Bloomberg Wealth: Adena Friedman

I have passion for what Nasdaq does. I have complete dedication to our mission. We are here to advance economic progress for all and I think it's because we've taken such a holistic approach that clients really appreciate that and they they choose to come to Nasdaq. Staying focused on growth, staying focused on bringing the next generation of technology here, keeping everyone super driven towards serving our clients is something I literally focus on every minute of every day. Adina Friedman first walked into Nasdaq in 1993 as an intern fresh out of business school. So they say come on in you've got an MBA, you know how to write product plans, business plans. I said okay I had no idea how to write a product plan or a business plan but I figured it out. Today she's the CEO. Nasdaq is the country's second largest stock exchange although it was a pioneer in electronic markets now the industry standard. With its marketplace expertise as well as the suite of technology products it offers its clients, Nasdaq says that of all the companies to go public in the past five years, 70% of them have chosen to IPO on Nasdaq. Because we serve our clients very holistically. We think about their lives going public. It's not just about going public but it's about being public. Going public is a massive project for our company to transition to the public markets but being public is a new existence. Friedman first cut her teeth in the finance world as a young girl accompanying her father to the trading floor at T. Rowe Price in her hometown of Baltimore. When I would have a day off of school I would actually want I would ask my dad if I could go to the office with him. After graduating from Williams College with a liberal arts degree it was her father who encouraged her to get an MBA. I talked to my dad and he was saying you know I think that you know that ultimately thinking about business is the right next step for you. He was right. As CEO, Friedman has grown Nasdaq considerably roughly doubling the number of employees to 8,500 and overseeing the largest acquisition in company history. The 2023 purchase of risk software provider Odensa for ten and a half billion dollars. A massive bet on fintech. Investors have really learned to understand us more as a technology company. And you know there's that whole notion of being a fintech company and I would say that we are a foundational fintech company here. For those people who are not that familiar with Nasdaq. What does Nasdaq stand for and what does Nasdaq actually do. OK. So Nasdaq stand. What it stands for is a Jeopardy question. And so the answer. So when we were formed back in 1971 we were a subsidiary of the N.A.S.D. So N.A.S.D. A.Q. stands for National Association of Securities Dealers Automated Quotations. So we were born as an automated quotation capability to allow for companies to come public that maybe weren't eligible to go public elsewhere. We were also an automated market. We were the first electronic marketplace in the world that really made it so that we brought Wall Street to Main Street. You know no matter where you were within the United States you could invest and trade on Nasdaq. When Nasdaq was started it was for companies that maybe couldn't go public on something you didn't want to mention the New York Stock Exchange. But the New York Stock Exchange now. Is it really that different any more than Nasdaq. In other words people won't go public. They pick Nasdaq. They pick New York Stock Exchange. What's the real difference between going on one or the other. Well first of all all the markets the United States are electronic now. So we were a pioneer in electronic markets. But all the all the markets are now electronic. And so really it's a matter of how well do we support our clients. And today Nasdaq is winning over the last five years. We've won more than 70 percent of all IPOs that have come public have Nasdaq. We've raised more capital on Nasdaq. Why is that on our pier. I was because I think because we serve our clients very holistically. We think about their lives going public. It's not just about going public but it's about being public. Going public is a massive project for our company to transition to the public markets. But being public is a new existence. York Stock Exchange traditionally when it takes a company public they go and they ring a bell or something like that to open the markets. But are there people really on the floor anymore who are running around scurrying around trading or is that really a past thing. I think that that is that is history. Today the markets are electronic. They have data centers in New Jersey. We have data centers in New Jersey. The order flow comes in from all over the world. And we all we process those through through our mechanisms and through our infrastructure. I think that the New York floor is an experience for clients to come and experience the history of the of the of the exchange. And here at NASDAQ we have a market open as well downstairs from this from this studio where we allow companies to bring in all the people that are important to them like who help them get them to where they were like get them to that point of going public have a huge celebration open the market close the market through celebrations all year long. So for the average person who buys a stock let's say I want to buy 100 shares of some stock. I just tell my stockbroker to buy that. Do I really care whether it's a New York Stock Exchange or NASDAQ that it's traded on. Does it make a difference. And I care. You don't care. It's traded. You know it's traded the same way where they list from an investor's perspective is ubiquitous. I call it you know it's really it's a neutral decision in that regard. In recent years another firm has come along Citadel Securities and don't they trade do things that NASDAQ does as well. And is that eating into your market share or is that not a big deal for you. Well I mean first of all Citadel is a very important client to us just like all the market makers are important clients to us. So on average we have 33 market makers that underpin you know that that support the companies that are listed on NASDAQ. So they'll come in and trade those stocks all day long. They'll provide a constant bid and offer in those stocks. They do appreciate transparent markets. They like having you know they like the fairness of our market structure. We are what we call an egalitarian marketplace. Everyone comes in on the same position and they compete order flow. And Citadel does that. They also internalize flow too because they'll take in retail orders. They'll execute those orders within their systems and then they'll offload the risk into the market. Many many years ago if you wanted to buy stocks you had a fixed charge you had to pay the broker. Then that was deregulated. But today if I buy a stock and it's trade on New York Stock Exchange or NASDAQ am I paying the same commissioner fee really. Well if you're if you're actually most of the retail brokerage platforms are commissioned free now. So you're not anything regardless of where it's listed. So you're actually they make money. So they make money on helping you know manage those those securities. They make money through how they manage that order flow into the markets. Not so much on the investor themselves. OK. Today you're running an organization has how many employees. So we have 8500 employees around the world today. One of the fun facts is that when I when I what became the CEO we had two point four billion dollars of revenue. And in 2023 pro forma for our latest acquisition Adenza we had two point four billion dollars of EBITDA. So we've grown the company a lot over the period of eight years or seven and a half years. Let's talk about Adenza. This is the biggest acquisition NASDAQ has ever made. You paid ten and a half billion dollars for a company. What is Adenza and why did it worth ten and a half billion dollars. Yeah. So Adenza is a very scaled software provider to the financial industry around risk management and regulatory technology. So they are the most scale provider of what we call regulatory reporting technology and then a very scale provider of risk management. Think liquidity risk management clearing risk management treasury risk management. So all the things that kind of sit in the engine room of a broker dealer that helps them manage risk and drive liquidity into the capital markets around the world. So when you did the Adenza transaction I think you gave or you sold an effective 15 percent of your company. Is that right. To to time of Toma Bravo which bought it. Right. Yeah. And then somebody go on the board then and of your company. Yeah. So as part of the consideration for Adenza Toma Bravo about half of it we paid in cash and half we paid in stock. So they took a 15 percent stake in NASDAQ. And and Holden Spade who is a senior partner there is now serving on our board. So that's he's been as you know they've taken a strategic stake in NASDAQ. Now they are a private equity firm. They're not in the business necessarily of of having public equity but they've been very strategic to us as a shareholder and as a partner to us since they took us. They would never say to you you know your whole company should go private. You know I think that they recognize that we really like our lives in the public markets and they're just happy to be a shareholder. So do you consider NASDAQ a tech company or a financial services company. I consider us a tech company that serves the financial services industry. And do you get a tech multiple as a result of that. Well we we like those multiples. I think that we you know we do feel like we are multiple is there to reflect the growth and the margin potential of our company. And I think that investors have really learned to understand us more as a technology company. And you know there's that whole notion of being a fintech company. And I would say that we are a foundational fintech company here. Now recently many tech companies are focused on something called A.I. artificial intelligence. So what are you doing in that area. And is that a major focus of your efforts. Yeah. Actually A.I. has become a big part of how we look at how do we advance our products and make our clients more efficient and effective. And then how do we advance our business and make us more efficient and effective. So A.I. we've actually formed an A.I. group about seven years ago when I became CEO. We have a centralized A.I. team. They go and they'll be deployed into the businesses to help come create new A.I. capabilities. So for instance they helped us create the first A.I. driven order type in NASDAQ. So it's got approved by the SEC. It's a very effective way to kind of bring clients together and have higher fill rates within our systems. But we also now are using Gen A.I. to really help make the workflow solutions that we have. So like our anti-fin crime suite uses algorithmic A.I. to root out criminal behavior and then uses Gen A.I. to make the workflows of reporting that much more automated. So we'll do that in the products. We have several different use cases of A.I. in our products. And then we also are using Gen A.I. to make our developers more efficient. Make it so that we can develop develop code that's faster and an even higher quality than it is today. Make it so that we can also manage our clients more effectively and efficiently. Do you worry about the U.S. debt the enormous amount of government debt and the higher deficits we have or do you think that's something that's transitory and we can get through that. You know I think that that's a long term challenge that a lot of economies are going to have including the United States. I do think over time we have got to find a way to create a more balance in both the government revenue versus government spending. I also think that there are periods of time like covid where having fiscal support for the economy is very important. So we've got to work our way through that. Now that's we're kind of in the aftermath of that. We've got to figure out how to work our way through that. And what is the biggest problem in the economy you actually worry about. I actually worry the most about consumer sentiment. And then consumers really drive our economy. And they've been very resilient. They've had an opportunity on the back of covid to come back out into the world and explore the world again. You've seen that in a lot of industries. They obviously are very interested in technology and the future of technology. And they've been consumers in that around that area. As soon as consumer sentiment changes that changes spending behaviors. Once that changes that obviously it has a huge impact on on corporates in terms of their their activity levels. And that then impacts earnings. That's what really drives market market behaviors and market sentiment. So I actually came as an intern. They say come on in. You've got an MBA. You know how to write product plans business plans. I said OK. I had no idea how to write a product plan or a business plan. But I figured it out. Let's talk about your background. So I am from Baltimore and you are from Baltimore as well. Can tell us about your background. You were born in Baltimore. I was born in Massachusetts but moved to Baltimore when I was 2. So all my memories are of Baltimore. OK. And your parents did what. So my dad worked at T. Price his whole career and he spent the last 10 years as the chief investment officer there. And my mom actually went back to law school when I was 9. She went to us when I was 9 and became a lawyer when I was 11. And she ultimately became the first female partner at a law firm. So. So I've had two good role models in my life. So when you were growing up did you ever go into the T. Rowe Price offices and say I can do this better than these other guys can do it. Well I definitely went into the T. Price offices like when I would have a day off of school I would actually want I would ask my dad if I could go to the office with him and I would hang out down on the trading floor and you know they had a small trading floor and I would just hang out with the guys on the trading floor and try to understand what they were doing. When you went to college where do you decide to go. I ended up going to Williams College. And why did you pick Williams a wonderful school. But it's a little remote. Did you decide that you wanted to get away from an urban area. Well actually. So my dad had gone there and I was convinced I didn't want to go there as a result of that. And so my mom was like OK well let's just take a tour. We'll see a bunch of schools. And we ended up at Williams. And I loved it. And I like despite myself I loved it. I love the campus. The tour guy was excellent. The school is amazing. And I just I could just feel myself there. So you graduated. Did you major in finance or what did you major in. Well Williams is a liberal arts school. So I majored in political science and I had a concentration in Soviet studies. So I studied Russian and French in high school. I studied Russian and French in college and ended up going to Russia actually in 1989 and going to France as well. But I found that I I really loved the idea of international relations. I thought that that's the path I was going to take. But I ultimately realized that the pace of business is definitely more my speed. So you ultimately went to business school at Vanderbilt. How did you happen to pick Vanderbilt. Well at that time I was actually I went straight through. I went straight from college to business school which is kind of unusual. And I decided that you know I really wanted to focus on business. You know I tried I thought about going into the government side of things and realized that I really wanted to have a faster pace. I talked to my dad and and he was saying you know I think that you know that ultimately thinking about business is the right next step for you. And so I decided to apply to Vanderbilt when it got in. Super lucky. And and I actually loved it there. I had two of my most fun years of education at Vanderbilt. And so after you graduated from Vanderbilt with an MBA what did you decide to do. I came here. So I actually came as an intern and they'd asked me to come in at that time. You know it's 1993. So they were 22 years old. Still pretty young company. They had been building out these trading solutions beyond the markets like these very esoteric trading products. And they hadn't really thought about how to grow and expand them. So they say come on in. You've got an MBA. You know how to write product plans business plans. I said OK. I had no idea how to write a product plan or a business plan but I figured it out. And so I came in and wrote product plans for their trading products to help them grow their revenue and think about them more holistically. I ultimately became a product manager including to one of those products actually. Now you rose up to be ultimately the CFO of NASDAQ. Is that right. And then a firm came along a big private equity firm and they convinced you to join the private equity firm as the CFO. That was Carlisle and you were there for a few years and then you had a chance to come back here. You came back because did you have an understanding you would probably become the CEO. I had an understanding that I had a path to being the CEO if I was successful when I got back. So I had to prove myself again. But yeah I joined Carlisle in 2011 and together we had a lot of fun together and we took the company public. And then three years later on NASDAQ and then three years later we came. The CEO of NASDAQ called and said would you like to come back as the president with an opportunity ultimately to become CEO. If you can prove yourself. So I said that sounds good because you know I had I'd run a business. I've been running the data products business. I then became the CFO of NASDAQ. And so you go from being like a risk taker to a risk manager. I joined Carlisle which was honestly just an amazing experience an amazing opportunity. But I ultimately realized I like being a risk taker. I like running a business having the pressure of the P&L. And so coming back to NASDAQ I had a chance to go back into that side of things. So let's suppose you read about a stock and you think it's a pretty good stock and you have a personal investment portfolio. Can you buy a stock that's traded on NASDAQ. So I am from a policy perspective allowed to do that. But I almost never do that because I think that I just find first of all it takes a lot of time to make sure that you're buying you're buying the right stocks and I don't have a lot of time. And second of all who does your investing. Yes. So I actually I'll buy ETFs. I really like buying into ETFs. So like a little bit more of really focusing on a strategy or a theme and buying an ETF that follows that theme. NASDAQ has a wonderful index business and we have about 600 billion dollars of assets under management in our index business. I buy private equity private equity funds and I am a believer that private equity is a good way to create value for investors. And then I also buy into mutual funds. So to your appraised I have to say I'm a pretty loyal to your appraised clients. And I have passion for what NASDAQ does. I have complete dedication to our mission. We are here to advance economic progress for all. It matters to me. I live that every single day. So you are one of the few women running a global financial service firm. The market capitalization of your company is what it's just under 40 billion 40 billion dollars. All right. And it's up about 250 percent under your leadership. Yeah that's pretty good. So let's say that somebody comes along to you and says you know you're running a 40 billion dollar market cap company. But I have a 100 billion or 200 billion dollar market cap company. And why don't you come work for me. If you ever thought about doing this you've been doing this now for about eight years. Yes. Eight years. So you ever thought about running a bigger company. You know I remember a conversation you and I had 11 years ago. So I was at Carlisle and you asked me about you know the idea of would you ever want to become a CEO. And I said if I were ever to become a CEO I think it's the most important thing is you have passion and dedication for the business that you're running because it's such a hugely time consuming job. It's so all encompassing. But if you don't have passion for what you're doing you're not going to be as successful. And I have passion for what NASDAQ does. I have complete dedication to our mission. We are here to advance economic progress for all. It matters to me. I live that every single day. I focus on it. I love our clients. I love what we do. So I would actually have a really hard time envisioning myself anywhere else. OK well let's suppose a president United States came along and said Idina I need a secretary of treasury and I want to have somebody who has financial market experience as you do. Why don't you come in and serve your country as secretary of the treasury. What would be your response. I would start by saying well I could recommend someone. No I you know honestly I really do love what I do. And I never say never. But I would find it would be really hard to imagine myself anywhere else. Ask you about two other acronyms that CEOs deal with these days. One is ESG and the other is DEI. So what is your ESG policy and how are you trying to solve that dilemma. Well so I mean NASDAQ itself as a company we we work hard on making sure that we're you know we're carbon neutral and all the things that we can do. We also have from the ESMG. So on the governance side we have a whole suite of governance solutions that serve our clients and help them manage their governance. But more generally what we look at is like kind of our role as a as a central provider in the industry. So we have thousands of corporate clients and we have thousands of investment manager clients. And there is a lot of interest from investors on getting disclosures around the companies and what they're doing around ESG. But it became very very complicated for companies. You know they they get all these inquiries from investors and they got it from rating agencies and they got different taxonomies and different regulators. And it became super difficult for companies to manage all of that complexity. So we actually built a whole suite of solutions that make it easy for companies to put all their ESG data into one place. We map it out and we send it out to all of the different providers. And then on the flip side on the investment management side we've gathered up all the ESG data from like 10,000 corporates and we make that available now to our investment management clients. What about DEI? So DEI we we are a big believer that diversity actually helps drive the business and makes us more successful. So we have had you know very established DEI programs here at NASDAQ for a long time and we're continuing to do that. We have about 12 employee networks that allow people to bring come together and and find people with common interests and backgrounds. But they're open to everyone. And we do training programs that are open to everyone but also kind of help different different communities come together and advance their careers. And then we really do focus on bringing opening up the field of bringing in a lot of candidates from diverse backgrounds to be considered for employment here. So that as we continue to grow our population we're bringing in the best people around the world to help us. With respect to your own investments what would you say is the best investment advice you've ever been given. So I was definitely given the best advice my father. And he said that remember that markets go up and down but the company performance and well the stock performance of a company will ultimately revert to its fundamentals. So if you're a long term investor focus on the fundamentals of the company and make sure you're investing behind the fundamentals of the company. And what do you think is the most common mistake that investors make. I think market timing is probably a very difficult thing to get right. And I think there was actually a really good study that was done by an investment management firm that showed that if a person had just put their money into a fund or into you know any stock or any fund over a period like let's say in one year and then 20 years later if they just stayed invested whether that's the Nasdaq 100 or the S&P 500 something very indexed and just stayed there they would have compounded their you know their investment a huge amount. But if they tried to time it and they'd sold out when the markets looked like they were going down or the markets were down they actually made a lot less money over that period of time because it's so difficult to time the market. So tell me this. What is the biggest challenge you have as the CEO of Nasdaq. What are you most worried about every day. I can honestly say the thing that worries me about the most is making sure this company never becomes complacent. You know our job is to serve our clients every day and our clients are relying on us to bring them the best technology and the best service the best capabilities to help them manage risk and to manage their lives in the capital markets. And if we get complacent for one single second that's when we start to decline as a company. So staying staying focused on growth staying focused on bringing the next generation of technology here keeping everyone super driven towards serving our clients is something I literally focus on every minute of every day.