Yahoo Finance Presents: Nasdaq CEO Adena Friedman

Yahoo Finance's Editor-at-Large Brian Sozzi speaks with Nasdaq CEO Adena Friedman about her journey at the company as well as how she balances her career and motherhood.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: Adena, good to see you again. I have not seen you I think since Davos 2020 or something like that.

ADENA FRIEDMAN: It has been a while. It's great to see you.

BRIAN SOZZI: Yeah, likewise. Good to see you in person I should say. We, I was just thinking back before I came in to do this interview, you just hit your five-year mark as CEO, can you believe that?

ADENA FRIEDMAN: It is hard to believe. It's been so fun and exciting that the time has flown so far.

BRIAN SOZZI: Have you-- do you get a second to reflect back at all?

ADENA FRIEDMAN: Yeah, every now and then. You know, when, you-- well, it used to be when you travel, I always found that my best reflecting comes when I traveled but for a period of time we weren't traveling. But yes, now that we're sitting back, we can sit and reflect on it occasionally.

BRIAN SOZZI: So it is International Women's Day. We're, of course, focused on this big, big day. How did you get here? Tell us your story.

ADENA FRIEDMAN: Well, I started as an intern at NASDAQ in 1993 and I moved up primarily through the product organization, becoming a product manager. And then there was a big shift in the leadership at the end of the '90s and they asked me to become head of one of the business divisions, the data products division. Which of course, now has become one of our largest business divisions. And I took the helm of that in '99 or 2000. And then when the former CEO, Bob Greifeld came in, he also added me to become the head of the corporate strategy. So I started working on all of the M&A deals, ultimately became the CFO.

And then I actually left and went to the Carlyle Group as their CFO, helped them go public. And came back to NASDAQ in 2014 as president and then became CEO in '17. So it's been a wonderful journey. And obviously, somewhat upward, the trajectory has obviously been up, but also a little bit around.

BRIAN SOZZI: You can't go any higher than this, you're CEO of NASDAQ. That's cool. How did you decide, you're in school doing your thing, how did you decide you wanted to work in the financial services industry?

ADENA FRIEDMAN: Well, I grew up with a father who was in the financial services industry. So he spent his career at T. Rowe Price. And not that I really thought that that's what I wanted to do in high school or college, I actually was a political science major in college, international relations. But then I realized that I really actually really did like the idea of going into business so I went to business school. And once I was there I realized I really like financial services but I wanted to be a product manager. So a product manager in financial services. So that really leads you to product-- like financial technology.

And NASDAQ was I wanted to work in Washington DC, and at the time NASDAQ was headquartered in DC, people don't know that. We moved our headquarters to New York in 1999. So I had a chance to become that product manager in NASDAQ, helping on their trading products. But it was that kind of journey of thinking I wanted to do one thing. I think there was a time when I wanted to be an astronaut. You know, you kind of go through all those periods.

BRIAN SOZZI: There's still time if you wanted to do--

ADENA FRIEDMAN: Apparently. But you know, you have all these different periods of your life where you kind of coalesce around what you really are passionate about and I've come to be very passionate about NASDAQ.

BRIAN SOZZI: Those early jobs, when you're running product. I remember you telling me when you were president and COO, those early-- you had a lot of leeway back then. How did you get that leeway and how do you go from running a product to advancing in a company like this?

ADENA FRIEDMAN: Sure. Well, if you think about it, first I had amazing managers. You know, just managers who really trusted me. And that made such a difference to me. My first manager, he a manager for seven years, and he was the person who put me in charge of the first products that I ran. And he just gave me a lot of latitude to say, OK here's a product, you have a chance to grow the revenue, advance the technology itself, and engage with the clients and understand what the future of that product should be.

And so I look at it in four Ps, product management is product, the product features, pricing, placement, which means kind of distribution and how you engage the clients, and promotion, marketing. So I had the chance to do all of those as a product manager. Well, what is running a business? In many respects, it's all of those same things at a bigger scale. So to me, product management really gave me the skills to work across teams as well as build a team to make it so that I could be successful in growing and expanding a product, then growing and expanding a business and now growing and expanding NASDAQ.

BRIAN SOZZI: Did you think when you were in the trenches then that you could be CEO? Did you want to be CEO?

ADENA FRIEDMAN: Well, actually pretty early in my career I looked up and said being the COO was a pretty interesting job. I don't think I necessarily kind of looked all the way to the CEO seat but I really liked the COO job. Just being operationally oriented, really helping craft the company and shaping it from the inside. I thought that was a really, really interesting role. So that definitely piqued my interest pretty early in my career.

BRIAN SOZZI: So you have a good time, you're working on product, you're advancing up the organization. And then you left, why'd you leave?

ADENA FRIEDMAN: Well, I had been at NASDAQ for 17 years and I told you that I wanted to live in Washington when I came out of business school. Well, I stayed in Washington, so even though NASDAQ had moved its headquarters to New York, I was living in Washington with my family and Carlyle called, just cold-called. Like I was the CFO of NASDAQ at the time, and Carlyle as a financial institution in Washington is a-- you know, it's a wonderful company and a wonderful firm. And they were looking for a CFO to take them public, which is such a unique opportunity.

And I love NASDAQ I was not looking to leave, but at the same time, this was a great opportunity to work and live in Washington and to have this unique experience as a CFO. I had watched so many companies go public but now I had a chance to kind of see it from the other side and experience that. And I did make the move and I really enjoyed my time there.

But I found that I didn't want to be a CFO forever. You know, CFO has both a risk management, risk-taking side but more risk management. I really like running a business, engaging with clients, managing a P&L, and growing a business. So when NASDAQ called and said, would you come back as president? It was a very compelling offer.

BRIAN SOZZI: How did you-- how do you know that the moment is right to switch to a new job?

ADENA FRIEDMAN: You never quite know.

BRIAN SOZZI: Because working-- OK, so it's Carlyle.

ADENA FRIEDMAN: Right.

BRIAN SOZZI: And it's NASDAQ but still it's hard to imagine, leave a company like Carlyle just like that.

ADENA FRIEDMAN: Oh, I can say this, it's a big risk you take every time you take that next step or that change, you make a change, it's a big risk because you're having to establish yourself somewhere else, you're having to see whether-- you don't know what the culture really is going to be like when you get there. But at the same time, I think that there are moments when it's important to when someone comes to you with such an interesting opportunity, even if you're happy where you are, it's always important for you at least to evaluate it.

I had been frankly, I had other opportunities to evaluate over the years and none of them were that kind of-- compelling enough for me to leave a place that I loved. But the opportunity, that one opportunity is kind of a once-in-a-lifetime opportunity for many CFOs to have that chance to take the company public. So it just-- it felt like the right move at the time.

And then coming back to NASDAQ, actually that was a little bit easier decision because I already knew the culture of NASDAQ. I already knew the products. I already knew how awesome NASDAQ was. And then to be offered that role of president where I was overseeing almost all the business divisions here when I got back, it was such a huge opportunity. So the one thing you're hearing is opportunity, you want to take a-- make a change when there's a really compelling opportunity. You shouldn't be making a change because you are leaving something-- it's not so much you're running away from something but you're running to something more compelling.

BRIAN SOZZI: What did you do when you got the call that you would be the CEO of NASDAQ?

ADENA FRIEDMAN: I was pretty excited.

BRIAN SOZZI: That's the one question I wanted to ask. When I spoke to you in 2016 I forgot to ask you and I was very upset with myself but what did you do?

ADENA FRIEDMAN: Well, my husband and I, we definitely kind of had a really nice dinner and you know, opened a bottle of champagne. But honestly, I was so excited for the opportunity. And the good news is I also felt really ready for the opportunity. So it felt like a natural progression. And I was just super excited.

BRIAN SOZZI: I promise you, I promise you, we're going to get into the business, I promise you. But you're a working mother. When I first talked to you in 2016 your kids were 20 and 18, maybe so--

ADENA FRIEDMAN: Yeah, right around that. Yeah.

BRIAN SOZZI: I clearly have too much time on my hands to remember this stuff, but how do you juggle all this stuff? And what advice would you give to others in your position?

ADENA FRIEDMAN: Sure. Well, I had children very early in my career so actually like within one year of joining NASDAQ I went into my boss and said, hey, by the way-- so actually, it was two years in. And so I've actually really grown my career as a mother the whole time. So the first thing I would say is it was really important that I had a conversation with my husband at the time to say, OK, honey, this is a partnership. And he completely agreed.

So we really looked at it as a partnership from the very start. So he would drop the kids off every day and I would pick them up every day from daycare. We always had that rhythm of working together. I worked part-time for four years after the kids were born and then he worked part-time for a period of time. So we always had that partnership along the way.

Also, you have to choose your priorities. So my husband and I had this very important priority which was if we're not working, family comes first, right? So work is super-important but family is next or at least equal. And so it meant that I couldn't do other things that I might have an interest in doing. But now that the kids are grown and they've launched their own careers, it gives me more flexibility to be able to do more things. Like I'm on the board of the New York Fed, I'm on the board of Vanderbilt University. I didn't choose to do those when the kids were home. So I think that you just have to choose your priorities.

BRIAN SOZZI: What-- we talk to a lot of working mothers, and during the pandemic, their lives have changed. They have had to come home and bear the responsibility. I look at my own family, my brother, his wife's been at home the past 2 1/2 years, was homeschooling their children. How has your dynamic changed at home given everything that's been going on?

ADENA FRIEDMAN: Yeah. I actually have been extremely fortunate because our kids came home for a period of a few months at the beginning of the pandemic and they were helpful. So they would make dinner.

BRIAN SOZZI: Really?

ADENA FRIEDMAN: Yeah, they would actually-- really were quite helpful. That's a very different dynamic. But I understand having been a mother throughout my career just how incredibly hard that is and the stress. I mean, the stress of that must just be immense. And then even when the schools reopened there might not be pre-care. I mean, we completely relied on daycare, pre-care, aftercare and that was our lives, camp over the summer. You know, none of those things have been available for parents for quite some time. And the unpredictability of it is what really causes the stress. I think the most important thing you can do is understand that, empathize with that, and work with your employees to figure out how to help them navigate that.

So one thing that NASDAQ did was we put something in place called flex days, where you could choose-- for any employee, it's two days a month, where you could say you know what, I need a day or I need two hours or I need four hours to be able to-- but you had up to two days a month to kind of have your own time. And for working parents, where they had children who were not in school, we also said you can have four days a month throughout the pandemic to address the needs of your family while trying to navigate work as long as you worked it out with your manager. So just trying to create that flexibility is an important element of managing through all of this.

BRIAN SOZZI: Great, now my mom's going to expect me to like make her a meal or something. So I appreciate that. It's great. Thank you so much. But one cool thing is about-- I imagine about working at NASDAQ is you talk to a lot of different companies, tons and tons of companies. As you talk to them, what does it look like in terms of women rising up the leadership ranks? Of course, it's improved versus what, 1995? Absolutely, but where do things stand now?

ADENA FRIEDMAN: I would say there's been continuous improvement. I mean, we have to celebrate the progress. Obviously, do we feel like we are where it's a perfect blend? I would say of course not. If you just look at the Fortune 500 CEOs you kind of know that. But I think that the progress has been really significant. And I look at it specifically within the financial community, absolutely. When I came in I would say that I was really fortunate because I benefited from a lot of groundwork that had been laid in the '80s where companies at least acknowledged that they needed to put policies and practices in place to try to create more parity. I got the benefit of that coming into the industry.

Now over between the '90s in the 2000s though it went from policies and practices to culture, to career progression, to a lot more opportunity. So when you look at the financial industry many more women are at the very tippy-tops of those firms and you, of course, have Jane Fraser now as the CEO of Citi. And so you're seeing a lot of progress. In other industries across the corporate community, you're seeing many more CFOs, COOs serve as women so you're seeing that happening. But we have a lot-- we still have more to go. And I think that we just have to acknowledge and celebrate the progress but then say, OK but there's still a lot more we can do to really create that parity.

BRIAN SOZZI: And you are doing that. I would say last year you put something-- put forth something with ESG that in many respects is legacy-defining. You don't have to say that, I will say it for you, what is the progress on that initiative?

ADENA FRIEDMAN: Right. So and this year so we-- proposed it last year, it got approved this year-- in 2021, to basically-- it's a new rule, it's a listing rule for NASDAQ and we call it the board diversity rule. The first foundation of it is, every year companies have to disclose the diversity characteristics of their board on an anonymized basis. And then over the next four years, we have set standards to have at least one woman or one underrepresented-- I'm sorry and one underrepresented minority or LGBTQ to the board, add them to the board within the next four years. And if they don't, their obligation is to explain to investors why not. So it's a disclosure rule. We call that a disclosure rule.

Disclosure rules can be very powerful because it provides investors with the information they need to make an informed choice. And it allows them to have that dialogue with the management team as to what kind of progress they intend to make. So we have put that in place. It's going quite well. People are starting to work on their disclosures, you're starting to see them in the proxies.

BRIAN SOZZI: I do, I see them--

ADENA FRIEDMAN: So--

BRIAN SOZZI: --in annual reports front and center for once.

ADENA FRIEDMAN: That's right.

BRIAN SOZZI: It's about time.

ADENA FRIEDMAN: Yeah. And so I think that's really-- and you are already starting to see progress in terms of more women and more underrepresented minorities coming onto the boards in the US. So I think that it's just one of those things where it just catalyzes a natural progression I would say.

BRIAN SOZZI: Is it-- what's the next level of ESG disclosures? So you're focused on governance but is there something around climate change we should be on the lookout for?

ADENA FRIEDMAN: Yeah. So I think NASDAQ has a special place to play in the governance side because as a listing exchange one of the key things that we look at as a gatekeeper to the public markets is the governance of a company, the board composition, independence characteristics, committees, et cetera. Now, more broadly, the SEC looks at a lot of other disclosures. And so the SEC in the US and the regulators in Europe are really starting to craft what is a framework for disclosure on climate, on other social programs, and on governance.

And I think that that's a big dialogue that's happening. I think that you're going to see proposals come out in the coming months both here and I think already in Europe. And you're seeing a lot of engagement from corporates and investors. And that's the key, NASDAQ has a great convening influence because we have great corporate relationships and we serve investors. So we really like to try to bring those-- have dialogues, bring those views into the room together to figure out what is the right disclosure regime that's pragmatic but moves the ball forward. And I think that we have a role to play there in helping companies and investors do that.

BRIAN SOZZI: You think there needs to be an evolution in disclosures for SPAC companies?

ADENA FRIEDMAN: Interesting. So SPACs are a little different in that they're really-- they're kind of an empty vehicle until they find a company that they want to purchase. But that empty vehicle has certain terms. So the terms of what are the benefits to sponsors, how do sponsors stay invested in the company post IPO? All the things that investors should be looking at. That's actually disclosed but it's a matter of investors reading those disclosures and really understanding what kind of payments are going to go to the sponsors? How invested are they going to stay?

And then, with the companies that go public, it's not an S-1, it's almost like a merger document. So that has different disclosures, disclosures on the forecast of the business. We'll look at that and say, is that a realistic forecast? So you have-- the data is there. It's a matter of the investors saying do I believe that? Do they have underpinnings behind that? But it requires effort. I mean, being an investor requires effort for sure. And it's really a matter of leveraging the disclosures that are there to make sure that you feel like you can make an informed choice.

BRIAN SOZZI: All right, a couple of business ones for you, why is NASDAQ moving to AWS cloud? I am not a tech geek but help me understand this move and what does it mean to NASDAQ?

ADENA FRIEDMAN: Sure. Well, I think it's good to understand like exactly how are we doing that. So the great thing about the partnership with AWS, and we also have a partnership with Equinix, which is our data center provider, is we have a great data center in the New Jersey-- in New Jersey but what we're trying to do is actually bring AWS into our data center.

So they are going to become a private local zone and that allows us not only to have our own markets in a cloud zone but to allow our member firms and other firms in the financial system, leverage that private local zone for their operations. So why would someone do that and why would we do that?

So on the one hand, we want the benefit of the scalability of the cloud. We want to get the benefit of the security and the innovation that these cloud providers are really bringing to corporate America. We want those benefits, we think that they're great partners for that. But we also need hyper-low latency and we need to have some and we need to have some controls on the latency and the resiliency of our markets.

So AWS chose to partner with us in a really unique way where they could bring their cloud infrastructure into our data center, offer it to us and then scale it up for other industry players. And we're working with Equinix to double the size of the data center. So it allows us to have those benefits.

It is the next wave. I mean, if you are not super latency-sensitive, the public cloud actually is a really viable option for markets today and then we are deploying markets, we provide the technology that powers 130 other markets around the world. And we are deploying markets in the public cloud all over the world right now. But we also are creating these like really unique ways to work with cloud providers for those hyper-low latency markets like ours.

BRIAN SOZZI: Should investors be nervous migrating all this traffic if I'm even saying it right, off this to the cloud how-- are you concerned about a hiccup in trading?

ADENA FRIEDMAN: Well, so that's why it's really great that they're coming with us into our data center because we have the benefit of the technology operations, the infrastructure team. Our security layer with their security layer that allows us to really kind of optimize for the experience that we need to provide to our investors here in the US. I think, though that at the same time, recognize that we-- all the offline services-- so as soon as the match the trade occurs we have a whole bunch of other systems that capture that data and make that data available to our clients and send that data out, all of that is already migrating to the public cloud.

We've been doing that now for the last five years. So what we're really down to is the match itself. And that's where we need to kind of create this gated community with this private local zone that allows us to get the benefits of the cloud but also to continue to have some control over that experience.

BRIAN SOZZI: All right, something I am more informed on, deals and how they happen and when they happen. 73% win rate on new US listings last year and you also saw 33 switches from the New York Stock Exchange. How do you do this, how you gaining the share?

ADENA FRIEDMAN: Well, I would--

BRIAN SOZZI: Why?

ADENA FRIEDMAN: I really need to start with the team and I'm serious. We have the most amazing, amazing team in our listings business. I mean, first of all, there are long-tenured, they're super dedicated to the clients, and they're very, very focused [? on clients. ?]

BRIAN SOZZI: These are-- this is super-competitive stuff.

ADENA FRIEDMAN: It's a very competitive process. It is super competitive. But really that team, I mean, Nelson and his team, just do a spectacular job. But the second thing is we've spent over a decade building up capabilities and services to support companies throughout their lifecycle so we have the NASDAQ private market when a company is private, that where they can do liquidity programs through the NASDAQ private market and we develop a relationship with them.

We then have a board portal tool that allows them to modernize their communications with their boards as either private companies or public companies. Then they come to the public markets, we have a whole suite of solutions that allow them to navigate through the public markets in terms of investor relations, ESG reporting, and program development there, as well as of course, marketing and branding support for those companies through a place like this one, that really help them kind of catalyze themselves into the public markets and be successful there. That whole suite of solutions is owned and operated by NASDAQ, whereas our competitor outsources some of those functions or doesn't provide some of them. So I think that we've just done such a really great job of building out this comprehensive solution that companies just love to work with us.

BRIAN SOZZI: I'm just always fascinated about this battle. Is it like a Coke versus Pepsi type battle? I mean, do you think of it that way?

ADENA FRIEDMAN: I would say that we really believe that it's just a natural way for us to-- we're very client-centric organization. So it's really a matter of how the client-- how can we serve the clients better than anyone else?

BRIAN SOZZI: What's the deal outlook for this year?

ADENA FRIEDMAN: Well--

BRIAN SOZZI: IPO?

ADENA FRIEDMAN: Yeah. So in terms of IPOs, the pipeline of companies wanting to go public is extremely strong. And it's as strong, if not stronger than it was last year if you look at the S-1s on file that have chosen to come to NASDAQ. Actually, that number is twice as large-- was twice as large in January as it was January of last year. And last year we had 750 IPOs. But at the same time, the market needs to be open and available to them and investors need to be excited to take risk. And right now the political and economic environment is more uncertain. So even though the pipeline's strong, a lot of companies are waiting until the second quarter to consider coming to the public markets.

BRIAN SOZZI: All right, last set of questions here. We like to do a little short around the horn with-- when we do these interviews. First up, you said your dad finished the last 10 of his career as-- and I just remember this from last time we talked-- last 10 years of his career as chief investment officer at T. Rowe Price, right?

ADENA FRIEDMAN: That's correct.

BRIAN SOZZI: Best advice he ever gave you? Investment advice?

ADENA FRIEDMAN: Oh, stick to the fundamentals. It's all about the fundamentals. Companies always revert to the fundamentals.

BRIAN SOZZI: Biggest or most challenging day of the past 2 1/2 years?

ADENA FRIEDMAN: Oh, wow. There have been a few. You know, I think that I don't have one day that really sticks out but you always have-- whenever you have a big change. It could be a change in management, it could be an acquisition that you've made a decision around, it could be anything where you have a big change. Those are the days that really stick in your mind.

BRIAN SOZZI: Are you still doing taekwondo?

ADENA FRIEDMAN: I am. Although the pandemic has made it a lot harder. So I was taking some like remote classes. I've been doing a lot of practice but I'm waiting a little longer to get back into the studio.

BRIAN SOZZI: You're modest. You're a black belt, right?

ADENA FRIEDMAN: I am, yes.

BRIAN SOZZI: And are you still flying planes? You're a private-- you have a private pilot's license.

ADENA FRIEDMAN: I did. So I got my private pilot's license when I was in my 20s and then life took over, made it very hard to keep that up. There's actually a requirement that you have to fly a certain amount of time over all the time. And I was-- I let it lapse. So I actually started taking lessons again when my son was interested in taking lessons. So he took lessons. I said, well, I'm going to do it again. And I really enjoyed it, but I have not yet re-certified.

BRIAN SOZZI: Last one, I'll end it on a finance one. There's about to be a big change in Fed policy like to which many investors have never seen before in their investing career. How do you think this will impact markets?

ADENA FRIEDMAN: Well, I think that it's really important to recognize that it's a balancing act that the markets and the Fed have to kind of have to achieve. So on the one hand, we have had really, really strong recovery from the pandemic. And it's been faster than I think anyone really expected it to be. And there's been just a surge in demand for goods. And so as people couldn't travel and couldn't do other things like you know what, I think I really want to upgrade this or upgrade that, right? So the surge in demand. So it's been a demand-driven-- but that's resulted in inflation demand-driven inflation, super-tight labor market, demand-driven inflation, right, because you really have to find that talent that's going to make your company work.

So that kind of demand-driven inflation is something that the Fed has-- it's a new world for them. And they're going to have to figure out how do we, therefore, allow for the recovery to continue but tamp down on that demand-driven inflation? And that's going to be a balancing act that they're going to have to undertake over the coming quarters. And we'll see how the markets react to it. But I think everyone knows it's coming, it's just a matter of how quickly they go about it.

BRIAN SOZZI: Thank you for giving us so much time. I know you are a very, very, very, very, very busy person. Look forward to talking with you again soon.

ADENA FRIEDMAN: Great thank you so much.

BRIAN SOZZI: Appreciate it.

[MUSIC PLAYING]