Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Jill Wisenthal, and I'm Tracy Alloway.
Speaker 2: Racy, how good at Excel?
Speaker 4: Are you.
Speaker 3: Not good? Compared to a lot of people who listen
Speaker 3: to this podcast? I would imagine, I mean, I can
Speaker 3: do some basic stuff like auto some and you know
Speaker 3: so some.
Speaker 5: No, it's not.
Speaker 3: That's like literally clicking a button. I can write like
Speaker 3: a couple formulas in the little command prompt. But I
Speaker 3: think everyone can.
Speaker 2: I could write some really rudimentary formasts, but I never
Speaker 2: really I got to the degree that some people are.
Speaker 2: But the good news is I saw that I have
Speaker 2: to learn it. We don't have to learn I saw
Speaker 2: that Claude code they have or Claude they have some
Speaker 2: extension where you just talk to Excel and and you say, like,
Speaker 2: you know, build this kind of formula and make these
Speaker 2: changes and import this. I haven't played around with it,
Speaker 2: so not one hundred percent sure would work. And to
Speaker 2: be honest, because by limited Excel skills, I wouldn't even
Speaker 2: be able to verify if it worked in the first place.
Speaker 2: But my sense is, you know that maybe that seems
Speaker 2: like a maybe that's changing.
Speaker 3: I would guess that it works pretty well. And imagine
Speaker 3: if you're someone who's been working probably in finance for
Speaker 3: like twenty years, and you became known as not and
Speaker 3: I don't want to say Excel spreadsheet monkey, Excel spreadsheet gorilla,
Speaker 3: like you know, someone really admired for their Excel skills
Speaker 3: and suddenly you've been disrupted totally.
Speaker 2: Wellst Sometimes you see these things online where like they
Speaker 2: show this stuff like oh, the investment bank investment analysts
Speaker 2: or junior analysts just got put out of a job,
Speaker 2: and like there's a go I'm pretty sure there's more
Speaker 2: to the job. So I do know that, like building
Speaker 2: models and so forth, there's an important thing in finance
Speaker 2: and Wall Street in various capacities. I'm pretty sure that's
Speaker 2: not the entire job. I'm pretty sure automating Excel was
Speaker 2: only part of it. But nonetheless, technical skills are technical skills,
Speaker 2: and if that changes, who knows, maybe the job could change.
Speaker 1: Well.
Speaker 3: The question I've always had about Wall Street is how
Speaker 3: much of it is driven by your own personality and
Speaker 3: sort of client facing skills versus I am a brilliant
Speaker 3: analysis who is not only able to come up with
Speaker 3: amazing ideas for mergers and acquisitions, sort of you know,
Speaker 3: working girls style, where like Melanie Griffith is in an
Speaker 3: elevator and is like, I know your company needs to
Speaker 3: start with whatever, versus like I'm just really good at
Speaker 3: hopnobbing with executives.
Speaker 2: It's probably a mix, right, That would be my guess
Speaker 2: that there's someone is really good at this company that
Speaker 2: is parking lot, so this the city could buy another
Speaker 2: parking lot company and so forth, and then another person
Speaker 2: who's really good at staying out and taking the class
Speaker 2: to a nice dinner. I don't think you could really
Speaker 2: or I don't really want to have a conversation, but
Speaker 2: the degree to which AI is going to disrupt all
Speaker 2: of these white jobs until I have a better handle
Speaker 2: what the white color jobs are in the first place,
Speaker 2: I feel like we are.
Speaker 3: How important are excel skills actually in this business?
Speaker 2: What is the sort of distribution of skills that it
Speaker 2: takes to thrive in some of these capacities. Anyway, very
Speaker 2: excited to say, we really do have the perfect guest
Speaker 2: to talk about some of this. Someone we talked to
Speaker 2: last year and that was about sort of the history
Speaker 2: of investment banking over the last several decades and the
Speaker 2: sort of connection between global capitalism investment banking. We wanted
Speaker 2: to have them back on the show because as an
Speaker 2: investment banking veteran, someone who can maybe talk about the
Speaker 2: inside and how people work and how the culture change
Speaker 2: and how technology changes. So we're going to be speaking
Speaker 2: with return guests. Scott Baki is the former longtime CEO
Speaker 2: of the investment bank Greenhill, the author of the recent
Speaker 2: book Surviving Wall Street and it comes back on odd Lot.
Speaker 2: So Scott, thank you so much for coming back with us.
Speaker 2: It's great to be back.
Speaker 4: Thank you.
Speaker 2: What are you for listeners who, in case they didn't
Speaker 2: listen to the previous one, which they should. What did
Speaker 2: your career span on Wall Street? When did you first
Speaker 2: get into it? And you know how well give us
Speaker 2: the sort of the thirty second Scott book career bio. Well,
Speaker 2: I feel like.
Speaker 4: I started at the very beginning of really the explosion
Speaker 4: of the investment banking business. You know, as I said
Speaker 4: in my book, when I graduated from Wharton, I did
Speaker 4: not know what an investment banker was. I knew exactly
Speaker 4: one person from our entire class who got a job
Speaker 4: on Wall Street. So it was a very small place.
Speaker 4: Back then, M and A was very rare. Here were
Speaker 4: we talking about nineteen eighty one. Okay, you know, it's
Speaker 4: your interest rates peaked. It's the you know, stock market
Speaker 4: was had been flat for more than a decade. You know,
Speaker 4: private equity is a phrase didn't even exist. Hedge fund
Speaker 4: didn't exist. I mean, it was a very very different role.
Speaker 4: By the way, it wasn't even legal to buy back
Speaker 4: your own stock back then. That that happened a year later.
Speaker 4: It was viewed as market manipulation to do that. So
Speaker 4: the whole thing of sort of playing with balance sheets,
Speaker 4: putting companies together and so on. I mean, there had
Speaker 4: been a bit of that in the nineteen sixties, mostly
Speaker 4: around building conglomerates, which I think in part was because
Speaker 4: they couldn't buy back stock. Because if you're generating cash
Speaker 4: to do with it, you could be it t a
Speaker 4: big industrial company, and so I think I'll buy the Hartford,
Speaker 4: a big insurance company. You know, today people would think
Speaker 4: that's a crazy idea, but that was kind of the
Speaker 4: predecessor to what became, you know, the M and A
Speaker 4: and transaction business around you know, maximizing shareholder value. That
Speaker 4: that really began, I would say, right at the beginning
Speaker 4: of my career.
Speaker 3: Perfect, this is already a fascinating conversation, I have to say,
Speaker 3: so I imagine this dynamic would have changed throughout your career.
Speaker 3: But how much of the investment banking business is the
Speaker 3: bankers approaching clients and saying we have an idea for you,
Speaker 3: versus the clients coming to the bankers and saying we
Speaker 3: have a problem, such as we have all this cash
Speaker 3: and we can't you know, buy back our shares or
Speaker 3: we want to do something with it to reduce our
Speaker 3: cost of capital or whatever.
Speaker 4: You know, that changed an awful lot of our time
Speaker 4: because it's the beginning. There were lots of companies and
Speaker 4: very few investment bankers, and so they didn't get a
Speaker 4: visit all that often, and so when they did, the
Speaker 4: bank would try to bring, you know, ideas and maybe
Speaker 4: they hadn't heard before. You know, Now there's thousands and
Speaker 4: thousands of investment bankers, many many different firms of many
Speaker 4: different types, and they're all maintaining relationships. So it really
Speaker 4: turns into more of a dialogue where you don't you
Speaker 4: don't just you know, you never met the client before
Speaker 4: your show up say hey, I think you should buy
Speaker 4: this company down the street and wow, that's a great idea.
Speaker 4: I hadn't heard that before, and they do it. It's
Speaker 4: more like you have an ongoing dialogue with a client.
Speaker 4: You figure out what they want to do, what they're
Speaker 4: you know, kind of what their appetite to their board is,
Speaker 4: what their balance sheets like, how their business is going,
Speaker 4: how they feel about their share price, you know, what
Speaker 4: what they think is kind of the next big thing
Speaker 4: for them, And over time you come to an idea.
Speaker 4: Almost mutually.
Speaker 2: I would say, what were you good at in the
Speaker 2: early eighties or the people that you went to work
Speaker 2: with very early on, what would you say you had
Speaker 2: in common? Why? Why did uh you know? Why was
Speaker 2: it a fit for you?
Speaker 4: For me, I was probably a little bit different since
Speaker 4: it came from a legal background than some. I mean,
Speaker 4: there were some people who were you know, the ex
Speaker 4: and by the way, Excel wasn't even around then. It
Speaker 4: was Lotus one, two three. Who are the you know
Speaker 4: Excel jockeys who built these you know, enormous models and
Speaker 4: so one and I did a bit of that myself.
Speaker 4: I think my strength was more in sort of structuring, conceptualizing, negotiating,
Speaker 4: you know, marketing, talking to CEOs and boards. It was
Speaker 4: more of that kind of uh in many ways, the
Speaker 4: qualitative skills, the math. You can pick up what you
Speaker 4: need fairly quickly. And you know, I sometimes tell, you know,
Speaker 4: people of like my my son's generation, he's he's thirty
Speaker 4: years old. I tell his people at his pure level,
Speaker 4: I see, you know, the great rubicon a cross in
Speaker 4: the world of you know, Wall Street and related fields
Speaker 4: is when you get to the point where there's somebody
Speaker 4: smart working for you. You're you're You're no longer yeah,
Speaker 4: you're You're no longer the one, you know, training some
Speaker 4: complete newbie. You're no longer the one doing it all yourself.
Speaker 4: You're the one who's doing a bit of conceptualizing and
Speaker 4: giving into a very smart person who's going to stay
Speaker 4: late at night and build you a beautiful model.
Speaker 3: I want to ask you what it was actually like
Speaker 3: working a sort of junior banker in the eighties. But
Speaker 3: before I do, what's with all the people with legal
Speaker 3: degrees going into banking in the nineteen eighties, Because you
Speaker 3: weren't the only one. I think there were a few
Speaker 3: other famous compatriots at the time. Lloyd blank Find for instance,
Speaker 3: stands out. But what was it about having done a
Speaker 3: law degree that translated into banking?
Speaker 4: Back then, there were many who made the move, And
Speaker 4: as a matter of fact, while I was interviewing the
Speaker 4: New York Times, Sunday magazine had a cover story called
Speaker 4: lawyers Becoming Bankers. I mean, it really was a big phenomenon,
Speaker 4: and I think literally the reason was the business exploded suddenly.
Speaker 4: There's just massive amounts of transaction activity. There aren't that
Speaker 4: many investment bankers. You're not just going to hire more
Speaker 4: people who are twenty two years old and train them.
Speaker 4: You need someone who's twenty six or twenty eight or
Speaker 4: thirty years old who actually has kind of been around
Speaker 4: the business. They may have some skills to learn, but
Speaker 4: they bring other skills to the table, and so they
Speaker 4: brought into bank the lawyers, including myself, is kind of
Speaker 4: a way of sort of ramping up the scale of
Speaker 4: the team rather than just saying we're going to just
Speaker 4: hire more twenty two year olds and train them. But
Speaker 4: you didn't have a time for that, you know, there's
Speaker 4: so much such a growth in transaction activity. That's why
Speaker 4: a lot of lawyers made that move.
Speaker 2: Well you mentioned just now you're like, okay, it's nice
Speaker 2: to be in the position where you can conceptualize something.
Speaker 2: And then the really you know, the smart wiz kids
Speaker 2: stays up all night building the model? Are they staying
Speaker 2: up all night?
Speaker 1: Like?
Speaker 2: This is the This is sort of one of the
Speaker 2: big questions that people have is like, what is it
Speaker 2: about the business that demands these sort of in some
Speaker 2: case extreme hours laid into the night. Why can't they
Speaker 2: just do it during the day? I clock out at five?
Speaker 4: Very good question, you know, I think one in this
Speaker 4: this kind of relates to, you know, the future of
Speaker 4: AI and efficiency and investment banking and so on as well.
Speaker 4: I think maybe the dirty little secret of the industry
Speaker 4: in terms of how the sausage is actually made, is
Speaker 4: that the actual building of the model, the creation of
Speaker 4: the math that says why it makes sense or doesn't
Speaker 4: make sense to buy something that certain share price, that
Speaker 4: that takes a limited amount of time, the fiddling with
Speaker 4: the PowerPoint pages that expressed that information so it makes
Speaker 4: just the right points and just the right way and
Speaker 4: just the right color seam, and you know, just the
Speaker 4: right things in italics and other things in bold and
Speaker 4: things like that. You know, bankers tend to be perfectionists,
Speaker 4: and so they will fiddle with that for a very
Speaker 4: long time and a lot of times. I mean, if
Speaker 4: you ask people who are in the early part of
Speaker 4: their careers, like, what are you really doing when you're
Speaker 4: there late at night, it's very often it's fine tuning
Speaker 4: math that was done long ago.
Speaker 3: There's also a schedule misalignment, I guess, because you get
Speaker 3: the feedback from your boss at like five or six pm,
Speaker 3: right and like at the end of their day, and
Speaker 3: then you have to stay up really late to make
Speaker 3: all the changes and get them on their desk in
Speaker 3: the morning. But okay, perfectionism long hours. Was that the
Speaker 3: case when you were initially entering the industry in the eighties,
Speaker 3: very much so, But not with PowerPoint, with something else?
Speaker 4: Well, that's true. I mean it literally was. I don't know,
Speaker 4: I'm not sure it was called anything. I think it
Speaker 4: was like a typed page, you know, of numbers.
Speaker 3: You know.
Speaker 4: It was kind of the early, the early version where
Speaker 4: there wasn't all the software that put it in pretty
Speaker 4: pictures and so Matia look that that came along with
Speaker 4: the you know, pie charts, and bar charts and things
Speaker 4: like that. You know fairly early, but it wasn't nearly
Speaker 4: as kind of beautiful, is it. And I mean now
Speaker 4: it almost looks like you know what Vanity Fair magazine
Speaker 4: used to look like, right you open up's got beautiful
Speaker 4: color and pictures and charts and and all that sort
Speaker 4: of thing. But people always worked very long hours. That
Speaker 4: was always the sort of ethos of the industry that
Speaker 4: there's a lot of work to be done. We wanted
Speaker 4: to be perfect, and hey, if you can make it
Speaker 4: a little bit better by staying another half hour, you
Speaker 4: stay another half hour.
Speaker 3: So how much of that do you think was driven
Speaker 3: by genuine client demand in the sense that you know,
Speaker 3: a client presumably would be not very impressed if you
Speaker 3: saw that a bullet point was slightly misaligned in a
Speaker 3: PowerPoint presentation or something like that, versus driven by the
Speaker 3: institution itself and a soret. I don't want to say
Speaker 3: hazing culture, but there is a sense that, you know,
Speaker 3: we all have to work long hours. I worked long
Speaker 3: hours at the beginning of my career. It's expected that
Speaker 3: now you are going to work long hours yourself.
Speaker 4: I think if you go back to the beginning really
Speaker 4: the nineteen eighties. I think it grew initially out of
Speaker 4: neither of those things. I think it grew out of
Speaker 4: the fact that business was growing so fast and you
Speaker 4: had a limited sized team, and you had twice as
Speaker 4: many deals to work on as last year, and next
Speaker 4: year you had fifty percent more than that, and I
Speaker 4: mean it was a really extraordinary growth, and so there
Speaker 4: just like weren't enough hands on deck that you could,
Speaker 4: you know, go home at seven o'clock at night. Now,
Speaker 4: over time, that generation of bankers, including myself, you know,
Speaker 4: they bore the scars of those years throughout their careers,
Speaker 4: and so yes, there probably was in the industry some
Speaker 4: element of hey I worked like this, You're going to
Speaker 4: work like this. But initially it was just a genuine
Speaker 4: business issue of hey, there's so much business to do,
Speaker 4: so a few of us here to do it. We
Speaker 4: have to work very lately get it done.
Speaker 2: What about the element of essentially banking, Like many other fields,
Speaker 2: including academia but also law, you know, there's like a
Speaker 2: pyramid element where there's like a very small number or
Speaker 2: relatively small number of extraordinarily good slash remunerative jobs at
Speaker 2: the top at a large base of junior analysts and
Speaker 2: so forth, and how much is it a sort of
Speaker 2: emergent competition amongst the junior bankers or whatever such that
Speaker 2: it's not even necessarily some directive to put it in
Speaker 2: crazy hours. But there's a big field of people and
Speaker 2: they want to get up to the next rung, and
Speaker 2: there's fewer spots to the next rung, and that creates
Speaker 2: that mechanism of intense competition, the desire to sort.
Speaker 4: Of over please, you know, to just go over the top.
Speaker 4: And yeah, that's that certainly is there as well. I
Speaker 4: remember back I don't know why I remember this, but
Speaker 4: back you know, kind of in the late eighties. I
Speaker 4: was probably in late twenties at that time, not even
Speaker 4: a vice president yet at Morgan Stanley. I remember we
Speaker 4: had this meeting once with the head of investment banking
Speaker 4: at Morgan Stanley, the guy named Joe Fog very very
Speaker 4: sort of, very sort of tough guy of that era,
Speaker 4: and we're sitting around the table. I don't know, there
Speaker 4: must have been twenty some associates in New York at
Speaker 4: that time something like that, and people are asking them
Speaker 4: the question, hey, you know, we have someone you know
Speaker 4: who covers the retail industry, someone who covers the industrials,
Speaker 4: someone who covers you know, insurance companies, Like, what what
Speaker 4: are we going to grow up into? You know, what
Speaker 4: are the roles going to be for us? And so
Speaker 4: people did try very hard to differentiate themselves. Now, of course,
Speaker 4: what none of us around that table knew is this
Speaker 4: business was going to be like a hundred times bigger.
Speaker 4: So it wasn't like, oh, we have somebody to cover
Speaker 4: the retail industry, So I guess that's not an opportunity
Speaker 4: for me. No, there was going to come a day
Speaker 4: when you would have twenty five people covering the retail industry.
Speaker 4: But there's always been that sense of, you know, few
Speaker 4: opportunities at the top, even when it wasn't true, you know,
Speaker 4: even when there was going to be more opportunity.
Speaker 3: So I imagine quite a bit of the work you
Speaker 3: were doing in the nineteen eighties is what we would
Speaker 3: now characterize as pretty rote work in the sense that,
Speaker 3: you know, we didn't have computers, we didn't have Bloomberg
Speaker 3: terminals that would show the share price or a bond quote.
Speaker 3: You would have to like actually call someone up and
Speaker 3: get that.
Speaker 4: Inn which that's right now. Who owned that company, but
Speaker 4: Bloomberg put it out of business a long time ago.
Speaker 3: Shout out to the Bloomberg terminal. I guess, but you know,
Speaker 3: you went through a wave of disruption, basically, And yet
Speaker 3: it seems that the work of physically going somewhere to
Speaker 3: find corporate papers or physically calling someone up to get
Speaker 3: a share price quote, that was replaced with work of
Speaker 3: a different kind. Can you explain how that substitution kind
Speaker 3: of happened.
Speaker 4: I think it was replaced with going from the sort
Speaker 4: of very intermittent meetings with a limited number of clients
Speaker 4: to talk about ideas to a place the industry is
Speaker 4: today where you go very very regularly to almost every
Speaker 4: company on the planet of any real size. Right You're
Speaker 4: someone is there, and you're there with analysis of their industry,
Speaker 4: their performance, their stock price, their competitors, what's for sale,
Speaker 4: what might be for sale, and so it's more like
Speaker 4: a saturation coverage. It's you know, it's a little bit.
Speaker 4: I think investment making is very very different from consulting,
Speaker 4: but you know, but where it has some similarity is
Speaker 4: this kind of try, this attempt and desire to sort
Speaker 4: of almost get inside the business and really know your
Speaker 4: client's business, and that was not something that was even
Speaker 4: attempted back in the nineteen eighties. But that's what all
Speaker 4: those people are doing with all those extra hours.
Speaker 2: Now you mentioned you in the early eighties, you couldn't
Speaker 2: have anticipated that the industry was going to grow one
Speaker 2: hundred folder whatever it was. And this is one of
Speaker 2: those things where perhaps from any indo people, many in
Speaker 2: the public like wise, finance so big? Why why is
Speaker 2: there so much money in this area? Finance doesn't produce anything?
Speaker 2: Why why is this? Why has this grown so much?
Speaker 2: How would you articulate that to someone? Why fundamentally, there
Speaker 2: is just so much demand for financial services at the
Speaker 2: corporate level, and so much more than there was, say
Speaker 2: forty years ago or forty five years ago.
Speaker 4: Look, I think there there are literally it's no exaggeration
Speaker 4: to say that there really was an ethical change that
Speaker 4: the world of sort of post World War two. You know,
Speaker 4: big companies building conglomerates, you know, work at the same
Speaker 4: place for thirty five years like my father did. And
Speaker 4: you know, not a massive amount of intense competition, not
Speaker 4: a lot of mergers, kind of stable, stable companies and
Speaker 4: and and you know, maybe that meant slow growth at
Speaker 4: some point, and maybe that was part of a problem.
Speaker 4: But in the early eighties you had really a lot
Speaker 4: of things change. I think corporate culture changed a lot.
Speaker 4: You know, Jack Els took over from a guy named
Speaker 4: Greg Jones who was very involved at pen where I went,
Speaker 4: you know, a very very different kind of character. You know,
Speaker 4: the the tax law changed. You know, capital gains got
Speaker 4: started getting taxed differently from ordinary income. The tax rates
Speaker 4: got cut quite a lot. Deregulation increase, the kind of
Speaker 4: pressure on unions, you know, Reagan breaking the Air Traffic
Speaker 4: Controllers union, the ability to buy back stock, even the
Speaker 4: sort of theoretical notion of you know, what is a
Speaker 4: company for, right, Milton Friedman said, the company's sole purposes
Speaker 4: to make money. You know. Professor at Harvard Business School
Speaker 4: named Michael Jensen wrote all these these stories or analysis
Speaker 4: about why, you know, you had to maxim my shareholder
Speaker 4: value and you can't serve two masters, so that has
Speaker 4: to be the only thing you're you're trying to do.
Speaker 4: And you know, and he had this long running debate
Speaker 4: with my first boss, Marty Lipton, founder of Walked Out
Speaker 4: Lipton about you know, should a company serve you know,
Speaker 4: the community its employees, it's customers, et cetera. And that
Speaker 4: all those things mixed together really made for a tremendous
Speaker 4: focus on transactions. How do you maximize values with more
Speaker 4: shares outstanding or less outstanding? Is it combining with this
Speaker 4: other company? Is it spinning off a business you've already got.
Speaker 4: Maybe this year it's spinning it off, maybe four years
Speaker 4: later it's buying it back. You know, this this game
Speaker 4: really in a way, and hedge funds grew up to
Speaker 4: sort of play that game, to bet on that game,
Speaker 4: and investment bankers grew up to really you know, drive
Speaker 4: the transaction activity from that. So the industry that you
Speaker 4: know again was very very small back in the in
Speaker 4: the seventies, and you know, as you turned into that
Speaker 4: sort of Reagan era when all those rules changed, just
Speaker 4: really exploded it. And you know, the number of transactions
Speaker 4: to you know, has been very very high and growing
Speaker 4: for a long time. I think the interesting question is
Speaker 4: does that go on forever? But it's not like it
Speaker 4: was there forever. If you're if you're you know the
Speaker 4: age I am, and you started what I did, you
Speaker 4: sort of feel like it did. But if you look
Speaker 4: just a tiny bit further back in history you realize, no,
Speaker 4: this is all new.
Speaker 3: This might be a dumb question. But in terms of
Speaker 3: the urge to do something as a corporate manager or executive,
Speaker 3: did you notice a difference between public and private companies.
Speaker 3: Was that urgency or pressure more apparent at publicly traded ones.
Speaker 4: Yes, because they had you know, there was this thing
Speaker 4: that became known as the market for corporate control. Right
Speaker 4: if you if you don't buy into my mantra of
Speaker 4: maximizing shareholder value, and therefore you don't, I will bid
Speaker 4: for your company, and I will maximize shareholder value, and
Speaker 4: the difference between the value today and the value later
Speaker 4: is going to be mine. And so there was pressure
Speaker 4: on public companies. Of course, private companies, you know, there
Speaker 4: were a lot of sort of family owned companies that
Speaker 4: had a longer term point of view and some that
Speaker 4: are still there, you know, the Mars family, you know,
Speaker 4: some companies like that are huge Cargill, some really big
Speaker 4: ones that have remained you know, kind of steadfastly private.
Speaker 4: But today, of course, private company really means private equity
Speaker 4: owned company, you know, and that has grown you know what,
Speaker 4: thirty thousand plus companies owned by that sector of a
Speaker 4: bit of a log jam right now, and they really
Speaker 4: are the masters of that universe. They're the masters of
Speaker 4: trying to maximize shareholder value.
Speaker 3: Actually we should talk about that because this is the
Speaker 3: other thing that's happened in investment banking is you have
Speaker 3: had the rise of private equity and also hedge funds,
Speaker 3: which are in some ways, you know, competing directly with bankers.
Speaker 3: One of the things you sometimes hear, actually when it
Speaker 3: comes to the junior bankers actually working really long hours,
Speaker 3: is this idea that well, we all know they're going
Speaker 3: to go join Blackstone in like two years anyway, so
Speaker 3: we have to squeeze out as much as we can
Speaker 3: from them before that actually happens. How did that actually
Speaker 3: change the business? And I guess, like how much pressure
Speaker 3: did that generate on the banks to respond and I
Speaker 3: guess retool their own offerings and response.
Speaker 4: Well, private equity really became the biggest client base for
Speaker 4: the whole industry, right and that also was a very
Speaker 4: very small, nascent industry. You go back to the you know,
Speaker 4: the early days, like Morgan Stanley had to its first
Speaker 4: private equity fund. It was I can't remember exactly. I
Speaker 4: think it was like a forty four zero million dollar
Speaker 4: fund and you go back to KKR's initial fund. I
Speaker 4: mean people used to do leverage buyouts with like you know,
Speaker 4: buy a ten million dollar company with one hundred thousand
Speaker 4: dollars down and by and by by the rest with debt,
Speaker 4: right we put together, I think you may have missed
Speaker 4: the opportunity. Unfortunately, prices went up from there. But you know,
Speaker 4: these things kind of fed fed on themselves, had some
Speaker 4: early success, and so really in the nineteen eighties beginning
Speaker 4: then you had the rise of the private equity industry.
Speaker 4: You know, these huge players that for a long time,
Speaker 4: you know, did very very well taking companies private, you know,
Speaker 4: kind of doing a number of things to boost their
Speaker 4: returns and then putting them back out into the public.
Speaker 4: That that has also changed quite a lot where the
Speaker 4: industry is looking at, you know, all kinds of private capital, right.
Speaker 4: I mean, you know, Blackstone really pioneered this model of oh,
Speaker 4: let's do real estate, let's do hedge funds, let's do
Speaker 4: private credit, and so you expanded to so many different fields.
Speaker 4: But that that really fundamentally changed Wall Street because the
Speaker 4: rise of the private equity to created a client that
Speaker 4: was kind of in the kind of permanently in the
Speaker 4: transaction business, right, not like a public fortune one hundred
Speaker 4: five hundred company that might do a deal every year
Speaker 4: or two or three. You know, these were firms that
Speaker 4: did you know, ten or twenty deals a year, and
Speaker 4: so they were became the most important clients.
Speaker 3: They're raising Dutch is raising money. I got thank you.
Speaker 3: I stole that from Lloyd Fling. Fine. Actually, oh I
Speaker 3: feel bad. I've been reading his book, which is why
Speaker 3: I keep mentioning him that good one.
Speaker 2: Okay, you get a little bit further into your career
Speaker 2: and you get a sort of role where perhaps you
Speaker 2: get to think a little big picture and you have
Speaker 2: to more junior people are the ones staying up late,
Speaker 2: et cetera. Talk to us a little bit about recruiting,
Speaker 2: and I met this is an area of course today
Speaker 2: that there's probably a lot of anxiety for people going
Speaker 2: into the biz. But talk to us a little bit
Speaker 2: about like, Okay, some things obviously can be taught. Math
Speaker 2: can probably generally be taught. Put aligning bullet points on
Speaker 2: a PowerPoint. I think that could probably be taught. Though
Speaker 2: fastidiousness and attention to detail maybe inherently, maybe not how
Speaker 2: would you talk to us a little bit about how
Speaker 2: how you found people at the writ fit, how you
Speaker 2: what that process was like.
Speaker 4: Well, that also, of course has changed dramatically as the
Speaker 4: industry has grown. If you go back to early days,
Speaker 4: we recruited a very few schools. I mean it really
Speaker 4: was sort of the Ivy League and maybe a few others,
Speaker 4: and it was for a small number of jobs, so
Speaker 4: there were plenty of students there for that. Now, when
Speaker 4: the industry really exploded, those schools weren't producing enough people.
Speaker 4: And I can say in the early days of Greenhill
Speaker 4: we had in terms of like what knowledge these these
Speaker 4: young people had, we had a little bit of a
Speaker 4: strategy of you know, let's take half of the class
Speaker 4: just kids who are really smart. You know, but they
Speaker 4: can do math, they can speak, they can write, they
Speaker 4: just got great grades all the way through. They're really
Speaker 4: really smart. And let's take the other half as people
Speaker 4: who actually have some substance of knowledge that's useful. You know,
Speaker 4: they went to Wharton. There are other great business schools
Speaker 4: about University Gina had one. We recruited a lot from
Speaker 4: a University of Texas, Indiana, University, University of Michigan, and
Speaker 4: so we'd kind of do half and half in figure.
Speaker 4: You know, the kid who majored in finance at Wharton
Speaker 4: can teach the kid who majored in English at Yale.
Speaker 4: Now today, what's changed is that the typical student wherever
Speaker 4: he or she sits, as they're in their senior year
Speaker 4: of college. I mean, they've had like four internships by now,
Speaker 4: they've taken various online courses. They come in so ready
Speaker 4: to roll, even if they majored in something that's completely
Speaker 4: unrelated to what Wall Street actually does. So you're getting
Speaker 4: someone who's almost trained before they even arrived. Now you
Speaker 4: give them a lot more training, of course, but it's
Speaker 4: not the kind of thing where you bring in an
Speaker 4: English major, you know, as we did in the early
Speaker 4: days and teach them like here, here's what a stock
Speaker 4: is and here's what a bond is. You know, these
Speaker 4: students have been working on that since they were in
Speaker 4: high school. I'm maybe I'm sorry to say I think
Speaker 4: they should probably doing other things in high school. But
Speaker 4: you know, it's become a very very competitive world, right
Speaker 4: even though there's many, many more opportunities for students to
Speaker 4: get a job on Wall Street today as they come
Speaker 4: out of college at the same time, it's very very competitive.
Speaker 2: Was there like a point where you started noticing that
Speaker 2: or like around when that change, because it certainly tracks
Speaker 2: that you like meet young people and they're like, oh
Speaker 2: my god, like, how do they know all this stuff
Speaker 2: and about things that maybe it's the Internet or something,
Speaker 2: the things that I certainly didn't know about when I
Speaker 2: was in high school really even college in many instances.
Speaker 2: But I'm curious when you started when you started noticing that.
Speaker 4: I think maybe in the sort of the post dot
Speaker 4: com bubble bursting kind of in the early two thousands,
Speaker 4: when business really started to pick up again and you
Speaker 4: had those several great years leading into what, of course
Speaker 4: became the financial crisis, But there was such an increase
Speaker 4: in opportunity then, and there was and now everyone was
Speaker 4: in on the secret, right, I mean, they could read
Speaker 4: about the industry, they could understand the you know, compensation
Speaker 4: structures and the potential for themselves to get ahead in life.
Speaker 4: And and so these students started kind of working backwards like, Okay,
Speaker 4: I wanted to get a first year analyst job.
Speaker 2: How do I do that?
Speaker 4: What internship should I get after you know, freshman year? Well,
Speaker 4: you can't get a very good one then, but maybe
Speaker 4: you can get something tangentially, you know, do you know
Speaker 4: somebody works as a stockbroker, Can you be a you know,
Speaker 4: work in the mail room there or something after software,
Speaker 4: or maybe you can do a little better than that.
Speaker 4: After junior year, maybe you can get you know, something
Speaker 4: better than that. And by time you show up, you know,
Speaker 4: as a college junior looking for that first year analyst
Speaker 4: job at Goldman Sachs, you know, you've got like five
Speaker 4: names on your resume that look like, wow, this this
Speaker 4: person's been around the industry a long time, even though
Speaker 4: they're twenty one years old at the point, at that
Speaker 4: point scary.
Speaker 3: Do you think as many people are going to want
Speaker 3: to go in finance given that, I mean, we've already
Speaker 3: been through shifts in the popularity of finance as a career.
Speaker 3: So at one point it was the place that you
Speaker 3: wanted to go to if you were like a Harvard
Speaker 3: grad or whatever, and then it became tech for a
Speaker 3: little while, and now there's all this anxiety over AI
Speaker 3: disrupting particularly analytical jobs. Do you think it's going to
Speaker 3: be as popular a choice.
Speaker 4: I think it will. It will evolve and fluctuate and
Speaker 4: probably decline over time. Just the industry is all about cycles, right,
Speaker 4: Markets are all about cycles. I mean, we've had an
Speaker 4: incredible run, incredible run. Okay, the you know, COVID was
Speaker 4: a little bit of a hiccup right where markets sort
Speaker 4: of plummeted and things slowed down, but then you know,
Speaker 4: it exploded in activity in just a matter of months later.
Speaker 4: So it's been a long run really since the financial
Speaker 4: crisis of you know, really wonderful times largely on Wall Street.
Speaker 4: And you know at some point there's going to be
Speaker 4: you know, a retrenchment from that. There's going to be
Speaker 4: some kind of decline. Who you know, who knows. Maybe
Speaker 4: maybe maybe a war set you know, turns things around,
Speaker 4: maybe a private credit problem turns things around. But something
Speaker 4: will happen, I think can sort of dampen the interest again,
Speaker 4: just as happened, you know, with the dot com crash
Speaker 4: or the financial crisis.
Speaker 2: Let's talk a little bit more about technology and the
Speaker 2: technological changes that you saw in your career. So okay,
Speaker 2: mentioned like you're using Lotus one two three in the beginning,
Speaker 2: which I have some memory of Lotus one two three
Speaker 2: and ease of data retrieval is so much is so
Speaker 2: much different now. But talk to us about okay, twenty
Speaker 2: twenty four, but in recent years and some of the
Speaker 2: other ways, like what what other technological innovations came out,
Speaker 2: What time consuming activities did they shrink to your zero?
Speaker 2: And then what new things did people do on top
Speaker 2: Once Okay, the technology is here, you don't have to
Speaker 2: allocate your time to this. You're now going to allocate
Speaker 2: your time to that. Talk to us what else you saw?
Speaker 3: Sure?
Speaker 4: Yeah, I mean look in the early days, like even
Speaker 4: if companies weren't even that of their own share price, right,
Speaker 4: I mean, not everybody had a Bloomberg terminal or CNBC
Speaker 4: you know screen on their on their desk. If you're
Speaker 4: sitting in Dayton, Ohio. Uh so you didn't know. As bankers,
Speaker 4: you know, you could bring very little information and it
Speaker 4: was new to the client. It was interesting to the client.
Speaker 1: You know.
Speaker 4: Over time, we used to do a lot of laborious
Speaker 4: work to create sort of a comparable companies analysis. Here
Speaker 4: are the ten companies in your business segment. You know,
Speaker 4: you trade at this pe multiple or this ebit don multiple,
Speaker 4: and here's where the other guys trade, and here's how
Speaker 4: their leverage is different than yours, and here's how their
Speaker 4: stock is performed. And that used to be a tremendous
Speaker 4: amount of work. You know, Now really a machine can
Speaker 4: largely do that, and a lot of the other kind
Speaker 4: of creation of sort of standard charts on you know,
Speaker 4: on what's going on in the industry, even what's going
Speaker 4: on in your company can be done very very quickly.
Speaker 4: So I think, you know, the pyramid I have to
Speaker 4: think is going to get less fat at the bottom
Speaker 4: because you're going to be really leveraging technology to do
Speaker 4: a lot of things that used to be somebody sitting
Speaker 4: up all up all night trying to find out, you know,
Speaker 4: what pe multiple Coca Cola was trading at, and now
Speaker 4: you know it's that you can get it at the
Speaker 4: touch of a finger.
Speaker 3: Does the edge in that scenario? You know, if it's
Speaker 3: not about how much knowledge you're accumulating and can share
Speaker 3: with your client, is the edge more on the execution
Speaker 3: side of things, just the knowledge or the client's belief
Speaker 3: that you, out of everyone else in the IB business,
Speaker 3: is going to be able to execute like a smooth deal.
Speaker 4: I think that's true to some degree, And you know,
Speaker 4: particularly amongst sort of the so called independent firms like
Speaker 4: green Hill was for a long time and many others
Speaker 4: are today. But I think among the larger you know
Speaker 4: group of competitors, I think a lot it's going to
Speaker 4: come down to what else is in the relationship. You know,
Speaker 4: are you are you and their revolving credit facility? To
Speaker 4: do you do their bond offering? Are you doing equity
Speaker 4: research for them?
Speaker 2: Uh?
Speaker 4: Are you know, are you touching them and just every
Speaker 4: are you doing their hedging? Are you, you know, talking
Speaker 4: them about currency, talking them about commodity prices? And so
Speaker 4: I do think it it may That's why I think
Speaker 4: sort of the one stop shopping is kind of a
Speaker 4: little more appealing again because if if nobody, if nobody
Speaker 4: really has the magic anymore, right of the magic is
Speaker 4: now a fingertips uh, and you know me even a
Speaker 4: lot of things like you can you can you don't
Speaker 4: even need to do the Excel model. I mean, you
Speaker 4: can say into a in the AI, if you have
Speaker 4: this stream of cash flows to this period of time,
Speaker 4: this discount, right, what's the number? I mean, it will
Speaker 4: give it to you without you typing a single number
Speaker 4: under the page. But I think that with everyone having
Speaker 4: access equal access to that information. I think it will
Speaker 4: come down to, yeah, maybe are you smarter than the
Speaker 4: other guys? Can you execute better? But probably in most cases,
Speaker 4: you know, what else are you doing for me? And hey,
Speaker 4: I could give this to anyone, but I'm gonna give
Speaker 4: it to you.
Speaker 2: How much Tracy alluded to this at the very beginning,
Speaker 2: But you know how much of the job is being
Speaker 2: a good hang, being a good hang at the golf course,
Speaker 2: knowing being able to get a good dinner reservation. It's seriously, no,
Speaker 2: for real, like this is like I don't think you know,
Speaker 2: this is where I when I think about if I
Speaker 2: were this, I don't think i'd be very good at that.
Speaker 2: I like start looking at my watch or you on anger,
Speaker 2: so mostly I start looking at my phone's looking board,
Speaker 2: et cetera. The endurance, that's true.
Speaker 3: It's very obvious when Joe is bored talking to you,
Speaker 3: I speak from a.
Speaker 2: Gast So this is not this should not be my field.
Speaker 2: But talk to us about that element and just the
Speaker 2: sort of people skills and all there.
Speaker 4: Now, of course that's at quite the high level, right,
Speaker 4: It doesn't matter how you know, how fun you are
Speaker 4: to be with as a senior associate at JP Morgan.
Speaker 4: That's not necessarily going to win the business. But maybe
Speaker 4: your boss's boss, you know, whether he's in the right
Speaker 4: golf clubs and inviting clients and you know, getting to
Speaker 4: know them on a personal level. Look, there's always going
Speaker 4: to be that element to the business, but that that's
Speaker 4: a pretty small piece. And of course everyone has that too, right,
Speaker 4: I mean, you can one up others. You can bring
Speaker 4: somebody to the Masters, you can, you know, rather than
Speaker 4: to a you know, a country club on Long Island.
Speaker 4: You know, you can. There's there's different levels of sort
Speaker 4: of client entertainment, but you know that that's Look, it's
Speaker 4: important to build relationships.
Speaker 2: It always is.
Speaker 4: I think what you know, whether you're talking about sort
Speaker 4: of personal wealth management or corporate financial management, what the
Speaker 4: what the advisors have to realize is like everyone in
Speaker 4: the world is calling on this guy and trying to
Speaker 4: get you know, either his personal money to manage or
Speaker 4: trying to manage his corporate affairs and help him do
Speaker 4: acquisitions and so on. I mean, it's not That's another
Speaker 4: thing really that changed a lot in the industry. Used
Speaker 4: to be that people, you know, firms had clients like
Speaker 4: like you, No, that's my client and this one is
Speaker 4: your client. Now they're just all clients and everyone's clients everyone, right,
Speaker 4: And it's kind of a free for all where you've
Speaker 4: got a lot of parties out there, you know, in
Speaker 4: you being special because you invite somebody to you know
Speaker 4: something and get to know them butt, I mean everyone
Speaker 4: else is doing that too, And as a matter of fact,
Speaker 4: if you don't have the relationship, you're probably more prone
Speaker 4: to do that because you're trying to break in, you know,
Speaker 4: get to know them.
Speaker 3: You mentioned this word earlier in the conversation, but can
Speaker 3: you explain culture to us? Explain all culture to us? No,
Speaker 3: the investment banking culture, because this is one thing that
Speaker 3: we hear all the time time from you know, especially executives,
Speaker 3: former executives at investment banks, this idea that well, we
Speaker 3: have a culture that is different to someone else's culture.
Speaker 3: And whenever you hear them summarize the culture, it's almost
Speaker 3: always like we're client facing and it's all. I've never
Speaker 3: heard a bank say it's not about the client. Actually,
Speaker 3: our culture is about something else. What does culture mean
Speaker 3: in investment banking?
Speaker 4: I think it's probably fair to say every firm aspires
Speaker 4: to the same culture. Right, you aspire to be driven
Speaker 4: by excellence and attention to detail and client service, and
Speaker 4: and you produce that great coverage through team work and
Speaker 4: training and mentorship. I mean, every everyone aspires to all that.
Speaker 4: There are though different cultures. There are some places I
Speaker 4: think are much harder to work than others, although I
Speaker 4: think the industry has become a little more in common.
Speaker 4: I mean, I think there was there was a day
Speaker 4: when you know, the difference inture between like a Morgan
Speaker 4: Stanley and a bear Stearns was was vast.
Speaker 2: I would say more about that, like what would have
Speaker 2: been the d.
Speaker 4: You know, there were some firms that sort of you know,
Speaker 4: the word scrappy sometimes gets thrown around on Wall Street, right,
Speaker 4: and if you're if you're the elite firm, like say,
Speaker 4: you know back in the day, Morgan Stanley and Golden
Speaker 4: Sacks were. Of course there's still elite firms in any
Speaker 4: ways today, but you know, as opposed to someone who's
Speaker 4: kind of scrappy trying to get business that maybe you
Speaker 4: wouldn't do. I mean, there were there was a day
Speaker 4: One of the interesting things not to bring up the
Speaker 4: Epstein files, but but you know, there was a day
Speaker 4: when when there firms had a lot of rigor over
Speaker 4: who they would do business with, you know, and I
Speaker 4: know that you know, Morgan Stanley, that was the case.
Speaker 4: I think at Gold and Sacks that was the case.
Speaker 4: I mean, look, they were in the law firm business.
Speaker 4: There were there were firms that didn't like hostile takeovers.
Speaker 4: You know, they thought that, oh, that that's kind of
Speaker 4: unseemly for us to be trying to buy somebody else's
Speaker 4: business on a hostile basis. And so these firms that
Speaker 4: you know, you could put in the category of scrappy
Speaker 4: were the ones that were trying to be a little
Speaker 4: more like, hey, if the client wants that help, I'm
Speaker 4: going to give the client that help. Or if the
Speaker 4: client has a little bit of a that's right and
Speaker 4: and well, and also by you know, maybe doing a
Speaker 4: transaction for someone as a client that maybe of you know,
Speaker 4: back in the day, I'm Morgan stand there, gomal Sex
Speaker 4: wouldn't have worked for now you've got a credential that industry. Now,
Speaker 4: now you've done a media deal. Now maybe you can
Speaker 4: do the next media deal. Maybe you can swim upstream
Speaker 4: toward the more prestigious clients. So so, I think at
Speaker 4: one point the cultures were a lot more different than
Speaker 4: they are today.
Speaker 2: I think it's kind of flattened.
Speaker 4: I think, you know, look, this is probably a function
Speaker 4: of scale of activity, and of things like technology, and
Speaker 4: of things like you know, just so much open information
Speaker 4: on everything. You know, everyone can sort of copy everyone else, right,
Speaker 4: It's pretty obvious what a good culture is higher smart
Speaker 4: young people. Train them well, treat them decently, and they'll
Speaker 4: grow up to be you know, good good bankers. You know,
Speaker 4: pay attention to your clients, have integrity, you know, et cetera.
Speaker 4: You'll build a good business. But that those aren't secrets, right,
Speaker 4: everybody knows those.
Speaker 2: I have a question. It's sort of this on long
Speaker 2: standing puzzle within finance. It might be relevant this year
Speaker 2: because there's some very big companies that might come public.
Speaker 2: Why does the IPO process as we know it exist
Speaker 2: and persist? Because this is one of the long standing
Speaker 2: academic things. Why is there frequently a pop Why did
Speaker 2: the companies have to pay large fees to underwriters, particularly
Speaker 2: given you'd think the Internet could just just have an auction, right,
Speaker 2: an auction out the allocation of shares you want and
Speaker 2: then get the market price instantly and so forth. And
Speaker 2: yet this has been tried for a very long time,
Speaker 2: and going back to the dot com here or there
Speaker 2: have been attempts to disintermediate the traditional IPO process with
Speaker 2: almost no success backs tried. That seems to be sort
Speaker 2: of not a particularly counter signal. Perhaps, How would you
Speaker 2: describe the persistence of the IPO.
Speaker 4: Well, you know, first of all, the public start with
Speaker 4: public companies, right, that's what you have after you do
Speaker 4: on IPO. You know, that market really has shrunk. I
Speaker 4: mean it fell in half. The number of public companies
Speaker 4: in America fell in half the in the twenty five
Speaker 4: years or so that our firm was an independent firm.
Speaker 4: So that I don't think that's a good thing. I
Speaker 4: think it's a good positive thing to have more companies
Speaker 4: in the public realm, where there's more information and more
Speaker 4: under you know, transparency to what they do and so on.
Speaker 4: But I think to go from the world of private
Speaker 4: where nobody really knows much about your company to public,
Speaker 4: I think having a lot of you know, a lot
Speaker 4: of sort of activity around that, you know, a big
Speaker 4: almost like pr campaign, you know, lots.
Speaker 2: Kind of video and stand up there on the thing
Speaker 2: and like, yeah, yeah, exactly. It is a bit like that.
Speaker 4: I mean, I remember for our own IPO back in
Speaker 4: two thousand and four, we had like sixty something one
Speaker 4: on one meetings as well as big group meetings and
Speaker 4: places like New York and Boston and so on. But
Speaker 4: if you're trying to get known by a lot of
Speaker 4: investors in a real hurry, you kind of need to
Speaker 4: go through something like that. And you know, and that's
Speaker 4: not like the industry has been some sort of a
Speaker 4: you know, uh, fees are fixed and there's nothing you
Speaker 4: can do about it. I mean, for a long long time,
Speaker 4: an IPO was I remember it was seven percent. That
Speaker 4: was an underwriting commission, you know. I remember we worked
Speaker 4: and advised a Visa when it did what was then
Speaker 4: the biggest IPO in two thousand and probably seven or
Speaker 4: something like that, and that was like a fraction of
Speaker 4: a percent, you know. So the end of it is
Speaker 4: it sort of succumbs to competition, right, And somebody says, Okay, yeah,
Speaker 4: if I'm doing a classic early year Silicon Valley IPO
Speaker 4: and we're raising one hundred million dollars, yes, I think
Speaker 4: a seven million dollar fee is fair for that, And
Speaker 4: probably your competitors feel that way too. It's a lot
Speaker 4: of work, it's a little bit risky. But when you're doing,
Speaker 4: you know, an ip that's in the hundreds of millions,
Speaker 4: the billions, and maybe today the tens or hundreds of billions,
Speaker 4: you know, the fees will be very, very small and
Speaker 4: driven by pretty ferocious competition.
Speaker 3: I'm sure did you say Greenhill iPod in two thousand
Speaker 3: and four. Yes, So that's kind of late, right for well,
Speaker 3: certainly in the context of like some of the larger
Speaker 3: investment banks, because I think by then even Goldman had
Speaker 3: had gone from.
Speaker 4: A vestorship in nineteen ninety nine.
Speaker 3: Yeah, So what was the sort of push pull process
Speaker 3: of actually going public for you? What were the considerations?
Speaker 4: Well, for us, it was that there had been a
Speaker 4: long I mean, obviously some bigger firms like Morgan Stanley
Speaker 4: went public in nineteen eighty six, and I think Goldman
Speaker 4: in ninety nine or something like that. But you know,
Speaker 4: for a firm like Hours that was kind of a smaller,
Speaker 4: more focused firm, the long history of that was that
Speaker 4: you normally sold the firm, and even in its fairly
Speaker 4: early days, you'd kind of build something, you know, prove
Speaker 4: you had a team, Priva, had a brand, prove, you
Speaker 4: had some clients, and you'd go out and sell the firm.
Speaker 4: There were many, many cases that happened, and you know,
Speaker 4: we viewed the IPO as an alternative, and IPO is
Speaker 4: a way to realize the value you had created, but
Speaker 4: also keep what you thought of the special culture. To
Speaker 4: go back to that word, you didn't want to change things,
Speaker 4: You don't want to give up control, et cetera. And
Speaker 4: so that that was really what drove us to go
Speaker 4: public and I think many others as well.
Speaker 3: So when but also in an IPO process, you're raising capital, right,
Speaker 3: what what does capital actually mean for a boutique advisory
Speaker 3: firm Light Green Hill?
Speaker 4: You know, you're you're often that used to be the case.
Speaker 4: That was the original idea that you go public to
Speaker 4: raise capital, and to some extent that's still true. But
Speaker 4: you look at even take these mega you know technology companies,
Speaker 4: stay do they do they need capital? They can raise
Speaker 4: all the capital they want the private markets. So it
Speaker 4: really has evolved from that to wanting liquidity. I would say,
Speaker 4: you want to have a you want to have a
Speaker 4: marker that says here's what my company is worth. Uh,
Speaker 4: and you want to have the liquidity to be able
Speaker 4: to transact at that price in any given day. So
Speaker 4: I think that has driven more I pos in recent
Speaker 4: years than the kind of the earlier notion of wow,
Speaker 4: we need to build a new factory, or we need
Speaker 4: to you know, invest a lot to build an overseas
Speaker 4: business or launch a new brand, so we need to
Speaker 4: do an IPO to raise money.
Speaker 2: Has something changed in the IPO front? Now? I'm just
Speaker 2: maybe I missed it, But I feel like several years ago,
Speaker 2: maybe the mid twenty tens, I still used to hear
Speaker 2: read a lot of stories about so and so won
Speaker 2: the Uber deal, right, or so and so and this
Speaker 2: would be a big thing and they like their flush
Speaker 2: left on the swan or the perspectives.
Speaker 3: Whatever getting or something yeah, and stuff like.
Speaker 2: That used to and how I feel like, I don't
Speaker 2: has something changed there or that's still a thing. Okay,
Speaker 2: that's still that's still a thing.
Speaker 4: You still want to be on the left and but
Speaker 4: you know what, what also, again, the industry became very
Speaker 4: very big, very very competitive, and so you know, it
Speaker 4: used to be like there was one lead underwriter and
Speaker 4: then you got into well, you're the global lead. You're
Speaker 4: the co global lead.
Speaker 2: You're the lead laugh, massive lead. Like everyone everyone gets
Speaker 2: to be a lead.
Speaker 4: It's it's like getting an A at Harvard. I understand
Speaker 4: the pipation for.
Speaker 2: Trophies for the Uber one, like there wasn't There was
Speaker 2: a banker who became an Uber driver. There was remember
Speaker 2: that because he wanted to show that he and like,
Speaker 2: I get it. It's like that's cool. He like really
Speaker 2: like got it. He really took the job seriously and
Speaker 2: he Joe for Uber and stuff like that. But still
Speaker 2: in my mind, I was like, does this really make
Speaker 2: a difference from ubers. They're just selling some shares that
Speaker 2: they're moving on, like it's cute. People used to do
Speaker 2: that sort of thing.
Speaker 4: I think. By the way, I can't remember his name.
Speaker 4: He was kind of slightly after my time, I think,
Speaker 4: but he is. That banker is still at Morgan Stanley
Speaker 4: and is I'm sure going to be the one driving
Speaker 4: the pursuit of Elon Musk's large IPOs to come we should.
Speaker 2: Yeah, he became. He was also he became the Uber
Speaker 2: He became an Uber driver for a while. Yeah, he was.
Speaker 3: He was a big deal.
Speaker 2: And that definitely in the mix today with some of
Speaker 2: these big potential IPOs.
Speaker 3: We should actually talk about league tables, though, because I
Speaker 3: feel like this is sort of perhaps an inordinate amount
Speaker 3: of what an investment banker's life is actually about. And
Speaker 3: back when I was covering the banks, the league tables
Speaker 3: were the things I probably got called up about the most.
Speaker 3: You know, lots of banks explaining to me why the
Speaker 3: league table rankings were not, in fact an accurate reflection
Speaker 3: of their business. How much do those actually matter?
Speaker 4: I think whether you're frankly, if you're number one or
Speaker 4: number four, number seven, you know, we're number nine or
Speaker 4: eleven even, you probably have a pretty equal chance at
Speaker 4: pursuing something. But look, the bankers, do you know, do
Speaker 4: aggressively fight to try to be number one in some
Speaker 4: in something? Right? And but but again with the with
Speaker 4: the increase in just availability of information and transparency, I mean,
Speaker 4: it used to be that, you know, there was a
Speaker 4: lot of gamesmanship around the league tables. You know, you'd say, well,
Speaker 4: we're number one in in uh you know, and I
Speaker 4: pos and you'd look into the footnotes and it would say,
Speaker 4: you know, this includes all deals for you know, radio
Speaker 4: stations with a market cap more than a two hundred
Speaker 4: and fifty million dollars. And you know, if you're trying
Speaker 4: to pitch some media deal or something, and you always
Speaker 4: have some way to slice and dice, like us I
Speaker 4: pos uk, I pos this industry, this deal size. Now
Speaker 4: it's kind of all out there and it's uh, you know,
Speaker 4: but there's there's ten or a dozens that are very,
Speaker 4: very competitive, and the fact that one ranks number one
Speaker 4: versus four is not a big deal.
Speaker 2: It's hilarious. Michael Grimes, he not only drove for Uber,
Speaker 2: he mastered the online game Farmville before Facebook's IPO. They
Speaker 2: spent hours playing that and hey, if that paid off
Speaker 2: for him, good for him. And now he is bad
Speaker 2: because it looks like he'll probably be a.
Speaker 3: Lot of people master Farmville for free with right, he.
Speaker 2: Turned it into something, and I guess it's likely to
Speaker 2: be involved or perhaps positioning himself for a potential role
Speaker 2: into SpaceX IPO. Final question for me, But I'm just curious,
Speaker 2: So like, Okay, we don't know what the future is
Speaker 2: going to look like, but I'm curious, like people you're
Speaker 2: talking to or things you're seeing the AI question, and
Speaker 2: there's some obvious things today anyone knows that you can
Speaker 2: do a very good comp analysis already with almost no knowledge,
Speaker 2: like what are some comps here? And well, maybe that's
Speaker 2: not the kind of output that you would show to
Speaker 2: a client, but it might get your ninety five percent
Speaker 2: of the way there. And so that's that's extraordinary about
Speaker 2: excel files and stuff like that. What else, like, what
Speaker 2: does it feel like AI is going to do to
Speaker 2: this space or what would be your guess or where
Speaker 2: today would you imagine we're already seeing AI change the
Speaker 2: nature of the job.
Speaker 4: No one really knows the answer to that question. Of course,
Speaker 4: is such a fast moving technology. But look, I do
Speaker 4: think it will change a lot about how bankers interact
Speaker 4: with clients because the information now is going to go
Speaker 4: from you know, from kind of available, but you have
Speaker 4: to sort of work to dig it out to available
Speaker 4: just literally your fingertips, and by the way, not just
Speaker 4: to you the banker, but also to your client. So
Speaker 4: I think differentiating yourself as a banker inside one of
Speaker 4: these firms or as one of these firms relative to
Speaker 4: your peers trying to win the IPO, trying to win
Speaker 4: the M and A deal, trying to win the bond
Speaker 4: offering is going to be more complicated. You'll you'll have
Speaker 4: you'll be more efficient in preparing your materials, You'll be
Speaker 4: more efficient in communicating with that client and delivering you know, interesting,
Speaker 4: insightful information to them. But a lot of that information
Speaker 4: is going to look it's going to be commodity like.
Speaker 4: And so the real challenge is going to be, you know,
Speaker 4: if a client has access to all the information you do,
Speaker 4: when they're getting all the feeds of you know, various
Speaker 4: data they like and so on, and you have a
Speaker 4: one hour meeting with that client, how are you going
Speaker 4: to use that meeting? That one hour meeting. You know
Speaker 4: that they already know a lot as you're walking in there,
Speaker 4: So how do you use that? It's got to be
Speaker 4: more about you know, the human dimension, the tactics, why
Speaker 4: this company may be more amenable to a deal now
Speaker 4: than they were in the past. You know, things like
Speaker 4: that that are more about psychology really than about math.
Speaker 3: I feel like the trend is towards extroverts with large
Speaker 3: balance sheets.
Speaker 2: I suppose yes. All right, Scott bo, thank you so
Speaker 2: much for coming back on the podcast. We love catching
Speaker 2: up with you, and now we got to do it again.
Speaker 4: I would love to it's a great probably.
Speaker 2: Thank you.
Speaker 5: That's great, Tracy.
Speaker 2: I love talking to Scott.
Speaker 3: I yeah, that's great.
Speaker 2: I'm glad. I'm glad we met Scott. I think just
Speaker 2: this idea and it came up at the very end
Speaker 2: about the information asymmetry just being gone, and it feels like,
Speaker 2: you know, that's not something that is just true with
Speaker 2: AI now, right, but it feels like there is a
Speaker 2: version of this story that you could say, going back
Speaker 2: for the last forty five years, in which decline degradation
Speaker 2: of the information edge that a bank would have had
Speaker 2: over its clients for all kinds of different largely you know,
Speaker 2: technological changes since then.
Speaker 3: Yeah, I mean I found that conversation fascinating. I guess
Speaker 3: the two takeaways for me are the first technological revolution
Speaker 3: in investment banking and the idea that, well, we don't
Speaker 3: have to spend as many hours like actually pulling physical
Speaker 3: sec filings or something like that, or looking up quotes
Speaker 3: on a quotron or whatever, and what replaced that work
Speaker 3: was more meetings. Right. I feel like humans can always.
Speaker 2: Find a reason to meet with each other exactly.
Speaker 3: I know, it's crazy, isn't it ridiculous?
Speaker 2: Humans just love touching base and any am I maybe
Speaker 2: I'm revealing my own your own biases, my own biases.
Speaker 3: I think it's I think it's very good that we
Speaker 3: have an extrovert and an introvert on the show. We
Speaker 3: got both sides, both sides of the story. But the
Speaker 3: other thing I was thinking is the trend towards bigger,
Speaker 3: bigger balance sheets, more services, the one stop shop idea.
Speaker 3: And it feels to me like, Okay, if you can't
Speaker 3: have an informational edge anymore, and if you do have
Speaker 3: this sort of flattening of culture for various reasons, because
Speaker 3: everyone's getting smarter and smarter about what a good culture
Speaker 3: actually looks like and they're able to sort of execute
Speaker 3: on it in various ways, then it is it feels
Speaker 3: to me like it's very much going to be fought
Speaker 3: just on size and scale.
Speaker 2: You know, I don't think share buybacks are evil to
Speaker 2: a lot of people do, but it is interesting. We
Speaker 2: could just go back back. So interesting fact, like I
Speaker 2: always forget that that they haven't been around that long,
Speaker 2: that they were seeing as market manipulation at one point,
Speaker 2: we could just ban them. I mean, the fact that
Speaker 2: capitalism worked fine for a very long time without share back.
Speaker 2: Share buybacks would probably be probably wouldn't be the end
Speaker 2: of the world.
Speaker 3: We should do another episode on this, but that reminds me.
Speaker 3: The other thing I was thinking was this idea that like, well,
Speaker 3: we had an entire I mean multiple industries really that
Speaker 3: grew up whose entire sense of purpose was about doing transactions. Right,
Speaker 3: So you have the traditional Wall Street banks, but then
Speaker 3: you had private equity and private credit, and so you
Speaker 3: just have this explosion in deals.
Speaker 2: I wonder, if Michael Grimes is going to ride on
Speaker 2: a rocket to get the lot to space, he's gonna
Speaker 2: he's gonna do a little space joy ride. So to
Speaker 2: get that.
Speaker 5: It was one thing.
Speaker 2: Oh you know what I thought was also very interesting,
Speaker 2: and I think this says a lot about culture in
Speaker 2: general on just banking. The idea that at one point,
Speaker 2: for better or worse, and maybe for better, and that
Speaker 2: there were like clients that the banks wouldn't touch, but
Speaker 2: they end that they're like, no, we're above this, this
Speaker 2: is not what we do here.
Speaker 3: Well, some of them had investigators, like on staff to
Speaker 3: go out and investigate potential clients.
Speaker 2: I think that's really interesting and a certain level of
Speaker 2: you know what we're going to leave some money off
Speaker 2: the table because this is not what we do here.
Speaker 2: We have standards and so forth. And I do feel
Speaker 2: like these days it's just money. It's just across the board,
Speaker 2: it's just accumulating more and more money, and so the
Speaker 2: idea of some money isn't good enough for here, Like
Speaker 2: it does not feel like that's a thing anymore. Maybe. Well,
Speaker 2: I think a lot of people would say in retrospect,
Speaker 2: people they should have had better standards about who they
Speaker 2: do business with.
Speaker 3: Yeah, it feels much more a moral now. And I
Speaker 3: mean that in the sense that like there's a possibility
Speaker 3: that people hide behind that say, like, well, we shouldn't
Speaker 3: be making qualitative decisions about our clients. We're just here to,
Speaker 3: you know, share the good gospel of capitalism. Yeah, all right,
Speaker 3: shall we leave it there.
Speaker 2: Let's leave it there.
Speaker 3: This has been another episode of the Odd Lots podcast.
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Jill Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our producers Carmen Rodriguez at Carman armand desh Ol
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