James Gorman on Leadership, Wealth Management & Career Lessons

Sounds good to me. Thank you.

I haven't got a choice now, have I? Kind of stuck. All these people came. I wasn't sure which James they came for, though. Dean James has served on our board, or what was our board — I'm now a retiree — with great distinction. So you folks are lucky to have her.

You mean skepticism by the guy who went on TV and said I should be fired, or the analyst that wondered aloud on a call, 'Why is this guy doing this job?' So, you've got to — if you're given a position of responsibility, your job is to conduct yourself to the best of your abilities. And my view was that the pure global balance sheet intensive investment banking business had failed. And my evidence was pretty complete. Drexel had disappeared. Kidder Peabody, EF Hutton, Shearson, Lehman Brothers, Bear Stearns, Merrill Lynch, Solomon Brothers, now Credit Suisse. So almost all of the industry disappeared either before or during the financial crisis. So given that reality, any student of business would say, what do we need to change? It's not working. The remaining pure investment banks that were global were Morgan Stanley and Goldman Sachs. The others were inside large commercial banks like JP Morgan, Bank of America, etc. So both Goldman and ourselves became bank holding companies, so we took on the artifice and the regulatory requirements of being banks, but it was up to us to decide whether actually to do anything about it on the business side. So I was just responding to the reality the industry had failed, therefore you better change yourself, or the next time it fails, you'll be gone too. And the obvious path forward, it seemed to me, was, if you're going to help move capital between — for governments, for sovereign wealth funds, for institutions, help manage, originate, distribute capital, why wouldn't you do it for individuals? What was the difference between a wealthy family, or even moderately wealthy family, and buying and selling stocks and bonds and putting together portfolios, than it was for an endowment or a foundation? Obviously, the answer is, there is no difference. It's exactly the same function. So take advantage of that function. Built upon the same research, the same pipes, the same trading capability, the same technology, and build out the wealth and asset management sides of the business. And I thought with that would come an asset-light, much more durable business to complement the enormous trading and banking businesses that we had, and continue to have, and are well over half of the firm. So it was sort of a completely rational decision. And the people who criticized it were of the view that it wasn't going to work. And I said, 'Well, that's their opinion. I have a different opinion,' right? Or, you know, there are things that — in the early days that didn't go perfectly, and — you know. But you've got to — you've got to — if you have a view, you've got to stick to your view. You can't be pushed around by the critics in the absence of fresh evidence that your view was wrong. Opinions are not evidence.

Oh, it's — it's — it's not really — it's just a tool that I use. But as all of us get caught up in the day to day minutiae of life, and we get dragged from this class to that class, or this meeting to that meeting, and you never get to stop and actually think. And so the short term stuff is, you have to deal with it. You got to arrive at class on time. You got to have your books. Your computer has to be charged. You got to be ready for game time, right? So short term minutia, getting up on time, eating the right way, getting some exercise, turning up a class on time. You got to manage all of that stuff. But every now and then, you got to sit back and say, what am I trying to — I'm analogize into your situations. What am I trying to do with my career here at the Wharton School? What am I trying to learn? What are the disciplines that I'm most engaged with? Who are the professors who most energize me, and what kind of careers could that lead to? And that helps you shape your courses as you get through. Your friendships, your clubs, the job interviews you do. And then the longer term is, what am I really trying to do with my life? Am I trying to simply get a job to get a job, or am I trying to change myself? Or am I trying to change something else? So the analogy is no different. Whatever you're doing in life, you've got a tension between getting stuff done every day, getting a few things done every year, and then long term, having a plan. And in running a business, my three sheets of paper every night, I wrote down all of the numbers for all of our businesses, their revenues every day. So every single day, I knew exactly what Morgan Stanley's revenues were in all parts of the world and all major businesses. Did I need to know that? No, but it made me feel like I was in control. And when I saw things that were out of line — either too big, sometimes, or too small, I could send out emails and keep — it kept me in a very intense daily routine, but at the same time, once a year, on first week in January, I'd come into the office and on a blank sheet of paper, write down 10 things I wanted to get done this year. And that was my — I was — actually had them in the car for a different reason. I was reading them on the way through, the way down here. And that made sure every year you got some meaningful things done. For example, sell the physical commodities business we had. We had a shipping business. I thought banks owning oil transportation businesses post financial crisis with the capacity to have an Exxon Valdez oil spill was not a good look. Just a view. So I said, if we then, you know, cause some huge catastrophe to the environment, having already been part of a catastrophe for the economic environment, anything could happen. Get rid of it. So I gave myself 12 months to figure out how to get that out of the building. And the third sheet is just a description of the long term strategy of the company. So you know, everything is pointing more or less in the same direction. Maybe a different slope of the gradient you're on, but you're generally moving from bottom left to top right. So it's the challenge that we all have of toggling between the immediate, getting things done over a reasonable period of time, and having a long term view of where you're trying to land. If you don't have view of where you're trying to arrive, you probably won't get there.

I don't know that there are sort of explicit differences between generations, at which I'm taking your question to mean, you know, every four or five years kind of generation. It's like, over a 30 year period? Yeah, things have changed a lot, I think. You know, when I came to the US, you know, the film Wall Street came out with Michael Douglas. You know, Ivan Boesky. The character played that role and gave that speech about 'greed is good'. And I read something about it the other day that, you know, it disgusted half the world, but the other half thought, 'Okay, I'm heading to New York. You know, I want a piece of that.' So we're in a very different cultural, economic and social environment now, from then. And society, you know, at the end of the '60s, with the end of the Vietnam War and the — you know, the Iran hostage crisis and the oil embargoes and inflation was very different from the '80s. The '80s was sort of a response to that. So I don't think students come along differently. I think students reflect the environment in which they've been students. And you know, if you — if you're — if society is prosperous, and you're growing up in a prosperous environment, you will approach things with a greater sense of both entitlement and also expectation. And I think, you know, in the — as the — this country has actually thrived, at least since I've been here, it seems to me, and become more prosperous, there's more opportunities. So the students today spend more time almost reacting to that prosperity by saying, 'But what about the rest of society? What about the other issues in society?' So I think there's more concern for what is going on outside these buildings than what it was 20, 25 years ago. In terms of skill set, you know, social skills and the ability to engage and communicate are extremely important and not fully valued. And most of us are — many people tend to introvert versus extrovert, more introverted, and we rely upon our academic capabilities when what helps you get through life is a combination of the complete human being, IQ and EQ. And I would say, if anything, that trend has got exacerbated by the amount of time we spend in front of screens rather than simply communicating, debating issues with friends. So that's the one thing that I'd like to see. The competence is there to do the work. That's — you know, if anything, it's just got better and better, and it's more global. So more smarter people have come into places like this, but the social skills have got a little worse, would be my judgment.

To take a whole society and put it by one — now, among my own two children, they would violently disagree with me.

I don't know. I mean, I don't know. I don't know if AI is — I just don't know how much AI is really going to change our life. I think I have a view. I — you know, I don't know if the dollar is going to remain the reserve currency. I think it will. I don't think we're going to use machine learning to replace all the analysts that came into work, but some people think so. At the moment, I think you — I try and approach major shifts in technology and human behavior incrementally, which sounds counterintuitive. I'm not about making bold pronouncements and bold position taking on things that you — simply are not knowable. It's what Donald Rumsfeld once said, who was, I think, Defense Secretary. There are known knowns, things you know and can quantify. And there are — there are unknown knowns. There are things that, you know we know are going to happen. We just don't know what it's actually going to do. And then there are — and I think he made it even more confusing. He said there are known unknowns, and that's basically things you don't know. But he was defense secretary, so it sounded smarter. So I really don't — I don't know. I don't — you know, I think we've got to be constantly investing in new technologies and constantly surrounding yourself with people who have provocative and different ideas and being open to change. So I don't have the answers.

Well, you can't ensure it. You hopefully build culture not by dictate, not by telling people you shall think this way, you shall behave this way. They may do that for as long as you're around, for self preservation. You know, whole countries behave that way sometimes. But that's not sustainable. How you create culture is by articulating the values that are important to you and demonstrating authentic leadership by living by them. And if you're — you know, if you have values and articulate them and live by them, certain people who share those values will be drawn to your institution. People who don't won't be. That's fine. I don't want everybody to want to be drawn to Morgan Stanley. The world doesn't need that. The world needs people to be drawn to lots of different endeavors. So the culture of the institution will sustain itself if it's built on strong values, and I believe it is. And I think the new leadership, Ted Pick, who replaced me as CEO and recently as chairman, embraces those values, as do the president and the other leadership.

Well, my first two years at Morgan Stanley, I was CEO and I had a chairman. The next I think 12 years, I was CEO and chairman, and the last year I was chairman, the executive chairman. And now at Disney, I've just been named the chairman. I think it's completely different roles. I mean, when you're CEO and chairman, you are responsible for everything, including managing the board. When you're executive chairman, you're responsible for nothing but one person on a sort of daily basis, and managing the board. But one function. When you're non-executive chairman, you're really responsible for the board. So I describe it as, the CEO's job is to run the company. The non-exec chair's job is to run the board, but to be available for the CEO on any topic that they want help on, and obviously, to feed back to the CEO what the board feels and thinks about different issues. So you're a conduit. There's got to be — you can't have 10, 12, 15 people all coming at a CEO with their own point of view. That doesn't work. That's not functional. You need some hierarchy. And the non-exec chair is sort of first among equals, if you will. Their job is to represent the view of the board, provide feedback on issues to a CEO, gather information from the CEO and — and work those two things, you know, so the pathways remain clean. It is not to run the company. It's not to engage yourself in the day to day activities of the company. And some chairmen do that and do it with poor consequences.

It's — it's — it's very personal. I mean, depending on your family circumstance and background, and what life gave you or didn't give you, perhaps being the first person in your college to go — first person to go to college in your family is — is success for life. But, you know, you've got to sort of — we don't approach success or failure from the same conditioning. We approach it with different advantages and disadvantages. And I think what matters is you find what is purposeful to you. I don't want everybody in this room to be an investment banker. You know, that's — that's not — society is not going to benefit if — if there's only one career which everybody wants to do. In the world of finance, there are a million different careers, right? That are interesting. I happen to think investment banking provides enormous career opportunity. Wealth management, portfolio management, and so on. But — but I want people to find what — ultimately you reach a point, probably in your 20s, where you stop listening to what everybody tells you you should be. It's a very dangerous word, 'should', right? And you start listening to yourself of, what do I want to be? What makes me happy? Not what makes those who are saying with this label, if you work at Morgan Stanley, therefore, you know, I can talk about my child at a dinner party and be proud of them. What if the child's unhappy? You know, there's much more to it than just what the job title is, or what the — what they got paid, or — it's the complete human being. We're all going to be dead. And we're dead for a long time, right? So it's — it's what drives your self and your authentic self, which is what I've tried to encourage my kids to do. And anybody who comes to me for mentoring and stuff. It's not — success of itself defines itself in, you know — that's like outcomes. It's more trying to be the complete human being that you can be.

Not you expect from a banker, right? We're going — we're going deep, people.

Well, firstly, it's to embrace what leadership means. I think, you know, the primary job of a leader is to make decisions. You have a soccer team, and the captain says, 'This is the way we're going to play.' You're going on a hike with three friends. You come to a fork in the trail. 'We're going to go left, we're going to go right.' You make decisions. Decisions have consequences. Took the wrong trail, the right trail, whatever. And consequences are judged. You spend the night being lost in the woods, or you get back to your nice cabin, have a cold can of beer. Everything's going well. So a lot of people want to be the leader. Not many people like the consequences being judged, because then they can get criticized. And a lot of people don't like being criticized. They want the good bits of leadership, which is, I got to decide. They don't want the bad bits, which are, sometimes you're wrong, and even if you're not wrong, you're judged to be wrong. And people say unpleasant things about you. By the way, word to the wise. If you ever get in a public leadership position, and there are articles written about you — which I've had in my life literally 1000s — not exaggerating, never read the comment section. You know, you click on the little button for comments, and it's like, oh, my God, there's 482 comments. You think, 'Ah, whatever. I'll read a little bit, see what's going on.' And these people say these horrible things about every possible aspect of you. Your brains, your — your beauty, your lack of beauty, and you just — you've got to remind yourself that is an unhealthy human being, and all they have is a computer in front of them, right? And do not engage. So anyway, just a little lesson. So the first part about leadership is being prepared to own the decisions, and being prepared to accept that you'll be judged. The second is to be — my philosophy is, I am who I am. It's exactly the same talking to you, talking to this group, as I'm talking, as Eric would tell you, to the board of directors of Morgan Stanley, or I was on the board of Federal Reserve in New York for six years. I'm exactly the same person. I am who I am. I don't really care that much if people want me to be different. I'm who I am. And that's — your authenticity needs to come through. Your — your values as the person that you are, not the person that people want you to be. And if you — not everybody has to like you. Not everybody has to want to be you when you're a leader, but they have to respect you, and they're much more likely to respect somebody who is themselves, rather than somebody pretending to be something else.

I — you know, we don't get a control thing in life. We don't know what it would be like if I'd stayed — I was a young lawyer in Melbourne, Australia. If I'd stayed in Melbourne Australia. I certainly wouldn't be CEO of a global company. That much I'm positive of. If I'd stayed at McKinsey and Company. I was, you know, a partner and doing well, and I loved my colleagues and my job. I thought it was very interesting. But an opportunity came up and I took a risk and jumped at it. So you don't get to run — I think you can't — my suggestion would be, don't constantly second guess yourself. You make your life choices, live with them, try and improve the situation you're in, and if it turns out it was a bad choice, change something. Get out of it. But don't say, 'But I should have done this, if only I'd done that.' Again, that word 'should', which is so controlling. So I have — I have no regrets, because — it doesn't mean I haven't made mistakes. I made a lot of mistakes. But I have no regrets about them, because that's part of leadership.

The best recent piece of advice I got was from a taxi driver in New York. And I was talking to him, and I was complaining about something and some person. And he didn't know who the person was. And he said, 'I have some advice to you.' I said, 'What?' He said — he said, 'Judge with kindness.' And that's become my new motto. People do stupid things, maybe because — not related to you, maybe related to themselves and their own circumstance and just give people a bit of a chance every now and then. You know, it's — rather than being so sure that they're wrong and you're right. So on a career thing, my advice — I don't know if I was given it or I sort of evolved to this. But I always thought my job was to do the job I was being paid to do at that moment. And too many young people and some older people look like when you're talking about their job, that they're actually trying to figure out how to get the next job. And there is nothing more frustrating than to have the people work for you appearing to be constantly campaigning or manipulating how to get something better. The way to get ahead is to do what you're paid to do really well and trust the system. And if the system works, it should recognize somebody who's talented doing what they're paid to do really well, and say, 'Oh my God, they're really good. Why don't we give them more?' And if you're in a world where the system doesn't recognize your talent for whatever bias or lack of capability or whatever, fine. Move — move out. Get out. Get out of that. But — but don't be constantly campaigning and looking over that — you know, over the edge of the desk, like, 'Why don't — why aren't I doing that? Why can't I do more of that?' Do the job you're paid to do.