Self-made millionaire Sallie Krawcheck reveals the mistake that hinders all careers

Source: Getty Images
Source: Getty Images

Sallie Krawcheck — Wall Street C-suiter and self-made millionaire — knows from workplace sexism.

She started her finance career in the 1980s as a junior analyst at Salomon Brothers, a bank so fratty it inspired a young Michael Lewis to quit and publish an exposé of the firm's culture and mismanagement.

Every day at Salomon, Krawcheck would arrive at her desk to find a photocopy of male genitalia.

But when Krawcheck shares this anecdote in her new book, Own It: The Power of Women at Work, her purpose is not simply to shame her anonymous  harassers or remind young women of how intolerant workplaces used to be.

Her story is a backdrop for a bigger argument about the value of diversity: Intolerance breeds groupthink, groupthink is bad for business, and that's one reason diverse companies perform better — while less tolerant ones suffer.

That same refrain — the idea that listening to differing viewpoints leads to better financial or career outcomes — can be helpful on an individual basis, Krawcheck argues.

Indeed, she says, men and women would do better financially if they'd just listen to one another and acknowledge their respective biases. Mistakes common to male investors (e.g., taking too much risk) versus female investors (e.g., not investing enough) are two sides of the same coin, she argues.

Likewise, when your views are challenged at work, she says, it pays to take a beat and listen to the other side before replying — because you may have simply made a mistake.

Krawcheck builds her case through lessons from her career journey: from time as chief financial officer of Citi to CEO of wealth management at Merrill Lynch to CEO and co-founder of women-focused financial advisory firm Ellevest today.

Mic talked to Krawcheck about some of these lessons during Facebook Live session on Jan. 11. The following is a transcript of the interview, edited for length and clarity:

Mic: How did you get into finance and the world of money? Was it what you set out to do originally?

Sallie Krawcheck: Oh, gosh, no. I wanted to be a princess. Or an actress. Or something that was not this. I was a journalism major, actually. My life goal was to write.

It was getting time to graduate from the University of North Carolina at Chapel Hill. The job offers were to go to Florida and write obituaries or to go to New York — it was the late '80s, so Wall Street was hot — and to go to Wall Street.

My father forbade me from moving to New York, so I said, "Okay, I'm going to New York. And I'll work on Wall Street for a couple years, and I'll figure that out and I'll become a business journalist."

Which, of course, never happened.

So what made you take that turn?

SK: Well, I hated my first decade.

So for your viewers out there who are 20-somethings saying, "Ugh, I'm watching Facebook Live because I cannot tell you how much I hate my job," there is hope! 

I was an investment banker through my 20s and hated every single minute of it. [I was] pretty mediocre. I never figured out the politics or how you did it.

At the age of 29 years and 11 months I had the startling insight — as I like to say, that so many young women have — that I wanted to be a sell-side equity research analyst.

So the princess thing was out the window.

It was really because I had figured out ... I loved analytics and numbers, building models. Loved it. I really liked writing. And I liked engaging with smart people and I wanted personal responsibility.

I mean, so many people ... want to be on "the team." I didn't want to be on a frickin' team, at the time. I wanted to ... be out there.

So in my 30s I was a research analyst covering banks, covering Wall Street ... and it just worked. It really worked. I quickly became director of research and [later] CEO. As soon as I was in the right place — whoosh — there we went.

I was at Sanford Bernstein ... they've [since] changed the name to AB. There have been several acquisitions since then.

It was a quirky, smaller, intellectually honest firm. So it wasn't the Goldman Sachs or the Solomon Brothers.

In your book you explain what you think contributed to the financial crisis. Can you talk about that?

SK: Well, here's what I saw.

I later ... went on to run Smith Barney, Merrill Lynch, I was the chief financial officer of Citi for a period of time, so, you know, I've been around.

And I've worked for lots of different leadership and management teams.

Watching the industry go into the crisis, the thing ... [everybody says is], "Oh, those evil geniuses who foresaw the crisis." That is not what I saw.

What I saw were a bunch of people who were pretty much exactly the same.

I always like to pause and stop and say: I love middle-aged white guys. I've been married to a couple of middle-aged white guys.

The industry was run by middle-aged white guys. All of them. They all went to the same schools. And they all went to the same training programs. And they all vacationed together. There was this enormous amount of groupthink.

So whereas there would be ten people in a room and they thought they were getting ten different opinions, they were getting about one different opinion. Or two.

Typically that worked just fine until the run-up to the crisis, when things were changing rapidly. And I spent a lot of time in rooms where people would say, "It's fine," "It going to be fine," "It's going to be fine." And they got very confident. 

I call it the "false comfort of agreement," when you have people who are just alike who all agree with each other. They're like, "We got it, we're smart, we got it." And I think that was a really unexplored reason for the crisis and a lot of the issues Wall Street's had.

Beyond groupthink within one department, what if within one bank you have two departments that actually have competing goals?

SK: At Sanford Bernstein, back in the day, we saw that.

Not to go into too much stuff, but we had a research business and we had an investment banking business.

In the research business what you wanted to do was to advise your clients to buy inexpensive stocks. In the investment banking business you wanted to advise companies to issue stock at a high price.

So if you're advising both of these: Buy low, sell high. Whoa, wait a minute. That's hard to do. That's hard to give both of those groups good advice.

Someone you're going to screw.

At Bernstein we saw this. ... I was running the business, [I said,] "You know this conflict is bad. Let's get out of this business."

We gave up millions of dollars. ... And we lost people, because we couldn't pay them as much for a period of time.

But during the Nasdaq decline of the late 1990s [to] early 2000s, Eliot Spitzer came in and found all these emails — emails never go away, emails are never gone — and found that the industry overall had been saying, "Yeah, we're recommending this stock to the public," but over here they're saying, "This is a piece of shit."

We were the biggest ones who had [already] gotten out of those conflicts.

In your book you talked about moments of sexism in your career. There is something powerful about acknowledging those, because they are likely happening to other women, too.

SK: Look, when I was more junior, there was almost nothing you could do about it.

I remember turning around one day and there was an individual pretending to perform a sex act on me, behind my back. I think in this day and age that doesn't fly. But at that time you couldn't go to HR. You couldn't go to anybody. And so you just sort of powered through.

Part of that was then I said, "Okay, I'm not part of the squad. It's clear." And for some points these guys wanted me out. And so I said, "Okay, I have to have my own path here." 

... They [were] not going to run me out. That [was] not going to happen.

One, because I just refused. But two, because I couldn't afford it. I had rent I had to pay.

And so when I then found a place, the next place that was intellectually honest, I had sort of gotten used to having a perspective and a point of view.

And as a research analyst — which I often tell young people is a great job to go into — you have to get very comfortable being wrong.

Because you're wrong — if you're a great analyst — you're wrong 45% of the time. And in public.

In your experience, what's the best way to be wrong at work and recover from it?

SK: Just own it. 

You know, I remember the first time I had a client call me for a research report in which I had made a mistake. He was like, "Sallie, if you look at this exhibit, this can't be, you can't create equity out of air." I started to explain why he was wrong, and then I was like, no it's a mistake. All right! It's a mistake. My mistake.

And then when I hung up the phone I started to think, "Who can I blame?" You know, my dang director of research! He should have figured out ...

Then I was like, nuh-uh. This is all right here.

And if you can own [your mistakes], you know, then people will trust you more. 

As opposed to, "No, no, no, it was him!" or, you know, "The stars weren't aligned that day, it was a little cold, it was hard for me to work when it was cold."

Any time you waste blaming other people, or even blaming yourself, is time not spent pivoting to solve the problem. 

SK: Here's the issue, and I talk about this in the book, which is business is changing fast. So, you know, maybe, 50 years ago, you could start at the bottom rung of the ladder at XYZ company and get your gold watch when you were 65 and not have any public failures. 

But that is not possible today.

Particularly for women. We tend to take failure harder. We tend to blame ourselves.

Part of the reason I've shared a lot of my stumbles in the book is because I want to normalize that a bit. It's okay to fail. Just pick yourself up. Off you go.

By the way: Nobody cares about it as much as you do. You're the only one who really cares. Everybody else is busy caring about, you know, themselves.

Let's talk about how men and women are different at managing money. What are some of the differences?

SK: Facts are facts. First, I believe it is abundantly clear that gender diversity, and diversity of all kinds, leads to better performance by companies.

There is research report after research report — whether it is Catalyst, Morgan Stanley, [International Monetary Fund], Goldman Sachs, Credit Suisse, I mean, you know, we could fill this room with research reports — and the gender diversity, in particular, leads to higher returns on equity. Not by a little. By a lot.

Lower risk. Greater innovation — super important. Greater client focus. Greater employee engagement. I could keep going on.

So something magical is happening when you have people of difference, in this case gender difference.

But you and I can make the argument for the difference of [sexual] orientation, difference of educational background, difference of nationality. We could make a case for all of it ... difference of optimism and pessimism. 

All kinds of diversity brings those different voices into a room so decision-making is better. And the stories I told about Wall Street are, in a way, to contrast it with that very non-diverse business.

And as you dig into the research, on average, what women tend to bring more is a relationship focus. And we sort of know this, don't we? We're all, "How are you, today? No really, how are you?"

[There's also] risk awareness. Not risk aversion, but just risk awareness. Greater long-term focus, greater drive for meaning and purpose. ... The ability to, brain scans show, solve problems more holistically, taking into account more information.

You cite brain scan research in your book to describe how men and women make decisions differently. Let's talk about the "menu" example?

SK: The menu example that we always tease women about is, you're sitting in a restaurant. I'll be the man, you be the woman. The waiter comes by and says, what do you want? And I say: "Steak."

You look at the menu, and you go: "Well, steak sounds really good, but my cholesterol is a little high, and I had steak last week. You know, maybe the chicken. Chicken was dry when I had it, that's no good. How about the salad? Salad's weird for dinner. How about the fish? The salmon was a little fishy."

Everybody is waiting for you. [But] the man drops dead of a heart attack the next week, because he's had steak for every meal since he was 14.

The man tends to make the more efficient decision. The woman, because she takes into account more information, tends to make the more effective decision. But it is slower.

And, I'm telling you, I saw that [in my career]: When there were more people of difference in a room those decisions were slower. Whereas when it was all one type: Boom! Finish each other's sentences, move on.

How much of this is nature and how much is nurture?

SK: Who knows? And I'm not even sure it matters. ...  So much of the advice that is out there for women today in business, in book after book is: Act like a man.

You need to ask for the raise like a man, you need to take a seat at the table like a man, you need to negotiate like a man.

Now that doesn't work, because the power of diversity is diversity.

Allowing you to be different and bringing your full self to work, as opposed to having you act like everybody else. And I think that's been part of the problem.

Another part of the problem is if we're told to act like somebody we're not, we get exhausted and we leave.

I can't go back and solve the nature versus nurture issue. All I can do is look at the research right now and say this is where we are and we've been pigeon-holed into acting a certain way.

I think the really exciting thing today, really exciting, is this company [Mic], you couldn't have formed 10 years ago. Maybe even five years ago.

Ellevest, a digital investment platform for women, I couldn't have formed five years ago, maybe even three years ago.

[And] when I was younger, [I said,] "Okay, if the company is not treating me well, I could stay or I could go to another company that may or may not treat me well."

Today, if they're not treating me and my friends well, we can go to another company with much more information. I can go to all kinds of sources and compare maternity leave policies, and crowdsource culture.

Or I have much more ability to start my own thing and build my own culture.

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