Morning Coffee: Why a top private equity fund hires second rate students. And the bankers of Extinction Rebellion

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One of the top ten cliched things for a middle-aged banker to say is, “If I was applying for my job today, I wouldn’t get it!”.  Obviously it’s better to say this after you’ve won an industry award, rather than between a profit warning and a federal investigation, but it's the kind of thing that emerges from the mouths of senior finance people very often. Yesterday, Steven Schwarzman of Blackstone said it in an interview. Nowadays Blackstone only hires "1% of people who apply," added Schwarzman, before observing that its all a bit "surreal."

When you're that bombarded by candidates, you need to screen. And there's a temptation to use academic grades as your main screening tool. Schwarzman said this is bad. He noted that he himself didn't graduate Magna or Summa cum laude, and nor did eight out of nine people on his management team. Most of the top team at Blackstone are "generic people" who are "pretty flexible," Schwarzman observed. 

It doesn't take an academic genuis to see why this might be. One thing about incredibly academically successful people is that they don’t have much experience of trying and still failing.  And trying and failing is common in banking, markets and private equity.  Not only that, but the way that many markets work is that when they hand you a humiliating defeat, they simultaneously hand you a number of opportunities to make things substantially worse for yourself.  If the first time you experience the pain of losing is when a deal falls through or a trade goes bad, there’s a pretty substantial risk that you’ll react emotionally and turn a bad day into something far worse.

That’s why Blackstone likes to hire more generic people with leadership skills and some personal qualities, as well as the academic superstars.  Even the predilection of private equity for people with a successful sports background isn’t all about searching for determination, will and focus.  A lot of the attraction of the athletes is that they have an intuitive understanding that you can’t win every single time, an understanding which, by definition, isn’t given to you by getting a 4.0 grade point average.  In Schwarzman’s words, “they can handle the pain”.

Elsewhere, parts of London and cities around the world are being shut down by the climate change protestors of Extinction Rebellion.  'ER' seem to have been concentrating quite a lot of their attention on the financial sector, with protests at City Airport and at the offices of a hedge fund.  But there are bankers on both sides; Extinction Rebellion’s finance chief is former HSBC derivatives trader Andy Medhurst, and some of the donations have been coming in to him from the charitable foundation set up by enfant terrible activist hedge fund manager Chris Hohn.

There’s a sort of logic to it though; as Medhurst points out, traders instinctively understand the concept of “risk of ruin” and that of planning for the worst case.  The private bankers are also in on the act. One of the key selling points for a wealth manager is the ability to plan on a multi-generational basis, and some have been inviting Extinction Rebellion to present to investment seminars on the general topic of what action might need to be taken to ensure that there are future generations to inherit.  Although it would probably be exaggerating to describe the protestors as “popular” with people who have had their daily commute inconvenienced, the gap between the anti-capitalists and the capitalists is not quite as wide as it used to be.

Meanwhile …

As Steve Schwarzman says, adversity builds character and makes you a better leader.  But if you don’t have time or inclination to go through the adversity, the business school IMD Lausanne reckons that Jungian therapy might be the next best thing to help develop leadership ability.  (FT)

After all that fuss, Deutsche Bank has confirmed, and a U.S. court has seemingly accepted, that it no longer holds Donald Trump’s tax records and so cannot have them subpoenaed. (Bloomberg)

Fintech horror stories – although you seemingly have to make a lot of other mistakes in handling the initial problem, it is possible that using Apple Pay to buy a bus ticket when your phone is low on juice could land you with a large fine and a criminal record.  The last bit is particularly important for bankers to know about as the conviction can delay U.S. visa applications which is inconvenient if you need to travel for work. (FT Alphaville)

Bank of America might have hired a cryptocurrency head; there was a job posting for the “Ripple Project” which has now been closed (Coin Telegraph)

Alex Ehrlich, who joined the industry in 1979 and has been head of securities services at Goldman Sachs then head of prime services at UBS and lately Morgan Stanley, is retiring this year.  Think of all the changes he must have seen … (TheTrade)

From carrying bags for Bruce Wasserstein to a recruitment process for Citi that took ten weeks of daily phone calls, global head of corporate & investment banking Raymond McGuire looks back on his career (Yahoo Finance Video, 2min)

“What one or two things, if taken off my plate, would alleviate 80% of the stress I feel now?” Two Harvard professors look at strategies for coping with the sensation of feeling permanently overwhelmed. (Harvard Business Review)

Photo by Dmitry Ratushny on Unsplash

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