Henry Cornell on Merchant Banking (Podcast)

both in Asia and the US. He's got an incredible history of being a successful investor in a number of different areas, incredibly knowledgeable about the sort of private equity that has generated really solid returns without taking a lot of risk. I know, when we think about private equity, we sort of have a tendency to think about the wacky l b o s where we just saddle a company with a lot of debt and then let him eventually die. This is not that sort of merchant banking.

This is not that sort of private equity. This is building a portfolio of companies, getting them capital and taking already solid working companies and making them that much better. And when you hear some of the names he's been involved with, you will really understand this. If you are at all interested in private equity in finance in global investing. You're going to find this conversation to be absolutely fascinating. So,

with no further ado, my conversation with Henry Cornell. This is Masters in Business with Barry Ridholts on Bloomberg Radio. My extra special guest this week is Henry Cornell. He is the founder of Cornell Capital. Previously, he was one of the original architects of Goldman Sachs Merchant Banking Division. He is a trustee for the Navy Seal Foundation as well as a trustee for the Whitney Museum of Art and the Age of Society. Previously, he was chairman of

the Citizens Committee of New York City. Henry Cornell, Welcome to Bloomberg. Thank you, Barry, very nice to be here. I'm intrigued by your background somewhat I too, am an attorney who uh is now reformed and working in finance. You were at Davis Polk before joining Goldman Sachs. How did that transition from attorney to investment banker? Come about? Well? I thought, frankly, the hand of God had come down and touched me. When I got the job at Davis Polk.

I went to a small law school and I was the first one that ever got there, and I couldn't believe my good fortune. They were kind and sent me to London for a while and had me doing lots of stuff in New York. But my last review there they said, you know, you're the lawyer, not the banker on the deal, and that set off the bell in

my head. And I interviewed around the street and liked the ethos at Goldman Sachs, which was not as concerned about where your parents came from or what college you went to, but what you could add to the team. And so I was fortunate to get that job in the spring of four and it was difficult, frankly. The first year or two. I went to a shall we say, progressive college where you got to choose your own curriculum,

which is dangerous for an eighteen year old. So I hadn't taken a math course in college, and all of a sudden I knee deep in financial terms. So it took me a while to get up to speed. But then, um, then it finally made sense to me. So you you moved to Tokyo in to work on building out Goldman Sachs real estate efforts in Asia, and then on to

Hong Kong. And two, what was your experience like in Asia in the late eighties when their market peaked and then in the early nineties, well coming to Tokyo and was, without a doubt, the hottest city on the planet. I was fortunate to have worked on a lot of Japanese deals while I was in the States, and my boss asked me if I would go and see if I could build relationships in Japan. So at age third too, I kissed my mother goodbye, hopped on a plane and

it was crazy. I mean, if you recall at the time there was a book a week being published saying Japan was going to take over the world. The real estate value of the Imperial Palace was more than the state of California on paper, and Hamburger costs fifty bucks. So it was like the best party you ever went to in college. But it was like the worst hangover you had in college. People were talking to themselves walking

down the street. And at that time, Bob Ruben, who was the chairman of Goldman, authorized the creation of GS Capital Partners, and Hank Paulson was ultimately the boss on that. And Hank said, how would you like to go to Hong Kong and open up Asia for us. And I said, Hank, don't want to really run investment banking anymore. I really want to get involved in this investment effort. And his comment, you don't really know anything about investing, and I said, well,

you've got no one else who wants to go. So it was a mute ul mutual agreement went down. And you know, we had about ten people at the time, and you know when I left in two thousand, were well over a thousand. So it was extraordinary to have been in Japan as it rose and then watched that crash, and then get to China as Dung Chao Ping opened up the country, and people forget we still are far far below that peak in Japan, which was six times

the valuation of our dot com peak. So the hangover continues. You really have been at You're almost like Zeleg from the Woody Allen movie at these crucial moments in history. So you you leave the peak of Japan in the early days of the crash to go to the opening of Hong Kong. What was that experience? Like? That had have been madness? Also, well, it was frankly extraordinary luck

to be present at the creation of history. I was fortunate literally to watch China go from mouth suits to blue suits, bicycles to cars, and the greatest explosion of human creativity, human wealth creation, I think in history, because it was just unleashed and the appetite for knowledge, the desire to build was extraordinary. And to be in a position where I had a checkbook and could be the financial partner in building out and up the country was

an extraordinary experience. And even when I moved back to the States, I still continued to run Asia and it's an important part of my firm strategy today. So it's a lifelong it was a lifelong gift. Frankly. So you mentioned even when you go back to the States, you come back to the US and now suddenly you go from investing in real estate to private equity. What was

that transition like? Well, actually, when I moved to Hong Kong and nine two, I ran both the real estate private equity group as well as the corporate equity group. And when I moved back to the States, I just focused on corporate corporate equity. And you may recall at the time everybody was doing dot coms and Frankly, there were so many investments. I'm not sure anyone really knew what the right hand was doing to the left hand.

And again I went to Hank and said, it's really a little crazy, and I would like to get back to basics, focus on traditional merchant banking and consumer industrial strategy. We had strong presence in financial institution investing. I helped to create the energy investing platform. So we went back to you know, back to the future, so to speak, and did not do what we didn't know, but did

what we did know. And so turn that around in two thousand and o one and o two, and at the time merchant banking and private equity was a pretty small portion of Gold and Sacks revenue stream. Today not so much. It's become pretty substantial, hasn't it. Well in the time, I would say from two thousand up until two thousand and ten, So as the you know, we got through the financial crisis, it was a small group, but on a per pound basis, we're definitely punching way

above our weight. The firm supported the effort and was roughly the capital. So when and then you had partners and employees also co investing, so roughly thirty cents of every dollar was family money, so to speak. So when you went to talk to other folks to join you, it was effectively investing with Goldman Sachs and that was a very powerful fundraising tool and we were frankly, very profitable for quite some time, and it worked out for

our investors and certainly worked out for the firm. Fascinating before we get into some of the details of that space, can you help me out a little bit with the terminology I of people using private equity and merchant banking and occasionally forms of commercial banking interchangeably. What what's the difference between merchant banking and private equity if any? In my dictionary, virtually none. It's really making investments to go

out and support growth, support businesses, you know. I think merchant banking has a historic precedent in British terminology of the nineteenth century, and private equity is something that was developed in the last thirty years. I remember the first time I was in Beijing and saw p I A on the back of an airplane. I was like, wait a minute. The principal investment area no Pakistani international airways, So you know, you have to keep your terms straight.

I'm glad, I asked that. So, so, what sort of deals were you doing when you were building the merchant bank division at Goldman Sachs. How did these look? If I go back to when we were building it in China, what was very apparent is that the consumer sector was going to take off, and we invested in a bicycle business partnered with Giant Bicycle out of Taiwan when they

were building factories in China. We owned an interest in the largest pork company in China, and Apple Juice Company, the world's largest manufacture of sneakers for Nike, Reebok, and Adidas. And one of my mentors, Steve Friedman, called me and he said, you know, insurance is a very good proxy

for wealth creation in a country. So I studied hard and then we wound up making an investment with the ping On Insurance Company in at a very low valuation and just watched the company explode in growth over the next decade. And when I came back to the States, continued investing in insurance. That was a very good lesson. Started a couple of insurance companies from Scribe and that

worked out pretty well. Started investing in the energy sector, both upstream prospecting deep sea oil drilling in the Gulf of Mexico and off the coast of Africa, as well as continuing this consumer industrial focus because the States is consumer paradise, and it was if you pick your spots appropriately, you can back companies that can go out and grow

grow an access of GDP. So fast forward to after a good long run of what is that almost three decades at Goldman, you say I'm gonna launch my own shop, and that was what were you thinking in terms of advantages of a smaller merchant bank versus a big shop with a lot of moving parts like Goldman. Well, after thirty years at Goldman, it was a wonderful run. Some of my best friends, I met my wife at Goldman life experiences I'll treasure forever, but it was time to

hand the baton to a new generation. And one thing I had noticed is when you're in your fifties, people think you're at the very top of your game and you've still got a lot of energy and all that wonderful experience. And when you're in your seventies, they tend to say, you know, would you join my board? And I was like, I realized I had a window of about a decade plus, and so I wanted to form

chapter two. I got married a little later in life and have five young kids, and sitting around in my library and my gym shorts is not exactly an inspiration for your children. And I'm genetically engineered to work. So I knew I had to do something. And I was very fortunate to have a number of financial partners so I didn't have to run around with a tin cup. But spent literally two thousand, thirteen, fourteen and fifteen thinking about how the landscape had changed, looking at the lessons

of a lifetime, what worked, what didn't. Since I could create my own own ethos in a new enterprise, what would my business principles be? John Whitehead, I think in the late seventies sat down and wrote the Business Principles of Golden Sacks, which has guided generations. And not that I'm John Whitehead, but I took a page out of his playbook and put down my own thoughts of Chairman

Mao and kind of put that into action. And so today we have over three billion dollars, We've got an up and running Hong Kong office that focuses on Asia, as well as New York City. So it um it was a good time to leave, and it was nice to have the time to think. And your comment about small verses large, it's it was very interesting to go from running a life for better term in Army Division to a platoon of Navy Seals. And I sit on the board of the Navy Seal Foundations, so I don't

take that lightly. And you know, a platoon of seals can take over a city just like a vision. And so having senior folks who I've worked with throughout my career, so we actually could finish each other's sentences, we knew how we took our coffee. Was also a very exciting opportunity to get the band back together again and have a focused strategy and have a small group of investors who would write large checks frankly and and support our activities.

That's quite interesting. So one of the things that I've noticed over the past decade or so is a lot of the negative spotlight has been shined on hedge funds, and private equity seems to be capturing all the positive limelight.

What is it about this sector of alternative investments that seems to have had a golden touch, especially since the financial crisis ended well, I think frankly, throughout history of private equity, which you know, you can go back to the end of World War Two and the start of ben Rock, and how how in its essence it is supporting growth, It is supporting the establishment of companies. If successful, it creates jobs, it creates wealth, and it has a

long term perspective. You really can't buy a company and build a company and do it in thirty days. Some of my most successful investments we have owned for well over a decade, and frankly, but for the terms of each fund, these are things that I would own forever. And there are some of the investments where I was able to take stock which I own forever and will

own forever. And I think that aspect of business building, of the effect and communities, the effect on labor forces, and how it can build globally makes it an attractive asset class. And frankly, I think the returns over the last few decades have been quite superior to the public markets,

and I think that attracts a lot of interest. And of all the alternative investments, it is private equity is the one that is least correlated to the public markets, and and that is certainly something that is is appealing. You mentioned in one of your investments or some of your investments, you've taken stock. When I look at the world of venture capital, it's almost all stock. How different is merchant banking in terms of the structure versus something

like venture capital. Merchant banking is probably investing at a later stage then venture capital, which could literally be an idea. An engineer comes in with a new mouse trap. Experienced people who understand what it could do will back it

even before it has any revenues. Uh. And it's a pre revenue concept or just possibly small revenue concept, whereas more traditional merchant banking, it's established the revenue, there's a business plan, there's a need for capital, for growth, for acquisition, for foreign establishment. And so it's just a difference in timing, if you will, between coming in at inception and coming in with a little more maturity and a track record.

Quite interesting. Let's talk a little bit about your firm, Cornell Capital, which I believe you mentioned has about three billion dollars in in assets under management. Tell us a little bit about your deal sourcing. Do you go out and look for deals do deal? Does deal flow come to you? How do you how do you find things

to put money into? Well, when you consider I've been doing this now somewhere between thirty five and forty years, and at Goldman, Sachs personally lead an investments into one hundred plus companies, which probably means I've spoke to three to five hundred CEOs over my career. When I left Goldman and retired in two thousand thirteen, I spent literally two to three years calling every CEO I ever met

and just letting them know that I was free. I was hopeful that they would call me back, and frankly, for every call I made, I got to back. And once you can get into the CEO network and they understand what you would like to do and they understand how you would like to do it, that reference, you know, John will call Jane, who will call Jack, who will call Susan, and all of a sudden deal flow is created.

And those personal relationships where they've had a good experience when you were a sponsor and back them is just fantastic recommendation to someone else who's thinking about capital or alternatives and looking for a financial partner. We Also because of the time I spent at Goldman, Sachs have a pretty good relationship with the other houses on the street, and half the world is in auction these days, so we maintain a strong presence with um Wall Street, generally

just to hear what's going on. But it's the key I think to our success so far is really having proprietary deal flow from our CEO network. So what is the process like when a possible deal comes in, how do you go through the process of evaluating it and how do you decide what's an appropriate funding level and valuation. Well, after we put the Luigi board away and realize it could be a good opportunity, you basically are looking you you put your lines in the water, and you know

what you'd like to do. So, for example, our expertise is an insurance so many of the big departments on Wall Street, and many of the insurance executives that I know are very kind to call us with many ideas, and in our portfolio we have to tow insurance investments. We also are very interested in consumer industrial and so we own the company that produces pyre X and the instant pot and corral dishes. We also own the world's largest manufacturer of skincare, also purell um and hair care.

And so when these calls come in, you understand whether it fits the criteria you like, and then you spend time and you see what the opportunity could be. And so taking our investment in KATC, which is the largest manufacturer of skincare, it was dominant in North America, and we realized that because of our Asia strategy, we could actually help take them to Asia, and we could do

it in a very effective manner. And one of the things we do because we're small, and we've told our investors that we will create a very focused portfolio where we will routinely commit ten to fift of our capital in each investment, and we have a very large co investment, which has been secret to our ability to punch above

our weights. So for every dollar of investment in the fund, there's a dollar and a quarter of co invest which lowers the cost for my LPs, but it also allows them to put more capital to work, which they're all interested in doing. And so understanding we could take KATIEC internationally was one of the reasons why we were very aggressive in buying it. And when we bought it, we had roughly a hundred million of EBITDA and today on

a run rate basis, it's about three hundred million. Having acquired the world's largest packaging asset and then acquiring another personal and house care business and taking them to China and partnering with my old friends at Ali Baba, and so our ability when you first get the phone call to have the creativity and the vision about what value you could add, which is a horrible concept, value add value AD. Everyone talks about it, but it's actually true.

You sit there and say, what can I do to this What in my experience or in my relationships will allow me to take this very fine company and double or triple its opportunities going forward? And it takes time to develop that, and so far we've only owned it for a year and a half and where you know, way I had a plan, even even with the setbacks that everyone's experiencing because of the virus. I have to ask about some name brands you just mentioned. One obviously

is PUREL. But before I get to that, what are the consumer brands of KATC What name brands might a listener recognize? Well, they manufacture, they don't own any brands, So we will manufacture for St. Lauder, for l Brands,

for Laureale, for Johnson and Johnson. We are a contract manufacturer, so we own no brands, but we support brands with you know, manufacturing with R and D because we have three laboratories that are constantly creating new compounds to make things better and more ecological, um and just better for people. And you mentioned Purell. What's your relationship with Purell and how are they managing for a crisis that was tailor

made for them practically, Well, you know, hand sanitizers. Now you can't walk into any building or any establishment and not have hand sanitizers. So I think that market was already strong and now it has exploded because I have them in my car. I'm sure you do. And listeners, you have them in the home, you have them in every office, every bathroom, and so they're managed. They were managing brilliantly, and now their businesses has dramatically improved because

of the public safety issue around contamination. So that will probably only continue and many brands are launching sanitizers and it's probably a growth area for the next few years. I think everybody was caught a little flat footed when the demand suddenly spiked back in February. In March, have they ramped up production to meet this massive new demand for something that can help keep us safe from an infectious virus. Yeah, I think production is in full swing.

There was probably two or three weeks when it was in short supply, but that has been completely taken care of. Are you guys located in New York City or where are you headquartered? We are ordered at Park Avenue, which is the corner of fifty nine in Park in Our Hong Kong office is in the Bank of China building. So let's talk a little bit about what's been going on with private equity, and I want to start by

putting a few um numbers on this. Typically we look at the equity markets and over long periods of time we could see an eight to sort of return over decades. What sort of returns our private equity targeting these days? Well, everyone always tries to double money plus. Uh. Some people will advertise plus, some will say depending on the asset

class and the style of investing. You know, a premium of five basis points to the tenure treasury, which today does not look that dramatic, even out the Treasury is um. So it really depends on who you talk to. I've always been a fan of you know, Mr buffettum Bill Berkeley at W R. Berkeley. You know, these geniuses have basically been making fifteen returns their entire career, so effectively doubling plus every five years, with very low failure rates

and very high success rates. And that's basically the strategy that I learned at Goldman and that we are certainly employing at Cornell Capital. So one of the things that's always confusing when I discuss returns with private equity investors is the various ways it's described. Some of it is cash on cash returns, some of it is I r R.

What is the best way to measure returns? If I'm a an endowment or foundation and I have a billion dollars to put into a private equity funds, how should I expect those returns to look like over the life of that funds. Well, it's an excellent question, and there are many opinions on how they should be measured. I try and balance I r R with Mike multiple of invested capital. I r R is a wonderful tool for

measuring performance against other asset classes. But at the end of the day, you can't pay electric bills with I r R. You pay them with cash or your MIKE. And so I understand that you know, many folks that manage liabilities for unions or universities measure themselves and their folks get paid on I r R. But you have to fall back on MIKE at some point because you

need the cash to actually pay your bills. When do no one's going to accept I r R. So I think frankly I r R has become more of a tool and gets more focus, and I always check as to whether I've actually made money as opposed to just I r R, because I r R is quite you can manipulate I r R. So if I put a dollar to work today and within nine months I pull out one point one times or one point one five times my capital, I'll have I r R. But if I get a bill for a hundred bucks to pay

my car or to pay my mortgage, they're not going to take my I r are. They want the cash, And so you need a balance as you're putting both together. So we have been since the financial crisis in an era of unprecedentedly low rates. How does that impact how you go about either thinking about making investments or funding companies. What's the role of ultra low rates over the past decade or so, and how does that impact how you

do your job. It is quite attractive to borrow because borrowing has been historically in this last decade incredibly cheap and covenant light, which frankly allows for excess. Throughout my career, I have been afraid of leverage, and I have always over equitized and under levered when I was at Goldman and certainly now as a new fund, as a young firm, we didn't want to make a mistake, and so our average leverage in our entire portfolio is three point nine times.

We have no subordinated securities, no mezzanine debt. We over equitize everything because I can't predict when a meteor will hit the planet or a virus will shut down the US economy, and so our portfolio certainly has operational challenges, but we have virtually no balance sheet risk because we have protected the balance sheet by over equitizing the position. Many firms in the last ten years have used leverage to their advantage and report and have achieved high I

r rs. But at a time when a punch comes out of left field, that capital structure is not going to be in a position to take advantage of the environment or possibly not even survive. And so you know, I'm an optimistic person by nature, but I'm an optimistic person whose glass is always half empty, not half full. And so I'm always trying to hope for the best, but preparing for the worst. And that's the philosophy in

our firm. And so that's why at this moment in time, and you know, as I said, we have issues we are dealing with, but we will be just fine going forward because of how we've structured things. People have a tendency to for get that, Hey, leverage is a double a D sword. If it helps on the way up, it's going to leave a mark on the way down. That is something I've learned throughout my career and my

mentors have drilled that into my head. So before I leave Private Equity and talk about some of the bogeron, I have to ask one question. Vcs are notorious for posting their missed opportunities. It's almost a badge of honor. Oh I said, no to Apple in four or whatever whatever it happens to be. Any major deals that you passed on that you look back and say, you know, maybe we should have pulled the trigger on that one.

There's always one or two that got away. Um. But I will tell you I I tend to look forward, and some of the largest deals I did, you know, working with rich Kinder Kinder Morgan to take him private fifteen years ago was one of the highlights of my career. Carrying his briefcase and learning from a master was an extraordinary achievement. You know. Some of the things I was not able to do that I wanted to do in Asia have proved to be quite successful without our involvement, unfortunately.

But back then I was not in a political position so to speak, to sway the Investment Committee. And today I'm in a little bit of a different different position. So looking forward, not looking backwards. Henry, you and I don't know each other personally, but I really can't picture you carrying anybody else's bag. No, No, I'm happy to do it. I'd like to be a good student. Believe me. There's a lot of good teachers out there. So so let's talk a little bit about some of the boards

that you were on. Um, your trustee at the Whitney Museum. UM, I love what they did moving down to the high Line. It's it's really a fascinating new uh location. How involved were you with that process? Well, the whole board was involved with the process. I think the Whitney board is like a family. We had a medici, Leonard Lauter, who led the charge in supporting the museum, just an unbelievable philanthropist, thoughtful, and the board followed his lead and it was, frankly

a debate. You may recall the Whitney tried many different architectural ideas for the corner of seventy in Madison, and at the end of the day, the idea of moving downtown and creating your own environment was something that excited

the board and it was a bold move. Frankly, I think Madison Avenue did roughly three to four hundred thousand visitors a year, and the museum now does well over a million, sometimes close to two depending on what the exhibit is and align basically being one goal post on the high Line and how the whole meat packing district has exploded as an exciting center was just fortuitous for

the museum, and it's it's in really good shape. Although right now, due to you know what's going on, it's closed down, but I know it will open back with a roar and the and the board. It's a terrific board. And Adam Weinberg, who is the director of the museum. I love Adam. The board loves Adam. He has been a fantastic director and he's the one who probably deserves Optimistic Lorder the most um accolades forgetting the museum downtown and making it a success, as well as the whole

team at the museum. It's been it's been, frankly, quite a quite a wonderful time to be involved with the museum. So so let's talk about somewhat different sort of board you're on. You're you're involved with the Navy Seal Foundation. Tell us a little bit about that organization. What does it do and how did you get involved in that? Well, you know, unfortunately we all sleep comfortably in our beds, and as George Orwell said, rough men have to go

out and defend the country. And the Navy Seals, you know, there are men lost in battle, and you forget that these are husband's fathers, sons. And when they come back to the States, uh, you know when when if they're Gold Star families, they get a death benefit from the government, they get an American flag as a triangle and thank you for your service. And I heard about this almost twenty years ago from a colleague of mine who grew up with one of the captains in charge of one

of the seal teams. And I was flabbergasted that these warriors, these heroes literally were their families were not really taken care of when they came back, and when you think about how they are deployed and they are the tip of the spirit, just was extraordinary to me. So I got involved early. UM. The foundation supports the children, supports the families, and supports the men who come back, some of which are been wounded, uh injured, in all levels

of support. And Robin King, who runs as the president of the organization, she's amazing. Her husband's master chief. So talk about tough UM. And it's an honor. It's actually one of the greatest honors of any of the philanthropies that I've ever been involved with. To meet these men, to understand what they've done for the country and in in some small way, letting them know that God forbid their felt in battle, their children, their families will be

taken care of. And so it grew from a tiny idea twenty some odd years ago to today where you know, we have a ninety million dollar endowment. We would love to double that so that no gold Star child ever has to worry about paying for tuition or paying for any type of schooling or or anything. And that's, UM, that's the goal, is to really support these guys in some way while we're back home and they're protecting the nation.

That is fabulous and amazing, and I'm glad to hear that there are people in the country who recognize this acrifices that are made and actually you're doing something about it. The last board, I have to ask you about your chairman of the Citizens Committee of New York City, whose goal is to help people in low income areas improve the quality of life in their city. What is that organization like? What do you try and do to make

positive impact in New York? Well, Barry, I was the chairman for fifteen years, UM, and I did pass the baton, but I was honored to be associated with this I was born and raised in the Bronx. I'm the first in my family to be born in the country, just raised by my mom. And this organization was started by Oz Elliott and it basically helps the Block Association's neighborhood

groups throughout the city. They've touched ten thousand groups. So if you want to plant to garden, you need money to create an after school program, you want to help feed the elderly. After nine eleven, you know, the Aybridge section in the Bronx, which was my old neighborhood, had many people who were not documented working in the restaurants in the trade center, and we were the first to

get up there with checks to support their family. It is literally blocked by block neighborhood by neighborhood poverty relief, but it's done by the citizens, so it's not imposed from above. It is created by the people who have the experience that need a solution. And so whether you're a libertarian or a liberal, you've got to love the fact of how citizens come together get supported by their

fellow citizens. Because the checks we write to these groups are under a thousand dollars, but you'd be amazed what a thousand dollars can do to create a block association. And it's been around since the mid seventies. It was created in the financial crisis of New York City and seventy and the way we're spending money right now, it wouldn't surprise me if we have another financial crisis coming in New York City. But it was a way to get citizens to get involved in their neighborhoods, and it was.

It's a terrific organization and it's continuing now that I have retired, so to speak, as their chairman. Quite quite interesting and sounds like a worthy organization. I know, I only have you for a couple more minutes, So let's let's get to our our favorite questions that we ask um all of our guests. And let's start out with streaming. What are you? What are you watching either on Netflix

or Amazon or Disney or whatever? What podcasts or are what are you doing to stay entertained during this shelter in place period? Well, as I mentioned, I've got five kids aged seven to fourteen, so I have rediscovered every Disney movie out there and price and then I have tried to introduce them to some Hollywood classics, Casablanca, the man of Shot Liberty Valence. Um. And I'm a little less successful in getting them involved with the classics, but

I've I've become reacquainted with my Disney childhood. That that Disney Plus went from almost no subscribers to I think they're up to forty million in an incredibly short period of time. It's a giant lockdown success story. Um. You've mentioned mentors several times. Tell us about your mentors who helped helped your career, help who helped you form your

philosophy of merchant banking. Well, my my first boss was Dan Knightick at Golden Sacks and he was tougher than tough, but generous with his teaching, and he set me on my way. Uh. Steve Friedman made me a partner in ninety four, and Hank Paulson was kind enough to take me under his wing, and they were my formative mentors at Golden Sacks. And then I met Bill Berkeley. M. Bill is the chairman of W. R. Berkeley Insurance, a spectacular investor and a partner of mine and a very

tough task master. Uh. You know, he is a little older than me, and he's up every morning at the crack of dawn and demanding the same from everyone. And he's terrific. My friend Farruke Pastiki, who runs the Quait Investment Authority, He has been a wonderful mentor for me over the years. And then frankly, my wife, the best sounding board on the planet. I lay it all out for her and her quintessential common sense and deep intellect. It's like, no, you're being stupid there, No, that sounds okay,

you know. So it's a combination of having you know, true love at home and wonderful partners in your life that basically point out we're acting like an idiot and try and set you on the right path. That that sounds like a nice group of of mentors. What are you reading these days? Tell us about some of your favorite books or or what you're plowing through now. Well, um,

favorite books. I always go back at least once a year, and I read On the Road by Jack Carouac and The Sun Also Rises by Ernest Hemingway, just because they touched me when I was living in Paris courtesy of Davis Polk in my twenties, and there are essential truths there. I've been reading a lot more history these days, the foibles of how we fell into World War One? Because I worry a little bit about what's happening in the South China Sea. And then my kids, I pulled out

some old dickens for them. So we're plowing through Tellato cities and great expectations. And so that's that's been the last that's been the lockdown reading list for the last two months. Well, what's the book you mentioned about how we fell into World War One? Did I hear the title? Well, Barbara Tuckman Guns of August Catastrophe Europe at War by Max Hastings. I mean, there's it's just history does move

in circle. And so seeing how a nations fell into cataclysm a hundred plus years ago and I worry a little about it today with what's going on internationally, just reminds me of, you know, what to do because I am involved in Asia society and the Council on Foreign Relations and in a small way just try and remind people that, you know, we're not immune for making the

same mistake twice. To say the least. That the book that has always stayed with me about the transition period from World War One to World War Two is the Lords of Finance by Liquidamat. I don't know if you're familiar with that, just a terrific book, yep. Absolutely. Um, So are our final two questions. What sort of advice would you give to a recent college grad or or someone of that age who was interested in pursuing a

career in merchant banking. First, maintain a sense of humor and make sure you have lots of patients, because you need both in order to be successful. I think I've found that broad based liberal arts with an ability to understand the world in its totality. So read a book of poetry, read a novel, understand history, understand a little of science. Just demonstrate a knowledge of the world and be open to trends and not locked into specific thinking.

And obviously work whatever relationships your you have, your friends, parents, your parents, your college development group, because getting out and talking to as many people as possible is important. To find a fit. Because I will tell you how I haven't really only had three jobs in my whole life. Davis Polk which was spectacular, and then Golden Sacks, where I was for thirty years, and now at Cornell Capital

finishing seven years here. Um, finding that fit where you are inspired to do your best, where you have colleagues who will challenge and support you. Um. You know these are platitudes, but they're also essential truths. And being not being afraid to saying you know what, this just doesn't work for me, or demanding some attention, or walking into your boss's office, make sure you're prepared. Just don't walk

in there with attitude. You have to walk in with a thoughtful point of view and and explain what is troubling you or where you'd like to go. It's like quite interesting in our final question, what is it that you know about the world of investing today that you would have found useful thirty plus years ago? I wish I was a little smarter about the digital revolution that was happening in the eighties and nineties. I remember when Microsoft went public and I bought a few shares, but

I had no idea what they did. Just was one of those things that sounded exciting and not really understanding, you know, Google and Yahoo and am us On and Apple until they were already formed. Um was probably a big miss on my part. Now I'm you know, my fourteen year old is teaching me, So I feel like I've got a great mentor there um, and I think that's the one thing I did not put enough emphasis on.

This changing technology landscape quite interesting. We have been speaking with Henry Cornell, founder of Cornell Capital and one of the original architects of Goldman Sachs Merchant Banking Division. If you enjoy this conversation, well be sure and look up an inch or down an inch on Apple iTunes, where you can see any of the previous three hundred plus such conversations we've had over the past five years. You can find that at Apple iTunes, Spotify, Google Podcast, Overcast, Stitcher,

wherever your final podcasts are sold. We love your comments, feedback and suggestions right to us at m ib podcast at Bloomberg dot net. Give us a review on Apple iTunes. You can check out my weekly column on Bloomberg dot com slash Opinion, follow me on Twitter at Ridholtz. I would be remiss if I did not thank our crack staff that helps put together these conversations each week. Michael Boyle is my producer slash booker. Tim Harrow is my

recording engineer. Michael Batnick is my head of research. A Tico val Bron is our project manager. I'm Barry Riholts. You've been listening to Masters in Business on Bloomberg Radio