An outsider tries to prise open the secret world of London finance. Worth reading? A lot of this is unlikely to be new to those who work in London’s financial sector but the fresh perspective of an outsider will bring a few new insights. To those outside this world, this is an excellent primer.
The premise of this book is simple: practically no-one outside London’s financial industry understands it.
If this sounds like an assignment for an investigative journalist, that’s precisely what Dutch Joris Luyendijk is (the book started out as a blog in 2011 for The Guardian) and Luyendijk presents himself as the ingénue abroad who wants to answer the above for the un-initiated. This he does well. After all, it’s not the first time he’s cracked open a little known world: he did a similar assignment on electric cars but before he can even get his foot in the door of London’s financial sector, Luyendijk learns his first lesson: electric car insiders may be eager to talk, City insiders, not so much. He has to cajole them with escalating promises of anonymity because the biggest taboo in finance is not bankrupting the firm, he learns, but breaching confidentiality. “Almost every…interview I conducted took place under a cloud of stress and fear”.
“Almost every…interview I conducted took place under a cloud of stress and fear”. Breaching confidentiality – the City’s biggest taboo?
The book gives some interesting facts, for instance, did you know London is the size of Berlin, Madrid and Paris combined, and brings a fresh perspective that only an outsider can do, marvelling over eye popping job titles (Vice President anyone?) and asking interviewees to describe their roles in terms of animals: traders think of hunters – wolves, tigers, hyenas; an internal accountant is a beaver; a human resources officer a beta male chimpanzees, and a regulator an elephant (powerful, clumsy, you can hear them coming…). Most telling is the response of the (presumably) frazzled compliance officer “Animal? I’m the zoo-keeper!”
The chapter on internal control and regulators makes somewhat despondent but unsurprising reading for Moxie Rules’ audience. The author finds the differences between front, middle and back office staff striking, the first offering to be interviewed as a favour, the latter deferential. He also observes that no investment banker ever speaks “with respect about the middle office” or regulators, with one blog post cannily titled “The trouble is, regulators are idiots” – a direct quote from a terribly self-confident but blinkered trader who asks: “Why would a smart, aggressive, competitive 22-year-old decide to work for the regulators”? (A couple of regulators quickly contacted the author to explain why).
But what this book is really about is what’s wrong with the financial sector because Luyendijk is clear there was, and still is (when the book was published in 2015), something wrong with it. It took him, he says, a while to get past the plausible, reasonable “version of reality” presented to him from the first interviewees to see that the City is “deeply dysfunctional”. So why does he think is wrong?
First of all money… there’s a lot sloshing around in the City but focusing on greed is, Luyendijk concludes, the biggest mistake outsiders have made. Instead he thinks many City workers who earn good but not mega money become financially stuck, having upgraded their lifestyle – kids in private schools, for example. (And worth noting here the figures cited in the book that while only 7% of British kids are educated at private schools, around 66% of the medical, media, judicial, legal and civil service elite is privately educated so you see why aspirational parents think this is a requisite.)
7% of British children are educated at private schools: around 66% of the medical, media, judicial, legal and civil service elite is privately educated
Perverse incentives are also blamed: bonuses, the most talked about element in the media, is part of this but Luyendijk also brings up how conflicting activities are housed under one bank and the historic change from merchant banks being owned by partners to shareholders so that those who bear the risk are not the ones taking them. The hire-and-fire culture also comes in for a drubbing as it breeds short terminism and kills loyalty. The ferocity of the hire-fire culture probably impacts front office staff more than middle or back office with one banker reporting his bank would hire two people for the same role and see who survived. In such a climate, people focus on their own immediate best interests and not the longer term best interests of the bank.
Overall, Luyendijk concludes the City is amoral: good and evil, right and wrong, they play no part in the decision making process. Instead, the focus is on reputation, risk and is it legal? This book is a great primer for people not familiar with London’s financial sector and want to understand more.
You can still read Luyendijk’s blog here.
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Financial services regulatory consultancy, specialising in MiFID II: resources, training & tips