This Private Equity leader thinks seniors don’t make better decisions

Is diversity better business, even in Private Equity?
Alan Jones on the Wall Street Lab Podcast
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Alan “AJ” Jones has been around the investment block. But that doesn’t mean that he lets his seniority overrule his younger colleagues. “The problem in a hierarchical world like financial services is people give too much credence to the opinions of the senior people. So my challenge was, how do I make sure we balance out everybody’s opinions?”

Now, the Harvard magna cum laude graduate is heading the North American Private Investment arm of ICG Asset Management (a global alternative asset manager with over $74.5bn under management), but previously he spent 25 years with Morgan Stanley and build up his reputation in the Private Equity world from there. Most recently, he was their Vice Chairman of private credit and equity.

alan jones
ICG’s Alan Jones

With that background, he’s a natural mentor to aspiring professionals in the field – PE being notoriously competitive and hard to get into. But AJ’s upbringing certainly played a role in his mindset.

So, what’s investment banking?

“I grew up in a small town in New Jersey”, AJ says. “My father worked in a factory and my older brother became an attorney. Those were the only two professions that I was aware of in my factory-dominated town.”

But AJ loved math and science, and his third-grade teacher helped him get a summer job with First Boston, an investment banking operation that later merged into Credit Suisse.

The teacher told him the job would be in investment banking. “I said that’s great. I have only one question. What’s investment banking?” In AJ’s little factory town, nobody had ever heard about investment banking. “Don’t worry”, his teacher said. “He just needs somebody who’s very good at math.”

My father worked in a factory and my older brother became an attorney. Those were the only two professions that I was aware of in my factory-dominated town.


Fighting investment biases

AJ is known to let the youngest or most junior employees go first on any decision his team runs – a move that’s counterintuitive in the Private Equity world, where large transactions and decisions are weighed and leveraged with precision.

“We’re no homo economicus”, Alan says. “We’re no computers. We’re riddled with emotions and biases, and to create excellence in investing, we have to spend a lot of time trying to either eliminate or correct for those biases.”

Investing is bedeviled by biases. And humans are not rational calculators.

Alan Jones

For AJ, who quotes Daniel Kahneman’s research as influential in his thinking, this means getting people to disagree with each other.

“So by starting with the youngest professional, by the time it gets to me, all of the important opinions, both positive and negative have been expressed. And I get to play the role of weighing the evidence if you will. But we get a much richer sense of the opportunities and the risks of an investment.”

But AJ says that this approach also helps the members of his team feel heard. “Everyone’s talking about the importance of diversity and inclusion, but it’s very good business because it means we’re building teams with diverse insights. The discovery that I’ve made over time is that we just make better decisions by doing that. And candidly, our professionals grow more quickly in their careers because they rally around this. They come in well-prepared because they know they have to opine. They advance much more quickly than in a traditional, hierarchical environment. I couldn’t be happier about the outcome.”

You can listen to the full interview with Alan “AJ” Jones on The Wall Street Lab podcast and on YouTube.

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The Wall Street Lab Podcast

Welcome to the Wall Street Lab!

The Wall Street Lab is the podcast that explores the world of finance from an insider’s perspective. Hosted by-weekly by Andreas von Hirschhausen, CFA, you’ll get perspectives from some of the most renowned professionals in the world of M&A, Venture Capital, Private Equity, and Asset Management.

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