Month: January 2022

Leadership is one of the most analysed topics in business literature. There are thousands of management books issued – all with the intent of helping people be better leaders. But perhaps the most critical success elements for leaders are common sense and an openness to feedback on bad judgement – preferably before mistakes are made. Recent stories revolving around COVID-19 issues supports this simplistic view of good leadership.

Queen Elizabeth II highlighted her approach to being a leader in a trying time at the April 2021 funeral for her husband, Prince Philip. As reported in The Guardian, the Queen attended her husband’s funeral and sat on her own. This simple act of lonely suffering resonated with many in the United Kingdom who were also suffering losses at a time that human contact was limited in an attempt to control the spread of COVID-19.

No such leadership was on display during this same timeframe at No. 10 Downing Street as summarized by The New York Times. There parties continued throughout and whilst the final report on who did what when is expected this week, it was clear that the Prime Minister Boris Johnson did not see his leadership as requiring the sacrifice of good times and parties even though the government policy imposed that sacrifice on the rest of the country.

This same lack of leadership was more recently seen in António Horta-Orório’s departure from Credit Suisse. The Financial Times summarized the numerous times where he did not follow various quarantine and travel requirements relative to COVID-19. Having been brought into Credit Suisse to address reputational issues, it was clearly not possible to continue in that role after a series of violations of COVID-19 requirements.

Then we move to the Antipodes where the participation of the Novak Djokovic in the Australian Open ended up not happening. Tennis is a game of man-made rules but apparently Djokovic was not able to adequately follow the man-made rules of Australia relative to COVID-19. The twists and turns of this story were usefully covered in The Guardian.

And just as Queen Elizabeth II showed her leadership ability at the funeral of her beloved husband, Prime Minister Jacinda Ahern showed her leadership ability when she cancelled her wedding due to the increase in COVID-19 and the imposition of stronger rules in New Zealand. As quoted in a BBC article:

“I am no different to, dare I say it, thousands of other New Zealanders who have had much more devastating impacts felt by the pandemic, the most gutting of which is the inability to be with a loved one sometimes when they are gravely ill,” she said. “That will far, far outstrip any sadness I experience,” she added.

Why is that too many leaders lack the simple common sense to follow the rules established for all? Where are the advisors and friends who tell them they are making a mistake? Or do too many leaders believe that they are too important to have rules apply to them? Do they suffer from the Leona Helmsley syndrome: “Only the little people pay taxes?”

Everyone would like to believe that the work they do is critical to improving the world. Prior to the financial crisis investment bankers active in creating the financial products that ultimately led to the crisis saw themselves as “masters of the universe” delivering wealth for society. A similar self-importance can be seen among sustainable bankers with a belief that their work will somehow solve the critical economic, environmental, and social issues facing today’s world. An advantage of being a retired banker is the realization that banking and finance should not be the center of the world.

A series of recent articles have reinforced my view. Two articles in the Financial Times in August (“The whistleblower who calls ESG a deadly distraction” and “The ESG industry is dangerous”) led me to the Secret Diary of a Sustainable Investor written by Tariq Fancy, BlackRock’s first global chief investment officer for sustainable investing. His “secret diary” is worth reading in full.

As noted in early in this well written and entertaining essay, he sees sustainable investment as “a dangerous placebo that harms the public interest.” He goes on to note that a systemic crisis requires systemic solutions – and the environmental challenges we face are systemic in nature. He correctly notes that “many things that are lucrative are also bad for the world.” As a result, in a world where “we’ve built private firms from the ground up to do one thing really well: extract profits,” it is not surprising that firms are not sufficiently addressing climate change.

Fancy also brings additional nuance to the supposed view of Milton Friedman that the only purpose of a corporation is to make money. Fancy notes:

What’s most galling about the entire debate is how Friedman’s own message has been mangled. Yes, he said that the sole purpose of a business is to generate profits for shareholders. But that didn’t mean that he thought no one should look out for the public interest: in the very same paper he argued that the responsibility for protecting society fell to civil servants, whose authority business executives should not usurp as such roles “must be elected through a political process.” In fact, he called the idea of business executives taking on this role to be “intolerable” on grounds of political principle.”

This analysis leads to his conclusion that there is “a dire need for government action.” This view is supported by a recent article in The Economist on Glencore. As summarized in the final sentence: “Only concerted government action to tax carbon emissions and redesign energy systems will kill off king coal.”

Bankers with good intentions were prominent in Glasgow with assurances that their work could resolve the environmental challenge. This path was skeptically viewed by Christopher Caldwell in the New York Times. He noted that “(m)oney men have taken the thing over.” He quotes Gillian Tett from The Financial Times that Glasgow like other COP events have been taken over by “business leaders, financiers and monetary officials.”Caldwell goes on to note “(t)hat is bound to render the movement’s tactics and goals less democratic.”

This democratic deficit is further highlighted by Olufemi Taiwo in The New Yorker in a review of three recent books. The first book builds on the story of nutmeg and the role of the Dutch East India Company (V.O.C. in Dutch). Taiwo notes: “The global marketplace, created and shaped by forays like the V.O.C.’s in Indonesia, is fixated on growth in ways that have led to an era of depredation, depletion, and, ultimately, disruptive climate change.” The two other books reviewed tell similar stories about “hierarchy, commerce, and exploitation” highlighting broken climate politics. Taiwo notes that none of these books provide a solution for the politics but all note the need for political solutions.

So whilst finance should focus on issues of sustainability, bankers as individuals and professionals should be working to deliver the necessary systemic change within existing political structures. Perhaps outside their comfort zone but one required for long term, sustained change.

Boomer Banker has been quiet for the last six months. This pause has allowed me time to take a step back and consider what issues are most important for bankers in the current environment of increased evidence of environmental risk, heightened levels of political risk and the ongoing high level of economic inequality. Unfortunately, I have not been able to develop any breakthrough ideas for solving these complex and inter-related issues. But I realized that this blog can and should provide links to a variety of thinkers and writers on issues that may be less directly related to banking. So 2022 will be a year of fewer posts with a reduced focus on banking but an increased focus on the overall environment in which banks and bankers are operating

In that vein, what struck me most in the last week is the question above: Why is everyone so angry?

This question came to mind after reading two articles highlighting the high level of anger that seems to be prevalent in various locations. The New York Times on 1 January 2022 reported on increased anger among young South Korean men regarding women’s rights. Despite having one of the highest gender gaps for pay and a low level of female participation in both government and business, there is a very large movement opposing feminism. One group even had the motto: “Till the day that all feminists are exterminated.

Just a day or so later I read an article by Evan Osnos in The New Yorker titled: “Dan Bongino and the Big Business of Returning Trump to Power.” This article provided an interesting insight into a business model that is focused on making money by creating and exploiting a general anger that seems to be prevalent in the United States. As noted in the article, he builds on the premise that “suspicion is an appetite that is never fully sated” as he covers a variety of conspiracy theories that seem never to be proven but also seem never to be able to be disproven. A key part of Bongino’s business model is that nothing is “more potent than the constant regeneration of fear.”

In both of these examples and others, there is an underlying anger that is difficult to explain or understand. In general other than the known challenges arising from the impact of the COVID pandemic, the underlying economics for the vast majority of people are relatively good. Nearly all countries provided substantial economic support to date in the pandemic. But as Nobel Prize winner Abhijit Banerjee stated at a John Adams Institute event last year: “We ignore at our peril what people tell us.” And too many people are saying they are angry.

The final piece of my thinking fell a bit into place with an Elizabeth Kolbert article in the same issue of The New Yorker as the article on Dan Bongino. Whilst Kolbert is best known for her focus on environmental issues, she did an excellent analysis on the impact of social media on the rise of anger. She covers a variety of analyses on how social media has exacerbated societal division as well as noting some suggestions on how to address this challenge.

As bankers it is easy to ignore these challenges as being irrelevant to our work providing financial services. But I would argue that this rise in societal animosity is a substantial business risk that could have a very negative impact on the economy and banking. Perhaps the roots of the next financial crisis are being created in the fury that seems to be growing around the world. Whilst I do not know what bankers should be doing in either their work or in their personal efforts as citizens, ignoring these issues does not seem to be a very prudent approach.