Speaker 1: Hello, Odd Lots listeners, It's Joe Wisenthal. Now, before we
Speaker 1: get to today's show, I wanted to tell you about
Speaker 1: another one of our great podcasts here at Bloomberg, Bloomberg Surveillance,
Speaker 1: So every day of the week, Tom Keene, Jonathan Farrell,
Speaker 1: and Paul Sweeney deliver insight on market news of the
Speaker 1: day with leaders in global finance, politics, and economics. In
Speaker 1: a recent episode, they spoke with a brand strategy expert
Speaker 1: on we works wild Ride, a global leader in foreign
Speaker 1: affairs on Trump's Middle East policy, and the top fixed
Speaker 1: income strategist on Europe's low interest rates. If you feel
Speaker 1: like you need a daily podcast in your life, definitely
Speaker 1: check out Bloomberg Surveillance. It'll be right up your alley
Speaker 1: and you can find every new episode of Bloomberg Surveillance
Speaker 1: weekday mornings. Subscribe to them on Apple Podcasts, Spotify, or
Speaker 1: your favorite podcast out. Hello, and welcome to another episode
Speaker 1: of the Odd Lots Podcast. I'm Tracy Alloway and I'm Joe.
Speaker 1: Wasn't all Joe? Did you get retweeted by an culture today?
Speaker 1: But you weren't? Made? You bring that up? Why? Why?
Speaker 1: Why would you start an episode with that? Fact, but
Speaker 1: yes I did. I was trying to think of an
Speaker 1: intro um. So I'm just gonna say as uh, let's
Speaker 1: just say, in an effort to wait, how did you
Speaker 1: even notice that? Wait? Wait, wait a second, wait, wait,
Speaker 1: wait a second wait, how did you even notice that?
Speaker 1: I'm not going to tell you someone sent it to me,
Speaker 1: so in an effort to even out the political scales
Speaker 1: of your Twitter feed at the moment to we're going
Speaker 1: to be talking about something that actually relates to Elizabeth
Speaker 1: Warren's campaign platform. Okay, go on, Okay, I'm excited. No, no,
Speaker 1: I'm I'm excited, also intrigued at the at this uh
Speaker 1: elaborate intro that you're you're concocting here, But go on,
Speaker 1: I'm trying to thread a bunch of different stuff together. Okay,
Speaker 1: But I think it's fair to say that in the
Speaker 1: upcoming presidential election, there is this undercurrent of anger at
Speaker 1: the existing system of capitalism. People are upset about inequality.
Speaker 1: They think that lots of money just a cruise to
Speaker 1: the one percent, and so there are all these political
Speaker 1: proposals on the table, including Elizabeth Warren's Accountable Capitalism Act,
Speaker 1: to try to fix this problem, and The interesting thing
Speaker 1: that's happened recently is that we've even seen some company executives,
Speaker 1: including Jamie Diamond, the CEO of JP Morgan, also makes
Speaker 1: some noises about right. I mean, there's a lot of
Speaker 1: things going on. So absolutely, the sort of lingering anger
Speaker 1: from the financial sector that we've seen over the last
Speaker 1: ten years, it really does not seem like it's faded
Speaker 1: very much. If anything, maybe it's spreads other sectors like tech,
Speaker 1: but there still is that no one has really gotten
Speaker 1: over the crisis from a political perspective. And you do see,
Speaker 1: as you point out, more and more CEOs so in
Speaker 1: some sense trying to pay lip service to this, saying
Speaker 1: things like, oh, we're gonna do more than just focus
Speaker 1: on shareholder returns. Usually it just seems like that rhetoric.
Speaker 1: But you know, obviously it's they sort of see which
Speaker 1: way the winds are blowing, right, So we can never
Speaker 1: be that sure about how serious these CEOs and executives
Speaker 1: are about changing this shareholder first paradigm, but they're definitely
Speaker 1: making noises about it. And in fact, Jamie Diamond and
Speaker 1: all these other companies wrote this big statement talking about
Speaker 1: the idea of sort of embracing a new idea of value,
Speaker 1: one that wasn't focused on short term earnings targets and
Speaker 1: you know, shareholder returns, but one that presumably also cares
Speaker 1: about employees and society and the overall national economy and
Speaker 1: things like that. So yeah, that is well, no, I mean,
Speaker 1: I think you're totally right. And one thing that I
Speaker 1: do believe is genuine whether they're going to change their
Speaker 1: longer short term focus or focus on constituencies beyond the
Speaker 1: short term, is that I think people are really waking
Speaker 1: up to the degree to which culture matters inside a corporation,
Speaker 1: into which a college corporations culture can be its own
Speaker 1: inertia and be extraordinarily hard to change. I think Wells
Speaker 1: Fargo and the scandals that they've suffered in recent years
Speaker 1: there's a really good example of that, where there's just
Speaker 1: all these scandals that are essentially about you know, sort
Speaker 1: of edits route, basically about short term operations and hitting
Speaker 1: these arbitrary targets being extraordinarily difficult to tamp down and
Speaker 1: to just get a handle on how how how far
Speaker 1: they've spread internally. Right, So I'm glad you said culture
Speaker 1: that is the uh the name of the game. Today,
Speaker 1: we're going to be talking to an anthropologist who actually
Speaker 1: did a field study of culture in the financial industry
Speaker 1: on Wall Street and did an entire book talking about
Speaker 1: how that culture or discussing how that culture actually feeds
Speaker 1: into the way we think about corporations now and their purpose.
Speaker 1: So why is it that lots of people seem to
Speaker 1: think that a company's main, uh, you know, reason for
Speaker 1: being raised on DETRA is to maximize shareholder value? Where
Speaker 1: did that idea come from? And what is the link
Speaker 1: to Wall Street culture? I can't wait? Okay, great, So
Speaker 1: I'm really excited to say. Our guest for this episode
Speaker 1: is Karen Ho. She is the author of Liquidated and
Speaker 1: Ethnography of Wall Street, and she is now Associate professor
Speaker 1: of anthropology at the University of Minnesota. Karen, thanks so
Speaker 1: much for coming on. Thank you all for having me.
Speaker 1: So I have to say I've read your book, uh
Speaker 1: quite a few years ago, shortly after it came out,
Speaker 1: which I think was after the financial crisis. But maybe
Speaker 1: just to begin with, you could sort of set up
Speaker 1: the time period that you were working in and what
Speaker 1: exactly your field research entailed, because I think that's kind
Speaker 1: of central to the discussion that we're about to have.
Speaker 1: That's right. Sure. So I'm a social culture anthropologist and
Speaker 1: from the late ninety nineties and into the millennium, I
Speaker 1: actually did an ethnographic field study Wall Street, investment bankers
Speaker 1: and banks. In order to do so, I actually took
Speaker 1: a leave of absence from graduate school UM and entered
Speaker 1: the Princeton University recruitment process. Now, because I'm an anthropologist
Speaker 1: and an anthropology want the key tenants, especially given our
Speaker 1: rise as a discipline UM in the sort of British
Speaker 1: colonial period, UM, one of the sort of tenants of
Speaker 1: our discipline is actually to um let our informants are. Friends,
Speaker 1: are the people in which we're engaging in understand what
Speaker 1: our larger UM, you know, project is. Our projects are.
Speaker 1: So I took a leave of absence from graduate school
Speaker 1: and actually got a job at a banker's trust which
Speaker 1: is now Deutsche Bank and UM. And you know, for
Speaker 1: a year I actually worked on Wall Street. But during
Speaker 1: that year I was not doing field work. I call
Speaker 1: it pre field work language study UM. But it's through
Speaker 1: that experience that I helped while I started to learn
Speaker 1: the language of finance. And from then I actually amasked
Speaker 1: a web of contacts UM that I then actually UM
Speaker 1: engaged in conversations, interviews what anthropologists called deep hanging out
Speaker 1: UM in order to understand the sort of culture and
Speaker 1: practices and more rays of Wall Street and it. Certainly
Speaker 1: I did field work during the time of the longest
Speaker 1: bowl market and UM continue to do field work until
Speaker 1: around two thousand two. Then I actually got a position
Speaker 1: at the University of Minnesota where I UH continue to
Speaker 1: engage with Wall Street and write up the ethnography. So
Speaker 1: does an anthropologist go into a scenario like this with
Speaker 1: a specific question in mind? I mean, just as someone
Speaker 1: who is not steeped or that familiar with academic anthropology,
Speaker 1: what is the sort of when you start? Is it
Speaker 1: just to hear things? Is it just to talk? Or
Speaker 1: did you start by having a few specific goals in
Speaker 1: mind of things you wanted to learn or specific patterns
Speaker 1: you wanted to see if existed within the Wall Street realm?
Speaker 1: I did, UM, and often afropologists go into a particular
Speaker 1: field site with a burning question mind. And my burning
Speaker 1: question actually stemmed from a socio economic observation. So in
Speaker 1: a T and T, which is based in New Jersey,
Speaker 1: actually announced one of the largest corporate restructurings and downsize
Speaker 1: ngs UM in corporate history, and um, you know, close
Speaker 1: to a hundred thousand employees were let go right size, downsized,
Speaker 1: what have you. And in the New York Times business
Speaker 1: pages the next day, you know, there are certainly articles
Speaker 1: about um the social and economic dislocation of employees and communities, etcetera.
Speaker 1: But this sort of large, larger journalistic context was that
Speaker 1: Wall Street uh so a T and T stuff went
Speaker 1: up to a fifty two week high UM in the
Speaker 1: wake of that announcement, and the sort of larger coverage
Speaker 1: around Wall Street investment banks was that Wall Street cheered
Speaker 1: at this news. And immediately my anthropological ear um or
Speaker 1: sort of you know, anthropological spidy sense, if you will,
Speaker 1: begin to sort of uh tingle right, the idea of, well,
Speaker 1: here's the sort of massive social dislocation. And at the
Speaker 1: same time, why did they actually have to use the
Speaker 1: word cheer? Why were there so much sort of um
Speaker 1: odd celebration around this news. And part of what an
Speaker 1: anthropological tenant is is that you want to get at
Speaker 1: the natives point of view, so you don't want to
Speaker 1: presume from the outside, oh, gosh, these folks are just masochistic,
Speaker 1: that's why they're cheering. Um. But rather you want to
Speaker 1: get at what why does it make sense for them?
Speaker 1: What is it about the way investment bankers and investment
Speaker 1: banks are being socialized, incentivized, um, etcetera, etcetera, such that
Speaker 1: for them this is interpreted and understood as relatively good
Speaker 1: news or actually great news. So it was it was
Speaker 1: that question and that quandary right for me as an
Speaker 1: anthropology graduate student, I thought of this as terrible news.
Speaker 1: And yet there are people who were just you know,
Speaker 1: fifty miles away from me who were cheering, and so
Speaker 1: I wanted to understand from their perspective, from their social
Speaker 1: and economic location, from the natives point of view, in
Speaker 1: this case the native as being well street investment bankers, UM,
Speaker 1: how they came to this ethos? What motivated and what
Speaker 1: how did they sort of um come to this larger understanding.
Speaker 1: So I love the contrast between those two different points
Speaker 1: of view. So someone who studies societies for a living
Speaker 1: basically wondering why people think a massive societal dislocation is
Speaker 1: a good thing, and then people who are focused on money, uh,
Speaker 1: basically thinking that it's great and sharing it on as
Speaker 1: you put it. Nowadays, we kind of take for granted
Speaker 1: that when a company announces cost cutting UH programs, which
Speaker 1: are usually layoffs or salary reductions or things like that,
Speaker 1: that it's a good thing for the bottom line. But
Speaker 1: you point out in your work that that wasn't always
Speaker 1: the case. In fact, that's sort of a recent development.
Speaker 1: How did we get to that point where corporations maximizing
Speaker 1: shareholder value became the sort of norm. Even the sort
Speaker 1: of framing of corporations maximizing shareholder value is important to
Speaker 1: critique because I think what many studies have shown is
Speaker 1: that corporations maximizing shareholder value as a strategy actually shoots
Speaker 1: long term shareholder value in the foot. And I think
Speaker 1: this is UM many of the sort of critiques coming
Speaker 1: in the wake of two thou eight. Right, So it's
Speaker 1: like trying to run a marathon but telling UM the
Speaker 1: corporation to do sprints every four hundred feet, Right, If
Speaker 1: you do a sprint every four hundred feet, i e.
Speaker 1: Maximized short term value, you're actually going to never finish
Speaker 1: the marathon. And so the stract the strategy of short
Speaker 1: term stock price spikes UM actually even shoots shareholder value
Speaker 1: in the foot even for this sort of biggest adherents UM.
Speaker 1: But what I found in my research is that that
Speaker 1: UM the idea that corporations should simply be or primarily
Speaker 1: be framed by stock price primacy was really emergent and
Speaker 1: becoming dominant at that time, and it was highly contested.
Speaker 1: There were a lot of folks who thought of corporations
Speaker 1: as long term social institutions, right institutions that where that
Speaker 1: were sort of stewards, community stewards that were one of
Speaker 1: the sort of key promises was that of employment, uh,
Speaker 1: long term productivity, right benefits. So there's actually quite a
Speaker 1: contested thing when I actually went to do research, was
Speaker 1: the sort of a fight between corporations as a long
Speaker 1: term social institution and corporations as a stock price And
Speaker 1: I think unfortunately corporations access stock price one out in
Speaker 1: large part because of Wall Street UM financial advocacy. So
Speaker 1: that that sort of anticipates where I was going. What
Speaker 1: I was going to ask next is what was going on?
Speaker 1: And I take it this is sort of why you
Speaker 1: focused your anthropological work from the perspective of the banks,
Speaker 1: But why do you start to tell us what was
Speaker 1: going on inside the banks and their own internal requirements
Speaker 1: and their own internal expectations, and their own internal culture
Speaker 1: and goals that then bled through to this UH, this
Speaker 1: new expectation on on I guess non bank corporations. So
Speaker 1: what was going on inside Wall Street investment banks was
Speaker 1: what I call in my research a so called culture
Speaker 1: of smartnes and investment banks in Wall Streets at the
Speaker 1: time had really Germany the strategy in the lightteen eighties
Speaker 1: and nineteen nineties of only recruiting UM front office employees
Speaker 1: from the most elite universities in the US. UM this
Speaker 1: sort of two greatest feeder schools were Harvard University in
Speaker 1: Princeton University, and so part of the work that that
Speaker 1: did was what I call this halo effect. Right, so
Speaker 1: Wall Street, by recruiting from universities that we're already branded
Speaker 1: by the larger society is the best in the brightest,
Speaker 1: got conferred onto them that yes, Wall Street, you could
Speaker 1: trust Wall Street with financial advice, and you could trust
Speaker 1: Wall Street models UH as a model for how you
Speaker 1: should run your business because they are populated by the
Speaker 1: smartest in the world. Now, there are a few things
Speaker 1: that actually happened after this that smartness gets oddly catalyzed
Speaker 1: by what I call a culture of over work. So
Speaker 1: you have these Wall Street investment bankers that are in
Speaker 1: many ways working their butts off, right hundred plus our weeks.
Speaker 1: This sort of overwork, for those who actually continue on
Speaker 1: often gets read by them as evidence of their superiority
Speaker 1: in many ways as um, you know, better than or
Speaker 1: the best of or better than the average worker, right,
Speaker 1: And it's often sort of framed and start contradistinction to
Speaker 1: those sort of regular workers who only work nine to five. Now. Also,
Speaker 1: in addition to this, you have the larger Wall Street
Speaker 1: institutional culture, where there's a continual revolving door. Right. Another
Speaker 1: piece of Wall Street self identity and representation is that
Speaker 1: they are real time with the market. Right. So when
Speaker 1: people think of the market, they think of Wall Street. Right,
Speaker 1: So there's this sort of market simultaneity. What's going on
Speaker 1: to Wall Street should be we should actually emulate what
Speaker 1: we think is going on with the stock market. Now, Historically,
Speaker 1: the stock market was actually separate from the domain of
Speaker 1: most corporations. The whole point of having a large organization
Speaker 1: was that you could ameliorate, you could um at any weight.
Speaker 1: Some of the madness going on with the short termism
Speaker 1: in the stock market. The two were not conflated. Now.
Speaker 1: What happened during the nineteen eighties and nineties was that
Speaker 1: the culture and the time and the models of what
Speaker 1: we're going on in the financial markets came to sub
Speaker 1: in for and become a model for what should actually
Speaker 1: happened within organizations. And this was where Wall Street was
Speaker 1: taking the lead. Right, So their understanding of being real
Speaker 1: time with the market made it so that they continually
Speaker 1: had to close desks, open new desk, closed departments just
Speaker 1: so that they could showcase right that they were sort
Speaker 1: of real time with the market. In the crisis. They
Speaker 1: often called this um I b G y BG, I'll
Speaker 1: be gone, You'll be gone, right, So I'm not here
Speaker 1: to actually um fix the mistakes that I helped to
Speaker 1: rot write the unsustainability because I'm not going to be here.
Speaker 1: And then the final piece to this is that Wellstreet
Speaker 1: investment bankers are paid and compensated by the number of
Speaker 1: deals they're able to push through, right, So their bonuses
Speaker 1: are actually based on the number of transactions, not the
Speaker 1: wonderfulness of the advice, right, oh, nor their sustainability, nor
Speaker 1: their ability to actually create long term productivity. And so
Speaker 1: sort of think about this sort of crazy cocktail. You
Speaker 1: have people who think of themselves as smartest in the world,
Speaker 1: who think of themselves as superior workers, or themselves not
Speaker 1: going to be at their job for a very long time.
Speaker 1: There's a continual expiration date revolving door to their jobs
Speaker 1: I b G, y b G. They're compensated by the
Speaker 1: number of deals they can push through, not their efficacy
Speaker 1: or their long termism. And surely this is recipe for crisis, right,
Speaker 1: Unsustainable deals UM that push the market up UM that
Speaker 1: then also then set the stage for the for the crash. Right.
Speaker 1: So this is also where the liquidated in the title
Speaker 1: of the book comes from. This idea that even though
Speaker 1: you're supposed to be one of the smartest people in
Speaker 1: the world, and you're working one weeks uh, and the
Speaker 1: company is supposed to be valuing your work, and by
Speaker 1: company I mean the Wall Street firm that you're working at,
Speaker 1: yet you're really really disposable, Yes, yes, absolutely, And what
Speaker 1: cushions your disposability is the fact that you're so highly compensated, right,
Speaker 1: is your bonus And so oftentimes the sort of um,
Speaker 1: the irony of this is that the the tempt, the
Speaker 1: short term temporal nous, the disposability of high level Wall
Speaker 1: Street UH financiers and employees that experience of being downsized
Speaker 1: and yet landing on their feet or having the cushion
Speaker 1: to land on their feet, often makes them less sympathetic
Speaker 1: to the plight of the average worker, for whom being
Speaker 1: downsize often leads to massive social economic procurity and down
Speaker 1: red mobility, and so their experience a procurity gets often
Speaker 1: read back to them as creating men of metal, right,
Speaker 1: people who can withstand procurity, when in fact their structural
Speaker 1: position is quite different. Karen, I'd love to hear you
Speaker 1: talk a little bit more about that year you spent
Speaker 1: at Bankers Trust. What did you do? What was your
Speaker 1: job that year? And I'm curious what your mental mental
Speaker 1: state Isn't exactly the word I'm looking for, but sort
Speaker 1: of going in as an academic and sort of knowing
Speaker 1: that these ideas, this pre field work, as you're talking about,
Speaker 1: it was percolating. What was it like to do a
Speaker 1: job day to day, but also know that it was
Speaker 1: laying the groundwork for a sort of longer academic study
Speaker 1: in Bankers Trust. Um I was a analyst, and the
Speaker 1: position I had was an analyst as part of an
Speaker 1: internal management consulting group. And part of the role of
Speaker 1: an internal management consulting analyst was to actually rotate around
Speaker 1: the bank or within the bank, i should say, and
Speaker 1: understand different departments. And anthropologically speaking, it was actually a
Speaker 1: great position because I could learn um this sort of
Speaker 1: more raise and the understandings and sort of how the
Speaker 1: larger bank worked in relation to Wall Street, larger financial services, etcetera. Now,
Speaker 1: in terms of the kinds of um bifurcations that I
Speaker 1: would constantly have to navigate because I wanted to sort
Speaker 1: of leave Wall Street after you know, a year or
Speaker 1: so and actually come back and apply for grants and
Speaker 1: do field work. It was actually very very stressful and
Speaker 1: I struggled quite a bit with it. Now, UM my
Speaker 1: sort of coworkers and um people who I reported to
Speaker 1: all knew that I was an anthropology graduate student that
Speaker 1: I would want to come back and actually study Wall
Speaker 1: Street culture, etcetera, etcetera. So I feel fine about that
Speaker 1: because the what I did not want to do is
Speaker 1: to be framed as somebody who was doing covert research. Right,
Speaker 1: I was not doing covert research I was working. I
Speaker 1: was an employee for a year. People knew my sort
Speaker 1: of larger goals and hopes and I would come back
Speaker 1: in the future, and yet how to actually operationalize that
Speaker 1: created quite a bit of anxiety. However, Wall Street, in
Speaker 1: ironically to the rescue, our entire department, our entire management
Speaker 1: consulting group within Bankers Trust, actually got downsized. And it
Speaker 1: was actually the very first time that I recognized the
Speaker 1: people with my coworkers again sort of this is the
Speaker 1: you know, coming back to the conversation we were having,
Speaker 1: that my coworkers were actually dealing with constant insecurity themselves.
Speaker 1: And previously, before this experience, I had imagined Wall Street
Speaker 1: financiers as in some sort of um oblique sense, downsize
Speaker 1: or's right and rank and fall employees in corporate America
Speaker 1: as those people being downsized. And what I came to
Speaker 1: see was, oh, my gosh, Wall Street was actually using
Speaker 1: its models on itself, right. Wall Street financiers were, again
Speaker 1: this idea of real time, were constantly being subject to
Speaker 1: their own dominant models, right, so they're sort of drinking
Speaker 1: the the collective kool aid of maximizing shareholder value as well. UM, right,
Speaker 1: I have one more field work question and then I
Speaker 1: want to sort of fast forward into today's discussion about
Speaker 1: capitalism and the roles of companies. But as an anthropologist,
Speaker 1: did you ever regret not, uh, not doing field work
Speaker 1: on I guess a more traditional subject like most people
Speaker 1: think of anthropologists going off into the jungle or to
Speaker 1: pap a new guinea or something to live with remote tribes.
Speaker 1: And you were on Wall Street drawing you know, field
Speaker 1: maps of downtown Manhattan. Uh didn't you ever regret um,
Speaker 1: not going elsewhere? And what did your colleagues say about
Speaker 1: your your choice of field work? Yes? No, Admittedly, in
Speaker 1: the late ninety nineties, choosing to study Wall Street financiers
Speaker 1: was incredibly odd and um, certainly there was pushback. But
Speaker 1: you know, I hope I made the case, which is
Speaker 1: that part of the UM, the critical eye of anthropology
Speaker 1: that often gets honed through long term immersion and engagement
Speaker 1: UM in the ideas and values and practices of UM
Speaker 1: people's communities, ideologies. We want to understand and apprehend. That
Speaker 1: kind of engagement was often missing from larger social scientific
Speaker 1: studies of the powerful, and part of what I wanted
Speaker 1: to do was to use the tools of anthropology and
Speaker 1: getting at the ethos and the ethics and the values
Speaker 1: and how they come to be structurally reproduced and instantiated
Speaker 1: by individuals in a larger cultural web. I wanted to
Speaker 1: use the tools of anthropology to see and to understand
Speaker 1: how this is happening for the powerful. Oftentimes, the powerful
Speaker 1: have a cloak of invisibility, right what sort of a
Speaker 1: social scientists called the black box. And part of what
Speaker 1: that cloak of invisibility does is that it shields them
Speaker 1: from critique, from rendering specific the historical contingency and the
Speaker 1: cultural specificity of their practices, and from engaging with the
Speaker 1: values that then make up this big behemoth called finance.
Speaker 1: And one of the sort of points is in order
Speaker 1: to actually engage and unpack and critique and maybe reform
Speaker 1: and maybe restructure and maybe undo some of the kinds
Speaker 1: of um sort of bad cultural practices or the practices
Speaker 1: that lead to larger social economic inequalities, we actually have
Speaker 1: to understand how to get made in the first place.
Speaker 1: And so it was training the sort of eyes of
Speaker 1: anthropology to the corridors of power. I want to ask
Speaker 1: a question that's sort of specific to what got you
Speaker 1: interested in this topic in the first place, And you
Speaker 1: mentioned the A, T and T layoffs and how they
Speaker 1: were cheered on Wall Street. And something that you notice,
Speaker 1: whether you hear about a country in distress or a
Speaker 1: company in distress, is you over hear what the cult
Speaker 1: of what I would call like the tough choices, Like
Speaker 1: this government is going to have to make some tough
Speaker 1: choices about where they're going to cut social spending, or
Speaker 1: this company is going to have to make tough choices
Speaker 1: about layoffs, things like that. And I often wonder if
Speaker 1: when you here an example of Wall Street quote unquote
Speaker 1: cheering at layoffs, and of course you still hear that
Speaker 1: over uh twenty years later, how much is it about
Speaker 1: the actual presumed increased profit that the company will demonstrate
Speaker 1: by having fewer employees on its pay rolls and theoretically
Speaker 1: becomes a leader more efficient operation, versus the signaling that
Speaker 1: a CEO sends that they're willing to make a tough
Speaker 1: choice and the message that that sends to the people
Speaker 1: who themselves are dealing with the grueling lifestyle of Wall Street,
Speaker 1: so that it is less so about the increase to
Speaker 1: the bottom line per se, but the signal that it
Speaker 1: sends to the bankers that yes, we are willing to
Speaker 1: make the tough choice. We are willing to do something
Speaker 1: painful that nobody likes to do as a demonstration of
Speaker 1: our sort of willingness to be good stewards of capital.
Speaker 1: I guess what I would say to that is, oftentimes CEOs,
Speaker 1: who are often buys by Wall Street financiers, often get
Speaker 1: a a sort of false choice in their head, right,
Speaker 1: the idea that we need to do this in order
Speaker 1: to UM save jobs in the end, and that hasn't
Speaker 1: actually panned out. What often happens is the kind of
Speaker 1: restructuring UM, whether it's mergers and acquisitions or financial restructuring
Speaker 1: or taking on debt or downsizing or merging or acquiring.
Speaker 1: What that often does is actually sort of create these
Speaker 1: transactions that downsizes pieces of the institution and takes those
Speaker 1: so called savings and reinvested up top right, So the
Speaker 1: sort of restructuring that often happens is recaptured and UM
Speaker 1: sort of used to sort of fuel UM investor wealth.
Speaker 1: And I actually would frame that as much more of
Speaker 1: an extractive model that's not so much about getting the
Speaker 1: corporation in shape and actually fixing the longstanding problems, but
Speaker 1: rev are doing a relatively quick extraction for short term
Speaker 1: shareholder or investor gain, and oftentimes folks get sort of socialized.
Speaker 1: I would say, as understanding, well, it doesn't matter because
Speaker 1: as long as shareholder gains, the owner's gain. And so
Speaker 1: there's another sort of false choice here, and that is
Speaker 1: the assumption that historically and even into the present, that
Speaker 1: shareholders actually own the company. I would actually say that
Speaker 1: shareholders own shares of the company, but they don't necessarily
Speaker 1: own the entirety of the corporation itself. And that sort
Speaker 1: of um being sort of highly contested and um that
Speaker 1: debates really sort of coming up in the in the
Speaker 1: public realm discourse today. I have a sort of related question,
Speaker 1: but how much responsibility do the company's bear here, because
Speaker 1: it feels like even if Wall Street culture might be
Speaker 1: a little um distorted under your observations, the role is
Speaker 1: actually quite clear. Like Wall Street is selling a package
Speaker 1: of services to corporate clients, whether it's M and A
Speaker 1: advisory or fundraising and things like that, and the companies
Speaker 1: that hire them don't necessarily have to accept those services,
Speaker 1: and yet often they seem to. That's right, that's right. Um.
Speaker 1: What I would also say is that in that throughout
Speaker 1: the nineteen nineties, what happened was that Wall Street really
Speaker 1: worked quite closely with top level corporate management to really
Speaker 1: restructure the ways in which high level executives and managers
Speaker 1: and most of the largest corporations actually got compensated. And
Speaker 1: so the sort of shift to finance, the shift to
Speaker 1: the financial markets for most um, sort of large corporations,
Speaker 1: really happened in the nineteen eighties and nineteen nineties where
Speaker 1: corporate executives actually came to be paid through their stock
Speaker 1: options right, and in so doing, instead of actually relying
Speaker 1: on a salary that's in a sense in a context
Speaker 1: with the larger organizational culture in which they were embedded,
Speaker 1: they were reoriented to Wall Street time frames and understandings
Speaker 1: by actually being paid through stock and not through organizational salaries.
Speaker 1: So what happened over that nineteen nineties time frame that
Speaker 1: many executives actually came to see their roles as similar
Speaker 1: to that of Wall Street. And also, not surprisingly, many
Speaker 1: corporate executives were actually hired from finance, right. So this
Speaker 1: sort of idea of sort of growing up within the
Speaker 1: organization that pretty much ended UM in the nineteen eighties
Speaker 1: and nineteen nineties, where many executives were then hired in
Speaker 1: visa v finance or through finance programs after their NBA's
Speaker 1: I'm curious, you know, obviously it's no it's no secret
Speaker 1: or missed that within the halls of academia there are
Speaker 1: a lot of people of a sort of the more
Speaker 1: left persuasion who are going to be very critical of
Speaker 1: Wall Street and uh, big business. I'm curious, though, from
Speaker 1: your perspective, whether you think that other colleagues in your field,
Speaker 1: whether they have any blind spots that because they haven't
Speaker 1: actually gone in and done the work and actually been
Speaker 1: involved in working in a bank, that causes them to
Speaker 1: misunderstand aspects of how this all works. Academia certainly shares
Speaker 1: a large part of the critique, and one of the
Speaker 1: sort of key points, UM is that you know, certainly
Speaker 1: there are many economists who really help to promote this
Speaker 1: idea that shareholders are the sort of owners or of companies,
Speaker 1: that the purpose of business is to create a profit
Speaker 1: right sort of agency theory, that the whole role of
Speaker 1: managers is actually to um fulfill their role as agents
Speaker 1: to the principle which are the shareholders. These are all
Speaker 1: constructed academic paradigms that are actually disconnected a little bit
Speaker 1: from corporate history. Right, that then got promoted as the
Speaker 1: truth that then god also taken up by Wall Street. Right.
Speaker 1: So in many ways, academia actually helped hatch this idea
Speaker 1: that financiers then ran with, right, the Milton Freakman's of
Speaker 1: the world and the Michael Jensen's of the world, even
Speaker 1: though he later critiques some of his viewpoints. Getting back
Speaker 1: to my convoluted uh political intro, we are seeing more
Speaker 1: and more politicians make noise about reforming the reasons that
Speaker 1: companies exist. So Elizabeth Warren is talking about redistributing shareholder
Speaker 1: value towards the middle class. Jamie Diamond is talking about
Speaker 1: making companies less short term focused and you know, maybe
Speaker 1: reorient them towards something that isn't just quarterly earnings. What
Speaker 1: do you think of those types of movements, those proposals,
Speaker 1: and how would one actually go about changing the culture
Speaker 1: that gave rise to this existing system. You know, many
Speaker 1: of these kinds of large scale reforms UM would be
Speaker 1: important to actually think through and take on. And one
Speaker 1: sort of example is UM I believe it is with Warren,
Speaker 1: but many other folks are talking about what's happening with
Speaker 1: the private equity industry, and oftentimes the private equity industry
Speaker 1: will say, hey, look, we're sort of different than the
Speaker 1: people who do short term shareholder value because instead of
Speaker 1: actually doing the evil eye and quarter by quarter short
Speaker 1: term returns on a public company, what we're doing is
Speaker 1: we're actually taking companies private. But I would argue that
Speaker 1: many of the same kinds of UM ideologies and values
Speaker 1: of extraction right and paying oneself a dividend and loading
Speaker 1: on dead onto companies in order to extract those dividends. UM,
Speaker 1: it's a similar ideology that private equity firms have done,
Speaker 1: and yet by and large they're not regulated. And so
Speaker 1: one sort of iconic example is Toys r Us towards
Speaker 1: are US. Oftentimes people will say, well, what's the reason
Speaker 1: Toys r US want bankrupt? People will say, well, because
Speaker 1: of Amazon. And yet what folks are often missing is
Speaker 1: that Toys r Us wasn't doing wonderfully, but it actually
Speaker 1: wasn't doing that badly right. Because private equity funds often
Speaker 1: want to take over companies or buy companies that actually
Speaker 1: have a really good cash flow So this idea that
Speaker 1: these companies will have been bankrupt anyway or they're terribly
Speaker 1: distressed again is a false choice. Is a sort of
Speaker 1: problematic representation. Um that toys r US was doing okay,
Speaker 1: not wonderfully. And yet what sort of the takeover or
Speaker 1: the buying up of turning towards r US into you
Speaker 1: a portfolio company, of being capital KKR and um, we're
Speaker 1: not a realty trust? What that did? Was it engendered? Um,
Speaker 1: it's been it's bankruptcy by loading on billions of dollars
Speaker 1: of debt um so that they actually could not have
Speaker 1: the bandwidth right or um, the capital to invest in
Speaker 1: the kinds of online presence that they actually needed to do.
Speaker 1: I'm curious, Uh, you know, I imagine that someone in
Speaker 1: your position today who is thinking about uh doing a
Speaker 1: sort of similar ethnography, might be tempted to go into
Speaker 1: big tech these days and get a job at Facebook
Speaker 1: or Google. Because we know that there's so much scrutiny
Speaker 1: of these companies and arguably some of the anger that
Speaker 1: was directed towards Wall Street has been redirected of late
Speaker 1: towards them. What would you advise and what would be
Speaker 1: the kind of questions that if you were, say, doing
Speaker 1: the same thing, or you had a student who wanted
Speaker 1: to do something similar but at a big tech company,
Speaker 1: what would be the kind of questions you might encourage
Speaker 1: them to look out for to start focusing their work. Wow,
Speaker 1: so tech companies, Huh, Well, you know, the if I
Speaker 1: can sort of take one piece of that question, and um,
Speaker 1: that is that I think it would be really difficult
Speaker 1: to do the kind of field work that I did
Speaker 1: back then, um actually today. And when I was doing
Speaker 1: the field work back then, it was before two and
Speaker 1: I should also say it was before the ubiquity of
Speaker 1: a smartphone, and so, and the idea of the smartphone
Speaker 1: is that one's work, email, one's Gmail, one's phone numbers
Speaker 1: are all sort of conflated together. And so the kind
Speaker 1: of sort of immersive field work that I did for
Speaker 1: three plus years with digital recordings and tape recordings that
Speaker 1: would never have gone viral. Right of course, I'm under
Speaker 1: an anthropological um pledged that these are all confidential and
Speaker 1: that the data is destroyed, etcetera. But certainly given the
Speaker 1: scrutiny of finance, and you know, check today post two
Speaker 1: thousand and eight, I'm not sure I would have actually
Speaker 1: gotten the kind of approval to do the same kind
Speaker 1: of field work UM. And even though many of the
Speaker 1: sort of UM executives, etcetera. Are still you know, quite powerful,
Speaker 1: if not as powerful or if not more powerful than
Speaker 1: they were, they also feel much more scrutinized. And that's
Speaker 1: a that's a tough cocktail, right to be to think
Speaker 1: of oneself as under scrutiny and perhaps a victim, but
Speaker 1: also be very powerful. That that's a that's not a
Speaker 1: good combination to have. Well, Karen, I found that conversation
Speaker 1: really really fascinating. Just the idea of an anthropologist going
Speaker 1: to Wall Street and conducting their field work is absolutely amazing,
Speaker 1: and the book is great. So thank you so much
Speaker 1: for being with us today. Thank you so much for
Speaker 1: having me. Yeah, thank you, Karen. That was great. I
Speaker 1: love that, so Joe. I found that conversation really fascinating.
Speaker 1: And part of what's great about Karen's work is just
Speaker 1: the dedication of going and actually working this really intense,
Speaker 1: you know, work schedule in order to to long term
Speaker 1: field research on on Wall Street. I think that's really great.
Speaker 1: I thought that was really fascinating too, And you know,
Speaker 1: it's funny. So, like our last several episodes, we've been
Speaker 1: doing a lot about things relating to UH balance sheets
Speaker 1: and the sort of demands of balance sheet and accounting requirements,
Speaker 1: UM and how they affect the economy, and this kind
Speaker 1: of seemed like a break, But I actually think it's
Speaker 1: pretty connected because ultimately what ultimately these sort of of
Speaker 1: the constraints imposed on companies by Wall Street, by the
Speaker 1: people who can go out and fundraise, is going to
Speaker 1: have a very real effect on how corporations behave and
Speaker 1: whether financial conditions are loose, whether they're available to whom
Speaker 1: they're available, Who gets to decide who they're available to,
Speaker 1: what are the conditions of those people. I do think
Speaker 1: it's actually very much connected, in a sort of more
Speaker 1: theoretical sense, or a sort of more personal sense, to
Speaker 1: a lot of the themes we've actually already been discussing lately.
Speaker 1: So I really enjoyed that. Oh, I totally agree, except
Speaker 1: I would sort of flip it and say that, you know,
Speaker 1: in the past ten years or so, we've had extremely
Speaker 1: loose financial conditions by virtue of very very low interest rates,
Speaker 1: and in that environment, the only constraint on corporate behavior
Speaker 1: is basically cultural. Right. It's like the extent to which
Speaker 1: you are willing to undertake a number of transactions, whether
Speaker 1: it's depth financing or m and a back activity or
Speaker 1: buy backs, the constraint there is cultural. And so I
Speaker 1: think the conversation we just had about this idea that
Speaker 1: doing something has sort of become embedded in the Wall
Speaker 1: Street ethos, I think it's really important. Now. I I
Speaker 1: totally agree with you the other thing, and I didn't
Speaker 1: get to mention it, but Karen alluded to it several times.
Speaker 1: It's interesting to think about an era of corporations that
Speaker 1: actually existed before the view that the corporation's goal was
Speaker 1: to just get the stock price up. And if you
Speaker 1: read a book like uh, John Galbraith's New Industrial State,
Speaker 1: he talks about all this stuff about corporations viewing itself
Speaker 1: not as a profit maximization entity per se, but more
Speaker 1: from the perspective of insurance and having the ability to
Speaker 1: create an entity that would weather different economic site holes
Speaker 1: in different idiosyncratic risks and so forth. It's really hard,
Speaker 1: I think, in to imagine that corporations ever had a
Speaker 1: different purpose besides just um uh, besides just getting the
Speaker 1: stock price up, but it actually is is uh. I
Speaker 1: think I really appreciate hearing her talk about how it's
Speaker 1: kind of a modern idea. Oh yeah, So in Karen's work,
Speaker 1: it's quite clear that this is something that only really
Speaker 1: started to happen in the nineteen eighties, so quite a
Speaker 1: recent shift. Um, and it's it's weird again to think
Speaker 1: about how embedded it is in our modern notions of
Speaker 1: finance and the economy. This is how the financial system
Speaker 1: is supposed to work. Of course, capitalism is about making money,
Speaker 1: and therefore companies are trying to maximize their profits for shareholders.
Speaker 1: But just two or three decades ago, or I should say,
Speaker 1: I always forget what what is just three or four
Speaker 1: decades ago that wasn't necessarily the case totally. Alright, Well,
Speaker 1: this has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Allaway. You can follow me on Twitter at
Speaker 1: Tracy Alloway, and I'm Joe wisn'tal. You can follow me
Speaker 1: on Twitter at the Stalwart, and you should follow our
Speaker 1: producer on Twitter, Laura Carlson. She's at Laura M. Carlson.
Speaker 1: And check out all of Bloomberg's podcasts on Twitter at podcasts.
Speaker 1: Thanks for listening,