Tag Archives: Wall Street
Krawcheck Discusses Stalling of Gender Diversity
You may be aware that I presented Sallie Krawcheck‘s best-seller, Own It, last week at our monthly event, the First Friday Book Synopsis, at the Park City Club in Dallas. If you missed it, you can buy the handout and live recording at www.15minutebusinessbooks.com.
The book’s premise was that we should not be concerned about excluding men, but rather, including women. It is a book that will rival Lean In by Sheryl Sandberg.
Randy Mayeux sent me this link, which is an article, and an interview, in which Krawcheck explains that progress in gender diversity in Wall Street firms has come to a slow crawl. This is the link that you will be interested in:
I found the book provocative, and as is true for many women-in-business books, we have done a lot of talking about the problems that professional women have faced, and we have very few of the problems solved. Maybe this book will help.
Chilling Insider Trading Saga Breaks the Best-Seller Barrier
Stephen A. Cohen, who was the focus of one of the most intensive insider trader investigation in history, is the subject of a new best-selling business book that debuted at # 3 on the Wall Street Journal best-seller list (January 18-19, 2016, p. C10).
The book, Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street (Random House), was released on February 7, and as of today’s writing is in the top four best-selling books in three Amazon.com sub-categories.
The author is Sheelah Kolhatkar, is a current staff writer at The New Yorker. She is a former hedge fund analyst. Her features focus upon Wall Street, Silicon Valley and politics. Kolhatkar has appeared on numerous business television programs, and also been a guest columnist in several business magazines, as well as the New York Times.
Who is Stephen Cohen, and what exactly is this book about? Please read this summary taken from the publisher’s website at http://www.penguinrandomhouse.com/books/234210/black-edge-by-sheelah-kolhatkar/9780812995800/.
“The rise over the last two decades of a powerful new class of billionaire financiers marks a singular shift in the American economic and political landscape. Their vast reserves of concentrated wealth have allowed a small group of big winners to write their own rules of capitalism and public policy. How did we get here? Through meticulous reporting and powerful storytelling, New Yorker staff writer Sheelah Kolhatkar shows how Steve Cohen became one of the richest and most influential figures in finance—and what happened when the Justice Department put him in its crosshairs.
“Cohen and his fellow pioneers of the hedge fund industry didn’t lay railroads, build factories, or invent new technologies. Rather, they made their billions through speculation, by placing bets in the market that turned out to be right more often than wrong—and for this they have gained not only extreme personal wealth but formidable influence throughout society. Hedge funds now manage nearly $3 trillion in assets, and competition between them is so fierce that traders will do whatever they can to get an edge.
“Cohen was one of the industry’s greatest success stories. He mastered poker in high school, went off to Wharton, and in 1992 launched SAC Capital, which he built into a $15 billion empire, almost entirely on the basis of his wizardlike stock trading. He cultivated an air of mystery, reclusiveness, and extreme excess, building a 35,000 square foot mansion in Greenwich, Connecticut, and amassing one of the largest private art collections in the world. On Wall Street, Cohen was revered as a genius.
“That image was shattered when SAC became the target of a sprawling, seven-year government investigation. Labeled by prosecutors as a “magnet for market cheaters” whose culture encouraged the relentless hunt for “edge”—and even “black edge,” or inside information—SAC was ultimately indicted in connection with a vast insider trading scheme, even as Cohen himself was never charged.
“Black Edge offers a revelatory look at the gray zone in which so much of Wall Street functions, and a window into the transformation of the U.S. economy. It’s a riveting, true-life legal thriller that takes readers inside the government’s pursuit of Cohen and his employees, and raises urgent questions about the power and wealth of those who sit at the pinnacle of modern Wall Street.”
A less biased, although equally positive review appeared in the New York Times, written by Jennifer Senior on February 1, 2017. One of her points is: “But my hunch is that readers will most remember “Black Edge” for showing them just how alarmingly pervasive insider trading was in the years surrounding the 2008 collapse. It became commonplace, domesticated — dare I say it? — normalized.” You can read that review by clicking on this site: https://www.nytimes.com/2017/02/01/books/review-black-edge-an-account-of-a-hedge-fund-magnate-and-insider-trading.html?_r=0.
And, in case you feel sorry for Cohen, the last line in Senior’s review says, “[Kolhatkar] notes that in 2014, Cohen made $2.5 billion by trading his personal fortune alone. ‘He is making plans to reopen his hedge fund,” she writes, “as soon as possible.’”
Please continue to monitor our website at 15MinuteBusinessBooks.com, to see if this book rates one of our monthly selections at the First Friday Book Synopsis for presentation. Randy and I will discuss this very soon!
Ever More Traders, Seemingly Fewer Builders – Consensus is Growing
The consensus is growing. The problem is truly coming into focus. The solution seems to elude us all.
A while back, I wrote this blog post: “Traders” vs. “Builders” – the “Fantasy Economy” vs. the “Real Economy.” (It is the most read post on our blog in the last quarter). It was prompted by my reading of the Richard Florida book, The Great Reset. Though the entire book is worth reading, it is a small section that jumped out at me most strongly. Here’s the key quote:
…builders need to take their preeminent position back from the traders for the economy of the future to flourish.
A long list of observers and authors are weighing in on this disconnect in our society. Here’s a quote from Frank Rich, Still the Best Congress Money Can Buy, from this morning’s New York Times:
As John Cassidy underscored in a definitive article titled “Who Needs Wall Street?” in The New Yorker last week, the financial sector has paid little for bringing the world to near-collapse or for receiving the taxpayers’ bailout that was denied to most small-enough-to-fail Americans. The sector still rakes in more than a fourth of American business profits, up from a seventh 25 years ago. And what is its contribution to America in exchange for this quarter-century of ever-more over-the-top rewards? “During a period in which American companies have created iPhones, Home Depot and Lipitor,” Cassidy writes, the industry reaping the highest profits and compensation is one that “doesn’t design, build or sell a tangible thing.”
The article Rich quoted is What Good Is Wall Street? Much of what investment bankers do is socially worthless by John Cassidy. He puts it simply:
For years, the most profitable industry in America has been one that doesn’t design, build, or sell a single tangible thing.
And here are excerpts from The Power of Failure by William D. Cohan (William D. Cohan on Wall Street and Main Street):
Despite the very dire consequences of the latest financial crisis that Wall Street perpetrated on the world, America cannot seem to shake its infatuation with Wall Street bankers and traders.
We continue to shower them with riches, prestige and glory. We make movies about them. We write books about them. We seriously overpay and then envy them. This year alone, while millions of others suffer from the Great Recession, bankers and traders are expected to be paid — incredibly — another estimated $144 billion in compensation and benefits. Accordingly, Wall Street remains the No. 1 destination for our best and brightest.
There is enormous power in failure, especially when one learns from it. Wall Street has been making a lot of mistakes lately. But will it bother to ever learn from them? And will we have the courage to return Wall Street to a less exalted place? The answer to these questions will increasingly come to define what America is all about in the future.
So, Wall Street has taken us down some blind paths, and failed spectacularly. Yet, Wall Street profits are up, and seems to already be back on top. Our best and brightest would still rather work there than elsewhere. And when they do, they build little or nothing – they master “trading,” not “building.”
We need our best and our brightest building an actual economy, not moving money around in a stagnant one. But we seem to be powerless to bring about any needed change.
So, what shall we do in this fantasy economy era?
Michael Lewis Nails It – Don’t Let Wall Street Do Again What They Did Before, That Got Us Into This Mess
My post, A Quick Graphic Overview of The Big Short, has been one of the more popular posts on this blog. Here is a new article by Michael Lewis, with a clear statement of the problem, and his proposed solution. The article, Wall Street Proprietary Trading Under Cover (Bloomberg Opinion) is worth reading in full. Here are excerpts:
A few weeks ago we asked a simple question: Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary trading groups, without so much as a whimper?
The law directs regulators to study the prop trading ban for another 15 months before deciding how to enforce it: why is Wall Street caving now?
The many answers offered by Wall Street insiders in response boil down to a simple sentence: The banks have no intention of ceasing their prop trading. They are merely disguising the activity, by giving it some other name.
Solution proposed by Michael Lewis:
Keep It Simple
There’s a simple, straightforward way for the GAO to construe the Dodd-Frank language, and it would reform Wall Street in a single stroke: to ban any sort of position-taking at the giant publicly owned banks. To say, simply: You are no longer allowed to make bets in the same stocks and bonds that you are selling to investors. (emphasis added).
If that means that Goldman Sachs is no longer allowed to make markets in corporate bonds, so be it. You can be Charles Schwab, and advise investors; or you can be Citadel, and run trading positions. But if you are Citadel you will be privately owned. And if you blow up your firm, you will blow up yourself in the bargain.
Vote for Androgynous Leadership
Cheryl offers: There’s a lot of debate in the media right now over whether or not more women in the upper ranks of the financial leadership ranks would have prevented the current economic situation. In most of them, women and men seem to get “labeled” with all kinds of characteristics, usually stated as if they were fact based on profound research; usually they are not. Samuel Taylor Coleridge once said. “The truth is, a great mind must be androgynous” and I tend to agree with him. This infers a great mind would have both female and male characteristics (the best of both worlds so to speak). In Daniel H. Pink’s book, “A Whole New Mind – Why Right Brainers Will Rule the Future” he proposes the idea we are moving from the Information Age, dominated by an economy and society built on logical, linear, and computer-like capabilities (think left brain hemisphere and robotic traders on Wall Street) to one called the Conceptual Age characterized by inventive, empathetic, big picture thinking found primarily in the right hemisphere of the brain. Hmmm…makes me wonder if he’s not right! How different would our world be if the financial world had not been driven so much by numbers and had instead considered the long-term big picture with an empathetic view on the potential impact on those being affected. This is neither a male nor female view of the world. It’s androgynous and requires the whole brain to be engaged. Research has repeatedly proven more women in upper ranks of leadership will produce better financial and qualitative results. I vote for androgynous leadership rather than new financial laws!
Sara adds: I hadn’t thought about leadership that way, but I like it. Imagine a world where leaders are assessed by the competencies rather than gender or ethnicity! It echoes Jim Collins’ idea of leadership in Good to Great. “Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It’s not that Level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious – but their ambition is first and foremost for the institution, not themselves. “ It is the best of both genders – just think consider the possibilites!
Is all the business world a field or court?
A quick stroll through the business section of a bookstore or a search through the management section of an on-line retailer will quickly reveal the plethora of titles available from sports figures. Working from the analogy that the activities inherent around a basketball court, a football field, or a baseball diamond simulate the activities in the workplace, many current and former athletes and coaches have penned treatises teaching us how to be successful on the job. Topics for these books include leadership, management, motivation, teamwork, self-improvement, finance, and others.
A great recent example of this is the book by John Wooden that we featured at the First Friday Book Synopsis and that you can purchase at 15MinuteBusinessBooks.com. This book is also accompanied by videos, manuals, and training courses. No one can question Wooden’s success as a repetitive NCAA champion head basketball coach at UCLA. You could say the same thing about practically any of these authors. After all, who would read a book from a loser? I learned a long time ago in attending conventions of the National Speakers Association, that if you want to be successful in the business, follow the path of a successful speaker, not a failure.
Here are some others:
Rick Pitino – head basketball coach at the University of Louisville: Success Is a Choice: Ten Steps to Overachieving in Business and Life
Fran Tarkenton – former NFL quarterback for the Minnesota Vikings and New York Giants: What Losing Taught Me About Winning: The Ultimate Guide for Success in Small and Home-Based Business
Mike Ditka – former NFL head coach for the Chicago Bears and New Orleans Saints: In Life, First You Kick Ass: Reflections on the 1985 Bears and Wisdom from Da Coach
The assumption behind all of these books is that the activities and best practices which yielded success for these authors in sports are relevant and applicable to what we do at work. Therefore, a manager can use the techniques that a head coach uses, employees are players, competitors are opponents, strategies are plays, pilots or rollouts are practices, groups should become teams, and so forth. We can use terms and phrases such as, “she struck out today,” “this looks like a home run,” “he’s our quarterback,” and “we’re in a sand trap.” You get the point.
I think that there is some legitimacy to this, although I can tell you that in teaching my MBA courses at the University of Dallas, students are tiring of the sports analogy in business, particularly for teamwork. You may remember the series of silly commercials from American Express a few years ago entitled “Great Moments in Business,” where employees piled up on each other in a room after a successful presentation, and high-fived each other as if they had just won a World Series after a closed sale.
If you believe that the principles that motivate human beings are the same, no matter what the context, then you would have no problem with what these books try to do. Who would not advocate “practice” before performance, whether that is a presentation, a draft of a document or e-mail, or a pilot program prior to a national product introduction? The same principles and behaviors that qualify a group of people as a team on the court or field should apply on the job. Consider trust, which is a necessary, but not a sufficient condition for teamwork. Without trust, there is no team, no matter where it is. We don’t have to talk about money – that’s an issue in the business of sports as much as the business of business. Some have a lot, and some don’t have enough. Some even go out of existence, such as the recent announcement that the 20-year Arena Football League will cease operations. Some look for outside buoyance. The Federal Government keeps General Motors alive. Major League Baseball did the same for the Montreal Expos before moving them to Washington, D.C. Every sports franchise is as much of a business as a firm on Wall Street, or anywhere else.
And, managers and employees can go through all the motions of strategic planning, just like coaches and players study a playbook, diagram motions, and run through plays on the practice field or court, only to learn that when they face a competitor, it is considerably different. Rarely is there a situation where the presence of an opponent is the not the cause of substantial modifications in strategy, and the possibility of failure.
Remember when George Will told us that baseball players are not the “boys of summer,” but rather, “Men at Work.” He argued that baseball managers, just as business managers, examine a set of complex variables in making decisions. And, that players perfect their skills on the diamond in ways that go well beyond how employees do the same in the workplace.
In conclusion, advice from sports personalities about business is probably no worse than the lessons we can read about based upon Abraham Lincoln, Jesus Christ, Machiavelli, or General Robert E. Lee. Like many of these sports personalities, they didn’t run or work for any of today’s companies, but authors have used their best practices to show us how to work better in our jobs.
Is all the business world a field or a court? Perhaps no worse than a stage. No matter how we do it, we all have to perform. The question is simply what resources we want to use to guide us to success.
Let’s talk about it. What do you think?