At the End of the Day, It Is All About Culture

To Our Clients

What makes a business thrive and be sustainable across cycles? Why are some companies able to constantly reinvent themselves in an ever-changing world, while others remain complacent with products, strategies and services that worked yesterday? Who is responsible for making sure capital expenditures, acquisitions and investments are smart, targeted, and capital and cost efficient? Who is responsible for convincing clients and investors that the firm’s foundation is strong, honest and trustworthy?

The answers to these and countless other questions that define and determine the success of every business rest in the hands of the most vital asset within every business: the people. People across our industry speak about “fortress” balance sheets. We all know that one weak individual guarding even the largest fort can allow the course of history to change instantly. People talk about businesses with incredible barriers to entry. Without the right people leading innovation and continuously taking smart, calculated chances, every barrier becomes porous, and even the best business models become vulnerable. How many businesses have we seen in recent years with world-class brands that were the envy of competitors? Well, how many of those companies fell because the people entrusted as stewards were arrogant or complacent? And then, when hope was lost, when the right team of people get together with a broken brand, often there is a rebirth and a new chapter begins.

Between the two of us, we have been at Jefferies (and now Leucadia) for 33 years. We have watched the competitive landscape evolve in a multitude of directions. We live in a very competitive industry that often feels like “the Land of the Giants.” We succeed without a trillion-dollar balance sheet, a multi-trillion-dollar over-the-counter derivatives portfolio, our name on a sports arena, ATM machines on every street corner or a reliance on massive bank deposits from individual customers to fund ourselves. We are not too big to fail and we do not have the Federal Reserve or taxpayers standing by to protect us from ourselves if we take excessive risk.

We do have something that today appears to be a more valuable and scarcer resource than ever: we have a real culture of caring. Caring about our clients, caring about the value and differentiation we provide them, caring about the integrity of our profession, caring about the implicit promises we make in our work and caring about each other. We are 3,841 employee-partners around the world who have come together to form the foundation and core of Jefferies. We operate as a team and, as a firm, we greatly value the individual. None of our clients needs to do business with Jefferies (nor any other single investment banking firm or commercial bank, for that matter). The vast majority of our principal competitors believe the source of their strength and competitive position is their balance sheet or name.

We believe our foundation rests primarily in our people, who are the ones who get the job done every day. Don’t get us wrong, we have tons of capabilities. Our parent company, Leucadia, is a $10-billion-market-value enterprise with less than $1 billion of parent-level long-term debt. Leucadia’s brand of 35 years of smart investing and remarkable shareholder results is wonderful to be associated with. Jefferies has a $38 billion balance sheet aimed at serving our clients. We are a full-service investment banking firm with every product and service one needs to meet your needs.

All that said, our only secret weapon is our people. We will remain a strong firm so long as our culture maintains its foundation of being honest, hardworking, transparent, client focused, devoid of politics, humble, aggressive and creative. The day we rest on our enhanced balance sheet, our brand or a belief that our clients cannot do without us, that will be the day we begin our decline—and it might not be a slow one.

We ask you, our clients, as our most important constituency, to remind us every day of our commitments to you and to hold us accountable to the high standards we aspire to consistently reach. Honest and timely feedback allows us to learn and, when necessary, make the right adjustments. What we ask for in return is that—if we are indeed treating you as a long-term client versus a short-term counterparty—you return the favor and treat us accordingly. It is a long race and we intend to win, in partnership with you and our 3,841 culture-bearing employee-partners.

Sincerely,

Rich and Brian