Nasdaq’s Adena Friedman on the Power of Going Public - dot.LA
Spencer Rascoff: I'm in Times Square today at the Nasdaq market site with Adena Friedman, CEO of Nasdaq. Hi, Adena. How are you?
And then we take all of the data and analytics that are generated off of our exchanges as well as other information that we gather, and we provide a lot of insights and analytics to all of the customers in the capital markets, whether they're corporate clients or investment management clients or, obviously, the broker-dealer clients. We feel just so fortunate to be in the center of the capital markets globally today.
And then we also generate a lot of information coming off the trading engines, and that information we then sell to give people transparency into what's happening in the markets. That also is a revenue stream.
We then have our index data. We create a NASDAQ 100. We have $150 billion of assets under management tied to our indexes, and that's a revenue generator. And then we provide software and services to corporate clients as well as to other exchanges around the world and broker-dealers, and so that's a technology product base that we have revenue off of as well.
Rascoff: A much more diverse revenue stream than most people realize. So, let's talk a little bit about your career. You started as an intern at Nasdaq.
Rascoff: And what was your career path like during that, I guess, two-decade stint? And we'll cover when you left and then returned in a moment.
Rascoff: And we talk a lot at Zillow Group about career development and career pathing. Sheryl Sandberg in “Lean In" — on this podcast she talks, of course, about how career development is more like a jungle gym than a career ladder.
Friedman: Sure. Well, I would say that it was a jungle gym within the groups that I was in. There was no set career path for me. There was nothing in Nasdaq that had job families. It was very much still a very, what I call, “organic organization" in terms of looking at how to develop your career.
And I had a few times when I had to look around, and I said, “Wow, should I go and really focus in on marketing, or should I go take this product management job?"
And I had great mentors and sponsors within Nasdaq that really said, “Adena, you are someone who really likes to run a business. You should become a product manager. The marketing job is interesting, but it's not really — it doesn't play to your strengths as well as this other thing." So, I was able to move up through the organization but really with a lot of sponsorship.
Friedman: Sure. Well, I do think my personal opinion is that both sponsorship and mentorship — it very much has to be a natural activity. You can't force a sponsor or force a mentor on someone. I think that you, though, have to curate and develop that relationship.
When it comes to mentoring, I think it's an easier thing to curate where you start very casually, and you say, “Well, gosh, I really admire this person," whether that's a person inside the organization or outside the organization. If you ask them to have coffee with you one day, and you give them enough notice, most of the time they're gonna say yes.
Then once you have that coffee or have a meal, and you realize you have a good connection with that person, and they're giving you good advice, and they feel good about the advice they're giving you, they're likely to do it again. And if they do it again, then you have established yourself with someone who you can rely on to help you.
Friedman: It definitely was on me, and frankly, at the time you don't even realize you're getting sponsorship, right? So, with mentors, I do feel like you are realizing that you're going in and touching other people and asking them for their advice. But with sponsorship, you're just — it's so natural that you realize, “Wow, that person just really helped me out." So, it was much more organic than it was planned.
I think Nasdaq has definitely developed its mentorship program, but to me sponsorship really needs to become — it needs to be a naturally developed thing. It's somewhat the responsibility of the employee and of the manager.
Rascoff: So, a note to recruiters, by the way, 'cause I get a lot of calls from recruiters too. It's usually super anonymous and vague. It's like, “It's a leading industrial company. I can't tell you who it is." So, maybe recruiters should be a little bit more transparent to get the return call.
Friedman: Exactly. And it was funny because my family lives in Washington, D.C., and I had been commuting to New York for many, many years. I had gotten very used to it. So, it was very much part of our lives. But at the same time, Carlyle is the really premier financial institution in Washington, D.C. It's an organization that I knew well. I knew some of the people there. I had a huge admiration for the company.
And so, he really had no idea that I lived in D.C., but when he called, I said, “Well, do you realize that I live in Washington, D.C.?"
And he said, “Wow, that's fortunate." So he laid out the opportunity, and really, the opportunity to be the CFO of a leading financial institution like Carlyle, to help them go through the process of becoming a public company and really thriving as a public company, was incredibly compelling.
At the time, I'd been at Nasdaq for 17 years, and I felt that if I was going to try something different, this was the one opportunity that presented itself that seemed like the right one to take. So I left and went to Carlyle for three years, and I had a great experience there.
And so, he was very supportive. Really supportive. And he could have chosen not to be. But he really was supportive and said, “That's the right thing for you to do, Adena. Go for it."
Rascoff: And I'm sure the class that Nasdaq handled the situation with factored into your decision to return several years later.
But at the time I left Nasdaq, I had no expectation of ever coming back. When I make a decision, you say, “Well, gosh, what do I want to be for the next 15 years," and thinking about the opportunities at Carlyle were really, really exciting to me. So, I left with the intention of spending at least the next 10 to 15 years there.
Rascoff: On the topic of boomerang employees, there's a company that I did a summer internship at when I was in college called Bloomberg — that you know well — that famously does not allow boomerang employees. When you leave Bloomberg, you cannot return — with one exception, which was they let Mike Bloomberg come back. But his name is on the door, and he had left to become mayor.
Rascoff: So, they let Mike back, but other than Mayor Bloomberg, they don't let employees return. It's the only company I'm aware of that has a policy like that. But they actually think that's very important to their culture. It seems that you disagree. I also disagree. We welcome back boomerang employees.
But it's something that I've spent a lot of time thinking about because on the way out the door, it does — it certainly gives somebody much greater pause. A tech company like ours, we have people leave not infrequently to go try a startup, and sometimes their attitude is, “Well, if the startup fails, in a year I can always come back." As a manager, that's very difficult for me to let that person leave.
Friedman: Well, and my view on that one is it's totally up to you as to whether you let them come back. They have to make a determination that they're leaving with the intention of not coming back because if they assume they can come back, that may not be an opportunity. First of all, the company may have moved on. Second of all, they may have found someone better, frankly, to replace you. And third of all, you have to be coming back for the right reasons. You can't be coming back as a default.
That's up to the manager to understand what is driving that employee to come back to Nasdaq. Is it because, “Oh, well, they failed at the other thing, so they might as well come back"? Or is it, “Wow, I really miss Nasdaq, and I really can't wait to be one of your best employees ever"? Right? And so, I think it's up to the manager to make that determination, but you certainly shouldn't assume that you have that opportunity.
And so, when Bob came back and said, “Well, why don't you come back as our president, and you can run these certain businesses," it was an incredibly exciting opportunity for me to get back into that P&L responsibility and to take on such a large part of the Nasdaq ecosystem.
Rascoff: And I would be a terrible interviewer if I didn't ask: When you took Carlyle public, did they end up listing on Nasdaq?
Friedman: They did, actually, and it was really interesting. We went through a full, what I call, “bake-off process." We had both of the companies come in twice. I just got to be a fly on the wall and watch each of them do their pitch. So, it was actually really, really fun.
I tried very hard not to be a part of the decision process, 'cause it really was up to the founders to make that determination. It was fascinating to see how they came at it so differently.
Rascoff: I'm sure that makes you a better CEO of Nasdaq now having been on the client side.
Friedman: Yeah. I'd say certainly going through the process of going public has made me — it really, really informed me in terms of what we could do at Nasdaq to make it a better experience, to help manage the client through that experience and then to realize just how hard it is. We are here to make companies' lives easier, and so what can we do as the exchange to make that process for our customers?
Rascoff: So, a perfect segue into Project Revitalize, which is a project that's important to you. It's something that you and I talked about at the Microsoft CEO Summit.
Friedman: That's right. I'm glad you remember.
Rascoff: I don't know if you had actually formalized it as a full initiative at Nasdaq at the time. But for our listeners, the basic issue here is there are, I think, half as many public companies today as there were a decade or two ago.
Rascoff: And many fewer IPOs. Of course, that's bad for Nasdaq's business, but it's also bad for the economy. It's bad for innovation. It's bad for the country, the world. There are a lot of different reasons why, and I think reasonable people disagree on the specific reasons.
But you're spearheading a group of initiatives at Nasdaq to try to address this. Why don't you describe what you're working on?
Friedman: Sure. Well, I think the first thing is we had to determine that there really is a problem. I think that we have been seeing this problem manifest itself over a long period of time, and so therefore you don't realize necessarily each year that you go through it that there is a growing issue.
But I would say that over the last three years, it's really culminated into something that's a known issue today, which is that over time the government has placed so many requirements on companies as public companies and the process of going public has become so much more challenging, the nature of investors has really become very different and that the environment around being a public company is very different today than it was 10 and certainly 20 years ago.
So, why do we care, and why should anyone who is listening to this care? The first thing is that 86 percent of all job growth in the United States since 2000 has come from companies after they have gone public. So, when we look at the companies before they're public and after they're public, 86 percent of the job growth came after they went public, and that's just in the last 17 years. If we look over a longer period of time, it's over 90 percent.
Rascoff: Partly because being public provides them with access to permanent capital, which allows them to grow. And so, if they're not able to get public, there won't be as much job growth.
Friedman: That's right. So, the whole purpose of going public is to give you access to growth capital. It's really a shot in the arm to allow you to grow and expand your business, and so if you don't have that now people say, “Yes, but there's so much private capital out there. It's so readily available. Why do I need to tap the public market so I can grow that way?"
And for some companies, and a very small subset of companies, that is, in fact, true that they can use private capital to do that. But for the majority of companies, they really still do have to ultimately access public capital to really get the amount of capital they're looking for. I think that we are assuming that that's available to everyone in the private markets, and it's not.
The second thing to realize is that when companies do access private capital, and they have all of this ability to grow using private capital, well, where is that private capital coming from? And I come from private equity. I'm a huge believer in private capital as being part of the ecosystem.
But that private capital is being made available to the wealthiest in the country, right? It's the wealthiest in the country that are generating that private capital and making it available to those companies, which means the vast majority of retail investors don't get access to these growth companies until they go public.
Rascoff: So when Microsoft went public in — when did Microsoft go public, in the early '80s, I think?
Friedman: Mid-'80s, mmm hmm.
Friedman: That's right, and Amazon went public. They were $300 million in valuation, and they're now $400 billion. Another great company actually was Applied Materials that was here yesterday. So, they went public in 1972, the first year that Nasdaq existed. At that time, they were generating maybe $10 million in revenue, and today they are generating $14 billion in revenue.
Rascoff: And so, all of that appreciation accrues to investors, whether they be institutional investors or retail investors. It's egalitarian.
Friedman: Or retail. It makes it so that every investor gets to access it as opposed to a subset of investors. I think that private capital providers will say, “Yes, but we represent pensions," and that's totally true. But the average retail saver does not get access to those investments.
And I think it's really in our — I think it's frankly the government's responsibility, and it's Nasdaq and every exchange's responsibility to try to find a way to make the public markets more inviting for companies. So, we have a whole range of changes that we would like to see and that we will be strongly advocating for and pushing to make sure that we create a more inviting environment.
Proxy firm reform. The ISS and Glass Lewises of the world, should they have to have more regulation and oversight to make sure that they're doing the right thing for the companies and the investors?
Friedman: It depends on the country. So, in the UK, that is absolutely true. They have an obligation to report a full report twice a year, and then they do these interim reports the other two quarters. I think that's a good model to consider.
Friedman: Yeah. In fact, that's one of the things we said in there. There's also tax reform and things we can do on the tax side. There is, in fact, litigation reform to make it so that companies have a fairer environment when they're dealing with shareholder class action suits.
And then I think that then there's market structure. So, is every company being treated the right way in the public markets with a one-size-fits-all market structure, and should we be looking at a market structure that really is more tailored to smaller companies versus larger companies?
Rascoff: Okay. Wow, well, a lot to think about there. Obviously we went public relatively early as a company. We had $15 million in quarterly revenue, and people thought that was perhaps too small to go public. We went public with about a $500 million market cap, and we really followed that — it's quaint. You're right. People don't tend to do that anymore.
Now, most of the appreciation that has occurred at our company has accrued to public market shareholders, not private market shareholders, because we went public relatively early. In Zillow Group's case, it has been hugely successful and the right decision to have gone public early.
So, they also understand the potential of it. They can really get involved and engaged in understanding what benefit they're getting, and therefore they can understand why this company is gonna be a growth company, right? So, it actually has been a great success story.
The post Nasdaq's Adena Friedman on the Power of Going Public appeared first on Office Hours.
Uncategorized Innovation Leadership Mentorship spencerrascoff.com office hours nasdaq adena friedman
Nasdaq’s Adena Friedman on the Power of Going Public - dot.LA
Spencer Rascoff: I'm in Times Square today at the Nasdaq market site with Adena Friedman, CEO of Nasdaq. Hi, Adena. How are you?
And then we take all of the data and analytics that are generated off of our exchanges as well as other information that we gather, and we provide a lot of insights and analytics to all of the customers in the capital markets, whether they're corporate clients or investment management clients or, obviously, the broker-dealer clients. We feel just so fortunate to be in the center of the capital markets globally today.
And then we also generate a lot of information coming off the trading engines, and that information we then sell to give people transparency into what's happening in the markets. That also is a revenue stream.
We then have our index data. We create a NASDAQ 100. We have $150 billion of assets under management tied to our indexes, and that's a revenue generator. And then we provide software and services to corporate clients as well as to other exchanges around the world and broker-dealers, and so that's a technology product base that we have revenue off of as well.
Rascoff: A much more diverse revenue stream than most people realize. So, let's talk a little bit about your career. You started as an intern at Nasdaq.
Rascoff: And what was your career path like during that, I guess, two-decade stint? And we'll cover when you left and then returned in a moment.
Rascoff: And we talk a lot at Zillow Group about career development and career pathing. Sheryl Sandberg in “Lean In" — on this podcast she talks, of course, about how career development is more like a jungle gym than a career ladder.
Friedman: Sure. Well, I would say that it was a jungle gym within the groups that I was in. There was no set career path for me. There was nothing in Nasdaq that had job families. It was very much still a very, what I call, “organic organization" in terms of looking at how to develop your career.
And I had a few times when I had to look around, and I said, “Wow, should I go and really focus in on marketing, or should I go take this product management job?"
And I had great mentors and sponsors within Nasdaq that really said, “Adena, you are someone who really likes to run a business. You should become a product manager. The marketing job is interesting, but it's not really — it doesn't play to your strengths as well as this other thing." So, I was able to move up through the organization but really with a lot of sponsorship.
Friedman: Sure. Well, I do think my personal opinion is that both sponsorship and mentorship — it very much has to be a natural activity. You can't force a sponsor or force a mentor on someone. I think that you, though, have to curate and develop that relationship.
When it comes to mentoring, I think it's an easier thing to curate where you start very casually, and you say, “Well, gosh, I really admire this person," whether that's a person inside the organization or outside the organization. If you ask them to have coffee with you one day, and you give them enough notice, most of the time they're gonna say yes.
Then once you have that coffee or have a meal, and you realize you have a good connection with that person, and they're giving you good advice, and they feel good about the advice they're giving you, they're likely to do it again. And if they do it again, then you have established yourself with someone who you can rely on to help you.
Friedman: It definitely was on me, and frankly, at the time you don't even realize you're getting sponsorship, right? So, with mentors, I do feel like you are realizing that you're going in and touching other people and asking them for their advice. But with sponsorship, you're just — it's so natural that you realize, “Wow, that person just really helped me out." So, it was much more organic than it was planned.
I think Nasdaq has definitely developed its mentorship program, but to me sponsorship really needs to become — it needs to be a naturally developed thing. It's somewhat the responsibility of the employee and of the manager.
Rascoff: So, a note to recruiters, by the way, 'cause I get a lot of calls from recruiters too. It's usually super anonymous and vague. It's like, “It's a leading industrial company. I can't tell you who it is." So, maybe recruiters should be a little bit more transparent to get the return call.
Friedman: Exactly. And it was funny because my family lives in Washington, D.C., and I had been commuting to New York for many, many years. I had gotten very used to it. So, it was very much part of our lives. But at the same time, Carlyle is the really premier financial institution in Washington, D.C. It's an organization that I knew well. I knew some of the people there. I had a huge admiration for the company.
And so, he really had no idea that I lived in D.C., but when he called, I said, “Well, do you realize that I live in Washington, D.C.?"
And he said, “Wow, that's fortunate." So he laid out the opportunity, and really, the opportunity to be the CFO of a leading financial institution like Carlyle, to help them go through the process of becoming a public company and really thriving as a public company, was incredibly compelling.
At the time, I'd been at Nasdaq for 17 years, and I felt that if I was going to try something different, this was the one opportunity that presented itself that seemed like the right one to take. So I left and went to Carlyle for three years, and I had a great experience there.
And so, he was very supportive. Really supportive. And he could have chosen not to be. But he really was supportive and said, “That's the right thing for you to do, Adena. Go for it."
Rascoff: And I'm sure the class that Nasdaq handled the situation with factored into your decision to return several years later.
But at the time I left Nasdaq, I had no expectation of ever coming back. When I make a decision, you say, “Well, gosh, what do I want to be for the next 15 years," and thinking about the opportunities at Carlyle were really, really exciting to me. So, I left with the intention of spending at least the next 10 to 15 years there.
Rascoff: On the topic of boomerang employees, there's a company that I did a summer internship at when I was in college called Bloomberg — that you know well — that famously does not allow boomerang employees. When you leave Bloomberg, you cannot return — with one exception, which was they let Mike Bloomberg come back. But his name is on the door, and he had left to become mayor.
Rascoff: So, they let Mike back, but other than Mayor Bloomberg, they don't let employees return. It's the only company I'm aware of that has a policy like that. But they actually think that's very important to their culture. It seems that you disagree. I also disagree. We welcome back boomerang employees.
But it's something that I've spent a lot of time thinking about because on the way out the door, it does — it certainly gives somebody much greater pause. A tech company like ours, we have people leave not infrequently to go try a startup, and sometimes their attitude is, “Well, if the startup fails, in a year I can always come back." As a manager, that's very difficult for me to let that person leave.
Friedman: Well, and my view on that one is it's totally up to you as to whether you let them come back. They have to make a determination that they're leaving with the intention of not coming back because if they assume they can come back, that may not be an opportunity. First of all, the company may have moved on. Second of all, they may have found someone better, frankly, to replace you. And third of all, you have to be coming back for the right reasons. You can't be coming back as a default.
That's up to the manager to understand what is driving that employee to come back to Nasdaq. Is it because, “Oh, well, they failed at the other thing, so they might as well come back"? Or is it, “Wow, I really miss Nasdaq, and I really can't wait to be one of your best employees ever"? Right? And so, I think it's up to the manager to make that determination, but you certainly shouldn't assume that you have that opportunity.
And so, when Bob came back and said, “Well, why don't you come back as our president, and you can run these certai
n businesses," it was an incredibly exciting opportunity for me to get back into that P&L responsibility and to take on such a large part of the Nasdaq ecosystem.
Rascoff: And I would be a terrible interviewer if I didn't ask: When you took Carlyle public, did they end up listing on Nasdaq?
Friedman: They did, actually, and it was really interesting. We went through a full, what I call, “bake-off process." We had both of the companies come in twice. I just got to be a fly on the wall and watch each of them do their pitch. So, it was actually really, really fun.
I tried very hard not to be a part of the decision process, 'cause it really was up to the founders to make that determination. It was fascinating to see how they came at it so differently.
Rascoff: I'm sure that makes you a better CEO of Nasdaq now having been on the client side.
Friedman: Yeah. I'd say certainly going through the process of going public has made me — it really, really informed me in terms of what we could do at Nasdaq to make it a better experience, to help manage the client through that experience and then to realize just how hard it is. We are here to make companies' lives easier, and so what can we do as the exchange to make that process for our customers?
Rascoff: So, a perfect segue into Project Revitalize, which is a project that's important to you. It's something that you and I talked about at the Microsoft CEO Summit.
Friedman: That's right. I'm glad you remember.
Rascoff: I don't know if you had actually formalized it as a full initiative at Nasdaq at the time. But for our listeners, the basic issue here is there are, I think, half as many public companies today as there were a decade or two ago.
Rascoff: And many fewer IPOs. Of course, that's bad for Nasdaq's business, but it's also bad for the economy. It's bad for innovation. It's bad for the country, the world. There are a lot of different reasons why, and I think reasonable people disagree on the specific reasons.
But you're spearheading a group of initiatives at Nasdaq to try to address this. Why don't you describe what you're working on?
Friedman: Sure. Well, I think the first thing is we had to determine that there really is a problem. I think that we have been seeing this problem manifest itself over a long period of time, and so therefore you don't realize necessarily each year that you go through it that there is a growing issue.
But I would say that over the last three years, it's really culminated into something that's a known issue today, which is that over time the government has placed so many requirements on companies as public companies and the process of going public has become so much more challenging, the nature of investors has really become very different and that the environment around being a public company is very different today than it was 10 and certainly 20 years ago.
So, why do we care, and why should anyone who is listening to this care? The first thing is that 86 percent of all job growth in the United States since 2000 has come from companies after they have gone public. So, when we look at the companies before they're public and after they're public, 86 percent of the job growth came after they went public, and that's just in the last 17 years. If we look over a longer period of time, it's over 90 percent.
Rascoff: Partly because being public provides them with access to permanent capital, which allows them to grow. And so, if they're not able to get public, there won't be as much job growth.
Friedman: That's right. So, the whole purpose of going public is to give you access to growth capital. It's really a shot in the arm to allow you to grow and expand your business, and so if you don't have that now people say, “Yes, but there's so much private capital out there. It's so readily available. Why do I need to tap the public market so I can grow that way?"
And for some companies, and a very small subset of companies, that is, in fact, true that they can use private capital to do that. But for the majority of companies, they really still do have to ultimately access public capital to really get the amount of capital they're looking for. I think that we are assuming that that's available to everyone in the private markets, and it's not.
The second thing to realize is that when companies do access private capital, and they have all of this ability to grow using private capital, well, where is that private capital coming from? And I come from private equity. I'm a huge believer in private capital as being part of the ecosystem.
But that private capital is being made available to the wealthiest in the country, right? It's the wealthiest in the country that are generating that private capital and making it available to those companies, which means the vast majority of retail investors don't get access to these growth companies until they go public.
Rascoff: So when Microsoft went public in — when did Microsoft go public, in the early '80s, I think?
Friedman: Mid-'80s, mmm hmm.
Friedman: That's right, and Amazon went public. They were $300 million in valuation, and they're now $400 billion. Another great company actually was Applied Materials that was here yesterday. So, they went public in 1972, the first year that Nasdaq existed. At that time, they were generating maybe $10 million in revenue, and today they are generating $14 billion in revenue.
Rascoff: And so, all of that appreciation accrues to investors, whether they be institutional investors or retail investors. It's egalitarian.
Friedman: Or retail. It makes it so that every investor gets to access it as opposed to a subset of investors. I think that private capital providers will say, “Yes, but we represent pensions," and that's totally true. But the average retail saver does not get access to those investments.
And I think it's really in our — I think it's frankly the government's responsibility, and it's Nasdaq and every exchange's responsibility to try to find a way to make the public markets more inviting for companies. So, we have a whole range of changes that we would like to see and that we will be strongly advocating for and pushing to make sure that we create a more inviting environment.
Proxy firm reform. The ISS and Glass Lewises of the world, should they have to have more regulation and oversight to make sure that they're doing the right thing for the companies and the investors?
Friedman: It depends on the country. So, in the UK, that is absolutely true. They have an obligation to report a full report twice a year, and then they do these interim reports the other two quarters. I think that's a good model to consider.
Friedman: Yeah. In fact, that's one of the things we said in there. There's also tax reform and things we can do on the tax side. There is, in fact, litigation reform to make it so that companies have a fairer environment when they're dealing with shareholder class action suits.
And then I think that then there's market structure. So, is every company being treated the right way in the public markets with a one-size-fits-all market structure, and should we be looking at a market structure that really is more tailored to smaller companies versus larger companies?
Rascoff: Okay. Wow, well, a lot to think about there. Obviously we went public relatively early as a company. We had $15 million in quarterly revenue, and people thought that was perhaps too small to go public. We went public with about a $500 million market cap, and we really followed that — it's quaint. You're right. People don't tend to do that anymore.
Now, most of the appreciation that has occurred at our company has accrued to public market shareholders, not private market shareholders, because we went public relatively early. In Zillow Group's case, it has been hugely successful and the right decision to have gone public early.
So, they also understand the potential of it. They can really get involved and engaged in understanding what benefit they're getting, and therefore they can understand why this company is gonna be a growth company, right? So, it actually has been a great success story.
The post Nasdaq's Adena Friedman on the Power of Going Public appeared first on Office Hours.
Uncategorized Innovation Leadership Mentorship spencerrascoff.com office hours nasdaq adena friedman