Reflections on the Death of My Dear Friend, Mentor and First Boss: Jack Rivkin

I learned just a few hours ago that a dear old friend of mine, Jack L. Rivkin, passed away two days ago—on Election Day in the USA.  Each of us grieves in a different way—as an ex-analyst, the way I tend to come to terms with things is by writing about them.  I only ever became an analyst because of two people who, against all evidence, had faith in me—and one of them was Jack.  The other was a woman, who I do not think would be at all offended if I said that no single person has had as much impact on my professional career as Jack—I will miss him immensely.

I read the brief statement announcing his death put out by his recent employer.  It seemed so limited that I felt especially driven to write something which brings to life this extraordinary character and human being.  Much of what I could say about him is personal—of great interest to me—but of no interest to most readers.  I also feel especially compelled to write about something positive—particularly in these gloomy times.  So, permit me to indulge myself with a few paragraphs about this exceptional man and offer, from his life, some bright spots amidst the all the darkness.

Jack was “intellectually curious”.  In truth, I rarely used the expression until I met him, but have probably overused it ever since.  He had that childlike wonder about so many things.  Those of us around him, found his curiosity infectious.  It helped make him a top-flight investment professional, of course, but describing him as such misses the unique point of the man.  That he rose to senior levels at several firms is true, but is a one-dimensional view of someone with many facets, driven always by the passion to listen, to learn, to question, to challenge, to understand and to go beyond.  Meetings with him would always start late and run way over—he could sit and chat endlessly about a topic and was unperturbed by the consequences.  In these anti-intellectual times when complexity is avoided, discussion and enquiry replaced by soundbites and facts rendered irrelevant, Jack’s passion for knowledge, truth and understanding help me to remember much better days.

Jack was gender-blind.  At a time when Wall Street had hardly any women, Jack hired them in abundance.  In fact, as I recall, well over 1/3 of the Research Department for which I worked was female.  And this department became top-ranked on Wall Street, winning many awards.  Jack had taken a team which was barely in the top ten and turned it into the best by far, eclipsing larger and better-funded teams at such Wall Street heavyweights like Merrill Lynch and Goldman Sachs.   This was the subject of one of Harvard Business School’s most popular case studies, “Lehman Brothers: Rise of the Equity Research Department” in 2006.  Inspiring management was a factor, but I always felt his “secret sauce” was that he valued people on their merit—other factors were not of concern.  This was felt not only by the women in the department, but by everyone.  And he was indifferent to the puerile and predictable attempts to undermine what he had built.  Given the recent election and the attitudes revealed, Jack’s humanity and respect for all provides a striking contrast.

Jack possessed courage, as is partly evidenced by how he built his department.  He also was able and willing to speak truth to power—and did so, often suffering the consequences.  Had he played the game at Lehman, where I worked, I think he could have come to run it. I am also of the opinion that had this happened, the firm would not have gone under.  This is particularly significant given that the collapse of that firm nearly brought the global financial system down with it.  But my impression was that those running the firm feared his intelligence, his competence, his integrity and his increasingly well-regarded success across the firm.  He simply had to go.  Jack not only stuck to his principles but was also principled in his work.  This was much less rare in finance in those days but it was definitely uncommon.  I hardly need to draw the comparison again with modern times.

Finally, Jack was a real person.  He had an engaging smile, played very competitive tennis, loved green pens, co-authored a book, could admit when he was wrong, was genuinely liked and admired by those who worked for him, enjoyed young people (always a good sign), wrestled at university, enjoyed life, was true to himself–intellectually honest as well as curious.

I shall miss him greatly and will remain forever in his debt

Does profit with purpose offer something unique?

I have been involved in the area of impact investment since 1999, and during that time there have always been passionate debates about philosophy, politics and money. One of the most recent of these is the debate over the “profit-with-purpose” business and its growing relevance.

For the uninitiated, PWP companies operate like normal businesses, except, crucially, they are values driven. This can be a function of a “mission-lock”, statements a company’s constitutional document, or its more informal mission statement – something that means the business is not just about profit-maximisation. Various bodies have differing views regarding how firm and explicit such statements need to be, but they are distinct from the regulated “social enterprises” which, for example, receive favourable tax treatment under Social Investment Tax Relief.

I am not sure exactly why PWP businesses are suddenly in fashion, but I have several theories. First, I think the pool of capital available for investing in organisations which are destined to deliver sub-market returns is limited. This constrains the growth of impact investment overall. In the US far more deals are transacted and these are in the PWP space. There is also the growth of BCorps – private companies that meet social, transparency and accountability standards – globally, which is very American in its origins and this mentality is spreading. Big Society Capital’s investment criteria are partly set by its founding Act of Parliament, which restricts its capacity to back intermediaries that support PWP businesses. I sense BSC straining against these limitations, which threaten to hamper one of its key goals: the overall growth of impact investment in the UK.

In the interest of transparency, I should note that ClearlySo and its predecessor, Catalyst, have supported PWP businesses since 1999 and have never seen much point in arbitrary restrictions – for example, a maximum permitted dividend pay-out ratio – as the arbiter of what is and is not impact investment.

But opposition to the drift into PWP businesses has some sound philosophical bases. There is a deep-seated fear that the “values of the market” will encroach on the more values-driven impact investment world and change its nature. This view has been well-articulated by commentators such as Dan Gregory and David Floyd. The three-dimensional investment world that ClearlySo regularly advocates – where investors consider risk, return and impact – is still different from the existing mainstream where only risk and return matter. If we lose that difference, the movement for values-driven investing has lost.

I think the debate is also about money. Traditional third sector organisations, especially charities and the more tightly-controlled social enterprises, fear that PWP businesses will crowd them out in terms of investment. This is especially true with regard to the £600m which is under the control of BSC. The third sector sees that money as very much theirs – seeing any encroachment by PWP firms as a threat. I see their point – to see this BSC pot seep away into what are perceived as more mainstream businesses feels threatening.

While I can understand their position, on balance I support the expansion of PWPs. Despite some market values creeping in to impact investing, I believe that the only way to address the scale of social problems we confront is by encouraging mainstream capital into impact investing; seeing the investment world from the 3D perspective mentioned above. Many new innovative models will be supported and tremendous social, ethical and environmental impact will be generated. Traditional charities may indeed lose some of the BSC-backed investment that would have been headed their way, but the £600m, even when combined with matched funding, was never going to be enough to offset the effect of austerity.

This blog was first posted on Third Sector on 28/10/16.