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Straight Talk from A Wall Street Wizard

Recently, I had the opportunity to speak with Robert B. McKeon of Veritas Capital, a private equity firm based in New York City. Prior to founding Veritas in 1992, Mr. McKeon (MBA ’80) was Chairman of Wasserstein Perella Management Partners, Inc. where he was instrumental in raising and managing the group’s $1.1 billion private equity fund. Before helping found Wasserstein Perella, Mr. McKeon was a Director at First Boston Corporation where he handled sale of assets for Armco, Owens-Corning, Guinness plc, and Beatrice, among many others.

Throughout your career you have worked closely with a distinguished group of business professionals, including Bruce Wasserstein and Henry Kravis. What have been some of your key learnings from them?

I have worked with and for a wide variety of people over the years and the basic thing I have learned is that most success is directly related to hard work and the willingness to take risks. We often judge people by how they look or how articulate they are but I have found that, in the end, the best predictor of success is the willingness to put in the time to really understand what you are working on and, most importantly, to take action. There are no shortcuts (although I have seen people “get lucky”) and ultimately, it’s that extra time put in that yields the best results.
When and from where did your desire to start your own private equity firm originate?

I had decided that I wanted to be my own boss just before we started Wasserstein Perella in 1988. I told Bruce Wasserstein, when we started, that I wanted to be on my own someday. The desire came from my strong need to be my own boss and not have a limit on how much money I could make. As an investment banker, there is the annual ritual of sitting down at the end of the year with your boss and being told what a good guy you were and, as a reward, we are going to pay you X – I hated it. I wanted to have no limits on what I made but, more importantly, I wanted [my compensation] to be directly tied to what I had done, not what the organization decided or the market for professionals at my level were being paid.

People always ask me if I was afraid to go out on my own and the answer is absolutely not. I had no choice. I had to do it and I genuinely believe that is the way it has to be if you want [your venture] to work. It is a psychological state of mind that drives you to start your own company, not a business decision. And I haven’t regretted a day.

Your firm invests heavily in the defense industry, which has seen a lot of growth during the current administration. Do you believe that the industry will continue to grow?

I believe the defense industry will continue to be an area of attractive investment interest as it has been for the last century. As Plato said, “As long as there are men there will be war”. The world is an increasingly dangerous place and our government is committed to aggressively fighting terrorism as well as defending the free world from any threats that might disturb our country and its key allies. Defense electronics, defense services, defense IT, Homeland Security and UAV’s (unmanned vehicles) are all areas of interest. In addition to the business element, I enjoy the defense areas because of the public policy element that goes with it. I need to understand how our government works because, in the end, Congress writes the checks for defense spending.

Given your long and successful career, what are your major takeaways and what advice would you give to current HBS students?

It’s hard to distill all of what I have learned over the years into general advice or takeaways, but I will say the following based on my experiences:

Take your case studies at HBS very seriously. I can honestly say those hours I put in reading those three cases a night for two years were the most productive time of my entire career because you slowly realize that there is never a “right” answer to any business problem, only the best answer you can come up with in the time given and with the information that is available. The process of doing cases, night after night, does change your brain and I can honestly say all these years later (although it feels like just yesterday) whenever I approach a new business situation or problem I can still feel that mental framework kick in and it enables me to approach any situation calmly and analytically.

Listen to your intuition. The analysis we are trained to do can only take you so far and, particularly with people issues, your gut will tell you much more than a piece of paper or a spread sheet. There have been three or four times in my career where there were people who were prominent, respected individuals I came in contact with but a little alarm went off inside and I ended up avoiding them and, in each case, they turned out to
be real trouble.

Start out at a big firm. The early experience you get will be invaluable.

You will make more contacts and get a much broader experience that will help you later on if you decide to go out on your own.

Delegate. The key to getting things done is to only do things that no one else but you can do. It is surprising to me how few people are good at this but it is, I believe, a major reason people do not maximize their potential. They get bogged down because they can’t let go.

Work with the best. I have been very fortunate in that at First Boston, Wasserstein Perella and my own firm I am surrounded by really smart people. Smart, hard working people can get anything done.

Weekends off. I will work as long as I have to during the week so I can
take weekends off and this is one of the reasons I have been able to keep up a sustained work effort for so many years. It’s important to get away from work problems and the weekends are critical for recharging your batteries and doing something different.

Do/Think/Do. Do the analysis, think thorough the pros and cons – and then do it!

April 12, 2004
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