From the Financial Crisis to Art Auctions, with Michael Ainslie

The Sydcast

Episode Summary:

In this episode of The Sydcast, Syd sits down with American businessman Michael Ainslie to discuss how the former President and CEO of Sotheby’s fits into the complex stories of the 2008 financial crash, the ever-fluctuating prices of art, and the nature of educating underprivileged youth. It seems unbelievable that one man can be a focal point for three topics as diverse as these, but it’s all true, and you can hear it all on this episode of The Sydcast.

Syd Finkelstein

Syd Finkelstein is the Steven Roth Professor of Management at the Tuck School of Business at Dartmouth College. He holds a Master’s degree from the London School of Economics and a Ph.D. from Columbia University. Professor Finkelstein has published 25 books and 90 articles, including the bestsellers Why Smart Executives Fail and Superbosses: How Exceptional Leaders Master the Flow of Talent, which LinkedIn Chairman Reid Hoffman calls the “leadership guide for the Networked Age.” He is also a Fellow of the Academy of Management, a consultant and speaker to leading companies around the world, and a top 25 on the Global Thinkers 50 list of top management gurus. Professor Finkelstein’s research and consulting work often relies on in-depth and personal interviews with hundreds of people, an experience that led him to create and host his own podcast, The Sydcast, to uncover and share the stories of all sorts of fascinating people in business, sports, entertainment, politics, academia, and everyday life.

Michael Ainslie:

Michael Ainslie is an American businessman who’s distinguished career includes, among other things, serving as President and CEO of Sotheby’s from 1984-94 and transforming the world of auctioning. Prior to this he was the CEO of the National Trust for Historic Preservation where he helped to rewrite a tax law to provide a 25% investment tax credit for investment in historic buildings. He was a director at Lehman Brothers for 12 years, culminating with its 2008 bankruptcy. Ainslie was one of the ten people in the room on the night of September 14th, the night of the largest bankruptcy filing in US history, and afterwards was part of the team that oversaw the sale of the company’s remaining assets.

One of his more passionate ventures involved the Posse Foundation, which he helped to launch in 1994. This foundation finds young leaders from public and parochial high schools in ten major cities and sends them to one of over 50 elite university partners. They travel as a cohort of 10 scholars, and all receive a full merit leadership scholarship. To date there have been over 9200 Posse Scholars who have been awarded over $1.4 billion in scholarships.

He is a Trustee Emeritus of Vanderbilt University and has served on the boards of Sotheby’s, the United States Tennis Association, and the St. Joe Company. In 2020 he authored a book called A Nose For Trouble: Sotheby’s, Lehman Brothers, and My Life of Redefining Adversity, in which he describes his personal experience with these high profile events.

Insights from this episode:

• The complicated nature of the 2008 financial crisis and where Lehman Brothers exists in the story
• How deeply the global financial system depends on trust
• Understanding how the art market exists as one of the purest free markets in the world, for better or for worse
• How important it is to provide students from under-privileged backgrounds with the support they need in University settings

Quotes from the show:

• “The ability of a buyer from China or Russia or anywhere in the world to participate is now very easy to do. That has made it a true global market, it's also driven up the prices because a lot of these people have new wealth and they either want to own the art or be known to own the art.” - Michael Ainslie [00:32]
• “Universities go out of their way to admit students from very underprivileged backgrounds and they think their job is done. ‘We have diversity, we did a good thing, this is great,’ and then they leave these kids to sink or swim.” - Syd Finkelstein [05:58]
• “The problem was that causing the bankruptcy triggered that basically banks stopped and stopped working together, and the global financial world froze.” - Michael Ainslie [12:55]
• There's something that gets done after a bankruptcy that's called an examiners report, and a firm from Chicago was hired to do that. Believe it or not they spent $100 million on the forensic evidence to put together that examiners report. They concluded there was no malfeasance, there was no lack of carrying out responsibilities by the audit committee, the board, or management. They literally said ‘Lehman became illiquid in the last 5 or 6 days of its existence due to things I spoke about earlier.’” - Michael Ainslie [26:28]
• Congress literally opened the floodgates to the subprime mortgage crisis, you remember this, they were changing the lending standards. Do they go to jail for that decision? Because that, in a sense, is what really precipitated the flooding of money into these financial instruments that financed these subprime mortgages.” - Michael Ainslie [29:03]
• I think the involvement of wealthy individuals, and frequently very newly wealthy individuals, in the art market has driven prices to levels that are really quite remarkable. And frankly I think a lot of people have trouble with that. When paintings cost three or four hundred million dollars, even though they’re some of the great works of art, that seems excessive. - Michael Ainslie [32:39]
• “The Posse is kind of a genius idea because you have a team, you have friends, you have support group right from day one, which gives you a huge comfort level. You don’t have to worry about having nothing to do on a Saturday night in the first month because you don’t know anybody, you know nine people” - Syd Finklestein [49:24]

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Syd Finkelstein

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Michael Ainslie

Website: https://anosefortrouble.com/

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