October 17, 2024 • 24 mins
Peter Orszag is a London School of Economics trained economist, best known for decades for his service in government as part of President Clinton's Council of Economic Advisors, the head of the Congressional Budget Office, and eventually for his Cabinet position as head of President Obama's Office of Management and Budget. But in recent years, he's added "banker" to his impressive resumé, and since 2023, he's been the CEO of Lazard - a boutique investment bank offering clients a traditional M&A advisory, as well as its geopolitical advisory unit. Orszag spoke to David Rubenstein on his ambitious plans for grow Lazard's revenue, navigating the halls of power in Washington and on Wall Street, and what it's like to be an economist running an investment bank. This interview was recorded September 6 in New York.
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Speaker 1 (00:02):
One of the most interesting and smartest people running an
investment bank today is Peter or Zag. He previously serves
as head of the Congressional Budget Office, the office in
a Management Budget, and has a PhD in economics from
the London School of Economics. I sat down with him
his offices at Lazard Freyer to talk about his career
and also the future of investment banking as Lizard practices it. So,
you have been in the financial service world as an
(00:25):
advisor for quite some time, but you also served in government.
We'll talk about both aspects of your career. But right now,
one of the things that has held back and A
people say is the regulatory environment.
Speaker 2 (00:36):
In Washington.
Speaker 1 (00:37):
There hasn't been as much M and A activity as
some people in the M and A advisory business like
Lazard would like. Do you think it's the regulatory environment
where you think it's high interest rates? What has kept
M and A from going forward at the pace that
maybe some people think it should be going forward at.
Speaker 3 (00:51):
Well, let's start with what's driving it, sort of the tailwind,
So the biotech revolution, ongoing technology. I mean, we're seeing
a revolution in generative AI, de risking and changes in
supply chains and the energy transition.
Speaker 2 (01:09):
I mean, there are some big.
Speaker 3 (01:10):
Building blocks that propel deal activity forward. And then on
the headwinds, I think there have been a few. The
rate at which interest rates went up meant that there
was a disconnect between buyers and sellers on the value
of the assets. It also meant that financing was challenging,
the financing markets were a little bit more liquid. And
(01:33):
then yes, regulatory, but all three of those headwinds have
been abating. First as interest rates have topped out and
now we're debating how quickly they'll come down. And then
secondly on the regulatory front, the government has lost some
important cases in court. And what that has meant, in
turn is that many more boards and C suites are
(01:54):
willing to say, you know what, we'll see you in court,
will litigate for those.
Speaker 1 (01:57):
People that are not really involved in the M and
A world of the financial service world. They may not
know about Lazard. Tell us about the brothers that started Lazard.
How did they convert themselves from dry goods sellers to
financial experts.
Speaker 3 (02:11):
So the story of Lazard. We're one hundred and seventy
six years old. We began in New Orleans three French
brothers start a dry goods store like many other firms,
and this is documented in a great book called The
Money Kings. So the Seligman's, the Schieffs and others follow
the gold rush out to California, realized that lending gold
to your customers, or shipping the gold back to their
(02:33):
home countries and then lending on credit to your customers
was more attractive than selling the suits and the other
dry goods moved back to New York to set up
a bank, and then had correspondent banks in our case,
in Paris and London, and the rest is history. So
it is, And I would say out of all those
firms that started that way were the only ones still standing.
Speaker 1 (02:56):
Lazard today manages money. You have asset management, and you
have an M and a advisory business.
Speaker 3 (03:02):
Is that right?
Speaker 2 (03:03):
Yes?
Speaker 1 (03:03):
And you're a leader in M and a advisory. Tell me,
when CEOs want to do deals, why do they need
an advisor? Because if they're smart CEOs, can't they get
together without an advisor? What does an advisor really do
for smart CEOs when they want to do an acquisition
or merger?
Speaker 2 (03:19):
Well, I think there are several things.
Speaker 3 (03:21):
I mean, Blizard bankers are known as bankers with convictions,
so a lot of content, a lot of backbone in
terms of saying no, I don't actually think that's a
good idea. So you know you've been in many of
these positions. It is very helpful to have well informed,
smart people who are willing to push back suggest this
(03:42):
versus that, etc. I think the role of an advisor
is not just the narrow you know, what's this thing worth?
But do you really want to do this? What's the
regulatory implications? How is this going to play from an
investor relations and a PR perspective, It's the multidimensionality and
having a thought partner or someone who's counsel you.
Speaker 2 (04:05):
Could benefit from. That's one part.
Speaker 3 (04:07):
The second part is in many negotiations, it's helpful to
have a intermediary. It's why often you don't want to
be your own lawyer. And so I think that's the
second part of the advisory role.
Speaker 1 (04:21):
So when you call a CEO of a fortune fifty company,
I assume you can get a meeting with that person
not that hard. So do you always have an idea
of saying this is a good thing that you might
consider doing, or they come to ideas to you, they
bring them to you.
Speaker 2 (04:35):
It works both ways.
Speaker 3 (04:36):
But what I like to do with CEOs is to
have a broader discussion both about the world and then
about what their objectives are. And we present ideas and
then sometimes people will say, I'm thinking about this, could
you work on this with us?
Speaker 1 (04:51):
Now, the m and a advisory business, you competing against
people that have or organizations have large balance sheets. So
if somebody wants to do it deal, they might say
to JP Morgan, can you be my advisor? But can
you also lend me money to do the deal? And
the same is true with Morgan Stanley and Goldman Sacks.
You don't use your balance sheet for that purpose. You
just use your brain power to kind of say it's
(05:13):
a good deal or not a good deal. Is that
a competitive disadvantage or a competitive advantage?
Speaker 3 (05:18):
I think it's well, let the market speak. What's happened
over the past fifteen or twenty years is massive share
that went to independent advisory firms like ours that don't
use their balance sheets to provide the advice, that only
provide the advice and don't use their balance sheets. And
I think to win in that kind of environment, you
(05:38):
need to have differentiated content, great ideas, insight into the players,
an ability to read between the lines on the regulatory
and other developments, and also deep relationships. You need to
be both trusted and discreet.
Speaker 1 (05:54):
So you became the CEO in October of twenty three,
and I think shortly there after you said you one
of the double revenues.
Speaker 2 (06:01):
Is that I actually said that right before I took
over it before.
Speaker 1 (06:03):
Okay, so you want to double revenues by twenty thirty, right,
So is that realistic? Are you on the path to
do that?
Speaker 3 (06:10):
We're a head of schedule on accomplishing that, and I
think I think that really reflects the power of Lizard's
standing in the world, our brand, and what we needed
to do is just up our ambition and increase from
a cultural perspective, our focus on working together.
Speaker 2 (06:31):
And we're doing it.
Speaker 3 (06:33):
And so you're seeing that in the results I mentioned
a record first half. We're really excited about the people
that we're bringing on, and we're really excited about most
importantly about what we're able to do on behalf of
our clients.
Speaker 1 (06:44):
Now, you have an unit here, I guess it's called
a geopolitical Advisory unit. Do clients pay for that, and
are they happy to get that and pay for it
or you kind of give it as a service. And
do people really care about geopolitical events when they're doing it?
Speaker 3 (06:56):
M and A deals Absolutely, so, I mean in today's world.
Speaker 2 (07:00):
So let's stop back.
Speaker 3 (07:00):
What's happened over the past three or four decades is
we've moved from an environment in which the oil and
gas companies that always operated globally and needed to have
geopolitical insight and maybe a few others had to take
geopolitical considerations into account to a situation today in which
pretty much every important business decision that is made has
(07:21):
to take geopolitical issues into account or else you're going
to go You're going to go wrong. It's a fundamental
business need. And Lazard has always been known as a
banker plus so people that had the ability to provide
insight into not only what the other CEO was thinking,
but what the prime minister was thinking or the president.
(07:44):
So these are people who cross those boundaries between business
and government. So Lazard was always known as having that
skill set, and we thought we could professionalize it by
bringing in people who have done that for a living
in different settings. So The short answer is it's very
much part of Blizard's DNA. We now have a unit
(08:05):
that's dedicated to it in addition to just the bankers,
and it is a revenue generating activity, but it's also
something that is a great entree into boardrooms and c
suites for our bankers also. So this has been a
resounding success.
Speaker 1 (08:22):
What is the biggest geopolitical risk that you think now
faces the world in certainly the United States.
Speaker 3 (08:27):
I think the fact of the matter is the biggest
risk is that the world is changing and we don't
yet have an intellectual framework that matches this new reality.
So we have a splintering that's occurring between the major
blocks of the US and Europe on the one hand, China,
Russia and others on the other, and then some countries
that are in between the two, and we have not
(08:49):
adapted to that new world quite yet. Beyond that, there
are flashpoints. There are two hot wars going on in
Europe and the Middle East with uncle your trajectories on both.
So there is obviously elevated risk even before you get
to the traditional well, China invade Taiwan and other things
that people.
Speaker 2 (09:07):
Often talk about.
Speaker 1 (09:08):
Many people who are running investment banks, come from Wall Street.
Their whole career, you've been in government. Is there an
advantage or a disadvantage in having served in government when
you're doing the job you currently have.
Speaker 3 (09:20):
I view it as a significant advantage, and the reason
is that it brings a perspective having served in government
that is useful in lots of different settings. And it's
that multidimensionality, the ability to stitch together pieces from different
worlds that I think is very helpful. The other advantage
(09:41):
that it gives, I believe, is that I have a
lot of respect and admiration for our senior bankers at Lazard,
and so I view it as my job to do
part of the work, but then to hand things off
to our senior bankers. And I think people who have
spent their entire careers doing one thing, the natural inclination
(10:02):
is to then go do it yourself, and then the
problem becomes that you're not providing enough upward movement and
ability to grow to the senior people. So this is
a fantastic job, but I think, I hope and I
believe that I'm better at it because of what I've
done before.
Speaker 1 (10:19):
Let's talk about your own background as opposed to Azard's background.
So where were you born.
Speaker 2 (10:24):
I was born in Lexington, Massachusetts, outside of the Boss.
Speaker 1 (10:27):
What did your parents do?
Speaker 3 (10:28):
My dad was a MIT math professor at the time,
and he also ran a consulting firm that my mother managed.
Speaker 1 (10:37):
So if your father is teaching math at MIT, I
presume you're pretty good at math and.
Speaker 2 (10:43):
Not by his standards. Oh no, but I was.
Speaker 1 (10:46):
You were good?
Speaker 2 (10:46):
I was. Okay.
Speaker 1 (10:47):
Did you get eight hundred year math SAT?
Speaker 2 (10:49):
I did very well on my math sat?
Speaker 1 (10:51):
Yes, right, So you chose not to go to MIT
or another school up there called Harvard, but you went
to Princeton I did, and you got a PhD at
the London School of that's correct. Yeah, okay, So when
you got your PhD, what did you decide to do
with the PhD in economics? You want to go teach her?
What did you do when you came back to the
States with your PhD?
Speaker 3 (11:08):
Well, actually, I had in the meanwhile, in the middle
of graduate school, and I think it reflects the fact
that I clearly did not yearn to be a pure academic.
I had spent a year, not quite a year, but
a year in Moscow with a team of advisors to
the government there. And then when President Clinton was elected,
one of my undergraduate professors, Alan Blinder, called me up
(11:30):
and said.
Speaker 2 (11:30):
Isn't it kind of cold in Moscow?
Speaker 3 (11:33):
Would you like to come join the new Clinton administration
at the Council of Economic Advisors?
Speaker 2 (11:37):
Which I did?
Speaker 1 (11:38):
And how long were you in the Clinton administration?
Speaker 3 (11:39):
I did a couple stints, so I did a couple
of years. I went back and quickly finished my PhD.
I went back in for about a year or two,
So it must have been accumulatively maybe four or five years.
Speaker 1 (11:50):
In the Clinton administration. You eventually left and you went
to Brookings? Is that true?
Speaker 3 (11:55):
So I left the Clinton administration, I then have the
shortest tenure of anyone who voluntarily left McKenzie. I went
to McKinsey in San Francisco. After three weeks I decided
that was not for me. My younger brother and I
then founded an economic consulting firm, which subsequently grew. I
taught at Berkeley. I then moved to Brookings in two
(12:17):
thousand and one.
Speaker 1 (12:17):
So eventually the Congressional Budget Office people called you and said,
can you come up and run the Congressional Budget Office?
Right the Congressional Budget Office was set up under the
Budget Act of nineteen seventy four. Correct, since the Budget
Act of nineteen seventy four, deficits have been going this way.
Budgets had been going with not balanced. Was the Budget
Act a good idea because we were doing pretty well
(12:39):
without it?
Speaker 3 (12:40):
Well, first I didn't deficits having quick They went up, down,
and now they're backup. But I think what the Budget
Act did is it gave Congress better tools. But ultimately,
these decisions are not going to be up to an
agency like the Congression Budget Office.
Speaker 2 (12:55):
They're up to our elected representatives.
Speaker 3 (12:59):
Soew the Congression Budget Office as empowering the legislature to
make decisions, but those decisions are not you know, they're
driven by.
Speaker 2 (13:08):
Other factors too.
Speaker 1 (13:09):
Okay, So you're doing that for a number of years,
and then President Obama is elected and he asked you
to be the head of the Office of Management Budget. So,
for those who aren't familiar with that, what does that
office do?
Speaker 2 (13:19):
So that's slightly different.
Speaker 3 (13:20):
It sounds similar to the Congression Budget Office, but think
of the Congression Budget Office as an independent entity who's
really analytical. In his job it is to evaluate the
costs and implications of legislation and then to testify on
those to Congress. The Office Management and Budget does some
of that, but it also implements the president's policies. It's
(13:42):
think of it as like a COO type role for
a lot of the government. So the role is complex
because you're, remember the of the Cabinet, but also a
member of the White House staff effectively, and the organization
is partly analytical but also quite operation. So it's an
unusual organization.
Speaker 1 (14:03):
When I worked in the Carter administration, there were two
budget directors. One the first one was Burt Lance, and
he was a very good friend of Jimmy Carter's, and
sometimes he would sit at the cabinet room where we're
going through budget appeals and he would say, mister President,
that's Omb's position. Let me tell you my view.
Speaker 2 (14:19):
I never did that.
Speaker 1 (14:20):
You never did that. Now, so before the administration was over,
you decided to get it back into the private sector,
and you left OMB to go to City Corp. And
can you explain why you go to City Corp? A
nice bank and everything, but how did you happen to
pick City Corp as a place to go to?
Speaker 3 (14:36):
Well, actually, I spent a little bit of time at
the council and form relations, which you know well, just
to figure out what I wanted to do next. I
was about to sign with one of Lizard's actually competitors,
when I got a call from City, which I had
not really been considering. And the argument was which I
found some merit in, you've done other things, including consulting, etc.
(14:57):
But you've never done bank. If you go to this
other firm, you're only doing M and A. If you
come to us, we've got ten different things you could try.
If you're bad at all of them, that's your fault.
And why don't you kind of get trained and get
experience across a variety of things and see what you
(15:18):
really like.
Speaker 2 (15:18):
And that logic made sense to me.
Speaker 1 (15:20):
So you eventually went to Lazard about I think two
thousand and sixteen sixteen. Yes, So how did you rise
up to be the CEO and a relatively short period
of time? Were you really good at M and A advisory?
And to be good at M and A advisory? Do
you have to come up with ideas that clients want
or do you have to kind of just execute the
things that they say they want to do?
Speaker 3 (15:39):
All of the above on M and a advisory And
with regard to my role Atlizard, I think Lizard is
a special place. It's a place that has always valued
people that are useful to their colleagues. So when I
came here, my whole goal was, how can I be
useful to you? You banker in industrials, you the banker
(16:00):
in healthcare, you the banker in technology, And that's what
I tried to do.
Speaker 1 (16:05):
So let's suppose that next president of the United States
is a Democrat, and you've served in two Democratic administrations,
on the Clinton administration the Obama administration. Suppose the next
president is President Harris, and she calls you up and says,
I need a Secretary of Treasury who knows Wall Street,
also knows Washington. You're one of the few people who've
worked in Wall Street and also worked in Washington. What
(16:25):
would you say if she offered you that job.
Speaker 3 (16:27):
I think with regard to the question of returning to government,
there's neither supply nor to band, So I don't think
you're hypothetical is going to happen. But more importantly, I'm
really excited about what we're doing here at Lazard. We've
got a lot of momentum, and Lazard is a special place.
It's an important place, and I have a vision of
(16:48):
what we'd like to accomplish here that I'd like to
see through.
Speaker 1 (16:51):
So I'll take that you're not interested in being Secretary
to the Treasury for the time being.
Speaker 2 (16:55):
I have a great, unbelievably great job.
Speaker 1 (16:58):
Is ESG seen at high water mark in the United States,
and there's a pushback against it, And do you see
clients not as interested in pursuing ESG as before.
Speaker 3 (17:08):
I think there's a big difference between the United States
and Europe where there are probably the pendulum is swinging
back more in the United States, including among investors, than
is the case in Europe.
Speaker 2 (17:22):
On some of these topics.
Speaker 3 (17:24):
And again, what we're trying to do at Lizard is
see through that and kind of have an underlying north
star in terms of where we're going.
Speaker 1 (17:32):
Another acronym is DEI, which is a lot of pushback. So,
for example, do you try to get women African America
and Latino investment bankers here? Is it hard to do?
Investment bank is largely still a male dominated profession. I
soon is that fair to say?
Speaker 3 (17:46):
More diverse teams produce better outcomes when the problems are
not routine. So when you're dealing with a novel issue,
something that's different out of people's wheelboxes, having multiple different
perspectives where people are coming at it from angles, produces
better outcomes. That's the only kind of scenario where Lizard
is getting hired. And so from our perspective, having more
(18:08):
diverse teams, it's not just better work environment and a
more interesting dynamic and the ability to tap untapped labor
pools of people that are highly talented, but also the
thought that we're going to be better on behalf of
our clients as a result.
Speaker 1 (18:24):
What's the difference between advising a president of the United
States and advising a CEO. Do you ever say to
a CEO, Look, I've advised presidents and you're not a president,
but I'll give you my advice, or you don't mention
that you've been an advisor to president.
Speaker 3 (18:36):
I think perhaps the most important thing in providing good
advice to either a president or a CEO is first,
do your homework, don't you know it is too easy
to make things up that never works. And the second
thing is to have conviction. The number of times I've
seen people who say, I'm going to tell the president,
you know, put them in his place or put maybe
(18:58):
her in her place. And then they get into the
Oval Office and they say, and I one episode really
sticks out in my mind on this front, and it's
something I try to remember in this job. And it
was something that I definitely remember when I was in Washington,
which is I was in my mid twenties and I
happened to be in the Oval Office, which, as you
(19:19):
know in your mid twenties, is quite a thrill. And
there was a discussion with Bob Ruben and President Clinton.
President Clinton said something like, well, we're going to go
out and say X and Bob you'll give this speech.
And there are a lot of people nodding their head yes,
like yes, mister President. And Bob said something like, well,
that's terrific, mister President.
Speaker 2 (19:38):
We only have one problem. I can't give that speech.
Speaker 3 (19:41):
And President kind of looks out but him quite stunned,
and said, well why not, And he said because I
don't think it's true. And it was a moment when
he did it in a way that wasn't offensive sort of,
but he had backbone, he had conviction, and I think
those that is what many CEOs. That's what many presidentdence either.
Speaker 2 (20:02):
Should want or do want. In an advisor, you have
a point of view.
Speaker 3 (20:06):
You're respectful, but you're not just riding the wave of
what everyone else is say.
Speaker 1 (20:12):
So your goal for Lazard is to grow the revenue
and to keep it as an independent, publicly traded company.
Is there an advantage of being a publicly traded company
in the business you do because some of your competitors
are not publicly traded.
Speaker 3 (20:25):
I think the goal is to make Lazard far and
away I already think it's the best place to work
on Wall Street, but far and away the pre eminent
both financial advisory and in the part of asset management
that we do firm.
Speaker 2 (20:38):
And you could do that either.
Speaker 3 (20:40):
As a public company or a private company. As you mentioned,
some of our competitors or public, some are private. So
I don't really view that as the key determinant. Instead,
it is about that ambition to win. It's about conviction
and about the content.
Speaker 1 (20:58):
So today, if somebody says, I want to want to
work at one of these kind of firms, a small,
not JP Morgan sized organization, I want to use these
skills that I developed to work at a place like
those are How does one get hired here? If you're
in college or business school? What are you looking for
when you hire somebody?
Speaker 2 (21:14):
Well?
Speaker 3 (21:14):
I talk a lot about succeeding Atlizard and our people
being commercial and collegial.
Speaker 2 (21:19):
So what do I mean by that? Commercial?
Speaker 3 (21:21):
The ability to go out and act on behalf of
our clients effectively. Collegial in terms of being able to
work together as a team in delivering the best possible
outcomes for our clients. But beyond that, I think the
attributes that we look for and that I seek out
in our colleagues, it would be curiosity. You've talked a
(21:41):
lot about that, resilience and a work ethic and the
ability to have conviction around your ideas so that you're
not just going with the conventional wisdom and playing five
year old soccer.
Speaker 1 (21:55):
Young investment bankers have often said work eighty hours a week,
ninety hours a week. Why do they do that? Why
can't they work nine to five and not come in
a weekends and just say, look, I got to have
a balanced life and I'm just not going to come
in at night or on weekends. Why don't they do that?
Speaker 3 (22:09):
Teddy Roosevelt once said that the greatest gift in life
is the opportunity to do work worth doing. So I
think the point here is there are many professions where
you can't get around the.
Speaker 2 (22:23):
Effort part of it.
Speaker 3 (22:25):
But what I think our firm requires or o's are
people who are putting in.
Speaker 2 (22:30):
That effort is three things.
Speaker 3 (22:32):
The first is the opportunity I talk about practicing at
the top of your license to run as far and
as fast as you can. One of the exciting things,
for example, about being in government at a relatively young age,
is you have this sense that, oh my goodness, I'm
this aged, I'm doing that. And to create that same
sense of excitement for people entering financial services I think
(22:53):
is characteristic of bizarre and it's very important.
Speaker 2 (22:56):
So that's part one.
Speaker 3 (22:57):
Part two is, even if you're working hard, you need
to have some degree of agency and the ability to
if something else is important in your life, to take
time off to go do that. It's one of the
reasons why here in New York, for example, we still
have three days a week in the office and two
days remote because it eases those trade offs for many people.
(23:21):
And then the third really important part of this compact
is the feeling that you're part of something, you know,
you're working on important things.
Speaker 2 (23:32):
It's not just make work.
Speaker 3 (23:33):
And I think if you put all those elements together,
there are many many people who would rather work, you know,
whatever number of hours per week on interesting, important things
rather than fewer hours on things that are not that interesting.
Speaker 2 (23:48):
And that's what we're looking for. That's the trade off.
Speaker 1 (23:52):
Thanks for listening to hear more of my interviews. You
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wherever you listen
One of the most interesting and smartest people running an
investment bank today is Peter or Zag. He previously serves
as head of the Congressional Budget Office, the office in
a Management Budget, and has a PhD in economics from
the London School of Economics. I sat down with him
his offices at Lazard Freyer to talk about his career
and also the future of investment banking as Lizard practices it. So,
you have been in the financial service world as an
(00:25):
advisor for quite some time, but you also served in government.
We'll talk about both aspects of your career. But right now,
one of the things that has held back and A
people say is the regulatory environment.
Speaker 2 (00:36):
In Washington.
Speaker 1 (00:37):
There hasn't been as much M and A activity as
some people in the M and A advisory business like
Lazard would like. Do you think it's the regulatory environment
where you think it's high interest rates? What has kept
M and A from going forward at the pace that
maybe some people think it should be going forward at.
Speaker 3 (00:51):
Well, let's start with what's driving it, sort of the tailwind,
So the biotech revolution, ongoing technology. I mean, we're seeing
a revolution in generative AI, de risking and changes in
supply chains and the energy transition.
Speaker 2 (01:09):
I mean, there are some big.
Speaker 3 (01:10):
Building blocks that propel deal activity forward. And then on
the headwinds, I think there have been a few. The
rate at which interest rates went up meant that there
was a disconnect between buyers and sellers on the value
of the assets. It also meant that financing was challenging,
the financing markets were a little bit more liquid. And
(01:33):
then yes, regulatory, but all three of those headwinds have
been abating. First as interest rates have topped out and
now we're debating how quickly they'll come down. And then
secondly on the regulatory front, the government has lost some
important cases in court. And what that has meant, in
turn is that many more boards and C suites are
(01:54):
willing to say, you know what, we'll see you in court,
will litigate for those.
Speaker 1 (01:57):
People that are not really involved in the M and
A world of the financial service world. They may not
know about Lazard. Tell us about the brothers that started Lazard.
How did they convert themselves from dry goods sellers to
financial experts.
Speaker 3 (02:11):
So the story of Lazard. We're one hundred and seventy
six years old. We began in New Orleans three French
brothers start a dry goods store like many other firms,
and this is documented in a great book called The
Money Kings. So the Seligman's, the Schieffs and others follow
the gold rush out to California, realized that lending gold
to your customers, or shipping the gold back to their
(02:33):
home countries and then lending on credit to your customers
was more attractive than selling the suits and the other
dry goods moved back to New York to set up
a bank, and then had correspondent banks in our case,
in Paris and London, and the rest is history. So
it is, And I would say out of all those
firms that started that way were the only ones still standing.
Speaker 1 (02:56):
Lazard today manages money. You have asset management, and you
have an M and a advisory business.
Speaker 3 (03:02):
Is that right?
Speaker 2 (03:03):
Yes?
Speaker 1 (03:03):
And you're a leader in M and a advisory. Tell me,
when CEOs want to do deals, why do they need
an advisor? Because if they're smart CEOs, can't they get
together without an advisor? What does an advisor really do
for smart CEOs when they want to do an acquisition
or merger?
Speaker 2 (03:19):
Well, I think there are several things.
Speaker 3 (03:21):
I mean, Blizard bankers are known as bankers with convictions,
so a lot of content, a lot of backbone in
terms of saying no, I don't actually think that's a
good idea. So you know you've been in many of
these positions. It is very helpful to have well informed,
smart people who are willing to push back suggest this
(03:42):
versus that, etc. I think the role of an advisor
is not just the narrow you know, what's this thing worth?
But do you really want to do this? What's the
regulatory implications? How is this going to play from an
investor relations and a PR perspective, It's the multidimensionality and
having a thought partner or someone who's counsel you.
Speaker 2 (04:05):
Could benefit from. That's one part.
Speaker 3 (04:07):
The second part is in many negotiations, it's helpful to
have a intermediary. It's why often you don't want to
be your own lawyer. And so I think that's the
second part of the advisory role.
Speaker 1 (04:21):
So when you call a CEO of a fortune fifty company,
I assume you can get a meeting with that person
not that hard. So do you always have an idea
of saying this is a good thing that you might
consider doing, or they come to ideas to you, they
bring them to you.
Speaker 2 (04:35):
It works both ways.
Speaker 3 (04:36):
But what I like to do with CEOs is to
have a broader discussion both about the world and then
about what their objectives are. And we present ideas and
then sometimes people will say, I'm thinking about this, could
you work on this with us?
Speaker 1 (04:51):
Now, the m and a advisory business, you competing against
people that have or organizations have large balance sheets. So
if somebody wants to do it deal, they might say
to JP Morgan, can you be my advisor? But can
you also lend me money to do the deal? And
the same is true with Morgan Stanley and Goldman Sacks.
You don't use your balance sheet for that purpose. You
just use your brain power to kind of say it's
(05:13):
a good deal or not a good deal. Is that
a competitive disadvantage or a competitive advantage?
Speaker 3 (05:18):
I think it's well, let the market speak. What's happened
over the past fifteen or twenty years is massive share
that went to independent advisory firms like ours that don't
use their balance sheets to provide the advice, that only
provide the advice and don't use their balance sheets. And
I think to win in that kind of environment, you
(05:38):
need to have differentiated content, great ideas, insight into the players,
an ability to read between the lines on the regulatory
and other developments, and also deep relationships. You need to
be both trusted and discreet.
Speaker 1 (05:54):
So you became the CEO in October of twenty three,
and I think shortly there after you said you one
of the double revenues.
Speaker 2 (06:01):
Is that I actually said that right before I took
over it before.
Speaker 1 (06:03):
Okay, so you want to double revenues by twenty thirty, right,
So is that realistic? Are you on the path to
do that?
Speaker 3 (06:10):
We're a head of schedule on accomplishing that, and I
think I think that really reflects the power of Lizard's
standing in the world, our brand, and what we needed
to do is just up our ambition and increase from
a cultural perspective, our focus on working together.
Speaker 2 (06:31):
And we're doing it.
Speaker 3 (06:33):
And so you're seeing that in the results I mentioned
a record first half. We're really excited about the people
that we're bringing on, and we're really excited about most
importantly about what we're able to do on behalf of
our clients.
Speaker 1 (06:44):
Now, you have an unit here, I guess it's called
a geopolitical Advisory unit. Do clients pay for that, and
are they happy to get that and pay for it
or you kind of give it as a service. And
do people really care about geopolitical events when they're doing it?
Speaker 3 (06:56):
M and A deals Absolutely, so, I mean in today's world.
Speaker 2 (07:00):
So let's stop back.
Speaker 3 (07:00):
What's happened over the past three or four decades is
we've moved from an environment in which the oil and
gas companies that always operated globally and needed to have
geopolitical insight and maybe a few others had to take
geopolitical considerations into account to a situation today in which
pretty much every important business decision that is made has
(07:21):
to take geopolitical issues into account or else you're going
to go You're going to go wrong. It's a fundamental
business need. And Lazard has always been known as a
banker plus so people that had the ability to provide
insight into not only what the other CEO was thinking,
but what the prime minister was thinking or the president.
(07:44):
So these are people who cross those boundaries between business
and government. So Lazard was always known as having that
skill set, and we thought we could professionalize it by
bringing in people who have done that for a living
in different settings. So The short answer is it's very
much part of Blizard's DNA. We now have a unit
(08:05):
that's dedicated to it in addition to just the bankers,
and it is a revenue generating activity, but it's also
something that is a great entree into boardrooms and c
suites for our bankers also. So this has been a
resounding success.
Speaker 1 (08:22):
What is the biggest geopolitical risk that you think now
faces the world in certainly the United States.
Speaker 3 (08:27):
I think the fact of the matter is the biggest
risk is that the world is changing and we don't
yet have an intellectual framework that matches this new reality.
So we have a splintering that's occurring between the major
blocks of the US and Europe on the one hand, China,
Russia and others on the other, and then some countries
that are in between the two, and we have not
(08:49):
adapted to that new world quite yet. Beyond that, there
are flashpoints. There are two hot wars going on in
Europe and the Middle East with uncle your trajectories on both.
So there is obviously elevated risk even before you get
to the traditional well, China invade Taiwan and other things
that people.
Speaker 2 (09:07):
Often talk about.
Speaker 1 (09:08):
Many people who are running investment banks, come from Wall Street.
Their whole career, you've been in government. Is there an
advantage or a disadvantage in having served in government when
you're doing the job you currently have.
Speaker 3 (09:20):
I view it as a significant advantage, and the reason
is that it brings a perspective having served in government
that is useful in lots of different settings. And it's
that multidimensionality, the ability to stitch together pieces from different
worlds that I think is very helpful. The other advantage
(09:41):
that it gives, I believe, is that I have a
lot of respect and admiration for our senior bankers at Lazard,
and so I view it as my job to do
part of the work, but then to hand things off
to our senior bankers. And I think people who have
spent their entire careers doing one thing, the natural inclination
(10:02):
is to then go do it yourself, and then the
problem becomes that you're not providing enough upward movement and
ability to grow to the senior people. So this is
a fantastic job, but I think, I hope and I
believe that I'm better at it because of what I've
done before.
Speaker 1 (10:19):
Let's talk about your own background as opposed to Azard's background.
So where were you born.
Speaker 2 (10:24):
I was born in Lexington, Massachusetts, outside of the Boss.
Speaker 1 (10:27):
What did your parents do?
Speaker 3 (10:28):
My dad was a MIT math professor at the time,
and he also ran a consulting firm that my mother managed.
Speaker 1 (10:37):
So if your father is teaching math at MIT, I
presume you're pretty good at math and.
Speaker 2 (10:43):
Not by his standards. Oh no, but I was.
Speaker 1 (10:46):
You were good?
Speaker 2 (10:46):
I was. Okay.
Speaker 1 (10:47):
Did you get eight hundred year math SAT?
Speaker 2 (10:49):
I did very well on my math sat?
Speaker 1 (10:51):
Yes, right, So you chose not to go to MIT
or another school up there called Harvard, but you went
to Princeton I did, and you got a PhD at
the London School of that's correct. Yeah, okay, So when
you got your PhD, what did you decide to do
with the PhD in economics? You want to go teach her?
What did you do when you came back to the
States with your PhD?
Speaker 3 (11:08):
Well, actually, I had in the meanwhile, in the middle
of graduate school, and I think it reflects the fact
that I clearly did not yearn to be a pure academic.
I had spent a year, not quite a year, but
a year in Moscow with a team of advisors to
the government there. And then when President Clinton was elected,
one of my undergraduate professors, Alan Blinder, called me up
(11:30):
and said.
Speaker 2 (11:30):
Isn't it kind of cold in Moscow?
Speaker 3 (11:33):
Would you like to come join the new Clinton administration
at the Council of Economic Advisors?
Speaker 2 (11:37):
Which I did?
Speaker 1 (11:38):
And how long were you in the Clinton administration?
Speaker 3 (11:39):
I did a couple stints, so I did a couple
of years. I went back and quickly finished my PhD.
I went back in for about a year or two,
So it must have been accumulatively maybe four or five years.
Speaker 1 (11:50):
In the Clinton administration. You eventually left and you went
to Brookings? Is that true?
Speaker 3 (11:55):
So I left the Clinton administration, I then have the
shortest tenure of anyone who voluntarily left McKenzie. I went
to McKinsey in San Francisco. After three weeks I decided
that was not for me. My younger brother and I
then founded an economic consulting firm, which subsequently grew. I
taught at Berkeley. I then moved to Brookings in two
(12:17):
thousand and one.
Speaker 1 (12:17):
So eventually the Congressional Budget Office people called you and said,
can you come up and run the Congressional Budget Office?
Right the Congressional Budget Office was set up under the
Budget Act of nineteen seventy four. Correct, since the Budget
Act of nineteen seventy four, deficits have been going this way.
Budgets had been going with not balanced. Was the Budget
Act a good idea because we were doing pretty well
(12:39):
without it?
Speaker 3 (12:40):
Well, first I didn't deficits having quick They went up, down,
and now they're backup. But I think what the Budget
Act did is it gave Congress better tools. But ultimately,
these decisions are not going to be up to an
agency like the Congression Budget Office.
Speaker 2 (12:55):
They're up to our elected representatives.
Speaker 3 (12:59):
Soew the Congression Budget Office as empowering the legislature to
make decisions, but those decisions are not you know, they're
driven by.
Speaker 2 (13:08):
Other factors too.
Speaker 1 (13:09):
Okay, So you're doing that for a number of years,
and then President Obama is elected and he asked you
to be the head of the Office of Management Budget. So,
for those who aren't familiar with that, what does that
office do?
Speaker 2 (13:19):
So that's slightly different.
Speaker 3 (13:20):
It sounds similar to the Congression Budget Office, but think
of the Congression Budget Office as an independent entity who's
really analytical. In his job it is to evaluate the
costs and implications of legislation and then to testify on
those to Congress. The Office Management and Budget does some
of that, but it also implements the president's policies. It's
(13:42):
think of it as like a COO type role for
a lot of the government. So the role is complex
because you're, remember the of the Cabinet, but also a
member of the White House staff effectively, and the organization
is partly analytical but also quite operation. So it's an
unusual organization.
Speaker 1 (14:03):
When I worked in the Carter administration, there were two
budget directors. One the first one was Burt Lance, and
he was a very good friend of Jimmy Carter's, and
sometimes he would sit at the cabinet room where we're
going through budget appeals and he would say, mister President,
that's Omb's position. Let me tell you my view.
Speaker 2 (14:19):
I never did that.
Speaker 1 (14:20):
You never did that. Now, so before the administration was over,
you decided to get it back into the private sector,
and you left OMB to go to City Corp. And
can you explain why you go to City Corp? A
nice bank and everything, but how did you happen to
pick City Corp as a place to go to?
Speaker 3 (14:36):
Well, actually, I spent a little bit of time at
the council and form relations, which you know well, just
to figure out what I wanted to do next. I
was about to sign with one of Lizard's actually competitors,
when I got a call from City, which I had
not really been considering. And the argument was which I
found some merit in, you've done other things, including consulting, etc.
(14:57):
But you've never done bank. If you go to this
other firm, you're only doing M and A. If you
come to us, we've got ten different things you could try.
If you're bad at all of them, that's your fault.
And why don't you kind of get trained and get
experience across a variety of things and see what you
(15:18):
really like.
Speaker 2 (15:18):
And that logic made sense to me.
Speaker 1 (15:20):
So you eventually went to Lazard about I think two
thousand and sixteen sixteen. Yes, So how did you rise
up to be the CEO and a relatively short period
of time? Were you really good at M and A advisory?
And to be good at M and A advisory? Do
you have to come up with ideas that clients want
or do you have to kind of just execute the
things that they say they want to do?
Speaker 3 (15:39):
All of the above on M and a advisory And
with regard to my role Atlizard, I think Lizard is
a special place. It's a place that has always valued
people that are useful to their colleagues. So when I
came here, my whole goal was, how can I be
useful to you? You banker in industrials, you the banker
(16:00):
in healthcare, you the banker in technology, And that's what
I tried to do.
Speaker 1 (16:05):
So let's suppose that next president of the United States
is a Democrat, and you've served in two Democratic administrations,
on the Clinton administration the Obama administration. Suppose the next
president is President Harris, and she calls you up and says,
I need a Secretary of Treasury who knows Wall Street,
also knows Washington. You're one of the few people who've
worked in Wall Street and also worked in Washington. What
(16:25):
would you say if she offered you that job.
Speaker 3 (16:27):
I think with regard to the question of returning to government,
there's neither supply nor to band, So I don't think
you're hypothetical is going to happen. But more importantly, I'm
really excited about what we're doing here at Lazard. We've
got a lot of momentum, and Lazard is a special place.
It's an important place, and I have a vision of
(16:48):
what we'd like to accomplish here that I'd like to
see through.
Speaker 1 (16:51):
So I'll take that you're not interested in being Secretary
to the Treasury for the time being.
Speaker 2 (16:55):
I have a great, unbelievably great job.
Speaker 1 (16:58):
Is ESG seen at high water mark in the United States,
and there's a pushback against it, And do you see
clients not as interested in pursuing ESG as before.
Speaker 3 (17:08):
I think there's a big difference between the United States
and Europe where there are probably the pendulum is swinging
back more in the United States, including among investors, than
is the case in Europe.
Speaker 2 (17:22):
On some of these topics.
Speaker 3 (17:24):
And again, what we're trying to do at Lizard is
see through that and kind of have an underlying north
star in terms of where we're going.
Speaker 1 (17:32):
Another acronym is DEI, which is a lot of pushback. So,
for example, do you try to get women African America
and Latino investment bankers here? Is it hard to do?
Investment bank is largely still a male dominated profession. I
soon is that fair to say?
Speaker 3 (17:46):
More diverse teams produce better outcomes when the problems are
not routine. So when you're dealing with a novel issue,
something that's different out of people's wheelboxes, having multiple different
perspectives where people are coming at it from angles, produces
better outcomes. That's the only kind of scenario where Lizard
is getting hired. And so from our perspective, having more
(18:08):
diverse teams, it's not just better work environment and a
more interesting dynamic and the ability to tap untapped labor
pools of people that are highly talented, but also the
thought that we're going to be better on behalf of
our clients as a result.
Speaker 1 (18:24):
What's the difference between advising a president of the United
States and advising a CEO. Do you ever say to
a CEO, Look, I've advised presidents and you're not a president,
but I'll give you my advice, or you don't mention
that you've been an advisor to president.
Speaker 3 (18:36):
I think perhaps the most important thing in providing good
advice to either a president or a CEO is first,
do your homework, don't you know it is too easy
to make things up that never works. And the second
thing is to have conviction. The number of times I've
seen people who say, I'm going to tell the president,
you know, put them in his place or put maybe
(18:58):
her in her place. And then they get into the
Oval Office and they say, and I one episode really
sticks out in my mind on this front, and it's
something I try to remember in this job. And it
was something that I definitely remember when I was in Washington,
which is I was in my mid twenties and I
happened to be in the Oval Office, which, as you
(19:19):
know in your mid twenties, is quite a thrill. And
there was a discussion with Bob Ruben and President Clinton.
President Clinton said something like, well, we're going to go
out and say X and Bob you'll give this speech.
And there are a lot of people nodding their head yes,
like yes, mister President. And Bob said something like, well,
that's terrific, mister President.
Speaker 2 (19:38):
We only have one problem. I can't give that speech.
Speaker 3 (19:41):
And President kind of looks out but him quite stunned,
and said, well why not, And he said because I
don't think it's true. And it was a moment when
he did it in a way that wasn't offensive sort of,
but he had backbone, he had conviction, and I think
those that is what many CEOs. That's what many presidentdence either.
Speaker 2 (20:02):
Should want or do want. In an advisor, you have
a point of view.
Speaker 3 (20:06):
You're respectful, but you're not just riding the wave of
what everyone else is say.
Speaker 1 (20:12):
So your goal for Lazard is to grow the revenue
and to keep it as an independent, publicly traded company.
Is there an advantage of being a publicly traded company
in the business you do because some of your competitors
are not publicly traded.
Speaker 3 (20:25):
I think the goal is to make Lazard far and
away I already think it's the best place to work
on Wall Street, but far and away the pre eminent
both financial advisory and in the part of asset management
that we do firm.
Speaker 2 (20:38):
And you could do that either.
Speaker 3 (20:40):
As a public company or a private company. As you mentioned,
some of our competitors or public, some are private. So
I don't really view that as the key determinant. Instead,
it is about that ambition to win. It's about conviction
and about the content.
Speaker 1 (20:58):
So today, if somebody says, I want to want to
work at one of these kind of firms, a small,
not JP Morgan sized organization, I want to use these
skills that I developed to work at a place like
those are How does one get hired here? If you're
in college or business school? What are you looking for
when you hire somebody?
Speaker 2 (21:14):
Well?
Speaker 3 (21:14):
I talk a lot about succeeding Atlizard and our people
being commercial and collegial.
Speaker 2 (21:19):
So what do I mean by that? Commercial?
Speaker 3 (21:21):
The ability to go out and act on behalf of
our clients effectively. Collegial in terms of being able to
work together as a team in delivering the best possible
outcomes for our clients. But beyond that, I think the
attributes that we look for and that I seek out
in our colleagues, it would be curiosity. You've talked a
(21:41):
lot about that, resilience and a work ethic and the
ability to have conviction around your ideas so that you're
not just going with the conventional wisdom and playing five
year old soccer.
Speaker 1 (21:55):
Young investment bankers have often said work eighty hours a week,
ninety hours a week. Why do they do that? Why
can't they work nine to five and not come in
a weekends and just say, look, I got to have
a balanced life and I'm just not going to come
in at night or on weekends. Why don't they do that?
Speaker 3 (22:09):
Teddy Roosevelt once said that the greatest gift in life
is the opportunity to do work worth doing. So I
think the point here is there are many professions where
you can't get around the.
Speaker 2 (22:23):
Effort part of it.
Speaker 3 (22:25):
But what I think our firm requires or o's are
people who are putting in.
Speaker 2 (22:30):
That effort is three things.
Speaker 3 (22:32):
The first is the opportunity I talk about practicing at
the top of your license to run as far and
as fast as you can. One of the exciting things,
for example, about being in government at a relatively young age,
is you have this sense that, oh my goodness, I'm
this aged, I'm doing that. And to create that same
sense of excitement for people entering financial services I think
(22:53):
is characteristic of bizarre and it's very important.
Speaker 2 (22:56):
So that's part one.
Speaker 3 (22:57):
Part two is, even if you're working hard, you need
to have some degree of agency and the ability to
if something else is important in your life, to take
time off to go do that. It's one of the
reasons why here in New York, for example, we still
have three days a week in the office and two
days remote because it eases those trade offs for many people.
(23:21):
And then the third really important part of this compact
is the feeling that you're part of something, you know,
you're working on important things.
Speaker 2 (23:32):
It's not just make work.
Speaker 3 (23:33):
And I think if you put all those elements together,
there are many many people who would rather work, you know,
whatever number of hours per week on interesting, important things
rather than fewer hours on things that are not that interesting.
Speaker 2 (23:48):
And that's what we're looking for. That's the trade off.
Speaker 1 (23:52):
Thanks for listening to hear more of my interviews. You
can subscribe and download my podcast on Spotify, Apple, or
wherever you listen
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