I had spent my first twenty-four years getting ready for Wall Street. I had survived fifteen more years before Salomon Brothers threw me out. At age thirty-nine, the third phase of my life was about to start. With whatever values my parents had taught me, $10 million in my pocket, and confidence based on little more than bruised ego, I started over.
A month after the 1981 meeting in Tarrytown, I realized that Goldman Sachs, the firm that had offered me my first job in 1966, wasn’t going to call and offer me a partnership. If they had, I’d probably have accepted it just for ego reasons. But when they didn’t, I had to knock on doors looking for a job, stay unemployed, or start my own company. The prospect of working for someone else wasn’t exciting. Perhaps no one would hire me. Besides, I’d already done that. As to retiring, I’ve always been too restless. I’d go crazy just sitting around. So the last option, chasing the great American dream, seemed all that was left.
Resources weren’t a problem. I didn’t have to worry about feeding my family. That gave me the luxury of time. I had capital to fund a new business (thank you, Salomon Brothers). I knew how to manage and always thought both names on my old business card (Bloomberg and Salomon) mattered. Thus, I could be an entrepreneur rather than an employee if I wanted to.
Did I want to risk an embarrassing and costly failure? Absolutely.
Happiness for me has always been the thrill of the unknown, trying something that everyone says can’t be done, feeling that gnawing pit in my stomach that says “Danger ahead.” Would it be nice not to have uncertainty, to sit back and “veg out”? When the phone rings constantly, when people keep demanding attention, when I desperately need time to myself, it seems an attractive notion just to “chuck it all.” But then nobody calls, nobody stops by, and soon I’m nibbling my nails and getting irritable, and I realize that’s not what I want. It sounds good. In reality though, I want action, I want challenge.
Work was, is, and always will be a very big part of my life. I love it. Even today, after toiling for 50 years, I wake up looking forward to getting in early, practicing my profession, creating something, competing against the best, having comradeship, receiving the psychic compensation that money can’t buy. Whether you’re in business, academia, politics, the arts, religion, or whatever, it’s a real high to be a participant rather than a spectator. Not everyone gets the chance. But to have that opportunity and not use it? What a sin! (I was once quoted as saying, “Sunday night was my favorite because I knew when I awoke the next morning, I’d have five full days of fun at the office.”)
Think about the percentage of your life spent working and commuting. If you’re not content doing it, you’re probably pretty miserable with the situation. Change it! Work it out with those next to you on the production line. Talk to your boss. Sit down with those you supervise. Alter what’s in your own head. Do something to make it fun, interesting, challenging, exciting. You’ve got to be happy at your job. Sure, being able to feed the kids is the first focus. But when layoffs and promotions are announced, those with surly looks on their faces, those who always try to do less, those who never cooperate with others get included in the layoffs and miss the promotions. This big part of your life affects you, your family, society, and everything else you touch.
So, while finishing my last month at Salomon, I decided to be an entrepreneur rather than an employee. After a decade and a half as a loyal corporate soldier, I’d be my own general. Great. Enough of concept, however. Specifics pay the rent. Unfortunately, until I actually stopped working at Salomon, I didn’t have much time to plan my next moves—or even to worry. I worked my usual 7:00 a.m. to 7:00 p.m. twelve-hour shifts right up to the last day and seldom discussed my next career with anyone. The only time I searched for office space in which to start my new venture was on weekends. No one could say I didn’t give Salomon my all, even at the end.
Still, I did think about it while running. What would I do? Since I didn’t have the resources to start a steel mill, I ruled out that possibility; in other words, I wouldn’t go into industry. Having no musical abilities precluded starting a songwriting business; entertainment was out. Lack of interest in retailing excluded competing with Walmart; Sam Walton’s investment was safe. My impatience with government kept me away from politics (at least at that point in my life); all elected officials could stop worrying. Should I start another securities trading firm and compete with my former colleagues? Been there. Done that. Maybe I could be a full-time consultant like so many forced-out executives. No. I’m not much of a bystander beyond watching my daughter Georgina ride horses. Doing rather than advising others is for me.
What did I have the resources, ability, interest, and contacts to do? The question led me back to Wall Street. It was obvious the economy was changing and services were taking a bigger share of the gross domestic product. My talents, my experience, my financial resources, the momentum provided by the American economy—everything fit. I would start a company that would help financial organizations. There were better traders and salespeople. There were better managers and computer experts. But nobody had more knowledge of the securities and investment industries and of how technology could help them.
All I had to do was find a value-added service not currently available. I conceived a business built around a collection of securities data, giving people the ability to select what each individually thought the most useful parts, and then providing computer software that would let nonmathematicians do analysis on that information. This kind of capability was sorely lacking in the marketplace. A few large underwriting firms had internal systems that tried to fill this need but each required a PhD to use and weren’t available off the shelf to the little guy.
When it came to knowing the relative value of one security versus another, most of Wall Street in 1981 had pretty much remained where it was when I began as a clerk back in the mid-1960s: a bunch of guys using No. 2 pencils, chronicling the seat-of-the-pants guesses of too many bored traders. Something that could show instantly whether government bonds were appreciating at a faster rate than corporate bonds would make smart investors out of mediocre ones, and would create a competitive advantage over anyone lacking these capabilities. At a time when the U.S. budget deficit (financed by billions of dollars of new Treasury bonds and notes) was poised to explode, such a device would appeal to everyone working in finance, securities, and investments—combined, a very big potential market for my proposed product.
At great expense, each of the largest securities companies collected data independently. Worse (for them but not for me), they were practically relying on abacuses and slide rules, or the modern equivalents, such as small handheld calculators, to manipulate that information. I could provide a far more sophisticated system at a fraction of the price. Sharing expenses over many users would give me a distinct cost advantage. And if most firms used my data and analysis, I would be creating an industrywide standard, something which, for competitive reasons, the insiders themselves could never accomplish. Equally important, the advantage I had of not being a broker/dealer, of being beholden to no one, would give my product an independence others couldn’t possibly claim. And best of all, nobody was currently doing it.
* * *
If you’re going to succeed, you need a vision, one that’s affordable, practical, and fills a customer need. Then, go for it. Don’t worry too much about the details. Don’t second-guess your creativity. Avoid overanalyzing the new project’s potential. Most importantly, don’t strategize about the long term too much.
Banks and venture capitalists can be the worst enemies of entrepreneurs. They create doubt in entrepreneurs’ minds, with their insistence on detailed game plans before they lend. They want five-year projections in a world that makes six-month forward planning difficult, even for stable and mature businesses, and they insist on “revenue budgeting” when no one knows what the new product will look like or who’ll buy how much. And worst of all, they think an originator will be helped by their oh-so-insightful views on how he or she should run the new business. Often, they kill off what’s different, special, and full of potential.
In our early years, one venture capitalist who was on the boards of two successful companies came to see us. This guy was one of those self-entitled men who had been born on third base and thought he’d hit a triple. After telling us that everything we were doing was wrong, that we were too unstructured to survive and were stupid because we were unable to predict future growth with clairvoyant specificity, he left to advise his partners not to buy from Bloomberg. The reason? We didn’t show much interest in his views on how to run our company. He sure was right on that account.
I once saw the classic cart-before-the-horse planning error during a presentation by a would-be competitor. He showed slides of his new company’s shipping department. There were conveyor belts, packaging machines, truck-loading equipment, and a group of white-coated technicians ready to send out thousands of units each week. The only minor problem? They hadn’t yet built the first unit. And they never did.
At Bloomberg, we’ve always built the product first. We think about accounting and shipping much later in the process, when those functions become important, at the point where we’d better stop and refocus or get into trouble. Selling is the only process we run simultaneously with development from the start. That gives us feedback as we build and makes the customers part of the evolution process (they come to believe it’s their product). This strategy may not be without risks, but I’ve always thought it ridiculous to make the wedding arrangements before agreeing to the marriage.
The classic consultant’s model for success dictates building in controls at the beginning, but that kind of premature preparation is counterproductive; in fact, it’s usually diverting enough to preclude producing anything at all. You don’t know exactly what you’re going to deliver. You can’t predict in what order things will be done. You have no real idea who will purchase it. Why bother gazing into the crystal ball? If you’re flexible, you’ll do it when it makes sense, not before.
Don’t think, however, that planning and analysis have no place in achieving success. Quite the contrary. Use them, just don’t have them use you. Plan things out and work through real-life scenarios, selecting from the opportunities currently available. Just don’t waste effort worrying about an infinite number of down-the-road possibilities, most of which will never materialize.
Think logically and dispassionately about what you’d like to do. Work out all steps of the process—the entire what, when, where, why, and how. Then, sit down after you are absolutely positive you know it cold, and write it out. There’s an old saying, “If you can’t write it, you don’t know it.” Try it. The first paragraph invariably stops you short. “Now why did we want this particular thing?” you’ll find yourself asking. “Where did we think the resources would come from?” “And what makes us think others—the suppliers, the customers, the potential rivals—are going to cooperate?” On and on, you’ll find yourself asking the most basic questions you hadn’t focused on before taking pen to paper.
As you discover you don’t know it all, force yourself to address the things you forgot, ignored, underestimated, or glossed over. Write them out for a doubting stranger who doesn’t come with unquestioned confidence in the project’s utility—and who, unlike your spouse, parent, sibling, or child, doesn’t have a vested interest in keeping you happy. Make sure your written description follows, from beginning to end, in a logical, complete, doable path.
Then tear up the paper.
That’s right, rip it up. You’ve done the analysis. You’ve found enough holes in the plan to drive your hoped-for Bentley automobile through repeatedly. You’ve planned for myriad what-if scenarios. You’ve presented your ideas to others. You’ve even mapped out the first few steps.
But the real world throws curveballs and sliders every day, as well as the fastballs you practice against. You’ll inevitably face problems different from the ones you anticipated. Sometimes you’ll have to “zig” when the blueprint says “zag.” You don’t want a detailed, inflexible plan getting in the way when you have to respond instantly. By now, you either know what you can know—or you don’t and never will. As to the rest, take it as it comes.
* * *
So, I wrote out my analysis and then ripped it up. I rented a one room temporary office on Madison Avenue. It was about a hundred square feet of space with a view of an alley, a far cry from my previous place of employment, Salomon’s multi-acre forty-firstfloor trading room overlooking the New York harbor. I deposited $300,000 of my Salomon Brothers windfall into a corporate checking account. And fifteen years later, I had a billion-dollar business.
Of course, it took a little while to arrive at Bloomberg’s current headquarters, on Lexington Avenue in New York. And I really didn’t start out all by myself. At the end of 1981, I recruited four former Salomon protégés, three of whom are still with us today, nearly four decades later: Duncan MacMillan, who helped assess what our potential customers might want; Chuck Zegar, who created our software infrastructure; Tom Secunda, who wrote many of the first analytics; and one other guy. In our broom closet of an office, we celebrated our start on day one with a bottle of champagne.
Much to my surprise, on day two, the fourth guy came back to see me. “I’m more valuable than the others. I deserve more than they do,” he told me.
“That’s not true and that’s not what we agreed.”
“Yes, but I have kids to think about.”
“This isn’t about your children,” I said. “It’s you who has the problem.”
“Mike, this is too much of a risk for me with too little a return. You’re going to have to do better for me to join.”
I had several conversations like this with different people after that as Bloomberg grew. They all ended the same way, before they started. Either people believed in me, trusted me, and were willing to take the risk that together we would deliver success, or they didn’t. It was that simple. There was no haggling. I don’t negotiate.
Years later, I told Sue I felt sorry for this guy because he hadn’t swallowed his hubris and joined us back then as we got started. After leaving, he worked for multiple companies, never really making much of an impact or enjoying great success. Had he joined us, he would have done something important, had a great time, and become wealthy beyond his wildest dreams.
“Don’t feel sorry for him,” she said. “He didn’t have the guts for it. The others ran risks. They alone deserve the rewards.”
She was right, of course. At the same time, I do find myself more understanding, if not outright sympathetic. It’s scary taking a chance. If l hadn’t had the money from the Salomon sale bonanza, would I have made the leap? Funny, the older I get, the less simple life looks.
We rented a second temporary one-room office next to the original space and bought a small refrigerator for sodas and a coffee machine for survival. The first order of business once we were together was to go to our respective homes and make sure there were no papers there that arguably belonged to our previous employer. Since we’d all worked at Salomon, I worried someone would allege we were stealing software or ideas. That kind of accusation, however false, could make everything we were trying to do more difficult, from obtaining credit to building a reputation— the latter being especially critical, since our business was to be based on our collective reputation for probity.
Then, to maintain both the style and substance of independence and honesty, as we began getting some basic systems together and building the fundamental financial-information database, we took pains to differentiate ourselves from anything we had previously worked on. We used a different brand of computer. We wrote in a different computer language. We documented when and where we collected information. We even picked a different terminology and syntax for our entire system to use. After all that, it turned out that nobody ever questioned our honesty, but better safe than sorry.
The original four—Bloomberg, MacMillan, Secunda, and Zegar—got along pretty well from the first day (we still do). One time, though, I got annoyed at something they did that could have become a serious problem—so serious that I no longer remember what it was. It was infuriating enough that I stormed into one of our two office rooms and slammed the door shut behind me. I slammed it so hard, the catch broke. I was locked in. Having been an ass, I now had to humble myself and knock on the door until they came to let me out. They played with the handle for a while before it sprang open. I never asked whether the fumbling was deliberate or not.
In 1982 and 1983, we added some programmers: Tom Neff, Mark Purdy, Andy Wu, and Bob Ostrow, who worked on the Hubble telescope but claims no responsibilities for the incorrect curvature of its mirror—and who is still with Bloomberg today. Later, Nick Failla joined to run our nonexistent “Computer Room.” Mac Barnes would become our customer liaison person, along with Susette Franklin, who took over administration—even though we had no customers and little to administer. In 1985, before we had a product to sell, our first salespeople came on board—Stuart Bell, Dana Neuman, and Curtis McCool—followed by programmers Lynn Seirup, John Punturieri, and Fred Mitchell, for whom we had no desks and no computers. We hired operators Rodney Brown, Brett McCollough, James Rieger, and, for London (our first foray overseas), Laurence Seeff. These are people who joined before we had much of a business and stayed through the tough times—and I’m glad to say several are still with us. That’s the kind of loyalty that has always bound us together and promoted mutual respect—and it survives to this day.
* * *
Right after forming our company, we did some consulting. It brought in cash, gave us exposure, and helped provide us with Wall Street legitimacy that would later lead to work for more clients. And it brought our first sale: to Merrill Lynch & Co.
Three powerful members of that firm’s Capital Markets Division—Sam Hunter, Jerry Kenney, and Gerry Eli—had convinced us to study Merrill Lynch’s relationships with institutional customers. After a lot of traveling and research, our conclusions were the kind of insights we probably could have provided at the beginning based on just our Salomon experiences. Nevertheless, they seemed pleased with the report we wrote. We received $100,000 plus expenses for our six-month effort. That paid some real bills.
While Merrill was convincing us to undertake the study, we were told, “If you start to work for Merrill, you’ll never leave.” Well, the four of us didn’t exactly dash back into standard-issue Wall Street life, but the comment was on target nonetheless. The contacts we made and the trust we built gave us our next big break: an introduction to the fellow running Merrill’s Capital Markets Division, Ed Moriarty.
It was to Moriarty that I had to sell our proposed product. I finally arranged a meeting with him and his staff. It took place in an enormous corporate boardroom. At a forty-foot mahogany table, Ed was surrounded by accountants, lawyers, computer programmers, salespeople, traders, administrators—everybody in their company was represented. I went by myself, the way I always went into big negotiations, and was seated to Ed’s left. Hank Alexander, who was running all their software development, was sitting on his other side. I spoke as confidently as I could, making it sound as if our company, Innovative Market Systems, as we were then known, had exactly what Merrill needed (I implied with perhaps some minimal embellishment that everything but the packaging was completed). I made my pitch.
“We can give you a yield curve analysis updated throughout the day as the market moves. . . . We can show you the futures market versus cash and graph it for you as it’s changing. . . . For your traders, we’ll keep track of every transaction as it’s made and mark their positions to market instantly without any fussing.” No one else had done any of these things—and neither had we—yet.
Moriarty turned to Hank Alexander. “Well, Hank, what do you think?”
“I think we should do it internally,” Hank replied. “Build it ourselves.”
“How long would it take?” Ed asked.
Then Hank made his fatal mistake. “Well, if you don’t give us anything new to do”—which was clearly not a practical scenario— “we’ll be able to start in six months.”
And that was my opening.
“I’ll get it done in six months and if you don’t like it, you don’t have to pay for it!” I practically shouted. “Since Hank can’t even start for half a year, there’ll be no time risk. And since you only pay if it works, no cost risk either.”
Moriarty got up. “Well, that sounds fair enough,” he said, and he left the room.
I don’t think anybody had seen a decision made at Merrill that fast. Even I was surprised. But from Ed’s point of view it was a “no-brainer.” He didn’t have any downside; it was win or break even for him. Hank just sat there, speechless, as did everyone else.
When I came back from the meeting with Moriarty, my colleagues were elated—until the reality of a six-month delivery for something that didn’t exist began to sink in. As developers, we’re magicians, not miracle workers. Fortunately, it took Merrill Lynch and Bloomberg two or three months to write a contract. That’s when the six months we promised actually commenced—a little extra time to deliver something we hadn’t yet started.
Month after month as we worked, our mood alternated between elation and a feeling of impending disaster. We weren’t just putting out fires. We were adjusting to major earthquakes when some new software bug forced us to start over. But every day we got closer to building the machine we promised.
Our style then was pretty much the same as today. We took the problem and broke it down into little, manageable, digestible pieces. Then each of us took responsibility for the one we were best suited to do. We needed a proprietary Terminal to give us a technology and marketing edge; we hired an engineer, Ron Harris, to build it for us. We needed a central information storage computer; Chuck Zegar analyzed which was the best and wrote a customized database package suitable for our specific application. We needed some data; Duncan MacMillan collected it, scrubbed it, and typed it in. We needed calculations; Tom Secunda sat at a workstation and did the programming. We needed customers; I went out and sold. We needed outside support; we retained a lawyer, Dick DeScherer, and an accountant/CFO, Marty Geller—both are still with us today. It wasn’t elegant. It was laughably simplistic by today’s standards. But we did it, and it worked.
* * *
Back then, most Wall Streeters didn’t understand the language of general-purpose computers. It wasn’t intuitive. A key labeled “Tab” on a regular PC didn’t mean anything to average folks. Other buttons labeled “Ctrl” (Control) or “Alt” (Alternate) weren’t salespeople’s or traders’ terms. To be better, from the beginning, we built things for real people. We changed “Enter” to “GO” on our keyboard. (Remember Monopoly? “Pass Go and Collect $200.”) “Tab,” “Alt,” and “Ctrl” disappeared, though we brought them back when computer literacy improved. Function keys were labeled in English—no technical gibberish—for parts of the market that the Terminal has data on, such as “Equity” for stocks, “Comdty” for commodities, and “Muni” for information on municipal bonds. Making something practical (“user-friendly” in computerese) became our hallmark.
Merrill wanted its traders to be able to enter a transaction and automatically update the firm’s positions themselves. That wasn’t a big deal, you would think. But the only systems Merrill had for trade entry used massive, unreliable, and complex terminals that wouldn’t fit on regular-size desks, much less in the typical, salesperson/trader’s small cubicle. They connected these terminals to a single, large mainframe without backup. This wasn’t what the market needed.
We built our own compact, low-priced workstations so we could give the reliability that a single-purpose, single-user machine provides. (PCs and mainframes have to do everything with everybody. By comparison, we, with our own “closed,” custom-built hardware and software, could focus on a single task with perfect machine compatibility.) We designed our own color-coded, easy-to-use, small keyboard for the limited space our customers had in front of them. We built a customized square enclosure for the display screens we’d chosen, so users could stack them up vertically. We engineered our electronics to support keyboards and screens over great distances; that way, the actual computer didn’t have to be at the user’s cramped, dirty desk (the way PCs have to be), but could be kept separate, “down the hall,” in a life-prolonging, temperature-controlled, and dust-free machine room. Desk space doesn’t sound important unless you don’t have any.
We made mistakes, of course. Most of them were omissions we didn’t think of when we initially wrote the software. We fixed them by doing it over and over, again and again. We do the same today. While our competitors are still sucking their thumbs trying to make the design perfect, we’ve already gone through five rounds of testing. By the time our rivals are ready to begin development, we are on version No. 10. It gets back to planning versus acting. We act from day one; others plan how to plan—for months.
Then, as now, we had the resolve to see it through. We put together prototype after prototype and drummed up business again and again. We underwent a few very long years. In presentation after presentation, I guaranteed our product was going to happen. It was only a matter of time, I told the clients—and myself. Our efforts and my cash would carry the day.
Halfway through, I must admit I worried. I had committed nowhere near enough money to fund development. And it wasn’t obvious that the customers would appreciate what we were attempting. In my own private world, maybe, just maybe, I questioned the wisdom of jeopardizing my wealth and our reputation. In fact, we were spending what would grow to be a $4 million investment of my $10 million Salomon Brothers windfall. Simultaneously, I was becoming responsible for the families of almost two dozen company employees. I had convinced these people to follow me, and if the venture had not succeeded, I would have failed them, their spouses, and their children, as well as our prospective customers. Fortunately, however, even had I wanted to leave this enterprise behind, there was no graceful way to exit (thank God for ego!), so we plowed ahead.
From the beginning, I was convinced we were doing something nobody else could do. Nor was anyone else trying. Our product would be the first in the investment business where normal people without specialized training could sit down, hit a key, and get an answer to financial questions, some of which they didn’t even know they should ask. Over time, the Terminal evolved to allow users to run an ever-wider array of functions, developed by our more than 5,000 computer programmers and engineers. But it all began with a simple premise: putting more information at people’s fingertips, more quickly and more accurately than they could otherwise get it. That’s still the heart of our business.
So who uses a Bloomberg Terminal? Investment firms, regulators, security issuers, corporations, commercial and central banks, pension funds, universities, and other organizations and individuals.
It gives them the ability to select investments, do an endless number of “what-if” scenario analyses on their securities portfolios, and communicate over a private, secure e-mail and chat system (called IB, Instant Bloomberg) with their customers, suppliers, and associates. Money managers can buy and sell stocks and bonds and every other type of financial instrument. Foreign exchange traders use the Terminal to control exposure to risk and seize market opportunities based on fluctuations in the value of currencies. The Terminal lets them research information unavailable elsewhere. It gives them the ability to retrieve, store, calculate, graph, table, and share data, all customized around their needs.
The same is true for those in commodities—from cattle and coffee to soybeans and sugar—who use Bloomberg to stay on top of constantly fluctuating markets. Research analysts rely on Bloomberg for up-to-the-second, accurate data, news, and intelligence. And before the cloud ever existed, we had created one of our own. From the beginning, the Terminal has allowed customers to create and store as much of their own content from its myriad functions and data so that they can return to it, add to it, and amend it as they see fit. We write code, creating a never-ending stream of functions, but we also give customers the power to tailor those functions around their own individual and highly personalized needs and to keep those permutations in safe storage for future use.
Nearly every type of finance professional has a Bloomberg Terminal—or wants one. It’s the hub of the financial community, an interactive network that processes about 80 billion market transactions a day, along with 15 to 20 million instant messages a day. It all occurs instantaneously and accurately. And it’s available to subscribers 24/7, via the computer on their desk or the app on their phone. Wherever you need us, we’re there. Bloomberg Anywhere, we call it.
Some people say we’re like Google for the financial markets. The analogy works, up to a point. Like Google, Bloomberg collects, categorizes, and stores vast amounts of information that can be retrieved instantaneously—and it’s something that people rely on every day. We employ thousands of people and sophisticated technology to make sure that the information and data we provide is 100 percent accurate. When our customers search on Bloomberg, they know they’re not getting any fake news or phony data. They would never stand for it.
* * *
After the meeting with Moriarty, I was adamant we were going to deliver a product when we promised. It became a joke at Merrill: Bloomberg would deliver the first on-time software project in history. Yeah, right! What chance did we have when, in addition to writing software and collecting data, we had to build our own hardware? (There was nothing commercially available that could do real-time, computational analysis and still let us be profitable. In the early 1980s, we built a multiuser PC, something that took manufacturers more than a decade to replicate.) What chance did we have when no one had ever designed a real-time interactive system that was user-friendly enough for nonspecialists? Fourteen-hour days became typical at Starship Bloomberg. At one point, when nobody in our little electronics sweatshop could remember time off, the entire firm marched into a theater to see a movie and unwind together.
Finally, the day arrived. Almost. The six-month promise ran out on a Saturday, so we could postpone delivery until Monday. And Monday didn’t necessarily mean Monday morning; it could be Monday afternoon. We were constantly having to fix the software, rewriting it again and again to deliver the consistency needed for reliable real-time analysis. “We’re out of control!” I would shout, as each software bug surfaced. “We’re going to be out of business if this continues!” (I still say the same things today.)
Late on that fateful Monday in June of 1983, Duncan and I got into a taxi on Madison Avenue. I carried the Terminal and Duncan carried the keyboard and screen. But it was hopeless. For reasons we couldn’t understand, some newly introduced software problem kept the machine from starting up. Still, we took it down to Merrill while the others kept debugging the computer code. We installed the hardware in the office of the head bond trader, a smart, demanding guy named Danny Napoli. Everybody was standing around, astonished that the machine had actually appeared; nobody really expected delivery when promised. Were we going to be the first team in history ever to do so?
We plugged it in and turned on the power. As I talked, playing tour guide, I noticed out of the corner of my eye a flashing message on our screen saying “Loading Software.” Instantly, I knew that the big software bug that had befuddled us all weekend had been fixed—while we were in the taxi. I could feel the tension ease out of me. It was going to work!
By that time, a bottle of champagne had been opened by a dozen traders. These guys were the friendliest people I had seen in six months. Everybody was laughing and slapping each other’s back. I think we ran one function and the computer crashed. It didn’t matter. It was the principle that we had delivered something on time (close to), something that worked (sort of), a machine that would be useful (somewhat). Then our entire staff went to a restaurant on the Upper East Side to continue the celebration.
When I saw that screen light up that day in the Merrill Lynch offices, I lost any residual doubt that Bloomberg could make it. We had picked just the right project. It was big enough to be useful, small enough to be possible. Start with a small piece; fulfill one goal at a time, on time. Do it with all things in life. Sit down and learn to read one-syllable words. If you try to read Chaucer in elementary school, you’ll never accomplish anything. You can’t jump to the end game right away, in computers, politics, love, or any other aspect of life.
* * *
The data we use in the analytical calculations we supply to our customers have always been dramatically better than anything the competition has. Long before we began developing sophisticated algorithms to collect data, one of the great contributions made to our success was by John Aubert, the man who started our data-collection facility in Princeton, New Jersey. When Mac Barnes introduced me to John in the Merrill Lynch cafeteria in April 1984, he was head of a three-person company consisting of himself, his wife, and his son. They collected sinking fund data (information about how companies and governments pay off the debt incurred from the sale of bonds) and put them into a book called Sinkers. As luck would have it, the day we met, John had just had a disagreement with his only customer and wanted to deal with someone new. We had a cup of coffee together, and by the time the meeting ended, a handshake. His company got absorbed into ours. He collected data better than anyone else and loved the process. His eyes lit up when he talked about information gathering. That’s the kind of person we want in our company—people who love what they do.
John devised a way to give the data-collection process an analytical component. The clerical part became minor. Thus, we got much smarter people to “scrub,” categorize, and store each piece of data where it truly belongs—not just where it’s convenient to put it. They’re not automatons on an information assembly line. They’re traditional analysts who can provide a detailed contextual understanding of a market or industry based on current and historical information assembled from a multitude of sources.
Take our collection of income statements and balance sheets from companies around the globe. Many countries define depreciation differently. In the 1990s, we hired a consultant to teach us all the accounting systems in use around the world. That allowed our specialists to understand each standard. Thus, unlike other databases, ours knows the important distinctions. Companies can be viewed from different locations on a comparable basis. If one company depreciates assets one way, and another company a second way, we’ll highlight the discrepancies up front. At Bloomberg, a problem spurs a solution. That’s what makes us successful.
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For our first product delivery, we built twenty-two Terminals, keyboards, and screens. Our plan was to install the twenty Merrill Lynch had ordered and then use the two others ourselves, for development and backup. Needless to say, we installed all twentytwo in their trading room. They wanted them. And who were we to argue? We needed the revenue. Of course, we had no reserves, but now we had the cash flow to build more machines for ourselves, for Merrill, and for other customers who would soon hear the good buzz on Bloomberg.
In the beginning, we had the inevitable reliability problems. But at least we had something. And that something was Merrill’s system as much as ours. When we first installed it, Merrill assigned two traders to work with us. I thought they’d be real pains and second-guess us every step of the way. Was I wrong! It turned out both of them, Jack Delaney and Jack Meyers, were as responsible for our success as anyone. They were nitpickers, but not in a nasty way; they wanted us to succeed. When they said something didn’t work, they could show us it didn’t work, so we knew for sure it didn’t work, and more important, to help fix the problem, under what specific circumstances it didn’t work. Every day, our system got better as we fixed each problem they pointed out. I’d always rather have a smart, fair, honest, demanding client than a nasty dummy or an “I don’t care” user.
The agreement with Merrill was that if we delivered on time and if they liked it, they would pay us $600,000, a onetime custom development fee, plus $1,000 a month per Terminal for two years. We would receive no money until the entire system worked reliably. So, although Merrill didn’t fund our initial development, they were invaluable to our start-up. We just knew that if we could give them something useful, there was no way they’d walk away. And having one happy customer would lead to the next. For example, the Bank of England, one of the world’s oldest central banks, became a customer within two years. (Bloomberg’s London building, opened in 2017, is now just across the street.) The Vatican became a customer by the mid-1980s. (When their electricians seemed to take forever to install the wire needed for our Terminal, a nun in their funds’ management office told us she’d have the Pope bless our cabling to make the installation process go more quickly. I don’t know if he did, but the next day the installation was completed.) By the 1990s, the World Bank, the Bank for International Settlements, and every Federal Reserve Bank all became Bloomberg clients.
There was still a risk for Bloomberg after Merrill’s first order. It was a long time before revenue exceeded expenses. But after building the machines for Merrill, we had money coming in and a product to sell. I remember calculating repeatedly on the back of an envelope, “Twenty-two Terminals at Merrill at $1,000 per month times twelve months per year equals $264,000, plus $600,000. We won’t make a lot of money, but we’ll cover our costs and stay in business.” Today, that amount doesn’t even cover our reception area’s flower bill. But by starting small and working hard, we got where we needed to go, and Bloomberg was on its way.
Over time, along with the growth in our revenue, we hired more employees and became more specialized. Within about a decade, we had human resource professionals and accounts receivable and accounts payable people. We had a contracts department, a communications department, and an administration department. We employed controllers, lawyers, bookkeepers, consultants, accountants, tax advisers, and so on, just like any other big company.
Amazingly, for our first three or four years in business, I did all those functions. I also simultaneously worked full-time selling our services, negotiating all our supplier and customer contracts, and running the company. Never before or since did I have as much fun and as challenging a time in business.
Today, Bloomberg has the very best service and installation professionals. But back when we started, the original half dozen of us, after finishing our regular jobs, would go into clients’ offices on weekends and do these functions as well. During the summer, with the air-conditioning turned off in those sealed skyscrapers, the heat sometimes hit 100 degrees Fahrenheit under the new customers’ desks where we crawled to lay our cables. Amid old McDonald’s hamburger wrappers and mouse droppings, we dragged wires from our computers to the keyboards and screens we were putting in place, stuffing the cables through holes we drilled in other people’s furniture—all without permission, without giving any thought to any fire law or building code. It’s amazing we didn’t burn down some office or electrocute ourselves. At the end of the day, ten or eleven o’clock at night, we’d turn it on and watch what we’d created come alive. It was so satisfying.
We improvised everything as we went along.
Need to deliver the product? We transported the equipment in the back seat of a yellow taxicab. Import/export regulations? We just carried it into the next country in our luggage. Did we obtain passes to get computers and keyboards and screens into and out of buildings, past the security guards? “Hey, man. Going to get coffee. Want a cup?” They wave you through every time. Inventory tracking? “Did we install two or three at that last place? Beats me.”
I used to write all the checks myself. I signed every contract. I paid every bill. I did the hiring and firing. I bought the coffee, sodas, cookies, and chips we nibbled on. I emptied the wastebaskets and dusted the window sills. I wrote and handed out the paychecks personally to each and every one of our employees working in New York City, thus giving me the chance to follow up on project and people development, to offer encouragement, or to “bust a few chops” if need be. By the 1990s, there was a specialist for each of these functions.
Those were the best days, the first few years in the early 1980s. We all were involved in every aspect of our company. I helped design furniture, select equipment, demonstrate our capabilities to prospective customers, order phone lines, collect data. I used a screwdriver as much as a pencil. As we grew and turned these functions over to newly hired specialists, I felt like I was losing a child to adolescence. Good for the kid, but painful for the parent.
Moving from “hands-on” to “hands-off” management was a gradual, and not all that pleasant, process for me. I like doing things myself, getting my hands dirty. If we were to grow and not be dependent on yours truly, turn it over I must. That doesn’t mean I was happy about it, but the more we grew, the more I came to appreciate the importance of delegation. Anyone who tries to micromanage a large organization will fail in the end.
One of the growing pains small companies experience is when outside contractors are brought in who aren’t invested in the company’s success. Often, when we “farmed out” a project to others, I’d be reminded of the difference in Bloomberg’s pioneering culture compared to others’ standards, and I’d wish we’d done it ourselves. A consultant comes in to do something and stops at 5:00 p.m. Everyone “inside” works until 7:00, 8:00, or 9:00 at night, until the project is done. Once, we hired an electrician to “pin” (put plugs on the end of) a bunch of 25-wire, color-coded cables. It was one of those things that had to be done perfectly (i.e., red into No. 7, blue into No. 19, green and red stripe into No. 24, and so on, as specified on some highly detailed schematic drawings) or the computers would crash. The electricians’ union shop steward assigned us an experienced guy who was hanging on until retirement, arguing that his age gave him the patience to do this tedious task without error. A month later, after tearing our hair out trying to find the reason nothing worked, we discovered he may have had lots of good qualities and work habits, but he was legally color-blind. Every single connector was wrong. The waste in computer programmers’ time diagnosing the trouble was enormous. (The next electrician just cut off all the ends and did the job again from scratch. Needless to say, we had to pay for both electricians.) Outsiders at best do only what’s asked. Insiders do what’s needed.
Even today, when I watch a visitor throw a paper towel toward a wastebasket in the bathroom, miss, and just walk away, I want to scream. I react the same way when I see someone walking by a piece of scrap paper on the floor and ignoring it. Perhaps I’m compulsive, but I stop and pick it up, even at someone else’s place. Your company is one of your families, and the office is that family’s home.
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America really is the land of opportunity and home to more start-up enterprises than any other country. In this country, banks, venture capitalists, and stock exchanges are all accustomed to funding new ideas. The United States has a culture that prizes innovation, its social hierarchy is primarily built around merit, and it rewards the risk taker. Low barriers that encourage trade, publicly funded research that spurs innovation, and favorable tax laws that encourage entrepreneurship have been critical to our nation’s growth. Yet lately, Washington has been walking away from them and making us less competitive in the global marketplace.
Not all ventures succeed here, of course. Myriad other companies started at the same time we did, many with capital, enthusiasm, and potential. Some had transitory success. Like a balloon, they expanded rapidly and eventually exploded. We think those that lasted were the companies with philosophies and management practices that were appropriate for the time, well articulated to employees and clients, and consistently applied. Through both good and bad periods, staying power, we believe, requires team leadership in a constant direction, one that the organization understands and accepts. The winners have this kind of leadership. We hope we do!
Bloomberg philosophy may sound strange to “outsiders,” but not to those who matter—us. We’ve always assumed that even if we’re paranoid, they probably are out to get us. While you’re reading this, we’re thinking about how our competitors are plotting to take the food from our children’s mouths. They must be attempting to beat our quality, provide better functionality, undercut our reputation, and mislead us as to their direction. And if they aren’t, they should be.
To counter this attack (whether real or imagined) in every way, we’ve got to improve just to stay even. Each of us at Bloomberg has to enhance his or her skills. Every element of all our products must be improved. All our expenses need reexamination and our customer service should be enhanced. The basic assumptions behind our business must constantly be reassessed, off-line and out of sight. When we say we’ll do A, we’ve got to do A, but internally we’ve also got to prepare for B and C in case the world changes or we’ve erred in our judgment. We really believe we won’t die, but that doesn’t mean we don’t buy life insurance just in case.
The difference between stubbornness and having the courage of conviction sometimes is only in the results. Since the first twenty-two Terminals were installed at Merrill Lynch, we’ve developed into a global, multiproduct company with more than 300,000 subscribers. Sure, we’re inflexible, if that means we don’t react every time a news article claims a competitor’s “to-be-introduced” product will be our downfall. But we change. We do things today we said “never” to years ago, and we no longer do other things that were our sine qua non then. Our customers, resources, and opportunities constantly shift. Our policies do too—when and at the speed we want them to, not just because we’re being goaded by some outsider who doesn’t have to deal with human beings, pay bills, or suffer the consequences of a hastily made wrong decision.
To run our organization, we’ve got to be consistent. But that doesn’t mean we have to have the same consistency forever. What’s appropriate in one part of our development isn’t necessarily so in another. Henry Ford’s infamous, arrogant statement that “You can have any color car you want as long as it’s black” wasn’t wrong. It worked for his company when he was the only large maker of autos. But he ultimately switched to a multicolor strategy when others came along with comparable vehicles and changed the competitive landscape. My job is to recognize that time in our business in advance and lead the organization into the new world.
For instance, one of our biggest growth areas has been what we call the “Enterprise” business. Virtually every financial firm is operating in a vastly more complex regulatory environment with many more requirements around transparency and risk management than existed before the financial crisis of 2008. That makes transaction processing and data management more crucial than ever, and it gives us an opportunity to offer our clients still more valuable services to support their information technology and operations. The kind of work that was long called “back office operations” has grown exponentially, into a world that is now referred to as “post trade services.” For instance: The new regulations that forced more standardization of derivatives and clearing also created demand for new technology to support it. With the industry experiencing more and more electronification and automation, running large firms is a lot more complicated than it used to be. We help managers do it, by providing the state-of-the-art infrastructure they need to be efficient and keep pace with their competitors who are using our services.
Another tenet of Bloomberg philosophy is that our main asset is not our technology, our databases, our proprietary communications network, or even our clients. It is our employees. Improving the rest is far less important than the care and feeding of ourselves and the maintenance of our culture. Physical plant, compensation politics, personnel policies, promotion, training, and so on—all of these at Bloomberg are designed with our culture in mind. The prospect of losing our culture—open, nimble, innovative, driving, caring, cooperative, unafraid of risk—is a bigger threat to our company than any outside competitor.
Nevertheless, we also periodically face the fact that our competitors started out lean and mean too. They may be overstaffed today, but they didn’t get that way deliberately. People at those companies never sat around trying to hire mindlessly. Every time they added someone, it was done with good reason. Likewise with us. But our world evolves, and people change. If we always add and never cut, why will we be different? We must have made some mistakes.
Infrequently we do have to face the issue of someone who just can’t do the job. Very seldom do we have the stomach for the process. But that’s what management’s all about. What are we doing with the bottom 10 percent? Do we as managers have a plan to improve those employees’ productivity? Are there better places for them in our company? Have we sat with them and attempted to address their problems, improve their attitudes, provide counseling, discover personal problems we can help with, retrain them? And if nothing works, after all that, while we’re doing well and can afford to be generous, no matter how distasteful facing the inevitable may be, have we exercised our responsibility to upgrade our staff? Management’s obligation is to all of us in the organization. We sink or swim together, and when someone’s not carrying his or her weight, everyone in the company suffers. It’s painful, but nature is filled with examples of extinct species that didn’t improve the breed. We don’t want to be one of them.
Most companies never upgrade until they are forced. When you read of a management’s “decisiveness” in making large sudden layoffs, ask yourself what they’ve been doing all along. No change in labor requirements happens suddenly. If they’d been minding the store, they’d have stopped additional hiring years earlier, retrained their excess workers for other positions, and improved everyone’s productivity so as to avoid the downturn and layoffs.
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Doing things differently has been basic Bloomberg from day one. If the world’s going left, we often go right. In football, going around the line when you are a light running back usually makes more sense than going up the middle through the heart of the other team’s defense. For us too. If our competitors’ strength is their balance sheets, we try noncapital-intensive strategies. If they concentrate on one part of the world, we focus on another. Letting them define the rules is a sure way to come in second. And in life, unlike in children’s games, second place is first loser!
We will survive if we can control our own destiny. We’ve come a long way since Merrill’s first order, but the challenge is still fundamentally the same. What’s in our interest? Who’s going to take us there? And most importantly, are we taking care of the current clients who got us this far?
Bloomberg has always treated its existing customers at least as well as its new ones. Not everyone else does the same. The next time a magazine subscription comes up for renewal, watch what happens. The first request asks you to pay full price. Don’t sign. The second’s at a lower price. Don’t sign. The third’s better still. Let it expire and they’ll practically pay you to subscribe again. Why some companies give a better deal to their worst customers, I’ve never understood. What’s the incentive to be a good client? Treat your customers well and they’ll stay with you forever.
Our pricing policy for all our products tries to reward the best clients over those not so good: the five-person firm with five Terminals over the thousand-person firm with one hundred Terminals. Size isn’t everything. Intent matters, too. Sure, we want the giant orders, but we don’t forget that the Big Guys are with us because we’re the small ones’ champion.
The same with pricing. Want a special deal? If we give it to you, how could you be sure we’re not giving your competitor an even better one? To publish one price and then negotiate secretly with those you want to favor or those who complain the loudest—that just encourages confusion, dissent, uncertainty, and unpleasantness, not to mention what it says about the seller’s ethics. Favor one client over the other and, when the roles reverse, the favored client forgets and the initially disadvantaged one remembers.
At Bloomberg, we have a published price for the Terminal and generally stick to it. If we do make an occasional exception, it’s usually for the small shop on the verge of bankruptcy. My sympathies have always been with the struggling up-and-coming firm anyway. We were once like that, and to this day I remember who helped us and who didn’t. Besides, if a company chooses another’s product over ours because of small price differentials, we don’t have a long-term customer.
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From unemployed to having my own growing business was a lot of work. I loved every day of my fifteen years at Salomon Brothers. I was just as ecstatic “doing my own thing” building Bloomberg LP. In both venues, I worked six-day weeks and twelve-hour days. In both, I cared about the company and other people there. In both, I’ve strived and thrived. And in both, I knew when it was time to leave. At Bloomberg, I don’t want any manager here to do the same thing for too long, and I shouldn’t either. That’s why I left to run for mayor.
Before I entered City Hall, people always asked which I liked better: working for others or working for myself. Many assumed the answer was the latter. But I was not sure. Certainly, I made much more money being an entrepreneur, but I remember every day at Salomon as being just as challenging and just as much fun. Let’s leave it that I’m a lucky guy. I had two careers—and together, they prepared me to pursue a third, in public service. More on that later.