Following news that he looks set to make a late run for the Democratic presidential primary, we’ve been thinking about Mike Bloomberg.
For a 77-year-old man worth over $50 billion, with a stellar business and a career in public office behind him, it’s tempting to ask, why? Why not step back and enjoy the autumn of your years? Why not relax and spend time with family? Why is President Bloomberg a good idea?
One answer to that question can be found if you look back to 1981, the year Bloomberg set out to found his own company. He had just been laid off by Salomon Brothers, receiving close to $10m for his equity. Aged 41, that lump sum added to the considerable wealth he’d made from a distinguished career in finance set him up for life.
Put yourself in his shoes… North of 40. A multimillionaire. The opportunity to do whatever you want with the rest of your life. Most of us would be thinking about early retirement. But not Mike Bloomberg. In fact, he did quite the opposite, choosing to plough that $10m into his own financial data and technology business venture. And the rest, as they say, is history.
Bloomberg’s story began with an unremarkable upbringing in a middle-class family in Massachusetts, graduating from Johns Hopkins with an electrical engineering degree and an MBA from Harvard before joining Salomon in 1966 and making partner in 1972. In 1978, Bloomberg was charged with leading the firm’s IT division, where he stayed until he left in 1981.
Having designed in-house computerised financial systems for Salomon, Bloomberg founded Innovative Market Systems, a company that provided real-time data and analytics to firms on Wall Street. Merrill Lynch invested $30 million in IMS in 1983 to help finance the development of “the Bloomberg”, the terminal, and by 1984, IMS was selling the hardware to all of ML’s clients.
In 1986, the company was renamed Bloomberg L.P., and boosted by the roaring markets of the 1980s, launched a range of products, including Tradebook, Messenger, and Newswire before starting its news division in 1990. A truly multi-dimensional technology company was leaping ahead of its rivals, digging out a moat that would be very difficult for them to overcome.
As most of us know from first-hand experience, the Bloomberg terminal and its news service have taken a vice-like grip on the financial services industry. Despite being challenged over the years by the world’s largest media organisations, and lately from a host of niche fintech startups, the product is hard to challenge or replicate, thanks to the fact that Bloomberg enjoys the benefits of data ownership and a corporate structure that few other companies can match.
A crucial part of Bloomberg’s early success was down to the fact that they managed to create a product that served investment banks before they were banks. In the 1980s, they were small partnerships with tiny (if any) tech/compliance/procurement divisions. These firms looked more like consultancies today and, as they grew, they needed outsourced data solutions. Consolidations, tightening regulation, and the financial crises that took place through the 80s, 90s and 00s led to the formation of bank holding companies that offered Bloomberg a different beast to sell to and these giants were growing ever-more reliant upon Bloomberg’s product.
Of course, it’s easy to look at the terminal and feel that, by today’s design standards, the UX feels dated, and how it might be a prime target for newer upstarts. But that shows a lack of understanding around the advantages of the network effects that Bloomberg created. The hard work the company did when building out their proposition through the 80s and 90s hooked in thousands of users, at both an individual and corporate level, who now really don’t want to change to another provider. As said, the Bloomberg moat is deep.
Bloomberg’s enormous success and unparalleled market dominance are also reflected by the tight corporate structure that has governed the company since inception. It’s always been a privately held company and Mike Bloomberg has held a majority. The company’s success has been squarely built upon its founder’s ability to focus and lead. The fact that he has managed a small group of stakeholders and had few distracting strategic motivations to cope with meant that the business remained on target. This approach contrasts to today’s funding-dependent startups, such as Bloomberg rival, Symphony.
It’s this focus and leadership that shows how the company’s success is a true reflection of its founder’s talent as a businessman. It’s also that sense of drive and direction that answers the question of why President Bloomberg might be a good idea.