#95 - Driving Growth Through Change (Stephen Philipson, Vice Chair and Head of WCIB at U.S. Bank)

Speaker A: Foreign.

Speaker B: Welcome to Investing in Integrity. I'm Ross Overlein, CEO and co founder of Scholars of Finance, a rapidly growing organization on a mission to inspire character and, uh, integrity in the finance leaders of tomorrow. If you're an investor, finance professional or student, uh, aspiring to make an impact with capital, this show is for you. Investing in Integrity brings you conversations with leading minds in finance to help you learn how you can make finance a force for good by investing in integrity. On today's episode, we were joined by Stephen Phillipson, vice chair and head of wealth, corporate, commercial and institutional banking at at US bank, one of the largest banks in America. Over the past 15 years, Steven's helped build and lead a diverse portfolio of businesses across asset management, capital markets, commercial, real estate, equipment, finance, impact finance and much more. Serving clients from individual investors to global institutions. He joined US bank amidst the 2009 financial crisis, bringing with him experience from Morgan Stanley and Wachovia. And since then, he's played a pivotal role in expanding U.S. bank's capital markets capabilities and integrating impact finance into the bank's broader strategy. Today, he leads the collection of businesses that sit at the intersection of markets, mission and client success. It's really interesting. He has a deep enthusiasm for corporate finance that he's had since he was young. He shares his life story beginning his journey in finance, which I thought was super interesting. And he's really passionate about smart and wise risk taking, innovation, leadership and investing in the next generation of talent. So we had a really, really interesting conversation covering all those topics. He shares his journey, his life story. We get to hear more about how he's built such a robust capital markets platform at uh, US bank, how he thinks about risk and return safety with innovation striking the balance between those his leadership principles, his core values, and how he creates a unified strategy, that vision and culture across such a diverse array of businesses that he oversees. And then we get a dive into AI, what that's going to be doing to finance and to the world. And we dig into that a bit and how he's thinking about the next generation of talent, what he looks for in leaders, whether early career or very seasoned leaders that he's bringing into his groups, especially in the face of how AI is going to be changing the industry. This was super interesting, a really fun conversation. U.S. bank's a founding partner and we're so grateful for their support, uh, scholars of finance and I've really enjoyed getting to know Stephen and this conversation was really fun. I hope you find it as insightful as I did. Without further ado here is Stephen Philipson. Stephen Phillipson, it is such a pleasure to have you on the Investing and Integrity podcast today, sir. We have a lot of ground to cover and we do not have enough time, so we'll jump right in. But first, can you share with our audience how you're doing and where you're calling in from?

Speaker A: I'm doing great, and thank you for having me, Ross. Uh, it's an honor to be here on your podcast. I am calling from Charlotte, North Carolina, where I am based. I work for U.S. bank. I'm Vice chairman and head of the wealth, corporate, commercial, and institutional banking division at U.S. bank. U.S. bank is based out of Minneapolis, so I also spend a lot of time up there. So you usually either catch me in our Charlotte office or Minneapolis office.

Speaker B: It's a beautiful time of year in Minneapolis. Well, weather's getting a little more frigid, a little more invigorating.

Speaker A: That's the R between having the two offices is I could be in Minneapolis when the weather's nice up there in Charlotte, when the weather's nice here.

Speaker B: Nice. It's an honor to have you on the podcast. U.S. bank is one of our founding partners at, uh, Sof, uh, Ray Badaminsky and Andy Saceri and Richard Davis, all, of course, who have now moved on to their next chapter in their careers, struck the founding partnership, and really helped us get this off the ground. It was born in Minneapolis at Piper when I was interning there, and at U.S. bank, we've had Gunjan on the podcast. She was amazing. Several other amazing leaders from U.S. bank, and we're really grateful to have you here. And you and I had a really interesting call about a month and a half ago. Just getting to know each other more. I found your story really interesting. Can you begin the conversation today by just sharing with our audience who doesn't know you, your story and your journey?

Speaker A: How far back do you want me to go, Ross?

Speaker B: Uh, as far back as you want to start, sure.

Speaker A: So I grew up in New Orleans, Louisiana, just down the Mississippi river from Minneapolis, and went to college in a small liberal arts school in Virginia, Washington and Lee, which I refer to as the Harvard of Southwestern Virginia. And as I went through school there, I was an economics and East Asian studies major, was really interested in classes like money and banking, about how the M markets worked, and started reading the Wall Street Journal every day. Was really just fascinated with corporate finance and commerce and companies raising capital and buying and selling each other. Didn't know what I really wanted to do long term. But uh, a lot of friends older than me in school would go off up to New York and do investment banking analyst programs. And I thought well that sounds pretty neat. You can live in New York where I'd never been but obviously knew a lot about New York, go into this great training program and then I'll do that for two years, do this banking thing for two years and then figure out what I really want to do. And so I ended up going and working at Morgan Stanley in their investment banking analyst training program and worked in the capital markets group helping companies raise capital in the bond market. And it was sort of what I was interested in in terms of being at that front end of the growth engine of the economy, of raising capital that Len allowed companies to build factories and grow and create jobs. And I was very fascinated with the capital markets. I loved the fast pace and enjoyed New York. Although working 110 hours a week, I didn't get too much time to really enjoy New York from a day to day, but enjoyed living there and after a couple years did well in the analyst program. And they said do you want to stay be an associate and sort of skipped going to uh, business school. And they called it an accelerated career path. And that sounded good to me. I didn't really want to go back to school. And they said do you want to try doing something different for a couple years? And I had an opportunity to go work on the fixed income, the bond trading desk where they would trade Fannie Mae and Freddie Mac bonds. And a gentleman who I worked for in the capital markets group was moving up to run that desk. And he said we had this one desk that we've tried all these different people in the seat and we've fallen down in the rankings to number 12. And the agencies, Fannie Mae and Freddie Mac are telling us if you don't start supporting that program that huh, trading business more, you're going to stop getting the big lucrative bond deals that we do. And, and he said we tried a bunch of people in the seat. You're a hardworking kid, we've got nothing to lose. Why not try a kid in the seat and see what you can do. And so I took over this trading book where I'm managing several billion dollars in risk, which I had no idea what I was doing. But I thought this was just this great opportunity to learn a new skillset. I found that the people in my other group, the capital markets group, who were particularly effective had done something different in their careers and brought that to the job. So I thought, this is a great opportunity. I'm going to go learn how to manage risk, learn how to trade, and then dec what I want to do next, maybe go back to that other area. And like I said, I had no idea what I was doing in terms of managing risk. First of the month, the payrolls report comes out. It's a big market moving report. And I remember my boss tapped me on the shoulder before the report and he said, how are you positioned going into the report? And I said, well, I think if it's a bad number and rates rally, I'm pretty well positioned. And if it's a good number and rates sell off, I think I'm also pretty well positioned. So I'm pretty neutral going in. And the payroll data hit and the market sold off massively. And I looked at my screen and I was down like $5 million. And I thought, okay, I thought I was neutral, but I wasn't. It turned out I didn't really understand the concept called duration. It was an expensive way to learn, but I learned and got a hang of it. And within six months, Ed helped move Morgan Stanley from being number 12 in the league table rankings for that product to number one and got a lot of kudos for that, was given more responsibility, ended up trading a broader book. Was doing great, loved Morgan Stanley, great firm, great culture of excellence. And a few folks from around Morgan Stanley around that time, this is 2005, left Morgan Stanley to go move down to Charlotte to help Wachobi in building out their fixed income business, their corporate bond business. And they started calling me and said, we know you're from New Orleans. That's like right next door to Charlotte where we are now. And, um, being New Yorkers, they didn't know that Southern geography that well. And so they thought New Orleans was right next to Charlotte.

Speaker B: It's a little further.

Speaker A: But they said, we're building this business down here, why don't you come down? And I wasn't really thinking of leaving Morgan Stanley, but it was an interesting opportunity. I thought about what I really enjoyed at Morgan Stanley was helping rebuild that agency business. And so I met with them and came down a few more times and really thought, wow, this is an interesting opportunity. What I loved was building some. This is an opportunity to really build something with a big balance sheet behind you, get a great quality of life down in Charlotte. And I went to resign from Morgan Stanley. I had to sit down with the head of fixed income at the time and she told me, you're making the Biggest mistake of your life, your career, you're throwing it away. Commercial banks won't be in this business within two years. This is a fad. This isn't going to be sustained. You shouldn't go. Which was as a, uh, 27 years old. It's pretty daunting to have big figure on Wall street telling you you're throwing your career away. But I went for it. And I figured I built a decent network in my short time up in New York. And if it didn't work out, I could probably get back somewhere. Went down to Wachovia, was, uh, working on a corporate bond syndicate desk, helping build their corporate bond business with financial institutions. So getting financial institutions, banks, finance companies, insurance companies to choose Wachovia to lead their bond deals. And again had some good success sticking to the same playbook that I used in building out that agency business at Morgan Stanley, which was really focusing on clients getting out, marketing out, hustling the competition, and built that business up very nicely. And then the financial crisis hit and Wachovia was not doing very well. And it was clear Wachovia, uh, was not going to make it. And the gentleman who I worked for who had brought me down to Charlotte, Jim Keligrew, who had built out the corporate bond business at Nations bank, bank of America in Charlotte, and had come down the street a few years earlier to do it at Wachovia. He started reaching out to other banks and reached out to U.S. bank. As the only bank at that time in the financial crisis to not have a quarterly loss. U.S. bank had this amazing pristine balance sheet. Really managed through the crisis incredibly well and pitched to them. I built out this fixed income business at a regional bank, nations bank. Been doing it at Wachovia. I've got great talent here at Wachovia. That worked for me at bank of America. You've got this pristine balance sheet. You're the only one that can really grow right now, extend capital in a meaningful way. Why don't we bring this talent into U.S. bank and help you build out corporate, uh, bond business? And at the time, U.S. bank was one of my biggest clients at Walcobia, leading a lot of their bond deals. And so started talking to them. He said, I really want you to do this together with me because you know these guys, they're your client. And I thought about it and I thought the risk of taking a chance on something new, the downside was pretty minimal at that point because it's the depths of the financial crisis and it couldn't really get much worse. Regardless of where you were in the industry at the time. And so things progressed. Wells Fargo ended up buying Wachovia. But we still were talking to U.S. bank and they said, do you still want to do this? Now Wells Fargo's taken over Wachovia, everything's okay. And we said, well yeah, everything's going to be okay. But this is still pretty appealing, the idea of coming to a bank that has outperformed and has really got this edge on the rest of the industry right now, building something from scratch and doing almost like an expansion draft in sports where you get to pick players from all the different banks to come and build it out. And so in the uh, spring of 09, a few of us resigned from Wells, a few from B of A. And when I left Wells, people told me, you're crazy, why would you leave? We've just been saved. We're twice the size bank we were a year ago and we're so well positioned and we're going to grow these businesses more. Why would you leave? But again, I thought the risk was low. It was still pretty bleak in the industry and the upside and the opportunity with the organization was pretty meaningful because what really appealed to me about US bank was they outperformed, they were in this incredible position, but they still had this culture built on humility and there was no sense of arrogance of being this pristine position and there was no judgment of other businesses. It was, we're really humbled that we're in this unique position that we could grow businesses like this. We don't have the expertise. We'd love for you to come and educate us and build out this business and serve our clients. So I left together with Jim in 09. We came over in the middle of 09 to US bank and started building the corporate bond business. Ultimately ended up leading that business and then leading the capital markets businesses and then about two and a half years ago joined the managing committee of the bank. And a year ago when Genjin was elevated to uh president, I took over wcib, which I continue to run today. And that consists of a bunch of our institutional businesses, those capital markets businesses that I help build, commercial real estate, corporate trust fund services, asset management and trust and custody and impact finance as well as our wealth management business on the consumer side. So that was a long version, but it's been a fun journey and still having a lot of fun years later.

Speaker B: First and foremost, I appreciate you sharing a long version. It's a really interesting story and I appreciate you sharing some of the decision making process At a number of critical junctures. You actually answered several of the questions I had in mind coming into this. Just sharing your story the way you did, because I was curious to hear more about why I moved to US Bank. Why make that move in 2009 at such a tenuous time in the markets? Right. The great financial crisis, the housing market bubble and ensuing meltdown. And hearing the thought process was really interesting. One red thread that I hear in the story, even when you talk about your big break, taking the 12th ranked seat on a trading desk, you said you took on billions of dollars of risk. And throughout your story there seems to be this pattern where you are even in the face of Wall street legend saying, don't do that to you in your 20s. You taking the risk. I'm really curious, as you now on the management committee of U.S. bank, you're playing a preeminent role in continuing to scale and grow the organization. How do you think about risk and managing risk? Especially when I think from talking to Richard Davis, he would attribute US Bank's relative success during the financial crisis to the their healthier risk appetite. Right. They weren't getting into some of these really risky business lines that led to so many firms falling apart. It's been durable, steady growth, long term. That's why Warren Buffett was so happy to be a shareholder. How do you balance that? How do you balance what seems to be a strong tolerance for risk with a, uh, culture over decades and decades that's been measured with risk and grown very steadily.

Speaker A: I think it's actually consistent with the stories I was sharing is it's about taking calculated risk. As a bank, our job is to manage risk on behalf of our depositors, our shareholders, our bondholders. And that doesn't mean you're supposed to swing for the fences, but it's about taking a prudent approach to risk and really thinking long term and thinking about all those stakeholders. And I think that's something different to today, sitting on a managing committee versus when I was in my 20s and trading, it was managing risk, hoping I don't have a big loss and get in trouble, get someone mad at me and get fired. The stakes are higher when you're on, um, the managing committee of a bank and there's a $75 billion market cap company is $670 billion in assets that you need to protect. And you're protecting it not just for your own personal livelihood. You're protecting on behalf of those depositors, on behalf of those shareholders, on behalf of those clients, on behalf of the communities that we serve. But again, you still have to take risk. But today when we take risk, when we look at a transaction that a client's asking us to support, it's a calculated risk. We're joining and collaborating across the bank, across various subject matter experts in the business, in our, uh, risk management organization. And that can be for a specific transaction, it could be for a new product determining. There's always going to be some risk involved. But what is our downside scenario? How important is this to a client? What does this mean in terms of the growth of our business, the growth of our franchise and taking that all into account, should we be taking that risk? But it is important that we continue to take risk, but do it in that prudent and responsible fashion. And keeping in mind that there's 162 year history to this organization and we want it to be around for at least another 162 years, 300 or 400 years even.

Speaker B: My hope is that US bank is here in perpetuity. I appreciate you sharing that. It's actually very well aligned that uh, your career of managing risk is a lens that you fundamentally view your role through, that you are protecting the assets of your depositors, shareholders, et cetera. It's really interesting. I would be curious to hear more about how you've been able to grow the business lines that you oversee. Some of the leadership principles, some of the strategies you employed. Can you share a little bit more about the growth of the business lines under your purview over the last 15 years, and some of the leadership principles and strategies that have enabled the really incredible growth you've led.

Speaker A: So there are a few approaches and it depends on the business. Some of our businesses, like that capital markets business, where it's only been around 15, 16 years and competitors have been around 50 to 60 years or a hundred plus years. It's a newer business in the marketplace, but it's in a very established marketplace. So a lot of the opportunity is doing more with our clients. And that can either be getting a greater share of their business or actually getting into products that are established in the marketplace. Because our platform has still been developing, there's this opportunity to expand the product set and do more by offering more of the products that the rest of the industry offers. So that's been one avenue for growth in a business like that. And then we have very well established businesses like our corporate trust business, where we're number one in every market we serve. We're sort of this dominant player and you ask, well, how can you grow? And there we're really just trying to delight our clients and capture a greater share of their business by showing them the value that we can offer, giving them this high touch level of service relative to competitors. So they want to continue to support that certain number one market share and grow that number one market share and then across the businesses. The other way we try to grow is by going to market across all these businesses in a, we call it, interconnected manner. So you take a few of my businesses like capital markets and corporate trust and asset management. When you think about a company doing an acquisition and they need bridge financing and that bridge financing will be taken out with a bond issuance. The proceeds from that bond issuance might be invested in a uh, deposit or money market fund until they're ready to close the acquisition. Historically sometimes we would go to market and a lot of banks go to market in very segmented manner where the capital markets team is talking to them about the financing. The corporate trust team is talking about serving as trustee, the asset management team, and they're doing it in silos. And um, one of the values that we found in having all of these businesses together, one of our growth strategies is going to the company in a coordinated, interconnected manner. So instead of approaching that transaction from three or four different parts of the bank, being coordinated and going together and being able to say to your client, this is sort of one stop shopping, we can actually serve you across the lifecycle of this transaction. So that's been another way in which we've been able to and continue to grow these businesses.

Speaker B: Can I ask about management committee meetings?

Speaker A: Sure, yeah.

Speaker B: It's funny, I've never asked Richard or Andy or Gunjin or anyone what they're like. And I want to preface the question a little bit. We have an advisory board at sof. Uh, uh, Richard is one of our advisors and we used to do these quarterly meetings with all the advisors, all of our board members, our executive team, there'd be 20 people on a call. We ended up winding those back and now we do like one on ones with all of our advisors once a quarter. But still after we stopped doing it, several said, hey, we really liked the group meetings and interfacing with the other advisors and meeting people. We understand that you move to one on ones because it's higher value. We did that because when there's 20 people in a room, you have a two hour meeting. Any individual person, if they're being considerate, can only speak two or three times to let it make space for everyone. But, uh, we still have this annual in person, off site with our advisors, our directors, now our whole management team. It's like 40 of us now, like in a room. KKR, Blackrock, Piper have hosted us in San Francisco and New York for this like two half days. How big is management committee? How many people are in the meeting?

Speaker A: 16 people.

Speaker B: 16 people who are all incredibly bright, driven, have ownership mentalities, feel a personal sense of responsibility for the firm's success. How are those meetings made productive? I'm just curious what the dynamics are in that when it's 16 leaders overseeing an entire institution the size of U.S. bank on a regular cadence.

Speaker A: Yeah. So there's a lot of trust in the room. And that's important. Right, because you do have 16 people that are very good at what they do, very successful, very driven. And it doesn't work if it's a competition in that room. In terms of having the mic and espousing one's view. Some of us are newer to the group. I've been in it for two and a half years and I really was the new guy. And now I feel like more of the seasoned guy. And then we have people that joined just a few months ago. But we spend a lot of time together. So not just in that room, but in a lot of committee meetings that we're on for the bank. A lot of client interaction. And so we spend a lot of time with each other outside of that room, which leads to a level of trust inside the room. So we used to meet every week and it would be like a 30 minute meeting, sort of a report out this what's going on in my business. And half people be on video, half people will be in the room. We shifted earlier this year to meeting every other week and extending it to two hours. And the idea behind meeting every other week was so that as many people could be in the room as possible. So we could schedule other things around that or schedule travel around that. Because we spend a lot of time with each other because we know each other well and trust each other. It's conversation. It's not a competition for having the last word. It's really a good, thoughtful conversation. And sometimes we get into really deep issues like in office dynamic, return to office or compliance. Sometimes it's less in depth and serious. Like might be looking at The Happy Gilmore 2 trailer that the US bank was featured in.

Speaker B: Congrats.

Speaker A: But a lot of it is try to grapple with the issues that impact us across the bank and are sort of most pertinent. And sometimes it's just presenting like there's something big going on in my business that even though it doesn't directly day to day impact the other lines of business or the other enabling functions, we just want the awareness. And so I look forward to that meeting every other week because it is always fascinating what we're talking about and also just hearing the different perspectives in the room given the talent and the experience that's in that room.

Speaker B: Have you seen Happy Gilmore too?

Speaker A: Oh, of course.

Speaker B: Nothing's ever as good as the original. Happy Gilmore was a classic. I grew up on that film. It's pretty cool that US bank was featured in the trailer for the second one.

Speaker A: It was definitely one of the coolest marketing things I've seen us do. It was a proud moment being a US Banker

Speaker B: going out on a ledge there. So we talked about risk a bit and we just unexpectedly got to hear a bit about pushing the envelope more on marketing. Thank you for sharing. By the way. The Dynamics and Management Committee. I'm really curious to hear more about how you think about innovation. Everyone's talking about AI. We've had conversations in the last couple of months with leadership and even my team with folks on the ground across several of our founding partners, the bulge bracket, investment banks, asset management firms, retail banks, et cetera. And there really is a spectrum that we continue to hear of views on the impact that AI is going to have. And that's just one vector of innovation. There's many vectors of innovation. Before we really dive into AI, I just want to ask how you've thought about bringing innovation into U.S. bank into your business lines. How do you think about balancing the safety and security and stability of doing things the way they'd been done with that risk of innovation, of evolution, of changing?

Speaker A: We have to innovate as an industry, right? When you think about what we've seen in our 162 year history, just in a way the world has changed the way banking has changed. We have to constantly innovate or we become irrelevant. Now that doesn't again mean we chase every shiny object, but it gets back to making sure that we are taking the right prudent risks that are appropriate to, uh, stay relevant with the times and also most importantly, to be able to serve our customers. And that's what we're constantly trying to think about in the business in terms of innovation is what are our clients doing, what behaviors are changing with them and how do we need to adapt accordingly. And there's always this fear that if you latch onto this new innovation, you're killing the old and you're making that irrelevant. But when, uh, we were talking about this yesterday in a meeting when ATM machines came out, everyone thought that was the death of the branch and the bank teller. But sure enough, banks and branch tellers are still very important and the ATM is able to coexist with that. And there have been so many instances over the years where new innovations were considered a death sentence for existing norms or industries. But I think it's all about leaning into those new innovations and figuring how do we leverage that for our clients and leverage that to make our existing model better.

Speaker B: How are you personally thinking about AI and the use of AI? We've heard a whole range from David Solomon coming out months ago saying that someone completed 95% of an S1 in minutes with AI, which something that used to take a six person analyst team two weeks. OpenAI has 150 former investment bankers training their model to build financial models. One of our founding partners we just spoke to a month and a half ago and they said at the time of this recording, we're probably going to reduce entry level hiring. We're looking for more advanced degrees who know how to use AI, trying to find the smartest people in the world and teach them finance, which we were a bit surprised by. I thought some of that disruption might come three years from now. And I live in Silicon Valley. I'm a mile from meta headquarters and eight miles from Google headquarters, whatever it is, 10 miles away from Google. We thought that might be three years away and it's already happening now. How are you thinking about the use of AI, how that can change, transform, disrupt the business? How are you thinking about adopting it versus still keeping it at a distance?

Speaker A: I'll, uh, share a somewhat related but unrelated story. I was texting with my wife and one of her friends about something with Halloween. And their friend jokes, yeah, you all should go as the four with two kids. The four of you should go as the Royal Tenenbaums. And my wife joked and said, yeah, our daughters could be Ari and Uzi from the Royal Tenenbaums. And then I took a picture of the four of us, put it in ChatGPT and asked for it to spit out a picture of us dressed as the Royal Tenenbaums with the kids as Ari and Uzi. And it did it like instantaneously. And I sent it to her and it blew her mind. She didn't even know AI had that capability at my fingertips. So she thinks now I'm the AI expert because I was able to do that. But the way we think about it at the bank, we're definitely leveraging the power of it and just getting started. In a lot of ways, it's been incredibly helpful from a, uh, productivity standpoint with our tech engineers as they're developing new platforms and programs. They used to write code and then have a colleague check that code and then go back and make the changes and then have another colleague review the code they'd written and go back and make the changes accordingly. Now they use AI to check that code and like instantaneously. What would have taken many days is being done by AI and the productivity is unbelievable. It's having a meaningful difference in just what it frees us up to do. Whether that's freeing up just those hours from those programs or actually just freeing up financial capacity when you're able to create that kind of productivity. And then in my businesses we're looking at it in areas like our investment services business, corporate trust and fund services. It is a very human intensive business. When you're processing bond payments or administering, uh, loans, fund accounting. And historically, as that business grows, you have to scale up the people to support that growth, which can be inefficient from a cost standpoint. If you can't grow without meaningfully growing your expense. The things that we're looking at is how can we leverage AI to make our teams more productive, such that someone who was working on 10 deals with an AI tool could now work on 20 transactions. And so when you double the workload to 20, you don't need to go higher. So that ability to scale the business without meaningfully having to scale the expense is a really neat opportunity for us. And then we're looking across every business for use cases, whether it's wealth management and defining next best action for clients. You know, in capital markets, we created a program where a, uh, trader can scan the whole inventory of bonds that we have on our balance sheet to meet what a client is looking for in their portfolio. So lots of tools that really just make us more productive, make us faster to market and enable us to scale the businesses. So I'm very excited to see where it goes. And I know there's a lot of fear out there about the power of AI and what it could do and the disruptive nature that it could have, this disruptive impact it could have. But I also remember when the Internet was coming about and I remember sitting in my computer class in high school, a teacher talking about the power of this new tool, the Internet, and how it was going to destroy the world in all these different ways. And it really became an enabling tool that made us more productive and made us more efficient in so many ways. And I think about that the same way with AI, it's going to create a lot more productivity and efficiency, which just frees up human capacity to do that much more.

Speaker B: I hope that you're right long term. I think short term, that sounds absolutely on point. And I'm not an expert. Right. I'm just sharing my own opinion. I'm also highly aware of my biases. Like, we built an organization trying to attract, identify, recruit and develop ethical, compassionate, principled, virtuous leaders and send them into financial services to steward this system overseeing trillions of dollars. And we take that very seriously. And so we hope that entry level hiring continues. We're thinking about how to serve analysts and associates, early experienced hires, as well as just to expand the surface area with which we can service them and help develop them as better future leaders. And in one way, you could do that as a hedge too. The sort of doorway its location and its shape into finance may change. And we're thinking we'll always focus on college students with our nonprofit developing them as leaders. But in this AI world, hey, who else do we have to help get into finance? And what do we have to be teaching the students? To think critically, to be ethical. They still have to be curious and humble and do their research and work hard. You can't get up in front of a client having had AI produce all of your materials and not be able to speak to them. Right. Obviously. And it's still an apprenticeship business in a lot of ways. You know, our thought is long term. Is there a world where the Internet couldn't think? The Internet was replacing the telephone. It wasn't replacing the human brain. And so I'm curious because in that world, we had Steve Ellis on the podcast. He was the former global managing partner of Bain and Now he runs TPG's Rise Fund. It's the largest impact investing fund in the world. Private equity fund, tens of billions of assets. And he's worried about this growing inequality, this growing wealth gap that AI might exacerbate. And you've taken on oversight of US Bancorp, impact finance. And as you know, in our last conversation in sof, we really care about finance being a force for good finance, maximizing human flourishing for everyone and maximizing prosperity for everyone. I'm really curious to hear how in this sort of changing landscape, in this Changing world, how you think about finance remaining a force for good, accelerating as a force for good. And I'd love to have you share more about the impact Finance group and that function, some of the priorities, what you're working on. I'm really excited about it. I'd love for our community to hear more about it too.

Speaker A: Yeah. Our impact finance business, it's really consistent with what the mission is of the whole bank, which is to power human potential. And it's helping, leveraging our balance sheet to help individuals and businesses and large companies, uh, achieve their goals. And impact Finance, what we are doing is supporting clients who are outbuilding affordable housing, renewable energy, helping finance those types of initiatives. And so it ultimately helps support the communities that we serve. We certainly get benefits from it in terms of meeting our Community Reinvestment act goals and tax benefits. But the ultimate impact is leveraging our balance sheet and leveraging our expertise, especially areas like affordable housing. The expertise we have around managing a, ah, construction project from a, uh, financial risk standpoint to help support those clients and ultimately help support all those communities. So it's been this nice business that there is an and to banking that you can have a profitable business as a bank and support communities and clients goals again, whether that's affordable housing, whether that's building out power to support communities or helping reinvigorate communities.

Speaker B: I really appreciate you referencing the and of finance. I'm reading the essays of Warren Buffett by Lawrence Cunningham. Just yesterday I wrote down a quote that he said. He said, I won't close down businesses of subnormal profitability merely to add a fraction of a point to our corporate rate of return. However, I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses and prospects. Adam Smith would disagree with my first proposition and Karl Marx would disagree with my second. The middle ground is the only position that leaves me comfortable. I was really struck by that and I think that maybe captures the spirit of the and of finance.

Speaker A: Yeah, absolutely.

Speaker B: We oftentimes talk about the four values that we teach. Integrity, humility, compassion and excellence. Excellence is requirement in finance to get in, to rise the ranks, to be a leader. And gosh, if there's anything we can all agree on these days, we want leaders in positions of power who also have integrity, humility and compassion. There's an and there, and I want to use that to segue into a question about how you think about leadership whenever we have guests on. One of my favorite questions to ask is what are Some of the leadership principles, some of the core values that you've lived and led by, we talk about integrity, servant leadership, all these things. But for you personally, what are some of your values, some of your leadership principles that have guided you?

Speaker A: So it's interesting because you don't set out to be a leader in a, uh, company, right? Everybody starts as just a regular worker beef. And I don't really think about what is my leadership style going to be. And it just sort of naturally develops. And I'd say my leadership style is really about authenticity and transparency and approachability. It's amazing how teams want to work for someone they feel they can trust, and it gets back to that integrity piece. And when you're transparent either about things going on in the company, in the industry, what the goals or strategies of the company are, and talk to people in a straightforward manner, they really buy into that and want to follow that. And it also, you sleep a lot better at night as a leader when you're operating with that level of transparency and authenticity. And I think it's really important, and it's something that I take pride in demonstrating to my teams. It gets lost a lot in today's world, especially in the world of tweets and sound bites and marketing, that I think a lot of people try to be what they think audiences or employees or the market wants to hear, but people see through that, and it makes a big difference just to bring that level of authenticity to the table every day.

Speaker B: I have to say, and I'm not just saying this to flatter you publicly, but my experience of you has been authentic and approachable. So I just, I want to, as an end of one, say I, uh, definitely have experienced you is in line with what you've just said. I'm curious how you think about forming a transparent, authentic, approachable, genuine, real culture as a leader in your business lines. I mean, WCIB spans a wide array of businesses, from asset management and trust services to real estate and impact finance, which we just discussed. What helps you lead across such a diverse portfolio and maintain a, uh, unified culture and a unified strategic vision when you have so many different businesses, so many different products, so many different groups?

Speaker A: So one is trying to just dive into the businesses and really understand what makes them tick is really important. I can't be an absolute expert on every aspect of my business, but I do need some level of understanding so that I can understand when problems are brought to me, when opportunities are brought to me, when being asked to opine on risk. Having some level of Understanding is important. Part of that is also having very good leaders in place. My job is very easy when I have good leaders sitting on top of those businesses and making them tick every day and keeping the engines running. But there is an aspect of people ask me, oftentimes you oversee this very diverse set of businesses. How do you make it work? And another part of it is finding the connectivity between the businesses. So when you think about all the businesses that I oversee, one common thread is they're all related to the capital markets in some form or another. Whether that is the actual capital markets business. Wealth management very tied to the markets. Corporate trust is based on serving as trustee in marketed securities. Fund services is all about serving asset managers who are managing money in the capital markets. Impact finance, a big part of that is syndicating tax credits out into the marketplace. Commercial real estate, very markets dependent on rates, the direction of rates. And asset management is literally managing assets in the company. So finding that common thread in which you can connect all of these businesses and help the teams within those businesses see a commonality with the other businesses that they're under this umbrella with, which also helps create the opportunities and getting back to that interconnectivity piece, how we can serve our clients in a more coordinated fashion. So it's not always obvious that connectivity between the businesses, but if you get to know them well enough, you see the common threads and you're able to articulate that to the teams.

Speaker B: It's super interesting. I'm curious to hear about how you identify those great leaders. We at SOF are primarily focused on developing the next generation of high performing, purpose driven, principled future finance leaders. And you're known for investing in your next generation of talent. As technology and markets rapidly evolve, what do you believe the next generation of finance leaders will need to succeed both technically and ethically and morally? What traits are you looking for in emerging leaders right now and over the coming years?

Speaker A: What I look for first and foremost is work ethic. I want someone whether they're starting out right out of school or they're an established leader. Someone who I know is going to work their tail off and is working to move things forward for the client, for the company, for their colleagues. It's such an important thing that gets overlooked. And people ask me this all the time when they're looking for mentorship or they'll ask what do I need to do to get to, uh, where you are today? And I always tell them I didn't get into banking with an eye towards being a, uh, Vice chairman at US Bank. I came into banking to learn something for two years while I figured out what I was going to do. Once I realized I enjoyed it, I didn't think about, all right, how do I get to the vice chairman role? I said, what do I need to do to get to the next level? That's my goal, is just get to the next level. When I get to the next level, what do I need to do to get to the level above that? And ultimately, if you're focused on just doing the job that you're in really well, such that you get to that next level, that will carry you throughout your career. And so I think it's just important to have that kind of work ethic and curiosity, a desire to learn not just what you're doing, but what others are doing. And that's going to help create an edge in an AI world. Right? Is being curious and thinking beyond just what the machine is programmed to think about. And then the last thing I look for is communication skills. It's amazing. We talked about for the advent of the Internet and email and a lot of people forgot how to write when email came about. And even worse, it was tweets and texts came about. But it makes a big difference if you can write, uh, a coherent email to a client or to a colleague versus someone who can't because they're used to just shooting off text. And that, I think, is going to be another thing. Regardless of what happens with AI, with technology, that ability to write and talk and communicate articulately is really important.

Speaker B: I appreciate you sharing that. I've had a few friends, when I shoot them, an email are like, Ross, your emails are so formal. Come on. And I'm like, your emails feel like text messages. Come on. So thank you, Stephen. I'm going to quote you next time. I get flack for proper greeting and salutations and punctuation.

Speaker A: I'm the victim of a liberal arts education. What can I say?

Speaker B: Harvard of Southwest Virginia.

Speaker A: Oh, there you go.

Speaker B: Right. Did I get that right?

Speaker A: Yes, you did. Yes, you did.

Speaker B: Stephen, we'd like to end our episodes of the Rapid Fire Round. Can I hit you with a few just rapid fire quick questions just for the first thing that comes to the top of your mind?

Speaker A: I guess. So we'll see.

Speaker B: What are one or two books that you highly recommend any leader in finance or aspiring leader in finance read?

Speaker A: I love Energy Bus. So it's a very simple book. It's about how sort of your attitude and your energy you bring to things dictates outcomes. It's told in the form of I actually had my 11 year old and 13 year old kids read it and they loved it. It's told in the form of a story where a guy, his car breaks down and he's just so negative and it's the end of the world. And then he ends up taking this bus every day where he learns about having a positive outlook and avoiding the energy vampires who drain the energy from a room. And he ultimately gets this conclusion that gosh, if his car hadn't broken down, his brakes had actually given out, if he continued to drive the car he would have gotten in a wreck and it instead set him on this great path. So it's sort of about looking for the bright side in things. Uh, it's just a great book, especially in team dynamics. People start to think about the energy they bring to colleagues, to the room makes um, a big difference. So that's another one I always recommend. Regardless of what you're doing or what level you're at, it's a great read.

Speaker B: I'm going to put that one on my list. The Energy Bus. What is one key daily or regular habit that you do that helps you maintain balance and mental health amidst such a demanding leadership role?

Speaker A: I get up at uh, 5am every morning and exercise. Usually it's a run, sometimes peloton, but it makes a big difference in my day working out, just you decompress, you know, it's the beginning of the day allows me to gather my thoughts, think about the day ahead. I feel just my energy level is much better the rest of the day and it's totally off. If I don't get that opportunity, if I don't have the opportunity, if I have a super early flight or something like that. So I try to do that every day. And I was once traveling with a client, an executive of a company or taking out a roadshow to meet with investors for a uh, securities offering. And his assistant said he needs to be at a hotel with a 24 hour gym and said okay, that's fine. And we're out in California and we were out with some investors at a dinner out kind of late. And he said all right, well I've got to call 8am East coast tomorrow. So it's 5am M here. He said I gotta get up cause I gotta go to the gym at 3am I why would you go to the gym at 3am and he said well you know, I have a form of, I think it was multiple sclerosis and he said the best preventative medicine beyond the medicines I'm on, that the doctors told me I can use is just exercising every day. So when my alarm goes off and I don't want to get up, I think about him, where he was getting up and exercising literally to live. And I'm just doing it to get the runners high. And so I always think about that individual and it motivates me to when that alarm goes off at 5am M every morning.

Speaker B: That's amazing. If you ever get to go on a run with John Gray during business travel, let me know if you've seen his running selfies. They're great. They're great. We're very supportive. Another founding partner. We're very grateful. One last question. This is a layup. You've been generous with your time. We spent some time together. Here we are in the podcast. U.S. bank has been a founding partner of Scholars of Finance and our work to inspire character and integrity. And the next generation of finance leaders would just love to hear your thoughts on the mission and why you might encourage other people to, uh, get involved and try to help.

Speaker A: I mean, I think it's such a great organization in terms of developing the next leaders for this business as we've seen in finance over and over. And it's funny, I'm reading the book 1929 right now, Andrew Ross, uh, Horkin's book. And you're gonna pull. There it is. Oh, very nice, Very nice.

Speaker B: It took some work to get this signed copy.

Speaker A: There have been so many in the world of finance where people have made bad decisions, right. And it's harmed a lot of people. But when you have ethical people who are operating with integrity within our businesses, we can have that sort of compounding math, getting back to Warren Buffett, the power of compounding, but that compounding effect on society. And when you think about the capital that we bring to communities, uh, to people, to cities, towns, states, countries, if we've got the right people in the seats with the appropriate level of integrity, the impact is just exponential. So the fact that this organization is helping to encourage that and develop that, I think is so critical for the growth of our industry and making sure that we don't make those mistakes that have been made for every so many years that set us back, keeping us on that straight line path of growth and integrity, I think is very important.

Speaker B: An amazing note to end. Um, Stephen, thank you so much. We're really grateful for your support for U.S. bank's continued support as a founding partner of the work and really enjoyed this conversation. I have so many more questions. I'd love to have you on again in the future if you would suffer through another hour with me.

Speaker A: Anytime, Ross, I enjoyed it as well. And again, I really appreciate what you're doing with this organization. It's really, it's inspirational.

Speaker B: Thanks again, Stephen.

Speaker A: Thank you.

Speaker B: Thank you for listening to today's episode of Investing in Integration Integrity by Scholars of Finance. I want to share a huge thank you to our advisors, directors, donors, team, and our members who make this all possible. If you like this episode, please leave us, uh, a review on Apple Podcasts. And if you have any feedback for us, you can send it to hellocholarsofinance.org or by visiting our website. Until next time, please join us on our mission to inspire characters and integrity in the finance leaders of tomorrow.