Invest Like the Best with Patrick O'Shaughnessy
· Ken Langone
We got to know each other that summer, and we really hit it off personally well. By the way, I'll tell you, one of the great joys in my life was his friendship, and this is an aside. One of the great honors of my life is when I got the call from the family, Ross Jr., they'd like me to deliver a eulogy at his funeral. Wow, me. So anyway, we're driving through the tunnel. Elaine went home because our kids had to go to school the next day. We had 3 kids. So we're in a limousine -- by the way, the limousine driver was always a witness signing the papers, so this was all legal stuff. So we're driving through the tunnel. It was a back seat where you had 2 seats looking at each other. Margot and Ross are looking ahead. I'm sitting with my back to the front, looking at them. He said "Well, -- all the other guys on Wall Street told me now is when he's gonna back away from what he said he's going to do." What are you talking about, Ross? "Well, I'm told, Ken, this is when you guys say, sorry, Ross, I miscalculated. I can't do it at the 100x earnings. I got to do it at a lower number." What are you talking about? "Because I suppose this is where you're going to tell me I'm not getting 100x earnings." I said, how do you know that? "See Margot, see Margot?" I said, how did you know that? "What do you mean?" I said, I'm not going to do it at 100x earnings. I'm sorry. "See Margot, there you are, they're all alike up here! They get us company boys up here and they pick us clean." I said, wait a minute. Wait a minute. Does 100x earnings mean that much to you? "Damn right," he says. "In Texas, you put your hand out, your word is your bond. It means a lot to me, not just the number, but the fact you kept your word." I said, well, Ross, look, the last thing I want is an unhappy client. We'll do it at 100x earnings. "Damn right, you will." I said, okay. So Margot -- I winked at Margot while he was in a little bit of a tizzy. She says to me -- god bless Margot, she's sharp. She goes, "Ken, what were you going to do with that?" I go, "Well, I was going to do it at 115x earnings, but if he only wants 100x earnings, it's okay with me." We did it at 115x earnings. And by the way, it went from 16 to 24 the first day, so it was a very successful deal. And that deal, for lack of a better way to describe it, put me on the map.
· Ken Langone, Patrick O'Shaughnessy
The most important thing of all was he was a man, who when you delivered to him and you kept your word, he never forgot it. So he became perhaps my staunchest advocate. I was a young kid, 33, I had never done an underwrite. That friendship has lasted all through his life and now with his family as well. [00:00:00] S0: What about his style do you feel is most lacking in the world of leadership today, if anything? [00:00:00] S1: Integrity. That's it. The man was maniacal about keeping his word. And the second thing would be loyalty. If you promise to him, delivered for, he'd never forget it. I miss him bad. [00:00:00] S0: One of my favorite ideas of yours is this notion of leaving more on the table for the other guy than you think the other guy thinks he deserves. Did that come from Ross?
· Ken Langone
[00:00:00] S1: No. Let me tell you where that came from. That came from my experiences as a poor kid. When I realized, if somebody expected this of me, I gave them that plus some. And to me, the art of negotiating is not see who bests who, the art of negotiating to me is to get a deal for yourself and make sure the guy you're dealing with feels he got more than he thought he was going to get or he should get. 100x earnings to 115x earnings. I can't think of a deal I've done where I couldn't have gotten more than I got, but that's okay because the element of trust is the most precious thing in living. If I trust my doctor that he's going to do the right thing for me, there's a better chance he's going to be more candid with me and more willing to try and help me whatever my condition is, or a friendship or a marriage, I don't care what it is. I'll give you a for instance. I did a deal with a guy, I bought a company. He was a tough negotiator. He negotiated back and forth, back and forth, and I virtually gave in on every point. We got done around 9:30 at night, my office. I said, now are you sad or happy? He couldn't be happier. Okay, I say, well, tell you what, let's go back. I'll drop you off at your hotel, I'll pick you up in the morning, we'll have breakfast. We'll talk some more. He said, okay. So the next morning, I pick him up. We were driving to my office. He said, "Ken, could I be honest with you?" I said, Please do. He said, "I'm sorry." He says, "As I reflect on this. I don't think this is a good enough a deal for me as I'm entitled." I said, well, let's go upstairs. And I say, okay, where do you think this thing is deficient for you? And he tells me, "It's okay, you got it." What do you mean? I said. Tell me what you want, and you got it. But then I want to tell you something else. I will never do business with you again. You bargained hard all day yesterday. You assured me at the end of the day, it was exactly what you wanted, you were fairly treated. I said, I can't take a one point at it and concede to you. I said, I'm sorry. You got what you want on this deal, but I never want to do business with you again. And I feel strongly about that. And the best testimony is I never had a fear of a client or a potential partner in a deal saying something bad about me, because I did okay. I would always hope that I'd do okay.
· Ken Langone, Patrick O'Shaughnessy
You can see where I started and the city where I am right this minute. And it's okay to bargain hard. But when you're done, you're done. And he was shocked. I'm assuming you got your deal, you got exactly what you wanted. Now you got it. Frankly, I said, I thought you had a great deal last night. But obviously, you thought there might be more on the table. So I won't disappoint you. By the way, that company turned out to be a home run. We did okay. So that's the philosophy in life. I pride myself on that. I think there's nothing more precious in my life, other than my family, than my word. [00:00:00] S0: Was there early formative experience, like a specific experience that most taught you that lesson? How did you come to that conclusion, it sounds like, at a really young age? [00:00:00] S1: My mother and father. They were humble, uneducated but incredibly honorable people. But just how they lived their lives, that was really where it was chiseled home to me. You know, keep your word, work as hard as you can and give it all you got. And live by the golden rule. One of the things that I feel strongly about is I'm very forthright about my childhood because that's where it all started. That I had a good fortune meeting this lovely lady. She was 16 and I was 18. We got married when she was 18 and I was 20, and almost 68 years later, we're still hanging around with each other. That's pretty good. [00:00:00] S0: What's the key to doing that well?
· Patrick O'Shaughnessy, Ken Langone
[00:00:00] S0: What's the key to doing that well? [00:00:00] S1: Have your fights but never carry a grudge. Don't go to bed pissed off. We have 2 kids that truly love each other, and with triumph and success I wouldn't change this, and I hope it hasn't. I urge my kids to be genuine, to be authentic. That to me is very important, being authentic. [00:00:00] S0: Life and business is a repeat game. The story you just told about not doing the second deal with that guy, even just the way you've created successful financial outcomes seems to have been by holding longer than anybody else.
· Ken Langone
[00:00:00] S1: Well, I love loyalty. if I would like to be remembered for one thing, only one thing. I'd like to be remembered that I was a loyal friend, a loyal husband, a loyal father. Whatever you want. Loyalty is in short supply, and I miss it. The world has become very transactional. My epic battle with Eliot Spitzer, which I whooped his ass, I can tell you right now. He isn't coming back for more, I can tell you right now. He isn't coming back for more. I got his ass whooped. And that was a fight that I loved every single second of. But there, people were saying to me that I showed my loyalty to Dick Grasso. I said, no. In that case, by the way, it wasn't just loyalty. It was the facts. The facts were that the whole committee, all 9 of us, always voted unanimously to give them these pay packages. Which, by the way, will magnify it because every previous Chairman of the Stock Exchange never had a tenure short of longer than 10 years. So I know when you got these deals right here 5 years, 6 years, 7 years span. Dick Grasso started at the Exchange as an $82.50 a week, union clerk. Went from that, all the way to the Chair. Guess what, he had 37 years of service. So when you put the yardstick to that, well, that's what you wanted. He created it that way to get people to stay, and look what he did. When he took over, they had 1,200 listings. When he got the bullet in his head, they said he had 2,800 listings. He made all of this. I bought seats for $72,000 a piece. I got $8 million for each one of them. I mean how bad a deal was that? We had guys on the floor of the exchange every hour, the whole key of the exchange was listings. But people said, well, that was loyalty. Yeah, it was loyalty, but more importantly, it was being loyal to the truth. I knew the truth. The truth was every single member of that committee knew exactly, and that was the sad thing to me, the number of high-powered guys that withered under this guy's tenure. Bring them on, baby. I'll show you how it works, okay? Bring them on. He did and he got it.