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,

and you produce that great, coverage through teamwork

and training and mentorship.

I mean, 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

in culture between, like, a Morgan

Stanley and a Bear Stearns was was vast.

I would say. More about that.

Like what would have been the,

You know,

there were some firms,

the 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 Goldman Sachs were of course,

they're still elite firms in many ways today.

But, you know, as opposed to someone who's kind of scrappy,

trying to get business that maybe you wouldn't do.

Hello,

and welcome to another episode of the Odd Lots podcast.

I'm Joe Weisenthal.

And I'm Tracy Alloway. Tracy, how good.

At Excel are you?

Not good compared to a lot of people

who listen to this podcast, I would imagine. Right?

I mean, I can do some basic stuff

like Autosum 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, everyone.

Can I can write some really rudimentary form. Yeah.

But I never really like got,

you know, to the degree that some people are.

But the good news is I saw that.

And I have to learn that.

You don't have to learn.

I saw that, Claude, code they have or Claude,

they have some extension

where you just talk to excel in English 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 I'm not 100% sure would work.

And to be honest,

because of my 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 20 years

and you became known as not and I don't want to say

Excel spreadsheet, monkey Excel spreadsheet.

Gorilla. Yeah.

Like, you know, someone really admired

for their Excel skills.

And suddenly you've been disrupted.

Totally.

Well, you sometimes you see these things on line

where like, they show this stuff like, oh,

investment banker, investment analyst or junior analyst

just got put out of a job.

A and like,

there's a guy, I'm pretty sure there's more to the job.

So I do know that, like building models

and so forth is 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

is 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 girl style where like, no,

like Melanie Griffith is in an elevator

and is like, I know your company needs.

The. Truth, whatever.

Versus like,

I'm just really good at hobnobbing with executives.

It's probably a mix, right?

That would be my guess that those

someone is really good at this company, that owns

parking lots of this.

The city could buy another

parking lot company and so forth.

And then another person who is really good

at staying out and taking the clients

to a nice dinner, I don't, but I really don't know.

And anyway,

I don't think you can really

or I don't really want to have

a conversation about the degree

to which

AI is going to disrupt all of these

white collar jobs,

until I have a better handle of what the white collar

jobs are in the first place, I feel like 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, I'm very excited to say,

we really do have the perfect guest to talk about,

some of this.

So when 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 and investment banking.

We wanted

to have them back on the show

because as an investment banking veteran,

someone who could maybe talk about the inside,

how how people work

and how the culture change and how technology changes.

So we're going to be speaking with return guest Scott Bok,

who is the former long time

CEO of the investment bank Greenhill,

the author of the recent book Surviving Wall Street

and, comes back on an odd lot.

So, Scott, thank you so much for coming back with us.

It's great to be back.

Thank you.

For listeners who, in case they didn't

listen to the previous one, which they should,

when did your career span on Wall Street,

when did you first get into it?

And you know how it would

give us the sort of the 32nd Scott Bok 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&A was, you know, very rare.

It was. Here we talk about. 1981 okay.

You know, see your interest rates peaked.

It's the you know stock market was had been

flat for more than a decade.

You know private equity as a phrase didn't even exist.

Hedge fund didn't exist.

I mean, it was a very, very different world, by the way.

It wasn't even legal to buy back your own stock back

then that that happened a year later.

It was used 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 1960s, mostly around building conglomerates,

which I think in part

was because they couldn't buy back stock,

because if you're generating cash,

what are you going to do with it?

You could be it

a big industrial company. And so I think I'll

buy the Hartford 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&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

over time because it's a beginning.

There were lots of companies

and very few investment bankers,

and so so they didn't get to visit all that often.

And so when they did, the bank would try to bring,

you know, ideas that 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 dialog where

where you don't

you don't just, you know,

you never met the client before you show up, say, hey,

I think I should buy this company down the street.

And oh, wow, that's a great idea.

I hadn't heard that before.

And they do it.

It's more like you have an ongoing dialog with a client.

You figure out what they want to do, what their you know,

what kind of

what their appetite of their board is, what's 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 80s

or the people that you went to work with very early on?

What would you say you had in common?

Why why did, yeah. Why was it a fit for you?

For me?

I was probably a little bit different

since I came from a legal background than some.

I mean, there were some people who were,

you know, the Excel.

And by the way, Excel wasn't even around then.

It was Lotus one, two, three.

Who had the,

you know, the Excel jockeys who built these, you know,

enormous models and so on.

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 on boards.

It was more of that kind of,

in many ways, the qualitative skills, the math.

You can pick up what you need fairly quickly.

And, you know, so I sometimes tell,

you know, people of like my, my son's generation, he's,

he's 30 years old.

I tell his people at his pure love.

I see, you know, the great Rubicon

to 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, right?

You're you're no. Longer.

Yeah, you're, 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 it to a very smart person.

Just going to stay late at night

and build you a beautiful model.

I want to ask you what it was actually like

working as a sort

of junior banker in the 80s, but before I do,

what's with all the people with legal degrees

going into banking in the 1980s

because you weren't the only one?

I think there were a few other famous, compatriots

at the time. Lloyd Blankfein, 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 22 years old and train them.

You need someone who's 26

or 20 8 or 30 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 in the bank,

the lawyers, including myself.

It's 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 22 year olds and train them.

But you didn't have a time for that.

You know, there was 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 a position where you

can conceptualize something.

And then the really,

you know, the smart whiz kid

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 cases, extreme hours

late into the night?

Why can't they just

do it during the day and I clock out at five?

Very good question.

You know, I think one and this,

this kind of relates to, you know, the future of AI

and efficiency in 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 in that certain share price

that that that takes a limited amount of time.

The, the fiddling with the PowerPoint pages

that express that information.

So it makes just the right points in just the right way

and just gets the right color theme 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 5 or 6 p.m., 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 80s? 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 it was like a typed page and of numbers,

you know, it was kind of early,

the early version where there wasn't

all the software that put it in

and pretty pictures and so many, you know,

look at that, came along with them,

you know, pie charts and bar charts and things like that,

you know, fairly early, but it wasn't nearly as kind of,

beautiful as it.

And I mean, now

it almost looks like, you know, what

what Vanity Fair magazine used to look like, right?

You open up, it's got beautiful

color and pictures and charts and,

and all that sort of thing.

But people always worked

very long hours that, that, that was always the, the,

that sort of ethos of the industry that, that,

there's a lot of work to be done.

We want it 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 sort

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 1980s,

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 size team,

and you had twice

as many deals to work on as last year,

and next year you had 50% more than that.

And, I mean, it was a really extraordinary growth.

And so there just weren't enough hands on deck

that you could, you know, go home at 7:00 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, they 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 few of us here to do it.

We have to work very late to 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 is like a very small number

or a relatively small number of extraordinarily good

remunerative jobs at the top and a large base of,

you know, 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 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

spot to the next rung.

And that for that creates

that mechanism of intense competition that 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 80s,

I was probably in late 20s at that time,

not even a vice president at a Morgan Stanley.

I remember we had this meeting

once with the head of investment

banking at Morgan Stanley,

a guy named Joe Fogg, very, very, sort of,

very sort of tough guy, that of that era.

And and we're sitting around the table,

I don't know, there must have been,

I don't know, 20 some associates in New York

at that time, something like that.

And people are asking 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 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 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'd have 25 people covering the

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 1980s is what we would now characterizes pretty rote

work in the sense that, you know, we

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 information on which.

That's right.

Know 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 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.

Your 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 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 1980s,

but that that's

what all

those people are doing with all those extra hours. Now.

Why did the bit, you know,

you mentioned you in the early 80s,

you couldn't have anticipated that the industry

was going to grow 100 fold or whatever it was.

And this is one of those things were

perhaps many of the people, many in the public, like,

why is 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, 40 years ago or 45 years ago.

Okay, I think they're there.

It's no exaggeration to say that there really was,

an epochal change,

that the, the world of sort of post-World War Two,

you know, big companies building conglomerates,

you know, work at the same place for 35 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,

you know, maybe that meant slow growth at some point.

And maybe that was sort of a problem.

But in the early 80s, you had really a

lot of things change.

I think corporate culture changed a lot.

You know,

Jack Welch took over from a guy named Greg Jones who was,

very involved at Penn, 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 quite got, cut quite a lot,

deregulation increase, the, kind of pressure on unions,

you know, Reagan braking the air traffic controllers,

union, the ability to buy back stock,

even even the sort of theoretical,

notion of, you know, what is a company for, right?

Milton Friedman said the company's

sole purpose is to make money.

You know, a professor at Harvard Business School

named Michael Jensen wrote all these

these stories

or analysis

about why, you know,

you had to maximize shareholder value

and you can't serve two masters.

So that has to be the only thing 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, its customers, etc.

and that all those things mixed together

really made for, a tremendous focus on transactions.

How do you maximize value?

So 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 70s and,

you know, it's

you turned

into that sort of Reagan era

when all those rules changed, just really exploded.

And, you know, the number of transactions,

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 mean, you started on, 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 very, you know, the Mars families,

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, 30,000 plus,

companies owned by that sector.

A bit of a logjam right now, but,

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 in response.

While private equity really became

the biggest client base for the whole industry. Right.

And that also was a very, very small, nascent industry.

Go back to the,

you know, the early days, like Morgan

Stanley had its first private equity fund.

It was I can't remember exactly.

I think it was like a 44, $0 million fund.

You know, you go back to KKR initial fund.

I mean, people used to do leveraged buyouts, would like,

you know, buy a $10 million company with $100,000 down

and and buy a buy the rest with with that you could.

Do that, you. Know.

Right.

Like we could put a hundred K together.

I think you may have missed the opportunity.

Unfortunately, prices went up from there.

But, you know, these things

kind of fed on themselves, had some early success.

And so really, in the 1980s, 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,

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 know,

expanded to so many different fields,

but that,

that really fundamentally changed Wall Street because

the rise of the private equity industry created a client

that was kind of in the kind of permanently

in the transaction business. Right?

Not like a public fortune 100 or 500 company

that might do a deal every year or 2 or 3.

You know, these were firms that did,

you know, 10 or 20 deals a year.

And so they were became the most important clients.

They're there, raise them.

Is, raising raising money.

I guess that's a good one.

Thank you.

I still I stole that from, Lloyd Blankfein, actually.

Oh, I feel about I've been reading his book,

which is why I keep mentioning him. That's a good one.

So what?

Okay, you get a

little bit further into your career,

and you get a sort of role where perhaps you get to think

little big picture and you have to.

The more junior people are the ones staying up late, etc..

Talk to us a little bit about recruiting.

And I admit,

this is an area, of course, today

that there's probably

a lot of anxiety for people going into the business.

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 can probably be taught, though.

Fastidiousness and attention to detail, maybe inherently,

maybe not.

How would you talk to us a little bit about how you,

how you found people the right 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 the

early days, we recruited very few schools.

I mean, it really was sort

of the Ivy League and maybe a few others.

And it was a for a small number of jobs

or 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,

be just just kids who are really smart,

you know, they can do math and can speak.

They can write their

they just got great grades all the way

through the really, really smart

and and let's take the other half as people

who actually have some substantive knowledge

that's useful.

You know, they went to Wharton.

There are other great business schools

about University of Virginia had one.

We recruited a lot

from University of Texas, Indiana University,

University of Michigan.

And so we'd kind of do half and half and 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, you're getting someone

who's almost trained before they even arrive.

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

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

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 changed?

Because it certainly tracks that you like, meet

young people and there's like, oh my God, like,

how do they know all this stuff?

And about things

that maybe it's the internet or something there.

Things that I certainly didn't know

about when I was in high school

or 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 dotcom bubble bursting

kind of in the early 2000s, 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 potential for for themselves to,

to get ahead in life.

And, and so these students started

kind of working backwards, like, okay,

I want to get a first year analyst job.

How do I do that? Okay.

What what an internship should I get after,

you know, freshman year?

Well, you can't get a very good one there.

But maybe it's something tangentially,

you know, did your

do you know somebody else who works as a stockbroker?

Can you be a, you know, work in the mailroom

there or some people after software?

Maybe you can do a little

better than that after junior year.

Maybe you can get, you know, something better than that.

And by the 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 resumé.

They'll look like, wow, this

this person's been around the industry

a long time, even though they're 21 years old at the

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, 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 and probably decline over time.

Just, you know, nothing.

I mean, the industry is all about cycles, right?

Markets are all about cycles.

I mean, we've had a incredible run, incredible run.

Okay.

The you know, Covid,

it 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 and in just a matter of months later.

So it's been a long run really since the financial crisis.

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,

you know, who knows, maybe, maybe, maybe a war, 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 dotcom 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,

you mentioned like

you're using Lotus one, two,

three in the beginning,

which I have some memory of Lotus one, two, three and, but

and then, you know, you're talking about

the ease of data retrieval is so much,

so much different now.

But talk to us about, okay, 2024 when it recent years

and some of the other ways like what

what other technological innovations came out and what,

what what time consuming activities

did they shrink to near 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 get your time to that.

Talk to us. What else? You sure?

Yeah.

I mean,

even look, in the early days, like, even a companies

weren't even that aware 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,

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 a 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 EBITDA 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 performing.

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 night

and not up all night trying to find out,

you know what PE multiple Coca-Cola

was trading at and now, you know, it's

you can get it at the touch of a finger.

Does the edge in that scenario.

You know, if 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

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 among sort

of the so-called independent firms

like Greenhill was for a long time and,

and many others are today.

But I think among the larger,

you know, group of competitors,

I think a lot of it's going to come down to

what else is in the relationship, you know,

are you are you in their revolving credit facility?

Did you do their bond offering?

Are you doing equity research for them?

You know, where are you touching them?

And just every

are you doing their hedging or you,

you know, talk to them about currency,

talking to a lot of 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.

The magic is now I fingertips

and you know,

when 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,

you know, in the I if you have this stream of cash flows

of this period of time,

is this discount rate, what's the number?

I mean, it will give it to you without you

typing a single number onto 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 going to 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 at.

Seriously? No, I'm for real. Like pickleball.

This is like, I don't know,

you know, this is where I

when I think about if I earn this,

I don't think I'd be very good at that.

I like start

looking at my watch or yawning or so

when they start looking at my phone

as I look at board, etc.

the endurance just this is true.

It's very obvious when Joe is bored talking to you.

I speak from. Experience.

This is not this should not be my field.

But talk to us about that element and just the sort of

people skills and what.

They're at now.

Of course, that's at quite the high level, right?

It doesn't matter how. Right.

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 is like 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,

no, that's my client and this one is your client.

Now everyone now. They're just all clients and.

Everyone is clients of everyone. And it right.

And it's a kind of a free for all

where you've got a lot of parties out there,

you know, and you being special

because you invite somebody

to, you know, something and get to know them better.

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

get to know them.

You've mentioned this word earlier in the conversation,

but can you explain culture to us, explain all culture

to us, know

the investment banking culture,

because this is one thing that we hear

all the 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,

and you produce that great, coverage through teamwork

and training and, and mentorship.

I mean, every everyone aspires to all that

there 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

in culture between, like, a Morgan

Stanley and a Bear Stearns was was vast.

I would say. More about that.

Like what would have been the,

You know,

there were some firms,

the sort of, you know, the word scrappy

sometimes gets thrown around or Wall Street. Right.

And if you're if you're the elite firm, like, say,

you know, back in the day, Morgan

Stanley and Goldman Sachs were of course,

they're still elite firms in many 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 their firms had a lot of rigor over

who they would do business with,

you know, and I know that, you know, at Morgan Stanley,

that was the case, I think, at Goldman Sachs.

That was the case.

I mean, I've looked at that 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

or 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 dollars are still brand.

That's right.

And and well, and also

by, you know, maybe doing a transaction for someone

that's a client that maybe of, you know, back in the day,

Morgan Stanley or Goldman Sachs wouldn't have worked for

now you've got a credential now that aren't 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 sort a.

Flattening, it's kind of. Flat.

I think, you know,

look, this is probably a,

a function of, of scale of activity

and of things like technology, you know, 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.

I mean, treat, you know, hire smart

young people, train them well, treat them decently.

And, and they'll grow up to be,

you know, good, good bankers, you know, pay

attention to your clients, have integrity, you know, etc.

you'll 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 longstanding 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 longstanding

academic things, is why is there a frequently a pub?

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, and 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.com era, there have been attempts

to disintermediate the traditional IPO process

with almost no success.

SPACs tried.

That seems to be sort of

not a particularly a counter signal, perhaps.

Well, how would you describe the persistence of the IPO?

Well, you know, first of all, the start

with public companies, right?

That's what what you have after you do an IPO,

you know, that market really has shrunk.

I mean, it fell in half the number of public companies

in America

fell in half in the 25 years or so that that our firm was

an independent firm.

So that I don't think that's a good thing.

I think that's

I think

it's a good positive thing to have more companies

in the public realm

where there's more information and and more under,

you know, transparency to what they do and so on.

But I think to

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 of it's.

Like a corporate bar mitzvah.

Let's

stand up there on the thing and let you choose.

A. DJ. Yeah. Yeah, exactly. It is a bit like that.

I mean, I remember for our own IPO

back in in 2004, we had like 60 something one

on one meetings

as well as big group meetings in places

like New York and Boston and so on.

But if you're trying to get known

by a lot of investors and a real hurry,

you kind of need to go through something like that.

And, you know, and it's not like

the industry has been some sort of,

you know, warp fees or fixed.

There's nothing you can do about it.

I mean, for a long, long time,

an IPO was I remember it was 7%.

That was an underwriting commission.

You know, I, I remember we worked, and advised,

visa when that did

what was then the biggest IPO in 2000,

probably seven or something like that.

And that was like a fraction of a percent, you know.

So, so the end of it is it, it sort of succumbs to

competition, right? And somebody says, okay. Yeah.

If I'm

if I'm doing a classic early years Silicon Valley

IPO and we're raising $100 million.

Yes, I think a $7 million 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 IPO,

it's in the hundreds

of millions, the billions, and maybe today

the tens or hundreds of billions. Yeah.

You know,

the fees will be very, very small and driven

by pretty ferocious competition, I'm sure.

Did you see a Greenhill IPO in 2004? 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.

Veteran in 1999.

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 1986

and I think Goldman in 99 or something like that.

But, you know, for a firm like ours,

that was kind of a smaller,

more focused firm, the long history of that

was that

you normally sold the firm and and even in its fairly early

days, you'd kind of build something,

you know, prove

you had a team, prove you 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, an IPO as a way to, to

to realize the value

you had created, but also keep the,

the what you thought was the special culture.

To go back to that word,

you don't want to change things,

you don't want to give up control, etc..

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 like Greenhill?

You know, you're often it's 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, they do, they do.

They need capital.

They can raise all the capital.

They want the private markets.

So it really it's 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,

and you want to have the liquidity

to be able to transact at that price on any given day.

So I think that has driven more IPOs in recent years

than the kind of the earlier notion of why 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 on the IPO front now?

And just maybe I missed it,

but I feel like several years ago,

maybe in the mid 20 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 those should be a big thing.

And like their flush left on the S-1 or the prospectus.

And Morgan Stanley getting Facebook or something.

Yeah, stuff like that used to.

And how I feel like I don't see the like

there is that has something changed there?

Or maybe that's still a thing. Okay.

That's still that's still a thing.

You still want to be on the left and.

Yeah, but you know what.

But 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 until well you're the the global lead.

You're the co global lead. You're the lead.

Left.

Massive lead it like everyone.

Title info.

Everyone gets to be a lead right.

It's it's like getting an A

at Harvard I understand they did.

Participation trophies for trophies for investment banks.

The Uber one like that was it.

There was a banker who became an Uber driver.

Yes there was.

Yes, I remember that because he wanted to show that he.

And like I get it, he understood

like that's cool.

He like really like got it.

He really took the job seriously

and he drove for Uber and stuff like that.

But still in my mind I was like,

does this really make a difference for Uber

as they're just selling some shares

and then they're moving on?

Like, I mean, it's cute, like.

People used to do that sort of thing. Yeah.

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 tell Grimes that's who it is.

Michael. Right?

Yeah. He became he was also he became the Uber.

He became an Uber driver for a while. Yeah.

He was a he was a big deal at that time.

I remember vividly

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,

of what an investment bankers 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 9 or 11 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 and and some in something.

Right as and

but but again with the with the increase

in just availability of information and transparency.

Many used to be that,

you know, there was a lot of

gamesmanship around the league tables. You know, it.

You'd, you'd say, well, we're number one.

And, and you know, and IPOs and you'd

look into the footnotes and it would say, you know,

this includes all deals, four in a radio stations

with a market cap, more than $250 million.

And, you know,

if you're trying to pitch some

intermediate deal or something and you don't

have some way to slice and dice, like US

IPOs, UK IPOs, this industry, this deal size,

now it's kind of all out there and it's you know,

but there's, there's ten or a dozen firms

that 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 Facebooks IPO.

He spent hours learning that.

And hey, if that paid off for him, good for him.

And now he's back because,

it looks like he'll probably be, you.

Know, a lot of people master Farmville

for free with no expense out. Here.

He turned it into something, and I guess it's likely

to be involved.

Or perhaps positioning himself

for a potential role in the space IPO. Okay.

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 saying the AI question, and there are some obvious

things today.

Anyone knows that

you can do a very good comp analysis

already with, with almost

no knowledge, like, what are some comps here?

No. Well,

maybe that's not the kind of output

that you would show to a client,

but it might get you 95% of the way there.

And so that's a that's extraordinary.

And we talked 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.

You know,

I think no one really knows the answer to that question.

Of course, there's 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 it

kind of available,

but you have to sort of work to dig

it out to available at just literally your fingertips.

And by the way,

not just to you, the banker, but also to your client. Yeah.

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&A deal, trying to win the bond offering,

is going to be more complicated.

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. Yeah.

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 at 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,

it's 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.

Scott Bok,

thank you so much for coming back on the podcast.

We love catching up with you.

I know we got to do it again sometime. I would love to.

It was great fun. Thank you.

Tracy I love talking to Scott.

I think it's. Great.

I'm glad we I'm glad we met.

Scott, I think the,

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 the story that you could say going back

for the last 45 years in which the 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 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 quote, Tron or whatever.

And what replaced that work was more meetings.

Yeah, right.

I feel like humans can always,

Find a reason to meet with each other.

Exactly. To love me.

I know, I know, it's crazy.

Isn't it? Ridiculous?

Humans just love touching base and and and I am I maybe I'm

revealing my. Oh, no.

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, both sides of the story.

But the other thing I was thinking

is the trend towards bigger balance

sheets, more services, the one stop shop idea.

And it feels to me like, okay, if

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 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

the way a lot of people do. But it is interesting.

We could just go back.

That is so interesting.

Like, I always forget that, that

they haven't been around that.

Yeah, that they were seen 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 share buybacks

would probably,

you know, 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, in deals.

I wonder if Michael Grimes is going to ride on a rocket

to get the air to lock, to go into space.

He's gonna he's going to do a little, space joyride.

So to get that we do is one thing.

Oh, you know what I thought was also very interesting?

And I

think this says a lot about culture in general

beyond 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 the day and,

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 amoral now.

And I mean that in the sense that, like,

there's a possibility that people hide behind that

and 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. So we'll 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 @tracyalloway

And I’m Joe Weisenthal You can follow me @thestalwart

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