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7 Must-Read Books for Investment Bankers To Better Understand Their Clients
American novelist, screenwriter, and television producer, George Martin, once said, “A reader lives a thousand lives before he dies . . . The man who never reads lives only one.” Living a thousand lives through reading is especially beneficial for investment bankers since a hallmark of a great investment banker is the ability to step into the shoes of his or her clients.
Here are seven must-read books for investment bankers who are intent on better understanding their clients, and also instilling trust in them. As Warren Buffett once said, "the more you learn, the more you earn."
The Hard Things About Hard Things is the brainchild of Ben Horowitz, an experienced entrepreneur and the co-founder of Andreessen Horowitz. The Hard Things About Hard Things is a revved-up version of Horowitz’s well-respected blog—many of the blog’s entries were adapted into the pages of the book.
Horowitz’s book is jam-packed full of advice for managing the most challenging hurdles involved in building and running a startup. There’s no sugar coating it—Horowitz offers an honest and accurate account of the trials and tribulations involved in building a company. But the book’s honesty shouldn’t be associated with a lack of levity. Horowitz is a rap enthusiast and intertwines his business lessons with lyrics from his favorite rap songs.
One of our favorite of the book’s lessons is: take care of people, products, and profits—in that order. Horowitz underscores the importance of putting people first—if you don’t put people first the other two “p”s (products and profits) won’t matter.
Putting people first starts with hiring. Horowitz emphasizes the importance of hiring for strength rather than a lack of weakness. He also reminds readers of the importance of having clear expectations of people, with the acknowledgment that nobody is perfect. Finally, he advocates for having multiple people involved in the hiring process but making the ultimate decision solo, explaining that consensus-based origin can derail the process.
The Outsiders has held the #1 spot on Warren Buffett’s recommended reading list. And for good reason—it’s a book that every investment banker should have on his or her reading list. Author Will Thorndike leverages years of experience and learnings from his successful investment career to impart wisdom on his readers pertaining to the characteristics of eight top-performing CEOs. But these aren’t just typical CEOs. Their firms—which include wide-ranging organizations such as The Washington Post Company, Teledyne, and General Cinema— outperformed the S&P 500 by a factor of twenty in terms of average returns. While the CEOs and their companies differed widely, they all shared specific traits that primed them for success. One especially powerful, yet potentially counterintuitive, trait relates to prioritizing per share values rather than other metrics such as earnings or sales growth.
What we especially love about this book is that it is based on research (in particular Thorndike’ s many years of experience and research), yet the CEO traits highlighted are not often intuitive. We certainly agree with Forbes that The Outsiders is “one of the Most Important Business Books in America".
Barbarians at the Gate chronicles the story behind private equity firm Kohlberg Kravis Roberts’ (KKR) landmark $25 billion leveraged buyout (LBO) of RJR Nabisco. A New York Times bestseller, the book offers top-notch investigative recording featuring the flamboyant personality of Ross Johnson, CEO of RJR Nabisco. It offers an unprecedented look at the personality traits of successful private equity investors. There’s a reason that Jon Friedman of MarketWatch has dubbed the book "the best business book ever.” When you’ve finished the book, check out Barbarians at the Gate, the HBO movie inspired by the book.
4. Shoe Dog
There’s a reason that Bill Gates named Shoe Dog one of his five favorite books of 2016. Shoe Dog, written by Nike’s founding father—Phil Knight—details the early history of Nike’s founding and the trials and tribulations involved in getting it off the ground. As Gates has explained, the book is “an amazing tale, a refreshingly honest reminder of what the path to business success really looks like. It’s a messy, perilous, and chaotic journey, riddled with mistakes, endless struggles, and sacrifice. Perhaps what’s most attractive about Shoe Dog is Knight’s honesty. As Gates has said, “Phil Knight opens up in ways few CEOs are willing to do.”
Two of Knight’s lessons stand out. First, great businesses are not built overnight. Knight’s story is one from rags to riches. The story of Nike dates back to 1962 when Knight first borrowed $50 to import shoes from Japan. After numerous setbacks and less than favorable outcomes, it took more than a decade for Knight’s brand to garner widespread recognition.
Second, Knight emphasizes the importance of talking to enthusiasts. Knight was an all-star networker. In building Nike, he networked extensively with coaches, runners, and their teams. He drove near and far to talk to enthusiasts and, by doing so, he became intimately aware of the problem he was intent on solving and engaged in extensive user testing.
Management gurus Bob Sutton and Huggy Rao’s book, Scaling Up Excellence, is a must-read for any investment banker or other individual looking to get a driver’s seat view into what’s involved in scaling up a company. From General Electric to JetBlue to Capital One to Hyatt, in reading Scaling Up Excellence, you’ll learn to appreciate the intricacies involved in scaling. As Sutton and Rao highlight, scaling up excellence involves scaling a mindset, not just a footprint.
One of our favorite lessons from the book relates to the distinction between “Buddhism” and “Catholicism”. As Sutton and Rao detail, scaling often involves carefully contemplating whether you’re going to embrace Buddhism and adapt your practices to local areas or Catholicism and adopt more of a “one size fits all” model. Not all geographies are equally ripe and ready to embrace an offering and leaders must ask themselves whether they suffer from delusions of uniqueness. A great example of Buddhism is Starbucks. Founder Howard Schultz initially established Starbucks locations as faithful replications of an Italian espresso bar. However, Schultz ultimately decided to make important changes to better align with American tastes. He, for example, replaced the stand-up coffee bar with chairs and blaring opera music with jazz and other tunes better suited to American tastes.
Originally published in 2001, nearly 20 years ago, Jim Collins’ best-selling book, Good to Great has stood the test of time—and more. In Good to Great, Collins describes the process involved in companies transitioning from being good to being truly great. He also emphasizes how and why most companies fail to make the transition.
Like The Hard Things About Hard Things and Shoe Dog, Collins’ book is chock full of lessons about building strong businesses, especially when it comes to relationships. Collins, for example, emphasizes the importance of “Getting the right people in the key seats.” Collins likens building a company to driving a bus. It’s not enough to have a driver; you also need the right people in all the key seats.
Built to Last has, for good reason, developed a cult-like following. It was first published in 1994 by Jim Collins and Jerry Porras as a powerful summary of six years of research. It has since been translated into 25 languages.
Built to Last details 18 visionary companies and what makes them distinct from their non-visionary peers. One of the most memorable characteristics of visionary companies as detailed by Collins and Porras is that they set Big, Hairy, Audacious Goals (BHAGs). BHAGs are goals that, to outsiders, would be considered unrealistic. Setting BHAGs has enormous benefits in terms of motivation and inciting teams to achieve the improbable.
As a primer, Collins also offers some words of wisdom in terms of how to establish BHAGs. He explains that BHAGs lie at the intersection of the answers to the three questions:
- What are you deeply passionate about?
- What drives your actions and income now?
- What can you be the best in the world at?
Descartes once penned, “The reading of all good books is like conversation with the finest (people) of the past centuries.” For investment bankers and others, reading good books such as the seven listed here is a great way to learn from the trials, tribulations, and triumphs of the great leaders that have made their marks in the history books. By having conversations with the greats by way of reading, you’ll be able to step into the shoes of your clients and propel them to new heights.