Morning Coffee: 39-year-old ex-Morgan Stanley analyst says colleagues too upper class. Goldman Sachs implies things aren’t great
It is hard not to be a little bit cynical. Just as Davos is famously “where billionaires talk to millionaires about the problems of the working class”, online education startup Multiverse might be described as “one of the world’s biggest nepo babies, talking about opportunities for disadvantaged students to become apprentices”. It’s run by Euan Blair, son of former British prime minister Tony Blair. Euan does at least admit that “When your dad’s the prime minister, it’s really easy to believe that anything is possible because he’s just your dad, a regular guy, and he’s running the country”.
Blair junior may still have a point, though. Having gone from Yale to Morgan Stanley, Euan realised that nearly everyone else on Morgan Stanley's graduate program was white, male and from a “privileged background”. According to his LinkedIn this would have been the analyst class of 2007 – pre the financial crisis, post the realization that diversity was needed, but pre the industry getting its act together to do anything about it.
Since then, recruitment has got a lot better in terms of the “white” and “male” bit, but arguably worse when it comes to the “privileged background”. Ten or fifteen years ago, the recruitment pool had already contracted to a small number of “target” schools. Nowadays, banks boast about all the universities they've hired from, but they still want the subset of elite graduates who also did internships, and therefore knew at the age of 17 or 18 that they wanted to be investment bankers. And there are fewer routes into banking outside the analyst program – a few veterans and athletes programs, but hardly any ways for ambitious accountants to make it into the front office.
In other words, the world has moved on from one of “all kinds of people from all different backgrounds, as long as they’re white men” to “a rainbow nation of identical elites”. Euan Blair, in a kind of act of class treason to nepos and elites, wants to bring people whose main capabilities are grit and aptitude, rather than passing exams and writing internship applications.
At present, Multiverse seems to be concentrating its training and selection programs on “data skills, software engineering and business transformation”. These are more mid-office than front-office roles, but the company claims that their recruits tend to get better performance reviews than graduates. And there’s no real reason why the same thing shouldn’t happen if they persuade major banks to drop the “graduate” requirement for their main analyst programs. For almost any job in investment banking, it’s likely that the best person to do it will be someone who actually wants the job, rather than someone just applied for it because it seemed like the right thing for someone like them to be doing.
Elsewhere, the job of investor relations at Goldman Sachs has historically tended to demand core talents in gracefully accepting praise and finding new ways to agree with ingratiating analysts on conference calls. Unfortunately, it seems that in recent weeks, more prosaic skills of expectations management have come into focus. According to Mike Mayo of Wells Fargo, “There’s probably half a dozen items this quarter that fall into the weak, bad or ugly category”.
Since the beginning of May, the consensus estimate for Goldman Q2 earnings per share has fallen from just under $8 to the current level of $3.94, with some analysts as low as two bucks. While this can’t have been a pleasant period for any of the executives involved in “preparing the market for potential issues” like the trading revenue slowdown, commercial real estate writedowns and selling the Greensky platform, Goldman can at least comfort itself with the fact that if you’ve talked about this sort of thing during the quarter, you don’t have to talk about it again so much on earnings day. In recent weeks there’s been some signs of recovering trading income, capital markets opening up again and consistent growth in asset management fees. Hopefully a return to “great quarter, guys” is just around the corner.
Jamie Dimon’s latest salvo against remote working is slightly curious in its logic. In an interview with the Economist, he says “I don’t know how you can be a leader and not be completely accessible to your people … I do not believe you can be a leader and not be accessible to your people”. Which is fair enough, except … is it really easier for JD’s “people” to get into his office, or to place a Zoom call to him? Even for the “people” who aren’t literally on a different continent? (The Economist)
We’ve had “greenwashing”, “competence-washing” and now “gender washing”. A number of Japanese banks are being accused of giving fancy titles to female employees with comparatively low salaries and few direct reports, in order to make the gender diversity statistics look better. (FT)
ChatGPT is banned on the trading floor at Citi, but according to Jane Fraser, AI in general “has the potential to revolutionise all functions across our bank and the industry — changing how we write code, onboard clients, service customers, detect fraud, develop market research and strengthen compliance and controls”. (Financial News)
New York State is planning on legislating a comprehensive ban on non-compete agreements, with surprisingly few exceptions for hedge funds, investment banks and other high-paying jobs which traditionally require a period of gardening leave. (Bloomberg)
If you see any colleagues coming in with these items of swag tomorrow or next week, you’ll know that they’ve been shopping for the recommended top bargains on Prime Day. (WSJ)
High praise indeed for John Carreyou – his “Bad Blood” study of the rise and fall of Theranos has been added to “Liar’s Poker”, “Barbarians At The Gate”, “When Genius Failed” and “Smartest Guys In The Room” in the canon of classic Wall Street books. This also suggests that Californian VCs are closer to being part of finance culture than they might want to admit. (LitHub)
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