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Morning Coffee: How to earn a $200k salary and $20m bonus at the age of 28. Harvard students destroy their banking careers

Caroline Ellison at a mathematics competition

There are many ways to reach the banking big leagues, where total compensation is in eight figures, and doesn’t begin with a 1.  Most of them involve frustratingly long years of annoyingly hard work, combined with good client relationships and a lot of luck.  But there are short cuts. 

Not many people would like to swap places with Caroline Ellison today.  But at one point in the not to distant past, she was on the kind of pay package that only genuine legends of the banking industry ever see; $200k basic and $20m bonus as CEO of Alameda Trading.  She was in a position to lend (lend?) her parents $100k  How did she manage it?

It certainly doesn’t seem to have been a case of being a trading prodigy – the picture painted by the court testimony so far is of someone who was shockingly far out of her depth, and who followed Sam’s instructions on everything.  Even to the extent of taking $10bn from customer accounts and making use of a funny little bit of python code that stopped FTX from closing her loss-making positions.

Part of the story is of course her relationship with the worst boyfriend in crypto, but she wasn’t actually going out with Sam at the time of her promotion; their relationship was “on a break” and they were spending their time awkwardly trying to avoid each other in the Bahamas penthouse.  So there’s another possibility.

And that is that it was her very cluelessness that was her appeal; she may have looked like someone who might be useful to keep around in case you needed a scapegoat at a later date.  Sam certainly appears to be following this strategy – as soon as the black hole appeared at Alameda he started yelling that it was her fault, and his defence strategy seems to rely on blaming his ex for as much as possible.

They say that if you can’t identify the sucker at a card table, it’s probably you.  There might be a similar rule to bear in mind if you find yourself getting rapidly promoted at an aggressive risk-taking fintech.  But on the other hand, if you’re getting paid $20m to take the rap, many bankers might consider that to be a fair trade. 

There’s always the possibility of having the last laugh.  We don’t know when Caroline Ellison started giving evidence against FTX, or what whistleblower programs she might be able to benefit from.  We’ve noted in the past that adjacency to criminality can be a very lucrative position indeed if you take full advantage of it.  As a career strategy, it’s potentially no worse than what was apparently Sam Bankman-Fried’s own method when he was at Jane Street – “have memorable hair so that people don’t forget you at bonus time”.

Elsewhere, Bill Ackman has asked Harvard to publish the names of students responsible for some controversial public statements about the Hamas attacks on Israel, saying that he and “a number of CEOs” want to be sure not to “inadvertently” hire any of them.  It’s unlikely that the university will do so (although finance CEOs are putting quite a lot of pressure on universities at the moment; Marc Rowan of Apollo wants the leadership of UPenn to be fired over a Palestinian literature festival).  

But it is possibly a reminder to young people that the internet is a great place to do yourself some serious career damage, and that however strongly held your political views are, they might not need to be expressed quite so immediately, or in terms that cause hurt and distress to people you might want a job from.

Meanwhile …

Goldman Sachs has a pilot project for an artificially intelligent super-banker.  According to CIO Marco Argenti, it’s a kind of chatbot that looks through notes and minutes of previous client meetings to “suggest speaking points” for the next meeting with that client.  Argenti says that “if out of 10 meetings with the client, normally three or four ended up really providing new information, and the rest is more like relationship. Now, maybe nine out of 10 are new information, and one is just a relationship”.  Which seems to kind of misunderstand what the purpose of banker/client meetings is? (Axios)

The trend of “tiny boutiques in huge deals” continues; after Tidal Partners scored on the $28bn Cisco/Splunk, Petrie Partners are there in Exxon’s acquisition of Pioneer Natural Resources. The investment banking league tables might be a bit more interesting this quarter. (Reuters)

Elizabeth Crain, a co-founder of Moelis & Co and the former COO, has apparently “accomplished what I came to do” (presumably make a lot of money), and will be leaving the firm next year to “take some time” before deciding what to do next. (Bloomberg)

UBS has advised all of its staff in the Middle East not to go on any work-related travel until the conflict is over.  They say it’s an “abundance of caution”, and so far no other bank has gone so far, but it’s a sign of how things are developing. (Financial News)

It's a fundamental principle of risk management that if a trade isn’t working, you just need to take the pain and move on.  Goldman Sachs has this principle deeper in its culture than almost any other bank, and now they’re showing they mean it – after buying consumer lending firm GreenSky two years ago and already having taken a $504m writedown on it, they’ve announced a $0.19 hit to the quarterly earnings from getting rid of it completely. (Bloomberg)

Tod Combs (one of Berkshire Hathaway’s top portfolio managers) claims that he owes his success to “not kissing ass”.  It’s important to understand that when someone senior says something like this, what they really mean is “being good at kissing ass without it being too obvious that’s what you’re doing”. (NYPost)

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AUTHORDaniel Davies Insider Comment
  • AS
    AS1
    14 October 2023

    Creating a climate where young ppl are afraid to speak out is dangerous. If ppl weren't scared to speak out in 1930s Germany for a demonised minority then may be history would've happened differently. Ackman should know that.


    By the way, the leading Israeli newspaper, Haaretz, published an editorial article that said the same thing those Harvard students said - but I dont see Ackman going after the Haaretz. Ackman is a bully and morally repugnant and should be called out.

  • co
    common_caves
    12 October 2023

    Really badly done article. it fails to provide a deep dive or critical analysis into any of these subjects. just a bunch of fragmented information and speculations. Come on efinancial you can do better than this

  • As
    AsiaMatt
    12 October 2023

    Good on Ackman - accountability is a GOOD thing.

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