Market Mover

by Robert Greifeld

  I would encounter Bezos on a few other occasions pre-Amazon. Amazon went public in 1997 on Nasdaq, raising $54 million for an overall market valuation of around $440 million. For new disruptors in the digital landscape like Amazon, Nasdaq was the venue of choice for raising money in the nineties. Indeed, in those days, NYSE didn’t take startups. They considered themselves to be the stock market for established companies, and they expected all significant national businesses to switch over to NYSE once they reached a certain size. Dick Grasso, NYSE’s CEO when I joined Nasdaq, used to boast that he’d reserved the prestigious one-letter ticker symbols M and I for the anticipated defection of Microsoft and Intel. But it didn’t happen that way. As Nasdaq nurtured a generation of young technology companies, it earned their loyalty. After all, Nasdaq was providing them with critical funding in the public markets at a time when there simply was no other significant source of capital available. This was long before the days of a venture capital marketplace awash in money. I give my predecessors at Nasdaq credit for walking a delicate line—embracing promising startups while keeping their listings standards high enough to earn credibility in the eyes of investors.

  The result, over time, was the creation of a national duopoly. Most countries have one primary stock exchange that provides listings services for national companies. There is one in Paris, one in London, one in Madrid, one in Tokyo, and one in Sydney. America has two: Nasdaq and NYSE. Inevitably, this leads to an intense competitive dynamic. Think Coke and Pepsi, Airbus and Boeing, Android and iOS.

  I knew that in the long run, our greatest competitive advantage was to be found in transforming our transactions business through technology. But I couldn’t ignore the other business in which we went head-to-head with NYSE: listings. My client relations team wouldn’t let me. “Grasso is in our accounts,” they kept telling me, in my first weeks and months on the job, meaning that NYSE’s CEO was whispering in the ears of our companies, offering them enticements to switch their business to his exchange.

  A hardscrabble guy who had worked his way up from floor clerk, Grasso was an intelligent, tough competitor with a fearsome reputation on Wall Street. I respected Grasso’s work ethic and knew he was not to be underestimated. He certainly wasn’t going to back off just because we were going through a painful reorganization. He was always working the phones—a seemingly omnipresent behind-the-scenes rival, trying hard to convince Nasdaq companies to bolt for NYSE, and in the process forcing me to spend much more time on the listings business than I had planned in those first years on the job. (Interestingly, when he left months later, my life got much easier.) Hence, in my role as CEO, I found myself doing sales once again—working hard to entice the next generation of technology startups to choose Nasdaq as their home and to keep our existing clients happy lest they take their listings elsewhere.

  The Human Side of Business

  When it comes to a business that is built on relationships, you can never take anything for granted. Before I’d even started the job, I had a conversation with John Jacobs, the longtime Executive Vice President of Nasdaq’s Global Index Group. I asked him, “What do I need to know about Nasdaq that I don’t yet understand? What don’t I get about this job?” His response was prescient. “I know you have a deep understanding of the transactions business. You have extensive technology experience. You have a good sales and operations background. But the listings business is a different animal. It has an emotional component that will surprise you. Companies don’t choose to list with Nasdaq or NYSE for purely rational or financial reasons. You’re often dealing with CEOs and founders and their pride, ego, life aspirations, and concerns about their legacy. Nasdaq may be less expensive than NYSE and offer a better package of services. But that alone seldom wins the day.”

  Over and over again, I discovered that Jacobs was right. There were all kinds of reasons why companies chose Nasdaq over NYSE, or vice versa. It wasn’t simply about the bottom line. What made the listings business challenging—and interesting—was that our customers were the founders and leaders of some of the world’s biggest companies. In leading the listings business, I had to work directly with these iconic figures and try to figure out what made them tick. More often than not, it surprised me.

  Yes, some CEOs were eminently rational: “What can you offer me that NYSE can’t? What’s the benefit?” they wanted to know. Others were transactional: “What could my company sell to Nasdaq if I list with you?” Some were social or tribal: “What are other companies in my industry doing?” Many were emotional, their choices based on personal aspirations or childhood ambition: “I always dreamed of ringing the bell at NYSE,” or “I want to see my company’s name listed among the world’s best technology companies on Nasdaq.” In these latter cases, I eventually realized, trying to sell the benefits of Nasdaq’s superior trading statistics was beside the point. How many CEOs did I put to sleep by regaling them with the underappreciated benefits of Nasdaq’s micromarket structure before I learned that such matters were probably not driving their decision-making?

  Certain CEOs put more value on the personal relationship than on a cost-benefit analysis. They would list with whichever stock market had developed the best connection with the CEO (or executive team). Some thrived on engagement and joint partnerships. Some made a decision, and you barely heard from them again for years—like Jeff Bezos and Amazon. Some needed reminders every so often that Nasdaq was still the best partner for their business. Some were loyal, no matter what, to the exchange that had been the venue for their IPO. Others were always wondering if the grass might be greener down the street.

  A key factor, I discovered, was often brand affiliation. Why did technology companies want to list with Nasdaq? An important reason was simply that other technology companies did the same. Our affiliation with innovation and technology was unmatched by our rivals. Indeed, the brand identity of the two exchanges was quite clear in most CEOs’ minds. It all came down to “Who are you as a CEO?” and “Who are you as a company?” I’ve arrived, I’m established—that was NYSE. I’m growing, I’m innovative, I’m entrepreneurial—that was Nasdaq. We worked hard to make “Nasdaq-listed” a badge of pride for the world’s best companies. And it was a virtuous circle—our companies liked to associate with Nasdaq, but we also built our brand through association with them. But this sometimes made it hard to convince companies outside the tech world to list with us as well. In every sale, it seemed we were either leveraging that affiliation to our advantage or fighting tooth and nail to escape that brand box.

  I quickly realized that being a likable social presence and an effective CEO-to-CEO networker was an integral part of my role, and key to representing Nasdaq on the national and world stage. Of course, there were perks as well. I had the opportunity to meet probably more CEOs than just about anyone in business. I sat in hundreds of conference rooms, from Apple to Zillow, and heard their leaders’ visions as I pitched Nasdaq’s wares. Inevitably, I spent a lot of time in Silicon Valley, talking to executives all over the peninsula, attending industry events at Stanford, visiting venture capitalists on Sand Hill Road, and schmoozing with social media savants in San Francisco.

  John Chambers, longtime CEO of Cisco, was kind enough to throw a party for me on my first trip to the Bay Area, introducing me to the leaders in the Valley. It was a bit nerve-racking, as this type of public profile was new to me. I was fascinated by the unique ecosystem of Silicon Valley and, in particular, the symbiotic relationship between the university, the business community, and the venture capital firms. The executives at the event, many of whom had attended Stanford, mingled with professors, technologists, startup founders, and venture capitalists (VCs). Money, ideas, business savvy, and intellectual firepower were all richly interwoven through the community in a fertile network of talent. Many Stanford professors had spent time in Silicon Valley businesses or VC firms, or started their own, and some business leaders now taught at Stanford.

  I remember staying at the gat
hering late into the California evening, something that seemed perfectly natural in the warm, Mediterranean climate of Palo Alto. That would have been rare in New York business, where everyone is eager to make it out of the city as soon as the workday is done. California’s casual dress code and laid-back attitude were novelties to me, but I soon learned not to make the mistake of thinking my new West Coast friends were any less driven than their New York counterparts. I came to look forward to my visits to the West Coast as one of the more enjoyable aspects of my job. And there would be plenty of them, as the competition for the tech company listings ramped up.

  Changing the Competitive Landscape

  In 2003, when I started as CEO, no company had ever switched its listing from the New York Stock Exchange to Nasdaq. If they moved at all, they went the other way. As Nasdaq had become a more established brand, the flow of companies wanting to switch their listings to NYSE had slowed dramatically. But it was still unheard-of for large, established American companies to switch from NYSE to Nasdaq.

  I was determined to change that.

  Bruce Aust and I put our heads together and came up with a strategy and a list of companies to approach. One of the first was Charles Schwab, the innovative financial management company based in San Francisco that was still run by its famous founder, Chuck Schwab. I flew out to the Bay Area, and Bruce and I met with Chuck and discussed the opportunities available with a Nasdaq listing. Usually, our sales pitch was based on tailored packages of offerings and talking points. These included a series of marketing “gives,” things like cobranded advertising and promotions that we tweaked and tailored for each customer. Finally, we would leverage our brand as “the Silicon Valley stock market.” That was a real selling point for companies like Schwab that were trying to position themselves as part of the new information economy.

  Schwab was receptive. But he wasn’t ready to abandon NYSE yet. “What about dual listing?” he asked us. Dual listing? Bruce and I looked at each other with a mixture of confusion and curiosity. It wasn’t something companies had done before. At first, I thought Schwab was saying this just as a way to get out of the meeting—throw something out that isn’t going to work, and then move on. But I quickly realized that he was serious. My mind started turning even as the discussion continued. After all, a listing switch is as much a marketing victory as an economic win. A dual listing would largely accomplish that without requiring the same level of immediate commitment. “We’ll look into it and get back to you soon,” we told him.

  Sometimes your customers give you great ideas. They have a unique view on your business. Always pay attention to their feedback. Maybe a suggestion will be embedded in a complaint, disguised in a rejection, or hidden in a throwaway remark, but listen closely and the nugget of wisdom is there. That being said, you never want to limit your vision to your customers’ demands. They are usually focused on incremental changes to existing products or services. Genuine leaps of innovation happen when you envision the thing your customer doesn’t yet know they need.

  Dual listing wasn’t a leap, but it was a real step, and no one had tried it before. If Charles Schwab was willing to put one foot into the Nasdaq ecosystem, surely others would follow. Given that we were having difficulty convincing companies to switch outright, this was a much easier proposition, allowing us to build long-term relationships with new companies, even as they evaluated Nasdaq’s offerings. Over time, our hope was that we could outwork NYSE and win the listings outright. So Nasdaq set out to find a group of companies willing to dual-list. We wanted at least five or six to announce all at once.

  Soon, we got a boost from one of Silicon’s Valley’s most celebrated companies, Hewlett-Packard. Bruce and I met with Carly Fiorina in her office at HP’s headquarters and pitched the benefits of dual listing. Fiorina was open to the idea and, with her characteristic assertiveness, had a meeting on the spot with her CFO and decided right then and there to go ahead. Her willingness to rationally think through the benefits and her capacity to act quickly and make an immediate decision were very impressive. We were thrilled, even knowing that part of her motivation was likely to be in a better position to sell HP technology to Nasdaq’s back-end trading systems.

  By January 2004, we had six companies ready to go. We put out a press release announcing the program, and the companies that had joined up—Hewlett-Packard, Walgreens, Cadence, Charles Schwab, Countrywide Financial, and Apache. All of them were significant market cap companies. There would be many more over the years. But this was a great first step—a shot across the bow to NYSE.

  Walgreens, in particular, was a coup. This wasn’t a technology company. (These days, every company is a technology company to some degree, but this was before that became the reality of the business landscape.) It was a heartland mainstay, headquartered in Illinois, an icon of Middle America. And yet, more than most, they were willing to see the benefits and take the risk. I loved our reputation as a technology stock market, but I didn’t want to be limited by that. We needed to be able to represent all kinds of companies. Walgreens was exactly the kind of business that affirmed that strategy, as was Starbucks, another early and loyal nontech Nasdaq company. Starbucks was one of the first nontechnology companies that stuck with Nasdaq as it blossomed into a global retail brand, and affirmed that we were much more than a market for high-flying Silicon Valley companies.

  One More Cup of Coffee

  Winning a customer feels great, but it’s really just the beginning. Like a marriage that has to be renewed every year, Nasdaq’s relationships with its listed companies can never be taken for granted.

  As a case in point, some years later, Bruce came into my office with a worrisome message: “We have a problem with Starbucks.”

  “Starbucks! Are you kidding? What’s going on?” The iconic coffee chain had been with Nasdaq for almost two decades. Led by celebrated CEO Howard Schultz, Starbucks was always a much-loved customer at Nasdaq’s headquarters—and not just because they had a store in the lobby of One Liberty Plaza that was frequented by my executive team. Over the years, the company had grown into one of America’s truly great brands, and we had been along for that remarkable ride the entire way. We had done plenty of joint promotional activities, including a market open at MarketSite with Howard Schultz and Jamie Dimon, launching a Starbucks Rewards Visa card. They had even been featured in a Nasdaq advertising campaign, and one of their executives was on our Board. What could possibly be wrong now? Bruce didn’t know the details, but he had heard rumblings of discontent from his contacts at the company. It was clear we needed to get out to Seattle and make sure the relationship was on a good footing.

  I called John Jacobs, who had a close relationship with Starbucks’s CMO. Jacobs worked in Nasdaq’s DC office. “Have you heard anything?”

  “I haven’t been able to find out any details,” Jacobs replied. “In fact, their CMO doesn’t know anything either. Maybe NYSE has been whispering sweet nothings into Howard’s ear.”

  “Yes, maybe. But we can’t lose Starbucks. Pack your bags. We’re headed to Seattle. I’ll set up a meeting with Schultz.”

  When we arrived in the Pacific Northwest, I huddled together with Jacobs and the customer account person for Starbucks and prepared for the meeting. I’m not a coffee drinker (I consider myself self-caffeinated), but that day I made sure I had a Starbucks mug in hand as we were shuttled into an office with Schultz and his CMO. Sure enough, we soon learned the seats in which we were sitting had recently been occupied by our competitors. “NYSE was just out here and they are willing to knock down brick walls for me and Starbucks,” Schultz told us as the meeting began.

  Schultz and I had developed a positive relationship over the years. He had grown up working-class in Brooklyn before his ascendance to fortune and fame, and I always felt a kinship with such an inspirational, bootstrapping biography. He was the type of CEO who was always tending his company’s brand. Perhaps Nasdaq had been remiss in providing Starbucks the full capacit
y of our promotional power. Perhaps he wanted reassurance that Nasdaq was still in Starbucks’s corner. Sure enough, the conversation soon turned to Schultz’s forthcoming book, which told the story of the creation of Starbucks. Clearly, he was hoping the book would give the brand a boost, and he was looking for our support. In fact, it seemed to have become a kind of test of our partnership.

  John must have realized the same thing, because before I could respond, he jumped in: “Just so you know, Howard, Nasdaq has a lot of plans for your book. I think it’s a remarkable, inspirational story, a must read for C-suite executives at Nasdaq companies. We’re planning to buy several thousand copies, and we’re going to send them to all of our listed businesses.”

  As Jacobs outlined plans for the book launch, the tone in the room changed. Schultz looked encouraged, and his interest was piqued. John continued, laying out plans for Starbucks’s fortieth anniversary the following year, with an opening bell in Seattle. “It would be the first time it has ever been done out here. It could be a great cobranded event with Starbucks and Nasdaq.”

  I smiled to myself. I knew John was improvising to some degree, but that was okay. He was doing what was needed in order to keep an important customer satisfied. This is why you have talented executives, so they can stay one step ahead of a client’s needs. And when they fall behind, for whatever reason, they find a way to scramble back into the lead.

  John’s quick thinking saved the day. We did do the opening bell in March 2011 at Starbucks’s first store in Seattle’s iconic Pike Place Market. I took the stage with Schultz at 6 a.m. on a rainy morning. We opened the trading day together, launched Starbucks’s new logo, and celebrated a wonderful twenty-year relationship, with lots of highly caffeinated onlookers. Schultz, a remarkable entrepreneur who built his company up from essentially nothing to more than seventeen thousand stores in fifty-five countries, gave a powerful speech about preserving and extending the values and culture of Starbucks. For my part, I resolved to preserve and extend Nasdaq’s relationship with Starbucks as the years went by.