Welcome to How Leaders Lead, where every week you get to listen in while I interview some of the very best leaders in the world. I break down the key learning so that by the end of the episode, you'll have something simple you can apply as you develop into a better leader. That's what this podcast is all about. Today's guest is James Gorman, the Chairman and CEO of Morgan Stanley. Now James is an Aussie and in Australia, there's something known as the Tall Po ppy Syndrome. Now in a field of poppies, there's always one or two that stand out from the rest and it disrupts the beauty of the field. And for that reason, they'll snip off those poppies. They trim them down so that they don't stand out amongst the others. Now, what's really interesting is that in the Australian culture, Australians do this with one another. As someone starts to succeed and begin to think too highly of themselves, they help to keep each other grounded. And it's important for all of us as leaders to know who keeps us grounded. Humility is vital if we want our success to be sustainable. I think you're going to get a lot out of this conversation today, so let's get right at it. Here's my conversation with my friend and soon to be yours, James Gorman. James, thanks so much for taking the time to join us. David, it's great to be here and I'm honored to be one of your guests. I've watched and listened to the podcast over the years and you've done an amazing job. Well, thank you very much. And you know, James, speaking of amazing jobs, you took over at Morgan Stanley in 2010. Tell us about the Morgan Stanley you took over and the Morgan Stanley today. Well, it's been a wild 12 years 2010. I became co-president, writers of financial crisis was happening. We had a huge trading blow, which cost us. Think of this. We lost a third of our total capital that we'd built up over about 70 years. We lost on one trade. So I sort of lived through the crisis and then my predecessor, John Mack, turned it over to me right after it. We were fragile, honestly. A lot of people betting against our survival, the stock got down to a little over $6 and the first order was really just build some stability back into it and get rid of the dangerous stuff, build some stability and then figure out where to go from there. So, you know, and I'm sure we'll talk about some of the steps along the way, but it was a fascinating journey and I got to live it, which is kind of fun. That's not too much fun when you see your company almost go down the tubes like that. You know, how'd you keep yourself up during that period? It's a good question. It was hard. I walk a lot of the way to work and home. I live in Upper East Side Manhattan. I used to live on Ellev downtown and I was walking home at night a lot and I started just throwing up on the street. Throwing up. You're kidding me. Throwing up. And I thought at the time that's weird. Like I'm not feeling stressed. I'm very calm guy, but clearly my body and my mind weren't in the same place. And something inside me was saying, this is enormous pressure and we in the stomach don't like it. So I took it as a real lesson, started working out a lot, got very fit. I do a lot of rowing on the rowing machine and just got real balance back in. I mean, when you're under that much stress and, you know, we had 70,000 people, we could have, they and their families could have lost their income. The whole pride of Morgan Stanley since 1935 could have disappeared. And even though I didn't feel the stress, like I didn't have evidence of it in my own mind, I had clear evidence of it physically. And I think recognizing that, recognizing like you and these jobs, they never stop. It's like standing on the shoreline and you know, you look at the waves and you think maybe if they could just stop once for a few minutes, never stops, the ocean never stops rolling. These jobs never stop, depression never stops. So you got to make adjustments. So you got to make mental and physical adjustments. If you're going to stay in it for a long time, which fortunately I've been able to do. Yeah, you've definitely had a great run in over a decade, which is fantastic. And that's one heck of a story, James. I really appreciate you sharing that. And I really can't wait to get into how you go about leading because, you know, you've got such a great reputation for being a great leader. But I'm sure everybody knows by now, James, that you're from Australia. Tell us something about Australia that you would only know if you were an A ussie. Oh man, you know, people worry about all the poisonous things. I mean, my grandfather's property, we had flesh-eating spiders and the toilet was outside. There wasn't an inside toilet. There was an outside shed. You had to go out in the dark with a little flashlight. And man, were you worried about those spiders? And then you come back and we slept in bunk beds with my siblings. A lot of us. And we used to hit the bunk bed with a cricket bat every night before we got in , in case there was a snake in there. And you know, my dad, when he was growing up, he worked on the property up there, his homeschooled. And they rode around, you know, and horses rounding the sheep up and everything . And they had to, as kids, had a little bit of string tied to their belt. And on the end of the string, he had a razor blade. So if he got bitten by a snake because they were so far in the outback, nobody could get to him, he had to cut it and suck the venom. That didn't happen. I don't think ever, maybe it happened once, but the reality is, point to me, telling you all this, that's sort of what people hear about, Crocodile Dundee and Steve Irwin and all this stuff. But the reality is, Australia is the most urban population in the world. More people live in cities, in Australia, than any other country in the world. So actually, those kinds of threats that all the tourism board talks about and everybody's fear flow up, they never happen, right? You got to be out there in the outback. Not many people are. So it's actually a very safe, very welcoming, very happy, very optimistic country. I love Australia is one of the places I love to visit the most and I love the people. And speaking of people, you did a lot in your family to increase the population of Australia. I understand that you were the seventh of 12 children in your family. When you think about it, James, how did that influence the kind of leader that you've become today? My mum had 12 kids and two died both from very different reasons at the age of four, coincidentally. So we really grew up as 10. Listen, I think what it teaches you, David, is you're not that special. You know, I mean, we live in a world where everybody's exceptional. I tell all the young analysts, I say, your parents have told you a whole life you're exceptional. I'm going to tell you not because I've had evidence that actually most adults, I know, are not exceptional. They've got exceptional qualities, but we're all flawed, right? Human beings. And I had proof positive of it because I had nine siblings. There's somebody who's smarter, somebody who's more athletic, somebody who's funnier, somebody who's better looking, somebody who's got better balance, somebody who's a better cook, somebody who dances better. Everybody's got something. And I think it brings with you a little humility when the whole world isn't focused on you. Now that said, I've got two children of my own, so they got a pretty good serving of their mother and father and the whole world focused on them and happily they've turned out to be great young adults. But I think in such a large family, my dad was, you know, he was an entrepreneur and engineer. He found his own little firm and, you know, he raised us all in a wonderful, happy lifestyle. But we, you learn to respect others a lot more. I think you're just, you're forced to. Otherwise, everybody spags you down. I imagine everyone in the world wanted to call you Jim when you were growing up . You know, for example, my last name is Novak now, but if I pronounced it the way out should be pronounced to be Novak, okay? But I just finally I gave it, but you've been able to maintain that integrity of being James, you know, I admire that because it's easy to do what I did to become a Novak when you're really a Novak. But anyway, tell us about how you kept your first name, James. Yeah, that's so funny because I got an email today from a guy, D. Jim, who I know pretty well, actually. My mother always wanted me to be James. That's a simple story. And you know, I kind of like the name and I followed it in Australia. They shorten everything. It's Jim, it's Slim Jim, it's Big Jim, it's Jimmy, it's, you know, three things . Everything's get shortened. It's the land of familiarity. You'll walk up to a total stranger and your objective is to be their friend. So formalities are not good. But you know, the other hand, I think you got to respect who you are. And this is who I am. Somebody doesn't like it. I care. It's my name. You know, it could be Berta, it could be Fred, but it's James. It's not a sore point. You know, a couple of my brothers still call me Jim. But if somebody asks me, I say it's actually James, you know. Well, I think your mom, she's stuck to her guns and that's great. So as you'd say in Australia, good on you, James, that's great. You know, when you look back and as a kid, what kind of jobs did you have? And did you learn anything significant from them that really shaped your perspective? Well, we always worked. And you know, my dad's rule was once you hit the age of 18, you supported yourself financially, which would be called, you know, cruelty to children these days. But basically, man, if you want to go to university, you better win a scholarship so that it pays for whatever fees were there. Otherwise, you're not going. If you didn't want to go to university, you want to do something else, that's fine, but you're going to support yourself. So he got a little softer with the younger ones in the run. My first job was in a funny, I haven't thought about this for probably 50 years , but it was in a local bidega, you know, milk bag, we call them, where they sell soft drinks and candy and stuff like that. And I'd stack empty soft drink bottles at the back of the shop. I worked as a caddy for my dad. He played golf and he had a rule, David, you'd appreciate this. He only paid me if he won. And I said, how does that work? He said, we're a team. I said, okay, so it was good. So I learned how to read parts. I learned how to be a good, you know, moral supporter because we're a team. My summer during university, I worked at a sheet metal factory welding. When I was a college, I paid for my college by, you know, I can't believe this, but it's true, I had actually three jobs. One every morning from 739.30, I lived in all male dormitories and I was one of the toilet cleaners. So we got paid $2.75 an hour to clean the toilets in a male dormitory. Not a great job. I worked on Friday, Saturday and Sunday night in a pub, pouring beers and, you know, working in the public bar, which was the rough end of the pub. And then the fun part was the music bar at the end. Different nights you go there. And then on Saturdays, I worked at a brokerage firm posting odd lot trades together on Saturday mornings from during the weeks brokerage. So I had a lot of jobs all the way through. And you know, we're in coach to do that. I mean, that's how you got money. We weren't going to be given any money. Yeah. Well, you got some major league life lessons there. You know, teamwork, every job has dignity, even if you're cleaning toilets, customer satisfaction with the bar. What's your big lessons? You know, you got to get a bend. Do your job. It's funny. I was in a restaurant recently and I was waiting for somebody and I had a drink at the bar waiting for them. Glass wine. I started talking to waitress, you know, the lady behind the bar. She said, have you ever done this kind of work? I said, actually, for five years, yeah, I was a barman three nights a week and she had no idea who I am. And I didn't obviously didn't talk about it. But I told her, I thought it was the single best way to learn how to deal with people. You deal with people that they're absolute best and they're absolute worst in a bar. And if you can deal with all of humanity in a bar, trust me, inside Wall Street , that's easy. As I understand it, James, you started out as a lawyer in Australia for four years, then you headed to the United States to go to Columbia Business School in New York. What was behind that decision to come to the U.S.? I was a lawyer for four years. I wasn't very good lawyer. I went to a good law school. Didn't do very well. Didn't work very hard. Didn't like it. You know, nothing gets lawyers. It just didn't ring my bell. My two elder sisters were lawyers and I could see people who loved it and what they did. And it wasn't me. And I thought, I've got to get into business, which is where I wanted to be, but very hard in Australia in those days, David, in the late '70s to move across professions. And I thought the way to deal was to go to Business School in America, there was one business school that just started in Sydney. But it was in its first year or two. So I thought, I'll try my chances, see if I can get into a school in America. And I got into Columbia. I was sort of astonished. I got in. I tell you something that probably is pretty wild fact now. I borrowed everything but $5,000, which I'd saved. So I don't know what my education and housing and everything cost, probably 40 or 50,000 those days in total. My interest rate was 24%. I went to the bank in Australia to borrow and I was unsecured. And he said, I'll lend you the money, the bank manager from a new bank called Bank of Melbourne, to start up Bank Bank then. It's gone belly up. I hope that's not a good omen. And he said, I'll lend you the money for three conditions. Number one, you get honors in your first year. And I thought, okay, that's fair. I'll work really hard. Give that a chance. Number two, you need to have a job lined up for the summer before you leave Australia. So that was it. He wanted to get some of his money back. And I said, fine, I'll do that. And he said, number three, the interest rate we're going to charge you is 24%. And he said, do you still want to do it? And he said, if you don't pay the 24% or you don't get the job lined up or you don't get honors, we're not lending you the second year. And I said, I thought I'd died and gone to heaven. Are you kidding? I was going to go to America. How good was this? Worst cases, I'd go back and be a lawyer and pay it off over a decade or something. How lucky was I? I said, of course, this is great. He just laughed. That's great. You know, then you ended up at McKinsey, the renowned consulting firm. And as I understand it, here you ran the financial services practice. When you look back at McKinsey, was there a specific thing that you did there that accelerated your career trajectory? What was your big break there? I did a lot of work in different industries. I did work for, you know, Cabri Shweps in Europe, did some work for hydro electricity. I did work in pharmaceuticals, but then I focused on financials for a very simple calculation. Most financial institutions were headquartered in New York. So I figured I'd travel less. It was a lifestyle decision, which got me into finance. It wasn't a desire. But I think the break I had, there are a lot of people a lot smarter at McKin sey and I'm. It's full of really brainy people. But where I could connect with, I could see from the client's perspective probably better than many, what it would take to get stuff done. A lot of people had great ideas, but they were so obsessed with the quality of the thinking and the analytics. I mean, you know this as a businessman. Somebody can bring you in, one of your division heads, a great piece of analysis around some new business they want to buy, some edition or some expansion. And you're thinking, yeah, but can they get it done? Are they good? Can they make it work? Can they implement it right? Do they understand the culture of the new organization? So you quickly move from the analytics into the reality of execution. And that's where most of the client's head is around. They weren't wowed by the beauty of the analysis. They were wowed by, could it actually change the performance of the business? So I had that kind of mindset pretty early. It wasn't, it's just who I am. And it's probably why I could transition into business management better than some consultants who can't leave that hyper analytic personality. And at some point you've got to make the transition into can you be pragmatic, get stuff done? And I was pretty good at that, which I think made clients just, I got along better with clients for that. I first met you when Ron Daniel, who was the head of McKinsey, introduced me to you. And we had a good time playing some golf and it was really fun getting to know you. And you know, at that time, James, you were the head of a brokerage division of Merrill Lynch. And then I thought it was really great. You had this great relationship with Ron Daniel, yet you left the firm, you know, and here he is taking you to a golf course that everybody would love to go to. What happened there was I'd been doing a lot of work for Merrill Lynch and Dave Kamansky, who sadly recently passed and I was very honored to give one of the eulogies there, had been sort of my mentor or my father figure. And one day I did some presentation on the impact of the internet and online trading into Merrill's business. And I took the view passionately that it would be additive, not destructive. It wouldn't replace it, but people would deal both with human beings and with their machines. By the way, I was right about that and roll the tape for 30 years. We just bought e-trade as proof positive. We want the two things together. Anyway, David called me, do his place at the Greenbrier, we were saying, and he said, you're too passionate in there. You can't do this for us anymore. I said, David, that's terrible. I mean, I care about it and I was just trying to put my best foot forward. What I think the right answer is he said, you're missing the point. You've now crossed the bridge, you're on our side of the fence. I said, what are you talking about? He said, you work for us now. I said, really? That's great. What am I going to do? He said, it doesn't matter. He said, run marketing. I said, but marketing's done in the businesses. He said, you're missing the point again. I just want you on the team. We shook hands, no contract, no money, no job description, pure trust. When I came in to run marketing, I had one person working for me, one employee. And she was my assistant. Then I heard this young woman, lovely young woman who went to Harvard, brilliant Karen Meyer as a part-time reader. I had to read everything for me for three days a week and summarize it and help me think through all the changes that were going on in the world. That was my job for a year. But it was all on trust with David. You shook his hand. That's all I needed. That's amazing. When you think back at your Merrill Lynch days, what was the biggest challenge you faced in the roles that you took on there? And how did you handle it? I had a complicated time there. I joined as head of marketing. I then ran the field organization. Here's a McKinsey guy with a funny accent who wears navy suits, talking to 10, 000 brokers from Topeka and Little Rock and Amarillo and great towns around America. And there's a little bit of organ rejection. What are you going to do? Show us some charts. I did in the early days, I put charts up. Boy, was I stupid. And I finally realized that you don't speak to people through analysis. You speak through their heart and you get them to understand something, then they'll follow you. And I think I took a long time to adjust to that, David, if I'm honest about it . And then I had various jobs there, I ran research and I was in a role where I felt I'd been demoted. It actually was in the newspaper that morning and Morgan Stanley called me when they read in the newspaper. And I took the call. I never would have taken a call. Oh, that's interesting because I was going to ask you what was on your mind when you went to run a wealth management of Morgan. That was a big change. Well, John called me John Mack and he had lunch with me and they knew that my role had changed at Merrill. I felt whatever my interpretation was, I was done there and different people disagree, but didn't really matter. And John said to me, we've got this broken retail business called Dean Whitter, you've run the best business in the world, which is Merrill Lynch. What about coming and running ours? And he said, but first can it be fixed or should we just sell it? I said, well, John, you've got three other companies doing exactly what you're doing, making three times as much money as you're making. So it obviously can be fixed. It just hasn't been run well. I said, but in two years time, we got a different decision. You need to decide then having fixed it. It needs to get to scale. So it's got to get bigger. You either sell or you buy one of those competitors. But for two years, I will do the job. I promise you will fix this business. If you sell it, I'll go. If you buy another company and you want that leader to take over, I'm fine with that too. I'll give you two good years, but we'll get it done. And that's what we set off to do. You did a great job doing that, obviously. And when was there an aha moment for you when you started to think about the idea of becoming the CEO of Morgan Stanley and actually believing that you were the guy for the job? I certainly didn't go to Morgan Stanley expecting to be CEO. I was very clear with people about that. And I think that actually helped a lot because you weren't going to the outside guy coming in to take the job. Back to the Dean Witter story, we actually bought another business two years in called Smith Barney, which was a home run, probably career-defining moment. And I think then I began to realize I had a strategy from Morgan Stanley right from day one that it needed more balance. You needed more stable businesses to go with the very volatile trading stuff. I did a presentation of the board about 20 days into the job and it basically said it rated the business along very poor, poor and okay, the business has runny and said, here are all the assessments and here's how we're going to fix it. And when we fixed it, I think the board started saying, if this guy can handle risk management in the trading, the complicated stuff, maybe he's a contender. It just became apparent over time that I could probably handle the job. And then I started to think, well, it might end up this way, but I didn't go there David too. I never tried to do the job ahead of the job I have. I've never tried to plan for the next job. I've just assumed you do your job really well. Reasonable people will recognize that and you'll be rewarded. You mentioned Smith Barney is being a career defining moment for you. And I remember this, you know, I think you spent around $3 billion to acquire Smith Barney. Maybe more, I'm not exactly sure of that number, but you know, you did it in the midst of the financial crisis. That took a lot of gumption, didn't it? Well, you know, it was an interesting problem we had. Smith Barney was owned by Citibank at the time. And we'd just come out of the financial crisis. And I was co-president and I was absolutely positive. We couldn't survive another crisis if we didn't change. It was about a month after we nearly went on it, maybe not even. It was pre-Thanksgiving and we'd nearly gone under. I think it was October 8th when in John's office and I said, I've got an idea. I think we should approach Citibank. They don't like this business. It's not doing well. We fixed our equivalent. We could fix theirs, we'll get scale and they can mark it up and get the equity capital that they get from marking up. And I think we could help them by doing a staggered acquisition over many years where they would share in the upside. So that was the idea. It came literally three weeks after we nearly went under. And we went to Citibank and they agreed. We ended up probably paid in total because we bought it in stumps and the first piece was about $3 billion. That's right. I would say we probably paid maybe $6 billion in total. What we bought then is probably worth $50 billion. That's a nice career to finding moment. It was pretty cool. And because of the benefit of putting it with something that gave it the scale, then we turned it around and so on. But if you face reality and you know it because you're a pragmatist, I'm a prag matist and if you're pragmatic, if you see your business nearly disappear and you don't change, you just rolled the biggest dice of your life. Because if another crisis comes, you're dead. I said to the board, to John, to everybody, we have the luxury of being forced to do something. Others have what I call tyranny of success. They get through the crisis really well. So they think they don't need to change. But the world changed. Irrespective of how you got through it, it still changed. We didn't have that option. So we went hard at changing the place. And it's easy if you've got a gun to the back of your head, which I thought we did. You mentioned a little bit earlier, you made another big acquisition with e Trade. Tell me how you took your team through that process of making another big move like that. How do you get an organization or the right people aligned in a place like Morgan Stanley to make a big move to buy an eTrade? We bought eTrade. Then we bought a company called Eaton Vance, both during COVID, spent about $20 billion on them last year. I've become convinced that while the internet and online trading and companies like Robin Hood and Schwab, etc., weren't going to kill our business, they're eating into it. And our ability to build a digital platform and a digital bank was going to take a lot longer than if we could buy one. There were really only three that were of size that were worth buying or merging with. They were Schwab, a meritrade, an eTrade. And one morning, a most amazing thing happened. Two of them decided to merge. So the two likely bidders for eTrade just disappeared. I walked into our CFO's office. I said, "You know what we're going to do?" He said, "Well, I said, "We're going to buy eTrade." He said, "You're nuts. What are you talking about? We're in the middle of COVID." I said, "You see the news this morning?" He said, "Yeah, a meritrade in Trump merged." I said, "This is the best news we could possibly have had." And two competitors just got taken off the field. Absolutely. Opportunity knocked, right? You got to go for it. You know, we're in COVID. We're under stress and everything. But when the moment hits, you've got to go for it. But it was based on the strategy of we needed to provide for the next hundred years world class digital capability and something called workplace. We serve hundreds, thousands of companies for their employee stock plans through eTrade and through our business. We could combine that. Once we explained the logic to the team, everybody was supportive. But not everybody arrives at it through the same filters. Some people start with, "Well, it's going to be expensive." And you know, he said, "Yeah? You ever bought a house that was a really, really good house, really cheap?" "No." "Okay. You got to pay for quality." He said, "It's going to be difficult to integrate." I said, "Yes, it would be better if we didn't have COVID going on, but we do." So we went through a series of sort of the, everybody's got their own visceral reasons why things can't get done. And you've got to calmly and gently just explain why yes, it's a challenge, legitimize the feelings because they're real. But don't let them knock you off course. Now, if you're wrong, ultimately you lose your job. That's part of the game. That's right. I take that risk all day long. It's like getting your loan to go to college. You got to back yourself. I'm convinced, you know, we know these businesses really well. And when you have that kind of information advantage, if you don't act on it, then you shouldn't be in your job. One thing that I've learned in my research is that I understand you run the company with three pieces of paper. Yeah. Explain that. One is every night before I go to bed, I write down the daily numbers for our businesses. And I do it by hand because it gives me a visceral tactile feel for how we're doing. And I don't know if you're the same way, but I see patterns in numbers. And I've done this nearly 3,000 nights, never missed a night. I can tell you on the fourth quarter of 2018, on the third of December, which was day 46 on the quarter, we made 72.7 million, now wealth management business, 77 million in trading, and I cumulary revenues were 3.12 billion on that day, and so on. So that's one way of just staying day to day. The second cheat I also happen to have here because I'm working on it, I write down 10 things that I want to get done because my bum is in the seat. Long as Santa's going to do great this year, I'm sure of it, whether I'm in the job or not. My job is to make it do even better because I'm in the job. So certain things, whether it's sell businesses, integrate deals, develop succession plans for my management, work on our dividends, I put in here past my annual fitness test . Some of them are very personal goals. In the third sheet, which I won't pull out, but it's in here, it's very short, it just says what our strategy is over the next five, 10 years. So I'm trying to toggle between David, 10 year view of the company, one year get stuff done and daily make some money. And that's any executives challenge is how do you stay sort of visionary but real. And it's those three sheets. It just works for me. I mean, everybody's got different tools. Does it help you drive your decision-making, James? Does it help you say what you say yes to, what you say no to? Absolutely. I come back to some idea comes up. We should buy XYZ bank and I'll make it up Brazil. I'll say, okay, go back to the strategy sheet. Does it fit? If not, don't do it or change your strategy. If I see where our numbers are trailing in any given quarter, it changes the tonality of how you talk about the business. And in any month, I'm looking at my 10 things to get done. And if we haven't got them done and I'm in December, I'm working hard to get those things over the finish line. I like completing the task in front of me. I find it very useful. But again, all our finance guys come in and they look at these sheets of numbers that are right down, thousands of numbers. And they think I'm completely nuts. And I probably am a bit in that regard. But it's what works for me. So it works. Everybody's got to find what works for them. What's the biggest thing that you've said no to, that you wish you would have said yes to as it relates to the business? Well, we made a mistake. We sold a business. I don't know. It's not exactly saying no to it, but we sold a company we should have kept an asset manager could van camp and several years ago. So I wish we hadn't done that, frankly. That was a mistake, I think. It's nothing that I can see, obviously, that we've said no to that we shouldn't . I probably, if I fault myself, I think I was a little slow in picking up on how important we needed to invest in innovative technologies. I don't come from that kind of background. That's a clear deficit in my skills, because in this day and age, all CEOs should have pretty strong technology chops. I don't have them. You know, as a different generation and I'm a lawyer and consultant and blah, blah, blah. So I think I probably didn't have the sense of urgency I should have had when people wanted to invest more. We've caught up now. We've done it and we've got some fabulous, more visionary people now driving, which is great. I had the same thing happen to young brands. That's my one thing I look back on and wish I would have been better at. James, you happen to be one of the nicest guys I know. But how's a guy like you not only survive, but you've really thrived in what is viewed to be a doggy dog business, the whole financial services? That's a tough business. Firstly, thank you. It's very kind. You have to have a set of beliefs. You've got to be willing to listen and to be moved and to be influenced, but you've got to have a fundamental view and I have a very strong fundamental view about how to run this particular company during this decade. I've had some very tough conversations. I'd said publicly once it got me a lot of grief on Wall Street, but outside Wall Street, I think probably everybody cheered. They said if bankers didn't like their bonuses, this is when we're making basically no money and people whinging about how much bonuses we paid. Listen, David, when we make great years, I'm prepared to pay people huge amounts of money and we do and they deserve it. But when we make no money, no. I said they didn't like it, they could leave. Well, a guy came up to me, he was in Dubois and he came up to me and said, "You know, everybody in New York is laughing at you." I said, "I don't care. Firstly, we pay them in stock and the stock's going down." You'd think they want the stock to go up because they've got a lot of equity tied up. Secondly, if we don't do that, our shareholders are going to pick up their bat on ball and go home. We've got nothing. Sometimes you've just got to say the truth that they don't like it or find if I screw up and the bottles throw me up, that's fine. I'm not going to pretend to make people happy. Listen, when we do great, we pay people great and God bless them. They do phenomenal jobs for their clients. They help companies like your old company merge by businesses, raise capital, hedge currency risk, and so on and provide financial advice to the individuals. But when we don't do great, you don't pretend you did great. The old axiom heads I win tells you lose. It doesn't work. When you think about being a CEO, what have you had to give up in this season of your life to be a successful CEO? What are you not willing to give up? You can't have your health, your kids, your marriage, your friends, your job, your hobbies, your interests, all doing well. At any point in your life, something's taken away from something else. To me, my relationship with my kids has been the most important thing. Thankfully, I have a fabulous relationship with both of them, both young adults . I spend less time with my friends than I would like. Your health is very important. I exercise a lot. I think you just can't have it all. I've seen enough where I know a lot of things I don't need to do, so I've probably got more balance in my life. But these are all encompassing. It never stops. It's like standing on the ocean and you're watching the waves come in and you want them to stop for a little bit and they just don't stop. You have to accept that and somehow you have to remove yourself from standing on the shoreline and find a quiet place under a quiet tree and give your mind and your body a time to reflect and to think. For me, I like doing that on the golf course. I like doing it walking on the beach. I like doing it swimming. I like doing it rowing. I do it physically, mostly, not mentally or through meditation. I probably should do some meditation. Everybody tells me how great it is. I think I probably should. But I definitely give myself space. I shut this door behind me. No problem. Everybody thinks I'm in here furiously working. Sometimes I'm just staring out the window because I want the brain to have a chance to recreate. That's how we stay on edge. But listen, in life, somebody said to me a while ago, "You must be under a lot of stress." This was after the financial crisis. I said, "I've got some stress, but let me tell you what real stress is." Real stress is a guy my age then, 54, somewhere around there who just lost his job. And he's not likely to get another job. I said, "That's real stress. If I'm claiming calling stress out when I'm the CEO of a great public company, shame on me. It's hard, but fair. Other people have much bigger challenges. I've been very lucky." You know, shifting gears, you were one of the first to take a stand on the people needing to come back to the office and work. What made you go public with that belief? Were you surprised by the reaction? You know, it's funny. I made it in a conference. It was actually an internal conference that was open to the media. And they picked up part of my comments. They didn't pick them up all just like they did recently when I said I was wrong about when I thought COVID would end. They all said, "Well, I was wrong about bringing people back in the office." But the media would do what it does. You got to have a thick skin and deal with that. But I had a fundamental view that we do a great disservice to the young kids we hire if we let them have their whole careers remotely. The reason I've got to have the skills I've got is largely because people like Dave Kymanski and others that I could watch and learn and listen from. And you know what we told our organization, David, is take 0, 1 and 5 off the table, meaning you won't be in the office zero days a week, one day a week, or likely five days a week, unless you choose to be. But you will be three or four days a week. I felt like it was a statement of values around what's the right thing to do to help people learn so they can serve our clients properly. And I don't believe being isolated 100% of the time is good for anybody's mental health. Now we've got some parts of our company. Some of the tech functions can do that. So I, you know, surprise the way the media picked it up because I had a very quotable quote in there. I said, "If you can go to a restaurant, you can go to the office." Well, that's true. That's the sort of thing my dad would say. And you know, people picked it up because it makes common sense. But the heat is hate you and the like is like you. And you're not going to please everybody. It's part of the deal. You know, I'll tell you one group that has been very pleased by your performance and your company's performance or your investors. Your stock has done terrific under your tenure and you're on an incredible run. You're up 34% in 2020, up 40% in 2021. How do you keep the pressure on performance? You know, it's something that I think about almost every day. But part of it is I have a clear succession plan. I believe in succession as a very orderly discipline process. So I have a timeframe and we have a plan. But as long as I'm in the job and staying the job, I have an obligation to do it to the best of my ability as though it was day one. I could coast for a bit here. There's no question I could. I mean, I know what I'm doing honestly pretty well. But the minute you start coasting, I think it eats into the whole energy of the place. And you've got to show energy. So it's part of the deal. You don't get the good bits and not the bad bits in the job. You get all the bits. And you know, my plan is to step down in a few years and I'll do that because I think it's right for our organization. But until I do that, I'm going to be 100% motivated. And the day I'm not, I have flameness enough with myself and with the board to say to them, you know what, I just, I don't have the energy for it. But right now I definitely have the energy. As a leader, it's pretty obvious just listening to you that you're thick skin ned. You address conflict head on. You know, in fact, I understand you have a particular routine you follow. If you ever find out there's going to be a bit of news out on Morgan Stanley and you actually make a few phone calls to the people that are affected about. Tell us, tell us about that process and why you do it. Well, I try and think always about who's the unintended audience. You're intended audience, so you have good earnings or bad earnings. Your intended audience is the investors in earnings call, which you know you live through this for a long period of time. And also the employees communicating well and then hopefully some clients. The unintended audience is the media will pick up the story. The regulators will pick up the story. The political community will pick up the story. In our businesses, the regulator bank, the regulators are a big deal. I never want our five key regulators to be surprised. So whenever I know that there's something that's big that's going to be in the paper the next day, I'm going to call them in advance and tell them what it is, give them my, not spin on it, my read and they can judge for themselves obviously, but give them an honest call. And I call them the night before every earnings and I've done it for 12 years. I call the head of the Fed who covers supervision, the vice chairman, the head of the OCC, the head of the New York Fed, the head of the SEC and the head of the FDIC. And I've called them each every quarter for 12 years. And I've called them many times between quarters when stuff has happened. I felt they should not. The calls David maybe last three minutes, five minutes. I'll say, here's what's going to happen. Here's what the world's going to say. This is my read of it. If you have any questions, call me back. I've only had one regulator in all that time, hasn't wanted to take the calls. Every other one has wanted to take them. One just thought there wasn't any point because we're doing fine. But I think it also opens up a dialogue where you're dealing with the human being. You get to know them over a long period of time through the ups and through the downs. I think it develops a level of trust that what you're saying is real because they see a play out over many years. So I've always done it and I don't regret it. It was just something that came to me very early in my tenure. I thought these folks probably worry when bad stuff happens about Morgan Stanley. And here you are, you've climbed the top of the mountain. I have to ask you, what's it like when you get together now with your brothers and sisters in Australia? Do you get a lot of ribbing from them on being the big CEO? Oh, we have so much fun. I mean, my dad gave us all an IQ test when we were kids and he posted the results on the living room door. You imagine 10 of you ranked one through 10 based on his IQ test that he found in some book. And next to each one, he had what your probable career expectation would be. The mind was middle management. So it is 90th birthday. I was asked to propose a toast to him and I said, Dad, remember that you gave us this test? When I was like 12, my prediction was middle management. I'm happy that it worked out okay. But my siblings joke, you know, they're always joking with me. Like we'd just park the plane, you'd park it on the front lawn. All this kind of stuff here's the big swinging. He's going to be, it's good. Somebody's paying for dinner tonight. I'm very close to them. They're all different personalities and they've had their own successes in very different ways. You know, one of them is a stand up comic for a long time. Sister was a top judge in Australia. Another one is a scientist and sort of medical innovator. Well, it sounds like they can keep you humble. I mean, they're pretty good at that. I understand that as an Australian, they have this thing called the tall poppy syndrome. Tell us about that one. Well, it's like if you look at a field of poppies, the view gets spoiled a bit if there's one sticking up. So you chop its head off to keep the view, everything looking smooth. That's various strain culture. It's very egalitarian. Everybody's very down to earth. And the more successful you are, it's sort of the reverse of the US. People in the US are successful as long as they're decent people are admired and people want to emulate that. In Australia, still to this day, it's moderated a bit, but the more successful you are, the less successful you have to behave. And they want to pull you down. You know, James, this has been so much fun. And I want to have some more with the lightning round of Q and A with you. Okay. Are you up for this? Sure. I better get some water. Okay. All right. The three words that best describe you. I would say probably more in this context, strategic, pragmatic and something like uncluttered. But single hardest thing about being CEO. Oh, the, the, the, uh, the, uh, the relan, it never stops. If you could be one person for a day beside yourself, who would it be and why? I'd probably be my grandfather who went into the up back and he put fences down around 40,000 acres of land that nobody had lived on before. The Aboriginal said had obviously lived on the land over, you know, thousands of years, but had never been settled and just find out what was going through his mind. He went to the middle of nowhere and, you know, I'm two generations later sitting at the top of a Wall Street firm. I mean, it's, it's amazing. He gave us that. He was the entrepreneur. Yeah. What's your biggest pet peeve? That's easy. Sitting next to kitchen doors in restaurants. What's something about you? Few people would know. I once went to a medical clinic when I was, um, turned 50 to do a full test and my pulse was 30. I'm very low pulse. Do you have any hidden talents? I don't know. I played Texas Hold 'em Poker since I was 14 long before it became famous when they used to play the old beignons before it became the World Series. So I played, I took six months off on Garden Leaf between Merrill Lynch and Morgan Stanley and I played professional poker tournaments for a lot of that in Vegas and Atlantic City. What's the number one place you'd recommend visiting in Australia and why? Following some of your interest, Roy Melbourne Golf Course, but for the person who's not a golfer, probably the great ocean road on the Southern Coast. It's like the Carmel 70 Mile Drive, but more rugged and dangerous surf if you 're not a good swimmer. You've got to be a good swimmer, but it's beautiful. You know, James, I have to ask you, you know, from my experience, Australians are great internationalists. In our company, the Aussies were the easiest to adapt wherever they went. They loved the travel. They loved other cultures. You know, do you think that's true or? Oh, definitely. I think part of it is small country. It's sort of the Dutch South Africa, you know, kind of thing that you're a small country, so you want to get out and see the world. The Australians are, because they've got a very, in general, a very down-a- worth style and personality, this is the positive of the tall poppy syndrome. They can go into any environment and not feel like they've got to show people who they are or push their culture. The primary objective is to have fun wherever you first land. And that's a pretty good place. Most people respond to somebody who's arrived to have fun rather than to show off or big note or do that. Plus, they're pretty physical people. They're pretty athletic. So they'll have a go at stuff, have a bit of a laugh. It's a combination of those things, but generally, you know, Aussies travel pretty well. What would be the single most important bit of advice you would give to an aspiring leader, who doesn't want to make big things happen in their company or for themselves? If they're senior people, it's got a two-part toward. Every business faces some sort of catastrophic risk, right? Whatever industry you're in, Aussies liquidity, you'll have to figure out a way to mitigate that risk, because if that event happens, it can't bring you down. So whatever it is, we carry way more liquidity than we should have. But we guarantee in the worst day that possibly comes in the next 50 years, we 're going to be fine. So manage for catastrophic risk. On the other hand, you have to manage aggressively when opportunities come. And most people, David, don't like holding those two counterbalancing conflicting thoughts in the head, be ultra conservative about something and ultra aggressive. You know, I've tried to make my career around when I see opportunities. It's like, if I've got the cards, I'm all in. I'm really aggressive. And I will bet a lot of anything on something where I think I have a huge information advantage on the market. We know more about our business than anybody does. So let's take that knowledge and invest behind the pieces that are going to make us great. On the other hand, let's be modest enough to know bad stuff happens. And the numbers of times in my career, I've heard somebody say, this has never happened before. Well, once upon a time, everything never happened before, right? So you've got to manage for that really bad thing happening. And that's the tension. Keep the defense and the offense going at the same time. And I love that challenge. It's fun. If people can do that and lead with authenticity, then I think they've got to shut it really making a success of it. James, I know you have a son and you also have a daughter. How is having a daughter really affected how you look at diversity and family in the workplace? My daughter's a musician and an artist and extremely creative. And my son's sort of the opposite. He's an analytic kind of guy. I think just respecting people's differences, seeing your kids grow up and have very different skills, different personalities is really rewarding because it teaches you the diversity of thought and personality that you can have even in your own family. But I just called somebody today about a young woman who's an engineering candidate. And she's a quiet personality. And I called somebody who worked with me years ago who's now a very senior executive, one of the big tech firms. And I said, this is a young woman who deserves a real shot. She's world-class. But is she going to two-to-horn? No. Is she going to have the smoothest interview? Maybe not. But you need young women like this and you need to celebrate them. The woman I called and she herself is an engineering graduate from many years ago, which is why I called her. And I like trying to help people break through and have opportunities when the cards are a little stacked against. And with my kids, I think the other thing, and you know, as a parent and I had that wonderful experience listening to your daughter interviewing Indra Nui, I think as a parent, you just want to celebrate them and their successes, but also make them real about the fact the world isn't not everything goes in a straight line. You know, I started out this conversation with asking you what Morgan Stanley was like when you first became CEO. And we kind of walked through a lot of the things that's happened while you've been CEO. Describe the Morgan Stanley today and what's your most excited about in the future? The most exciting thing to me is how proud our team is and our alumni. We do a survey every year. David, I'd only have one question on it. In fact, I insisted they put this question first. Are you proud to work in? 92% of our employees said yes. And about 6% were neutral. A couple said no. We've built a mousetrap that hasn't been built before. We've got a top three global investment bank. It's very hard to build global trading businesses now to being Hong Kong, being Brazil, to being Mexico, to being China, to be, you know, it's just hard. It's got a motor around it. And we're managing on the other half in wealth and asset management, six and a half trillion dollars. We're top three in the world and ours are all fee-based stuff. So it's the best revenue business in the world. I think this thing will go for 100 years. So we've just got to keep finding ways to stimulate growth across that platform , not get complacent. And part of that is me getting out of the room to let the next generation have a go at it who can bring that growth and energy. But I'm extremely excited. I think the place is in temperamentally and cultural. I think it's in great shape. Financially, we've had three consecutive record years in a row. We've put on about 140 billion in market cap in the last decade. But none of that matters if you can't keep the culture going and keep the pride in the people and make sure they do the right thing. Couldn't agree more. James, I've had the good fortune to be your partner on the golf course. And I don't think I've ever played with anyone who's more competitive yet so positive and encouraging. You are. I know you're bringing all those skills to Morgan Stanley and, you know, you talk about you got to get out of the way so other people can come in. I don't think any shareholders think that's really a big idea. You know, keep up the great work. You should be proud of yourself because people are proud to work at Morgan Stanley and that flows from the top. Listen, these are great privileges if you get one of these jobs. I've loved doing this with you. I've read your stuff. You're an amazing leader. You know, not many people could do this. Both the range of people you brought onto this podcast is incredible. And you know, and I've loved playing golf with you. We've had some fun out there and we've competed hard. You're a better golfer than I am. But that's why they give us handicaps. I'll take you any day, my friend. Thank you very much, James. I appreciate it. Great to see you, David. Well being from Australia has really served James well. It's given him the perspective that no one person is greater than another. And I couldn't agree more. The way how I stay grounded and practice humility is I remind myself of this little saying, "Don't look up. Don't look down. Always look straight ahead when you're dealing with people." Because here's the thing, everyone deserves to be treated with dignity and respect. And just because we may be leaders, just because we have more responsibility and power, that doesn't mean that we're better than anyone else. So let me give you a little coaching. Here's what I want you to do this week. Think about who's in your inner circle. Now who are the people that will call you out if you're not being humble or if you're not treating someone with the respect they deserve? Well, I hope I always treat people with respect and I do my best to stay humble . But for me, it's my wife, Wendy, my daughter, Ashley. And when I was running young brands, I built relationships with people at every level of the organization that I could count on to give me the true skinny. And these are the people I would lean on. They kept me humble. They made sure I stayed grounded. And as you grow and influences a leader, you'll need a core group of people you can lean on too. Because humility and treating others well is what will allow you to be successful for years and years to come. So do you want to know how leaders lead? What we learned today is the great leaders value those who keep them grounded. Thanks again for tuning in to another episode of How Leaders Lead, where every Thursday you get to listen in while I interview some of the very best leaders in the world. I make it a point to give you something simple on each episode that you can apply to your business so that you will become the best leader you can be. I'll see you next week. [BLANK_AUDIO] [ Silence ]