Thankful For A Merely “Yucky” Period

Dear Clients, Employee-Partners and Friends,

After over two years of living with Covid, the significant recent economic and capital markets challenges, and the many social and political issues around the world, it was no surprise that our firmwide Town Hall on Tuesday morning this week was laser-focused on how to cope and live in the current world. Enormous wealth has been lost these past six months, everyone’s job is now much tougher, there is massive pain from major unsettled geopolitical tragedies, and we are all still learning how to live through a pandemic. That said, many of us have been through far more intensely critical periods of pain in our careers and thankfully the current environment, while truly unfortunate, is NOT one of those systemically catastrophic or paralyzingly painful periods we have experienced before. For lack of a better word, this period just feels incredibly “yucky,” and it is compounded by the fact that every one of us is fighting each day against the formidable foes of mental and physical exhaustion. This is why it shouldn’t have been a major surprise that, during our Town Hall after we released our second quarter’s earnings (best described only as “reasonable”), we received more questions from our 5,000 employee-partners than we had in the combined last two years. What was clear to us is that people’s concerns are deep, emotional fatigue is real, and all of us are looking for comfort and confidence about the future. Unfortunately, this is a time of great transition on many counts, and it may take some time to reach the other side to find our desired sense of restored equilibrium. The key is not to despair or catastrophize, but rather to find purpose and direction. In this vein, as we often do, we share below a summary of some of what we discussed at our Town Hall, as well as some additional thoughts, all aimed at hoping that just one of these may help you and your team better cope with the present and best navigate through the “yuck” as together we all get to the other side, which we always do.

On the minds today of our people and perhaps yours, and what we think about it:

1. Has the Strategy Changed? People need re-confirmation that the strategy and course we have been on together is still the plan. There can of course be pivots or adjustments, but we all need to know what the long-term vision is and how we are now going to get there together. Even if this has been repeated ad nauseum during more robust times, it needs to be communicated even more often when things are murky. It is even ok to materially change your strategy if the evolving world requires it, but most good, long-term strategies will continue to be good and it may be the timing and intensity that needs to be addressed rather than a complete pivot. Regardless, over-communicate, as we all need comfort and confidence.
2. Lots of New Joiners. If your business is like ours, there are many people new to your company and, in many cases, they are just starting to come into their offices for the first time. These people need and deserve to know what is expected of them and what they must do to be successful. They need help integrating into the firm’s culture and becoming a true partner to their new team. When times are good and everyone is super busy, it happens more naturally. When times are more challenging, long-term partners can be even more distracted or disjointed, and this process can become challenging. We intend to do our best to not have a larger workforce, but rather an ever stronger and more united team.
3. Layoffs? Nobody likes to say the word, let alone execute the plan. In fact, during the heat of the pandemic some firms announced that there would be no layoffs at all. We never said that. What we said was that we will continue to do what we have done every year: people who underperform, are not fully committed, have lapses in judgment regarding ethics or who are not constantly reinventing themselves and growing, will always be at risk at Jefferies. We have this philosophy at Jefferies that has served us well for decades: “If you do nothing arrogant or ‘too stupid’ during the good times, you can play offense during the more challenging times.” This means we will remain on high alert for great talent that may now be available to join us. We intend to keep playing (what we hope will be) smart offense. We are not looking for reasons to shrink. We are looking for smart reasons to benefit from whichever of our competitors made poor choices in good times or is not fully committed to a sensible long-term strategy. That’s where our head is at – we will always do our best to be mindful of the true nature of the markets and the economy, and we come to work each day to win and eventually grow – this requires pushing and battling through the tough periods as well as possible.
4. Risk. When the world’s financial markets are a mess, we are not looking for people to be heroes. We don’t want anyone to force business to happen that shouldn’t. We don’t want “style creep” seeping into our firm because the normal way isn’t currently as exciting or productive as it was in prior periods. This is a moment to do our best to protect the foundation of Jefferies, use our capital to best support our clients and live to fight another day. It is a long race, but only for those who are able to stay in it.
5. Duration. Everyone wants to know the exact day (preferably time of day) that this tumultuous period will end and life will go back to exactly how it was when we were happier. Human nature dictates that many of us have conveniently forgotten the daily challenges and frustrations from those “happy days,” but that’s a different story. The bottom line is that we are certain of two things: 1) Nobody knows when this will turn; 2) Whatever does happen next, we will never be returning precisely to the way it was before. What we do know is that the sun will rise tomorrow, markets and life will evolve, and most likely sooner than many expect and perhaps as many are capitulating, an inflection point will be reached and the turn will begin. Don’t drive yourself nuts trying to figure out the timeline and instead productively do your best every single day until the sun shines brightly again, as it always does.
6. Empathy. Every single person in our firm is in some type of “yuck induced” funk right now. If you are not, you are either superhuman or never were human. It is natural and healthy for all of us to understand this and embrace this. Nobody should have guilt about it. Everyone should be on the lookout for those with more angst than others and be willing to lend an ear, a hand or a heart.  When times are good, a small handful of leaders can handle the load. When times are tougher, we need everyone at Jefferies to be a leader. That’s how we all get through these periods together and that is how a firm is built. We are asking everyone at Jefferies to help us because we cannot do it ourselves.
7. Different measures of success. When you are pricing 25 deals a week, trading more securities than you ever dreamed and putting out explosively positive research daily that is almost always right, it’s easy to measure success. When you are working harder than ever each day, but much of the payoff is delayed into the future, it can get de-motivating very quickly. Preparing our clients to do countless deals for when various markets re-open is incredibly important and vital to our future. Providing whatever liquidity we can muster in an impossible market can be more valuable than providing a ton of liquidity in a bull market when anyone can do it. Thoughtful strategic research that will help investors see through the vast amount of noise, but will take time to be proven right, is incredibly important and valuable work.  Meetings, sharing insight, building relationships, mentoring, helping recruit/retain great talent and being part of building a firm’s brand and market position will not yield overnight results. However, being part of the cohesive team that takes pride in these longer-term opportunities will make a difference during times like these and even more importantly, set the entire firm up for future success. People may ask, “how did they emerge from yet another crisis stronger and more cohesive than ever?” This is how.
8. Health. If things are a little slower right now and you still can’t find a way to focus on your physical and mental health, there is a problem. Yes, we are all going to give it our all and roll up our sleeves every single day, but this is also a time where we want our people to give themselves and their families a break and make sure everyone’s batteries stay as fresh and re-charged as humanly possible.
9. Prospecting. People get fewer phone calls and requests to meet when there is little good news coming from the people they deal with every day. There isn’t a better time to develop new relationships. Everyone has problems right now, in either their business or their portfolio. A fresh new call with an offer to help with the problem, or even just listen and commiserate, will be well-received. Relationships are made during challenging times and rarely during frothy times. Better yet, if you can help solve a new relationship’s really big and messy problem (who doesn’t have one of those today), you will have a new friend for life.
10. Perspective. Deals are getting done. There is no systemic risk to the system. Interest rates aren’t explosively high. Defaults are not occurring every day. We are not locked in our homes to remain safe. Life is ok. Actually, life is pretty darn decent. In fact, it is much more than our recent “reasonable” results. This is especially true for those of us in the free world.  This is the type of environment in which we need to constantly remind each other how fortunate we truly are, both individually and collectively. Stock prices, asset values and rewards may have peaked for a while, but most of us need to count our lucky stars. Sometimes you just have to be thankful and appreciate that while we are dealing with a “yucky” period, we are doing it together and we should be grateful for the opportunity.

Thank you for listening. We are deeply appreciative of all our people, clients and friends of Jefferies.

Looking forward to a little less “yuck,” but always focusing on the future opportunity together,

Rich and Brian