Ethan Berman, was the CEO and founder of the NYSE listed Risk Metrics, until it was bought by MSCI in 2010 for US$1.55b.
RiskMetrics, which was spun off from JP Morgan Chase in 1998 and became the market leader in risk management software systems. We need to transport ourselves back to the late 90s – a time of floppy disk distribution and only a handful of pioneer SaaS companies.
From writing plays in Paris, Ethan ran one of the fastest companies, software or otherwise, anywhere in the world during one of the most interesting modern decades, spanning both the dotcom crash at the turn of the decade and the GFC just 8 years later.
Few have had Harvard Business School case study written about them, nor received a letter from Warren Buffet commending him in his remuneration philosophy. Ethan is a private person, and so the opportunity to interview him was a tremendous honour.
TDM was an investor in RiskMetrics back in the day, and Ethan’s view of the world – from remuneration to fundraising - has shaped our own views more than any other singular force. After this, we hope you will see why.
You can follow TDM (linktr.ee/tdmgrowth) and host Ed Cowan (linktr.ee/eddiecowan) across social channels.
Show Notes;
Articles and documents mentioned in this episode
- HBS Case Study on RMG
- Ethan's Letter to the Board to pay him less - full version
- NYT article relating to Ethan's leaked letter to the board
Sadly the letter from Warren Buffett is not publicly available
Ethan’s journey from playwriting in Paris to being the founder and CEO of RiskMetrics (00:03:38)
The difficulty of spinning a software company out of a huge global investment bank (00:07:53)
Creativity in starting a business (00:11:15)
The changing role of the CEO in fast growing company (00:14:36)
How Ethan’s leadership style changed over time (00:19:40)
The hiring process at RiskMetrics and assessing culture fit (00:22:30)
Transition from private-market CEO to public market CEO (00:26:28)
How Ethan view and dealt with crises at Riskmetrics (00:30:05)
The appropriate level of transparency (00:34:30)
Becoming a bad news organisation (00:35:11)
How Ethan viewed remuneration (00:38:10)
RiskMetrics’ approach to options (00: 43:27)
The philosophy behind RiskMetrics only raising ordinary equity (00:45:55)
Ethan’s view on M&A (00:49:22)
What led Ethan to sell the business (00:53:45)
Does Ethan regret that RiskMetrics did not change the way risk was measured in the world after the GFC (00:59:18)
Ethan’s new project, i2learning (1:01:05)
