DebtStreet podcast - Jim Griffin

Jim Griffiths, co-founder of Derivative Logic, shares his journey from working at large banks to starting his own advisory firm. He discusses the challenges and rewards of entrepreneurship, the importance of finding the right business partner, and the early wins that confirmed the success of Derivative Logic. He also mentions the need for integrity and ethical practices in the industry. Looking to the future, Jim plans to incorporate more technology into the company's advisory services. Surprisingly, he reveals that he used to be a professional skydiver. Jim Griffiths, Co-Founder of Derivative Logic, Inc. Jim Griffiths, Co-Founder of Derivative Logic, Inc. So our guest today is someone who has built a highly successful business that is all about helping companies with interest rate and foreign exchange risk management. I'm extremely excited to introduce you to Jim Griffiths from Derivative Logic. Jim, welcome to DebtStreet. Glad to be here, Carol. Thank you. So we're very excited to hear about Derivative Logic, but before we dive in, I'd like to dig a little bit into your past. What was life like before you started Derivative Logic? It was terrifying. It was terrifying because I worked for very large banking organizations that didn't seem like they ever really knew what they were trying to accomplish at any given point in time, which was frankly terrifying as a husband and father of children. So I'm sure many of our listeners can relate to that. So not that it's not any less terrifying now. It certainly isn't, but it's just a lot more fulfilling from the standpoint that the clients that I personally serve and we serve at Derivative Logic are really our clients. They're not talking to us because maybe they have a lot of money parked with us from an investment standpoint or have borrowed a lot of money from us as an organization, like they would have done if they were my quote-unquote client while I was employed at large banks. So do you mind telling us a little bit about kind of your big bank background so our listeners can get an understanding of what you did for big banks? Sure. I'll take you way back to my teens. My father had a very successful insurance business his whole life, and I was brought up in that business. What does that mean? What that means is it was really a marketing organization. I'm talking to individuals really at all stratas of life, doctors, lawyers, cosmetologists, plumbers, pipe fitters, about managing their financial lives, both in terms of retirement and just their insurance benefits, both health insurance, disability, things like that. I grew up around a lot of salespeople all the time, everything from working in my father's mailroom, where he would send out a lot of mail marketing promotions to generate leads, to just hanging out with him and his colleagues at restaurants and bars, to be honest, in Fort Lauderdale, Florida, which you can imagine during the 70s and 80s was quite a different place than it is now. It was sort of like the land of Jimmy Buffett 24-7. My point is I got a lot of experience around a lot of salespeople during that time, what to say and how to say it and what makes sense and what doesn't. It gave me kind of a nice foundation for my entree into banks that I got purely as a salesman. I was never recruited to any of my bank jobs. I had three big ones during my career, where if you come into a trading desk at a bank, you're recruited really as an analyst, generally recruited from a big university that you just graduated from, not me. I got in through the back door because I could sell and I could talk to people, which I found at that time was a pretty valuable skill. I spent some time on the trading desk and was surrounded by these super smart kids that frankly didn't really know how to talk. They were smart, but they didn't really know how to talk to people. I used it as a platform to be pretty successful at all the bank jobs I had. I started at a bank called Imperial Bank, which no longer exists, which frankly had a business model almost exactly the same as Silicon Valley Bank, in that we banked pre-profit startups, lent them money, assigned standby letters of credit for them so that they could get office space and hire employees in exchange for warrants in the company. So imagine a bank that did that, right? Pretty risky. But being in Los Angeles at that time, it was also very successful. Part of those business needs or clients' needs was international in perspective in that they had to hire employees, establish foreign offices, buy equipment, raw materials for the widgets, the electronic widgets they were making or the services they were providing. In terms of my job at Imperial Bank, it was purely foreign exchange. So we were helping them manage exchange rate risk as they sent cash flows back and forth across borders. And so not to bore you with every banking job I ever had, I basically went to that pretty small localized bank and sort of wrapped up my banking career at UBS, the large investment bank in New York, where I basically consulted both borrowers and ultra-high net worth individuals and family offices around the management of interest rate, currency and commodity price risk. What do I mean by that? I mean precious metals, industrial metals, oil and gas, things like that. So it was quite a fun experience through banking. Does that answer your question? What made you decide that you were going to start this advisory firm and going from big bank banking to kind of start from scratch? When I got fired, Carol. Oh, I love it. I love it. It was a move of necessity. So many of our listeners out there probably don't realize that when you're an employee at a really large international, you're surrounded by really smart people and you have a lot of resources at your fingertips, but you're also very spoiled. At least you grow to be. And many people don't realize how spoiled they are that have worked at those organizations for so many years, which makes you soft, frankly, in terms of what you can tolerate, what you're willing to do on a day-to-day basis, etc. I was spoiled like everybody else, but probably less so just because of my early background. I realized, wow, this is really great. It's also really dangerous to those folks as individuals. But many of us learned how dangerous it was through the financial crisis through 07, 08, when many of these banker folks like myself basically lost their jobs because of it. So I woke up one day, Carol, and I was forced to wake up. That was scanning my badge on the elevator at my office for UBS in Midtown Manhattan, and it didn't work. And as I continued to swipe my badge and it didn't work, I look around and I'm basically increasingly surrounded by other employees that were having the same experience. Why won't our badges work? So if you want to do a little research into this experience, you can actually Google news articles in the Wall Street Journal from that time. I'd say, yes, UBS employees find out they were laid off en masse because they couldn't enter the building in London and Singapore and New York and things like that. So having come from a background as an employee of banks where basically I was hired to create businesses that didn't exist or fix broken businesses that weren't successful. That's why they hired me. I learned at that point that I would never build a business for a bank again. I swore that to myself. I will never do this again. I'm going to do it for myself. So that's when I woke up. That's when the lights went on and it started the process to creating Derivative Logic. What's that story? So it sounds like at one point you were famous because you made it to Wall Street Journal with your expired UBS badge. Sort of. I wasn't named in the article, but, yeah. You're the group that was named. I was part of those groups of people. Yeah. Yeah. It was a little – not a great way to be famous, that's for sure. But nonetheless. Yeah. Was it so shocking that day? Like did you have to actually go home and process it? Like how did you find out, oh, my badge is not working. They really are letting us go. Did they ever email you? I'm curious to know. Well, they ended up calling us on the telephone because we didn't have access to email after that morning. It was like we were just – like our heads were cut off completely. Yeah. Or as they say on Wall Street, we were shot, taken around to the back of the woodshed and shot, all of us. I mean, it took a while to process, as you can imagine. Anyone in sort of this bank for at that point was almost 20 years. The fact that, number one, you were ever fired from any job, which I had never been fired ever. I was always the star, right? But to be fired, number one, no matter what the circumstances were, was a shock. And then number two, based on the economy at that point and how the economy was performing, being faced with the prospect of not being able to work in banking at all or for a long time was also daunting. And in addition to having a wife at home and two little kids and being the only breadwinner was a third shock. So I had to figure it out pretty quick. Fire by fire. Yeah. So tell us about Derivative Logic. What do they do? So Derivative Logic is a group of highly experienced professionals that basically guide organizations of many shapes and sizes in their management of interest rate risk and exchange rate risk. So what does that mean? This is the elevator pitch. Basically keep borrowers out of trouble and those that transact or move money cross-border out of trouble. And in the best of cases, we allow them to profit when faced with both of those uncertainties. That's us in a nutshell. Cool. What were the big wins early on that made you realize this business is going to work? Well, after UBS, I basically spent almost two years trying to find partners in the business, meaning when I was at UBS and before I was let go from UBS about a year prior to my firing, began to take things away from us in terms of products we could promote, types of transactions we could do, things like that. And it got to the point where probably a couple of times a week near the end, clients would ask me, what do you mean, Jim? We can't do that type of trade anymore? What do you mean you can't engage us on this type of hedging transaction? Why not? And it was sort of a process of all banks at that time trying to figure out what businesses they wanted to be in after a couple of decades of excess prior to 2008. And UBS taking those things away from us was part of their sort of learning about what core businesses, that's what they called it, what is core to us, that they wanted to be in after the financial crisis. But when you have clients asking you that on a routine basis, a light should go on in your head that tells you, wait a second, if my client's asking me why they can't get it from me or anywhere else, there's a business to be had here. Someone is going to give it to them, like they used to be able to get it from UBS. The question is, who is that? So sort of a light was starting to come on, and the firing was sort of the trigger. That was the launch out of UBS. Some of the early wins that told me that we would be successful was I sort of knew that we would be moderately successful because of what I just described. But second to that was the fact that I found a great partner. I became very lucky. By the way, there was a couple of false starts before I met the great partner who is Rex Evans, who you may hear from on this podcast at some point. But basically Rex had had a similar business for a decade prior to my meeting him, just a much smaller one. And I knew just by witnessing Rex and knowing him and meeting him that we would be successful together for sure. I would be more successful faster with Rex, and Rex would realize greater success by being with me than he had experienced previously. That's exactly how it's evolved. So outside of that, and to really answer your question, it was really the first handful of client wins that we had, which happened in the first six months, which is very fast. So we were cash flow positive within a few months of starting the business, which was a big relief, frankly. We weren't able to really pay ourselves, but we were at least able to pay all of our expenses and whatnot. But in the engagement of the type of engagement that we had with those first few clients, it proved to me that, yes, the need that I believed clients would have is still there, number one, and that we could meet it in a way that didn't require that we be employees of large banks to meet the needs of the client. Long answer to your question, but couldn't really say it much shorter. So when you were looking for a business partner, did you sort of have a list in mind, or was it just kind of like, this feels good, this feels like it's right? Did you have like a checklist, or how did you kind of get to that point and say, yeah, Rex Evans will be a good partner for me? Probably the biggest requirement that I felt I would have trouble finding in a partner, well, let me back up. Number one, why need a partner at all? Before I even started that, you can't do this business by yourself. There's just too many details, too much work. And if you try to do it by yourself, you're going to cap your success, you're going to limit it pretty quickly just because there's not enough hours in the day. And then number two, to really have a true offering to your clients, you need to be more than one person. You need to be several people. So I knew before I even started that I couldn't really start it by myself and I didn't really want to waste a lot of time doing things by myself before finding a partner or partners. Probably the biggest attribute I looked for in someone once I started looking was aggressiveness. And that's a very rare quality with people that have our expertise or base of experience. Why? Because most people acquire this expertise while they worked for a bank. And like I told you early on or mentioned early on, banking spoils you. Banks spoil you as an employee just because banking is sort of like the electric company, right? It's almost like a utility. It's interwoven in society. They'll always be banking. As a bank employee, you don't really have to work that hard to be successful, frankly. So as I spoke with people that were either still at banks but wanting to leave or folks like myself that were forced to leave banks or had chosen to leave, the dearth of aggressiveness was everywhere. And dearth meaning shortage. It didn't exist. These people were not aggressive. They were scared. They weren't entrepreneurial at all. And it was really hard to find a good quality partner. And like I said, that's why I feel very lucky to find that in Rex because Rex, you'll hear his story maybe someday. He left banking voluntarily. He wasn't pushed out because he didn't like the ethics, decline in integrity and whatnot that he was witnessing. Plus, he's very aggressive. So he was perfect both from a moral standpoint and an entrepreneurial standpoint. It almost sounds to me like I'm listening to a dating story. Yes. You find your true love. Yes. You got your checklist and then you feel good. Let's do this. Yeah, yeah, yeah. On the flip side, were there any events that makes you wonder if the business was going to survive? No, not really. I mean, you know, in any type of service or consulting business where you're giving people advice that involves money, that based on your advice could result in a great outcome or a terrible outcome for your client in terms of, you know, sort of their return or their monetary returns or their wherewithal as a business themselves, you can get sued at any time by anybody for any reason based on whether or not you thought your advice to them was solid. So there's always a threat to any service business, a law firm, us, an accounting firm, you know, whatever, of being sued out of existence, frankly. And that's just the risk you have to take and just makes you pay attention and provide your advisory offering with integrity, which we do every day at Derivative Logic. So that's always a threat in the back of my mind and all of our minds here at the company and really sort of guides us every minute of every day, I think. I feel like in any businesses you can get sued for anything. You know, people can just sue you for nothing just because they don't like you. That's right. They might not have a case, but, you know, it gets you into enough trouble where you want to settle even though it's not your fault or, you know. It's a little crazy, definitely a little crazy out there. It's kind of like, you know, am I going to get hit by a car tomorrow? It might not be my fault. Certainly, and it's caused us, and maybe you too, Carol, in your past experiences, it's caused us to turn down business from time to time once we maybe are asked to do things that don't really fit our level of integrity as a company or ethics that we like to have. You know, we have walked away from several opportunities because of that because we were being asked to act in a way or advise in a way that just wasn't ethical at the end of the day or could be seen as unethical. It's just not worth it. Definitely makes sense. What makes Dirted Logic stand out from your competitors? Well, I think as all of us know, or at least many of us know here at the company, is our secret sauce is really the deep experience that we have and how we provide the fruits of that deep experience and the advice that we give and that we can go very deep into detail with a client-specific situation and give them advice that can result in significant savings to them, higher returns than they would have otherwise seen, et cetera, rather than just be kind of surface or like an order-taker type of organization. I think that's really what separates us. And, again, that skill set or the ability to provide that deep experiences or advice to our clients is really the deep, deep experience that we have and all of our people have here. It's our secret sauce. Yeah, definitely. I totally agree up and around. I've seen how other people do things, so that's definitely unique within Dirted Logic. Going forward, what big goals do you have for this business for the next three to five years? I'd say becoming more technological in a way, meaning weaving more technology through our advisory offering that we give to clients, trying to disrupt ourselves with technology. And what do I mean by that? You can imagine if you're giving advice out all day long, that's a lot of meetings. It's a lot of conversations. It's a lot of phone calls, a lot of emails with attachments, a lot of documents, things like that, meaning the way that we provide our offering involves a lot of labor, if you will. I think, number one, there's some great efficiencies that we can make by using types of technology to automate or at least simplify the way that we communicate with clients. And then second to that, really end up at the end of the day in three to five years with an efficiency-providing technology platform combined with the advice that will always be a manual process to the client. So those two things together, technology plus hand-holding and a partner and advice, are really the winning formula that we're hoping to achieve. Okay, I want to ask you about surprise facts about Jim. What are the surprising facts that people would be shocked to know about Jim? This is a concession session, so there you go. Maybe I can throw in a couple. So as some of us know here at the company, I was a professional skydiver in my 20s and my 30s. What does that mean? As a part-time job, I would skydive into sporting events or football games or arenas or rodeos and things like that. It was just, frankly, a hobby because it was fun. So, yeah, I did that for a long time and stopped right when I got married because I had kids pretty much immediately in my mid-30s. And I still dream about it to this day routinely. So it was a fun experience. Most people don't know that about me. Yeah, are you like an adrenaline junkie? Well, like you, Carol, sort of. Hey, hold on, hold on. I grew up in South Florida in Fort Lauderdale, even though I live on the West Coast now. So my childhood there was outside all the time and in the ocean all the time. Surfing, scuba diving, fishing, boating. It was basically a water childhood. And then on top of that, Florida, as most people don't know, is probably one of the biggest, if not the biggest, skydiving states or meccas in the United States. The reason is because of the weather. It's warm all year long. It's sunny all year long. You can imagine California is big. Arizona is big also. So it was sort of both of those environments together just kept me outside a lot and kept me always interested in, number one, the ocean, not to be afraid of the ocean, to respect it but not to fear it, and then get a chance to really experience all the nature that the ocean provides. Then later in my life, I ended up going to college in the western U.S., which specifically University of Arizona in Tucson, which opened up a whole western U.S. to me for the first time, mountains, streams, deserts. So like you, Carol, I got into rock climbing pretty heavily in college and thereafter in my mid-20s and later, multi-day backpacking trips, things like that. I feel very lucky to have been able to experience both the water, the ocean, and the mountains and that kind of life. It's been just wonderful to be alive and experience those things. You know, it's a learned skill to try to enjoy these things safely and respect them. I got lots of stories from the time when I was going to school in Hawaii, but definitely. So did you surf when you were in Florida? Believe it or not, yeah, the people do surf in south Florida. So I say that because there's probably people that live on the west coast hearing me say that. They're like, there's no waves in Florida. There are. It's a winter thing and it's especially when storms, hurricanes blow through or storms. We do get decent waves in Florida for sure. So yeah, I did that since I was about nine is when I started surfing. I started scuba diving when I was about seven because my dad was a diver in the Navy, my father. Oh, okay. He sort of got all of his kids into scuba diving when they were very young. Did you get your kid into diving or? Yeah, both of my kids do that now. They dive now. Oh, that's very cool. That's very cool. One fun question. If you could recommend one book for our listeners to read, what would that be and why? My favorite book that I'd recommend to everybody has nothing to do with business or financial markets. It's a book of fiction about a murder and it's called Perfume. It's by a German writer named Patrick Suskind. So I'll just leave you with this as a description of the book. It's a book about smell and smelling the world and about a person that has a genius level ability in his sense of smell. So very unusual, of course, but a really interesting book. Check it out. Perfume by Peter Suskind. Are you sure it's not written by a dog or something? Like from the perspective of a dog? No. It's much better than that. Much better than that. Thank you for listening into this episode of the Debt Street Podcast brought to you by Derivative Logic, Inc. Derivative Logic helps you get straight to smart about interest rates and how best to manage your risks. Please like and share the link to this episode with your friends and coworkers and subscribe to be notified of upcoming episodes. If you need to stay informed about interest rates, please go to www.derivativelogic.com and subscribe to the weekly straight to smart newsletter. 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