Why Being In Our 50’s Makes Us – But Not Jefferies – Middle-Aged

To Our Clients

This week, our firm finished its first half-century in business as Jefferies turned 50 years old. Coincidentally, the two of us writing this note also hit the 50-year milestone in the last few years. We would like to take this opportunity to talk about the importance and meaning of these milestones. First, we realize we are taking a chance in acknowledging that the two of us are “middle -aged.” Unfortunately, not very many of those with whom we started in this business in the first half of the 1980s are still walking around on Wall Street! That said, being in our 50’s and both devoting our working lives to the financial services industry has given us a whirlwind of experiences, pressures, victories, failures, satisfactions, disappointments, true partners, some adversaries and many lifelong friends.

There are numerous pitfalls we wish we’d had the prior wisdom to avoid, but hindsight only comes with experience. There are many bad decisions we fortunately were able to quickly reverse before too much damage was inflicted. There were instances where we relied on the wrong people, deals we should not have done and, occasionally, strategies that were flawed from inception. One of the key things we have recognized is that, if you never make mistakes, you aren’t trying to innovate, get to the next level, be creative or make a difference. The truth of the matter is that, while we would have much preferred fewer screw-ups, they appear to be a necessary evil that goes with the territory. However, it is of paramount importance that one truly learns from each mistake so you never repeat the same one and that you surround yourself with enough strong-willed and honest partners who help you quickly identify your missteps and correct them as soon as possible (or avoid them in the first place).

It is also vital that, while you can have many relatively small (albeit still painful and costly) mistakes, the big fundamental decisions have to be done right the first time: culture, capital structure, selection of key leaders, unbending rule compliance and integrity, liquidity and long-term vision cannot be even slightly messed up. Having a strong Board of Directors, a true partnership with your executive leaders, an open door policy to all employee-partners (who are truly the ones who can keep you out of trouble) are all critical. Of course, one can only really listen to what people are saying by surrounding oneself with great people and being humble so there is truly an open line of communication. We believe if this can be accomplished and institutionalized, it is the only way to keep any business leader out of trouble when being confronted by “big fundamental decisions.”

Now what about a firm that is turning 50 years old? On the one hand, it is a major milestone worthy of attention. Somehow our clients, shareholders, bondholders and employee-partners have all come together to create a partnership that is valuable, growing and vital. This is a somewhat amazing feat given how rapidly the world around us changes due to technology, innovation and globalization. When you add to the mix the extreme volatility and danger inherent in the financial markets, building a great firm takes on yet another level of complexity and accomplishment. However, unlike us 50-something-year-olds, Jefferies looks and feels as if it’s in the heyday of its youth. In many ways, Jefferies is just beginning to hit its stride as we find ourselves truly capable of serving global corporations and investors with every relevant product and sector. When you live inside our firm, Jefferies exudes youthful exuberance in terms of energy level, passion, commitment, competitive position and optimistic outlook. The fact that this organization celebrating its golden anniversary is populated with employee-partners in their 20’s, 30’s, 40’s, 50’s and 60’s means that we have the best of all worlds: true experience and raw optimistic energy. Our goal is to keep both of these balanced because, when we do, we will hit our goal of being the best firm in our industry: institutionalized, yet entrepreneurial; seasoned, yet ambitious; conservative, yet aggressive; defensive when necessary, yet offensive opportunistically; conservatively capitalized, yet willing to partner and support; cautious, yet creative; humble, yet confident. These are all aspirations that, more so now than ever in our 50-year history, are well within our reach and will differentiate us from much of our competition. We can be that firm and more. There are, of course, pitfalls and issues that have challenged many before us. There is no assurance we can live up to these aspirations. It will require a great deal of work, commitment and coordination by a lot of people. We will do our best to minimize the small mistakes that we will undoubtedly make. We ask each of you as our valued partners and clients to speak loudly and clearly to us to help us avoid mistakes on the larger fundamental decisions that are critical to Jefferies’ next 50 years. You have the undivided attention of all our 3,814 employee-partners, especially the two of us. Please don’t be shy. Thank you.

Sincerely,

Rich and Brian

P.S. Please don’t misconstrue our comments on our biological age. To be frank, we still feel like two kids every day we come to work: excited, passionate and highly engaged in our individual careers and opportunities for personal growth at Jefferies. (We are just not 34 years old anymore, which is a bit of a bummer.)