In Good Company with Nicolai Tangen - Morgan Stanley Chair and CEO: Succession, culture, stress, and leadership

Episode Date: November 29, 2023

James Gorman, one of the most successful CEOs in the world of banking, is stepping down as CEO and shares unique insights into the world of banking, investing, and leadership. He also shares how he reviews talent, and the immense stress and pressure that come with a job like his. The production team on this episode were PLAN-B's Nikolai Ovenberg and Niklas Figenschau Johansen. Background research was done by Sigurd Brekke with input from portfolio manager Frederik Thomasen and Philip Pearce.  Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

James, you are one of the most influential people in global finance and now you are stepping down after 14 very successful years. And it's an honor to be here with you. And now that you're stepping down, you can tell us what you really, really think. Well, let's see how we do. Now, starting with the beginning, you grew up in Melbourne. You were kind of the opposite of an only child. You grew up at the beginning with 11 siblings. What did that do to you? Well, I really grew up with nine.

Two died early as young children. So my mother had 12 children, but I really had nine. I think it teaches you everybody has some deficits and everybody has some special things to give. And it's a very normalizing environment. You can't be too egotistical or you get pushed down by your siblings. You find that there are others who are very good at certain things that you're not good at and vice versa. It's a very humbling environment, a very warm environment. Were you in the middle? Exactly in the middle. I was number six of ten. It kind of helped your diplomatic skills, I guess.

Yeah, I think you're sort of the youngest of the first half of the family and I was the mini-dad of the second half. So you get to do a bit of leadership stuff. Now, before you went into banking, you spent some time at Columbia and McKinsey and so on. Some people say that in McKinsey they hire insecure overachievers. Was that where you were at the time? No, I was a pretty secure underachiever, I think.

So I was probably the opposite. I must have been an aberration. I'd been a lawyer in Melbourne, Australia for four years before I went to business school. I wasn't a very good lawyer. And I had two sisters who were very good lawyers, and one became a top judge. And so in the family hierarchy of achievement, you know, I did fine, but I was not. There were some people at McKinsey who are extraordinarily gifted intellectually. Not all of them gifted interpersonally. them gifted interpersonally. And I found in business, you really needed a mix of having enough intellect to deal with complex problems and enough personality to deal with complex people.

And my upbringing helped bring that forward. When you look at the defining moments in your career, what have they been? I think first was the decision to come to America. It was most uncommon. Australians who go to study typically went to England. They try and go to the great universities in the UK. It's much easier to get a visa. And New York was a long way away.

It was very expensive. So the first was that decision. Then I had to borrow to come to university and the interest rate the bank charged me was 24%. Wow. Yeah, so it was considered by many to be extremely risky decision. By me it wasn't risky at all because I thought

I got to go and live in New York for two years. I got a business school education and I had some debt that at some point in my life I'd figure out how to pay off. So I think that was the most defining thing, was taking myself out of a very clear track to be a career lawyer, which I would have done. And I was working at a great law firm, and I got a wonderful job down there. So I clearly had a path to a successful career as an attorney, but it didn't excite me. It wasn't in my stomach.

I think the second most pivotal decision was leaving McKinsey. I had risen through the ranks to be a senior partner at a pretty young age, and I was being given more and more responsibilities, and I had bigger and bigger clients. But again, in my heart, while I really enjoyed my consulting time, and I had many wonderful colleagues there, and I think we did some great work for some clients, for sure, I ultimately wanted to be where the decisions were being made, not advising on how to make decisions, but actually doing it and bearing the consequence, the good and the bad. Is that why you left them?

Yeah, exactly. To be where the action was. I always wanted to be, I was happy taking decisions. A lot of consultants or advisors or lawyers or bankers are great at advising. But Nikolai, as you know, owning a decision and being responsible for the outcome, whether it's an investor is a good example of somebody who wears decisions. That's a different level of stress. And that's not for everybody, but it was for me. Talking about decisions, so you are one of the few CEOs who's laid out a really clear strategy and then just executed properly. Now, first of all, what's the key to a successful strategy?

Well, I think you have to have a vision for what success would look like. I mean, you can't have strategic paths without knowing what the end state is you're trying to achieve. So, I've always had a very clear sense of where I'm trying to go. Then the pathways state is you're trying to achieve. So I've always had a very clear sense of where I'm trying to go. Then the pathways of how you get there, sometimes you're opportunistic, do you buy this company or sell this division? Sometimes you're driven by the markets are cooperative, they're not cooperative. Sometimes you're driven by the talent you have around you. So there are many different pathways, but the heart of establishing a strategy is understanding what it is you're trying to arrive at. But how did you come up with the

goal of becoming big in asset management? Because that wasn't so obvious at the time. Well, it was really wealth management, wealth and asset management combined, I guess. No, Wall Street, if you looked at the history of Wall Street firms that were pure trading banking markets businesses, it was disastrous. Kidder Peabody, EF Hutton, Drexel Lambert, Dylan Reed, Bear Stearns, Lehman Brothers. They're all gone, right? Stearns, Lehman Brothers, Solon Brothers. They're all gone, right? Gone. Nicolai, how many industries can you look at and over a 20-year period see 70% of the participants, Credit Suisse, 70% of the participants disappear? So that's pretty good evidence that there's something structurally unsound. It doesn't mean you can't be successful. Some companies like Goldman Sachs have managed to persevere throughout.

But the odds clearly were against you. And the market was rewarding you with a multiple of about nine times earnings, pretty mediocre. Because the market's not stupid. It's saying, gee, in your industry, people seem to fail a lot. And we lose everything. So why would we pay you 15 times earnings? But everybody could have come up with that strategy, right? Now you did it. You were even ridiculed at the time for wanting to grow your wealth management business. I mean, I can't speak for others. I've never

operated from envy, hopefully in life, but certainly in corporate life. I regard, you know, we have certain assets, certain DNA, certain capabilities, and I think you leverage your own strengths. But others, interestingly, in the last five years, almost everybody has started trying to pursue our strategy in some form or another. In the early years, it was deeply unpopular, both internally at Morgan Stanley and externally. And you're right, a lot of people called for me to be fired. They felt I was misguided and naive and a consultant. And I said,

no, the evidence, the facts are the facts. You can have an opinion, but you can't escape the facts. The facts are Solomon Brothers does not exist, got consumed. Drexel does not exist. Lehman does not exist. These are facts. Why is wealth management such a good business? Because it's so stable. We've got 18 million clients and they don't all behave in the same way each day. The day somebody's buying a bond, somebody else is selling one. The day somebody's buying a stock, somebody else is selling a mutual fund. The day somebody else is buying, investing in a private equity fund, somebody else is investing in an infrastructure fund. So the human need for different investment profiles guarantees you have a very diversified set of outcomes. And sure, if one client goes broke and takes their

money out, or one financial advisor leaves for a competitor or a hundred leave, it's, you know, you wish it didn't happen. But we've got 15,000. So the sort of catastrophic risk issues in that business were very small. It was much more around operating things, having strong compliance, having great technology systems, having great cybersecurity. It was more things like that, that you had much more control over than, wow, having three traders who make a multi-billion dollar bet on something. And that's the problem with the trading side. Now, we've controlled that and we've managed it and we've reshaped it and put much more discipline around it. But I just felt wealth management, it's a wonderful business

because it's a markets business. At the end of the day, markets are about moving capital from people who have it to people who need it, from savers to borrowers, from investors to issuers. And same thing, whether it's Norges or whether it's James Gorman as an individual or whether it's the US government or whether it's a major corporation, they're all doing the same thing. They're just moving capital back and forth. So I saw our role as being in the middle of that flow of capital. And if we could do it for Norges, we could do it for GIC. We could do it for Tomasic. We could do it for James Gorman.

It's the same concept. And what's the key to communicating such a strategy to your shareholders and to get them to buy into your vision? Simplistic. Don't overcomplicate it. I tried to articulate it in a way that everybody would understand what we're trying to do. And I started seeing in the media over the years

words which I'd used, deliberately used, come back at us. Ballast and speed. You know, the ballast of an aircraft carrier, but the speed of the engine. Ballast being wealth and asset management, speed being trading and banking. And these words started playing back to us. It's kind of fun to see your slogans coming back now. It was fun. Catastrophic risk. Insure against it, hedge against it, sell it off, distribute it, do something, get rid of catastrophic risk. So I think consistency of message, clarity of message, you don't have to show off of how clever you are or not. That's not important. What investors care about is, do you have a plan? Can you define success? And will you

give me guideposts or stones like, you know, crumbs down the road to show me you're generally headed in the right direction? The slope of the gradient, in other words, can you achieve, let's say, pre-tax margin goals in wealth management business? I said when our margins were about 2%, I said I thought we could quickly get to 15%. Nobody believed that and we quickly got to 15%. Nobody believed that. And we quickly got to 15%.

And where are you now? We're at about 27 or something. And now I've said we will get to 30%. We haven't done it yet, but we will do it. But along the way, if you show investors, here's what we said we'd do. Now let me give you, and it's a long track record, 14 years of evidence. And every year, boom, boom, boom. And every now and then a slight dip. But the slope of the curve, it's pretty clear you're going from the bottom left to the top right.

And in all of our efforts, we tried to communicate the vision for where we're going, the rationale behind it, that it wasn't from envy, that it leveraged our strengths, and we would give you evidence. And it would be imperfect. Sometimes we'd miss a little bit. But generally, you would come away from it. I wanted investors to come away saying,

you know what, they told us what they're going to do, and they've kind of done it. But you also rebuilt the fixed income business. Yes. And at some stage, you said, listen, we are going to kind of retrace or, you know, build it down. Instead, you did the opposite. Yeah, we... Came back with a vengeance. No, but we took out 25% of the balance sheet, 25% of the risk-weighted assets, 25% of the people.

And at that point, the fixed income business was generating about 500 to 600 million in revenue per quarter so two to three billion a year call it I told them which didn't make me very popular sometimes I can maybe say things that are too direct maybe I have some Scandinavian in me to say or northern European but I said my aspiration for fixed income is to be mediocre. They didn't like that. I said, the reason I'm telling you that is because we've been terrible. Now, if we can go from terrible to mediocre, then we can start talking about going from mediocre to decent. Then we can talk about decent to good. Then we can talk about good to great. And where are you now?

I think we're in the good bucket. We generate roughly 2 billion of revenue a quarter. When are you going to be great? I'm not sure we want to be great because to be great, you'd have to put a lot more capital at work in it. You'd have to be, for example, in foreign exchange and emerging markets in size. I'm not sure we want to do that. in size. I'm not sure we want to do that. I don't think we'll ever compete with Citigroup or Deutsche or HSBC in the big foreign exchange markets, in all the emerging markets around the world. We could do it, but the cost of doing it and the amount of capital involved, I think we have better uses of capital. So I'm very comfortable with us being good in the business. We've taken our market share. I mean, it's stabilized around 6% over a bunch of years. Now it's 10, some years 11%. That's probably about right.

You acquired a few companies during the years as well. what's the key to a successful integration of companies oh you've got to be clear-eyed i mean nothing nothing gets done on time at budget with the right functionality so there's you've got to be clear-eyed that not everything is going to work well but you have we have a fighting force of people have now done all these deals and they're very, very good at it. And we put tremendous resources against it. I think, but it starts culturally, getting the management of the acquired company to embrace what you're doing

and getting them to trust you. Because if they're not trusting you, yes, they've been bored and their shareholders made a lot of money, but they don't trust you, they don't respect you, then the whole organizations will fight against each other. But you are trying to integrate different types of cultures, right? What's the key to that? I mean, we've allowed certain businesses like E-Trade to keep their name. Calvert has kept its name. Parametric kept

its name. So, honor their roots, but they're part of the Morgan Stanley family. And the Morgan Stanley family has five core values. We want them to embrace those same values. One is do the right thing. You have choices how you conduct yourself, do the right thing. Second is clients always come first. The third is lead with exceptional thinking. The fourth is give back to your communities. And the fifth is, which we've added in the last couple of years, a commitment to diversity and inclusion. Do the right thing. No offence, but isn't that a bit obvious? You're exactly right. And I debated this with the group and with myself when we laid out these.

and with myself when we laid out these. And I decided in the end, it's obvious, but the sad history of the financial sector suggests people don't do the right thing so often that it needed to be put on the front wall of every building we have. And why do you need to do that in the financial sector? Because there are a lot of other sectors where you don't need to do it.

Because the scale of what you're dealing with in terms of financial risk, what an individual can do to damage themselves, the market, their company is way disproportionate than if you're a Coca-Cola distributor or you're manufacturing car parts to provide to Mercedes Benz or Volvo or something. You're kind of handling hand grenades. provide to Mercedes-Benz or Volvo or something. You're kind of handling hand grenades. Yeah. And Nick Leeson at Barings, I think. Jerome Caravalho at Societe Generale. Our own people, we had 11 traders who ran a fixed income prop desk that lost $10 billion of capital. They lost a third of our capital that we'd spent 85 years building, 11 people. Now, why did they do it? Because they were greedy. They thought they could make more money. They'd

get paid more, et cetera. So that I said, okay, we know, and we've got now 83,000 people work for us now. I can't control human behavior. If you've got members of Congress in the United States, some of them end up in jail. Members of the police force end up in jail. Members of religious orders end up in jail, right? It's not human beings are human beings. It doesn't matter what cloak they're wearing. Some of them are just evil and some of them are greedy and some are stupid and some are reckless. And our job is to let people know in no uncertain terms that you're obligated to do the right thing here. And if we find you doing things like talking to the media when you're not authorized, we

find you biased against an employee because of their background or some form of diversity that they have. Anything that suggests you're not doing the right thing, you're done. You're out of here. Oh, you talk about all the bad guys. How that suggests you're not doing the right thing, you're done, you're out of here. Oh, you're talking about all the bad guys. How do you make sure you hire the good guys? Because good guys respect that kind of culture. Good guys are drawn to a place

where they know it's values driven. We've had no problem with, the new CEO has been here over 30 years. One of his two lieutenants, co-presidents, Dan Simkwitz has been here over 30 years, and Andy Saprstein, the other one, came with me 17 years ago. The length of our tenure, of our operating management committees, is extraordinary. But let's talk about that. So, you recently named Ted Pick as your new CEO. Why him?

We had an embarrassment of riches. We had three people who could be CEO. Each of them, Nikolai, were great in running their own businesses. But the job of a CEO, and you know this as investors, is not how good are you running a business. It's how good are you dealing with what a CEO has to deal with. You deal with governments. You deal with regulators. You deal with media.

You deal with investors. You are the face of the company. Your personal judgment really matters. Your willingness to own decisions really matters. You don't have a boss. I mean, you have a board of directors who will ultimately fire or hire you, but day to day, you don't have a boss. But to be picked at Morgan Stanley as the new CEO, what does it entail? How long is the process? Oh, I started working on this in my first board meeting in 2010 in January. I gave the board

a list of people who I thought could succeed me if the nightmare scenario happened. Was he on the list? No, no, he wasn't on that list. And then after five years, I changed that list. A number of them I retired and a new group started coming in, which included TED. And then three years ago, we started actively evaluating them. We asked them for health checks. We asked them to tell us if there's something that we should know about their lives. We tested them and we gave TED and one of the others strategy to run. We gave TED all of global technology to run.

We took them to forums and situations and put them on TV and showed them what the job of a CEO is really like and saw how they move towards the flame. Some people retreat from the flame or the fight, and some people move towards it. Ted rose to the occasion beautifully. Oh, it seems to be a class act. But you have also paid the rest of them $20 million to stay on, right? Tell me. Well, that was my decision or my recommendation to the board.

Firstly, these people make a lot of money. So it's not going to change their life. I wanted to do something from the board that showed how excited the board was for them. So, they paid in performance units. If we don't perform, it's not worth anything. And this is something which I felt was not life-changing, but was a meaningful statement. And I didn't want to give it to the two who didn't become CEO. It was sort of like, oh, I'm sorry, here's a little reward to keep you happy. No, I wanted to give it all three equal to show they're a team at the top of the company. And some shareholders won't like it.

I think for a company of our size, we've taken our market capitalization up. In my tenure, it's gone up $80, $90 billion. We've had several several competitors haven't gone up at all. When we started, I'll give you a fun fact, when we started this journey, we were smaller than Credit Suisse, UBS, Barclays and Deutsche. Five years ago, we were bigger than each of them. We're currently bigger than all of them combined. So the team that made that happen was not just me. It was a team. And the most important members of that team were these three leadership. So this is a way of saying from the board, we think you guys are fantastic. Now, you've got to perform to get this.

But this is our way of showing the three of you we think you're fantastic. I thought that was a no-brainer. I mean, market shares shift in a lot of industries. Sure. But wow, do they shift in the financial sector. And you know you say that it's all about the people, but I mean it's amazing. Well no it's... What kind of reflections do you have? How do you reflect on that? I haven't had time to reflect. My assistant said to me yesterday, she said, you're working so hard. But you will have time because now you're going to move on to be the chair. Yeah. Now, some people say that the important thing of being a chair is to remember that you're not the

CEO. Do you think that's going to be difficult? Not at all. Why? Why? remember that you're not the CEO. Do you think that's going to be difficult? Not at all. Why? It's not my person. I didn't try to be a CEO. I'm not a corporate guy. I'm an Australian guy who grew up in the suburbs of Melbourne who was going to be a lawyer and work as a barrister, like an advocate in court. I'm not sure what they call it in your part of the world, but that's what I was going to do. Then I joined McKinsey and I thought I'd be a consultant my whole life and ended up being hired by a client and it happened to be to run a wealth management, actually it was to run marketing at Merrill Lynch. And then they put me in to run wealth management and I wasn't a wealth

management guy. And then suddenly I'm hired by Morgan Stanley to come and fix their wealth management business. Then financial crisis comes and I'm the CEO. So- You make it sound a bit random, but I suspect you're pretty damn good. How long will you stay a chair? I don't want to be falsely modest. I was very good at what I did. I know that. And I know I'm a good CEO. I'm just objectively and honestly, I believe that. And you have to have that kind of self-confidence. But what makes you a good CEO? What is the key to that?

I think, firstly, there are different models for good CEOs. It's not like, hey, this is what a good CEO is. But some of the things that I think have mattered in my tenure is, first and foremost, you have to be very comfortable owning decisions. And you have to accept that if you're going to make a lot of decisions, you'll get some wrong. So I embrace failure. I say, well, of course we got those wrong. We had to get something wrong. We've done 100 things.

So rather than saying, why did that happen? How could that possibly happen? Say it's part of moving a complicated organization forward. So owning decisions and consequences is critical. I think being able to articulate in clear, simple language so everybody from the folks who serve me coffee upstairs to the most sophisticated traders in London or Frankfurt or wherever, they understand you. I think consistency of message, clarity of message, ownership of decisions, and then a temperament that does not get wildly buffeted in what is a very wild ocean. There are constant waves washing over the top of you. And if you let that get at you, I almost see my job as taking the stress of the organization

that I feel in my executives when they come into me with problems into my body, almost physically, draw it in, process it, and bring it back out to the organization with a solution. I'm focused on not what the problem is. We'll deal with that later. It's what's the pathways to solutions and get people focused on forward looking. Does that stress remain inside your body? Probably. And how do you get it out? It's a great question. In my early years, I found myself, and to be really candid, I was throwing up a lot, vomiting, nausea, out of the blue. What's the Morgan Stanley? Walking down the street during the early years

when it was incredibly stressful and I was working constantly. And I went to see doctors and I said, there's nothing wrong with you. And then it occurred to me, my head was saying, everything's great. You're on top of this. We've got this. We've got a plan. We're going to beat them. And my stomach, my gut was saying, you might think you're great up there. We're not great down here because all of it's going somewhere and it's coming down and hitting us. we're rejecting it and at that point I decided to get much fitter and I started rowing on a rowing machine and I became extremely fit and you look quite fit just but well I was thank you I was really fit back then and I just I just decided to I never really knew about meditation and I've never, very rarely practiced yoga.

But I think I, and a very close friend who meditates all the time told me, she said, you're meditating a lot. You know, you're closing your mind to the world around you. And just, I'll often just look out my window in the office and watch the hawks and the pigeons flying around manhattan and you're stilling the world around you to give your brain a chance to regroup so i think a combination of self-awareness that the pace i was on was unsustainable. Fitness and then a fit mind. When you have these moments in your office where you look at the birds,

how long do you do it for? It could be 15 minutes. And every day? Oh, yeah. Several times a day? No, just when it feels like. And I often play music a lot. I play music every morning in the office,

which I blast on speakers across the executive floor. What do you play? Whatever. I walk to work part of the way every morning and part of the way home, and it's whatever I feel coming in. Like classical or rock and roll? All. I mean, the day we were announcing I was stepping down as CEO,

as sort of a pun, a joke on myself, I played, I think it was Amy Winehouse's, you know, I forget the exact title, You're Not So Good or You're No Good. It's like, you know, just a reminder. And then I played Herb Albert and the Tijuana Brass, which is fabulous, you know, horns and trumpets, Tijuana taxi, very uplifting. And then I played a song by the band Fun because I thought, you know, I'm going to pick, and it was Carry On. So it's kind of like firstly a little humbling followed by a very uplifting song that we actually played

at my father's funeral, this Tijuana Brass, followed by Carry On, Move Forward. So it can be opera. I played some jazz last week. I'll play anything, hip hop, some Australian music, you know. This processing of the stress in the organization and kind of, I mean, you internalize it in a way on behalf of the organization. Was that mainly during the financial crisis or is it all from another? Because I had to puke sometimes during the financial crisis too. It's very, very tough.

Do you think people underestimate the stress of having these positions? Oh, yeah. People have no idea. And it's not their fault. I had no idea. Because the analogy I've used a few times, when I was a kid growing up in Australia,

we'd go to the beach every summer for three weeks. And it was fantastic. And I remember standing there once and asking my dad, why do the waves never stop? And he started explaining title as an engineer. And I realized the job was like the waves always coming at you. They never stop because it's global. And, you know, it's 24 hours, seven days.

The only time business really stops for me is from sort of noon Saturday to noon Sunday, because pretty much everywhere around the world is closed in that time frame. And what do you do then? Well, I swim a lot. I play golf. I, you know, I used to play a lot of tennis. I row on my rowing machine. I read books.

I see friends. I go out to dinners. I'm not a sort of New York socialite personality, but I occasionally have to go and do stuff like that. But pretty low key. I mean, a lot of walking, a lot of hiking, and just pretty out in nature. But the way to stop the ocean, you can never stop the ocean. So the way to stop the ocean constantly being at you is to turn your back to it. If you stand there watching the ocean coming in and feel this is endless, then physically turn around so you can't see it anymore, you can see a field, changes your mindset. It calms you. And that was my metaphor for how I had to treat this job. It calms you. And that was my metaphor for how I had to treat this job. I had to be able to turn my back to it. In other words, shut off my mind. And I have a little pond at the back of my beach

house, which has different birds at different times of year come and make it their home. And right now we have a family of swans with about 17 ducks that are also on the pond. And it is absolutely glorious to get up in the morning, open the big curtain from my bedroom, which looks over the pond, and see these elegant swans floating around. And that's me turning my back on work. I'm not looking at emails.

Talking about these waves, now we have wave after wave after wave of geopolitical tension. How do you read the geopolitical landscape? You happen to be a member of the Council on Foreign Relations, so you have deep insight here. I've been more positive. I'll just start with different regions. More positive on China-US relations because I think China, having made arguably the biggest policy mistake since the Second World War, since Germany's decision to engage in hostile conflict,

China's policy mistake is the one-child policy. Guaranteed shrink the labour force right when they've got an aging labor force. So that has been a terrible decision that they're rapidly trying to reverse, but you can't change birth rates overnight. And unless China can change its immigration, which I think is improbable, it's going to be really challenged without having strong global trade. It needs to be the market for consumers that aren't its consumers because it won't have enough of them to fund China. So you think that trend will pick up? I think they have to work together with the US much more than politics would suggest.

How do you read Europe? We have our first land war in Europe in 70 years. I mean, it's absolutely unfathomable that somebody would think you'd drive tanks across from one country border to another, yet suddenly it happened. We knew it was coming with the Crimea in 2014. We effectively shut our business in Russia in 2014 because as soon as I saw that, I said,

if they can take the Crimea, they can move further into Ukraine and God knows where. I wasn't some great predictor. I just thought the Russians had betrayed their intentions pretty clearly. So we had to act on it. I think it's a tragedy at every level. Geopolitically, it's not meaningful in the sense of the Russian economy is not big enough. The Ukrainians have done an extraordinary job in resisting and the rest of the world has largely aligned around their resistance. The most recent turbulence in the Middle East with, you know, the terrorists from Hamas simply going through the fences and killing people has a reminder that terrorism is omnipresent, particularly in that part of the world.

Unfortunately, what looked like we might be getting towards some sort of treaties between Israel and Saudi, it will either accelerate it or put it back decades. And I'm not sure which right now. How do you read the AI race? The AI race between the superpowers? I think artificial intelligence. I don't think of it as so much a race between the superpowers. I think there's nobody who will win. Nobody will create enough distinctive technology to damage somebody else. I think within corporations and industries, you'll see much more bifurcation of performance than you will at governments. In the same way that

national security and cybersecurity reach a level of parity among the more sophisticated countries, the same thing will happen with AI. Can we spend a bit more time on the corporate culture at Morgan Stanley? We talked about doing the right things, but how do you build talent in Morgan Stanley? First, I have a 20-year view. If you want to build senior executives, you have to start with them 20 years before. view. If you want to build senior executives, you have to start with them 20 years before. So, you've got to look through your pipeline of talent. And too many organizations focus on the level below the CEO. That's bait. They're already pretty fully developed, for better or for worse. I'm focused on two levels below that. So, no, I'm two levels below. I apply for a job here, and I managed to get an interview with the great James Gorman.

What are you looking for in me? Authenticity. And how do you see that? Am I seeing a resume, or am I seeing the real human being who's going to be working here? Everybody's resume. How are you going to figure that out? I ask a lot of questions. I'll ask people.

Well, such as? Give me a go. Give me the five words that people would use to describe you, whether it's your mother, your next-door neighbour, a work colleague, your child, your best friend. Go. Don't think. You haven't got time to think. People can't lie. If you've got no time to think, you say the truth. If you're smart, you're smart. You're funny, you're funny. You're shy, you're shy. So I immediately get a better sense of who the person really is just from that one question.

Tell me one thing about you that you are actually distinctive of compared to most people who you come across in your world. Now tell me one thing that you're actually not compared to most people. And we've all got one thing on both sides of those edges, or they wouldn't be in the interview. So things I'm trying to get at what is the real person, I can see their academic record. I can see their employment record. What I can't see is who it is that we're going to be dealing with who, when thrown in a team room, who has to navigate a delicate or sensitive or nuanced issue will have the skills to do it. And the people who are most likely to do that are people who are authentic,

who are true to themselves. And so now you hired me. What do you do with me? Well, we have programs of development where we write up reviews for you every year that are very thorough. We have all sorts of training programs to help you get inculcated with our culture. You participate in things like every June June we have Global Volunteer Month, where we all give time, not just money, volunteering activities.

You participate in that. If you want international mobility, we provide opportunities for you to interview for those jobs. We have a whole machine. You need mental health care for your children. We have ways for you to participate in programs we have set up for that. We have a whole thing that gets at your sort of mind, body, and work spirit to make you the best employee you can be. It doesn't mean you'll be the best employee in your group, but the best you can be.

That's our aspiration. So who succeeds in this company? People with good values. I've thrown out a lot of people whose values are just, they were talented. What do you have to sacrifice to get to the top? I think you've said sometime that you've sacrificed France. Well, it's hard to maintain a normal family and relationship life with the demands of the job. So you've got to overinvest in that. I think I did a great job with my children. I

think I did a much less good job with my friends. You lose your friends for a while. I call up my friends sometimes and say, will you have me back when it's all over? Do you think they will? Yeah, they'll have me back. I've been a good friend to them. I just couldn't give them the time. Stupid question. Why don't you hire a few more people and let them work a bit less? Well, we have a lot of people who work very balanced lives, but we have a lot of people who are very driven. I'm constantly telling people around me to work less. You say it, but you mean it. You really mean it? Of course I mean it. I care about duration of careers.

It's not a sprint. That's why we've got people here 30 years. I'll tell you a true story. Colm Kelleher, who is now the chairman of UBS, he was our president. He worked for me. The week I became CEO, my first weekend, he called me and left a message on my answering machine at my place outside New York City on Sunday late morning, I think it was. He said, there's an issue. I think you're aware it's this topic, and I'd love to catch up with you on it.

And I thought I knew what the issue was. Could wait. Nothing was going to happen between Sunday at 10 in the morning and Monday at 7 in the morning. Nothing. So I didn't call him back. And I went into his office on Monday morning at 7 o'clock. And I said, Colm, I got your message.

He said, yes, I left a message on your machine. Did you hear it? I said, I heard it. But I decided you wouldn't want to be disturbed with your family on a Sunday night. And I knew it didn't have to be solved last night. So let's talk about it now. He very rarely called me on a weekend after that. I was setting boundaries for him and for me.

But talk about calling people. So one of the things I hear from some of the CEOs is that you are very generous with your time and that you reach out to people who become CEOs of companies. Always. I've called every major CEO in the US and most in the world within a month or two of them getting their job. What do you say?

Hey, it's the top dude at Morgan Stanley. I thought I'd introduce myself to you if we haven't met. And I've been doing this a long time. I hope you're settling in. And if you ever want to talk about it, I said, I'm not trying to sell you banking services. I'm not here about business. I'm here about it as a fellow CEO. And then some of them will say, well, and I'll ask them, how's your board?

That will lead to questions. Is your success of staying around? How's your relationship with that person? So we have a conversation. Some are very short, you know, five, seven minutes. Some are 30, 40 minutes. And a number of them have come back to me multiple times and asked for advice on different things.

I'm now dealing with a very difficult director or how did you set up succession? You know, how do you deal with the stress? A lot of CEOs are very lonely and they don't want to appear back to your, what was it, insecure overachievers. Most CEOs are insecure overachievers. You think so? Hell yeah. And they don't want to admit to the fact, maybe they're not as smart as people think they're going to be. Or maybe they don't know everything that people think they should know. So they feel compelled to be constantly wise from day one. It's ridiculous. You're not. There's a lot you don't know. So you think also CEOs have got this imposter syndrome? I think a lot of them worry how they'll be judged.

And part of the conversation I have with them is, you're phenomenal, that's why you've been selected. But it doesn't mean you're perfect. And let's talk about how you can manage your life so you can keep growing rather than just get exhausted and get spat out in three years. And having done it for nearly 14 years, I obviously have some credibility for managing to, I don't know if survive is the right word, but do the job under extreme stress for this

long. And you can only do that if you've figured out how to manage the stress. Otherwise, you don't survive. A lot of CEOs tell me they're just utterly exhausted when it's done. I'm full of energy. I'm ready to go. I just don't think I should be CEO of Morgan Stanley. What will you do next after having been chairman? I'm probably going to join one board, something on the West Coast, because part of my life is now on the West Coast. And I want something that is complicated. I like solving problems. I'm not interested in joining boards so I can attend board meetings and get paid for it. It's not about status or finance. It's more about give me a problem in a different industry I can work on. I like to do that. And

I'll teach a little bit. I'm involved. I chair a business school at Columbia University. And my university in Australia calls me an enterprise professor, which is their polite way of flattering me. But it means I can teach down there. I can teach at Columbia. So on the sides, I'll still be executive chair. But on the edges, something that keeps your mind working in a new industry and something that keeps you around young people and teach. My son said I'm not intellectual enough to be a professor. And I said, I'm not a professor. I'm a teacher. I'm not generating original, you know, research.

But I've accumulated a lot of experiences and judgments that I think I can share with others. Well, I wish I could take one of your classes. What would be your advice to young people? Never pick jobs simply because you're impressing somebody else. never pick jobs simply because you're impressing somebody else don't worry about what you're being paid or try and negotiate what you're being paid unless it's grossly unfair and if it's grossly unfair you shouldn't be working at that place do things because in your core you know you're interested in them you know if if somebody i've had some in the last few months, a number of approaches to go on boards.

And there are a lot of industries, I respect them, but I'm just not that interested. Just don't get out of bed. When I read the newspaper, if there's something about that industry, I'm not reading that. It's not a lack of curiosity, it's just lack of interest. So pick things that really align with what your interests are. And then don't try and always, so many of these kids are trying to be, get to the next level. The best way to get to the next level is do your level so well that the people around you say, boy, you know, James is great. We should give him

more to do. Rather than James came to see us and said, you know, he wants a promotion. God, I don't know that he's ready. And that's like that always pushing for yourself to be put ahead rather than others recognize you. The best way to succeed, do the job you're paid to do really well. That's what I tell these kids. All I can say is that you for sure have done your job really, really well. It's been an honour having you on here. Big thanks for taking the time. I appreciate it very much. Thank you.