Plenty life left in Old Economy companies

David Komansky, CEO of Merrill Lynch, finds it ironic these days that the head of a veteran financial-services company is asked to lecture on the New Economy.

5 min read
David Komansky, CEO of Merrill Lynch, finds it ironic that the head of a financial-services company gets asked to lecture on the New Economy these days.

"Our company has been called 'a relic from the Cro-Magnon era'," he said. "But because of the patterns that started in the last year, some of the virtues of the Old Economy companies have now become more accepted."

Komansky, who met with students at Wharton last month as part of the Zweig Speaker Series, had some interesting advice to offer his audience, including this: There is no time like bad economic times to start a business career.

"Bad times breed opportunities. Those who don't have the courage to drive hard in bad times fall by the wayside," Komansky said, noting that he is not quite sure an economic downturn is coming in any case.

"But I would not hesitate to come into the financial services business in bad times...This business gives extraordinary people a chance to do extraordinary things."

At the same time, Komansky pointed to the arrival of a "new age" for business: "Globalization, deregulation and advanced technology will continue to make businesses both larger and more nimble; national borders have become irrelevant and learning to function all around the world is now a fundamental part of the financial services business."

And despite the dot-com shakeout, there is no denying the effects of technology. "Strangely, technology may have affected our business more than any other," said Komansky. "The best-selling product on the Internet is not music, not toys, not flowers or gifts, but stock."

The New Old and New Economy
What this all means, he added, is that to be successful in the New Economy, you need a blend of Old and New Economy virtues. In recognition of this, Komansky proceeded to offer his audience a list of five paradoxes of the New Economy.

First, he said, scale is just as important as innovation. "In the business press over the last few years, it was always reported that the small companies could be more innovative, that to be creative, you had to be small and flexible," he said. "But I feel that if you want to take these ideas and do something about them, you need scale and resources. Before long, only a handful of global players will be able to bring these new ideas to all markets," he said. "Frankly, we welcome that and want to be a part of it."

The second paradox is that in a world of endless choices, brand matters. Despite all the new Internet companies out there, only a few, like Amazon.com, have become household names. "I've heard it said that if you took away all the products from Coca-Cola and left the managers with the brand name, they could build up the company again in five years," he said. "But if you took away the brand and left them with the products, they'd be out of business in those same five years. New or Old Economy, brand still matters."

Third, in a world filled with information, relationships are critical. Financial services companies that only offer online services will find themselves falling off, Komansky said. There may be a lot of information for consumers, but they're still looking for someone with integrity to interpret it. He acknowledged that Merrill had to start an online service to compete with Schwab, but he also feels that young customers these days who trade online will, in a few years, want a trusted firm to manage their assets.

The fourth paradox of the New Economy is that age doesn't matter, but seizing opportunity does. "I give a lot of credit to Amazon and Dell and Yahoo. Those companies found new ways of buying and selling that are quite important," he said. "But neither should we assume that with the dot-coms crashing (only) old companies will thrive. Old or new, the news, as it has always been, is to not only see what is next but to have the resources to accomplish it."

Finally, he said, in the New Economy, the most satisfying job experiences can be found in traditional workplaces. Komansky, a large man with a wry smile, said that wearing shorts to work is something he would never consider. "Thankfully, I think," he said, looking down at his imposing physique.

"At Merrill, we take pride in our diversified employee pool, our more casual workplace, our flexible work rules, our faster decision making. Short-term perks can't take the place of creating long-term goals and values. The most successful corporations...offer employees a variety of experiences and nurture their dreams over a long time."

Komansky was not hesitant to use himself as an example. He has been with Merrill Lynch his entire 32-year career. "I came into the industry in 1968, and between 1968 and 1975, if there were 12 up months in the economy, that was a lot," he said. "I felt then and I feel now that these kinds of experiences breed opportunities for those who are prepared to work hard. Expectations, for one, are lesser in a downturn.

"But I am a pretty focused person, and I set a course for myself that I wanted to be in management and I just marched forward," said Komansky. In 1989, Merrill transferred him from sales to trading. "I didn't know a stock from a Venus probe. But I used the opportunity to learn.

"Our industry is full of unpleasant type-A personalities such as myself," he added with another wry laugh. "Never stand between me and a place I want to go. Don't confuse my civility with complacency.

"What I recommend is not to (succumb) to the negativity that inevitably surrounds you," Komansky said. "There is never a time not to dream. Too many people are afraid to have dreams. Those who do and are determined to accomplish them are those who become successful everywhere."

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