People and Purpose

For a combined 55 years, the two of us have been on an incredible journey working with all of you to build Jefferies. There have been countless opportunities and challenges at every stage of our time together, and this seems like a wonderful moment to reflect on the thoughts and concerns we experienced along the way and, more importantly, to share our priorities going forward and the opportunities we see.

One of us started at Jefferies almost 33 years ago to the day, but before he walked in the door, he had to spend months in a temporary job working on the liquidation of Drexel Burnham during the day, and manually copying the countless holders lists of almost all the high yield bonds ever issued at night. This exercise was our “big data” secret weapon that allowed us to use our $35 million of trading capital to begin Jefferies’ bond trading business and was the kernel of our investment banking and research businesses. At that snapshot in time, we only had a handful of worries and concerns:

1. Could we cover our payroll? Would our entrepreneurial venture survive?
2. Is this the beginning of a career, or just a potentially smart trade?
3. Do we have enough risk capital to be in this business?
4. Will anyone good agree to come work with us in essentially a startup?
5. Will any client know who we were and trust us? “I’m calling from Jefferies, J -E- F- F- E- R- I- E -S, please tell him I called.”

With the blink of an eye, roughly around 10 years later, there were two of us (along with our other original and always dependable partners) and we all found ourselves faced with another set of critical challenges and opportunities:

1. Could we take our young venture to the next level and build a firm that we are truly proud of with a brand that people recognize and believe stands for something?
2. Could we transform a pure trading commission shop into an integrated firm that encourages and rewards teamwork and partnership?
3. Even though we didn’t really know what the word meant, could we begin to build a “culture” that would provide the glue and substance to build and endure?
4. Could we begin to diversify beyond sales and trading and build a true investment banking firm?
5. Could we build a highly respected and truly independent research team?
6. Could we begin to amass true sector expertise that would allow us to attract the most highly sought after clients?
7. Could we differentiate ourselves among so many strong competitors?
8. Could we find the right strategic partners to help us take advantage of our expertise and knowledge base so we didn’t own too much risk?
9. Would the environment be favorable or would we be short of market opportunity?
10. Could we find other like-minded professionals who would join us in our mission to build a great Wall Street firm? 

Before we knew it, over ten years passed by, and the world was yet more perilous. The European sovereign debt crisis of late 2011 surfaced, and we found ourselves in the midst of a fraudulent short attack on Jefferies, which tried to shake us to our core. Our problems and priorities suddenly became very different:

1. Could we survive an escalating attack full of pernicious lies in an industry where trust is paramount?
2. Would we be able to maintain the confidence of the rating agencies, our regulators and the bond market as we tried to explain the truth?
3. Could we stop our competitors from seizing the opportunity to try to push us out of business?
4. Could we keep our team and clients with us through this period of intense volatility and uncertainty?
5. How do we smartly get more capital to build a moat around us (without asking the government to aid us) so that we could continue to build smartly and aggressively and continue our mission? (Our merger with Leucadia answered this one.)

Somehow, even though we will never forget this painful period (which brought the entire firm tightly together and made us incredibly stronger), another 10 years passed, and we found ourselves in 2020 with a new set of challenges and opportunities:

1. What is Covid-19 and how will we survive it?
2. Could we all really work from home for an indeterminate period of time?
3. Could we get ourselves healthy enough so that we could be there to support our clients in their moments of need?
4. Could we take the next step forward in building our brand and market share during this uncertainty?
5. Could we attract the best people and clients from the largest/toughest competitors?
6. Could we integrate yet more new people into our firm and make them “one” with all of our amazing existing people?
7. Could we complete our transition away from a complicated holding company/merchant bank and get back to our mission of building the best “pure play” global investment banking firm?
8. Could we right size our capital base to achieve a proper ROE for our shareholders?
9. Could we build the foundation for a meaningful and important asset management business?
10. How do we best navigate sudden and significant inflation, a rapid rise in interest rates and a real war in Europe?

This brings us to February 1, 2023. Before we finally discuss the priorities and opportunities today (which is the real reason for this long message), allow us to digress for a moment.

Maybe because of the number of years we have both been at this, perhaps because we each take our responsibilities so personally (as do so many of our other partners throughout Jefferies), or maybe because each of us have had our fair share of personal, real-life challenges and issues, we are both keenly aware of what is going on in the lives of so many of the people at Jefferies. We know from first-hand experience and caring that many people at Jefferies are dealing with, among other travails, things such as: personal mental and physical health issues; grief for siblings, friends, parents or spouses that are very ill or who have recently passed away; painful separations or divorces that are affecting them and their families; managing workload and expectations (real and self-imposed); layoff worries; and career development uncertainties. 

Nobody at Jefferies is immune from issues such as these and the much longer list of real-world challenges and obstacles. If nothing else comes from this note, we hope that everyone gets a little solace and comfort seeing that nobody is alone with any of these burdens.

So, this is why today, February 1, 2023, the two of us are NOT prioritizing:

1. How we further build our brand
2. How we recruit new talent
3. Whether new clients or partners will join us
4. Achieving a specific short-term ROE

This doesn’t mean for a second that we have any arrogance about any of these issues or take any of them for granted. These are all ingrained in our DNA and they will never escape. It’s just that today we see two more pressing and important themes that we believe are essential to our goal of building the best global full-service investment banking firm that will enable us to become the pride of our industry: People and Purpose.

Our People

1. Everyone at Jefferies needs to strive to be selfless and care about each other as human beings and real partners who trust, share and empower each other.
2. We need to recognize that regardless of title or role, both of us and each of you has the responsibility and privilege to sustain our culture and stand for our brand.
3. Mentoring must be embraced and real. Training must be embraced by every one of us.
4. Our relationships must all be shared and institutionalized so we can best serve our clients.
5. The “eat what you kill” mentality no longer exists at Jefferies. It doesn’t mean we have lost even one drop of our entrepreneurial spirit. It just means we think bigger, broader and for longer as we build our careers and our firm.
6. It is pretty clear that too many firms don’t prioritize their people the way they should. This a is HUGE opportunity for us. We can be The Wall Street Firm that is HUMAN. This doesn’t mean we are immune from making the tough decisions that always permeate our industry, but how we make those decisions can and will define us.

Our Purpose

For Jefferies to be the pride of our industry, we must truly stand for something we all believe in and that the outside world also sees in us. We believe we have been methodically building this case (perhaps subconsciously) for decades or perhaps since the very inception of our firm over 60 years ago:

1. We have the potential to be one of the most important global investment banking and capital markets firms, if not the most important, that supplies the very best advice, knowledge, ideas, access to capital and investment assistance to the best businesses and investors on a global basis.
2. We can be the firm that stands for respect and giving back to society and the less fortunate, and one that leads with honesty, transparency and respect for all.

Could it really be that simple? Have all of the decades and ups and downs along the way brought us to the precipice of this amazing opportunity that stands before us?

Of course, not. There is much hard work ahead and many ways we could fail, but in our minds and hearts, the two of us believe this is the opportunity that exists for us today, thanks to the endless hours and sincere devotion all of you (and the many who have come before us) have committed to Jefferies.

If the whole firm leads us in this manner going forward, the two of us are eager to follow.

Thank you for reading this lengthy note; the rest is up to all of us.

With you and with purpose,

Rich and Brian