Jonathan Steinberg On Taking On BlackRock With $92 Billion In Assets Under Management

Jonathan Steinberg has built one of the world’s largest financial services companies, which is also the fourth-largest gold manager in the world. His venture, Wisdom Tree, invests in exchange-traded funds (EFTs) via the WisdomTree U.S. LargeCap Fund, WisdomTree U.S. Quality Dividend Growth Fund, and WisdomTree U.S. Multifactor Fund.

In this episode, you will learn:

• Tokenization
• Transparency in financial services
• Jonathan’s top advice for other entrepreneurs

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About Jonathan Steinberg:

Jonathan Steinberg founded and has served as Chief Executive Officer of WisdomTree since October 1988. He also serves as President and member of the Board of Directors. Mr. Steinberg, together with Luciano Siracusano, was responsible for the creation and development of WisdomTree’s proprietary index methodology.

Prior to establishing WisdomTree, Mr. Steinberg served as Chairman and CEO of Individual Investor Group, Inc. From 1998-2004; he held the role of Editor-in-Chief of Individual Investor and Ticker magazines.

Before his entrepreneurial accomplishments, Mr. Steinberg was an Analyst in the Mergers and Acquisitions Department of Bear, Stearns & Co. Inc., from 1986 to 1988.

He attended The Wharton School of Business at the University of Pennsylvania and is the author of Midas Investing, published by Random House in 1996.

Connect with Jonathan Steinberg:

• Crunchbase
• LinkedIn
• Bloomberg
• PitchBook

Read the Full Transcription of the Interview:

Alejandro Cremades: All righty hello everyone and welcome to the dealmaker show. So today. We have a very exciting founder. We have a founder that has been pushing his company that he took public backing 9090 one I mean unbelievable unbelievable journey you know we’re gonna be learning a lot about you know et tokenization. Ah, wealth management competing against giants like Blackrog I mean I think that they we’re gonna be learning quite a bit on building and scaling successful companies. So without fartherdo. Let’s welcome our guests today Jonathan Steinberg welcome to the show. So originally borning long island.

Jonathan Steinberg: Thank you, Thank you for having me.

Alejandro Cremades: So give us a little of our walk through memory lane. How was life growing up.

Jonathan Steinberg: I was very fortunate I grew up in a very loving family very privileged. Um and you know we moved into Manhattan very young, but you know my upbringing was sort of as. Beautiful when I was a young man and as a young boy and my father who was a very successful businessman. Um sort of shaped my ambitions you know I really found my passion and I’m living my dream to be honest.

Alejandro Cremades: Because what? what did your father do.

Jonathan Steinberg: When my father was at he was the first in his family to go to college. He got into Wharton and he from Wharton was able to create the computer leasing industry. It was at at a time when Ibm had like a near monopoly on computers. And the justice department decreed that they had to offer third party leasing and he created that he came out of it. Um, and and and took his company public. Very very young and so all I knew of my father was that he was very successful as a young boy. And that he would you know public financial services which is so I always had a dream as a six year old you know a young boy that I would be running a publicly traded financial service company which I am doing so I’m pretty much living my dream I have to be to be honest, I’m pretty happy.

Alejandro Cremades: So you also went to Wharton but eventually you dropped out for an internship that he was supposed to be temporary ended up lasting a little longer. So what happened there.

Jonathan Steinberg: Yes.

Jonathan Steinberg: Well so um, I was never that interested in school I was always interested in business. Um, and you know my I was very fortunate being my father’s son I had um a very strong background on. Business and the markets what was going on in current in the moment and so when I got to bear stearns in mergers and acquisitions as a summer intern in 1 of the morning meetings I pitched a deal I pitched the breakup of Xerox and at that time it would have been. The largest lbo in the history of of the industry and um, they had never heard of that idea before and they hired me full time and so I was able to elegantly not graduate and it put me on my career to business. So I was very fortunate.

Alejandro Cremades: So then let’s talk about getting you into your career of business because you know this is where everything you know when you got started with everything started so tell us about that moment where all of a sudden you are leaving bear sts. You know to go after your dream. Okay.

Jonathan Steinberg: So I had um I had an interesting I found a small publishing company that was trying to buy guitar magazine but what they owned was a financial magazine. Called the penny stock journal and I was just interested in all things investing. So I subscribed to it and everything that they wrote about went out of business. It was just a marketing gimmick and I thought well I could do better than that. Um, and so I ended up when I was. After sort of two and a half years three years at Bear Stearns I negotiated with the seller to buy the penny stock journal since they were trying to move into ah music publishing. Um, they were willing to sell it to me at a very good price and I read so I took the penny stock journal. I rebranded it called an individual investor and I started hiring analysts to do independent unbiased research for the masses and my tagline was investing for maximum returns and I really took it from 28000 subscribers to a half a million subscribers I loved my journalism.

Alejandro Cremades: So what? What? what did it look like when all of a sudden you know you’re in the public eye.

Jonathan Steinberg: Um, you know publishing was a hard business and everybody was big and I was small. Um what I was able to do to build the business I don’t know if you remember in the wall street journal. They used to have the dartboard competition. Ah you would compete against. The pros and random picks and I was the most successful participant ever I won it like 10 times and I was able to parlay that into a public offering a small deal though. So I went public I took it was 3 common. 3 warrants and I netted three and a half million dollars and that was it back in 1991 and so I you know I’ve I’ve hustled to make it all come together. But um, very exciting process.

Alejandro Cremades: Ah, and how how have you seen I mean obviously now you’ve been you know in the public markets. You know us public company for for twenty plus years how has it been. You know like how have you seen changes and things you know shifting all the way up in you know till now.

Jonathan Steinberg: Well couple of things one being a public company is harder today than it ever was also being an employer is harder today. There’s a different social contract between the employee and the employer not easy to navigate. Um, you know as a Ceo.

Jonathan Steinberg: I have 3 constituents shareholders customers and employees and you have to be able to balance all the needs. It takes up to build something sustainable. You have to really have a sense of fairness and you know one thing that struck me my dad created computer leasing. And he went public and he used his high flying stock and he bought an insurance company called Reliance now what struck me about that reliance was founded in 1792 when he acquired it. It was the third oldest company on the New York Stock Exchange older than general electric and I thought man how do you create a business that could go through the civil war the great depression. How could you create something that’s everlasting and I’ve tried to figure out what does it take to be a forever company. It’s not easy. And I’m not saying I’ve done it but it takes evolution. It takes culture and obviously it takes success. You have to no one’s going to give it to you have to deserve longevity.

Alejandro Cremades: So in your guys’ case, what was that thing because I guess that achieving that longevity too is also adjusting to the markets and what potential customers are asking you for and so forth I Know that for you guys. You know there was a moment of reinvention. But what happened there.

Jonathan Steinberg: So you know I got into financial publishing in 1988 so at the very birth of the um sort of the retail investor before um, online brokerage before the internet.

Jonathan Steinberg: But not so far after I started. The internet came out so when I saw Netscape come out I knew my business was going to be at best challenging if not really in decline and I wanted to figure out a way. To sustain myself so I started creating indexes like Mcgraw hillll that owned business week in s and p created indexes 9097 I did a story on Etfs when there is only 2 the ques and the spider. When the rapper only had um, $40000000000 in aou m so ninety ninety seven the first etf came in 93 today Etfs represent $10000000000000 of a um but when I did the story and I had no legacy issue. To confuse me I could see that this was the future of investing liquid transparent more tax efficient and convenient. So as a media company who created his own indexes I ended up selling my media assets holding my indexes. And relaunching as an asset manager but that transition took longer and was much harder than I expected and so I went from a high of $11 a share and a hundred employees.

Jonathan Steinberg: Down to three pennies a share I actually touched one penny a share. Um so I own over fifty like fifty eight percent of the company. Um I have this IP and a vision and I was able to convince.

Jonathan Steinberg: In 2004 took me ah a year and a half to do it. But I convinced a man by the name of Michael Steinhart he was one of the legends of the hedge fund industry. So Michael Steinhardt a peer of George Soros for 29 years He delivered Twenty four and a half percent return a year after fees for 29 years The journal calls him one of the world’s greatest investors I got him a man by the name of Jim Robinson the former Ceo of American Express and a professor Jeremy Siegel to back my I p now to stay stay alive I had to delist from Nasdaq I had to shed all of my directors of the oldie director left and I sold control of the entity I raised $9000000 when I had a $300000 market cap I sold straight common at a 400% premium but when I announced my stock went up 38000% in a day and I was I went from $300000 market cap to 125000000 I then use that momentum I recruited a lot of leadership from I shares and in June of 22006 I launched 20 funds in a day and wisdom tree was born and today.

Jonathan Steinberg: Wisdom tree manages ah $92,000,000,000 has 280 employees and you know a highly profitable you know net 3 you know net 50 or 60000000 on three hundred and thirty million of revenue. Ah and a billion dollar market cap so it’s been a journey but. We’re on the most exciting aspects of asset management etfs models and tokenization. So. It’s been a very exciting journey journey.

Alejandro Cremades: So So obviously now that that you’re making it happen. You know with a with all the employees. The market company me now now is say you you’ve been able to really make it happen but but I guess back Then. You know you you you could have been viewed as someone that was doing something successfully you know and and well done. You know with all those employees and everything I mean it does take a lot of conviction to pull the plug on something like that and to completely reinvent you know, ah your guys selves. Where did that like high conviction come from to know that you were doing the right thing right.

Jonathan Steinberg: So so first of all because I was my father’s son so my father created the computer leasing industry. He also created Telemundo um a tremendously diverse background and we always talk business and we always talked what makes a great business. And so I had a lot of conviction in myself and as a Ceo I amtrtrying to make the right decision on the least amount of information possible because I’ve always been small and if you’re small, you have to be early. So. Making the right decision on the least amount of information I saw a little bit in ets and I knew that it was revolutionary and you know from $40000000000 to ten trillion in a u m I mean. I wasn’t surprised and so I definitely have a lot of conviction. But that also means you have to have checks and balances. There’s nothing more dangerous than a ceo with conviction. So you definitely need to know when um, you know when to change when to listen to others and I’ve gotten obviously better over the years I I don’t want to win every argument just because I’m the ceo you want to win only the decisions you should win.

Alejandro Cremades: So how does listening look like then you know when when you need to really understand who you need to listen to and how you listen to them. How do you go about that.

Jonathan Steinberg: On merit.

Jonathan Steinberg: So it really depends on the subject matter. But you know within wisdom tree and I have a lot of long tenured employees I mean I have a lot of people who have been with me 1015 almost twenty years I have experts in different areas. So I know where I play big. Branding product strategy ah culture building. Um, but like legal compliance I know where to listen to and I’m always fearful of not doing the right thing I always have to be in the right? Um, and so I just listen to the right people on the right? um subjects. I can hear truth well I don’t know I don’t know but I hear truth. Well.

Alejandro Cremades: And now last year you guys took like twelve billion in inflows you guys are now competing with the likes of Blackrock and so. I mean you guys are really taking on some pretty heavy heavy hitters here. So so how how does that look like when you know you’re looking to compete with the likes of Blackrock.

Jonathan Steinberg: You know it’s exciting and I find the creativity of business to be very satisfying so I have a tremendous amount of passion for what I do um and it is exciting to try. You know when I was when I was launching going from media to asset manager. My. Thesis was had to thrive in a vanguard world. So I was recognizing the power of indexing recognizing fee compression was a fact of life I actually created a different business model called self indexing. So um. You know vanguard licenses the sandpfivehundred from a media company at the time it was mcgrawhill. Um I create my own I p I get I keep more of the economics. Um, but you know you have to be they have such um. Blackrock eyeshares vanguard ssga they’re all trillion dollar asset managers it’s such a high standard of excellence that you have to be willing. That’s what it takes to be able to compete with them. You have to be able to deliver. What’s best in the world. And Etfs are are the best rapper today for exposures and um, they’ve conquered every liquid acid class that there is so it’s very exciting I have to say but you know they bring a lot to the table.

Jonathan Steinberg: They’re tough. They’re all very tough competitors.

Alejandro Cremades: You’re not kidding now what about tokenization. How do you guys think about tokenization. What what is going on right now is absolutely incredible.

Jonathan Steinberg: So um, for about 5 years I have been asking the question internally what could do to etfs what etfs did to mutual funds and I think and you know we got to a place about. 3 or four years ago that it could be blockchain enabled tokenization and where I find myself right now and it’s very very synergistic to my to my business I I have so many core competencies to what I do in etfs. That today. We’ve only spent $30,000,000 on tokenization to get to the place where this month wisdom tree will be launching wisdom tree prime in the app store. So we are creating a new distribution model. We’re creating a mobile app. Really a super app for financial services. It’ll be iterative so it comes out this month. It’ll they’ll be additions throughout the course of the year and then really like January first we blow it out from ah a marketing standpoint but it’s a very. Exciting I find myself today that wisdom tree is the leader in tokenization of liquid assets now when I launched Etfs I did it in 2006 the spider came out in 9093 I was.

Jonathan Steinberg: Committed with tokenization with what would come next to be first and I find that I am I’m ahead of Blackrock Jp Morgan and vanguard and everyone else in traditional asset management with regards to tokenization and I think it’s going to be. Um, very disruptive like the way newspapers disrupt it I’m sorry the internet disrupted newspapers tokenization and blockchain enabled finance is going to change all of financial services and I find that we’re at the birth of it. It’s very exciting. So and I mean I’m I’m actually more excited today than I’ve ever been like I said I went up 38000% in a day I mean I I saw early something as powerful as Etfs this will be even bigger than that and um I just. I feel very fortunate to be in the place that I am.

Alejandro Cremades: So why tokenization and blockchain when they come together. Why is it so powerful. So.

Jonathan Steinberg: So the reason that Etfs won is that it it offered the investor better functionality. It will be the same in tokenized tokenization. So as an example out of my $92000000000 wisdom tree manages 13,000,000,000 in gold I’m the fourth largest gold manager in the world right now gold sits in what we call exchange traded funds or exchange traded products and it sits on the side of your investment portfolio gold when you do physically backed. Tokenized gold in the wallet gold will not just be an investment It’s going to take on characteristics like savings and payments gold will be like currency like it was centuries ago. You’re going to be able to go to the store and buy. Groceries with gold or send gold to your children or friends like you do photographs and what’s also cool. It’s not just gold. We see every exposure getting greater functionality. T 0 settlement greater information flow. Um, so the way Amazon had an information advantage over. Let’s say Macy’s wisdom tree should have an information advantage over J P Morgan

Jonathan Steinberg: It’s very very exciting.

Alejandro Cremades: So in your case I mean you’ve been up and running now with the company you know seems 9088 so 30 almost 35 years so I guess 35 years you know gave say you know ground for a lot. And you’ve seen a lot of ups. You’ve seen a lot of downs you’ve seen market market cycles. You know ups swings. You know you’ve seen obviously more most recently covid you know the financial you know downturning a weight the dot com bust the dot com boom what have you learned.

Jonathan Steinberg: Yes.

Alejandro Cremades: About Market cycles being an operator and that perhaps that you can inspire to all the people that are listening us to us right now given the macro environment that we’re experiencing.

Jonathan Steinberg: So First of all financial services is all about trust and um, wisdom tree is built on transparency so every day we update our au m every day and our revenue capture so you can actually. Calculate my revenue on a going forward basis every week. We update our um a you our inflows and outflows for every fund so you can just see everything. It’s scale is not enough today.

Jonathan Steinberg: Business model is also extraordinarily important. So if you go back just you know a couple of I don’t even think it’s 2 years Schwab killed commissions right? They cut commissions to 0 so business models are changing so quickly. So one of the things that we’re gonna get from tokenization is diversified revenue streams not just an expense ratio but transaction revenue net interest income and lending revenue. So we’re really transforming in that sense but in financial services business model. Risk mitigation compliance embracing a regulation. This is just my world. You can’t um, you can’t um bluff in this space right? It really record and like you said. I had to I’m a I’m a pink sheet company in 2008 I have about four point nine five billion when 2008 hits I lose 65% of my a um even though. I took in 800000000 of inflows through that whole period now I had just pulled off a big financing at the end of 2007 so that I could actually go through 2008? Yes I had to lay off people but I could make payroll.

Jonathan Steinberg: There were times in my career when I would count days to payroll. Um, how many days of payroll do I have left before I have to close shop so you pick up a just a toughness um a sense of. You know what is necessary to get it Done. You know you got to be able to as an entrepreneur you got to be able to back your own Play. You got to have the capital you got to have the ability to deliver. Um,, there’s no other way to do this and I’m trying to build something that can evolve. Ah. Compete and satisfy an ever-changing customer.

Alejandro Cremades: So now Jonathan imagine you go to sleep tonight and you wake up in a world where the vision of the company of wisdom tree is fully realized what does that world look like.

Jonathan Steinberg: It’s I appreciate that question so today wisdom tree has a relationship with its customer where we are a part of their portfolio. We are individual exposures that build up their portfolio or. We actually sell them portfolios we pick the different funds and we rebalance it in the future with wisdom tree prime for the for the next ten years I’d like to be to a new group of consumers their primary. Second financial relationship and then after that eventually be their primary relationship. 1 of the things about blockchain enabled finance investing savings and payments all come onto 1 tech stack. So wisdom tree is going from just a. And asset manager to a much bigger relationship with its customer and so over the next twenty years for many I’m hoping to be their primary or their second most important financial relationship competing with their savings account their credit card account their brokerage account.

Alejandro Cremades: Now. Wow that sounds like a pretty incredible future. Let me tell you Jonathan now now imagine I put you into a time machine and I bring you back in time I bring you to perhaps 9088 you know that moment where you know now you were.

Jonathan Steinberg: All of it.

Alejandro Cremades: You know, getting going with a company. You just stay perhaps had left or wearing the process of leaving bear sts to really go after your own dream and you have the opportunity of of seeing that younger self Jonathan You know to have a chat and you’re able to give that younger Jonathan. 1 piece of advice before launching the business. What would that be and why given what you know now.

Jonathan Steinberg: So It’s been such a hard risk Risky journey that you would almost say you know don’t do it? Um, but I wouldn’t to be honest I wouldn’t change anything you you know my dad used to wake up and he would go wake up kids. It’s a new day. He had this passion. I wanted that passion and he had tremendous confidence I wanted his passion and his confidence so I needed all the body blows I you need the experience and so I wouldn’t. I Would I Guess the only I knew this when I started but this is the only advice I would give other people you’ve got to find your passion and pursue it with great integrity. Um, but that’s really otherwise life gets heavy life gets dreary and so I Just enjoy what I do I. You know I Love the people I work with I have a philosophy of only hiring happy people people comfortable in their own skin and so I’m just having a ball but I really I couldn’t I wouldn’t wish to avoid my challenges. My challenges have made me who I am.

Alejandro Cremades: I hear you loud and clear and and I just had a curiosity to double click on that on hiring happy people. What is 1 question that you asked to make sure that they’re gonna be happy people and not like downers.

Jonathan Steinberg: You you know I was not you know I said I didn’t do well in school I didn’t graduate I was highly dyslexic I had trouble reading. Um I learned to read people before I could read books and I said to you I tried a sense. Hear truth um I you never know and you can be wrong. But I’m looking for people who are just comfortable in their own skin and you can just sense sincerity or not I don’t know but I can see that my people have appreciated that I’m I’m not involved in much hiring today. But I love the the diversity and the quality of the people that we’ve been bringing on. Um and we’ve gone to a hybrid remote first orientation. So my people are I mean I’m really, we’re a hybrid organization but remote first. It’s working beautifully so I’m back on Long Island looking at the ocean as we speak and just ah, you know enjoying it. But.

Alejandro Cremades: That’s amazing. So Jonathan for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.

Jonathan Steinberg: Um, an email at ah J Steinberg at wisdomtree.com

Alejandro Cremades: Amazing, well easy enough. Well Jonathan thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Jonathan Steinberg: I Appreciate so much you inviting me on. Thank you for the opportunity.

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