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