Power Broker

What Is a Power Broker?

A power broker is an individual who is able to influence the decisions of other parties. This is usually done through the power broker's personal and professional connections rather than through public means, such as explicitly lobbying for a particular decision. In the world of finance, a power broker is typically an industry insider who is familiar with other important individuals and groups. By using these networks, they are able to exert influence or make decisions.

Power brokers may also be public figures, such as elected officials or well-known business leaders, who subtly work their connections rather than taking a public stance on a particular issue.

Key Takeaways

  • Power brokers are usually important figures within the industry over which they hold sway.
  • Executives often become power brokers post-retirement because of the networks they have spent their career building and maintaining.
  • Power brokers work behind the scenes building consensus with key players rather than through public statements or actions.

Understanding Power Brokers

Power brokers are often sought out by companies in order to rally support for issues that are vital to a particular industry, such as how they are regulated. Power brokers can command high fees or future favors in return for their work helping a company or industry deal with a particular issue or advance on a shared priority.

Generally speaking, a power broker has a deep understanding of the industries they operate in, particularly when it comes to identifying the key contacts. Industry lobbyists and media personnel are often viewed as power brokers because they are familiar with the ins and outs of particular issues and are able to reach and influence decision-makers faster than those less familiar with key players.

While important, the standing of a power broker can wane over time. This is especially true during periods of transition; for instance, with the election of a new political party to power, the old power brokers may see their status and influence quickly deteriorate.

How a Power Broker Operates

A power broker may or may not be directly involved in the operation and development of the sphere of influence where their connections exist. For example, an industry power broker might be a consultant, an attorney, or another ancillary participant in that industry sector. While they might not be a CEO or senior executive within a company that is a mainstay of the industry, their presence and influence can affect these companies. Former CEOs who have retired from their industry often become power brokers within their former industry through their existing connections and board positions held post-retirement.

For example, a former oil and gas sector CEO is ideally positioned to connect someone looking for partners on a large LNG terminal project. As a power broker, the retired exec would work his network to feel out interest in the project among oil and gas majors, identify customers in target markets to bring in early, and begin laying the groundwork for the political and regulatory acceptance necessary for such a large project. The power broker may never appear on an official document about the project, but his work would be critical to its success.

Qualities of a Power Broker

In order to become a power broker, one needs to gain influence and status. In order to sway decisions and steer outcomes, this person needs to be charismatic and sociable. This means that one's personality should attract others into their sphere, building an important social network of people who can help increase their influence. Expanding and extending one's contacts, especially among those who may be able to lend a hand, is especially helpful.

Being able to communicate effectively is also crucial, as the form of influence needs to be subtle, yet simple in its message. Finally, you must become knowledgeable in the spheres that you will influence. Being labeled an expert by other important players will ensure that people listen to what you have to say.

Examples of Famous Power Brokers

The term power broker is often used in politics and Hollywood. Henry Kissinger was long considered a political power broker who used his access to presidents and foreign leaders to play a role in world politics long after he left his formal roles behind. In Hollywood, Harvey Weinstein was seen as a power broker who used his connection to make and break careers—and his abuse of this power to sexually assault and later silence women led to his downfall.

In finance, however, there is one very famous power broker who held sway over the U.S. market in a way that is no longer conceivable in a global economy. J.P. Morgan was popularly seen as running the U.S. economy, advising politicians on regulations, and setting the standards by which all banks were run. Companies would seek a loan from Morgan whether they needed financing or not, as having the J.P. Morgan name associated with your business raised your standing in the eyes of all investors.

Today, many would say Warren Buffett enjoys a similar place in finance, as the investments he makes are widely reported, but Buffett has been reluctant in exercising his influence beyond sharing his opinions in his annual shareholder letter.

Who Are the Major Power Brokers in Congress Right Now?

In Congress, power brokers tend to be those in high-ranking positions like Speaker of the House or Minority Whip. Heads of key committees are also influential. In times of divided politics, such as today, those who sit in the center and are able to provide critical votes to break a tie are especially influential.

What Is a Power Broker in Real Estate?

In the real estate market, this can usually refer to one of two things. First, in keeping with the above definition, a power broker in real estate is one who is able to influence deals to get done. They can apply pressure to developers, buyers, or sellers to close a deal. It can also simply refer to a real estate agent who has a lot of business and a big rolodex, which creates greater influence.

Article Sources
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  1. The New Yorker. “The Power Broker-III.”

  2. McKinsey. “The New Power Brokers: How Oil, Asia, Hedge Funds, and Private Equity Are Faring in the Financial Crisis,” Page 16.

  3. Harvard Business School. “Henry A. Kissinger as Negotiator: Background and Key Accomplishments,” Page 3.

  4. BBC News. “Harvey Weinstein Timeline: How the Scandal Unfolded.”

  5. Federal Reserve History. “History of the Federal Reserve.”

  6. Bloomberg. “#5 Warren Buffett.”

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