Morning Coffee: The optimal age for taking the best job at Morgan Stanley, why top hedge fund men know this woman
Lots of the bank bosses profiled for Euromoney’s 50th birthday “CEO Agenda” series have tried to keep it general, talking about the importance of history or passing on analogies about their imaginary pet cow. For Morgan Stanley’s James Gorman, though, there’s a serious item on the agenda – with his long term lieutenant Colm Kelleher retiring, who’s going to be the CEO after Gorman?
Succession planning problems have historically not been handled very well in the investment banking industry. If they had been handled better at Citigroup, Jamie Dimon might be the CEO there today, rather than at JP Morgan. Succession planning issues also appear to have played a secondary role in the Andrea Orcel affair. But Gorman has a reputation as a long term planner, and he appears to be setting the process in motion well ahead of time – with an estimated three to five years to go until his own retirement, he’s setting the wheels in motion.
Interestingly, there’s no signs of any plans for a global search for the next Morgan Stanley CEO – as far as Gorman’s plan is concerned, the ideal candidate is going to be an internal promotion. According to the Euromoney interview, ““We have a strong senior team, all of them in the mid 40s to early 50s”, referring to the six division heads who used to report to Kelleher and who will now report directly to Gorman so he can get to know them a bit better. In some short time, one (or possibly two) or these candidates will be promoted to Kelleher’s old job title of President, and will become the heir apparent (or possibly the two rivals for the throne).
The remarks about age are pretty significant. Gorman himself is 60, and seems to be planning on retiring at 65. The next CEO will, by the time of promotion, be in his or her late forties to late fifties, and according to Mr Gorman, is likely to take three or four years to really get into the groove of the CEO role. Assuming the next CEO also retires at 65, that would give Morgan Stanley between five and fifteen years of stable leadership before the next succession cycle begins.
Why does it matter? Well, all the evidence from psychology and medicine suggests that people’s professional skills and sharpness peak a lot earlier than anyone would necessarily like to admit. Success and productivity tend to increase for the first twenty years in a job and then start to decline pretty soon after; if we discount the analyst and associate stages as part of the training process and say that an investment banker’s career begins in earnest at about 30, this would mean that the next Morgan Stanley CEO might be just about to peak when they get the job.
This is probably about right; analytical sharpness isn’t necessarily more important than relationship building and experience at the very highest level, and in many ways it makes sense to have the best bankers spending their peak performance years on revenue generation. But the decline is real – air traffic controllers have mandatory retirement at 56, for example. It’s an unpleasant thought, but the moment that one of Gorman’s favoured six gets the nod, they need to be thinking about the inevitability of decline.
Elsewhere, what’s “the biggest myth” about hedge funds? According to Ilana Weinstein, it’s that working in one is “a quick way to get rich”. She doesn’t expand on this point, which is a shame as that’s surely the whole point of doing it. Although, since her successful headhunting business has brought her to the point of gala dinners and being toasted by Steve Cohen, she might have a more ambitious definition of “rich” than the rest of us.
Her interview with the WSJ definitely brushes against the boundaries of political correctness; although she says “we have to do a better job of recruiting women” to hedge fund jobs and deplores the lack of role models, she also wishes “there was a deeper pool of talent to draw on”, speculates that “the stress and volatility” might be a factor preventing female talent from coming forward and says that “At the end of the day, we’re not going to pop a woman in the seat to have a woman. It’s about having the best possible person in that seat”. On the other hand, she reckons that the worst possible characteristic for a hedge fund trader is arrogance and dogmatism, and notes that men don’t exactly like stress and volatility either.
Meanwhile…
Firing employees is one thing, but Citigroup has started firing clients. After regulatory changes forcing banks to put up more capital and collateral (and a $180m loss on prime brokerage lending to a hedge fund last year), Citi’s FX prime brokerage has informed a number of clients (including some big proprietary trading companies and market makers) that it no longer wants their business. (Financial News)
A warning from the courts – whatever the merits of your case, whether or not your compliance officer non-consensually stroked your hair and whether or not the divisional managers referred to your complaint as “Hairgate”, if your contract of employment was in Dubai where the alleged events took place, then an Employment Tribunal in London isn’t the place to make your argument. (Bloomberg)
Neil Woodford’s one time nemesis, Kerrisdale Capital gets in a cutting insult – they are no longer shorting the stocks he owns, because they’re too small. (Financial News)
Of the 468 hedge funds that have used Goldman Sachs prime brokerage since 2009, nearly half are no longer in business, and most of those which closed did so after three years or less. If you can start with $1bn or more under management, though, your odds of survival are much better (Bloomberg)
The investor relations professional’s worst nightmare – you stick to the presentation, convey the message, but analysts pick up something unquantifiable in your tone of voice and the stock tanks. It’s not clear what went wrong for Danske Bank this pre-close season, but something seems to have. (Bloomberg)
“Every ten turns you must draw a Bitter Resentment card”. Job Hunt, the board game. (McSweeney’s)
The more unequal a society, the more likely people are to believe that the rich deserve to be rich (FT)
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