Remembering Jack Rivkin, Wall Street Research Giant
Jack Rivkin, who introduced many of the innovative research practices that eventually became commonplace at Wall Street’s biggest firms, passed away last week. He was 76.
He was a warm and witty observer of the investment business, and was best-known for his work running Shearson Lehman Brothers’ research department. He also served as chief investment officer of Neuberger Berman, headed research for Smith Barney, was a partner at Idealabs, and most recently, chief investment officer at Altegris. Matt Osborne, the company’s co-founder, said: “We are honored to have had the opportunity to work with Jack. He will be greatly missed.”
In 1986, Rivkin was recruited by Herb Friedman, the head of capital markets at Shearson Lehman, to help the company’s perennially underperforming research department. At the time, the firm was ranked 15th -- a humiliating dead last -- in the Institutional Investor annual survey. Rivkin accepted the job as director of global research. In three years, the department was ranked No. 1 by Institutional Investor.
In rebuilding the department, he changed not only Shearson Lehman’s approach to research, but all of Wall Street’s. This achievement is described in a 2006 Harvard Business School case study, “Lehman Brothers: Rise of the Equity Research Department.”
Many of Rivkin’s innovations were new and untried at the time, but are now considered standard procedure. He introduced a series of metrics to measure everything related to investment banking research. His philosophy: Any and every thing that could be measured should be measured:
We counted everything: how many calls they made, how many pages they published, how their recommendations panned out. Then we made subjective judgments on analyst performance against the backdrop of objective data. By and large the analysts felt that the process was fair, as opposed to our just saying, “You get this much bonus. Why? Because that’s what I think you’re worth.” If anybody wanted to argue about compensation they had to argue against the data.
Rivkin’s quantitative metrics included tracking analysts’ rankings, client calls (minimum 125 per month), research reports, client inquiries, number of calls, trading commissions, written reports, client visits and how much business each analyst generated.
Transparency was important for reasons of both fairness and motivation. All the data were posted for all to see, and the numbers served as both a motivator and a form of accountability.
Wall Street research was a mostly male-dominated profession. Rivkin found a “Moneyball”-like opportunity, hiring highly talented but overlooked female and minority analysts. He also implemented a formal training program for all analysts, which hadn’t been standard on Wall Street.
Lehman was primarily known as a bond shop, with equities and equity research the smaller revenue producer. After three years, Rivkin was appointed co-head of the worldwide equity division. Eventually, after a power struggle between the fixed-income and equities departments, Rivkin was fired by Dick Fuld.
Rivkin described his approach in an interview in Forbes:
The secret to managing a successful business is to monitor performance by the numbers, many numbers. Use objective not subjective criteria. Measuring something affects behavior. Humans respond to report cards. They will try to outperform their peers if goals are clear and ranked. Make it an interactive process and improve over time.
Rivkin co-authored “Risk & Reward—Venture Capital and the Making of America’s Great Industries.”
Rivkin, who had begun his investment career as an analyst at Mitchell Hutchins, later became director of research there. He subsequently became chief financial officer at PaineWebber (now UBS). He was also a director of Dale Carnegie and Associates Inc., a member of the Economic Club of New York, and most importantly, the Anglers’ Club.
Innovators like Rivkin come along infrequently. His insights and ability to change the way we do business will be missed.
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