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The transcript from this week’s, MiB: Henry Cornell, Cornell Capital, is below.

You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

 

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ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I really have an extra special guest. Henry Cornell is a rock star in the world of merchant banking and private equity. He currently runs about $3 billion at Cornell Capital. He is the guy who effectively built out Goldman Sachs Merchant Banking Division both in Asia and the U.S. He’s got an incredible history of being a successful investor in a number of different areas, incredibly knowledgeable about the sort of private equity that has generated really solid returns without taking a lot of risk.

I know when we think about private equity, we sort of have a tendency to think about the wacky LBOs, the way we just saddle a company with a lot of debt and then eventually die. This is not that sort of merchant banking. This is not that sort of private equity.

This is building a portfolio of companies, getting them capital and taking already solid working companies and making them that much better. And when you hear some of the names he’s been involved with, you will really understand this. If you are at all interested in private equity, in finance, in global investing, you are going to find this conversation to be absolutely fascinating.

So, with no further ado, my conversation with Henry Cornell.

MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My extra special guest this week is Henry Cornell. He is the founder of Cornell Capital. Previously, he was one of the original architects of Goldman Sachs Merchant Banking Division. He is a trustee for the Navy SEAL Foundation as well as a trustee for the Whitney Museum of Art and the Asia Society.

Previously, he was chairman of the Citizens Committee of New York City, Henry Cornell, welcome to Bloomberg.

HENRY CORNELL, FOUNDER, CORNELL CAPITAL: Well, thank you, Barry. Very nice to be here.

RITHOLTZ: I’m intrigued by your background, somewhat. I, too, am an attorney who is now reformed and working in finance. You’re at Davis Polk before joining Goldman Sachs. How did that transition from attorney to investment banker come about?

CORNELL: Well, I thought, frankly, the hand of God had come down and touched me when I got the job at Davis Polk. I went to a small law school and I was the first one that ever got there and I couldn’t believe my good fortune. They were kind and sent me to London for a while and had me doing lots stuff in New York.

But my last review there, they said you know you’re the lawyer, not the banker on the deal, and that set off a bell in my head. And interviewed around the Street. And like the ethos that Goldman Sachs which was not as concerned about where your parents came from or what college you went to but what you could add to the team.

And so, I was fortunate to get the job in the spring of 1984. And it was difficult, frankly, the first year or two. I went to a, shall we say, progressive college where you got to choose your own curriculum which is dangerous for an 18-year-old. So, I haven’t taken a math course in college and, all of a sudden, I’m knee-deep in financial terms. So, it took me a while to get up to speed. But then, it’d finally made sense to me.

RITHOLTZ: So, you moved to Tokyo in 1988 to work on building out Goldman Sachs real estate efforts in Asia and then on to Hong Kong in ’92. What was your experience like in Asia in the late ’80s when their market peaked and then in the early ’90s?

CORNELL: Well, coming to Tokyo in ’88 was, without a doubt, the hottest city on the planet. I was fortunate to have worked on a lot of Japanese deals while I was in the states and my boss asked me if I would go and see if I could build relationships in Japan.

So, at age 32, I kissed my mother goodbye, hopped on a plane, and it was crazy. I mean if you recall at the time, there was a book a week being published saying Japan was going to take over the world. The real estate value of the Imperial Palace was more than the State of California on paper and a hamburger cost 50 bucks.

So, it was like the best party you ever went to in college. But by 1991, it was like the worst hangover you had in college, people were talking to themselves walking down the street. And at that time, Bob Rubin, who was the chairman of Goldman authorized the creation of GS Capital Partners and Hank Paulson was ultimately the boss on that and Hank said, how would you like to go to Hong Kong and open up Asia for us? And I said, Hank, don’t want to really run investment banking anymore, I really want to get involved in this investment effort.

And his comment, you don’t really know anything about investing. And I said, well, you’ve got no one else who wants to go. So, it was a mutual — mutual agreement, went down, and we had about 10 people at the time. And when I left in 2000, we’re well over a 1,000. So, it was extraordinary to have been in Japan as it rose and then watched that crash and then get to China as Deng Xiaoping opened up the country. 

RITHOLTZ: And people forget we still are far, far below that 1989 peak in Japan which was six times the valuation of our ’99-2000 dot-com peak. So, the hangover continues. You’re really have been at — you’re almost like Zelig from the from Woody Allen movie at these crucial moments in history.

So, you leave the peak of Japan in these early days of the crash to go to the opening of Hong Kong. What was that experience like? That had had been madness also.

CORNELL: It was, frankly, extraordinary luck to be present at the creation of history. I was fortunate, literally, to watch China go from Mao suits to blue suits, bicycle to cars, and the greatest explosion of human creativity, human wealth creation, I think in history because it was just unleashed. And the appetite for knowledge, the desire to build was extraordinary and to be in a position where I had a checkbook and could be the financial partner in building out and up the country was an extraordinary experience.

And even when I move back to the states, I still continued to run Asia and it’s an important part of my firm strategy today. So, it’s a lifelong — it was a lifelong gift, frankly.

RITHOLTZ: So, you mentioned, when you go back to the States, you come back to the U.S. and now suddenly, you go from investing in real estate to private equity. What was that transition like?

CORNELL: Well, actually when I moved to Hong Kong in ’92, I ran both the real estate private equity group as well as the corporate equity group. And when I move back to the states, I just focused on corporate corporate equity.

And you may recall at the time, everybody was doing dot-coms. And frankly, there were so many investments, I’m not sure anyone really knew what the right hand was doing to the left hand. And again, I went to Hank and said it’s really a little crazy and I would like to get back to basics, focus on traditional merchant banking, consumer industrial strategy.

We had strong presence in financial institution investing. I helped to create the energy investing platform. So, we went back to back to the future, so to speak, and did not do what we didn’t know but did what we did know. And so, turned that around in 2000 and ’01 and ‘ 02.

And at the time, merchant banking and private equity was a pretty small portion of Goldman Sachs revenue stream. Today, not so much. It’s become pretty substantial, hasn’t it?

CORNELL: Well, in the time, I would say, from 2000 up until 2010, so as the — we got through the financial crisis, it was a small group. But on a per pound basis, we’re definitely punching way above our weight.

The firm supported the effort and was roughly 20 percent of the capital. So, when — and then you had partners and employees also coinvesting. So, roughly 30 cents of every dollar was family money, so to speak. So, when you went to talk to other folks to join you, it was effectively investing with Goldman Sachs and that was a very powerful fundraising tool.

And we were, frankly, very profitable for quite some time and it worked out for our investors and certainly worked out for the firm.

RITHOLTZ: Quite fascinating. Before we get into some of the details of that space, can you help me out a little bit was a terminology? I hear people using private equity and merchant banking and occasionally forms of commercial banking interchangeably. What’s the difference between merchant banking and private equity, if any?

CORNELL: In my dictionary, virtually none. It’s …

RITHOLTZ: OK.

CORNELL: … really making investments to go out and support growth, support businesses. I think merchant banking has a historic precedent in British terminology of the 19th century and private equity is something that was developed in the last 30 years. I remember the first time, I was in Beijing and saw PIA on the back of an airplane, I was like, wait a minute, the principal investment area? No Pakistani international Airways. So, you have to keep your terms straight.

RITHOLTZ: I’m glad I asked that. So, what sort of deals were you doing when you were building the merchant bank division at Goldman Sachs? How did this look?

CORNELL: If I go back to when we were building it in China, what was very apparent is that the consumer sector was going to take off and we invested in a bicycle business partnered with Giant bicycle out of Taiwan when they were building factories in China.

We owned an interest in the largest pork company in China and apple juice company. The world’s largest manufacturer of sneakers for Nike, Reebok, and Adidas. And one of my mentors, Steve Friedman, called me and he said insurance is a very good proxy for wealth creation in the country.

So, I studied hard and then we wound up making an investment with the Ping An insurance company in 1994 at a very low valuation and just watch the company explode in growth over the next decade. And when I came back to the States, continued investing in insurance, that was a very good lesson, started a couple of insurance companies from scratch and that worked out pretty well.

I started investing in the energy sector, both upstream prospecting, deep-sea oil drilling in the Gulf of Mexico and off the coast of Africa, as well as continuing the consumer industrial focus because the states is consumer paradise and it was, if you pick your spots appropriately, you can back companies that can go out and — grow in excess of GDP.

RITHOLTZ: So, fast forward to 2013, after a good long run of what is that? Almost 3 decades of Goldman?

CORNELL: Yes.

RITHOLTZ: You say I’m going to launch my own shop and that was 2013. What were you thinking in terms of advantages of a smaller merchant bank versus a big shop with a lot of moving parts like Goldman?

CORNELL: Well, after 30 years of Goldman it was a wonderful run, some of my best friends, I met my wife at Goldman, life experiences I’ll treasure forever. But it was time to hand the baton to a new generation. And one thing I’ve noticed is when you’re in your 50s, people think you’re at the very top of your game and you still got a lot of energy and all that wonderful experience.

And when you’re in 70s, they tend to say, would you join my board? And I was like — I realized I had a window of about a decade plus. And so, I wanted to form Chapter 2.

I got married a little later in life and have five young kids and sitting around in my library in my gym shorts is not exactly an inspiration for your children. And I’m genetically engineered to work, so I knew I had to do something. And I was very fortunate to have a number of financial partners, so I didn’t have to run around with a tin cup but spent literally 2013, ’14, and ’15 thinking about how the landscape had changed, looking at the lessons of a lifetime, what worked, what didn’t. Since I could create my own ethos in a new enterprise, what would my business principles be?

John Whitehead, I think, in the late 70s sat down and wrote the business principles of Goldman Sachs which has guided generations. And not that I’m John Whitehead, but took a page out of his playbook and put down my own thoughts of Chairman Mao and kind of put that into action.

And so today, we have over $3 billion. We’ve got an up and running Hong Kong office that focuses on Asia as well as New York City. So, it was a good time to leave and it was nice to have the time to think.

And your comment about small versus large, it was very interesting to go from running a like a, lack for a better term, an Army division, to a platoon of Navy Seals. And I sit on the board of the Navy SEAL Foundation, so I don’t take that lightly. And a platoon of Seals can take over a city just like a division.

And so, having senior folks who I’ve worked with throughout my career, so we actually could finish each other’s sentences, we knew how we took our coffee, was also a very exciting opportunity to get the band back together again and have a focus strategy and have a small group of investors who would write large checks, frankly, and support our activities.

That’s quite interesting. So, one of the things that I’ve noticed over the past decade or so is a lot of the negative spotlight has been signed on hedge funds and private equity seems to be capturing all the positive limelight, what is it about this sector of alternative investments that seems to have had a golden touch, especially since the financial crisis ended?

CORNELL: Well, I think, frankly, throughout the history of private equity which you can go back to the end of World War II and the start of Venrock and how in its essence, it is supporting growth? It is supporting the establishment of companies? If successful, it creates jobs, it creates wealth, and it has a long-term perspective.

You really can’t buy a company and build the company and do it in 30 days. Some of my most successful investments, we have owned for well over a decade. And frankly, but for the terms of each fund, these are things that I would own forever and there are some of the investments where I was able to take stock, which I own forever and will own forever.

And I think, that aspect of business building, of the affecting communities, the effect on labor forces, and how it can build globally makes it an attractive asset class. And frankly, I think the returns over the last few decades have been quite superior to the public markets and I think that attracts a lot of interest.

RITHOLTZ: And of all the alternative investments, it is — private equity is one that is least correlated to the public markets and that is certainly something that is appealing. You mentioned in one of your investments or some of the investments, you’ve taken stock. When I look at the world of venture capital, it’s almost all stock. How different is merchant banking in terms of the structure versus something like venture capital?

CORNELL: Merchant banking is probably investing at a later stage than venture capital which could literally be an idea. An engineer comes in with a new mousetrap, experienced people who understand what it could do will back it, even before it has any revenues, and it’s a pre-revenue concept or just possibly a small revenue concept.

Whereas more traditional merchant banking, it’s established. There’s revenue, there’s a business plan, there is a need for capital for growth, for acquisition, for foreign establishment. And so, it’s just a difference in timing, if you will, between coming in at inception and coming in with a little more maturity and a track record.

RITHOLTZ: Quite interesting. Let’s talk a little bit about your firm, Cornell Capital, which I believe you mentioned has about $3 billion in assets under management. Tell us a little bit about your deal sourcing. Do you go out and look for deals? Do deal — does deal flow come to you? How do you — how do you find things to put money into?

CORNELL: Well, when you consider I’ve been doing this now somewhere between 35 and 40 years and that Goldman Sachs personally led investments into 100 plus companies, which probably means I spoke to 3-500 CEOs over my career. When I left Goldman and retired in 2013, I spent, literally, two to three years calling every CEO I ever met and just letting them know that I was free, I was hopeful that they would call me back, and frankly, for every call I made, I got two back.

And once you can get into the CEO network and they understand what you would like to do and they understand how you would like to do it, that reference, John will call Jane who’ll call Jack who will call Susan and all of a sudden, deal flow is created. And those personal relationships where they’ve had a good experience when you were a sponsor and back them is just fantastic recommendation to someone else who’s thinking about capital alternatives and looking for a financial partner.

We also, because of the time I spent at Goldman Sachs, have a pretty good relationship with the other houses on the Street and half of them is in auction these days. So, we maintain a strong presence with Wall Street, generally, just to hear what’s going on. But it’s the key, I think, to our success so far is really having proprietary deal flow from our CEO network.

RITHOLTZ: So, what is the process like when a possible deal comes in? How do you go through the process of evaluating it and how you decide what’s an appropriate funding level and valuation?

CORNELL: Well, after we put the Ouija board away and realized it could be a good opportunity, you basically are looking — you put your lines in the water and you know what you’d like to do.

So, for example, our expertise is in insurance. So, many of the FIG departments on Wall Street and many of the insurance executives that I know are very kind to call us with many ideas. And in our portfolio, we have two to insurance investments.

We also are very interested in consumer industrial. And so, we own the company that produces Pyrex and the Instant Pot and Corelle dishes. We also own the world’s largest manufacturer of skincare, also Purell, and hair care. And so, when these calls come in you, understand whether it fits the criteria you like and then you spend time and you see what the opportunity could be.

And so, taking our investment in KDC which is the largest manufacturer of skincare, it was dominant in North America. And we realized that because of our Asia strategy, we could actually help take them to Asia and we could do it in a very effective matter.

And one of the things be — we do because we’re small and we’ve told our investors that we will create a very focused portfolio where we will routinely commit 10 percent to 15 percent of our capital in each investment and we have a very large co-investment which has been secret to our ability to punch above our weight, so for every dollar of investment in the fund is a dollar and a quarter of co-investment which lowers the cost for my LPs but it also allows them to put more capital to work which the role interested in doing.

And so, understanding we could take KDC internationally was one of the reasons why we were very aggressive in buying it. And when we bought it, we had roughly 100 million of EBITDA. And today, on a run-rate basis, it’s about 300 million having acquired the world’s largest packaging asset and then acquiring another personal and health care business and taking them to China and partnering with my old friends at Ali Baba.

And so, our ability, when you first get the phone call to have the creativity and the vision about what value you could add, which is a horrible concept, value add, value add, everyone talks about it, but it’s actually true, you sit there and say what can I do to this? What in my experience are in my relationships will allow me to take this very fine company and double or triple its opportunities going forward?

And it takes time to develop that. And so far, we’ve only owned it for a year and a half and we’re way ahead of plan, even with a setback that everyone’s experiencing because of the virus.

RITHOLTZ: I have to ask about some name brands you just mentioned. One, obviously, is Purell. But before I get to that, what are the consumer brands of KDC? What name brands might a listener recognize?

CORNELL: Well, they manufacture. They don’t own any brands. So, we will manufacture …

RITHOLTZ: OK.

CORNELL: … for Estée Lauder, for Elle brands, for L’Oréal, for Johnson & Johnson. We are a contract manufacturer. So, we own no brands, but we support brands with manufacturing with R&D because we have three laboratories that are constantly creating new compounds to make things better, more ecological, and just better for people.

RITHOLTZ: And you mentioned Purell. What’s your relationship with Purell and how are they managing for a crisis that was tailor-made for them, practically?

CORNELL: Well, hand sanitizers now, you can’t walk into any building or any establishment and not have hand sanitizer. So, I think that the market was already strong and now it has exploded because I have them in my car, I’m sure you do, and listeners, you have been in the home, you have them in every office, every bathroom.

And so, they’re managed — they were managing brilliantly and now their businesses has dramatically improved because of the public safety issue around contamination. So, that will probably only continue. And many brands are launching sanitizers, it’s probably a growth area for the next few years.

RITHOLTZ: I think everybody was caught a little flat-footed when the demand suddenly spiked back in February and March. Have they ramped up production to meet this massive new demand for something that can help keep us safe from an infectious virus?

CORNELL: Yes. I think production is in full swing. There was probably two or three weeks when it was in short supply, but that has been completely taken care of.

RITHOLTZ: Are you guys located in New York City or where are you headquartered?

CORNELL: We are headquartered at 499 Park Avenue which is the corner of 59th and Park. And our …

RITHOLTZ: Sure.

CORNELL: … Hong Kong office is in the Bank of China building.

RITHOLTZ: So, let’s talk a little bit about what’s been going on with private equity. And I want to start by putting a few numbers on this. Typically, we look at the equity markets and over long periods of time, we could see an 8 percent to 10 percent sort of return over decades. What sort of returns are private equity targeting these days?

Well, everyone always tries to double money plus. Some people will advertise 20 percent plus. Some will say depending on the asset class and the style of investing, a premium of 500 basis points to the 10-year Treasury which today does not look that dramatic if it’s (inaudible) Treasury.

RITHOLTZ: Right.

CORNELL: So, it really depends on who you talk to. I’ve always been a fan of Mr. Buffett, Bill Berkley at WR Berkley. These geniuses have basically been making 15 percent to 20 percent returns their entire career. So, effectively, doubling plus every five years with very low failure rates and very high success rates. And that’s basically the strategy that I learned at Goldman and that we are certainly employing at Cornell Capital.

RITHOLTZ: So, one of the things that always confusing when I discussed returns of with private equity investors is the various ways it’s described. Some of it is cash-on-cash returns, some of it is IRR, what is the best way to measure returns? If I’m an endowment or a foundation and I have a $1 billion to put into a private equity fund, how should I expect those returns to look like over the life of that fund?

CORNELL: Well, it’s an excellent question. And there are many opinions on how they should be measured. I try and balance IRR with MOIC, multiple of invested capital.

IRR is a wonderful tool for measuring performance against other asset classes. But at the end of the day, you can’t pay electric bills with IRR, you pay them with cash or your MOIC. And so, I understand that many folks that manage liabilities for unions or universities measure themselves and their folks get paid on IRR, but you have to fall back on MOIC at some point because you need the cash to actually pay your bills when due. No one’s going to accept IRR.

So, I think, frankly, IRR has become more of a tool and gets more focus. And I always check as to whether I’ve actually made money as opposed to just IRR because IRR is quite — you can manipulate IRR. So, if I put a dollar to work today and within nine months I pull out 1.1 time or 1.15 times my capital, I’ll have a 20 percent IRR. But if I get a bill for 100 bucks to pay my car or pay my mortgage, they’re not going to take my 20 percent IRR, they want the cash. And so, you need a balance as you’re putting both together.

RITHOLTZ: So, we have been, since the financial crisis, in an era of unprecedentedly low rates. How does that impact how you go about, either thinking about in making investments or funding companies? What’s the role of ultralow rates over the past decade or so, and how does it impact how you do your job?

CORNELL: It is quite attractive to borrow because borrowing has been, historically, in this last decade incredibly cheap and covenant light, which frankly, allows for excess. Throughout my career, I have been afraid of leverage and I have always overequitized and under levered when I was a Goldman and certainly now.

As a new fund, as a young firm, we didn’t want to make a mistake. And so, our average leverage in our entire portfolio is 3.9 times. We have no subordinated securities, no mezzanine debt, we overequitize everything because I can’t predict when a meteor will hit the planet or a virus will shut down the U.S. economy.

And so, our portfolio, certainly has some operational challenges, but we have virtually no balance sheet risk because we have protected the balance sheet by overequitizing the position.

Many firms in the last 10 years have used leverage to their advantage and report and have achieved high IRRs. But at a time, when a punch comes out of left field, that capital structure is not going to be in a position to take advantage of the environment or possibly not even survive.

And so, you know I’m an optimistic person by nature, but I’m an optimistic person whose glass is always half-empty, not half full. And so, I’m always trying to hope for the best, but preparing for the worst and that’s the philosophy in our firm. And so, that’s why at this moment in time and as I said, we have issues we are dealing with but we will be just fine going forward because of how we’ve structured things.

RITHOLTZ: People have a tendency to forget that, hey, leverage is a double-edged sword as it helps in the way up, it’s going to leave a mark on the way down.

CORNELL: That is something I’ve learned throughout my career and my mentors have drilled that into my head.

RITHOLTZ: So, before I leave private equity and talk about some of the board you’re on, I have one question. VCs are notorious for posting their missed opportunities. It’s almost a badge of honor. I said no to Apple in 1984 or whatever — whatever happens to be. Any major deals that you passed on that you look back and say, you know maybe, we should have pulled the trigger on that one?

CORNELL: There’s always one or two that got away. But I will tell you, I tend to look forward and some of the largest deals I did working with Rich Kinder at Kinder Morgan to take him private 15 years ago was one of the highlights of my career. Carrying his briefcase and learning from a master was an extraordinary achievement.

Some of the things I was not able to do that I wanted to do in Asia have proved to be quite successful without our involvement, unfortunately. But back then, I was not in the political position, so to speak, to sway the investment committee. And today I’m in a little bit of a different — different position. So, looking forward, not looking backwards.

RITHOLTZ: Henry, you and I don’t know each other personally, but I really can’t picture you carrying anybody else’s bag.

CORNELL: No, no, I’m happy to do it. I like to be a good student. Believe me, there’s a lot of good teachers out there.

RITHOLTZ: So, let’s talk a little bit about some of the boards that you are on, you’re a trustee at the Whitney Museum. I love what they did moving down to the High Line. It’s really a fascinating new location. How involved were you with that process?

CORNELL: Well, the whole board was involved with the process. I think the Whitney board is like a family. We had a (inaudible), Leonard Lauder who led the charge in supporting the museum, just an unbelievable philanthropist, thoughtful, and the board followed his lead.

And it was, frankly, a debate. You may recall the Whitney tried many different architectural ideas for the corner of 75th and Madison. And at the end of the day, the idea of moving downtown and creating your own environment was something that excited the board and it was a bold move, frankly.

I think Madison Avenue did roughly 300,000 to 400,000 visitors a year and the museum now does well over a million, sometimes close to two, depending on what the exhibit is and aligning, basically being one goalpost on the High Line and how the whole Meatpacking District has exploded as an exciting center was just fortuitous for the museum.

And it’s in really good shape, although right now, due to what’s going, it’s closed down. But I know it will open back with a roar. And the board, it’s a terrific board.

And Adam Weinberg who is the Director of the Museum, I love Adam, the board loves Adam, he has been a fantastic director and he’s the one who probably deserves, after Mr. Lauder, the most accolades for getting the museum downtown and making it a success as well as the whole team at the museum. It’s been, frankly, quite a wonderful time to be involved with the museum.

RITHOLTZ: So, let’s talk about a somewhat different sort of board you’re on. You’re on — involved with the Navy SEAL Foundation. Tell us a little bit about that organization. What does it do and how did you get involved in that?

CORNELL: Well, unfortunately, we all sleep comfortably in our beds and as George Orwell said, rough men have to go out and defend the country and the Navy SEALs, there are men lost in battle. And you forget that these are husbands, fathers, sons. And when they come back to the States, when — if their Gold Star families, they get a death benefit from the government, they get an American flag as a triangle and thank you for your service.

And I heard about this almost 20 years ago from a colleague of mine who grew up with one of the captains in charge of one of the SEAL teams and I was flabbergasted that these warriors, these heroes, literally, were — their families were not really taken care of when they came back. And when you think about how they are deployed and they are the tip of the spear, just was extraordinary to me.

So, I got involved early. The Foundation supports the children, supports the families, and supports the men who come back, some of which are — have been wounded, injured, and all levels of support. And Robin King who runs as the President of the organization, she’s amazing. Her husband is a master chief, so talk about tough.

And it’s an honor. It’s actually one of the greatest honors of any of the philanthropies that I’ve ever been involved with, to meet these men, to understand what they’ve done for the country, and in some small way, letting them know that God forbid they’re failed in battle, their children, their families will be taken care of.

And so, it grew from a tiny idea, 20 some odd years ago, to today where you know we have a $90 million endowment. We would love to double, so that no Gold Star child ever has to worry about paying for tuition or paying for any type of schooling or anything. And that’s the goal, is to really support these guys in some way while we’re back home and they’re protecting the nation.

RITHOLTZ: That is fabulous and amazing and I’m glad to hear that there are people in the country who recognize the sacrifices that are made and actually are doing something about it.

The last board I have to ask you about, you’re Chairman of the Citizens Committee of New York City whose goal is to help people in low-income areas improve the quality of life in their city. What is that organization like? What do you try and do to make a positive impact in New York?

CORNELL: Well, Barry I was the chairman for 15 years and I did pass the baton, but I was honored to be associated with this. I was born and raised in the Bronx. I’m the first in my family to be born in a country, raised by my mom. And this organization was started by Oz Elliott. And it basically helps the block associations, neighborhood groups throughout the city.

They’ve touched 10,000 groups. So, if you want to plant a garden, you need money to create an afterschool program, you want to help feed the elderly. After 9/11, know the Highbridge section in the Bronx, which was my old neighborhood, had many people who were not documented, working in the restaurants in the trade center, and we were the first to get up there with checks to support their family.

It is literally block by block, neighborhood by neighborhood poverty relief, but it’s done by the citizens. So, it’s not imposed from above. It is created by the people who have the experience that need a solution. And so, whether you’re a libertarian or a liberal, you’ve got to love the fact of how citizens come together, get supported by their fellow citizens, because the checks we write to these groups are hundred thousand dollars, but you’d be amazed what $1000 can do to create a block association.

And it’s been around since the mid ’70s. It was created in the financial crisis of New York City in ’75. And the way we’re spending money right now, it wouldn’t surprise me if we have another financial crisis coming in New York City, but it was a way to get citizens to get involved in their neighborhoods. And it was a terrific organization and it’s continuing now that I have tried, so to speak, as their chairman.

RITHOLTZ: Quite interesting in and sounds like a worthy organization.

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RITHOLTZ: I know I only have you for a couple more minutes. So, let’s get to our or favorite questions that we ask all of our guests. And let’s start out with streaming. What are you — what are you watching either on Netflix or Amazon or Disney or whatever? What podcasts or what are you doing to stay entertained during this shelter-in-place period?

CORNELL: Well, as I mentioned I’ve got five kids, age 7-14 so I have rediscovered every Disney movie out there and twice. And then I tried to introduce them to some Hollywood classics, “Casablanca,” “The man Who Shot Liberty Valance” and I’m a little less successful in getting them involved with the classics. But I — I’ve become reacquainted with my Disney childhood.

RITHOLTZ: That Disney+ went from almost no subscribers to, I think they’re up to 40 million in an incredibly short period of time. It’s a giant lockdown success story.

CORNELL: Yes.

RITHOLTZ: You’ve mention mentors several times. Tell us about your mentors. Who helped your career, helped — who helped you form your philosophy of merchant banking?

CORNELL: Well, my first boss was Dan Nide kph at Goldman Sachs and he was tougher than tough but generous with his teaching. And he set me on my way. Steve Friedman made me a partner in ’94 and Hank Paulson was kind enough to take me under his wing. And they were my formative mentors at Goldman Sachs.

And then I met Bill Berkley. Bill is the chairman of WR Berkeley insurance, a spectacular investor, and a partner of mine and a pretty tough taskmaster. He is a little older than me and he is up every morning at the crack of dawn and demanding the same from everyone and he’s terrific.

My friend, Farouk Bastaki, who runs the Kuwait Investment Authority. He has been a wonderful mentor for me over the years.

And then, frankly, my wife, the best sounding board on the planet. I lay it all out for her and her quintessential common sense and deep intellect. It’s like, no, you’re being stupid there. No, that sounds OK. So, it’s a combination of having true love at home and wonderful partners in your life that basically pointed out we are acting like an idiot and try and set you on the right path.

RITHOLTZ: That sounds like a nice group of mentors.

What are you reading these days? Tell us about some of your favorite books or what you’re plowing through now?

CORNELL: Well, favorite books, I always go back at least once a year and I read “On the Road” by Jack Kerouac and “The Sun Also Rises” by Ernest Hemingway, just because they touched me when I was living in Paris, courtesy of Davis Polk in my 20s and there are essential truths there.

I’ve been reading a lot more history these days, the foibles of how we fell into World War I because I worry a little bit about what’s happening in the South China Sea. And then my kids, I pulled out some old Dickens for them. So, we’re plowing through “Tale of Two Cities” and “Great Expectations.” And so, that’s been the last — that’s been the lockdown reading list for the last two months.

RITHOLTZ: What’s the book you mentioned about how fell into World War I? Did I hear the title?

CORNELL: Well, Barbara Tuchman, “Guns of August,” “Catastrophe 1914,” “Europe At War” by Max Hastings. I mean, there’s — it’s just history does move in circles. And so, seeing how nations fell into cataclysm, a hundred plus years ago and I worry a little about it today with what’s going on internationally, just reminds me of what to do, because I am involved in Asia Society and the Council on foreign relations, and in a small way, just trying to remind people that you we’re not immune from making the same mistake twice.

RITHOLTZ: To say the least. The book that has always stayed with me about the transition period from World War I to World War II is “Lords of Finance by Liaquat Ahamed, I don’t know if you’re familiar with that.

CORNELL: I am. It’s a terrific book.

RITHOLTZ: Yes. Absolutely.

So, our final two questions, what sort of advice would you give to a recent college grad or someone of that age who was interested in pursuing a career in merchant banking?

CORNELL: First, maintain a sense of humor and make sure you have lots of patience because you need both in order to be successful. I think, I’ve found that broad-based liberal arts with an ability to understand the world in its totality. So, read a book of poetry, read a novel, understand history, understand a little of science, just demonstrate a knowledge of the world and be open to trends and not locked into specific thinking.

And obviously, work whatever relationships your — you have, your friends’ parents, your parents, your college development group, because getting out and talking to as many people as possible is important to find a fit. Because I will tell you, how — I really only had three jobs in my whole life, Davis Polk which was spectacular and then Goldman Sachs where I was for 30 years, and now at Cornell Capital finishing seven years here.

Finding that fit where you are inspired to do your best, where you have colleagues who will challenge and support you, these are platitudes, but they’re also essential truth. And being not being — not being afraid to saying you know what? This just doesn’t work for me or demanding some attention or walking into your boss’s office, make sure you’re prepared, just don’t walk in there with attitude. You have to walk in with a thoughtful point of view in and explain what is troubling you or where you’d like to go.

RITHOLTZ: Quite interesting. And our final question, what is it that you know that the world of investing today that you would have found useful 30 plus years ago?

CORNELL: I wish I a little smarter about the digital revolution that was happening in the ’80s and ’90s. I remember when Microsoft went public and I bought a few shares but I had no idea what they did. It just was one of those things that sounded exciting.

And not really understanding Google and Yahoo! and Amazon and Apple until they were already formed was probably a big miss on my part. Now, I’m — my 14-year-old is teaching me, so I feel like I’ve got a great mentor there and I think that’s the one thing I did not put enough emphasis on this changing technology landscape.

RITHOLTZ: Quite interesting.

We have been speaking with Henry Cornell, founder of Cornell Capital, and one of the original architects of Goldman Sachs Merchant Banking Division.

If you enjoy this conversation, well, be sure and look up an inch or down an inch on Apple iTunes where you can see any of the previous 300 plus such conversations we’ve had over the past five years. You can find that at Apple iTunes, Spotify, Google Podcast, Overcast, Stitcher, wherever your finer podcasts are sold.

We love your comments, feedback, and suggestions. Write to us at mibpodcast@bloomberg.net. Give us a review on Apple iTunes. You can check out my weekly column on bloomberg.com/opinion. Follow me on Twitter @ritholtz.

I would be remiss if I do not thank our crack staff that helps put together these conversations each week. Michael Boyle is my producer/booker, Tim Harrow (ph) is my recording engineer, Michael Batnick is my head of research, Atika Valbrun is our project manager, I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.

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