John is the founder and Co-Managing Partner of ConvergenceLLC. Convergence provides data, custom research and advisory services to a broad range of clients in the alternative asset management industry. You can find more information on Convergence at www.Convergencellc.com
Previous to founding Convergence John served as the Chief Financial and Operating Officer overseeing accounting, investment operations, risk management and information technology at Apollo Global Management and prior to Apollo spent 30 years developing and managing the finance, tax, operations, technology, risk management and treasury operations at many of today’s leading financial companies including as a Partner at The Rohatyn Group, an alternative asset manager specializing in the Emerging Markets and prior to joining Rohatyn, he served in similar capacities at JPMorgan and Fidelity Investments.
John graduated Cum Laude from Suffolk University with a BS in Accounting and graduated The United States Marine Corp Officer Candidate program in 1980. John is a trustee of the Chewonki Foundation, an environmentally focused educational organization located in Wiscasset, Maine and is a trustee and head of the Investment Committee of the Marginal Way Preservation Fund in Ogunquit, Maine. John is a member of the Wilton Riding Club, in Wilton, Connecticut and the Cape Neddick Country Club, Cape Neddick, Maine. He resides in Wilton with his wife Cynthia and three children.
Q. You have a somewhat unique background in that you had senior leadership roles with some major private equity firms and a global bank and now you’ve gone the entrepreneurial route. Share with us the advantages and disadvantages of both experiences.
A. The advantage of working at some of the largest and most influential financial institutions is the quality of the training and the diversity of opportunities I was given to apply that training. In terms of the disadvantages, the sheer size of the institutions I worked at grew to such levels that the creativity and innovation process changed in a way that was less attractive to me. What I loved most about my experiences at those large firms was the diversity of the opportunities that came my way and as I matured, and as the organizations grew, the opportunity pipeline slowed. Also, the resources of a large institution help attract talent and allow you to invest in opportunities with a longer pay-back period. When I decided to move into the entrepreneurial arena, I didn’t do it because I had some primal yearning to be an entrepreneur. I did it because there were things missing from the industry that I worked in that I thought lent themselves to an entrepreneurial solution. To solve these problems one needs to be very entrepreneurial, defined as creative and very focused. When you combine the opportunity with the inherent creativity and innovation that drove me as a professional it was a natural pairing to launch Convergence.
Q. That segues perfectly into my next question because it would be really interesting to understand the genesis of Convergence from the perspective of the creative power behind it. In other words, when the light went on and you said, “There might be a business opportunity here,” and then how long it took to get that executed and when you thought, “This could actually work and be a successful company.”
A. Let me start with the challenges that I experienced growing asset management businesses and then talk about the genesis of Convergence and what we’re doing. Historically, no centralized or authoritative source of benchmarking data existed to help owners and operating executives of asset managers to gauge the efficiency and effectiveness of their infrastructure spending. I would call this a significant data gap because spending on infrastructure, industry-wide, is estimated at $20 Billion and growing 20% per year yet there is no empirical objective way to determine the effectiveness of this type of spending. I worked at some of the world’s leading asset management firms, including JP Morgan, Apollo, and Fidelity and we constantly struggled to find ways to identify efficiency best practices. Meaning, what does it cost me to produce some unit of volume against some standard of quality. And when we were able to cobble together components of relevant data and attempted to break down by business segment, the task became almost impossible. Since there was no real source of objective third party data against which I could then measure my headcount and financial metrics we simply measured ourselves against the prior year. Since measuring progress in this manner is somewhat blind, people tend to drink too much of their own Kool Aid and begin believing a bit too much in your own PR. For example, let’s assume that it cost me $10 to settle a standard equity trade last year and this year it cost $9. It looks like I improved productivity and financial margins by 10%. While this may be true, if the industry, or even my peers, improved productivity by 20%, then I underperformed by 50%. So what’s the point? CFO’s need more insight into the headcount and productivity within and across the industry and specifically their peers to determine if their headcount and costs create or destroy financial value. Since I could never get my hands on this type of data, I never TRULY knew how good my teams really were relative to competitors. Moreover, Dan, I looked jealously at other industries where there’s a lot of infrastructure benchmarking data that one can get their hands on to do exactly what I was trying to do within financial services. It surprised me that we in financial services, one of the richest industries among many, didn’t have the basic, fundamental data that other industries, like technology, have been using for years. In industrial America, manufacturing has been using benchmarking for a hundred years! It didn’t make any sense to me. So as my career progressed I began to appreciate just how important this objective information was to the decision making process in terms of making good infrastructure decisions. I felt an opportunity existed for a company that dedicated itself to finding, normalizing and enriching the type of information that could be consumed by the people like me. I have been talking about the opportunity for about a decade with a variety of practicing infrastructure leaders and academics and while about 2 out of 10 immediately understood the message, about 5 of the remaining 8 nodded their heads saying, “hey, it sounds like a reasonable idea and if someone presented me with a benchmarking product line designed to examine my headcount and financial metrics, I’d be interested.” Only 3 of 10 rejected the thesis outright citing reasons that I understood but disagreed with. The genesis of Convergence was a problem that I wrestled with for twenty plus years as a C-suite executive, nothing was being done. I was beginning to struggle with the side issue, with the institutions I worked for. There was the opportunity to say, “I think the market is right for a new player,” and I founded Convergence.
Q. You’ve been around, worked for and next to some very successful private equity and hedge fund players, traders and portfolio managers during your professional career. Having observed these folks, what kind of behavioral characteristics do you think the best ones have in common?
A. First, they all have supreme self-confidence. Meaning, they’re not afraid to take risks where they believe there is good risk/reward trade-off. They’re very confident, they’re very courageous. Second, they make decisions and they make them swiftly which allows them to capitalize on changing opportunities, regardless of the outcome. I want to make a point about “swift” in the context of the segment you are in. If you’re a hedge fund manager, swift means, “I may need to make a decision in fifteen seconds on what I am going to do with a position based on the information I am currently examining,” versus with a mutual fund, “swift” might be weeks-worth of analysis but it’s still making decisions quicker than one’s peer group.. Third, they are all very bright individuals, super smart. That’s what I think defines the best I’ve worked with. I’ve worked with the best Portfolio Managers at Fidelity and Apollo where the likes of Peter Lynch, Bob Stansky and Leon Black established themselves as legendary investors.
Q. You’ve been a manager and leader of people for most of your professional career. What are the tenets of your management philosophy and how do you get the best out of your people?
A. I would say leading by example is my headline. I have never asked anyone to do anything that I either haven’t done or am not willing to do. I also lead from the front because I think that is very important for professional people to see leaders coaching from the front. I think it’s inspirational and motivational. In terms of getting the most out of people, my philosophy is to set high standards and make them clear. Allow people to come into those standards over a period of time. Ensure that as an organization grows everyone across the organization is growing towards that common set of standards. You encourage them, mentor them and support them in that growth. As for those who come to realize the standards are too difficult, or not what they signed up for when they joined an organization, I think it is very important to find them opportunities more aligned to what they are capable of delivering at a high standard and fits their style or point of view. I like the metaphor of, if you decide to join the military, you can join a number of different branches. Each branch has their own code, identity, culture and STANDARDS. Since standards are directly correlated with intensity levels, you should do your research and ensure you are able to meet the intensity level of the branch you select because they differ. If you choose the one that has the greater intensity level you should know what you’re getting into. You shouldn’t be shocked when you can barely drag yourself out of your bunk every day. If you’re saying “this is too hard,” don’t blame the institution. Take responsibility because that’s what you signed up for. You have to look at yourself and say, “Maybe this is not right for me.” I think in the military sense there is a very clean division because you either cut it or you don’t. In corporate America today, a lot of people aspire to great things but once they get on that path they sometimes realize this might be a little too much or I might have bitten off a little more than I can chew. This does not make them bad people, they just have to adjust. But they can’t PRETEND that it’s something else. Therefore, I think it is important to give them opportunities to address the fact that it’s not working and it’s ok so let’s find something that is more suitable. It’s the notion that everyone has an opportunity to contribute at a very high level but it may be in a different role or position than they thought on day one. I think it is important for a leader, and probably for the people who drive themselves to meet those standards, that they are surrounded by people who have an equal dedication to working at high standards. For those that don’t, don’t let it become a performance problem. Take it on directly and constructively and move them to a place where they are going to find success based on a style they are comfortable with.
Q. It sounds like if you are in the third passing lane going 85 miles an hour, and if someone is in the far right lane barely doing 55, it just wasn’t a good fit.
A. Let me be really clear about JP Morgan, Apollo, Fidelity and these other firms I worked for. There was a day when that philosophy ruled the floor, when those values that you and I were talking about were the MO for the organization. Then they begin to grow and all of a sudden, the culture begins to shift, meaning somebody who can’t cut it is there in the slow lane and the rest of the organization is in the passing lane. These institutions lose sight of what made them great because they get so big and with the law and lawyers, everything gets complicated. You can’t do simple things and at times it seems like everything becomes an “HR” issue. Don’t get me wrong Dan, all of these companies remain dedicated to the “excellence” but the bigger they get the harder it is to deliver. It’s natural. Now that I am the co-founder and managing partner of Convergence I have these discussions with everybody. It is one-on-one and it is not confrontational. I constantly remind them of what they signed-up for and what is expected.. If you can’t keep up, lets really understand what is causing your struggle. If it turns out that you can’t meet the performance standards then we have to talk about it. To your point, sometimes it leads to people leaving. But, quite frankly, I find that you can find utility for a anyone with the right attitude and who truly wants to contribute.
Q. Any notable business mentors along the way and what did you learn from them and what do you remember about them? Any one stand out?
A. Professionally, I learned the most from my least effective bosses.. I observed how they struggled with their own leadership styles. I was able to see the impact on the organization and I was able to learn the hard way that those were things I should never do as a leader. From my best bosses, I’ve learned more about style; the best leaders I worked with showed me the how, the approach, the style needed to get things done. I was fortunate to work for institutions with outstanding professionals, so in a way, I’ve learned from so many. Privately, if I had to name the most influential person in my life, it would be my grandmother, Mamie Phinney. She was an absolute icon in our family. She taught us about the importance of having values, about work ethic, about people, honesty and integrity and to never believe in your own bullshit because it will kill you the fastest!
Q. So let’s circle back to Convergence. In a pure business sense, in the context of what you are trying to build right now. What keeps you up at night?
A. Our greatest challenge and what consumes most of my hours, in every day, is dealing with the pace of change in the industry and in ensuring that our products are always abreast of and, in many cases, ahead of the demand we see driving our sales today. It is the goal of always being viewed by our clients as being at or ahead of the leadership curve; it’s what establishes our brand. Obviously to do that is an exhausting effort because the technology and the speed of information exchange in the market is increasing. Not just the amount of data but the way in which data can be shared and communicated. That is what keeps me up at night, dealing with the pace of change in data and technology and how to ensure that our products are constantly evolving so that our clients are always happy.
Q. I don’t know if you’re a car guy or not but if Convergence were to be an automobile, what make and model would it be?
A. So, you know I’m not a car guy but I’ve always owned a BMW, ok? And the reason I always owned a BMW was that I felt that their engineering, the design and the client experience that they were going after met what I would call the standards and the philosophy that I embrace. I know there may be better engineered vehicles out there and other sexier makes and models, or that have more exotic engineering in them than the BMW, but for what I want, which is leading-edge, not bleeding-edge engineering and design. I want thoughtful design, not revolutionary design. And I want client-focus, not exclusive brand-focus. For me, that’s why I chose BMW. When I think about Convergence and I think about the automobile metaphor, I want our clients to understand that we are constantly working to examine the information flowing through the marketplace, that our clients and Convergence people have deemed to be relevant, and to capture that and to deliver that to them as quickly as we can so that they can make better business decisions every day. If it’s too sexy, then they are never going to understand how to use it and if it’s too arrogant, meaning it’s all the Convergence point of view and not theirs, then that’s not going to work either. We’re striving for that Goldilocks experience. We’re looking for very, very good engineering, thoughtful design and performance. We’re looking for a great client experience which requires client input to make sure that what we’re doing is recognizable and usable. Hopefully that answers your question. I would say a BMW. Maybe Mercedes might object to that, who knows?!