Dear Clients / Partners,
Whether you are in the investment management business or running a public or private company, you are faced with the challenges of managing people who have a myriad of options. To make it even more complex, you need to do this while you are trying to make smart investment decisions. We thought long and hard about both of these and wanted to share with you our thoughts and observations about the similarities of both challenges. We hope this letter, which we believe reflects the Jefferies culture, gives you more of a sense of us and Jefferies. More importantly, we hope it may help you and your people put some important topics in perspective. As always, please accept our sincere thanks for trusting us with your business.
Careers or Investing: Compelling Opportunity vs. Merely Intriguing
At a recent breakfast with a dozen of our analysts who had recently completed their first year at Jefferies, a question was asked about our own personal career paths. This was in the context of discussing our juniors’ careers and the forks in the road they anticipate will await them in their future. In explaining our own career decisions, what became clear is that each of our decisions were ultimately pretty darn easy and borderline obvious. If after doing the hard work an opportunity was truly compelling, we took it. If it wasn’t, we moved past it and never looked back. Jefferies was easy for us because it was a true Wall Street firm with incredible entrepreneurial spirit and culture, had a meaningful and important foundation that could be built upon, and was the size that a new business, team or even just one individual could have a meaningful impact. In our minds, these characteristics would afford us a chance to have a career with something we both valued – purpose. (As an aside, while clearly biased, we strongly believe that each of these important boxes are easily checked today at Jefferies – perhaps more so than ever.) As we said to these young future leaders who have been told by many that working in an investment bank is a perfect first stop on a journey, perhaps the next stop only makes sense if it too is “compelling,” not just “intriguing.” And by the way, perhaps the firm they are with today is the best firm and opportunity they will ever know.
The thought of “compelling” as the linchpin of major career decisions led us to recognize that the same is true for investment decisions. The work involved with investing includes value assessment at entry point, ability to help add long term value to the investment, understanding the short term and long term competitive position, and the ability to invest enough capital to justify the amount of time it will take to achieve appropriate compounded long-term returns. Downside scenarios and volatility assessment are also critical components to the investment process.
Our experience is that affirmative decisions to pivot and take a new job or boldly make a new investment should only derive from a conclusion of “compelling opportunity,” not a “merely interesting” chance to follow the direction of the often wrong herd. One can find that the totality of the facts make clear that an opportunity is distinct or perhaps unique, and only then is it time to pounce. If a handful of the many factors we just highlighted line up but one or two of them do not, act at your own peril and recognize you are flipping a coin with your valuable career or investable cash hanging in the balance.
Evidence of what we are saying can be found in the track records of great investors. What they all have in common is that they tend to pull the trigger selectively, generally very selectively. Whether it’s Warren Buffet, Carl Icahn, or George Soros, they are prepared to back up the truck when they see clear opportunity, but aren’t afraid to sit on their hands for long periods of time in which nothing compelling presents itself. They never find money burning a hole in their pockets. At Jefferies and our parent company Leucadia, we try to adhere to this same discipline. Often, it is easier said than done.
Similarly, those that have gone furthest in their careers or done the most good and made the most progress in their lives generally don’t quit lightly and don’t change focus without a compelling reason. You didn’t see Jeff Bezos, Howard Schultz or Tilman Fertitta panic or “bolt” when things inevitably got tough. Great leaders persevere and help solve the problems, and that is what makes them leaders. While writing this actually makes both of us squirm, we are personally approaching 30 and 20 years, respectively, at Jefferies. We joined Jefferies only after the lights went out at our prior firms – in one’s case, the challenges were insurmountable and, in the other, it was one merger too many. All this being said, we also acknowledge that sometimes (not as often as many think) the new opportunity is too perfect to pass up and in that case, the right decision may be to leave.
It is easy to buy stocks and bonds, do deals or change jobs. It is difficult to be successful, to have the discipline of a high bar in decisions and to persevere through thick and thin times. In our humble opinions, maintaining patience, keeping perspective, doing the hard work, and persevering and being unrelentingly disciplined in one’s decisions pays off in the long term.
We wish all a happy career and healthy investing,
Rich and Brian