Financial History Issue 132 (Winter 2020) | Page 17

do the right thing. And the right thing is to meet your objective function, which is to provide value to your clients. Money becomes the outcome. It’s when organiza- tions make money the objective and not the outcome is when things go awry. And that’s what we lived through. So, it turns out one of our core values is to do the right thing. It turns out that’s the embodiment of John Whitehead’s busi- ness and political career. And I’m deeply appreciative to receive this honor in his name. PETER A. COHEN Chairman & CEO, Andover National Corporation I want to thank everyone who’s here tonight for coming. Bill Donaldson, you went public when I was in Bermuda. Sandy Weill called and said, “Get home, we’re going public.” We were one of the three that actually went public at that time, which is the principal reason Shear- son became the firm it became—because we had permanent capital, and you (Bill) inspired us, so I want to thank you for that. Dan (Shulman), you were so inspiring. It’s something I’m really going to take to heart and think about how I can incor- porate it into what I’m going to be doing going forward. And, James (Gorman), as I said to you before, Morgan Stanley has always held a special place in my heart because when we were a very small firm in the early ’70s—CBWL-Hayden Stone— nobody took us seriously. We merged with Shearson Hammill in 1984. Some- body wrote in Barron’s that this was like rearranging the deck chairs on the Titanic. And the guys at Morgan Stanley were always very supportive of us and I am very proud of the fact that much of our ex- sales force resides now at Morgan Stanley under James’s control and leadership. I want to thank my friend, Karen Seitz, who introduced me to the Museum and has really inspired me to want to be more involved. The more I thought about it, the more I realized how important the Museum was. It’s irked me my entire career that every time I’m interviewing people for a position, I ask them what they know about the history of the busi- ness, and I find that they know nothing. Nobody takes the time to read it, study it or understand it. And I think it’s really a shame that we don’t inspire this in young people who want to come to work in the industry. The Museum is very important because it does represent the history of the coun- try. Without the (financial) history, we wouldn’t be the country we are today. And you can track it in so many ways. One of the interesting things I learned as I was getting ready for this was that we all think that New York was the epicenter of finance back in the day, back when Hamilton laid out the framework that he envisioned for the financial markets. But we weren’t it; it was Philadelphia. Philadelphia was the number one city for finance up until 1817. And I don’t think they get enough credit for it. Nevertheless, we started the stock exchange here in 1792. The first one failed. Then 24 people got together and made a pact, and the second one succeeded. But it wasn’t the New York Stock Exchange. That didn’t happen until 1817, and it’s been going on ever since. The conclusion one has to come to is the financial system, which is made up of banks, brokers, insurance companies and all manner of financial intermediaries, is unique in this country and the world. There is nothing that’s ever been like it, and I think there never will be anything quite like it. I want to jump ahead and talk about what I think are the seminal events that have allowed us to get to where we are today, which really occurred in the 1970s. We couldn’t be—whether it’s the banking system or the securities business—what we are, had it not been for Intel introduc- ing the microprocessor. Because we didn’t have the capability of processing the busi- ness that we were doing in the ’60s. In 1962, we had a market crash, and the tape ran four and a half hours late. Nobody had any idea what prices were. In ’87 during the crash, when they already had [better] technology, the tape ran about 20 minutes late. It still wasn’t great. But with the microprocessor we were able to build the back-office systems that we needed and the pipes we needed to grow this business almost infinitely. If you look back to the early ’60s, volume could be three to five million shares a day; in the ’70s it could be 15–17 million shares a day; and we now average about 6.5 billion shares a day in the markets in the United States. Without that major thrust from tech- nology, financial services and the financial industry wouldn’t be what it is today. Today there’s about one trillion dollars’ of commercial paper outstanding. Deposits in banks are about $10 trillion. And this is scary: derivatives on banks’ balance sheets and securities on firms’ balances sheets are $525 trillion. So think about that if some- thing goes wrong. I think we’re at, as Dan said, a very critical juncture point in the history of the country, and of the financial markets. I’m not going to predict; I have no idea. But I know we’re someplace the world has never been before, both economically and in the financial markets. I think we had a peek at what can happen in ’08. I hope that all of the safeguards that we tried to put in since ’08 do what they’re supposed to do. Because when you look at the total- ity of the financial system, the one thing I came to understand when I learned what the back office did, was that all of these firms—the banks, insurance companies and the securities firms—were all inter- connected. We saw that in ’08 and, if any- thing, we’ve just gotten bigger since then. I’ve had an amazing 50 years that I’ve been doing this. I’m starting on my third iteration of my career. I was a little anxious about the concept of receiving this award and whether there was a message embed- ded in “Lifetime Achievement” because I didn’t think I was done! I want to thank everyone, and I very much look forward to the future and building new businesses.  www.MoAF.org  |  Winter 2020  |  FINANCIAL HISTORY  15