Adena Friedman, CEO of Nasdaq, on the Red-Hot Market and Critics of Her Diversity Plan

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Last week was pretty typical for Nasdaq CEO Adena Friedman in 2020. Another record-high close. Another buzzy multibillion-dollar IPO (on Dec. 10, Airbnb’s stock doubled on its first day of trading, valuing the company at $100 billion, the latest sign of the market’s animal spirits). Meanwhile, the Wall Street Journal attacked Friedman’s proposal to increase board diversity on Nasdaq-listed companies. And the FTC and many state attorneys general filed a federal lawsuit seeking to break up Facebook, alleging anti-competitive behavior. Facebook is one of the five FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks that all trade on Nasdaq and that have powered much of the market’s somewhat perplexing rise in 2020, in a year where pandemic shutdowns battered the real economy and more than 10 million Americans are out of work.

Nasdaq has come to symbolize 2020-style inequality. The perception: while those with means to invest grow richer, others devastated by COVID-19’s destruction are left further and further behind.

On Dec. 1, Friedman, 51, unveiled the plan to increase the representation of women and underserved minorities on the boards of Nasdaq-listed companies. The proposal, which needs SEC approval, would require these companies to disclose diversity statistics of their board of directors. Additionally, companies would need to have, or explain why they do not have, “at least two diverse directors, including one who self-identifies as a woman and one who self-identifies as either an underrepresented minority or LGBTQ.” (There is more flexibility for smaller and non-U.S.-based companies.)

Friedman, who started at Nasdaq as an intern, joined TIME on Dec. 8 for a video conversation on the exuberant stock market, the divided reaction to the diversity proposal and the benefits of tae kwon do.

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(This interview with Nasdaq CEO Adena Friedman has been condensed and edited for clarity.)

Nasdaq hit another record close today, right?

I don’t know, actually. [Laughs] I should probably know but I don’t. [Editor’s note: It did.]

The Wall Street Journal editorial page has come out strongly against your diversity proposal, and even suggested that companies would be delisted if they don’t diversify their boards. That’s not correct, is it?

That is not the case. That’s the one misperception that has come through. The only obligation is disclosure, and we do believe that our economy is really founded on the basis of disclosure. We like the fact that it’s not a hard mandate. But it does really encourage progress in diversifying the boards.

This has really stuck in their craw; they posted a video, mocking the proposal as “woke” and said, “It’s virtue-signaling at someone else’s cost” and “is very dangerous for capitalism.” What is your response?

We are true believers in capitalism. Capitalism really does give the best opportunity for people to succeed and create growth. But the execution of it though has to be geared toward making it so that there’s opportunity for all. I think in the United States, we’re still trying to find what the right balance is—we call it cooperative capitalism, making sure that there is the opportunity for everyone to succeed. Whether it’s the gender issue or underrepresented minorities, we all can recognize that there are challenges that we have in our economy today where we have to make sure that we are giving more opportunities. We think it is the right balance to strike in a capitalist society. The fact is, we are not mandating this. Those who are saying this is a mandate, they are mischaracterizing our proposal.

Why not make it mandatory if you’re serious about this?

We’re really trying to encourage progress, not to force it.

You’ve mentioned the U.S. is behind other countries in terms of diversity of boards. What countries would you highlight?

Norway has a mandate for 40% of corporate boards to be represented by women. So we are not leading the world in this area.

Do you watch Borgen, the gripping (seriously) show about Danish parliamentary politics? In Season 1, the government almost collapses after the biggest Danish company threatens to leave the country because of a proposed law requiring companies to have female board members.

I haven’t yet watched that. I actually have it on my list of shows to watch because as you know, we operate a lot of exchanges in the Nordic region—including Denmark.

Let’s stay with the category of TV shows and Nasdaq for another moment. Do you watch Ozark, the Jason Bateman show about money laundering? I ask because you recently announced a multibillion acquisition of Verafin, a firm that provides technology to fight international money laundering.

I purposely don’t watch that show. To be honest, when I leave the office and I go home, I like to watch TV or read books that allow me to exit the role, not to double-down. And I love Jason Bateman.

But money laundering on the other hand is something we care deeply about. We are already very squarely in the anti-financial-crime space. But as we’ve talked to our customers, particularly our broker-dealer customers, their challenges in the broader sense of financial crime are just enormous. And what they’ve been asking us to consider is how do we bring anti-money-laundering investigation, crime-detection investigations into our offering, and team it up with our surveillance offering? Verafin has done a great job of being a tech-first, modern technology business geared specifically toward fraud detection and money-laundering detection and investigations for banks.

The estimated amount of money laundered globally in a year is up to 5% of global GDP, or $2 trillion. What does that mind-boggling number say about the state of the world?

With the digitization of the global economy, there’s been an exponential change in the way that funds have flowed across the world. You have to have the technology in place to protect those money flows and to make sure that those money flows are legitimate.

Airbnb is your latest IPO: they debuted with the ticker symbol ABNB. I’ve always been curious: At what point in the process does a ticker symbol get assigned, and how does that work? Do people get to choose that? And do you have some favorites? I like HOG for Harley-Davidson and HEINY for Heineken.

Do we really want to get into it, reserving symbols?

Yeah, let’s go crazy.

Reserving symbols has been actually an interesting part of the ecosystem within the U.S. capital markets for a while because we’re one of the few countries where we have competing capital markets. And it used to be we’d have it so that all of the companies listed on Nasdaq were four [letter] symbols, and all the companies that listed on [the] New York [Stock Exchange] were one, two and three. But when the SEC actually broke down that barrier to allow for both of us to be able to list one-, two-, three- and four-character symbols on either exchange, so frankly then that really helped enable us to switch a lot of companies from New York to Nasdaq. People get very passionate about their symbol. So when we started working on switching companies from New York to Nasdaq, one of the key barriers was “I want to keep my symbol.” So having the SEC allow for both exchanges to have all characters has been big.

It’s sort of like a football player wanting to keep their numbers after they’ve been traded?

Or someone wanting to keep their phone number when they switch [office] chairs.

So do you have English majors and word mavens on your staff that are scanning listings of unicorns and saying, “Let’s grab FIDO” for, say, a big pet-food delivery startup?

Within our IPO team, we do have people who think forward as we get to know a company and we think they might be going public in the next couple of years, we will start to think about what would be natural symbols for them to consider

There has been a stunning year for IPO activity this year to date. As of Dec. 11, there have been 427 IPOs on U.S. exchanges so far this year, raising $159.4 billion, according to Dealogic. That’s up sharply from last year. So what is driving this market today? The outgoing, defeated President who lost the election often conflates the stock market with the economy. How do you explain the dichotomy between the record-high stock market and what is still one of the worst economies since the Great Depression? Unemployment is back under 7%, but there’s still more than 10 million Americans out of work. It’s such a disconnect.

The first thing I’d say is when we think about the stock market, it’s all about the future. Right? So when investors are deciding which company to invest in, they’re looking at the future of that company. It’s always been about the future. And what I think the immediate impact of COVID was, Oh, my gosh, I don’t know what the future holds. And that obviously created a lot of selling behaviors. Because when they don’t know what the future looks like, they get nervous and they say, You know what, I’m going to grab my cash.

But then once more information was understood about COVID and there’s an expectation that this isn’t going to last forever. So if there are companies that are leaning into the future, they’re technology companies, they’re health care companies, they’re companies that also kind of facilitate people through this issue and could have a great trend on the back of it, those companies suddenly started recovering.

And the government was clearly resolved to really try to shore up the economy and help see it through this really dramatic pandemic.

So I personally think it’s all of those things combined that made investors say, It’s going to be easy for companies to borrow money. The government is going to be putting a backstop on certain parts of the economy. And there are a lot of these companies that are leaning into the future. And on the back of that, they came back.

There’s a German proverb, Bäume wachsen nicht in den Himmel, which translates to “Trees don’t grow to the sky,” suggesting markets don’t go up forever. How close to the sky do you think we’re getting?

I personally try to look at it more in the context of: Do I believe that investors are evaluating the risks and the opportunities as they’re looking at what equities to own? And frankly, what are the alternatives out there that are going to give them a return? There’s growth and opportunity in a lot of companies that sit in the Nasdaq. And against alternatives where the returns are very low. I mean if you are trying to invest in fixed income, then you are getting a much lower return for the risks you’re taking.

What percentage of Americans participate in the stock market? Using a broad measure, including pension funds.

The best estimate we’ve heard is between 55% and 60% of the adult population owns equities in some form.

What do you say to people that see markets as rigged or a casino or, my favorite, “a graph of how rich people are feeling emotionally”?

Markets have never been more accessible to everyday savers as they are right at this moment. There is an entire ecosystem of fairness that has been very well thought through to try to create an equal environment.

As a risk factor, do you worry about income inequality and social unrest in this country and around the world?

I’m a true believer that if we execute the models that we have, the capitalist models that we have and democratic models that we have, we can be a great society that gives opportunity to all. But we have challenges. I think that we definitely have to acknowledge that we have challenges. And I think that those challenges stem from equal access to education, equal access to early childhood education but also services. In the economic realm, it has to do with making sure that everyone has access to borrow money and to get access to equity capital to start a business. If they have a good idea and they have—and you believe that they can be successful, they should get access to capital to be able to create that. We’ve actually launched the Nasdaq Entrepreneurial Center to educate thousands and thousands of young entrepreneurs on how to build a business. But as a system, we have to make sure that banks are motivated to be in smaller communities, that they have motivation to lend to more people and people from different backgrounds so that we create a more equitable opportunity. That to me is really the key to sustaining capitalism, and I do think there are changes that need to be made in order to be able to achieve that.

You started as an intern. So, without being modest, how did you stand out?

I was very eager. I consistently asked to do more. I definitely was not sitting there waiting for someone to tell me what to do next. I found that if I had some free time I’d go over to someone and say, Do you have anything I can help you with? I was always willing to take on more. That also broadened my network inside the company so that they kind of saw me as a go-to person to help them with things.

You attended girls’ schools for 10 years, and you’re a big advocate of the benefits of single-sex education for young girls.

I was there from ages 8 to 18. And when I think about the confidence that I have to be able to speak up to ask questions, to be curious— I was deemed most inquisitive in my class, which I’m not so sure was a compliment. But it was an example of how I never felt that I had to hold back in a classroom. And being smart was celebrated. So I think that all of those are great elements for young girls as they’re gaining confidence.

Speaking of CNBC where you are a frequent guest and they clearly love having you on: you should start requesting that they play walk-on music, like Mariano Rivera, leaving the bullpen to take the mound at Yankee Stadium in the bottom of the ninth, with “Enter Sandman” by Metallica blasting. What would your walk-in music to CNBC be? Any favorite power ballads?

“Confident” by Demi Lovato.

You have a black belt in tae kwon do. Are you better at delivering a punch or taking a punch?

I’m best at kicking. Kicking is my favorite. I would much rather kick than be kicked.

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