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September 19, 2011
September 07, 2011
On a recent muggy July morning in London, Nouriel Roubini was doing what he does best: lecturing. With his shirtsleeves rolled up, the New York University Leonard S. Stern School of Business economics professor outlined, in his low, guttural voice, the reasons why the slowdown in global growth was raising the probability of another recession in advanced economies. The U.S. had yet to face up to its unsustainable deficit, he explained, and problems in the euro zone were intensifying. Public and some private debt in Greece, Ireland and Portugal would have to be restructured. Political dithering, while postponing the inevitable, was raising the likelihood that the restructuring would be disorderly — and damaging — for global credit markets.
Roubini’s audience sat in rapt silence. No one moved, although the crowded room was hot and uncomfortable. Finally, Roubini paused for questions. His listeners, however, weren’t students. They were current and prospective clients from some of the largest banks, asset management firms and family offices in London. The venue: a conference room in the London offices of Roubini’s booming macroeconomic and strategy research firm, Roubini Global Economics. Just down the hall more than a dozen analysts were hard at work, scouring economic reports and sifting through data for the firm’s 1,000 clients.
In the four years since the financial crisis began to erupt, Roubini’s classroom has grown.
When he first sounded the alarm about the probability of a housing market crash and deep recession, in July 2006, Roubini was an obscure academic. Well respected by his peers but largely unknown to the wider public, he had built his career on analyzing the causes of financial crises in emerging markets, not developed markets. Invited to speak before a gathering of economists at the International Monetary Fund in Washington in September of that year, Roubini’s grim message — that a huge crisis was in the making, the likes of which policymakers would be unable to stop — fell on deaf ears. No one quite knew what to make of the stocky, unsmiling economist, but his public profile as a purveyor of bad tidings was sealed. Various media wags promptly dubbed him “Dr. Doom.”
Five years after that fateful summer, Roubini has become a brand name. Instead of teaching graduate students, the 52-year-old economist now lectures on a world stage, jetting across multiple time zones to convene with central bankers, finance ministers, policymakers and politicians. Since the crisis broke he has addressed audiences at the World Economic Forum at Davos, the Council on Foreign Relations and the U.S. Congress. He has been interviewed on PBS by Charlie Rose and cohosted Squawk Box on CNBC. He’s also gained a reputation for hosting lavish parties at his $5.5 million penthouse loft in SoHo. But for all his individual fame, Roubini doesn’t work alone. Behind his instantly recognizable name is a team of economic analysts and market strategists; their work powers his punditry. Aided and abetted by their research, Roubini has transformed RGE from a good idea into one of the most influential economic research firms outside of Wall Street — but the firm is not yet profitable.
Although RGE has more than tripled its revenue since 2008, achieving gross revenue of more than $14 million in 2010, according to sources close to the company, RGE is still looking for ways to accelerate its growth. Reports have recently circulated that the company is for sale, but RGE refuses to comment. What is quite clear, however, is that Roubini and his fellow board members are keen to continue to expand the business and maximize value for the company’s shareholders whether that opportunity comes in the form of a strategic partnership, new investment capital or an outright sale. Their task is not easy. With another phase of the financial crisis unfolding, RGE’s ultimate value may depend on its ability to prove its relevance yet again.
“The most important thing in this kind of business is that you have to be right day in and day out,” Roubini says. “The fact that I made a right call a few years ago doesn’t matter. In this business you have to be right all the time, and we have to work harder because we’re not a traditional economic forecasting firm. We don’t predict minute changes in inflation or unemployment; we aim to look at complex analytical issues and connect all the dots.”