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Liquidated: An Ethnography of Wall Street (a John Hope Franklin Center Book) Paperback – Illustrated, July 13, 2009
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Ho, who worked at an investment bank herself, argues that bankers’ approaches to financial markets and corporate America are inseparable from the structures and strategies of their workplaces. Her ethnographic analysis of those workplaces is filled with the voices of stressed first-year associates, overworked and alienated analysts, undergraduates eager to be hired, and seasoned managing directors. Recruited from elite universities as “the best and the brightest,” investment bankers are socialized into a world of high risk and high reward. They are paid handsomely, with the understanding that they may be let go at any time. Their workplace culture and networks of privilege create the perception that job insecurity builds character, and employee liquidity results in smart, efficient business. Based on this culture of liquidity and compensation practices tied to profligate deal-making, Wall Street investment bankers reshape corporate America in their own image. Their mission is the creation of shareholder value, but Ho demonstrates that their practices and assumptions often produce crises instead. By connecting the values and actions of investment bankers to the construction of markets and the restructuring of U.S. corporations, Liquidated reveals the particular culture of Wall Street often obscured by triumphalist readings of capitalist globalization.
- Print length392 pages
- LanguageEnglish
- Publication dateJuly 13, 2009
- Dimensions6.13 x 0.98 x 9.25 inches
- ISBN-100822345994
- ISBN-13978-0822345992
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Editorial Reviews
From Publishers Weekly
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
Review
“Liquidated is an interesting description of many of the practices and orientations that exist in large investment banks, one that confirms what the reader may suspect: that these institutions are forcing-grounds for the sort of hubris and invulnerability that goes with the phrase ‘Masters of the Universe’, the incomprehensible money that sales staff receive, and the idea that they are ‘doing God’s work’. It also, however, indicates the reverse of the strength of the social studies of finance. Liquidated may help explain why those in investment banks think and operate in the ways that they do.”―James G. Carrier, Journal of the Royal Anthropological Institute
“[A] unique portrait of the industry that asks pertinent questions about constant change, job insecurity, and the banker’s identity. . . . Liquidated: An Ethnography of Wall Street asks many questions that those who work in the investment field should ask themselves. . . . Although many in the financial industry will not agree with Ho’s hypotheses and conclusions, they will be challenged by the questions she raises and enthralled by the body of fieldwork she presents.”―Janet J. Mangano, Financial Analysts Journal
“Ho’s refreshing ethnography of the daily lives of Wall Street investment bankers . . . outlines a web of practices, beliefs and structures that may be vital to understanding what keeps the market system in place despite built-in instabilities.”―Publishers Weekly
“Ho's study shows the intense competitiveness that is instilled in these primarily Ivy League recruits even before they are finished with their Bachelor's degrees. And she examines the myth that stockowners and companies are best served by maximizing shareholder profits. If anything, this book gives faces to the people who work in that abstract entity called Wall Street that seems to affect our world so much of late. I highly recommend it, especially if you have no idea how the world of high finance operates.”―James Franco, Huffington Post
“The book contains many wonderful insights, and is a veritable mine of quotations from Wall Street participants. . . . The book is, moreover, extremely well written throughout . . . . [A]n informed and informative text.”―Brett Christophers, Environment and Planning A
“[E]ngaging and hard to put down. . . Karen Ho’s book is a must-read for anyone contemplating joining one of the major global banks. . . . Actually, even faculty of our elite schools are starting to question why so many of their graduates end up in finance. Karen Ho’s book should be required reading for students and faculty at these schools.”―Ben Lorica, Quant Network
“After several decades when anthropologists at last overcame their inhibitions concerning the study of money, Karen Ho’s book . . . seems to mark a coming of age for the contemporary discipline. . . . The intelligence of its author shines through Liquidated. . . . I found it rewarding to read and reflect on, a landmark in the burgeoning anthropology of money.”―Keith Hart, American Ethnologist
“Although written for a mostly academic audience, the book becomes easily digestible because of the summaries Ho adds in each section. She connects well the main theme throughout any areas of the book. Ho’s views should not be considered ‘anti-Wall Street’ but viewed as an analysis of Wall Street’s effect on the American community and the financial markets. This book should be read by Wall Street investment bankers and corporate managers to better understand the social values and responsibilities of corporations and the role that they play in the American community.”―Linda Kee-Koa, International Examiner
“Karen Ho has picked an excellent time to publish her fascinating new study . . . of Wall Street banks. . . . As field-sites go, Wall Street is not classic anthropological territory: ethnographers typically work in remote, third-world societies. . . . Ho nevertheless embarked on her study in classic anthropological manner: by blending into the background, listening intently, in a non-judgmental way – and then trying to join up the dots to get a ‘holistic’ picture of how the culture works. That patient ethnographic analysis has produced a fascinating portrait that will be refreshingly novel to most bankers.”―Gillian Tett, Financial Times
“Karen Ho is my hero. . . . Her ethnography of investment bankers in the late 1990s, Liquidated, depicts the bravado, callousness, and contradictions that are the hallmarks of investment banking culture.”―Mitchel Y. Abolafia, American Journal of Sociology
“The book’s great strength lies in Ho’s careful observation of the means by which people succeed or fail on Wall Street, as she punctures many of the assumptions about how markets work.”―Keir Martin, TLS
Review
From the Publisher
"Liquidated is what many of us have been waiting for: a serious ethnographic consideration of finance capital. Using the best kinds of cultural and social analysis, Karen Ho gets inside Wall Street assumptions, turning them around to upend each other."--Anna Lowenhaupt Tsing, author of Friction: An Ethnography of Global Connection
From the Back Cover
About the Author
Karen Ho is Associate Professor of Anthropology, University of Minnesota.
Excerpt. © Reprinted by permission. All rights reserved.
Liquidated
AN ETHNOGRAPHY OF WALL STREETBy KAREN HODuke University Press
Copyright © 2009 Duke University PressAll right reserved.
ISBN: 978-0-8223-4599-2
Contents
acknowledgments.....................................................................................................................ixIntroduction: Anthropology Goes to Wall Street......................................................................................11 Biographies of Hegemony: The Culture of Smartness and the Recruitment and Construction of Investment Bankers.....................392 Wall Street's Orientation: Exploitation, Empowerment, and the Politics of Hard Work..............................................733 Wall Street Historiographies and the Shareholder Value Revolution................................................................1224 The Neoclassical Roots and Origin Narratives of Shareholder Value................................................................1695 Downsizers Downsized: Job Insecurity and Investment Banking Corporate Culture....................................................2136 Liquid Lives, Compensation Schemes, and the Making of (Unsustainable) Financial Markets..........................................2497 Leveraging Dominance and Crises through the Global...............................................................................294notes...............................................................................................................................325references..........................................................................................................................353index...............................................................................................................................369Chapter One
Biographies of Hegemony: The Culture of Smartness and the Recruitment and Construction of Investment BankersWhen I began to conduct fieldwork in 1998 and 1999, delving into the network of contacts, coworkers, and friends I developed at Stanford, Princeton, and Bankers Trust (BT), it struck me how often my informants ranked and distinguished themselves according to their "smartness." The term seemed fundamental to the Wall Street lexicon. My informants proclaimed that the smartest people in the world came to work there; Wall Street, in their view, had created probably the most elite work-society ever to be assembled on the globe. Almost all the front-office workers that I encountered emphasized how smart their coworkers were, how "deep the talent" was at their particular bank, how if one just hired "the smartest people," then everything else fell into place. Chris Logan and Nicolas Bern, recent Princeton graduates working at BT and Merrill Lynch respectively, explained that from their relatively fresh perspective, what was most culturally unique about Wall Street was the experience of being surrounded by, as Bern put it, the "smartest and most ambitious people." Logan added that the three qualities of success on Wall Street are to be "smart, hardworking, and aggressive. Everything else is considered tangential." According to Kate Miller, a Spelman College graduate and former analyst at Morgan Stanley, interviewees are typically told they will be working with "the brightest people in the world. These are the greatest minds of the century."
Such sentiments were not confined to eager young analysts or investment banking representatives talking up their industry to overawed recruits. Julio Muoz, who received his MBA from Harvard and was an associate in investment banking at Donaldson, Lufkin and Jenrette (DLJ), a prestigious boutique investment bank which has since been bought out by Credit Suisse First Boston (CSFB), claimed that the most distinguishing features of investment banks are their smartness and exclusivity:
People are really smart. They really don't hire any-the hiring standards are pretty good. That's one thing they really focused on doing, and that differentiates investment banking from other working environments in that they really do target the experienced individuals with good academic background.... [This] really brings to the investment banks a very elite society-somebody in society that had the means to study in X universities. If you really narrowed down the universities where the investment banks recruit, your number probably will not exceed fifteen to twenty universities.
Similarly, John Carlton, a senior managing director at BT who had worked at multiple investment banks such as Kidder Peabody and CSFB, stated that the key characteristics of Wall Street investment bankers are their smartness, aggressiveness, and self-confidence: "There is always a premium on having smart people ... so, it is highly competitive. What happens is that a lot of people say, 'Look, some of the best and brightest people are going to Wall Street. I'm pretty smart myself; I should go [there] as well. And, by the way, I get paid very well.'" Remarking on how hedge funds attract the most brilliant minds from investment banks, Robert Hopkins, a vice president of mergers and acquisitions at Lehman Brothers, exclaimed, "We are talking about the smartest people in the world. We are! They are the smartest people in the world. If you [the average investor or the average corporation] don't know anything, why wouldn't you invest with the smartest people in the world? They must know what they are doing."
The "culture of smartness" is central to understanding Wall Street's financial agency, how investment bankers are personally and institutionally empowered to enact their worldviews, export their practices, and serve as models for far-reaching socioeconomic change. On Wall Street, "smartness" means much more than individual intelligence; it conveys a naturalized and generic sense of "impressiveness," of elite, pinnacle status and expertise, which is used to signify, even prove, investment bankers' worthiness as advisors to corporate America and leaders of the global financial markets. To be considered "smart" on Wall Street is to be implicated in a web of situated practices and ideologies, coproduced through the interactions of multiple institutions, processes, and American culture at large, which confer authority and legitimacy on high finance and contribute to the sector's vast influence. The culture of smartness is not simply a quality of Wall Street, but a currency, a driving force productive of both profit accumulation and global prowess.
The key criterion of smartness is an ability to "wow" the clients-generally speaking, the top executives of Fortune 500 companies. In this sense, although technical skill and business savvy also help to constitute smartness on Wall Street, they are often considered secondary, learnable "on the job." "The best," "the greatest," and "the brightest" minds in the world are sorted and recognized through a credentialing process that is crucially bolstered by image and performance. In other words, smartness must be represented and reinforced by a specific appearance and bodily technique that dominantly signals that impressiveness; not surprisingly, such characteristics as being impeccably and smartly dressed, dashing appearance, mental and physical quickness, aggressiveness, and vigor reference the default upper-classness, maleness, whiteness, and heteronormativity of ideal investment bankers. Though here I focus mainly on the specific elitism that is the key valence of smartness, in the next chapter, I further analyze "the total package" through which smartness is recognized and delivered.
What allows investment bankers to claim smartness, what defines and legitimates them as smart in the first place, and what particular kind of smartness is being deployed? Where these questions become especially clear is during the process of investment banker identity and social formation: the recruiting, training, and orientation of freshly minted college graduates and MBAs, their initiation into the world of Wall Street. Here it is possible to discern, in starkest relief, Wall Street's cultural values in action, particularly the construction and maintenance of the hegemonic elitism that produces "expert" knowledge of financial markets. Through the continual praxis of recruitment and orientation, the Street enacts and regenerates the very foundations of its legitimacy.
Through the process of recruitment and orientation, investment banks define their notion of both what it takes and what it means to be a successful subject in an age of global capital. To play the role of "master of the universe" requires not only especially strong doses of self-confidence and institutional legitimation, but also a particular set of beliefs regarding Wall Street's role in the world and one's own role on Wall Street. Investment bankers, trained to view financial markets and corporate America through particular, highly ideological lenses, are also imbued with a sense of their own personal exemplariness as agents of and models for socioeconomic change-a sense that must be embodied, believed in, and continually "pumped up." In approaching the question of how investment bankers become empowered to advise and influence the direction of corporations in the United States and globally vis vis their personal trajectories, qualities, connections, associations, and identities, I make the case for the importance of the biographical and the institutional in enacting global capitalist change. The building blocks of dominant capitalist practices are also personal and cultural; people's experiences, their university and career tracking and choices, are constitutive of capitalist hegemony; and the financial is cultural through and through.
In particular, I focus on the construction of "the smart investment banker": a member of an extended "family" network of elite university alumni and a living symbol of know-how and global agency. Their impressiveness and financial influence are further cemented and proven by surviving brutally intense hard work and an insecure job environment, which in turn allows them to internalize the merit of their analyses and recommendations. Through the institutional culture of Wall Street broadly conceived-where job experiences and workplace incentives map onto elite biographies-investment bankers not only imbibe a particular ideology of shareholder value and spread it across corporate America, but they are also pushed to refashion and reconstruct the working lives of millions in the image of their own.
By investigating investment bankers, as individuals and as collective agents of change, I do not assume a priori that "the market" always already exercises power, but rather that the particular biographies, experiences, and practices of investment bankers, who are both empowered and constrained by their cultural and institutional locations, create social change and financial hegemony on a daily basis. Just as "it is through the 'small stories' that one can begin to unravel and challenge homogenizing discourses embedded within concepts such as globalization, 'the' market, and 'the' state," it is possible to decenter the market as an abstract agent and powerful force by demonstrating that it is only through the small and the everyday that we can understand the creation of hegemony in all its particularity and contextuality. Otherwise, we risk privileging, homogenizing, or taking for granted the metanarratives of the market, the big stories (Crossa 2005, 29; S. Smith 2005).
Recruitment
I first entered the cultural world of investment banks through the herculean recruiting efforts that Wall Street undertakes at the most elite universities. Despite my own ambivalence and feelings of mystification about Wall Street as an anthropology graduate student, this direct link-the pipeline between Princeton University and investment banks-enabled my very access to each step of the recruiting process, not to mention the field site itself. Wall Street, in a sense, came to me. Although I hardly recognized it at the time, Wall Street's ubiquity on campus, as well as the intensity of undergraduate interest in investment banking, meant that merely being a student at Princeton allowed, in a sense, automatic participant observation of this world. After fieldwork, I returned to Princeton to write the dissertation, thinking I would be getting away from Wall Street, retreating to an ivory-tower refuge in order to do some serious thinking and writing. Instead, it was more like reentering the belly of the beast. I was a graduate advisor at an undergraduate resident hall. Two weeks into the job, taking a walk after dinner I crossed paths with an undergraduate crowd (two of whom lived in my residence hall) headed toward Nassau Hall. Before I knew it, they had steered me into a Merrill Lynch presentation! The masses of students converging on these recruitment presentations and information sessions are akin to the campus traffic generated by the gatherings and dispersals of concert crowds. Already a veteran of the actual recruitment process back in 1996, now, almost four years later, after campus recruiting had even further intensified as a result of the bull market, I found myself participating in countless dining hall discussions about investment banking, attending still more presentations, and reading endless investment banking advertisements, updates, news, and opinion pieces in the pages of the Daily Princetonian. In 2000, I also had access on a regular basis to many of Wall Street's cultural representations and practices at Harvard University because my younger sister was an undergraduate there at the time. She introduced me to friends going through the recruiting process and kept me continually updated on how many of her acquaintances had suddenly, in their senior year, found their true calling as Wall Street investment bankers or management consultants. As many of my previous investment banking informants were also Harvard graduates, I have been able to make detailed observations of Wall Street's interactions with two elite universities.
More so than even the other Ivy League schools, Harvard and Princeton are the "prime recruiting ground for all of the most prestigious Wall Street, management consulting and other types of firms that offer the most sought after jobs.... The Princeton badge is a powerful currency that buys access" (Karseras 2006). As many of my informants have elaborated, "If you go to Harvard, Yale, or Princeton, there are really only two career fields presented: banking and consulting" (Duboff 2005). This shocking narrowness was verified throughout my time at Princeton and on Wall Street: I found not only that most bankers came from a few elite institutions, but also that most undergraduate and even many graduate students assumed that the only "suitable" destinations for life after Princeton-the only sectors offering a truly "Princeton-like job"-were, first, investment banking, and second, management consulting. With its extensive alumni network and juggernaut recruitment machine, Wall Street is the "de facto home away from Princeton for recent graduates, many of whom continue living together even as they take on new responsibilities and lifestyles" (Hall 2005).
As perhaps the most important feeder school to Wall Street, Princeton sends astounding numbers of recruits into financial services in general, and in particular investment banking. According to the Office of Career Services, 30 percent of the class of 2001, 37 percent of the class of 2003, and 40 percent of the class of 2005 and 2006 entered financial services after graduation (Chan 2001; Creed 2003; Easton 2006; Henn 2001). Whereas from 2000 to 2005, 470 Princeton students pursued law or medical degrees, "520 Princeton students-about 40 percent of Princeton students choosing full-time jobs directly after graduation-decided to work in the financial services sector," amounting to the largest percentage in a single industry (Hall 2005). At Harvard University, which rivals Princeton as the primary producer of Wall Street recruits, investment banking (as well as management consulting) also provides the majority of jobs for its students upon graduation (Lerer 1997). According to Harvard's Office of Career Services, in 2005, close to half of Harvard students go through "the recruiting process to vie for investment banking and consulting jobs" (Huber 2006).
As Devon Peterson, an undergraduate writing for the Daily Princetonian, observed in 2002, "It's been common knowledge that many of [Princeton's] undergraduates join the financial realm every year, creating a kind of lighthearted, self-deprecating joke about Philosophy majors becoming I-bankers and once hopeful novelists heading to Wall Street" (Peterson 2002). How do so many undergraduates who enter these institutions without any prior knowledge of investment banking, who once aspired to become, say writers or teachers, "realize" by the time they graduate that they have always wanted to go to Wall Street? How do these talented and well-connected students, with access to a wide range of possible futures, come to believe that investment banking is one of the only prestigious job options available post graduation? I argue that such changes in life courses and the attendant discursive transformations must be unpacked in order to understand the particular worldviews, cultural associations, and orientations the recruiting process demands and calls into being.
The forces that push these college students toward investment banking are obviously multiple: the particular college environment, the strength of alumni and peer networks, the cultural linking of success and smartness with Wall Street, the hierarchical narrowing of career options and what constitutes prestige, to name a few. Perhaps the most self-evident reason for Wall Street's recruiting monopoly is simply that its presence dominates campus life: recruiters visit the university virtually every week, even on weekends; they show up in the greatest numbers at career forums, panel discussions, and social events; their advertisements for information sessions, "meet and greets," and free drinks and hors d'oeuvres dominate the campus newspapers daily; their company literature and application forms are easily accessible, either at campus locations or online.
(Continues...)
Excerpted from Liquidatedby KAREN HO Copyright © 2009 by Duke University Press. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
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- Publisher : Duke University Press Books; Illustrated edition (July 13, 2009)
- Language : English
- Paperback : 392 pages
- ISBN-10 : 0822345994
- ISBN-13 : 978-0822345992
- Item Weight : 1.25 pounds
- Dimensions : 6.13 x 0.98 x 9.25 inches
- Best Sellers Rank: #692,428 in Books (See Top 100 in Books)
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And to this effort I say: why not? Economists, historians, reporters, and even Rolling Stone writers have thrown everything they've got at trying to explain Wall Street behavior, especially in the wake of the great financial crisis - and to what effect, we have to ask, if by effect is meant an easing of The Street's hold over our elected officials in Washington? When I use the term "Wall Street," I mean to cast it additionally in the role of chief augur of that difficult deity, part secular and part religious, "The Market," which casts such a pervasive, chilly shadow over so much of modern life. Although Ms. Ho's main focus is upon investment banks, when she uses the term "Wall Street," she inclusively means "the concentration of financial institutions and actor-networks (investment banks, pension and mutual funds, stock exchanges, hedge funds and private equity firms) that embody a particular financial ethos and set of practices, and act as primary spokespeople for the globalization of U.S. capitalism." (Page 4).
One of the main impediments to greater citizen understanding of what has happened to all of us under the ominous shadow of both The Street and The Market is the shield of abstraction, of impenetrability, which surrounds them. That is nowhere more apparent than in the daunting nature of their derivative "products," such as mortgage-backed- securities, credit default swaps, and interest rate swaps, which have been the focus of so much analysis, if not understanding, during the crisis. Yet what was it that enabled The Street to have such a hold over us all, to market these incomprehensible investment instruments so easily? Karen Ho acknowledges the power of those abstractions over us, noting that "many academic critics of market fundamentalism inadvertently take as foundational the notion that the economy has become `disembedded' from society, that financial market logics - as utopian ideals - are being used to abstractly shape social relations, leading to social violence and inequality on a global scale..."(Page 33.) She also takes note of the trend towards "dematerialization," away from making physical things and towards more ephemeral financial inventions. Yet she offers us, in Liquidated, a very different approach, and asks: what if we stopped accepting all the abstractions about The Market, and the aura of The Street, and actually looked at "the local, cultural habitus of investment bankers, the mission-driven narratives of shareholder value, and the institutional culture of Wall Street?" In blunter terms, she says "allowing finance to be simply abstract lets it off the hook."(Page 34.)
There are really two main strands to Ho's work: Wall Street practices, and the values behind them. Of course, there is a close connection between the two, and they often shade into one another. We're going to look first at some of the startling practices of The Street, of the investment banks, in particular, and then at the values presented in a long series of interviews Ho conducted - the heart of her field work - which allows the practitioners to tell us in their own words what they believe they are doing in their job, how they see themselves in relation to corporate America, and what it means for the broader economy.
But before that, some facts, and thoughts, about Ho herself. She doesn't waste any time in putting her own values on the line. In the Acknowledgements, she tells us that "an intellectual commitment to social and economic justice first galvanized this book's journey" and that her "search to understand the massive sea changes occurring in American business practices during the past three decades took me to the doorstep of Wall Street investment banks..." And on the first page of the Introduction, we learn further that it was the massive lay-offs at ATT in 1995 and that decade's compulsive downsizings, often resulting from "merger and acquisition" syndrome - and the celebratory mood on Wall Street towards these job loss tsunamis - that really got her started. So one wonders, right away, how did someone with values like these ever make it inside The Street? Well, Ms. Ho had some credentials that we come to understand The Street looks upon very favorably, primarily, her Stanford and Princeton degrees, and also the sense that Wall Street seems favorably disposed to the Asian association with smarts and hard work. So she was hired at Bankers Trust in 1996 as a "`internal management consultant,'" but lasted just a brief time before getting "liquidated" herself. Nonetheless, she was able to network well enough to conduct 17 months of field work from February of 1998 to June, 1999, across a range of institutions.
I suppose these facts, as well as her descriptions of what she had to do in her last months actually working on The Street, might lead some observers to render the judgement that Ms. Ho has some "axes to grind." Yet she presents her field work findings with a remarkably light touch, allowing generous room for Wall Street's finest to tell us what they are up to and how they justify it. In her interviews, in her own questions and gentle coaxings, she reminded me very much of the verbal style of Public Radio's Terry Gross, the voice behind the "Fresh Air" interviews. So there is no ax-wielding by Professor Ho here, just some finely turned dissection with very sharp mental instruments. And, interestingly enough, there are no charges of Wall Street hypocrisy made, or to be made, from the findings. In fact, we learn that Wall Street, in matters of hard work, its own self-inflicted job insecurities, the focus on the short term performance of the stock market, and its own corresponding lack of planning, is consistent with the values and pressures it applies to the rest of corporate America. I don't know whether that finding comes as a relief to readers or not. As for me, the code of Wall Street is scary enough in its implications for our economic and civic life not to need any hypocrisy to embellish the damage that has been done.
Wall St. at Harvard and Princeton: "A Communal Obsession"
As we continue to ask ourselves, "how could it all have happened," that is, the financial crisis that nearly plunged the world into a second Great Depression, we should not forget the nature of the salespeople who peddled the faulty investments which almost brought it on. That's conveyed to us in a startling way in Chapter One, which Ho has entitled "Biographies of Hegemony." In an interview (individual names are changed, the institutions' kept) with a "Robert Hopkins, a vice president of mergers and acquisitions at Lehman Brothers," the pitch is: "`We are talking about the smartest people in the world. We are! They are the smartest people in the world. If you (the average investor or the average corporation) don't know anything, why wouldn't you invest with the smartest people in the world? They must know what they are doing.'"(Page 40.) Now where do you find the smartest people in the world? Arguably, but conventionally, the answer would be mostly at Harvard, Princeton and the Wharton School at the University of Pennsylvania. Why not MIT, and Stanford, and what's the matter with Yale? Well, maybe it isn't quite all about smartness. In fact, it's about cultural projection too: clothes, confidence, aggressiveness contained within good manners, body image...in brief, it's smartness well-packaged, because salesmanship for financial products, deals and mergers, scanning the horizon for new customers, depends on wide business networking and social interaction with corporate America, and beyond...as we will see shortly. So sorry MIT, Ho tells us ("too nerdy"), Yale ("too liberal") and Stanford ("too far" - from Wall Street, that is)...
Two things jolted me about this smartness motif and the recruiting process at Princeton and Harvard. One is the astounding numbers of undergraduates that want to ascend into this celestial orbit; at Princeton, from 37% of the class of 2001 up to 40% of the class of 2005 & 2006 "entered financial services," with similar numbers for Harvard. How could that be done? The answer is not pretty: Wall Street's presence "dominates campus life: recruiters visit the university virtually every week, even on weekends...the recruiting process saturates almost every aspect of campus life from the very first day of the academic year."(Page 45.) Ho presents us with a two page spread of "Goldman Sachs Recruitment Schedule at Harvard University, 2000-2001," and I count 30 or so events, multiples in every month from September through February. It's so Wall Street saturated at these schools that Ho says "a glance at the campus publications...demonstrates what amounts to a communal obsession..." (Page 53.)
It was in the light of Ho's illumination that I read with great interest Harvard President Drew Gilpin Faust's September 6, 2009 NY Times Op-Ed, "The University's Crisis of Purpose." It's a retrospective and lamentation at the same time, in the wake of the Great Financial Crisis, and what universities had become, unable to "expose the patterns of risk and denial" contained in that "bubble of false prosperity and excessive materialism..." She asks if "universities (became) too captive to the immediate and worldly purposes they serve" and, "has the market model become the fundamental and defining identity of higher education?" Noting the trend, since the 1970's, for business degrees to outnumber by a 2:1 ratio the next most popular major, she reaffirms a mission for higher education to "offer individuals and societies a depth and breadth of vision absent from the inevitably myopic present." This sounds hopeful, but the trends of 30 years of Market Utopianism, and the vast shadow cast by The Market, will not be lifted in an instant, barring a further economic catastrophe on the scale of the Great Depression.
Readers who would to see more commentary on Liquidated, and other works, are invited to visit a longer essay: Sinners in the Hands of an Angry Market at [...]
William Neil
Rockville, MD
Liquidity means different things to different people. For the bond trader, liquidity is a fact of life. An asset has to stay liquid if it is to be sold without causing a significant movement in market price and with minimum loss of value. Money, or cash, is the most liquid asset, but even major currencies can suffer loss of market liquidity in large liquidation events. When even safe assets are considered high risk, flight-to-liquidity might generate huge price movements and lead to a panic. For an investment banker, liquidity refers both to a business' ability to meet its payment obligations, in terms of possessing sufficient liquid assets, and to such assets themselves. If a business is unable to service current debt from current income or cash reserves, it has to liquidate some assets or be forced into liquidation. For ordinary people, being liquidated means to lose a job, which in the US can happen on a brutal basis: you pack your personal items in a box and go. But even then, there are differences: for a banker, the line "you are fired!" means it is time to return the calls of headhunters, while for a CEO liquidation often comes with a hefty severance package or golden parachute.
Liquidation therefore provides a meaningful metaphor of how Wall Street operates. According to Karen Ho, liquidity is part of investment bankers' "ethos" or "habitus". Borrowed from French social scientist Pierre Bourdieu, these two concepts refer, first, to the worldview, and second, to the set of dispositions acquired through the activities and experiences of everyday life. They are the result of the objectification of social structure or "field" at the level of individual subjectivity. By using these concepts, Karen Ho's goal is to demonstrate empirically how Wall Street's subjectivities, its specific practices, constraints, and institutional culture, exert powerful systemic effects on US corporations and financial markets. Investment bankers live in a world where jobs are highly insecure, and they get paid for cutting deals or trading assets. They tend to project their experience onto the economy by aspiring to make everything "liquid" or tradable, including jobs and people.
Downsizing, restructuring and layoff plans are not only business decisions based on economic rationality and abstract financial models: they are the predictable outcomes of a peculiar corporate culture that values liquidity above all else. It is important to note that the people heralding downsizing and job market flexibility themselves experience it firsthand. Investment bankers are constantly subjected to boom and bust cycles and to waves of restructuring, even during bull markets (before writing her PhD dissertation, Karen Ho did a stint at Bankers Trust and lost her job when her team was dismantled). They live their professional life with an updated CV at hand, and are constantly solicited by headhunters and placement agencies. By pushing deals and reengineering corporations, they are projecting their own model of employee liquidity and financial instability onto corporate America, thereby setting the stage for rounds of market crises and layoffs.
While no terrain is considered off limits for modern anthropology, Wall Street is not usual territory for doing fieldwork. As Ho notes, you cannot just pitch your tent in the lobby of JP Morgan or on the floor of the New York Stock Exchange and observe what is going on. Chances are, security guards will throw you out in the matter of an hour. Besides, you won't be able to gain much relevant information, as a lot of what goes on in corporate banking happens behind close boardroom doors or as the result of abstract computer models. Negotiating access to the field is always an issue for anthropologists. In the case of Wall Street, the difficulty is compounded by the culture of secrecy and the strict control over corporate information exerted by financial institutions.
In addition, bankers are in a position of power relative to anthropologists. They can humble the apprentice social scientist with their cock-sure assertiveness and technical jargon. For an anthropologist, the challenge of "studying up" and researching the power elite is very different from the issues raised by "studying down" distant tribes or dominated social groups. The way Karen Ho went around this problem of access was pragmatic and opportunistic. She first landed a job in an investment bank to familiarize herself with the field. She then used her university connections, former colleagues and network of contacts to gather as much information as she could. Her field methods included structured interviews, casual conversations, and participant observation at banking events such as industry conferences or recruitment forums. She finally ordered her data into a narrative that described, in true anthropological fashion, the tribes, rites and myths of Wall Street.
Investment bankers form an elite tribe. They are the leaders of the pack, the smartest guys in the room. Their culture emphasizes smartness, hard work, risk taking, expediency, flexibility, and a global outlook. They look down on Main Street corporate workers, whose steady, clock-watching routinization produces "stagnant", "fat", "lazy" "dead wood" that needs to be "pruned". They are the market vanguard of finance-led capitalism, and perceive themselves as exerting a useful economic function. They hang around in the same places: gourmet restaurants, uptown watering holes, week-ends in the Hamptons, and jet-set vacations in exotic locations. Investment bankers form distinct sub-tribes or "kinship networks": they are the "Harvard guys", or the guys from Yale, Princeton, or Stanford. Individual employees are not only known and referred to by their universities but are also seen as more or less interchangeable with others from their school. The investment bank is organized into a strict pyramid, with the overall dominance of the "front office" over the "back office" and the hierarchy between analysts, vice presidents, and managing directors. Few new hires ever make it to MD status: Wall Street functions as a revolving door, where organizations are constantly restructured and reconfigurated.
Karen Ho explores several rites that define investment bankers' corporate culture: the recruitment process, the integration into the firm, closing a deal, getting promoted, negotiating a bonus, and hopping from job to job in an industry that applies a "strategy of no strategy". Smart students from Ivy League universities do not choose Wall Street as much as there are chosen along a natural path that makes investment banking the only "suitable" destination. They go through several rites of initiation that ingrain in them a sense of superiority, hard work, and professional dedication. Most of Ho's informants experienced an initial sense of shock at the extraordinary demands of work on Wall Street, though over time, they began to claim hard work as a badge of honour and distinction. A tremendous amount of energy is spent in determining compensation via end-of-year bonuses. As they themselves acknowledge, bankers do it for the money, and the amount they earn determines their sense of self-esteem and their position in the corporate hierarchy.
Bronislaw Malinowski, as quoted by Karen Ho, writes that "an intimate connection exists between the word, the mythos, the sacred tales of a tribe, on the one hand, and their ritual acts, their moral deeds, their social organization, and even their practical activities, on the other." The myths of Wall Street are the lessons taught in business schools and financial theory courses: the superiority of shareholder value and the relentless pursuit of profit maximization. These myths of origin are not always coherent. Investment bankers and consultants in the sixties heralded diversification and growth in unrelated sectors, before moving to a new mantra of "core business focus" and downsizing. Breaking up the conglomerates they helped assemble in the first place created a whole new source of profit for bankers. Similarly, stockholders were once described as fickle, mobile, and irresponsible in relation to corporate managers. The shareholder value revolution inverted the picture, and financiers pressured companies and their managers for profits and dividend payments. These "sacred tales" taught in business schools are also myths of legitimization: for Wall Street, the role of bankers is to create liquidity, to "unlock" value that is trapped in the corporation and to allocate money (as in the takeover movement) to its "best" use.
Karen Ho's ambition is to offer a "cultural" theory of corporate finance. In her view, strategy is produced by culture, and "the financial is cultural through and through". She constantly emphasizes the fact that investment bankers actively "make" markets, "produce" relations of hegemony and "create" systemic effects on US corporations through their corporate culture and personal habitus. Wall Street narratives of shareholder value and employee liquidity generate an approach to corporate America that "not only promotes socioeconomic inequalities but also precludes a more democratic approach to corporate governance". Of course, it can be argued that culture does not explain everything, and that Karen Ho's perspective in turn only reflects the views of a particular tribe: that of the cultural anthropologist. There is also the fact that Liquidated focuses on yesterday's battlegrounds: the focus is on corporate equity and M&A, which were the high-profile areas everyone could see, while the dark pools of CDOs and over-the-counter derivatives were left completely off the hook. The book was completed in 2008, and the subprime crisis is only alluded to in a coda. But despite these obvious limitations, Karen Ho's book provides a salutary perspective on the banking world, and should be made mandatory reading for any MBA student or financial PhD before they embark on their master-of-the-universe carrier. Maybe investment banks should also do well to hire their in-house anthropologist.
Top reviews from other countries
Karen Ho provides great insights into the workings and culture of finance. Eventually, it is quite depressing to see how little seems to have changed since the 2008 crisis, and how helpless governments seem to be in addressing the structural problems of financial institutions and financial markets. Also, the book provides a great starting point for those teaching economic sociology, finance and accounting, and marketing, to revise their syllabi that they include issues like 'profit', globalisation, markets, etc.






