What Wall Street Taught Me

Early in my career, I had an opportunity that many people would consider a dream start.

When I graduated from Harvard Law School, I was 24 years old. I had an offer to join a large law firm in New York, but instead I chose a different path. I went to Wall Street.

I began my career at Lehman Brothers (now part of Barclays) and later worked at Merrill Lynch. It was an extraordinary education. I had a front-row seat to the highest levels of global finance. I helped take companies like Garmin and Sirius Satellite Radio public. I worked on large mergers and acquisitions. I sat in boardrooms with CEOs and flew on private jets discussing billion-dollar decisions.

From the outside, Wall Street looks sophisticated, disciplined, and analytical. And in many ways, it is. But what I learned most powerfully had less to do with technical skill and more to do with incentives.

One realization fundamentally changed how I viewed the industry.

Investment banking, at its core, is an agency business. In that sense, it is not all that different from real estate brokerage. Compensation is tied to transactions. Bankers are paid a percentage of capital raised or a percentage of a company sold. That structure creates a powerful incentive to transact.

When you are paid to do deals, the pressure is always to do the next deal.

I saw firsthand how this incentive system can distort decision-making. I witnessed pressure to move forward with transactions that, in my judgment, were not always in the best long-term interest of clients or investors. The goal was not necessarily to ask whether a deal should be done, but whether it could be done.

The telecom boom of the late 1990s is a vivid example.

Following the Telecom Act, enormous amounts of capital flooded into telecommunications companies to build fiber-optic networks. From a value-investing perspective, it was clear to me that much of this capital would never earn an adequate return. Many of the projects simply did not make economic sense.

I suspect many people on Wall Street recognized this as well. But as agents, our role was not to protect investors. Our role was to serve the companies that hired us to raise capital. If investors were willing to provide that capital, it was not our place to stop them.

And if one banker refused to participate, another would step in. Saying no was not rewarded. In fact, it often meant losing your job.

Those incentives contributed to enormous losses for investors. Billions of dollars were destroyed, not because people lacked intelligence, but because the system rewarded activity over judgment.

That experience stayed with me.

When I founded Ridgewood in 2002, I made a conscious decision to leave that culture behind.

At Ridgewood, we are not agents. We are principals. We are fiduciaries. Our job is not to transact. Our job is to protect, steward, and grow capital responsibly over time.

That difference matters.

As principals, we invest as if the money belongs to someone we deeply care about (a family member, a close friend, or a loved one). Every decision is filtered through that lens. Would this make sense if it were my own family’s wealth? Would I be comfortable explaining this decision years from now, not just months from now?

History has reinforced why that distinction is so important.

Years after I left Wall Street, the global financial crisis of 2007 to 2009 exposed how deeply flawed the agency-driven culture had become. Firms followed one another into excessive leverage, short-term thinking, and risk that was poorly understood. Many of them collapsed under their own weight and were ultimately bailed out.

That is not a model we believe in. It is not a risk profile we accept. And it is not a culture we want anywhere near our clients’ capital.

The principle that guides Ridgewood is simple, but not easy.

We invest with a long-term orientation. We do our own homework. We avoid leverage that can permanently impair capital. And we guide clients toward decisions that compound quietly over time, rather than chase short-term excitement.

Markets will always have cycles. Narratives will always change. New technologies will always create enthusiasm and fear in equal measure.

What does not change is the importance of alignment, discipline, and incentives.

Leaving Wall Street taught me what happens when incentives are misaligned. Building Ridgewood has been about creating an environment where they are aligned, intentionally, with the people we serve.

That lesson continues to shape every decision we make.

-Ken