Two decades ago, before I became a journalist, I used to work as a social anthropologist in the Himalayas. It is undoubtedly an unusual background for a financial journalist.
It’s a jungle out there and Gillian Tett has been studying bankers:
Take the matter of risk and remuneration at banks. As my colleague, Martin Wolf, pointed out this week, one reason for the recent excesses of the credit bubble lies in how bankers are paid. For the emphasis on annual bonuses creates crazy incentives for bankers to gamble with client money – particularly since they don’t pay back these bonuses if deals later sour.
But, says Tett, it’s not all about the money. Consider also: luck, the character of those running the banks and culture.
The losers in this latest crisis have been “tribal” banks, she says:
…the different business lines have existed like warring tribes, answerable only to the chief. Moreover, the most profitable tribe has invariably wielded the most power – and thus was untouchable and inscrutable to everyone else. Hence the fact that, in this tribal culture, nobody reined in the excesses of the structured finance teams at Citi and Merrill.
While the winners – notably Goldman Sachs – have a more closely knit social culture, with a sense of loyalty to the bank, not the business line, and an ethos of shared accountability. So it’s Rome versus the barbarians perhaps.
Now, more than ever, investors need to understand a bank’s culture too – and the degree to which it is tribal. As I said, a training in Tajik anthropology is suddenly looking very useful.
Update: Michael Lewis, the journalist and author of Liars Poker, takes a look at the Goldman culture. (HT Yves Smith)