Investment Banking and Women, Cycles in American Politics, Future of Office

Sunday July 18, 2021

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My name is Larry Bernstein. What Happens Next offers listeners an in-depth analysis of the most pressing issues of the day. Our experts are given just SIX minutes to present. This is followed by a Q&A period for deeper engagement.

This week’s topics include Women and Investment Banking, Cycles in American Politics and the Future of the Office.

Our first speaker today will be Anne Clarke Wolff. I attended New Trier High School with Anne and we worked together at Salomon Brothers/Citi for over a decade. Anne managed the fixed income capital markets at Citigroup. She then led global sales for treasury and security services at JP Morgan. And then most recently global corporate banking at Bank of America. American Banker named Anne one of the most powerful women in banking.

Anne’s latest project is to create from scratch a women-run investment bank. I hope to learn from Anne what challenges she faces for setting up an investment advisory business from the ground up. I also want to find out about the market appetite for investment banking advice from women bankers.

Our second speaker will be Paul Rahe. He is the Charles and Louise Lee Chair in the Western Heritage in the Van Andel Graduate School of Statesmanship at Hillsdale College. Paul has written on the classics from the ancient world as well as the foundations of democracy that was introduced during the American Revolution. Today, Paul will speak about cycles in American politics.

Our third speaker is Lisa Picard who is the CEO of EQ Office which is Blackstone’s office division. Prior to that Lisa ran Canyon Ranch Spa and Resorts. In her career. Lisa has managed the development of 6.5 million square feet of real estate with a market value of more than $5 billion. I hope to learn from Lisa about the future of office.

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Anne Clarke Wolff

Topic: Opening a Women’s Owned and Managed Investment Bank
Bio: Former Head of Global Corporate Banking at Bank of America and Former Head of North America Corporate Banking and Head of Fixed Income Capital Markets at Citigroup


Larry Bernstein:
Our first speaker today is my good friend Anne Clarke Wolff.

Anne Clarke Wolff:
Great. Thanks, Larry. And it’s great to be back with the group again. Since leaving Bank of America in January, I’ve decided to try to tackle some of the inherent challenges in the investment banking industry. I’m launching a new firm called Independence Point Advisors.

So why? The current incentives on Wall Street have led to a decline in thoughtful corporate finance advice. Bankers focus on league tables and near-term ambulance chasing. Conflicts are abundant. Compliance restrictions frustrate. Public scrutiny on compensation has led to \ high stock and low cash compensation that frustrates many.

What do I hope to build? A place where exceptionally talented people with high content can provide great advice in a new ecosystem with attractive incentives. Elements of the old Salomon Brothers. What will we focus on? Independent capital markets advice, especially in the act of debate, whether founders should do an IPO versus selling to a SPAC.

Fixed-income capital markets advice given the absence of highly experienced people who are independent of the big balance sheet banks, and co-advisory and M&A to compliment other advisors’ perspectives.

We hope to leverage a community we’ve curated of over 500 women who serve on corporate boards. Can they help us identify companies who are unhappy with their bankers? Can they point out where an independent advisor could be helpful in a key transaction? I’ve also discovered that there are talented people who would like to act as senior advisors partnering with an advisory firm, but they want part-time or flexible time that is compatible with other board obligations. And finally, is there a model where a modern firm can be flexible in location with less than 100-hour work week increments?

What will be different? The key punchline is these exceptional people will be 70% women and minorities in a women owned firm. We will only succeed with exceptional talent and I’m mindful to not lead with diversity, but the question is whether diversity can be an added as a competitive advantage.

Does diversity matter? There’s been a lot written on the topic, and I know this group will have strong opinions. You could say diversity’s the result of a level playing field in a competitive environment, unless you believe white men have a monopoly on excellence, diversity is inevitable when the playing field is leveled. But does diversity lead to better advice? After 32 years of experience inside the three biggest banks, I’ve witnessed the benefit of diverse teams, as well as the lack of cognitive diversity and client problem solving.

There are fewer women managing directors at each firm today than there were at Salomon Brothers in 1990. When I was hired, I was interviewed by a female PhD in Math from Arkansas, a Lebanese man, a woman M&A banker and a red-haired Midwestern man. This lineup would be unheard of today. While personal experience is always anecdotal, let me share some of the data that I’ve found interesting. An enterprise decision-making platform studied business decisions made over a two year period, and they concluded that diverse change make better decisions 87% of the time, with geographic and age diversity the biggest contributors to improve decision-making. Mostly female organizations were 44% more likely to include men and women in decision-making 69% of the time, compared to mostly male organizations, only 48% of the time.

HBR published an article on why diverse teams are smarter, and that they boiled it down to three key points. They focus more on facts. They process facts carefully. They’re more innovative. BCG followed this up with their own view in The Mix that Matters: Innovation through Diversity, and found the companies with higher diversity in management earned 38% more in revenues from new products and services than those with lower diversity. And finally, the Pew Center studied areas where women are stronger. They’re 34% better at compromise, 34% more likely to be honest and ethical, 25% more likely to stand up for their beliefs, and 25% better at mentoring.

That’s a lot of data, and knowing many of you, I know you will say, “Well, this isn’t causal.” Let’s address the data. From my own experience women and minorities have had to be exceptional to secure a seat on Wall Street, and then to survive and advance. I’m simply going to curate a group of talent that’s always had to be exceptional, had to work hard, had to differentiate themselves by the quality of their advice and commitment to clients. No, I am not aspiring to be a 100% anything. Not a 100% woman or any one group, and white men are absolutely part of the solution if we’re going to drive true diversity of thought.

Then the question is, do companies care about diversity and their advice providers? In the capital markets there’s clearly a growing trend for companies to include minority firms, most of which came out of the municipal bond market, and interestingly, none of them have tried to create a scalable advisory business or hire talent from the street. And yet, according to Refinitiv, minority banks took part in 29% of the debt sales this year versus 22% last year, which represented 43% of the proceeds in the US investment grade market; up from only 33% in 2020. But in M&A, do I think companies really care about diversity and their advice providers? Is this the last frontier? If they don’t currently care, I think they will. Investors for a variety of reasons believe diversity is better, and are walking the talk with their capital.

And there are four themes related to M&A advice. The first is the trend to clearly add a second independent advisor to a meaningful M&A deal. Independents have seen their market share grow from 5% to well in excess of 18%. The three or more women on corporate boards, when will board members ask about the diverse representation of their advisors? If companies can get great advice and show some of their fee stream is supporting a challenge or model to improve Wall Street diversity, could we benefit? And finally, will LPs continue to challenge private equity firms and reward firms that take creative approaches to building the pipeline of diverse talent?

Can this succeed? The first challenge is there aren’t that many women left on Wall Street and many are risk averse despite the fact that what I’m building will offer them far superior economics. Will the big firms fundamentally fix what’s required and hold on to this diverse talent? I’m willing to bet not, given what we’re seeing and the female exodus from the workforce, especially during COVID. And then finally, are there enough companies that want to play a role in broadening representation of Wall Street? Here I’m optimistic. And I would close by saying, come join me or hire us. Thank you, Larry.

Questions for Wolff

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Paul Rahe

Topic: Cycles in American Politics
Bio: Charles and Louise Lee Chair in the Western Heritage in the Van Andel Graduate School of Statesmanship at Hillsdale College.


Larry Bernstein:
We’re going to go on to our second speaker, Paul Rahe. Paul is the Charles and Louise Lee Chair in the Western Heritage at Hillsdale College, and he’s going to speak today about cycles in American politics.

Paul Rahe:
In November 1787, in writing to a correspondent on the subject of Shay’s Rebellion, Thomas Jefferson observed, “God forbid we should ever be 20 years without such a rebellion.” The real danger was that his compatriots would remain quiet under their misconceptions. In this he perceived a lethargy that he described as the forerunner of death to public liberty. And so he asked, “What country can preserve its liberties if their rulers are not warned from time to time that their people preserve the spirit of resistance? Let them take arms. The remedy is to set them right to facts, pardon, and pacify them. What signify a few lives lost in a century or two? The Tree of Liberty must be refreshed from time to time with the blood of Patriots and tyrants. It is its natural manure.”

We are, I think, fortunate that Americans have rarely taken the arms. And that except during the Civil War, there has been very little spilling of blood. My thesis today is that it has rarely come to this for a reason. Thanks to the constitution designed by James Madison and his colleagues in Philadelphia in 1787, Americans have had a way to engage in an insurrection without bloodshed. They have done so at intervals of slightly more than the 20 years that Jefferson had in mind, and these upheavals have been occasioned by their fears of the very thing that Jefferson feared, the emergence of an oligarchy in Washington, DC that renders our federal government unaccountable to the country’s people. When were there such insurrections? About once in every 24 years, I call it the 24-year itch.

In 1776 obviously, but that involved bloodshed and did not take place under the constitution designed by James Madison. In 1800 however, 24 years after 1776 if Jefferson himself is to be trusted, with the ouster of the Federalists a revolution took place. In the period from 1824 to 1828 with the movement founded by Andrew Jackson. In the period from 1852 to 1856 when the Whig Party collapsed and the Democratic Party began to fall apart. In 1876 with the end of Reconstruction. In 1896 with William Jennings Bryan’s hostile takeover of the Democratic Party. In 1920 with William G Harding’s return to normalcy, and the largest Republican landslide in history. In 1946 with the Republican victory in the congressional and senatorial elections. In 1968 when George Wallace won the Democratic Primary in Michigan and shook-up American politics as a third-party candidate. In 1992 when Ross Perot ran as a third-party candidate and shook-up American politics again. And in 2016 when there was a hostile takeover of both of political parties with Donald Trump, who was not a Republican, winning the Republican nomination, and Bernie Sanders, who was not a Democrat, foisting his policies on the Democratic Party.

There is I would submit a rhythm to American politics. Once in every generation there is an anti-oligarchical and largely peaceful insurrection that leads to a reshaping of the American political scene. It ordinarily coincides with the presidential election, and even when the insurrection fails as it did in 1896, in 1968, and in 1992, it has a conserved considerable subsequent impact. I do not mean to say that events do not matter, the Civil War and the Great Depression are the most important events in the history of our Republic. I only mean to say that what I will call the anti-Federalist temper, the sneaking suspicion that the establishment in DC constituting the members of both political parties, are acting in concert to benefit themselves and their friends, runs deep in American politics, and occasions an eruption roughly once in every quarter century. I would also submit that the eruption that took place in 2016 was an especially powerful one, and that we are in for turbulent times as we take in its implications.

In 1787 Jefferson wrote to Abigail Adams and to Madison on this theme. To the first he observed, “The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive. It will often be exercised when wrong, but better so than not to be exercised at all. I like a little rebellion now and then; it is like a storm in the atmosphere.” To Madison he remarked that political turbulence is an evil productive of good. “It prevents the degeneracy of government and nourishes a general attention to public affairs. It is a medicine necessary for the sound health of governments.”

Questions for Rahe

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Lisa Picard

Topic: Future of Office
Bio: CEO of EQ Office which is Blackstone’s office division.


Larry Bernstein:
All right. Our next guest is Lisa Picard. She is the CEO of EQ Office, which is Blackstone’s Office Division. She spends her time thinking about where the office market is heading. Lisa, go ahead.

Lisa Picard:
If we’re going to talk about the future of office, we really have to talk about the future of work, the future of the worker, and then the future of the workplace.

Now, first on work, I think given the pace of technological changes, work is deeply knowledge-based, and in a world where there’s repetitious tasks, they’ll definitely become more robotic processes to sort of program that algorithm.

The World Economic Forum in 2019 said that 25% of the workforce will be comprised of new roles, and that really over 50% of the existing workforce must grow and advance and upskill themselves. In essence, the workforce must become more flexible, remote and decentralized. And we were already seeing this de-centralization., Now the talent is driving decisions and they were different driving decisions before, but even now with the great attrition that’s happening, there’s incredible tensions between leadership and talent. And with these acute talent shortages, specifically knowledge workers with digital skills, companies are having to pay more to attract hire, and also pay more for the existing talent.

And really what’s happening is that talent seeks leadership, proximity and opportunity. And if that opportunity is less cost housing, or if that opportunity is the potential to grow their career, that’s what’s really driving a lot of the decisions. Talent is also wanting the fresh start; this is what’s leading to the great attrition.

But ultimately, the worker is driven by opportunity. And I think that when we look at what happens with the workplace, what job will the office perform going forward? Leadership they’re seeing two functions in the organization; there’s the defensive moves and there’s the offensive moves. The defensive moves are getting your labor and your workforce to do everything that it already knows how to do. The offensive moves are the things that grow and advance the business, move it down the field. And the offensive moves are incredibly hard to do in isolation, and so, that’s what’s really creating this tension between leadership and talent. Talent, love the freedom, love the calling the shots and making its own day, with the exception of the younger cohort. The younger cohort is actually seen that they’ve kind of fallen back behind.

And so, given the nature that the work is rapidly changing, that the worker needs to upskill. And now that the workplace is becoming a place that needs to mentor, needs to educate, needs to entertain, needs to rejuvenate on the whole aspect of wellness, what that future of the office has to do is pull people to the office, not push them to the office. Not a dictatorial, “You must be here,” but pull them. And I like to think about them in the four CS. The effective workplace offers concentration, offers an ability for collaboration among colleagues, offers community, a place that you feel like you are part of the purpose and belonging. And fourth, it offers convenience; all the things that you can’t do at home. And I’ve been adding a fifth one, control. Giving you control over your environment. And I would probably like to end with just saying from master of yoga, “Difficult to see, always in motion is the future.”

Questions for Picard

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