I 800 00:45:16,520 --> 00:45:19,719 Speaker 1: want women to be in charge of entertaining. They've been 801 00:45:19,719 --> 00:45:22,640 Speaker 1: doing their own golf outings. So we got David Leadbetter 802 00:45:22,680 --> 00:45:25,360 Speaker 1: and his guys come in and we did golf lessons 803 00:45:25,440 --> 00:45:28,680 Speaker 1: up in Purchase, New York for our women professionals, and 804 00:45:28,680 --> 00:45:31,000 Speaker 1: then we took them down to North Carolina six or 805 00:45:31,000 --> 00:45:35,280 Speaker 1: seven months later at a club we belonged to called Landfall, 806 00:45:35,400 --> 00:45:38,239 Speaker 1: and we had, you know, the golf teachers come up 807 00:45:38,280 --> 00:45:40,360 Speaker 1: and work with them. And the beauty of it is 808 00:45:40,440 --> 00:45:42,600 Speaker 1: now that women have their own golf outing women only, 809 00:45:42,600 --> 00:45:45,040 Speaker 1: which I think is terrific. So what we tried to 810 00:45:45,080 --> 00:45:48,440 Speaker 1: do is pull people together and talk about how do 811 00:45:48,480 --> 00:45:50,840 Speaker 1: you make this a great firm again? Because it the 812 00:45:50,920 --> 00:45:54,600 Speaker 1: roots are there, the bones are there, and it was 813 00:45:54,600 --> 00:45:58,040 Speaker 1: about reaching out and bringing people together and working for 814 00:45:58,719 --> 00:46:02,720 Speaker 1: our clients and making sure that we treated people people fairly. 815 00:46:03,680 --> 00:46:06,759 Speaker 1: So there's a quote of yours in the book that 816 00:46:06,800 --> 00:46:12,040 Speaker 1: I found fascinating. You wrote, certain risk taking behavior multiplied 817 00:46:12,400 --> 00:46:18,480 Speaker 1: exponentially when investment banks were converted from partnerships to publicly 818 00:46:18,600 --> 00:46:23,319 Speaker 1: traded companies. I couldn't agree more. Tell us your thoughts, well, 819 00:46:23,320 --> 00:46:26,799 Speaker 1: the thought was when it was a partner's money, they 820 00:46:26,800 --> 00:46:31,040 Speaker 1: were much more conservative. They were literally jointing several liability 821 00:46:31,080 --> 00:46:34,040 Speaker 1: literally on the hook if the firm lost money. That 822 00:46:34,200 --> 00:46:37,360 Speaker 1: that's got to focus your attention. It does, and depending 823 00:46:37,440 --> 00:46:41,080 Speaker 1: where you were which firm, But the culture Morgan Stanley 824 00:46:41,120 --> 00:46:45,320 Speaker 1: had been a pure investment bank and they really didn't 825 00:46:45,320 --> 00:46:49,120 Speaker 1: have sales in trading, whether in equities or in fixed income. 826 00:46:49,640 --> 00:46:55,320 Speaker 1: But what became apparent that firms like Solomon Brothers, we're 827 00:46:55,360 --> 00:47:00,200 Speaker 1: making huge inroads because Jackie Coogler at Solomon could call 828 00:47:00,520 --> 00:47:02,960 Speaker 1: the CFO at I B M or A T N 829 00:47:02,960 --> 00:47:07,040 Speaker 1: T and say, here, what pension funds are thinking? And 830 00:47:07,080 --> 00:47:10,640 Speaker 1: doing with your stock. We think there's an opportunity you 831 00:47:10,640 --> 00:47:14,080 Speaker 1: could float a hundred million dollar equity deal or bond deal. 832 00:47:14,600 --> 00:47:19,080 Speaker 1: They had better information and Morgan Santley didn't have that 833 00:47:19,200 --> 00:47:22,080 Speaker 1: cells and trading business. We were not talking to portfolio 834 00:47:22,120 --> 00:47:26,600 Speaker 1: managers as traders. We were talking to them as we're 835 00:47:26,640 --> 00:47:29,200 Speaker 1: pricing a t N T at seven one a s 836 00:47:29,239 --> 00:47:31,680 Speaker 1: how many do you want? That's the way it worked. 837 00:47:32,320 --> 00:47:35,040 Speaker 1: But other firms, and including Golden Sacks, they were a 838 00:47:35,040 --> 00:47:39,320 Speaker 1: two way shop. They were buying and selling UH debt 839 00:47:39,400 --> 00:47:42,680 Speaker 1: and equities with pension funds and getting a lot of information. 840 00:47:43,239 --> 00:47:45,040 Speaker 1: What were they looking for and what were they doing? 841 00:47:45,080 --> 00:47:46,799 Speaker 1: And then you take that back and you show it 842 00:47:46,880 --> 00:47:50,000 Speaker 1: to New Jersey belt telephone, or you show it to 843 00:47:51,280 --> 00:47:54,960 Speaker 1: a t N T or IBM. You're bringing that CFO 844 00:47:55,160 --> 00:47:58,920 Speaker 1: or that treasure more information so he can figure out 845 00:47:58,960 --> 00:48:01,960 Speaker 1: what's the next move for a t N T or 846 00:48:02,040 --> 00:48:05,680 Speaker 1: Southern Bill. So was it inevitable that these firms had 847 00:48:05,719 --> 00:48:08,560 Speaker 1: to go public just so they had access to those 848 00:48:08,600 --> 00:48:13,400 Speaker 1: pools of capital to expand into trading and underwining in 849 00:48:13,560 --> 00:48:17,080 Speaker 1: everything else. Yeah, because the end of the day, the 850 00:48:17,239 --> 00:48:21,680 Speaker 1: risk component went up dramatically and uh, you know, if 851 00:48:21,680 --> 00:48:24,600 Speaker 1: you go through the crisis, probably if you were not 852 00:48:24,680 --> 00:48:27,839 Speaker 1: a public company, you'd have wiped out the partnership. So 853 00:48:27,920 --> 00:48:30,520 Speaker 1: you needed to have a strong base of capital and 854 00:48:31,040 --> 00:48:33,399 Speaker 1: selling equity and be end of the public market gave 855 00:48:33,400 --> 00:48:36,319 Speaker 1: you that. It also gave you the liquidity to go 856 00:48:36,480 --> 00:48:40,160 Speaker 1: in the market, uh, to raise more equity if you needed, 857 00:48:40,280 --> 00:48:42,719 Speaker 1: or do a bond do. I used to think, hey, 858 00:48:42,800 --> 00:48:46,359 Speaker 1: big mistake going from partnership to public because of the 859 00:48:46,480 --> 00:48:49,719 Speaker 1: change in risk profile. But it sort of sounds like 860 00:48:49,760 --> 00:48:53,719 Speaker 1: it was inevitable that all these partnerships would eventually go public. Well, 861 00:48:53,760 --> 00:48:56,719 Speaker 1: you know what's interesting if you look at Lazard, they 862 00:48:56,719 --> 00:48:58,960 Speaker 1: still do business. It's truncate, It's not what it used 863 00:48:59,000 --> 00:49:03,320 Speaker 1: to be. Uh. If you're a CFO or a CEO, 864 00:49:03,760 --> 00:49:06,360 Speaker 1: you want to know what are the hedge funds doing, 865 00:49:07,080 --> 00:49:10,200 Speaker 1: State of California, State in New York, Big Pools, Bundy 866 00:49:10,239 --> 00:49:12,080 Speaker 1: and their pension funds. What are they thinking? What do 867 00:49:12,120 --> 00:49:14,719 Speaker 1: they need? You want that kind of data. You want 868 00:49:14,719 --> 00:49:18,319 Speaker 1: to know what our investors looking for. And I think 869 00:49:18,400 --> 00:49:21,320 Speaker 1: you know, if you look back, and it was difficult, 870 00:49:21,400 --> 00:49:23,840 Speaker 1: we went through a hard time. The Dean would merge 871 00:49:23,880 --> 00:49:27,440 Speaker 1: or really changed the firm. Now you had unbelievable banking 872 00:49:27,960 --> 00:49:31,080 Speaker 1: with a retail and the amount of information that you 873 00:49:31,080 --> 00:49:34,800 Speaker 1: could bring to a CEO or a CFO about markets 874 00:49:34,840 --> 00:49:38,000 Speaker 1: and then the distribution network you now had was a 875 00:49:38,080 --> 00:49:40,800 Speaker 1: huge advantage. And I think that's one of the reasons 876 00:49:40,800 --> 00:49:44,479 Speaker 1: Morris Stanley has done so well. Really interesting. We'll talk 877 00:49:44,520 --> 00:49:47,200 Speaker 1: about books in a little while, but you seem to 878 00:49:47,280 --> 00:49:51,960 Speaker 1: throughout your book quote ron Churnow's House of Morgan a lot. 879 00:49:52,400 --> 00:49:55,760 Speaker 1: How helpful was that in doing your research to write this? Well, 880 00:49:56,320 --> 00:49:58,120 Speaker 1: I had read the book years ago, so I didn't 881 00:49:58,120 --> 00:50:00,640 Speaker 1: do a lot of work to dig down on So 882 00:50:01,840 --> 00:50:05,520 Speaker 1: I would say very little, really, because because he just 883 00:50:05,760 --> 00:50:09,080 Speaker 1: goes berserk on the research side, everything he does is 884 00:50:09,120 --> 00:50:13,920 Speaker 1: so deeply and richly researched it. He was never he 885 00:50:14,000 --> 00:50:16,560 Speaker 1: was never a bond salesman like me. Well, you were 886 00:50:16,560 --> 00:50:19,480 Speaker 1: actually on the inside, so it's a little different. One 887 00:50:19,480 --> 00:50:22,319 Speaker 1: of the other things you wrote was everybody got the 888 00:50:22,360 --> 00:50:25,560 Speaker 1: financial crisis wrong, and in the run up to it, 889 00:50:26,000 --> 00:50:28,719 Speaker 1: people just didn't expect the bottoms drop out that much. 890 00:50:29,040 --> 00:50:31,560 Speaker 1: Tell us a little bit about what took place with 891 00:50:31,600 --> 00:50:36,239 Speaker 1: Morgan Stanley leading up to the financial crisis. Well, number one, 892 00:50:36,560 --> 00:50:39,399 Speaker 1: we had too much risk there was no question about that. 893 00:50:40,239 --> 00:50:43,399 Speaker 1: But we were not alone, and we did not have 894 00:50:43,480 --> 00:50:46,279 Speaker 1: a fortress balance sheet like a JP Morgan with him, 895 00:50:46,400 --> 00:50:49,880 Speaker 1: or even a city bank. You know, no one knows 896 00:50:49,920 --> 00:50:52,680 Speaker 1: when the bullets coming with the bullet came and shot 897 00:50:52,680 --> 00:50:55,200 Speaker 1: a lot of us and a lot of these companies 898 00:50:55,239 --> 00:50:58,759 Speaker 1: either merged or went out of business. And all I 899 00:50:58,800 --> 00:51:02,480 Speaker 1: can say is God for the Japanese and what they did, 900 00:51:02,680 --> 00:51:05,359 Speaker 1: I mean, that was the life saver. It got us 901 00:51:05,360 --> 00:51:08,520 Speaker 1: through and thanking Mitsubishi with Morgan Stanley and as I 902 00:51:08,520 --> 00:51:11,359 Speaker 1: said to you earlier, they remembered our culture because we 903 00:51:11,400 --> 00:51:15,440 Speaker 1: would always have Japanese trainees and they stood up and 904 00:51:15,480 --> 00:51:18,400 Speaker 1: that's what saved us. So you tell a story in 905 00:51:18,480 --> 00:51:22,000 Speaker 1: the book. You have Hank Paulson, Ben Bernanki and Tim 906 00:51:22,040 --> 00:51:24,960 Speaker 1: Guythner coming to you to say, hey, you guys have 907 00:51:25,080 --> 00:51:28,120 Speaker 1: to find a merger partner in The response is we 908 00:51:28,200 --> 00:51:31,360 Speaker 1: have a hundred eighty billion dollars in capital. This is 909 00:51:31,400 --> 00:51:34,799 Speaker 1: gonna be a painful period, but will survive. What was 910 00:51:34,840 --> 00:51:39,719 Speaker 1: their response, They didn't care, didn't get more capital. So 911 00:51:39,760 --> 00:51:43,080 Speaker 1: you reach out to Bank of Mitsubishi and you're waiting 912 00:51:43,200 --> 00:51:47,000 Speaker 1: for the term sheet to come in and it's midnight 913 00:51:47,040 --> 00:51:49,920 Speaker 1: and it's two and it's four am, and it's six am. 914 00:51:50,000 --> 00:51:53,920 Speaker 1: And then Tim Geithner calls, and then Hank Paulson calls, 915 00:51:53,960 --> 00:51:58,879 Speaker 1: and then a third time Tim Geithner calls. What happens next, Well, 916 00:51:58,880 --> 00:52:02,719 Speaker 1: what happens The check flew into Boston and we had 917 00:52:02,760 --> 00:52:05,200 Speaker 1: to send one of our bankers up to pick up 918 00:52:05,200 --> 00:52:08,480 Speaker 1: the check and fly back. So he was at home 919 00:52:08,560 --> 00:52:10,840 Speaker 1: is on the weekend, and he went up in his 920 00:52:11,280 --> 00:52:15,759 Speaker 1: uh dungarees and and running shoes and picked up a 921 00:52:15,840 --> 00:52:19,960 Speaker 1: check for I don't know a billions some and brought 922 00:52:19,960 --> 00:52:21,960 Speaker 1: it down. I got it. I got it, a copy 923 00:52:22,000 --> 00:52:24,160 Speaker 1: of it framing in my office back at the townhouse. 924 00:52:24,960 --> 00:52:29,200 Speaker 1: The Japanese saved us. They saved us because they remember 925 00:52:29,320 --> 00:52:34,839 Speaker 1: our culture and we used to train tons of Japanese 926 00:52:34,880 --> 00:52:38,480 Speaker 1: bankers at Morgan Stanley. So you're you're waiting for the 927 00:52:38,640 --> 00:52:41,719 Speaker 1: final word from Bank of Mitsubishi. I think you know 928 00:52:41,760 --> 00:52:45,560 Speaker 1: where I'm going. And now Geith nicholes for the umpteenth time, 929 00:52:45,960 --> 00:52:49,799 Speaker 1: and your secretary pokes her head and then says it 930 00:52:49,920 --> 00:52:52,719 Speaker 1: was the head of New York, said Tim Geithner. And 931 00:52:52,760 --> 00:52:56,280 Speaker 1: he's insistent, and you basically said, we're going to figure 932 00:52:56,320 --> 00:52:59,880 Speaker 1: this out ourselves, and you did. And what's your relations 933 00:53:00,120 --> 00:53:02,720 Speaker 1: ship with Tim? Now? I liked him. I mean, listen 934 00:53:03,640 --> 00:53:06,160 Speaker 1: to me. I hope it's not personal to him. And 935 00:53:06,160 --> 00:53:08,000 Speaker 1: and the point was, I'm trying to save the firm. 936 00:53:08,000 --> 00:53:10,279 Speaker 1: I can't take all these calls when I'm talking to 937 00:53:10,360 --> 00:53:15,160 Speaker 1: the Japanese, so you know we're under the gun. He's 938 00:53:15,160 --> 00:53:18,000 Speaker 1: a decent guy, but he had his job to do 939 00:53:18,080 --> 00:53:21,600 Speaker 1: and I had my job to do. And um, at 940 00:53:21,640 --> 00:53:24,319 Speaker 1: the end of the day, it worked so uh And 941 00:53:24,400 --> 00:53:28,799 Speaker 1: in fact, the Treasury Department taps Morgan Stanley to help 942 00:53:28,840 --> 00:53:31,160 Speaker 1: with the AI G Bellot. Yeah, they did, so that 943 00:53:31,239 --> 00:53:33,920 Speaker 1: was a good, uh working relationship. You actually had a 944 00:53:33,920 --> 00:53:37,600 Speaker 1: good relationship with Hank Paulson from when he was CEO 945 00:53:37,680 --> 00:53:40,560 Speaker 1: of Goldman. Yeah. He's the best. Well, look, he's honest, 946 00:53:40,719 --> 00:53:44,279 Speaker 1: he's smart, he's straightforward, he gets things done. I have 947 00:53:44,360 --> 00:53:48,120 Speaker 1: a lot of respect for Ank Paulson. Before we get 948 00:53:48,200 --> 00:53:50,440 Speaker 1: to our favorite questions, there were a couple of little 949 00:53:50,480 --> 00:53:54,960 Speaker 1: curved balls I wanted to throw you. Um, there's a 950 00:53:55,000 --> 00:53:58,640 Speaker 1: story in the book. You talk about somebody who you 951 00:53:58,760 --> 00:54:03,040 Speaker 1: go to who you know is a giant Duke basketball fan, 952 00:54:03,680 --> 00:54:06,160 Speaker 1: and you asked him to give up part of his 953 00:54:06,239 --> 00:54:10,319 Speaker 1: bonus as you were doing, and very begrudgingly he did 954 00:54:10,400 --> 00:54:13,800 Speaker 1: it for the team. And then you get Coach K involved. 955 00:54:13,840 --> 00:54:16,759 Speaker 1: Tell us that story. It's charming. Well, he was a 956 00:54:16,840 --> 00:54:19,880 Speaker 1: huge fan of Duke, and um, I needed him on 957 00:54:20,040 --> 00:54:21,719 Speaker 1: board with what I was trying to do and he 958 00:54:21,800 --> 00:54:28,200 Speaker 1: gave up some power and money to accommodate me. And uh, 959 00:54:28,320 --> 00:54:30,359 Speaker 1: Mike Taoski is a good friend of mine, a close 960 00:54:30,400 --> 00:54:32,640 Speaker 1: friend of mine. So I called Coach K and I said, 961 00:54:32,719 --> 00:54:35,600 Speaker 1: might do me a favor. What you call this gentleman 962 00:54:35,640 --> 00:54:40,759 Speaker 1: and just tell him how much um, I appreciate what 963 00:54:40,840 --> 00:54:43,560 Speaker 1: he's done, and that you are happy that you helped 964 00:54:43,680 --> 00:54:47,160 Speaker 1: my friend John McK out. So Mike calls the guy 965 00:54:47,360 --> 00:54:50,319 Speaker 1: and he said, look, Um, I want to tell you 966 00:54:50,360 --> 00:54:56,520 Speaker 1: what you did is really something John Mac is. Um. 967 00:54:56,640 --> 00:54:58,600 Speaker 1: He didn't call me an a hull. He said, John 968 00:54:58,640 --> 00:55:01,959 Speaker 1: Mac is a selfish time guy and what you did 969 00:55:02,040 --> 00:55:04,239 Speaker 1: just warmed his heart. And I want to thank you 970 00:55:04,239 --> 00:55:08,560 Speaker 1: because he's my friend. The salesman was on cloud nine, 971 00:55:09,200 --> 00:55:12,640 Speaker 1: I can imagine. And then and then another curved bowl. 972 00:55:12,680 --> 00:55:16,400 Speaker 1: I gotta ask you you once stole Barton Bigg's car. 973 00:55:18,560 --> 00:55:23,400 Speaker 1: We hit it his car was a dump, It was 974 00:55:23,440 --> 00:55:27,239 Speaker 1: a clunker. He had a broken rear rear window. He 975 00:55:27,360 --> 00:55:29,879 Speaker 1: just taped it up. He didn't even replace the window. Yeah, 976 00:55:29,920 --> 00:55:32,560 Speaker 1: we hit the car and he was and then you 977 00:55:32,640 --> 00:55:36,520 Speaker 1: had a make believe sheriff from North Carolina, Paul. And 978 00:55:36,880 --> 00:55:39,759 Speaker 1: what was his reaction, Well, he laughed at the end, 979 00:55:39,800 --> 00:55:41,759 Speaker 1: but he had no idea what was going on. And 980 00:55:41,800 --> 00:55:44,440 Speaker 1: Bart was a wonderful man, but he's a good guy 981 00:55:44,480 --> 00:55:47,360 Speaker 1: to pull the pranks on. So what I've learned in 982 00:55:47,400 --> 00:55:51,440 Speaker 1: pulling pranks, of which there are numerous examples in the book, 983 00:55:51,800 --> 00:55:55,040 Speaker 1: But here's what I've learned though, when the prank is on, 984 00:55:55,280 --> 00:56:00,160 Speaker 1: you laugh because everyone's trying to get me some way 985 00:56:00,200 --> 00:56:02,880 Speaker 1: or one way or another. Very very funny. So we 986 00:56:02,920 --> 00:56:05,480 Speaker 1: only have a few minutes left to me. Uh, let 987 00:56:05,480 --> 00:56:08,279 Speaker 1: me jump to some of my favorite questions that we 988 00:56:08,360 --> 00:56:11,440 Speaker 1: ask all of our guests. Uh, tell us about your 989 00:56:11,440 --> 00:56:15,000 Speaker 1: early mentors who helped us shape your career. Number one 990 00:56:15,040 --> 00:56:19,640 Speaker 1: Dick Fisher, just hands down. He would call me in 991 00:56:19,680 --> 00:56:22,600 Speaker 1: and say, look, John, you got to do this. I 992 00:56:22,680 --> 00:56:26,520 Speaker 1: know you're aggressive, you're a great salesman. You can't manage 993 00:56:26,560 --> 00:56:28,560 Speaker 1: people and try to threaten them and scare him you 994 00:56:28,640 --> 00:56:32,440 Speaker 1: gotta ease up. Uh So he did that. He also 995 00:56:32,719 --> 00:56:34,440 Speaker 1: I could go to him if I had a problem, 996 00:56:34,480 --> 00:56:38,640 Speaker 1: a question. So he was, without question, my best mentor. 997 00:56:39,560 --> 00:56:42,080 Speaker 1: And the other person is not that she mentored and 998 00:56:42,120 --> 00:56:45,200 Speaker 1: she's my wife. She say, John, you know you ought 999 00:56:45,200 --> 00:56:47,560 Speaker 1: to reach out to that person, and you know they're 1000 00:56:47,640 --> 00:56:50,280 Speaker 1: kids sick. You've got him into children's hospital and Morgan 1001 00:56:50,320 --> 00:56:54,960 Speaker 1: Stanley Children's Hospital. Uh So she's been a wonderful partner 1002 00:56:55,480 --> 00:56:57,960 Speaker 1: in telling me, you know you're being a little too aggressive. 1003 00:56:58,040 --> 00:57:01,880 Speaker 1: Back down. And I think I think she's right. I've 1004 00:57:02,440 --> 00:57:05,160 Speaker 1: have I softened up. Yeah, I think I have softened up. 1005 00:57:05,480 --> 00:57:10,440 Speaker 1: And that's another thing. Um, Morgan Stanley got behind us 1006 00:57:10,520 --> 00:57:14,640 Speaker 1: and we built this children's hospital, which employees love. They 1007 00:57:14,640 --> 00:57:16,800 Speaker 1: go up there on the weekends and they read stories 1008 00:57:16,840 --> 00:57:19,640 Speaker 1: to kids. That's how you build a culture that you 1009 00:57:19,720 --> 00:57:25,120 Speaker 1: do things like that. And I'm trying to think. Frank Bennet, 1010 00:57:25,120 --> 00:57:27,880 Speaker 1: who's Herst Corporation, said to me he thought that was 1011 00:57:27,920 --> 00:57:31,840 Speaker 1: the best sign of corporate philanthropy he's ever seen. So 1012 00:57:32,320 --> 00:57:36,560 Speaker 1: if sometime you're up near the new Presbyterian uptown, if 1013 00:57:36,600 --> 00:57:39,720 Speaker 1: you go into the children's hospital, Morgan Stanley Children's you'll 1014 00:57:39,720 --> 00:57:42,560 Speaker 1: see on the wall that Morgan Stanley gave a lot 1015 00:57:42,560 --> 00:57:45,120 Speaker 1: of money, and then you'll see names of hedge funds 1016 00:57:45,160 --> 00:57:47,320 Speaker 1: and other clients. When they heard what we're doing, they 1017 00:57:47,360 --> 00:57:50,280 Speaker 1: gave money. And you know New York is huge. You 1018 00:57:50,360 --> 00:57:53,240 Speaker 1: got you know Philadelphia Children's Hospital. You got him in Boston. 1019 00:57:53,800 --> 00:57:57,600 Speaker 1: New York City didn't have a standalone children's hospital. And 1020 00:57:57,640 --> 00:58:00,280 Speaker 1: our employees will go up there now and read books 1021 00:58:00,280 --> 00:58:03,000 Speaker 1: of the kids on the weekend. Sometimes it's a wonderful 1022 00:58:03,040 --> 00:58:06,720 Speaker 1: thing we did. We it's we're really really happy with it. 1023 00:58:06,760 --> 00:58:08,960 Speaker 1: You should be very proud of that. You mentioned books. 1024 00:58:09,360 --> 00:58:11,320 Speaker 1: Let's talk about some of your favorites and what are 1025 00:58:11,320 --> 00:58:15,200 Speaker 1: you reading currently. Well, actually, I just read my book again. 1026 00:58:15,240 --> 00:58:18,120 Speaker 1: My my favorite book all time is Gone with the Win. 1027 00:58:18,360 --> 00:58:21,000 Speaker 1: Do you believe that that's a big book. It is 1028 00:58:21,000 --> 00:58:24,040 Speaker 1: a big book. So I'm taking History of the South 1029 00:58:24,160 --> 00:58:26,800 Speaker 1: at Duke University and one of the things you had 1030 00:58:26,840 --> 00:58:31,320 Speaker 1: to do you had to read fifty pages every other 1031 00:58:31,400 --> 00:58:34,040 Speaker 1: day about a history or something with a sound. So 1032 00:58:34,080 --> 00:58:37,040 Speaker 1: I picked up Gone with the Win. I didn't put 1033 00:58:37,080 --> 00:58:39,640 Speaker 1: it down until I finished it. Really, if you haven't 1034 00:58:39,640 --> 00:58:41,600 Speaker 1: read it, you got to read it. Seen the movie 1035 00:58:41,680 --> 00:58:47,160 Speaker 1: never books awesome. It's just awesome. So what sort of 1036 00:58:47,200 --> 00:58:50,760 Speaker 1: advice would you give to a recent college graduate who 1037 00:58:50,840 --> 00:58:55,560 Speaker 1: was interested in a career in finance or investing. Well. 1038 00:58:55,640 --> 00:58:58,120 Speaker 1: Number One, you have to pursue it. Uh, you gotta 1039 00:58:58,160 --> 00:59:01,080 Speaker 1: get in the door. Hopefully you have a background that 1040 00:59:01,120 --> 00:59:04,720 Speaker 1: will help you. If your education, let's say you're a 1041 00:59:04,720 --> 00:59:08,400 Speaker 1: history major. I was a history major. If your education 1042 00:59:08,480 --> 00:59:11,800 Speaker 1: doesn't put you naturally into that glide path, and take 1043 00:59:11,840 --> 00:59:15,120 Speaker 1: courses and get into that glade path. Go to school 1044 00:59:15,160 --> 00:59:18,680 Speaker 1: at night, get your NBA. That helps. But more importantly, 1045 00:59:18,800 --> 00:59:21,680 Speaker 1: figure out how do you get to know people within 1046 00:59:21,760 --> 00:59:25,400 Speaker 1: that company. Make sure your job you have now you've 1047 00:59:25,400 --> 00:59:28,320 Speaker 1: performed well in it, and get to know people in 1048 00:59:28,360 --> 00:59:32,680 Speaker 1: the company and get introduced by them to the head 1049 00:59:32,720 --> 00:59:35,800 Speaker 1: of a division or department. But you can get in it. 1050 00:59:35,840 --> 00:59:37,440 Speaker 1: I mean, there's a lot of ways to get in 1051 00:59:37,480 --> 00:59:40,120 Speaker 1: this business. And in one way of doing it, go 1052 00:59:40,240 --> 00:59:43,240 Speaker 1: work for a JP Morgan their asset management business. Go 1053 00:59:43,320 --> 00:59:45,680 Speaker 1: work for a hedge fund. Go work for a lot 1054 00:59:45,760 --> 00:59:48,600 Speaker 1: of people who are in the business and learned kind 1055 00:59:48,600 --> 00:59:51,360 Speaker 1: of the day to day sales and training business. And 1056 00:59:51,400 --> 00:59:53,280 Speaker 1: if you want to be an m and a specialist, 1057 00:59:53,760 --> 00:59:55,560 Speaker 1: my advice is you need to have a degree in 1058 00:59:56,000 --> 00:59:58,840 Speaker 1: an accounting or an MBA where you can really zero 1059 00:59:58,960 --> 01:00:01,720 Speaker 1: in and have the train need that you need to 1060 01:00:01,760 --> 01:00:06,560 Speaker 1: do it. Do that you can do that business if 1061 01:00:06,560 --> 01:00:08,920 Speaker 1: you didn't have any experience, if they give you a chance. 1062 01:00:09,040 --> 01:00:11,680 Speaker 1: My point is you've got to give them enough information 1063 01:00:11,760 --> 01:00:13,800 Speaker 1: that they want to give you a chance. And the 1064 01:00:13,840 --> 01:00:16,760 Speaker 1: way you do that is do extra work, or work 1065 01:00:16,800 --> 01:00:18,760 Speaker 1: for an edge fine, or work for you know, whoever 1066 01:00:18,760 --> 01:00:21,640 Speaker 1: it may be, and you'll get that shot. And our 1067 01:00:21,720 --> 01:00:24,560 Speaker 1: last question, what do you know about the world of 1068 01:00:24,600 --> 01:00:28,280 Speaker 1: investing today that you wish you knew fifty years or 1069 01:00:28,280 --> 01:00:32,480 Speaker 1: so ago when you were first getting started. Great companies 1070 01:00:32,640 --> 01:00:36,840 Speaker 1: that you invest in you should hold and Uh, I 1071 01:00:36,880 --> 01:00:41,520 Speaker 1: always looking for the profit and I made money on it. 1072 01:00:41,600 --> 01:00:45,440 Speaker 1: But some of these companies to take Apple Computer give 1073 01:00:45,480 --> 01:00:50,040 Speaker 1: you great great example, my son eleven years old, Morgan Stanley, 1074 01:00:50,080 --> 01:00:54,960 Speaker 1: takes Apple Public. I buy him a computer. He says, Dad, 1075 01:00:55,000 --> 01:00:56,840 Speaker 1: this is a great company. I want to buy stock 1076 01:00:56,880 --> 01:00:59,960 Speaker 1: in it. Uh. And he's like eleven or twelve years old. 1077 01:01:00,000 --> 01:01:03,960 Speaker 1: Anybody's shares in it. I think that small purchase is 1078 01:01:04,080 --> 01:01:07,680 Speaker 1: well worth over a couple of million dollars. So he 1079 01:01:08,280 --> 01:01:13,800 Speaker 1: understood great companies and his father, didn't you hold him? 1080 01:01:13,920 --> 01:01:17,360 Speaker 1: He's never sold a share and it's just been a 1081 01:01:17,400 --> 01:01:19,680 Speaker 1: home run. So I believe, well, dad's a trader of 1082 01:01:19,720 --> 01:01:23,880 Speaker 1: the sons. That's all right, that smart, smart investor. So 1083 01:01:24,040 --> 01:01:26,480 Speaker 1: I believe you buy great companies and hold him. And 1084 01:01:26,480 --> 01:01:28,480 Speaker 1: that's what we do. Now. We have a family office 1085 01:01:28,520 --> 01:01:30,960 Speaker 1: that helps me and we work with them, and we 1086 01:01:31,040 --> 01:01:35,600 Speaker 1: still meet and talked to a lot of investors. Quite fascinating. John, 1087 01:01:35,680 --> 01:01:38,720 Speaker 1: Thank you for being so generous with your time. We 1088 01:01:38,800 --> 01:01:42,560 Speaker 1: have been speaking with John mac, former CEO of Morgan 1089 01:01:42,640 --> 01:01:46,760 Speaker 1: Stanley and author of the fascinating book Up Close and 1090 01:01:46,880 --> 01:01:51,040 Speaker 1: All in Life and Leadership Lessons really from a Wall 1091 01:01:51,080 --> 01:01:54,800 Speaker 1: Street Warrior. If you enjoy this conversation, we'll be sure 1092 01:01:54,840 --> 01:01:57,760 Speaker 1: and check out any of our previous five hundred we've 1093 01:01:57,800 --> 01:02:00,400 Speaker 1: done over the past eight or nine years. You can 1094 01:02:00,440 --> 01:02:04,800 Speaker 1: find those at iTunes, Spotify, YouTube, wherever you find your 1095 01:02:04,840 --> 01:02:08,760 Speaker 1: favorite podcasts. Sign up from my daily reading list at 1096 01:02:08,840 --> 01:02:12,240 Speaker 1: Ridhults dot com. Follow me on Twitter at Ridholts. Check 1097 01:02:12,280 --> 01:02:16,760 Speaker 1: out all of the Bloomberg podcasts on Twitter at podcasts. 1098 01:02:17,240 --> 01:02:19,080 Speaker 1: I would be remiss if I did not thank the 1099 01:02:19,080 --> 01:02:22,480 Speaker 1: correct team that helps put these conversations together each week. 1100 01:02:23,120 --> 01:02:27,040 Speaker 1: Justin Milner is my audio engineer ATKO. Val Bron is 1101 01:02:27,080 --> 01:02:30,880 Speaker 1: my project manager. Sean Russo is my head of research. 1102 01:02:31,000 --> 01:02:35,320 Speaker 1: Paris Wald is my producer. I'm Barry Rihults Human listening 1103 01:02:35,320 --> 01:02:38,160 Speaker 1: to Masters in Business on Bloomberg Radio.