The news that hundreds of business suits have been left behind in Ropemaker Place, the old Goldman Sachs office in London, has sparked some predictable jokes. Remarks along the lines of “the feeling when you’ve been in the office so long your clothes have gone out of style” for example, or about the practice of leaving a spare jacket hung up so the boss thinks you're still in the office when you've gone home at 7pm. But in fact, bankers who pull regular all-nighters store clean shirts in the office, not whole suits, and they do take them home to be washed once the deal has been completed.
The story of how old suits (and although the story doesn’t mention this, almost certainly lots of worn-out shoes and obsolete smartphones) come to be left behind at Goldman in London, is therefore likely to be based on something different. It's likely an interesting little lesson in economics, illustrating the principle of marginal cost. The way it happens is that one day, you notice that your suit is looking a bit shabby. You could make a note to buy a new one at the weekend, but that would be a drag. And in any case, there are better tailor shops near the office. So you go out at lunchtime and buy a suit.
At this point, you could do the sensible thing and take your new suit home. But maybe you cycle in and don’t have a good way of carrying a second suit in your backpack. Or you don’t fancy getting it crushed on the Underground. It’s a bulky item and carrying it is a bother. So instead, you go down to the gym or the restrooms, change into your new suit and leave the old suit hanging up in a cupboard somewhere.
Once this minor initial act of laziness has been committed, that suit is likely to stay in your office for ever. It’s never going to be the suit you want to wear; it’s shabby. And on any given evening, leaving it in the coat cupboard for one more day is free, while taking it home is a slight but noticeable cost in terms of inconvenience. You might put it in a garbage sack if you move to a new job, but otherwise it will always be there, making you feel mildly guilty, until the wonderful prospect of an office move gives you the chance to lose it forever.
Of course, central to this theory (which also explains why Goldman is having all these suits dry-cleaned before donating them to charity) is the assumption that the suit was of the kind that you walk out of the shop with on the day you buy it. The kind of suit that senior Deutsche bankers bought for £1,200 while their colleagues are being made redundant needs to be schlepped back and forth several times for fittings. It is therefore typically sold to the kind of person who wants to look smart and is prepared to go to a little bit of trouble to do so, rather than someone who grudgingly wears a suit because of the corporate dress code. There are no details in the news story, but we would bet money that the majority of the Goldman suit mountain was attributable to Sales & Trading rather than IBD, and that the jackets were stretched out of shape from having been shoved on the back of a chair every day.
Another person who probably keeps a few spare clothes in his office is UK Shadow Chancellor John McDonnell; according to an interview, he gets up at 7am and starts working almost immediately, continuing until 10 or 11 at night. So when he says that the Labour Party wants to bring the average working week down to 32 hours, he’s presumably aware that there are some jobs in which this won’t be possible. Some junior bankers work 90 hour weeks and although banks are keen to protect weekends and minimise out-of-hours calls, they’re not likely to reduce the workload by 60% when a deal is on.
Except that, of course … the old joke goes “How many hours do juniors work in M&A? About one in four.” A ninety-hour work week can often include several surprisingly long stretches of sitting around, drinking machine coffee and gossiping about the MD’s halitosis. Workers in some industries used to be made to “clock out” when demand was slack. If a similar practice was introduced in banks (and just to be clear, we think this would be a terrible idea) while Analysts and Associates were waiting for comments to come back on Powerpoint slides, we might be surprised how close to 32 hours the industry could achieve.
Fabrizio Campelli is setting out his hiring stall for Deutsche Bank Wealth Management. He intends to hire 300 revenue-generating staff by 2020, growing his workforce by 50%. It’s noticeable that both UBS (once Iqbal Khan finishes his gardening) and Deutsche will now have their private banking operations headed by Credit Suisse veterans with growth ambitions. Tidjane Thiam might be getting nervous about having his franchise picked over. (FT)
In which context, it seems that CS is holding an internal inquiry into yesterday’s “incident” to establish exactly what kind of surveillance might have been ordered on Mr Khan. The internal memo refers to “significant inaccuracies” in reporting over the weekend, but doesn’t get specific. (FT)
“People Like Us Like People Like Us”, as the saying goes. Beware of hiring decisions based on “cultural fit” – all too often, interviewers assume that mirror images of their own personality, hobbies and even looks will fit in, but never bother to ask questions about values and approach (WSJ)
A year after the “mutineers’ memo”, Greg Guyett as HSBC is implementing that rarest of beasts – an investment bank restructuring without a cost cutting program. Some bankers will be cut if they don’t fit into the new system, but there’s no pressure to shrink. (Financial News)
“If you pay in cash, nobody knows where you drink, when you drink, how much you drink”. There are other points of advice in this profile of UBS and CNBC’s veteran market commentator Art Cashin, but this might be the most actionable. (Washington Post)
Apparently representatives of the Qatari royal family have been sounding out global headhunters to find a replacement for Deutsche chairman Paul Achleitner (Bloomberg)
Snapchat kept a dossier of what they regarded as anticompetitive practices by Facebook, calling it “Project Voldemort” (WSJ)
Photo by Andrew Neel on Unsplash
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