Friday, May 11, 2018

Friday Feature Book Review: Swimming with Sharks (A Hedge Fund Journey): Joris Luyendijk なぜ僕たちは金融街の人びとを嫌うのか? (ヘッジファンドの物語): ヨリス ライエンダイク

This is an excellent overview of the World of Finance and its unique culture. The author started the project knowing nothing about anything financial. Via interviews he figures out as a true beginner how all of the parts fit together. This was a blog project started by the UK newspaper "The Guardian" and gained a lot of popularity. Many in the public started bashing bankers of all types. We learn that, "it is not the people that are bad, it's the culture". One defense was curious. Saying that all bankers are bad is like saying "all athletes are bad because a few are caught for doping". I can see the logic now with that observation.

We learn a lot about the functions of different people with a bank versus a securities company versus a regulator. We learn about how front office traders (the tigers) differ from those within middle (the type B personality chimpanzees) or back office function (the worker bees). All are considered "bankers" but only a few seem to be the ones who the media go on about, the top 5% of earners. I like the saying, " this job involves selling your soul for a good salary", that does seem correct.

How did the financial crisis begin in 2008 anyway? Who was responsible? Why hasn't anybody gone to jail? This was a basic starting point of the blog, but many layers of the financial world are explored. It was important to understand how it worked, or didn't in many key cases. The first thing the author discovers is the "unspoken understandings" that exist within any bank. As an outsider, the author finds out what you can ask about and can't very quickly. he also finds out that no single person, or entity can really be pointed out as uniquely responsible for the crisis.

For anybody already working inside a financial institution, it all rings very true. For anybody looking to get into finance or switch careers, this can be a big eye opener. It really explains what the culture is like, who the people are, and what types seem to do well in certain kinds of roles. As far as a bigger picture on finance though, other thoughts are insightful. Are investment banks "too big to fail" or are now just "too big to save". Are they in fact "too big to manage" anymore? When too many in senior roles do not know what others in the bank are really doing, isn't this a bad sign? 

The Top 3 Takeaways from this book that impact any reader are:

1) There is no single person or small group who was responsible for the Great Financial Crisis of 2008.

2) A globally integrated system of finance with weak laws & guidelines was the true root cause of the crisis.

3) Nothing major has changed within this financial system, and a new trigger like an IT glitch could start a bigger crisis.

I come away with more questions on what "should be done by the end. It seems that even for an outside, the system has grown out of control by management and the regulators. How can this be fixed or improved? The amoral nature of the shareholders who now own most of these publicly listed firms, have no real interest in changing the system today. The whole worldwide financial system is interconnected and works in ways it was never intended to. A kind of global evolution gone wrong. It does not matter if Quants, Artificial Intelligence or any other FinTech innovations develop in future. 

The core foundation of global finance seems to need a big re-think. The biggest question is will the world make the changes in time, or will a meltdown in a bigger future crisis force this change only later? Investment Banks, Private Banks, Asset Management, Insurance or any other part of the financial system may need to be redone. I do not have all of the answers today, but after reading this book, I certainly feel that know what issues need to be addressed. Highly Recommended!

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