A Story of Rebuilding

An Interview with Howard W. Lutnick, Chairman and Chief Executive Offi cer, , L.P. and BGC Partners, Inc.

EDITORS’ NOTE In addition to his The markets are uneven with big trophies that are targets of the giant in- leadership of Cantor Fitzgerald, great opportunity and substantial risk vestment . Our aspiration was and is to is also Chairman coexisting. transact for our clients and to excel in serving and Chief Executive Offi cer of lead- The low interest rate environ- the middle market. ing global brokerage company, ment has made certain businesses That model requires us to have a much BGC Partners, Inc. He also served more viable and attractive than oth- larger sales force than the largest fi nancial fi rms, as Chairman, President, and CEO erwise would be the case, and at the because Cantor’s strength in distribution means of eSpeed, Inc., which merged with same time has constrained other busi- we bring value to both sides of a transaction. BGC in 2008. Lutnick guided the nesses. That cannot be a long-term We’re not in the business of taking risk and hop- rebuilding and growth of Cantor equilibrium. ing the markets go up. Our business is servicing Fitzgerald following the firm’s With the kind of issuance and our clients and meeting their needs, not trading tragic losses in the 9/11World Trade debt the country has, how can interest for ourselves or against them. Center attacks, and its care and Howard W. Lutnick rates not explode higher? They will, Therefore, we weren’t trying to market se- support of the families of its 658 em- eventually. But the economy’s weak- curities in 2008 that proved to be toxic to so ployees who perished, providing the families with ness means they will stay low for the foresee- many others and weren’t making subprime more than $180 million and 10 years of health able future. loans to people who could not pay them back. care. He graduated from Haverford College in Technology enterprises with exciting up- It became diffi cult for some of the larger 1983 with a degree in economics and joined side are attracting venture capital, since the cost players to transact business in the kinds of prod- Cantor Fitzgerald. He was named President of keeping money on the sidelines makes en- ucts they owned, because their ownership had and CEO in 1991 and Chairman in 1996. He tertaining those kinds of investments easier. A come at too high a price. They became unwill- is a member of the boards of Haverford College, number of tech start-ups are becoming visible ing and unable to conduct transactions in those Zachary and Elizabeth M. Fisher Center with new investment in interesting disruptive assets because they’d have to mark them down for Alzheimer’s Disease Research, Intrepid business models. Entrepreneurship and entre- at a loss. Museum Foundation, National September 11 preneurial business models are well received in We were able to focus on and take care of Memorial & Museum, Solomon R. Guggenheim this environment. our clients’ needs without the necessity of trying Foundation, and the Partnership for So funding for good ideas is available now to protect ourselves, which is why Cantor did so City, and received the Department of the Navy in a way that otherwise might not be expected. well in 2008 and 2009 and why we have such a Distinguished Public Service Award. At the same time, businesses that are clas- great business now in the middle market. sically driven by overall economic strength are We are not seeking to fi ll the shoes of Bear COMPANY BRIEF Cantor Fitzgerald making their numbers only by cutting. That’s Stearns and Lehman Brothers. Because Cantor (www.cantor.com), begun in 1945 as an in- what continues to put lackluster jobs reports Fitzgerald seeks to be extraordinary in its sin- vestment banking and brokerage business, be- back in the headlines. gular place in the market – a positioning that came known for innovation in computer-based How was Cantor positioned during the means we are smaller than the big guys but bond brokerage and as the market’s premier global economic downturn? much bigger than any small player – there is dealer of government securities. Today, Cantor 2008 and 2009 were intensely diffi cult pe- plenty of room for us to grow and build. is the leading independent middle market in- riods for fi nancial companies that owned assets During the boom days, many on Wall vestment , recognized for in the musical chairs world of “buy something Street were attracted to the big players. Did its institutional equity and fi xed income cap- beyond its reasonable value with the expec- that make it challenging to attract the talent ital markets services, investment and merchant tation to sell it to someone else beyond your you needed or is the message out about the banking, prime brokerage, and commercial original price and its intrinsic value.” opportunities you offer? real estate fi nancing, as well as gaming tech- That was true not only for Wall Street but We have hired great leadership and grown nology, e-commerce, and other new businesses. with respect to the housing boom and subse- great talent across the board. BGC (NASDAQ: BGCP) is a leading global bro- quent downturn. A huge volume of housing The markets in 2008 and 2009 gave us an kerage company primarily servicing the whole- was built with the impractical perspective of “I extraordinary opportunity to hire seasoned sale fi nancial markets across a broad range of can build it to sell to someone else who will professionals who previously had been in fi nancial products. BGC has announced it plans resell it.” This supposed value spiral did not large fi nancial institutions. Cantor’s model be- to acquire the U.S. business of Newmark Knight equate to a core market that was being ratio- came extremely attractive, as they knew they Frank, a leading real estate advisory fi rm. With nally served. could do business without being exposed to 50 locations around the world, Cantor and BGC When a business model is built to fi t a the kinds of market trauma facing many of and their affi liates execute over $200 trillion in core market and to meet core needs, it creates the large fi rms. notional fi nancial transactions globally. a solid foundation that enables a business to Is there an effective understanding in serve its market and to prosper. At Cantor, we the marketplace of the size, scale, and lead- Where does the economic recovery stand have always believed in the middle market – ership BGC has and how well that business now and do you see consistent growth ahead? focusing on quality growth companies, not the has done? VOLUME 34, NUMBER 4 POSTED WITH PERMISSION. COPYRIGHT © 2011 LEADERS MAGAZINE, INC. LEADERS 45 As a public company since 2008, BGC Is it challenging to not lose the innova- To build a business quickly, it is an has exhibited extraordinary growth guided tion drive? excellent strategy to embrace the needs of by spectacular leadership. They have built an We focus on consistently reinvigorating our your employees. Before 9/11, we had one amazing business model on the foundation of business. What excites us is that when we hear location, 1 World Trade Center. Now, Cantor employees owning 38 percent of the company. a good idea, we fall in love. While we’re not is in midtown and BGC is in . So our management’s and employees’ interests risk-takers in terms of market risk, we’re risk- We also have offices in Connecticut, New are entirely aligned with those of the public takers in terms of reasonable business risk. We’ll Jersey, and Long Island. We became more shareholders. build a business around a new idea for a new accessible to talented people who wanted BGC has been able to beat Wall Street’s marketplace if it fundamentally embraces our to join us and also desired a particular expectations 10 quarters in a row. Management core competencies. commute. works as one with employees and, as a result, Using our way of thinking to exercise our Much of Cantor’s culture was based the company has done brilliantly. special competencies in a different space and on a family feel – hiring relatives and In terms of BGC’s acquisition of in a different way keeps our business entrepre- friends. Has that had to change because of Newmark, what value will that bring? neurial. We are a brokerage business and a tech- circumstances? First, consider the strength and value of nology company. Those are core capabilities in The New York Times ran the 9/11 vic- our partnership structure – that is an incen- which we excel. Then we ask, “Where else can tims’ obituaries, each about 60 words. Fully tive to attract and retain talent and to acquire we apply those skills and assets?” Gaming tech- half the stories about Cantor employees in- companies. Second, BGC is not a risk-taking nology, for instance – a highly regulated market cluded sentences from their families that said business – we’re in the brokerage business. that demands the utmost integrity, accuracy, they loved their jobs. That’s extraordinary. It We hire high quality people who have great reliability and speed in structuring and process- wasn’t so much the work they loved. What client relationships and enable them to join us ing transactions – is entirely within our area of they loved was the environment they were as owners of the company. We invest in them, expertise. in and their special relationship with their providing them with the technological tools to Do you worry about growing too friends and colleagues. offer new and valuable market knowledge to quickly? What made Cantor special is that we their clients. The biggest challenge is always execution knew how to hire. Of course our employees BGC’s clients are among the most so- and leadership. The right leaders pursuing new were all talented. But we looked for what phisticated – the largest and most successful ideas makes the difference between pain and was inside an individual. When we began to banks and investment banks in the world. pleasure in business. rebuild the company, that is what we looked The key value that BGC brings them is know- We might not get every step right the for. ing not just “what price I can get you for a first time, but we’re confident we won’t We hired friends and family members transaction,” but “what you should get for it.” fail as each step takes us toward our goal. then and we do now; it is what allowed us to That’s the value our successful brokers add Ultimately, we’re usually right and generally survive after 9/11 and to thrive in the years to their clients, and that is information that early. since. We spend an enormous amount of time is equally important in and If you see something done differently with people we work with, so our view is real estate. within the fi rm than how you would do it, they should be the kind of people you like. The key is the mathematics to analyze the are you able to let it go? September 12th was Charity Day for market and know the right answer. For BGC, My management style is management by Cantor. Was it tough to get through, even that may mean deploying our global technol- stories. My senior management not only knows though you are doing so much good? ogy to collect market intelligence and em- my opinion but also knows how I came to that Naturally, it’s the toughest of days. So we ploying the right brokers with the financial opinion. My knowledge is available to them. reinvent work on that day. To commemorate acumen to piece it together, capitalizing on All I have is experience they might not yet have our friends who perished on 9/11, Cantor and our excellent relationships with the largest garnered. BGC donate all our revenues that day to dozens and strongest fi nancial companies in the world Bernie Cantor taught me the value of of charities around the world – about $12 mil- to create something innovative that meets the experience each time he asked, “Do you lion last year. Charity Day enables us to help client’s objectives. want me to take off my shirt and show you others, turning a tragic day into one that is posi- This is embodied in what we call our in- all the scars on my back?” My goal is to tive and uplifting. ferential pricing – for example, the ability to teach my senior executives the lessons I’ve At the end of that day, we have a me- determine the price the client, whether tenant learned so, together, we don’t have to expe- morial service with the families. The most or landlord, should get, or in investment sales, rience any mistakes of the past. At the same important thing for me is for us to all be to- the value you should get if you sell the asset. time, I also have newer executives who gether – surrounded with people who under- As a professional brokerage business, bring their diverse experiences and teach stand, who gain as much strength from me as BGC offers clients over 200 financial prod- me. That give and take makes my manage- I gain from them. ucts. If you distill real estate down to its ment style not more “hands-on” but “more 9/11 will always be a part of us, but it does core, it is a financial product. Our ability time together”. not defi ne us. We have chosen to accept that it to provide hedging and financial tools to Cantor is now in midtown but you still is a part of us and instead of fi ghting it, we em- help clients reach their goals will be a huge have a major investment downtown with brace the parts of 9/11 that are most important differentiator. BGC. The opportunity was there to move to us: caring for the families of those we lost Moreover, the largest clients in real es- out of the city after 9/11. Why was it impor- and helping others through our relief fund and tate are fi nancial service companies. Not only tant to keep the business in the city? Charity Day. are they huge companies with their own real I felt responsible to help my friends’ Many new partners and employees have estate needs but they manage vast amounts families by having a successful company so joined us over the past 10 years and have of real estate in their asset management we could provide them real support. The de- helped those families. In turn, we have to help business. cision was made by our surviving employ- their families by being a successful company Our relationships with those compa- ees that we would rebuild Cantor Fitzgerald because, in helping others, those partners have nies coupled with our inferential pricing to help the families of those we lost. The earned less than they otherwise would have. perspective will enable us to bring our ex- only way to rebuild is with talented people It’s a cycle. pertise to the real estate market. Plus, our and New York is a terrific place to hire tal- If you’re proud of what you have ac- partnership structure inherently allows us ented people. complished, it feels right to take care of the to attract and retain world-class personnel. In the immediate aftermath of the attacks people who have helped you. And I’m proud So I expect us to hire more people, acquire that virtually destroyed our company, we had of the spectacular men and women of Cantor more companies, and provide spectacular a goal every weekend to hire 35 people be- Fitzgerald and BGC who have done just client value. cause we had to grow. that.• 46 LEADERS POSTED WITH PERMISSION. COPYRIGHT © 2011 LEADERS MAGAZINE, INC. VOLUME 34, NUMBER 4