Video 1
Video 2 ( a sequence of 3)
Video 3
Q&A: Multi media entrepreneur
Slideshow
Oh yes, the podcast is complete…
Check it out by going to my pod-blog on Podbean.
For my second video, I spoke with Seth Merrin, founder and CEO of Liquidnet, about how exchanges discriminate against large buyers, his idea for a solution, and what it was like building Liquidnet – a blind crossing network for institutional buyers.
Since the subject matter is a little dense for those of us who don’t speak Finance, and since Seth does a great job of laying it out, I decided to turn the material into a series of three videos, which are embedded below so you can view them in sequence.
Part 1: The Problem looks at why exchanges are inefficient, and how they make life difficult for institutional buyers.
Part 2: The Idea looks back on the moment Seth synthesized the answer to this problem, and follows the process of finding backing for Liquidnet.
Part 3: The Solution takes us to the moment Seth flipped the switched and Liquidnet was born, and looks at how the company faired since that day.
To get a real sense of how much Wall Street culture changed, I went out to the Museum of American Finance, located on 48 Wall St.
Here, exhibits show the evolution of Wall Street, from a rowdy market where paper share certificates changed hands as street urchins ran buy and sell orders from investors to their brokers, to the more orderly tech-mess we see on TV today. There are separate sections on each of the capital markets, showing how bonds, stocks, and commodities developed, what a pork belly actually looks like, and the way a treasury bond evolved. The exhibit on trading technology goes all the way back to using career pidgeons and telegraph tape to broadcast market news and update stock prices, to the introduction of FM receivers and the Bloomberg machine for electronic trading. But, hey, this is multimedia – so rather than me telling you, check out the slideshow.
Since my unsuccessful Wednesday, when a ludicrous amount of time was poured into two frustrating pieces of software and no palpable product could be squeezed out at the end, I decided to experiment a little further with iMovie, before I attempt to re-do my slide show.
I’ve armed myself with the Nikon D40, which I barely know how to use, but that’s irrelevant. The idea is to practice. And so, I’ve been pointing it at everything around me hoping something will stick. Having got together a decent amount of pictures… (about 600 so far)… I’ve decided to practice putting together an iMovie slide show with the ones least likely to end up in the final product. Unfortunately for my subjects, the photos in question are of my friends.
But hey! I’m using them for educational purposes! Firstly I’ve learned how to prevent iMovie from applying the Ken Burns crop effect (previously called the “drunken sailor zoom”). I figured out how to standardize the length of all clips, and I fiddled with the options to add background music and opening and closing credits to the slide show. I also figured out how to upload the thing directly to YouTube. Most importantly I learned how to save the project I’m working on!!! So, while the subject matter of my little experiment may not be all that Wall Street, my skill set is definitely getting better.
Check it out:
Two years ago, the idea that a bank was behind a terrorist act, a political assassination, or just payrolling the occasional oppressive third-world dictator regime was a completely plausible conspiracy theory. It was probably still plausible in October last year, before Meredith Whitney of Oppenheimer & Co got to the clock tower and rang the alarm bell as loudly as she could.
But if back then some people believed in the Goldman conspiracy, the one about how Goldman Sachs rules the world, twelve months on this seems pretty silly. Ok, it had a brief resurgence about five weeks ago, when Paulson tapped another Goldman Sachs alumn to man the TARP funds… but then everyone looked at what’s been happening to Goldman’s shareprice and took it down a notch.
This is why the trailer to an upcoming feature film, The International, feels ironically late to the party.
The basic set up is that the world’s largest bank, the International Bank of Business and Credit, or HSBC IBBC, is behind a veritable gumbo of bad deeds from buying chinese missiles to assassinating politicians, and Clive Owen is going to foil its latest and baddest plan. Owen plays the buff but foppish investigator turned financial vigilante. Fellow Aussie Naomi Watts looks like some kind of financial secretary who puts her kids in danger to help out the righteous Brit crime-fighter, and the rest of the cast is filled out with European theatre stars never heard of on this side of the Atlantic.
Judging from the trailer, the script has a nice grip on the whole “evil i-bank” zietgeist… But again, would have worked last year… now, not so much.
A year ago, Wall Street was the place of greed and riches, where the brightest and the dodgiest congregated to make money out of thin air, leaving the rest to wonder what behind the curtains made the alchemy possible. Now we know. And if back then some of us lost sleep over the black magic mojo of Goldman Sachs or Citigroup, we can now sleep fast knowing they are not so clever after all. No secret power coup for you if you fumble with the world credit markets. Tisk-tisk.
While it takes only around eight weeks to shoot a film, a screenplay can be stuck in re-writes for years. Perhaps that was the tragic fate of The International, which is yet to hit movie screens but is already old news.
And the beat goes on.
Can too much money and power cause moral retardation? Well, that depends on whether you work on Wall Street.
George Packer, of The New Yorker, argues that the difference between American and European bankers comes down to morality. Namely that Wall St’s sons have the moral framework of a six year old, give or take a year.
The moral code of these Wall Street executives corresponds to stage one of Lawrence Kohlberg’s famous stages of morality: “The concern is with what authorities permit and punish.” Morally, they are very young children. The Swiss bankers are closer to stage four, most common among late teens, where a concern for maintaining the good functioning of society takes hold. Stage six, an elaboration of universal moral principles based on an idea of the good society, is a distant dream for the titans of global finance.
Packer’s piece praises Swiss bankers for declining exorbitant pay packets on the grounds that this shows a well developed conception of moral justice. He’s disappointed that their American counter-parties don’t feel as guilty about messing up the global financial system, and dreams of a day when they grow up enough to perform a public mea culpa.
Now, picking on i-bankers amid a financial crisis is easy game, but I think Packer raises an interesting point that needs to be developed further. He’s saying that Wall Streeters treat morality as something exogenous and focus on consequences rather than intentions. But he doesn’t tell you how they got to be that way.
I’m going to try.
Lets take as our core assumption that people aren’t born evil, they are made that way by their experiences and their interpretations of those experiences. So what happened to investment bankers? What caused such moral retardation?
Part of it has to come from the way the industry functions. Investment banking is not a lifetime career, as most corporate climbers jump or get pushed off fifteen or so years into the job. Take a good look at the pyramid structures of Wall St banks – it gets tight and lonely the further up you go. As Brad Hintz, bank analyst at Sanford Bernstein, writes in eFinancial Careers, “the lifespan of a typical managing director is around five years and that means that virtually none will get a gold watch at retirement.”
Now, put yourself in their shoes. You slave away for a decade, get to the top and suddenly realize your days are numbers. You plunge into paranoia - a side-effect from a decade of 90 hour weeks and the eager way that junior account manager says ‘sir’ in the elevator. Wouldn’t you harbor a healthy dose of animosity for the young blood scheming to undercut you and get your job? Wouldn’t you develop a near-paralyzing myopia, squeezing the biggest pay-out as quickly as possible, with little care for the risk-reward analysis or potential consequences? Especially if there’s a high chance you won’t be around by the time those consequences hit home? Really, then, i-bankers are a product of their environment and the incentive structure manifesting inside banks…
Well… at least it isn’t the parent’s fault…
In Friday’s class we discussed the evolution of online advertising, which developed from banners, to pop up windows, and now to a full blown video that either drops down or scrolls across to the center of the screen and plays out its proselytizing message while you manically search for “x” to click close.
Since our discussion focused on a Gucci ad seen on New York Magazine’s website, it made me ponder the challenge of branding luxury amid an economic crisis. It is often said that luxury goods are recession proof, which means people don’t stop buying them, and they don’t stop advertising while the economy locks itself into a death spiral. The quandary is how to continue promoting your decadent brand amid nation wide layoffs without seeming vulgar.
It seems to me that Gucci, with its advertising campaign for the “heart tattoo” line of bags, strikes the perfect balance. The ad features spunky singer Rihanna, riding a suspended hula-hoop with a Gucci bag slung across her body. The singer has both high fashion appeal, as per the Gucci threads, and low fashion appeal, as per her multiple tattoos. But hey, they’re all over the damn bag too, and the whole thing makes her an even more approachable, adorable spokesperson. Proceeds from the merchandise go towards helping Unicef, but in the ad the charity’s logo is small, and to the side – a tasteful nod to Gucci’s corporate social responsibility. After all, we don’t really want to associate Gucci with do-gooding, and the video is here to plug the product.
But somehow, this mix of likeability and philanthropy gives the ostentatious branding exercise a “get out of jail free” card. Gucci, which once promoted itself by tastefully branding a model’s pubic area, is now trying to ennoble conspicuous consumption amid the financial crisis. It’s saying, we’re generous, we care, and we do it in style. And frankly, even a cynic like me can almost, almost, forgive Gucci for slathering its aspiration wear on billboards and multimedia videos like a child painting Nutella on the kitchen cabinetry.
If only this lesson could transfer to Wall Street. Imagine if banks rolled out promotional campaigns that played up the philanthropy, the charity, the general do-gooding they do. Advertising would flood the airwaves detailing how checking with Chase feeds starving Afganis or how your trading account at Goldman helps actively support cerebral palsy research. Instead of bonus watching, editorials would harp on whether TARP funds helped bring clean water to Indian orphans, and congressional inquiries would snipe “We understand you gave 6 out of those 25 billion of tax payer money to feed the who? The poor? You want the American tax payers to feed the poor?”
Well… maybe not. But it was a nice thought…
In a world where salaries are a distant second to the year-end bonus, monumental change is afoot as Wall Street titans scrap the program.
After years of harsh media criticism and public outcry over exorbitant payouts, two of Wall Street’s biggest names, Goldman Sachs and UBS, are suspending the year-end bonus. Goldman made a symbolic gesture Monday morning, with the managerial echelon announcing they will forgo their bonuses this year. Six people may not look like a lot of belt-tightening, but the top three Goldman generals fished out an average of $55 million a pop from last year’s bonus pool. (Read the Reuters story here). Swiss banking giant UBS followed this, raising the stakes by suspending bonuses for top management and revealing plans to cut year-end sweeteners for all employees. (Read the NYT story here.)
Until now, Wall Street culture revolved around the year-end bonus. The lump sum payout normally gets delivered in January, and is treated like a second Christmas. Each year, the frenzy surrounding bonus time generates a carnival of media coverage. Like a child writing letters to Santa, I’ve heard pundits suggest that bank employees place calls to their superiors pointing out personal achievements and asking to be pushed up the bonus ladder. After all, for some Wall Streeters, the bonus check exceeds a 10 times salary factor.
The January/February period is known as “hunting season” on Wall Street, as maligned bankers, traders and analysts play musical chairs, jumping from bank to bank. You would too, if you didn’t feel adequately compensated for giving up any semblance of a personal life in favor of working till 2a.m. until your eyeballs bled excel sheets only to be back on the trading floor by five in the morning wondering why they still haven’t invented intravenous caffeine, and spending your weekends and holidays glued to your crackberry just in case. And so, come January head hunters executive search firms orchestrate an elaborate switcheroo trying to spear star players from i-bank’s starting line-ups.
Part of the problem is that Wall Street is about competition, not competency. It doesn’t matter how you do your job, but whether you are better than everyone else. And in a culture obsessed with outperforming the competition, it’s imperative to keep dangling an ever-growing, cash-laden carrot in front of the junior execs to keep the kids motivated. Partly, because management wants to make sure its A-grade players are incentivized and loyal, and partly because outperformance is what drives profits and innovation.
But today’s announcements by Goldman and UBS hardly come as a surprise. In a year when the US Treasury narrowly averted the collapse of the global financial system and Wall Street saw two of its most prestigious institutions disappear, reward for performance were likely to be meager. And if passing snipes at overpaid bankers were in the past reserved for snarky journalists and socialists, 2008 was the year a New York attorney general and a US congressman requested banks hand over their bonus plan data to ensure that taxpayers weren’t footing the bill.
Just as i-banks were wiped off the drawing board in mid-September, the suspension of the decadent Wall Street bonus is a secondary effect, another sign that the sun has set on investment banking’s golden era.
“I work for Goldman Sachs,” he said. A girl meeting a boy at a party in New York runs good odds of hearing that refrain. Sometimes, it is said with pride. Sometimes with downright arrogance. On Saturday it came out tinged by ennui.
Bankers, by which I mean investment bankers because the other kind doesn’t normally get much play on Wall St., are having something of an identity crisis since i-banks themselves are now extinct. Financial firms deemed survivors of the credit crisis are struggling to re-imagine themselves as bank holding companies. Out goes the leverage, the profits, the excitement, in comes restructuring, divestment, and what one senior Wall Streeter described as “quarterly colonoscopies by the Fed.”
The hallowed halls of greed and riches where men in made to measure Italian suits flock to scream (traders), steal (M&A), lie (sales), lie (research), really lie with the help of numbers (financial modeling), or just make things up (wealth management), no longer hold the promise of a 3x January bonus. Now bosses suddenly worry about “value at risk”, a crude concept from the medieval era of financial theory when risk and value were ludicrously thought to have some semblance of a causal relationship.
So the 28 year old kidults used to betting other people’s millions in a high stakes game of poker find themselves on a leash so short it’s just a plain old collar, while management have a brain melting experience over the types of gambling their firm considers “primary revenue streams”. This leaves very little opportunity for the kind of creative deal making and enterprising new securities that could patch this baby up for another decade until she finally collapses on some other generation’s lap.
And if the banker is unhappy with the homestead, a survey of the neighborhood leaves him pale as firms shed employees like a molting sheltie. The tide has turned from focusing on job satisfaction to just plain keeping yourself employed, and in this economy the latter is challenging enough.
Ironically, compared to its peers Goldman basically sidestepped the avalanche and is sitting on the chalet deck sipping hot chocolate with marshmallows. Goldman’s subprime writedowns add up to only $4.9 billion, compared with Citi’s $68 billion and Merrill’s $56 billion, this is spare change. But as the global business environment grinds to a halt, and i-banks struggle to attract any fee-generating activity, the future does not look quite as shiny as the past five years. Goldman, for its part, is axing some 3,200 employees because of the current crisis.
So why the ennui? Because since investment banking turned into plain old banking, life at these firms is increasingly and frustratingly boring. The daily juggle to keep your job is the kind of thing relegated to mere mortals in the back office, while financial wizards conjure up some new structured derivative to let lose upon the market.
Oh well, I thought, at least he still has a job…
