Jay Wintrob began his career as a corporate securities lawyer at O’Melveny & Myers. Though he enjoyed working as a lawyer, he admits that his mother was a bit disappointed (“She would say, ‘Did you win?’ And I would say: ‘We go for a win-win situation.’ She thought that was boring,” he said). At 29, Wintrob quit O’Melveny at the suggestion of his close friend Bruce Karsh, who had spent two years as executive assistant to Eli Broad, then the chairman of Kaufman & Broad, and suggested Wintrob take over his job.
Wintrob helped dismantle the two distinct business units of Kaufman & Broad predecessor firm of homebuilder KB Home and financial services firm SunAmerica Inc., which was acquired by American General International Group. Today, he is head of Century City-based AIG Retirement Services. (Last month, AIG agreed to pay $126 million to settle Justice Department and the Securities and Exchange Commission allegations of insurance industry bid-rigging.) He is still close to Broad, and serves on boards with many of L.A.’s most powerful civic leaders.
Question:
Have the investigations by New York Attorney General Eliot Spitzer touched your side of the business, AIG Retirement Services?
Answer:
Knock wood, we really have had no ill effect. Obviously, there’s been a lot of difficult publicity. I think that’s pretty much the case across AIG. We’ve worked really hard to keep everything focused on doing our business. There’s really a separation between the various investigations in those matters and the immediate coverage of those, and what’s going on day-to-day in our business.
Q:
Still, the publicity has been bad.
A:
It wasn’t a great summer but I think we’re coming out of that now.
Q:
What relationship does AIG Retirement Services have to the insurance side of the business?
A:
Virtually none. These businesses are very different. AIG is so large, it’s into everything, but its main domestic property and casualty insurance business is business-to-business. Our business is institutional and retirement savings. Traditionally, the people that sell property and casualty insurance are distinct from people that can sell financial products, securities, even life insurance. We have much more interaction with the traditional life insurance sales side because many life insurance sales people are really full-service financial planners and they’re selling life insurance, retirement savings and mutual funds.
Q:
What was it like when you first went to work at Kaufman & Broad?
A:
Kaufman & Broad prided itself on being a meritocracy. If you had a meritorious idea, if you worked hard, you became successful. I was diving into one project after another. The projects weren’t even related to each other. There was no career path, no mentoring program, which is very much like a law firm, you go from matter to matter, situation to situation, and you kind of figure it out as you go along. Fortunately there were great people to work with, and there was Eli of course. We were growing very fast.
Q:
What kinds of things did you do?
A:
I did everything. We disposed of some businesses. We structured some businesses. I was involved in some acquisitions. We were doing some very interesting private equity investments and hedge fund investments. I got involved in personnel matters. When you’re a lawyer, the great thing is you might have 20 different things and you don’t know what’s going to happen in the morning, afternoon or evening. It wasn’t a process job. It was about execution. Things started and ended. Most things ended up well not everything.
Q:
What happens when things don’t end up well?
A:
One of the philosophies we’ve got around here is you need to be confident about making mistakes. Look at baseball. If you could bat .400 that’s hitting four out of every 10 at bats you’re a star player. I always thought if you could make six or seven great decisions out of 10, you shouldn’t be ashamed of the two or three that didn’t work. The easiest way to avoid a mistake is to not do anything very interesting, anything very innovative or anything very creative. We had our share of mistakes, but the successes far outweighed them.
Q:
How did an independent SunAmerica come about?
A:
I joined Kaufman & Broad at the time when it was separating out its homebuilding business from the financial services business. They’d really been in the financial services business since 1973, but very few people knew about that. Eli Broad was changing the direction of Sun Life Insurance Co. of America to focus away from mortality-based life insurance business, to helping Baby Boomers save for their retirement products. At the time, words like retirement savings, retirement products, really weren’t part of the lexicon.
Q:
So the idea was to sell retirement products to Baby Boomers?
A:
Our whole idea was that there really was a demographic time bomb going on the group that was born post-World War II was marching towards reaching their key pre-retirement years. That’s when people really get serious about retirement. The second thing that was happening was that everybody was, fortunately, living longer. If you’re a woman who reaches age 65, you have a better than 50 percent chance you’ll reach your high 80s. I call it the good and the bad. It’s good you’re still alive, but it’s bad because nobody when they were 20, 30 or 40 was saving assuming a life expectancy of 75, 85 or 95 years.
Q:
It makes retirement products more of a necessity, right?
A:
You have more old people and you have more old people living longer. You add to that the kerosene of key government entitlements, Social Security and Medicare. Everybody knows the cost of health care has gone crazy. A couple of things are happening. Many of us spend a great portion of our savings on health care. Secondly, with Medicare itself, people are wondering if the deal is going to be as good as it was for my mom and dad. Then you go to Social Security, but a pay-as-you-go, what I like to call a Ponzi-scheme system, only works as long as there are more people at the bottom of the pyramid than there are at the top.
Q:
Could changes to Social Security actually create more problems?
A:
If you stop the flow of the younger people paying in, because now you’re giving them their money for a personal account, and the current retirees need to keep receiving their retirement benefits how are you going to fund that gap? I like the concept of choice and personal accounts because then people have skin in the game. But I don’t think it does anything to deal with the imbalance of those who pay into the system and those whom we have to take care of. I think there’s a lot more that needs to be done to reform the system than what’s being talked about.
Q:
Then what is the solution?
A:
Nobody wants to hear it, but what has to happen is benefits have to be reduced. If you look back at the history of Social Security, it was designed at a time when the average life expectancy was 60 years old. It was never intended to pay retirement benefits for 20, 30 or 40 years. Those who designed it would have told you back then that it wouldn’t work. Yet it’s so politically unpopular to say, “I’m sorry, you’re going to have to tighten your belt, that they have deferred and deferred and put it off, and now we’re faced with a mammoth problem.” Personal accounts may be part of the solution.
Q:
You sit on a number of non-profit boards, including Cedars-Sinai Medical Center, J. Paul Getty Trust and KCET.
A:
I’m a huge believer that this concept of corporate giving or corporate charity is really the wrong focus. The focus should be on encouraging individuals who want to get involved and then have the company support the heck out of them. For me, this is my great hobby and my great passion. It was part of my upbringing to focus on repairing the world, volunteering, making things better.
