23 Apr 2014
Inside Bloomberg, Inc. with Chairman Peter Grauer
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When former New York Mayor Michael Bloomberg left Bloomberg, Inc. to take office, he handed the reins to Peter Grauer. Grauer talks with The Business about leadership, the anatomy of the company, maintaining its momentum, and how he met the billionaire who changed his life.



The Business is a Harvard Business School podcast. Twice a month during the academic year, host Brian Kenny will bring you a new take on the business world through unexpected stories, and conversations with business leaders, entrepreneurs and faculty members. Subscribe on iTunesU.

 

Transcript

Brian Kenny: Peter Grauer is chairman of global financial media company Bloomberg, Inc., a role he’s held since 2001, succeeding none other than founder Michael Bloomberg. He’s led other global organizations, including Donaldson Lufkin & Jenrette and Credit Suisse First Boston. He’s also an entrepreneur, having founded his own financial services and investment firms. Peter, thank you for joining us today.

Peter Grauer: Thank you, Brian, for having me.

BK: So I thought it would be helpful for people just to hear a little bit about your background, how you got to where you are. I think there’s horses involved here at some point in the story. But just give us a glimpse of sort of the path that you followed.

PG: Well, the path started in 1969, when I was hired for my first job out of university, which was at Citibank. And I spent 11 years at Citibank on the corporate finance, corporate lending side of things, then went to work for Donaldson Lufkin Jenrette. And I guess the seminal moment that certain got me to where I am today turned out to be an October afternoon in 1989, when my then six-year-old daughter convinced her mother and me that she wanted to learn how to ride horseback. We were living in Manhattan. I found a barn in northern Westchester County. We packed a picnic lunch one afternoon, drove up to meet a trainer who was going to engage my daughter in this activity.

BK: Yeah.

PG: And as we drove in the driveway of this farm, in one of the rings on the left hand side of the driveway were two little girls, who turned out to be Emma and Georgina Bloomberg. And Mike’s youngest daughter, Georgina, and my middle daughter, Tory, are a week apart in age and literally started riding together at six, rode together until they were 16 years old. And as you can imagine, this guy Michael Bloomberg showed up. And I can assure you, Brian, he didn’t know who I was. I wasn’t quite sure who he was when I first met him. Our company at that stage was a $300 million-a-year business. We had about 1600 employees. But we became friends because we were thrown together by our daughters, and we became good friends, and we started taking vacations together and becoming closer and closer. And in October of 1996, we were at a horse show in Harrisburg, Pennsylvania, walked out at lunchtime to go get a sandwich. Standing in the parking lot of this big showgrounds, he turned to me and said I’d like you to go on my board.

BK: Yeah.

PG: And I said so who’s on your board? And he said, well, it’s me and my lawyer. And I said, well, what does your board do? And he said it actually doesn’t do much of anything. And I said, well, why do you want me to go on your board? And he said the reason I want you to go on my board is because, if something happens to me, I want you to play a more active role in my company with my employees and clients and so forth. And so I went back to my partners at DLJ and told them this was something that I wanted to do and I thought it would be god for our relationship with Bloomberg but, more importantly I had great trust in Mike, and so I did it. And the rest, as they say, is history.

BK: That’s great.

PG: I became nonexecutive chairman in 2001, when Mike decided to run. And then, on Christmas day of 2001, after he was elected, he came out for lunch and asked me to come to Bloomberg as chairman, president and chief executive officer. And so, just to put it in context for you – when people used to ask me, how did I ever get this wonderful job at Bloomberg, I said it’s quite easy. You befriend a billionaire and get him elected mayor of New York, and the rest is cake.

BK: (laughter) It’s a new kind of horse trading. Right? Yeah.

PG: Completely.

BK: So you’ve been in various leadership roles in different industries. What’s the one thing, if you sort of think about – was there a crystallizing moment for you – something that you learned that’s really stayed with you as a core value of yours?

PG: First of all, I think it’s a great question, and it really is the foundation of everything that I do. I had a great friend who passed away about 14 or 15 years ago by the name of Nick Forstmann, who was one of the partners in Forstmann Little, a very successful private equity firm. And what I learned from Nick at about my late 30’s, early 40’s was the importance of relationships – not in the context of just building a network of relationships, but in the context of nurturing and investing in relationships over the long term of the three things that I’ve kind of built my personal leadership style on, relationships and the intimacy of those relationships is certainly an important cornerstone.

BK: When you were a younger man, you said there were three things that you were really focused on, two of which you were really good at and that, ultimately, throughout time, you learned a lesson in humility. I’d love to hear you talk a little bit about those.

PG: So I was starting to build the private equity business at DLJ. And I had the opportunity to do what at the time was a pretty large transaction, which was about a $500 million purchase of a subsidiary of a large public company. And I thought I had everything wired, and I really felt it was important that I make my mark and get this deal done. And I uncharacteristically – hindsight being what it is – thought I could back the CEO into a corner with an equity package that I thought was favorable to him but also favorable to the investors who were going to invest in this business. And I thought I had him completely cornered in this regard. And I was totally wrong. He figured out a way to slip out, do the deal with somebody else. We lost a big transaction. We lost a big fee.

And it really forced me to rethink about my whole approach to, in this case, relationships – and how do I deal with people as we go forward? And so it made a really indelible imprint. And I think learning from it – it’s helped me get to where I am today.

BK: And I want to come back to some of those lessons and how you use those in your day-to-day management of Bloomberg. But first it would be helpful, I think, for people to hear a little bit about the Bloomberg business model – like how is it set up? And how does the business look from your perspective?

PG: Last year, we finished the year at just over $8 billion in revenues. We have, in Bloomberg LP, the operating company, about 14,300 people who work for us and 156 offices in 78 countries around the world. The business is primarily a financial information business. 82% of our revenues last year came from the core desktop Bloomberg Professional service which exists here at Harvard Business School, and we have 320,000 subscribers, about 380,000 –

BK: These are terminals?

PG: These are the terminals themselves which is a very robust application software product that provides news, data and analytics across virtually every asset class that you can think of with regard to the financial markets going forward. And, by definition, we’re in 202 countries with our product around the world. We cover most markets whether they be mature, developed markets like the U.S. capital system or whether they be early emerging markets like Nigeria and Zambia and places like that. Our users are financial services industry professionals, so they’re sales and trading people. They’re hedge funds. They’re investment management firms. The Harvard endowment, for example, is a very important customer of ours going forward. And they use our news data and analytics on a day-in, day-out basis, both at their desktop, but also on handheld devices, because we provide that capability from a mobile point of view, to interact in the markets day in and day out. And that’s 82% of our business. Another 16% – 14%, 15% of our business comes from media at adjacencies to the terminal, so we have a big enterprise platform, which includes data – it includes trading solutions. It includes enterprise applications. We also have something called Bloomberg Tradebook, which is a registered broker dealer. That’s another about $1 billion of revenues for us. And then what makes up the rest is basically our media platform, which the world knows as Bloomberg television, Bloomberg radio, our two websites, what we do from a mobile application point of view and how we syndicate content around the world. We have been fortunate enough to have record revenue performance for every year we’ve been in existence –

BK: Remarkable.

PG: – 32 years, including in 2009, when the financial crisis was at its worst. And we are a company, as you undoubtedly know, that is 85% owned by our namesake, Mike Bloomberg. We will be private, I think, for the – certainly for the foreseeable future. That gives us a great competitive advantage. We – of the 14,000 people who work in Bloomberg LP, we have about 3,000 programmers, we have about 3,000 people who are in the business of creating and collecting content day in and day out, so Bloomberg News and what we do on our various media platforms. And then the rest, as you would expect, will be sales and product development and support personnel.

BK: That’s very helpful just to give people a picture, I think because people are aware of the media piece but not so much – I don’t think – the insight into the financial piece. So what do you do day to day in your role?

PG: Well, so I’ve been there now on a full-time basis for 12 years. I was lucky enough in 2008 to basically hire Dan Doctoroff, who I refer to as my partner, as he is my partner, to come in. Dan was working at City Hall as deputy mayor for economic development and rebuilding. I brought Dan in as part of my succession planning as president and then, we elevated him to chief executive officer. So I serve as executive chairman. He runs the day-to-day business. He and I jointly worry about strategy. Obviously, I continue to work closely with him to help him become an even better CEO than he is – and he’s a terrific CEO as we sit here. I spend a lot of time with clients around the world. Last year I probably saw 600 clients all over the world, making sure that we maintain that contact. I spend a lot of time on leadership related issues internally. I started something seven years ago which is called our Global Leadership Forum, which we’re now about to go into 3.0 of GLF. And so I do that. I spend a fair amount of time with regulators around the world. Obviously our customers are highly regulated. Those regulations ultimately have to get promulgated through the terminal for compliance purposes, so we’ve kind of maintained that – those sets of relationships as we go forward. And then, as it relates to our overall financial performance and allocation of resources, Dan and I do those high-level things together, but he really runs the day-to-day operation.

BK: So when you’re in an organization that’s had record growth for 32 straight years, I mean that’s an enviable position to be in. At the same time, does it make it hard on the leader to create a sense of urgency to sort of sustain the momentum across the whole organization?

PG: And it’s a terrific question. You know, the operative – and I think I mentioned this before – the operative psychology at Bloomberg day in and day out is one of constructive paranoia. And it’s amazing what that kind of sense of creative tension – that that in turn results in – in an organization like ours just kind of keeps us all moving forward, trying to be more innovative. As the markets that we serve have changed as a result of what’s going on in the last seven or eight years in the financial markets around the world, we’ve had to innovate to make sure that we service our customers in a difficult environment so that they can be efficient, reduce operating costs, execute in the markets around the world. And all of those things, I think, have contributed to our ability to continue to grow. And I would never say – talk about that without talking about Mike and kind of what Mike left us 13 years ago when we went to begin campaigning – kind of the spirit, the culture and the foundation of Bloomberg – and certainly there are lots of people who went to work in the company when he was there who continued that cultural stream that’s been so important to us as we’ve gone forward. And I think that’s all helped us to continue to perform at the level we have.

BK: Is he back actively involved in the business?

PG: He is – he’s back. He’s on the road a fair amount – when he’s in New York, he certainly spends a portion of his time with us. It’s really great for us, because we want – Dan and I both want him to meet some of the people who have – really making a difference and will make a difference in our company going forward who he has not met since he’s been gone for 13 years. And he’s made a number of very positive suggestions for us. In fact he is he makes us all better at what we do. And in this environment, although we continue to strive to innovate and be constructive in terms of how we do things, having him – having the owner around periodically – more than periodically quite actively is – in my estimation is a terrific thing.

BK: So leaders face challenges of all kinds. And Bloomberg’s had some recent challenges with data security issues and the allegations of self-censorship in China. How, as the leader, do you keep people focused on the work at hand and not getting sort of caught up in the negative publicity that a giant brand like Bloomberg can attract when those sorts of things happen?

PG: Well, I mean the client data privacy issue, which Dan and I obviously went through together, was in my judgment kind of his first real test as chief executive officer, and he passed it with just remarkably strong performance and flying colors. And I think one of the things that that did for us was it very much gave us a wake-up call that we’re pretty darn good at what we do, but we can always do things a lot better. And certainly that’s been the case with the client data privacy issue. We mobilized the resources. We – it occurred in late April, early May of last year. We filed a report that was first approved by our board, which we did with two outside firms and then had Sam Palmisano, the former CEO of IBM, as an independent advisor to our board to kind of oversee the process. It came out with some 80-plus different recommendations as to things that we should do. We made it public. We certainly sent it to our major clients around the world and got lots of very good marks and positive feedback from them. We committed at the time we would do a six-month report. We did that February 20th – right on time. All of the commitments that we made in that interim period to fulfill under the 80-plus different initiatives that we identified that needed to be addressed we addressed successfully. We have a couple of things open. And we’ve been responding very well. I think, in the end, I certainly wouldn’t want to go through it again – and I hope we don’t – but I think our responsiveness to it showed just remarkable leadership.

BK: Yeah. And the need for transparency these days is unquestioned. You have to have it.

PG: Unquestioned.

BK: Let’s talk about the media piece of the business.

PG: Yeah.

BK: I know it’s the smaller part of the business, but it’s also one of the more visible parts of the business. You’ve got a new CEO who’s heading up the media side of the organization. He’s sort of laid out a vision for that side of the business going forward. Does Bloomberg have a point of view on sort of how people will consume media going forward?

PG: There is no longer one size that fits all, just because people want to consume information in different ways. So we’re creating six destination websites that will cover everything from Bloomberg News to Bloomberg Markets to technology to government pursuits, which is the leisure platform, and opinion, which is what we do through Bloomberg View on the terminal today and on our website. It’s very much focused still – believe it or not – on print media, and so we’ll continue to invest in Business Week and Bloomberg Markets magazine and pursuits – even radio, which we think is a terrific way to deliver some of our information to our customers as we go froward. There’s a monetization strategy behind it. Design will play a very important role in how we do things going forward. But it will be a significant transformation. Linear TV we’re still obviously very committed to, and we’ll continue to enhance the offerings that we have. We’re in 340 million homes around the world with our television. That’s an important part of it. The whole digital video component of how people consume media going forward we have characterized as a Manhattan Project for us, because we see that as so important .

BK: Interesting title. (laughter)

PG: – so because we see that as being very important going forward.

BK: Peter, thank you for joining us.

BK: Thank you, Brian, very much for having me.

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