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Out with the old, in with the new

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By Richard Metcalf
13 Jul 2021

For all their espoused commitment to capitalism — a system in which outdated ideas are supposed to be allowed to perish when superseded by newer, better ways of doing things — there is a club of leaders at the top of investment banking that seems obstinately, sentimentally, and possibly even damagingly attached to the way things have always been done.

“We want people back to work, and my view is that sometime in September, October, it will look just like it did before,” said JP Morgan Chase CEO Jamie Dimon at a conference in May. “And everyone is going to be happy with it. And, yes, the commute, you know people don’t like commuting, but so what? I’m about to cancel all my Zoom meetings. I’m done with it.”

Recent statements from CEOs like Dimon on the gradual relaxation of requirements for most bankers to work from home have struck a petulant, belligerent and patronising tone that might not come off as well as they imagine.

"If you can go to a restaurant in New York City, you can come into the office,” said James Gorman, CEO of Morgan Stanley, in the manner of a frustrated parent attempting to reason with a child who does not want to go to school, adding, somewhat threateningly: “By Labor Day, I'll be very disappointed if they haven't found their way into the office, and then we'll have a different kind of conversation."

Goldman Sachs’s David Solomon, meanwhile, has chipped in with a description of the flexibility that some bankers are starting to enjoy as “an aberration that we’re going to correct as soon as possible”.

So you can forget about dialling in from a beach hut in Antigua, he might as well have added.

It should be pointed out that no one has seriously suggested such a free-for-all. Bankers at various levels of seniority throughout the capital markets, speaking with GlobalCapital recently, have engaged with the topic of returning to the office with the utmost thoughtfulness and sensitivity, in sharp contrast to these titans of the industry.

All of them readily acknowledge that they will end up working in the office most of the time, once the last remaining restrictions are lifted. Indeed, some of them already are. Some have been putting in a solid five days a week for over a year, even if there is no boss in the office to impress with their presenteeism.

That’s because, for them, it’s not about being seen to be in the office, or macho posturing. It’s about where they actually need to be to perform optimally. And for most material risk takers in trading or markets, that place is in the office. No argument there.

But the idea that everything “will look just like it did before” or that the experience of the past 15 months is merely an “aberration” is preposterous.

The pandemic forced banks to conduct record amounts of capital markets activity with bankers working from home, but it was technological innovation that made it possible. That new technology is not going away. Bankers now know what can be done remotely — they cannot unlearn it.

And there are other forces driving change in the workplace, such as increased competition for talent. Investment banking is less special than it used to be 15 or 20 years ago, and sought after graduates have more options than ever.

“Fifteen years ago, 20 years ago, it really was something,” said a banker at one major US house recently. “It was stressful, but if you stood out and made the right choices and were lucky, you got promoted very quickly and got paid up a lot every year, and that is much less true in many parts of investment banking right now. It’s heavily regulated, margins have been competed down, you have other paths to comparable levels of pay and comparable paces of promotion and so that means it’s a very different prospect for many people in terms of what you will accept.”

These trends have been visible for years. An analysis conducted by the Financial Times in 2015 showed that MBA graduates from the world’s top 10 business schools were then 40% less likely to go into investment banking than they had been in 2008.

Pay and working conditions certainly had something to do with that, but it is impossible to discount the tarnishing effect of the 2008 financial crisis on banks’ reputations. Graduates looking for a higher calling may have found it difficult to take then Goldman CEO Lloyd Blankfein seriously when he said, with an impish grin, that he was “doing God’s work”.

And that matters, because talented young professionals now are more serious than ever about having a positive impact on the world, as evidenced by the floods of applications received for positions in green and sustainable finance lately.

For some young bankers, according to one head of European debt capital markets, having a happy client is no longer sufficient reward in itself. Can you imagine?

“Last year, during the second quarter, the rhythm was absolutely insane, but morale and commitment were super-high, because people knew it was vital for the borrowers to get their money,” he said. “But for some people, even that is not enough, and being able to delve into ESG topics full time is what has made their jobs interesting.”

The heavy-handed proclamations of the chief execs seem singularly ill-judged to appeal to such an earnest cohort of junior bankers.

In reality, despite the menacing tone of the CEOs, there is bound to be more flexibility in the future, even at Goldman Sachs. Of course, many employees will still need to be in the office most of the time, but there is no turning back the clock to before the pandemic.

Deep down, the CEOs know this. But their flippant comments betray a deeply ingrained, reactionary outlook, totally at odds with the bankers who are just starting out in their careers.

JP Morgan, Morgan Stanley and Goldman Sachs are still extremely attractive places for ambitious people to work, and they will have no trouble filling their graduate programmes as a result of these outbursts.

But investment banking is an increasingly competitive business, and in competitive industries, marginal differences between rival firms are important.

Banks whose CEOs, through careful use of language, create cultures that are more in step with the times may find, over the long run, that they have an edge over the competition.

By Richard Metcalf
13 Jul 2021