Interview with Seth Merrin of Liquidnet Holdings

Aug 18, 2009

Seth Merrin is the CEO and founder of Liquidnet, a successful investment firm which gives 1 percent of its pretax income to philanthropic initiatives. Here Merrin discusses Liquidnet's key role in a Youth Village for orphans in Rwanda, modeled on similar ones in Israel.

JULIA KENNEDY: Welcome to the Carnegie Council's Global Ethics Forum. I'm Julia Kennedy.

In past weeks we have discussed principles of global corporate social responsibility. The remainder of our interviews will highlight firms that put an emphasis on CSR [Corporate Social Responsibility].

Today we'll be hearing my recent conversation with Seth Merrin. He is CEO and founder of Liquidnet, an investment firm that allows institutional investors to trade large blocks of securities without triggering wild price swings in the market. Merrin and his firm have won many awards for their performance since Liquidnet's founding in 2001. Merrin made Forbes magazine's 2008 list of billionaires.

Merrin also keeps up a progressive stance on what he calls global social engagement, giving 1 percent of the firm's pre-tax income to philanthropic initiatives. Most of the money supports Agahozo Shalom Youth Village in Rwanda. Merrin told me why those gifts are central to his business' mission.

SETH MERRIN: Liquidnet has never been just about making money. Liquidnet has been about changing the industry. Liquidnet has been about building a community of our members. Liquidnet has been about being the champion of the buy side—basically, of the institutions that manage all these assets. They were very beholden to the brokers that they used or the exchanges that they had to execute on.

We feel just as passionately about our role in the rest of the world. If we are going to do well in business by simply making sure that we meet our customers' needs better, we should do well by doing good. That means, let's take the responsibility. Let's become the beacon to the rest of Wall Street that has been "thrammed" very poorly in the last year for perhaps helping to cause the financial crisis. Let's talk about doing well by doing good. Let's try to provide the example to other companies out there. We want to make a big statement. We're not about simply giving money to United Way, as great of an organization as that might be. Liquidnet is about finding big problems and coming up with creative solutions to them. We found that in the signature project that we are helping to build.

JULIA KENNEDY: Yes, and I hear you are just back from Rwanda. You are, of course, building an orphan community there. Tell me how Rwanda spoke to you and then how you got involved with Agahozo Shalom Youth Village.

SETH MERRIN: It was 2005 and my wife and I were listening to a lecture about the problem in Rwanda. We had all heard about the genocide, but being so far away, like the rest of the world, we didn't really know all that much about it and we didn't do anything about it.

A question was asked, what is the major problem facing Rwanda today? That was that in a population of 9 million people, you have 1.5 million orphans. You have a per capita of, I think, a dollar or two a day. Kids are taking care of kids. There are so many stats. Sixty percent of the entire population is under 20 years old. You don't have any systemic way of stopping the problem.

It's bad enough that the entire world looked away during the genocide, but it's even worse, considering that there are massive problems, that we are leaving it there to continue to not improve. These are 1.5 million orphans, and we're not doing anything about them either. That's just not forgivable.

You have certain things in Rwanda that make it possible. You have a great government, really. You have no corruption. You have a government with a vision. You have education that's mandated, at least through secondary school. They are one of the poorest nations in Africa or the world, one of the highest-density populations in the world. But you have at least some hope that the government is creating that will allow us to do something really good for that country.

It was my wife who said that after the Holocaust, there was a tremendous number of orphans that made their way to Israel. Israel must have come up with some kind of solution to deal with the orphan population. Not knowing what it was, she went to Israel and she did some research, and there were, in fact, these villages that were created.

The concept of a village is really, really important to the solution. They need everything. All over Africa, they need everything, but simply an orphanage, someplace where they can sleep and be fed—that would be a big plus. That's not the whole solution.

We visited orphanages there, where they have maybe 50 babies in one room and five people to take care of them. It's better than not being there, but it's not the solution to a problem. You need a place to live. You need a roof over your head. You need food. But you also need education. Simply building a school, and not having anyplace to live or to fight every day for food—that's not a complete solution either.

Finally, these kids have been through the worst trauma. You can't even imagine. It's right out of the worst and goriest horror movies that you could ever see, and you probably wouldn't even be able to sit through that movie. You need someplace for medical care and to deal with that kind of trauma, so that they can, in fact, be productive people in society.

Can you imagine even the goal of making these people productive in society? In fact, we are, and they are. That is all of our goal. It's an amazing place, I have to tell you.

JULIA KENNEDY: How old are the kids who are there? You think about the genocide. It happened 15 years ago. Are they teenagers or are you also accepting kids?

SETH MERRIN: It's high-school age, and high-school age is 15 to 20. They all come in and they do a four-year program. The first year is a catch-up year. They are anywhere from 15 to 20 years old in that first year. They will go through all four years. In December, we will take in another class. It's not like it is here. In fact, one of the big things that we discovered was, when we asked their ages or their birth dates, they had no idea. So we had to give them new birthdays as part of the village.

JULIA KENNEDY: I bet that's pretty exciting for them.

SETH MERRIN: When I went there—and this was the first time that I was there when the kids were there—everyone, to a T, said that when they first got there, it took them a few months to even believe that this was their new home. Every night they went to sleep thinking, "Tomorrow I'm going to be sent back to my real life."

Certainly the first few days that they came into the dining room, they piled their plates to the ceiling with food, because they had no idea when the next meal was going to come.

It takes a while to make these people feel that they belong, that they are loved, and that they are special, because they are there, and they are there for a reason. That is the philosophy of the village.

JULIA KENNEDY: What has it been like to work with your wife, Anne, who runs the village?

SETH MERRIN: I have played an extremely bit part to my wife's part. She is the brains and the force behind this thing. This is something that certainly, when she first got involved, was something that she had to do. It was nuts. It was crazy. It was an absurd type of venture, to think that you could bring a model that works in Israel to another continent that has no infrastructure, that has no resources, that you really don't know a lot about. It's just absurd. That was three years ago.

The fact that we built this and that people are living in this village—I will tell you, they came in, these kids, six months ago, not knowing English, never having seen a computer before, were in school where their teachers didn't know much more than they did. After six months in the village, they were teaching us, the visitors, classes about physics and biology and math and computer science, in English, using PowerPoint slides that they created.

JULIA KENNEDY: They wanted to learn.

SETH MERRIN: School starts at 7:30. They're in their seats by 6:30.


SETH MERRIN: They want this.

JULIA KENNEDY: Tell me more about your global social engagement programs here at Liquidnet and how you involve your employees in the process, beyond just helping sustain this village.

SETH MERRIN: It's more than our employees. One of the things about Liquidnet is that we work hard and we party hard. That's the proverbial—but we really mean it. People spend a lot of time at Liquidnet. If they were miserable here and they went home, then their spouses would be very sympathetic. But they actually enjoy it, and their spouses are less than sympathetic.

What we want to do is include everyone. So we invite them to come in to work on the committees and help us in social engagement. We have gotten quite a few that have participated. What that does is, that lets them get to meet all of our people, get to know them, and feel more comfortable in the company itself. So when we have parties or when they come for any of these meetings, they feel part of the community, too.

Seventy-five percent of our employees around the world have actually been involved, one way or another, in the village and through our other social engagement projects.

Some of the things we do: We encourage individual giving with a program that we call Double Down. Up to $1,000 we will match. And it's not just money. It's also the time that they put in. We calculate a dollar rate on that. If they donate their time, we too will match that with money.

We have local impact grants so that we can actually give money, based on a vote, I think, that we have on submissions by all of our employees. Then there is a committee that votes on these things, as to who gets that local impact grant. We do that around the world. We like to involve ourselves in the community, too.

When new employees come into this company, there is a whole orientation process that we give them. We do two things at their graduation of orientation. One, we give them a certificate that says that, yes, they actually made it through. But two, we give them a card that has $100 on it. That card is like a credit card. They can use that to donate to any one of hundreds of charities that are on this Web site. So we try to get them involved from day one in our philosophy here of giving.

JULIA KENNEDY: You mentioned it earlier, but there is a stereotype of Wall Street as, to put it bluntly, selfish. People are here to make money, and the perception is that that is the main goal. Why do you try to instill that kind of giving culture in your organization?

SETH MERRIN: Because that's who we are. We have a set of core values. We try to hire people who are like us. If somebody is not interested in what we're doing holistically—innovative, basically be kind to each other, help each other out, and the culture of giving back—then this is not the right place for them.

So this is who we are. We encourage people to participate with it. If, for any reason, they don't want to, of course, it's not mandatory. But overall we try to hire people that share all of the core values that we have here at this company.

JULIA KENNEDY: Would you say that stereotype about Wall Street is well-founded or not?

SETH MERRIN: It's difficult to stereotype. In broad, general terms, I think that there's way too much money in Wall Street, and that leads to a lot of greed. I do believe it led to, ultimately, the whole financial crisis. I think that probably in Wall Street there's more money than most industries. It's very difficult to talk about greed when you're talking about local market stores. But when you're talking about people that make millions of dollars a year, then I think it's probably more prevalent in Wall Street than other industries.

JULIA KENNEDY: Do you see people taking a step back after the crisis?

SETH MERRIN: Wall Street tends to get itself into a crisis probably every ten years. What happens is, we all get chastised and we all learn our lesson. But then we tend to do it again, in some other area. It's unfortunate that this industry tends to repeat those crises every so often.

JULIA KENNEDY: Talk about sustainability. Tom also mentioned that you tried to promote a culture of sustainability around the office. Tell me a little bit more about that.

SETH MERRIN: Any way that we can, we try to reduce our carbon footprint. We have recyclable cups. We don't have plastic water bottles anymore. We used to. We give those out. People really appreciate that, too.

There's only so much that we can do, but where we can do our part, I think it's incumbent on us and everybody else to do what they can do.

JULIA KENNEDY: In your personal life, how do you try to balance your engagement with Rwanda and other community efforts and work? I'm sure it's a lot to run this company.

SETH MERRIN: How do I balance it? You know how people say you want to give the person who's busiest the new task to do? I think there's something to be said for that. You have to make time. You have to section it out. You need time with your family. You need time for the company. You need time to make the world a better place.

The village—and I have to emphasize this—we have a lot of people at this company that spent a lot of time working on this village. I am not one of them. I have my own things that I do outside of work. I spend a certain amount of time on that. I certainly help Anne in whatever way I can. But she is the major driver behind that.

There's enough work out there for everybody. There is no shortage of good causes out there. We try to divide and conquer and try to do more than focusing on the same projects.

I think most people want to give back. I really do. I think most people don't know how. For most people, simply sending a check to a charity is not sufficient for their own purposes. This is a great opportunity and experience that we can offer people. We have seen so many people actually take it up, and they are so grateful to do so, that we give them an opportunity to become involved in something.

We're not just talking about 150 kids or 500 kids, when the village is full. We're talking about creating the leaders of Rwanda. We're hoping that Rwanda continues to be a shining light in Africa. What kind of difference that can make to an entire continent.

When you have big, huge aspirations like that, it's pretty easy to get people involved and excited.

JULIA KENNEDY: What role does religion play, both in the village and in your and your wife's impetus to start something like this? You mentioned that it's modeled on Israel, and there is the name "Shalom" in the title. It seems to be sort of connected to that ethos for you.

SETH MERRIN: Yes. It is very important to us. Most of the kids in the village are some form of Christian. There are Catholics. There are Seventh-Day Adventists. I think there a few Muslims in there. We have a chapel there where people can go and they can pray. We're not a religious village. We don't force any kind of religion on them. But whatever they are practicing is what they should be practicing. We encourage them to believe in whatever they were brought up to believe in.

From the Israel perspective, it is a product coming out of Israel. It's not exact. It had to be tailored to Rwandan culture. But it is coming out of Israel, and we want that to be known. Agahozo means "to dry one's tears" in Kinyarwanda. All the people that work at the village—most of the people; there are some Israeli volunteers and some American volunteers—the vast majority are Rwandans. The people that built the village, the construction and the architecture firms, were Rwandan. So we brought a lot of jobs to the country.

It is a great solution that is coming out of Israel, which is why we want the "Shalom" part in there, too, apart from the meaning, which is "peace."

JULIA KENNEDY: What's next? What would you like to see in the future, both from your global social engagement programs here at Liquidnet and in Rwanda?

SETH MERRIN: Six months is not a success. We want to make sure these kids are actually going through and continuing to thrive. If the next six months or couple years is anything like the first six months, it's going to be a miracle. I would say it's as close to a miracle as one can come. Everyone in government in Rwanda knows about the village. Many have been there. They're already asking to utilize the same educational philosophies that we're teaching these kids and teach other teachers on how to deliver that type of education.

We're bringing in new forms of agriculture and computer science, new technologies that are really not available. Rwanda is just made up of subsistence farmers. If they had a bull to pull a plow, that would be a huge upgrade in technology for them. We're talking about really taking them to a different level.

Forestry—half the country has been deforested. To actually reforest is a big thing in Rwanda.

So in addition to just dealing with the kids, we're really giving them the tools, and the rest of Rwanda, too, to take a look at what we're doing and to steal our philosophies, to take what we're doing and to use it elsewhere as well. This has the ability—I'm talking about in ten or 20 years, when we will have enough graduates to have changed the future of that country.

So we have to see where it goes. There are lots of possibilities that could be very, very exciting. But we still have to make sure that it's successful.

JULIA KENNEDY: Is the idea to prepare these kids, then, to go on to college?

SETH MERRIN: Every kid that I spoke to said, "Of course I'm going to university." That, too, is, I'm sure, a huge change. The opportunity was never there. There are universities in Rwanda.

I came from Tufts. In fact, my dad sent 20 kids from Tufts over to the village to volunteer for ten days. Now half the kids, I think, want to go to university at Tufts and then come work at Liquidnet.

JULIA KENNEDY: You'll have to see if you can expand your employment that far.

So then the idea is to have a model that can be used throughout Rwanda. But is this something you think can be used elsewhere as well?

SETH MERRIN: We believe so. We believe that if you can transport it from Israel to Rwanda and it works, chances are it is portable to other countries and other places. There are requirements. The great thing about the Rwandan government is that there were no hands looking for money. They just wanted to help, and they did.

That really facilitated it. You can't really say that there are that many countries in Africa that have that kind of government in place.

It's up to the government and the stability. But there's no shortage of countries—and it's not only Africa—that could use a solution like this. In fact, once we have some data under our belt, then we will take it the United Nations and see if they want to do anything with it.

JULIA KENNEDY: Great. It's a wonderful project. It has been a pleasure to hear about it from you. Seth Merrin, thanks so much for joining me.

SETH MERRIN: My pleasure. Thank you.

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