Joe Weisenthal: What does culture mean in investment banking?

Scott Bok: 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.

Joe Weisenthal: I would say. More about that. Like what would have been the,

Scott Bok: 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.

Joe Weisenthal: Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

Tracy Alloway: And I'm Tracy Alloway. Tracy, how good. At Excel are you?

Tracy Alloway: 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.

Joe Weisenthal: No it's not that's like literally clicking a button.

Tracy Alloway: I can write like a couple formulas in the little command prompt. But I think everyone, everyone.

Tracy Alloway: 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.

Joe Weisenthal: You don't have to learn.

Tracy Alloway: 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.

Joe Weisenthal: 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.

Tracy Alloway: Totally.

Joe Weisenthal: 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.

Tracy Alloway: 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.

Joe Weisenthal: 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,

Tracy Alloway: 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?

Joe Weisenthal: 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.

Scott Bok: It's great to be back. Thank you.

Tracy Alloway: 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?

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: Perfect. This is already a fascinating conversation. I have to say.

Tracy Alloway: 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.

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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?

Scott Bok: 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?

Scott Bok: 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.

Tracy Alloway: 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?

Scott Bok: 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.

Joe Weisenthal: 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?

Scott Bok: 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.

Tracy Alloway: 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?

Scott Bok: Very much so. But not with PowerPoint, with something else.

Tracy Alloway: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: 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.

Scott Bok: 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.

Tracy Alloway: 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?

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Scott Bok: 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.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: 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?

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Joe Weisenthal: Do that, you. Know.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: Is, raising raising money.

Scott Bok: I guess that's a good one. Thank you.

Scott Bok: I still I stole that from, Lloyd Blankfein, actually.

Joe Weisenthal: Oh, I feel about I've been reading his book, which is why I keep mentioning him. That's a good one.

Joe Weisenthal: 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?

Scott Bok: 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.

Scott Bok: 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.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: 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.

Scott Bok: 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?

Scott Bok: 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.

Tracy Alloway: Scary.

Tracy Alloway: 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?

Scott Bok: 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.

Joe Weisenthal: 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?

Tracy Alloway: You sure?

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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?

Scott Bok: 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.

Joe Weisenthal: I would say. More about that. Like what would have been the,

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: Bit of a dollars are still brand.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: 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?

Scott Bok: 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.

Joe Weisenthal: Let's stand up there on the thing and let you choose. A. DJ. Yeah. Yeah, exactly.

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: Yeah.

Joe Weisenthal: So what was the sort of push pull process of actually going public for you? What were the considerations?

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: 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?

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Joe Weisenthal: I understand they did. Participation trophies for trophies for investment banks.

Tracy Alloway: The Uber one like that was it. There was a banker who became an Uber driver.

Scott Bok: Yes there was. Yes, I remember that because he wanted to show that he.

Tracy Alloway: 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.

Scott Bok: People used to do that sort of thing. Yeah.

Scott Bok: 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.

Joe Weisenthal: We. Should tell Grimes that's who it is. Michael. Right?

Scott Bok: 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.

Joe Weisenthal: 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?

Scott Bok: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Tracy Alloway: He turned it into something, and I guess it's likely to be involved.

Joe Weisenthal: 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.

Scott Bok: 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.

Joe Weisenthal: 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.

Scott Bok: 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.

Scott Bok: 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.

Scott Bok: 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.

Tracy Alloway: I feel like the trend is towards extroverts with large balance sheets, I suppose.

Joe Weisenthal: Scott Bok, thank you so much for coming back on the podcast. We love catching up with you.

Scott Bok: I know we got to do it again sometime. I would love to. It was great fun. Thank you.

Joe Weisenthal: 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.

Joe Weisenthal: 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.

Tracy Alloway: Yeah, right.

Joe Weisenthal: I feel like humans can always, Find a reason to meet with each other.

Tracy Alloway: Exactly. To love me.

Joe Weisenthal: 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.

Tracy Alloway: Your own biases.

Joe Weisenthal: 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.

Joe Weisenthal: 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.

Tracy Alloway: 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.

Joe Weisenthal: So to get that we do is one thing.

Tracy Alloway: 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.

Joe Weisenthal: 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.

Tracy Alloway: Maybe.

Scott Bok: Well, I think a lot of people would, say in retrospect, people they should have had better standards about who they do business with.

Tracy Alloway: 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.

Joe Weisenthal: Yeah. All right. So we'll leave it there.

Tracy Alloway: Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me @tracyalloway

Joe Weisenthal: And I’m Joe Weisenthal You can follow me @thestalwart Follow our producers Carmen Rodriguez @carmenarmen, Dashiel Bennett @dashbot and Cale Brooks @calebrooks And if you want more Odd Lots content, you should check out our daily newsletter. You can find that at bloomberg.com/oddlots And you can chat about all of these topics 24 seven with fellow listeners in our discord discord.gg/oddlots And if you enjoyed this conversation, then please leave a comment or like the video. Or better yet, subscribe! Thanks for watching.