Here’s another division in the social universe of the modern banker: the Geek and the Schmoozer.
If you look around the realms of banks these days, you will see armies of people trained in modern financial science… However, what is striking is that this army of CDO-lovers generally are not currently running any banks.
Or, to put Gillian Tett’s question another way: how was it that senior figures at banks like UBS or Citi didn’t understand how a CDO worked.
Part of the risk management problem in banks is surely that the people at the top – and in most of the senior positions – don’t understand or want to understand, the vagaries of structured finance. They’re not geeks.
In fact, suggests Tett, the only reason they are where they are, is precisely because they’re not geeks. They’re schmoozers.
As long as the schmoozers don’t have a clue what their quants are doing,
The fundamental management challenge remains this: somehow banks either need to turn their CDO experts into charismatic leaders, or persuade their senior statesmen to embrace their inner egghead. It is certainly not an easy task.
But surely, we imagine, the real problem is that when a geek learns to schmooze, they leave. And start a hedge fund.