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