THE JOURNAL OF CHI PSI FRATERNITY Spring 2011 : Page 4

Cover Story By Steve Starnes, Epsilon 2001 Return On Life Be different, be interesting, and have some fun. Four leaders in financial services say this is how they achieved great success in their careers, and how they think future leaders will find success as well. Verne Istock, Epsilon ’62 E very day the news headlines give us rea-sons to be fearful of today and tomor-row. (Of course, scaring us is how the financial media attracts our attention.) But is this time really different? Some things are different, they say, and the financial servic-es industry is also still a people business. Success requires building relationships and trust, values which mature during the Chi Psi experience. Verne Istock, Epsilon ’62 , retired as Chairman of Bank One in 2000. He started as a credit analyst at the National Bank of Detroit (NBD) after getting his bachelors and MBA from the University of Michigan, and eventual-ly rose to CEO of NBD in 1994, then CEO of First Chicago NBD, and later CEO of Bank One. During his career in commercial lending, NBD became one of the most respected banks in the Midwest, before it merged with First Chicago and later Bank One (and was Alpha Pi 1841 -U NION C OLLEGE Schenectady, New York -4-27 Fall Initiates Initiates Host of the 2010 Rowe Regional Leadership Conference #1: Sean Aaron ’12 aarons@garnet.union.edu Corporation President: Brian Shea ’82 518-393-4012 • brian.shea@iasg.us Cover Story Feature The Purple and Gold Spring 2011

Cover Story: Return On Life

Steve Starnes

Return On Life Be different, be interesting, and have some fun. Four leaders in financial services say this is how they achieved great success in their careers, and how they think future leaders will find success as well. Every day the news headlines give us reasons to be fearful of today and tomorrow. (Of course, scaring us is how the financial media attracts our attention.) But is this time really different? Some things are different, they say, and the financial services industry is also still a people business. Success requires building relationships and trust, values which mature during the Chi Psi experience. Verne Istock, Epsilon ’62, retired as Chairman of Bank One in 2000. He started as a credit analyst at the National Bank of Detroit (NBD) after getting his bachelors and MBA from the University of Michigan, and eventually rose to CEO of NBD in 1994, then CEO of First Chicago NBD, and later CEO of Bank One. During his career in commercial lending, NBD became one of the most respected banks in the Midwest, before it merged with First Chicago and later Bank One (and was Eventually purchased by JP Morgan). Verne’s career trajectory followed the trend of national and international bank consolidation, which started in the 1980s. Verne says throughout his career he spent time to get to know people personally, including executives of banks around the world, a skill which matured during his time at the Lodge. And when the wave of bank consolidations came, he already knew who he was dealing with. Verne served as #4 and #1 during his days at the Lodge in Ann Arbor, an experience he says “did a great deal for his maturing, social relationships, and understanding people from different backgrounds.” The Lodge is “the kind of place a lot of students don’t have,” he says. He also proudly reports Alpha Epsilon won the Thayer Trophy while he was #1. For Chi Psis considering a career in financial services, Verne gives very clear advice. He says “You are dealing with people, both customers and employees. The people are fun. If you don’t like the people aspect, then go do something else.” Going forward, he thinks small- and medium-size banks will continue consolidating, while large banks will not. He doesn’t feel that international consolidation will be as successful because of significant cultural differences among the customers in different countries. Americans have an affinity for local banks, and Verne notes that arguments will continue whether small or large banks provide better service. Verne’s greatest professional joy has come when he has been able to get clients through a crisis. He Remarked that it always felt really good when his bank could save a business. He also cautions that it is really important to do your homework, and know who you are working with, before carrying out business deals. This is a common theme among the Chi Psis interviewed for this article. Steve Puccinelli, Delta Delta ’80, is currently head of Private Equity, North America and Europe, for Investcorp. He graduated from UC Berkley with a degree in accounting and made his way to Harvard Business School for his MBA. While at the Lodge he served as #1 and #4. He says the leadership skills he learned in these roles helped him to get into Harvard Business School and helped him with the leadership roles he has had in business. “Learning how to work effectively in groups,” he also says, “Is a success skill that is necessary in many aspects of life.” The leadership experience Steve had at the Lodge whetted his appetite for managing, and he knew he wanted to run something after school, and knew he didn’t want to practice accounting. Out of business school he went to work in investment banking where his brightest classmates went, and started at Donaldson, Lufkin & Jenrette (DLJ). Through investment banking, his goal was to identify a medium-sized company where he could move into a management role. One thing led to another, though, and Steve’s investment banking career progressed; he stayed at DLJ for 15 years. In 2000, Steve moved to private equity, and joined Investcorp. He says private equity is much different than investment banking. Investment banking, matching companies who need funds with investors, is a commodity, and investment bankers are highly paid salesmen. Once a deal is done, you’re on to the next deal, and it doesn’t matter what happens to your client next. Private equity is very different, he says, because when you invest in a business, “you participate in the future management and success of the company. You have to live with your decision for four to six years.” Steve says being involved at this level is very exciting. Looking ahead, Steve says private equity investors should do well over time because there is a good alignment of interests between owners and investors, and this will create shareholder value. He also says the size of the industry will shrink from where it is today because too much money has been raised. There is a lot of competition for good deals, and, as a result of the financial crisis, there are few companies for sale with a good financial track record. For Chi Psis interested in a career in private equity, he says most firms do Not hire directly out of undergraduate school. He recommends aggressively applying to investment banks, e-mailing fellow alumni at Wall Street firms, and starting early! A summer job can also be very important. A graduate degree is not absolutely necessary to succeed in private equity, he says; yet he recommends graduate school because it is an opportunity to meet a group of very talented and potentially successful people. Steve stays involved with Chi Psis from his era, and every Fall he hosts an annual get-together at the Lodge in Berkeley. He and three other Chi Psis also have an annual guys trip. Rod Lindsay, Kappa Delta ’49, was President of JP Morgan before retiring. He started his career in international banking, primarily providing credit under the Marshall Plan. Rod then spent most of his career in corporate banking. Since his retirement from JP Morgan, he has participated on the boards of several companies. Rod says it is important to be an interesting and well-rounded person. He graduated with a degree in Spanish literature from Yale and sees college as an opportunity to do something you won’t have the opportunity to do later. Rod likes to write, used to be quite a piano player, and has been very involved in the Westminster Kennel Club. Throughout his management career, he had a preference for well-rounded people. “Someone with a breadth of experience is better able to handle what comes along and is more interesting to be with,” he says. While at the Lodge, Rod served as #2, and he says they had a strong group. “The fraternity world is about trust, and so is banking. Living with Brothers who on the outset are strangers requires trust.” He says that in his time at Yale fraternities were eating clubs with Greek affiliations. Still, pledges relied on their predecessors to hand down a viable organization. He sees the Chi Psi experience as valuable time to learn management and leadership lessons. Like most of the other fraternities at Yale, Kappa Delta operated a bar out of their large dining space. Spending beyond their means on improvements to create a welcoming atmosphere for Brothers and guests, the Lodge entertained not only on big football weekends but on weekday nights as well. Unfortunately, though, the Alpha was unable to keep up with rising expenses and taxes and eventually closed, along with many other Yale fraternities. Rod says that as an Alpha leader, he learned some tough lessons and remembers putting on a brave face for pledges as he and other officers’ experienced, firsthand, the perils of the business world. As for the future of banking, Rod says that financial institutions should concentrate their efforts in areas where they have proven success and profitability. He says that despite the presence of multi-national banks with investment activities and of investment banking organizations who have added banking charters, relatively few institutions have the ability to draw on vast pools of capital in order to dominate international banking. He also notes, though, that “there will always be room for the niche players to emerge with new ideas with healthy returns on capital.” Rod says if he were to start a firm today, the firm would manage money for private wealthy clients. Dick Jenrette, Sigma ’51, co-founded the Wall Street firm Donaldson, Lufkin, and Jenrette (DLJ) in 1959. Dick also served as CEO of Equitable, turning it into a very successful insurance and asset management firm. Dick credits his success to being different and is regarded in Wall Street circles as “The Great Contrarian.” As an undergraduate, Dick served as #1 and says this was “the best management training program, even better than Harvard,” where he got his MBA. Dick says “it was distinctive to be a Chi Psi.” He notes that when he was an undergraduate, they respected traditions and had formal dinners, and this distinguished Alpha Sigma from being known as a party house with neon signs in the windows, like so many other fraternities on the UNC campus. As Dick puts it, “Charming irrelevancies and customs can make life more enjoyable and don’t need to be cast aside.” In his professional life, Dick says he successfully recruited talented employees year after year by applying the successful experiences Alpha Sigma had during fraternity rush. “Bad rush years will damage a company, just as it will an Alpha.” He points out, “This is a contrarian view in an era when cost cutting is the great management god in American business.” He also says smart people “pay their Lodge bills on time” and also “make you look good” at work. DLJ found early success because the firm did something no one else was doing at the time; it provided in-depth research on small growth companies. Being different was a significant advantage because it meant that the firm had no competition. Later, as CEO of Equitable, he guided the company from being a mutual insurance company, owned by policy holders, to being a publicly traded firm. This was a bold step at the time because the mutual business model was very common in the insurance industry. The move to be a publicly traded firm, however, provided Equitable access to billions of dollars in additional capital, providing a stronger foundation for future growth. Again, being different paid off. In the future, Dick thinks “conservative investment management will come back into fashion.” He also agrees with Brother Lindsay and says there is a bright future for financial firms who manage money and investments for people. In the past, many people received a pension in retirement. He points out that, now, nearly everyone has some responsibility for managing their own retirement savings, such as 401(k)s and IRAs, and there is opportunity for firms to serve this need. In addition to financial success, DLJ’s other corporate objective has been to have fun. “Life and business should not be boring, though so many people try to make it so.” Dick says “It’s more fun to do things differently.” A hobby is an important way to be a centered person and also to have fun, he says. Like the other successful Chi Psis profiled here, Brother Jenrette is involved in many interesting pursuits. He speaks Spanish and French. He also has a passion for restoring historic homes and founded the Classical American Homes Preservation Trust. Because of Dick’s influence, the offices of DLJ and Equitable have been decorated distinctively. As Dick’s business partner, Dan Lufkin, put it, “We mustn’t forget that the whole purpose is to get a return on life.” Return on Life For those people who want a good return on life, the lesson from the life stories of these Chi Psis is simple: be different, be interesting, and have some fun. It is good to see these Chi Psis embody the high expectations we have of all Chi Psis, which is to act responsibly, a leadership value Chi Psi Continues to foster. Brother Jenrette summarizes it very well when he says, “By trying to do the right thing, whether it’s helping educate your fellow citizens or making the world a little more beautiful, you should try to wear the white hat, be on the side of the angels … And the wonderful thing about that is that it usually ends rebounding on you.” About Steve Starnes Steve Starnes, E’ 01, lives in Arlington, Virginia. Steve manages more than $100 million for busy professionals, as a financial planner with The Monitor Group in McLean, Virginia. He also speaks and writes regularly to educate the financial community in protecting clients with Alzheimer’s. The 2001 Stanley J. Birge Award recipient earned an MBA from the University of Virginia, plays the violin, and is engaged to be married in early 2012.

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