The Distressed Lecturer with Mike Harmon

Liz Tinkham (00:06):
Hi, this is Liz Tinkham and welcome to Third Act, a podcast about people embracing the third act of their lives with a new sense of purpose and direction. The third act begins when your script ends, but your show’s not finished.
Hi, everyone, and welcome to Third Act. On today’s show, I talk with Mike Harmon, the distressed lecturer. Mike graduated from college with dreams of going to Wall Street, but it was 1991 and a recession caused that party to be over. He did, however, end up at a bank working on distressed loans, but he found his calling there in the distressed assets business. But after 20 years in the business, as he puts it, his turkey thermometer popped. He was burned out, not seeing his family, and needed to move on. Sound familiar?
Luckily, a happiness lecture on the Okinawan’s during a Harvard Business School reunion prompted him to find his ikigai, or, reason for waking up in the morning. He found public radio and teaching in that search. Today, he is a happy part-time lecturer at the Stanford Business School. Join me as I talk to Mike about how he made that journey from distressed assets to lecturer.
Well, Mike, welcome to the Third Act podcast, good morning. Where does this podcast find you today?

Mike Harmon (01:23):
Today I’m in my home in Manhattan Beach, California.

Liz Tinkham (01:26):
Oh, I am jealous. That is a beautiful place to live. And you’re about to go on vacation, correct?

Mike Harmon (01:32):
My wife is Dutch and we’re finally going to visit her parents in the Netherlands after two and a half years. And then we’re headed off to Costa Rica for some relaxation.

Liz Tinkham (01:43):
Oh my gosh. That sounds wonderful. Well, thanks for taking the time to do the show before your trip. I want to start with some background on your first act. You grew up in the United States, but ended up going to McGill in Montreal. Why did you choose there?

Mike Harmon (01:56):
I went to high school in New England and I wanted something a little bit different, culturally, than what my friends were doing and what my high school was like, but I didn’t want to go too far from home and McGill seemed to check all of those boxes.

Liz Tinkham (02:10):
Okay, and what did you think… What’d you major in? What did you think you were going to do coming out?

Mike Harmon (02:14):
I was an economics major. And when I was in college, it was the 1980s. A lot of my friends and I were drawn to the lure and excitement of Wall Street. But when I graduated in 1991, unfortunately, the party was all over. There was a major recession. And so, I ended up taking a job in the loan restructuring department at a bank called Society Bank, which is now part of KeyCorp.

Liz Tinkham (02:40):
Okay. And you said to me when we were prepping that you found distressed loans and you loved it. Why did you love that line of work?

Mike Harmon (02:47):
Well, I think it was really the dynamic aspect of a lot of these country companies. It’s not like I find joy in others’ pain, but I like that every company and situation that I encountered in the distress world was so different and dynamic. And it really felt like a great opportunity to learn new things on every deal that I worked on. It really kept me on my toes.

Liz Tinkham (03:11):
You continue working, you go to PWC, you’re still doing distress things. I think maybe it would be useful to describe that asset class, since it becomes your career. What all do you do when you work with distressed loans and assets?

Mike Harmon (03:25):
The type of distress we’re most often dealing with is called financial distress, which means it isn’t so much that these companies have a broken business model. Although, some of them do. Often, it is distress related to what we call the right hand side of the balance sheet, which means that they just borrowed way too much money. And then there might be a correction in their business where that capital structure is no longer useful or tenable for them. And so, I really like that aspect of it. It’s like a puzzle that you’re trying to figure out in each situation.

Liz Tinkham (04:04):
And eventually you realize you need to go on and get an MBA, so you head to Harvard. And while there, you identify Oaktree Capital as the place you want to be. And you told them… You told me that you harassed them until they gave you a job. It must have worked because you were there for 20 years. What did you end up doing at Oaktree?

Mike Harmon (04:20):
We would raise pools of capital from institutional investors, groups like pension funds, endowments, and then we’d use this capital to buy companies or in some cases make influential investments in companies. And most of these companies were either distressed or they were going through some kind of transition. And the idea is that opportunities in these types of markets often offer superior investment returns relative to similar opportunities in healthier markets because the dislocation from the balance sheet really causes an opportunity. And there aren’t a lot of investment groups that play in that space.
I was a managing director there, so I would lead the deals to buy companies. And then I would sit on their boards of directors and help them improve their performance. And then we would sell them or take them public.

Liz Tinkham (05:14):
And then you said the turkey thermometer popped. Say more about that. I love that phrase.

Mike Harmon (05:20):
It was kind of like it was the greatest job I could ever imagine until it wasn’t. And the analogy that a Harvard professor that I worked with later gave me. For her, it was like one of those turkey thermometers where it pops when the Turkey’s done. And that’s kind of how I…

Liz Tinkham (05:38):
The Butterball Thanksgiving Turkey, right?

Mike Harmon (05:40):
Yeah, exactly. And I think for me, part of it was that I was traveling almost every single week and that was really wearing on me after doing it for-

Liz Tinkham (05:51):
Yeah, I know that drill.

Mike Harmon (05:53):
Yeah. And I wanted to be more present for my family. It felt like I was missing out on a lot of important moments there. But also there was an element of what was happening in the investment management industry. It’s really become a lot more efficient due to a combination of factors. We’ve been in this low interest rate environment for a while. Technology has made it very easy for a lot investors to play. And there have been very high capital flows and this has made it a lot more challenging to find attractive investment opportunities. And this is particularly true in the distress space.

Liz Tinkham (06:27):
When the thermometer popped, I mean, what did you decide to do?

Mike Harmon (06:32):
Well, I had to figure out what to do. I was somewhat addicted to my job to be honest, but I also wanted to do the right thing for my firm. I was on seven boards of directors at the time. And I had over a billion dollars of investments that I was responsible for. I didn’t want to leave the firm without a succession plan for all of that. But part of it was really selfish. It was spooky to be honest, to leave a role that had been a part of my identity for so long. This had been my dream job. I worked really hard to get it. And now, I was considering leaving. I didn’t want to quit the addiction cold turkey, so I wanted an easy glide path out, so I did something that no one had done at my firm. I gave the firm three years notice. And as part of that, I really wanted to have some time to figure out what my third act would be.

Liz Tinkham (07:32):
You were telling me, you were the first among your friends to go leave their second act and go into their third act. I mean, were your… particularly male friends, were they supportive? Were they jealous? I mean, it’s a little less typical to see men at the top of their game decide to leave early.

Mike Harmon (07:50):
Yeah, I agree with that. I think a lot of my… I would put my friends in different categories. Some of them truly love their job and they’re still in their jobs today. I think others need or want the income. They might have financial goals that they’re shooting for, but I definitely had a category of friends that don’t have to do their job and maybe they don’t love it, and they were the ones that I think were watching me closely to see how it was all going to work out. Was I going to be happy or was I going to miss working?

Liz Tinkham (08:21):
And so then you go to your 20th Harvard Business School reunion and you go to a happiness lecture that had a profound impact on you. I think we need to hear this lecture. Can you tell us a little bit about it?

Mike Harmon (08:33):
Yeah, so the lecture was part of it, but it was really the path hat that lecture put me on that had the most influence. The lecture was put on by a professor named Michael Norton. He had written a book along with Elizabeth Dunn called “Happy Money”, but that really led me to read a number of books and listen to a number of podcasts on happiness generally. And I was really inspired by what I read about the Okinawans. They have this concept called an ikigai, which is their word for life purpose. And when you look at the Okinawans, they never really retire. They just continue throughout their life to work on something that is meaningful to them.
And separately, I was also inspired by a quote that I read that was… It’s largely been attributed to Pablo Picasso, but it’s that the meaning of life is to find your gift and the purpose of life is to give it away. And so, as I was thinking about my next act, I started to think about some of these concepts as I was deciding what to do next.

Liz Tinkham (09:38):
And you developed a set of criteria that you used to decide to do next… about what to do next. Tell us about that criteria.

Mike Harmon (09:44):
Yeah, whatever I was going to do next, it had to be meaningful to me and to others. It had to leverage the skills that I developed over a career. And it had to relate to things that I’m passionate about. But above all, it had to be fun.

Liz Tinkham (09:58):
Yeah, I would agree. I have the same for what I’m doing, but I like how you articulate that. And I think that’s going to be really helpful to some of our listeners. So, you venture into the world of truth and journalism and politics, if I have that right. Do I have that right?

Mike Harmon (10:13):
Yeah.

Liz Tinkham (10:14):
And is that fun? Tell us about what you’re doing there. I’m not sure that sounds like so much fun right now.

Mike Harmon (10:20):
Yeah, no, I hear you. And I think I realized as I was seeking out that next chapter, that one of the things I had become concerned about was the political environment. The divisiveness and polarization that’s been occurring in our country. And I think it comes from a lot of different places, but one of those, in my opinion, is the news media. And I think I grew up in a generation where when I was a kid, there were three networks and they had news anchors and they were in charge of just delivering factual news. And as a society, we could all have different views, but they were at least based on a common set of facts. And now it seems like each media outlet, and I would add social media to this, has more and more of a political agenda as well as an agenda around getting people riled up on all sides of the political spectrum. And every network seems to have their own set of facts.
So, I decided to join the board of directors of a public radio station in Los Angeles called KCRW that among other things, focuses on the dissemination of truthful and balanced news content. It’s a great board. It’s a great group of people. And it’s just one of these things that you can do in your next wave that keeps your mind sharp and keeps you engaged. I love it.

Liz Tinkham (11:40):
As an aside, because I have to ask you because my brother’s a journalist and we were chatting last night about Anonymous and who Anonymous really was, but how does KCRW figure out that they have truthful information to report?

Mike Harmon (11:54):
Yeah, it’s a really good question, but I think they just have a higher standard around when they’re presenting things, is it factual? And if they’re going to present opinions, are they presenting all sides of it? They have a great podcast which I’d encourage any of your listeners that are interested in to listen to. It’s called Left, Right & Center.

Liz Tinkham (12:16):
Left, Right & Center. We’ll put that in the show notes, okay.

Mike Harmon (12:19):
Yeah. And what they do is they bring experts in from all sides of an issue and they have a truthful and respectful debate on the issues without tearing each other’s eyeballs out. It’s a refreshing place to get your news.

Liz Tinkham (12:41):
So then you also start working at, go back to the Harvard Business School. How did you get started there?

Mike Harmon (12:46):
One of my partners at Oaktree introduced me to an HBS professor named David Scharfstein and he expressed an interest in writing a case study on one of my investments. I helped him write the case and then I came to class and presented a lecture for about 20 minutes at the end. And that was a big aha moment for me. I really enjoyed that experience. So, I ended up reaching out to the dean of HBS at that time, Nitin Nohria. He had been a professor of mine many years earlier and I asked him how I could plug in. And he had me do a series of meetings that resulted in a series of guest lecture roles at HBS. I ended up teaching 23 classes as a guest in a variety of topics at the MBA and executive education level.

Liz Tinkham (13:34):
Oh, that sounds like so much fun. I mean, we shared this story. I also teach and I just love it, but that was a ways away, right? Because you live in Manhattan Beach, I assume you were flying out to Cambridge or was this also during COVID?

Mike Harmon (13:45):
Well, part of it towards the end overlapped with COVID, so I did some of it on Zoom, but most of it was in person. I still have family on the east coast, so it’s an opportunity to see them. I also have some physical therapy that I get done out there, so I have a lot of reasons to be out there.

Liz Tinkham (14:04):
So your current role though, is as a lecturer at Stanford Graduate Business School, which is a little closer to home. And I love your story of how you landed that job, because I think it’s instructional for people listening who want to become… who want to get more engaged in local universities. Tell us, how did you get your job at Stanford?

Mike Harmon (14:21):
Yeah, so from the HBS role, I decided I wanted to do teaching more on a regular basis with a single class that I could develop, deliver, be responsible for. And looking around, I realized that Stanford didn’t have a class on a particular topic called financial restructuring, where I had some expertise. So, I cold called them and I pitched them on the idea of creating a new class from scratch. And their model is to pair practitioners with tenure line faculty, so they gave me a great partner, Claudia Robles-Garcia, and together we developed the materials for the new class and we teach it together. And we’ve just finished our second full year teaching it.

Liz Tinkham (15:04):
Teaching that class, does it meet your four criteria?

Mike Harmon (15:07):
Yeah, a hundred percent. It’s meaningful. I think my favorite moment, and you’ll really relate to this, is when you see the light bulbs go on in your students and you see that it’s meaningful to them as well, that you’re really transferring that knowledge. And it certainly leverages my career experiences. I’m very passionate about the material that we teach. And it’s a lot of fun. I mean, after years of commuting to an office building and sitting on planes to New York every week, there’s something refreshing about commuting to a college campus for work on a bicycle.

Liz Tinkham (15:42):
I totally agree with you. I can ride my bike to school as well here. What’s next for you in your third or your fourth act as you look forward?

Mike Harmon (15:50):
It sounds cliche, but I’ve been spending my whole career thinking about what is next. And right now I’m just enjoying the situation that I’m in. To connect to my teaching, I’ve been doing some writing in business journals. I’ll probably continue to do more of that, but I think mostly it’s more of the same.

Liz Tinkham (16:06):
Great. I almost named this podcast, I’m Not Done Yet. What aren’t you done with yet?

Mike Harmon (16:11):
I would say just living my life to the fullest with good balance between family, fun and work. And my full-time job now is 10 weeks a year. And that’s perfect for where I am in my life cycle. I think the rest of the time I get to spend time with my family, travel, do sports, as well as some project work, research and writing articles. So for me, that’s the perfect life balance. And at least for now, I’d like to continue that.

Liz Tinkham (16:39):
Well, I wish I could name this podcast When The Turkey Thermometer Pops, but that’s probably too much, because it’s a perfect metaphor for how so many of us feel about life and jobs sometimes. Thank you so much for coming on this show and sharing your story. Where can our listeners find you online?

Mike Harmon (16:55):
Probably the best place is LinkedIn. I’m listed as Mike Harmon, Gaviota Advisors, or you can find me on the Stanford GSB website.

Liz Tinkham (17:04):
All right, we will reference both of them in the show notes. Mike, thanks so much and have a wonderful vacation.

Mike Harmon (17:09):
Great, thank you so much, Liz.

Liz Tinkham (17:13):
Thanks for joining me today to listen to the Third Act podcast. You can find show notes, guest bios, and more at thirdactpodcast.com. If you enjoyed our show today, please subscribe and write a review on your favorite podcast platform. I’m your host, Liz Tinkham. I’ll be back next week with another guest who’s found new meaning and fulfillment in the third act of their life.