James Gorman - A Final Word

For 14 years, as the chief executive officer of Morgan Stanley, James Gorman came in on the first day of the year and wrote a checklist. He said that gave him a framework for focusing on the big things.

“In these jobs, there are thousands—literally thousands—of issues that come at you. And you can easily lose sight of the stuff that actually matters, which is a few big things,” he told me in an interview just days after stepping down as CEO and handing the top job to Ted Pick. “One of them was always ‘no new mistakes,’ which I defined as things that cost us more than a half-billion of capital. Sometimes they were personal, like ‘stay fit’ or ‘get fit,’” he said. “Sometimes I’d write: ‘Development and leadership with our top team.’”

This year, Gorman didn’t write a checklist. You’ve got to switch gears, he explained, while still dressed in Morgan Stanley blue. We spent the minutes before we went on air talking about his practice of long-distance swimming and his butterfly stroke, which sounds gentle but requires great strength. We chatted about balance, how both of us were trying to find it.

In the course of the interview, we talked about what it meant to make mistakes. “It might sound immodest—I don’t think we made a lot of big mistakes,” he said. “If you look at the major things that we did, whether they were the deals—the Smith Barney, E*Trade, Eaton Vance, succession, which is critical, navigating through Covid—you know we got, frankly, most of the big stuff right.”

He said it took a little too long to get the full team he wanted in place in the right jobs. And he wished that he hadn’t sold Van Kampen, the behemoth asset manager, to Invesco in 2009. Just over a decade later, Gorman recommitted to building out a money manager, sealing a megadeal to buy Eaton Vance and catapulting that unit to assets under management of well over $1 trillion.

“But you can’t do these jobs and not make mistakes. When I see a mistake, I embrace it. You know, it’s like Kipling, those travelers of success and failure—you’ve got to embrace them both,” Gorman said, referring to the English writer Rudyard Kipling. “I never see a mistake as a negative, I just see it as something you learn from and move forward. Because if you’re not making mistakes the chances are you’re not doing enough,” he said.

You can watch the full Gorman exit interview here. And here are some more key points:

• On the job ahead for Pick: The next five years won’t be the same as the last five. So Gorman says his successor’s biggest choices will be strategic: “When opportunities come to move left or move right, how do you do that, how aggressively do you do it, and when do you do it?” Gorman says he’ll be there to share his views for the first year, but later Pick will have to rely on his team.
• On Disney: Gorman has been nominated to join the board of Walt Disney Co. in February. CEO Bob Iger “is iconic for a reason,” Gorman says. “He’s led that company through so many cycles.” On what his role might be at the company, Gorman says, “I like dealing with complex situations. The changes going on in that industry are profound, and there are choices to be made.” Looking back at the succession he just engineered at Morgan Stanley, he adds, “Hopefully, I can add something to the succession committee that I’ll be joining.”
• On American education: Gorman chairs the board of the Columbia Business School. “I’m looking to get more involved in Columbia University in the coming months,” he says. “This is not the first time universities have been hotbeds of dissent and turmoil—my whole life they’ve been that, from when I went to university in Australia in the 1970s. That doesn’t bother me. But it’s important that people are able to have dialogue and discussion on campus without intimidation.” (Some context: This week the president of Harvard University stepped down amid plagiarism accusations and concerns about free speech on the campus, with a donor revolt in the background.)
• On the banking system: It’s in “rude good health, to use a British expression,” he says. “We had a crisis among three banks, it was a crisis for their shareholders and their employees. It’s not a crisis for the market.”

And elsewhere in banking!! I sat down for a well-rounded, exclusive conversation with Goldman's Stephan Feldgoise , co-head of global mergers and acquisitions, on his outlook for 2024. You can find our conversation here, where he speaks to the role of private equity, regulation and the IPO market in the dealmaking comeback.

Hedge Fund Fortunes

Everywhere you look, there's a divergence of fates.

You may remember in 2022, Citadel catapulted past Bridgewater to become the most profitable hedge fund in the world. In the next year, Citadel notched one of the best performances across Wall Street, while Bridgewater's flagship fund fell more than 7%.

Citadel's main hedge fund jumped more than 15% last year. Some of its big multi-strategy rivals also inked gains -- with DE Shaw jumping nearly 10% and Millennium even more than that. AQR, coming off a record year in 2022, advanced another 18.5% last year. Michael Platt's BlueCrest gained 20.3% last year in another year of gains -- though that gain was "muted by his own lofty standards," as my colleague Nishant Kumar reports.

Tiger Global, which had a two year losing streak, jumped 29% last year, Bloomberg's Hema Parmar reports. But remember, the firm is a tech heavy investor, and the Nasdaq 100 surged more than 50% in 2023. Many of these hedge funds are trailing the broader market. (Most investors don't put money into hedge funds to beat the market anyway, though you can argue that the definition of a hedge fund is largely in flux.)

In another reversal of fortunes, macro trader Said Haidar is overhauling his portfolio after slumping more than 43%, the biggest annual loss since starting to trade more than two decades ago. This is a fund that surged 193% a year before.

It's why we watch the hedge fund universe so closely. Humbling, really, how fast a fortune can change.

And it's a big year for all the changing fortunes, we'll be watching closely. To find this newsletter online, you can do that here -- and to sign up for Bw Daily, for which I write every Friday, you can do that here. Next week, investors will have their eyes on whether the SEC will approve the first spot Bitcoin ETF. And come next Friday, there's a flurry of big bank earnings, where we get the full year picture and the 2024 lookahead from the largest firms on Wall Street. As you know, I start wicked early those days. So tune into Bloomberg Television, and send tips and opinions to [email protected].