October 20, 2008

Some real examples of greed.

Writing about Greed from Kang's blog

I was reading Kang`s (Louis) entry on his blog about greed. I`m sure he was inspired by the lecture we  attended on Friday about the credit crunch (by the way, great lecture this time the tutor spent quite sometime explaining some basic economy concepts that are fundamental to the understanding of the whole thing). I have my personal opinion about the CC, but I wanna talk about two things I`ve seen in my life, real stuff, real experience that will help illustrate both what the professor and Kang said.

1st. I`ve been working in banks for quite some years now. I`ve always worked on international Banks from different countries. I`ve worked in several different areas and projects. I`ve worked in some different cities as well. All these things change people. For example, working for a British bank is very different from working in an North-American one. Several differences in recognition policies, pace, style, priorities, etc etc. But there`s something that is ABSOLUTELY the same in every bank (and from my experience it is the same all over the world). The traders (these are the guys who really decide what to make with the banks money, were to lend, from whom to borrow, what rates to pay, what rates to accept, etc etc ) are young, addicted to gambling and taken risks, self-confident and VERYYYYYYYYYYY well paid. I`ve seen people with 28, 29 years old, little experience and no managing of people getting paid as much as people with a 25-30 years career, managing structures with hundreds of people, etc etc. They usually don`t have a high paycheck, but they`re bonuses.....It`s funny because most of them don`t stay that long as traders. They usually make a lot of money in a few years and them go to open they`re own business, go to work in other areas of the financial industry with a different profile (Mergers & Acquisitions, counselling, etc etc). I `ve asked many people (and human resource professionals as well!) why there was such a difference. The logical explanation is that it`s hard to find appropriate and qualified people from the job, and there are only very few spots. I think that explanation is not complete. It sure has it`s logic, but I don`t think it fully explains this because even though a certain profile (personality wise) is needed, the technical knowledge itself can be learned by anyone with a reasonable background in maths. The rest is pretty much a consequence. There`s another interesting explanation. It says that people are paid not for the amount of the money they bring to the organisation, but by the amount of money they can make the company loose. In the light of the credit crunch recent facts, that second explanation does make a lot of sense, doesn`t it?

2nd. I had a brilliant teacher on my MBA.  He is a reference in finance in Brazil and currently he is living in China, working as the head of the office for the second biggest Brazilian bank, working with corporate finance (http://en.wikipedia.org/wiki/Corporate_finance). He lectured us on International Iinance. In the place where I had my MBA we used the Harvad method, therefore we had a case to be studied for every class. We had 13 lectures with him, and 11 case studies, all of them about countries and companies that had somehow been through crisis. In the last day we did some discussion about the common causes. In this day he said something that I always remember when I think about the credit crunch
He got to us and he sad:
"We are all very clever now. Pointing the mistakes of several government officials from all over the world, several very senior economists. We must all been thinking that we would have been able to avod it because we are hear criticising it. But it`s not. First because each crise has it`s own dynamic, and as we all know history is really a mirror looking at the past. And besides that, that`s not how things work in real life. When these crises arrived, people knew there were problems coming but they could not do much to avoid it. First because we are eternal optimists, but mainly because all companies are driven by results, that`s not what they say and how they would like it to be. But when you look at your competitor making money, even though he`s taking more chances and risks, you just can`t say you are not going to make money because you think that this is dangerous., that can bring additional risks (off course respecting the law and all the banks regulations). That`s not how most companies work. You are always compared to your competitor. And don`t think another crise is not about to come, they`re always about to come because we are always relaxing our controls and thinking we are safe"
And he went on and talked about several potential crises we could face including the risk of a buble burst in the housing market in America (even though I`ve been hearing about the chance for YEARSSSS now..)..
But the point is, companies are frequently driven by short term greed in here too.
Well, that are two real stories I saw/heard that I hope will help illustrate Kang`s points.
Francisco

 


- 8 comments by 1 or more people Not publicly viewable

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  1. Apollo

    Really interesting working experience, I would like to have that much experience like you…

    20 Oct 2008, 21:50

  2. Apollo, is just a matter of time!

    20 Oct 2008, 21:53

  3. Having working experience and MBA degree is quite good for you to this further MBE study~ And my undergraduate major is also finance, maybe sometime we can communicate about the financial issues~ I think I can learn quite more from you~ok?Francisco? (__)

    20 Oct 2008, 22:03

  4. oh, I want to print a smile face, but it shows like (¡ª¡ª)
    what a pity~never mind~

    20 Oct 2008, 22:04

  5. Yes, we can talk about finance, that`s a subject I like very much!

    20 Oct 2008, 22:50

  6. For finance companies it seems they have less choice because their product is based on bringing high rate of return for their customers. Unlike manufacture or other service industries where values are added to the economy, finance companies focus on analysing the market and make short term profits. These are the real businessmen where the concern is how much $$ is brought through the door, nothing else.

    It wouldn’t be a surprise to me then, that they are purely profit driven because that is the ONLY way they can survive, not by product differentiation , not innovation , no nothing… this is probably a bit of a extreme view. Lou

    22 Oct 2008, 01:39

  7. Hero

    One of the main problems is that people who go into business are often the people who want to go into finance not those who are good at it. The pool that employers are picking from is not ‘all competent people’ but ‘all people who want to go into finance’ a good majority of these are motivated by greed and lifestyle aspirations and so the pool is ‘the most competent from a pool of people motivated by greed, high bonuses and expensive lifestyles’

    If recruiters looked across the board perhaps fewer stupid guys with big aspirations would be in powerful positions.

    I have a business qualification and have also undertaken some higher level study in business. Many of my peers in the class were business obsessives, always attended in (what I call) twat shirts (i.e. any shirt as long as it needs cufflinks – these tools think that ‘cufflinks = competancy!’, wore expensive watches to ‘prove’ they were the right calibre, and were thick as pig shit. I mean that truthfully I sat next to one who had about 20 pages of notes on a case study who came up with a decision to slash staff and cut the selling cost of the company’s product – in order to ‘make the company profitable’ – actuallly when the model panned out it closed the company in record time – he got a job as a manager in the NHS. This was typical, yet I and a few others who were interested but not obsessed by business, were going in reading the case studies, coming to decisions in the class and when these were modelled out they consistently stimulated growth.

    The problem is that many who want to be managers in big companies – and especially in finance, is that they are one-dimensional and tend to gget stuck on a mantra rather than examining each problem at face value – normally the mantra is ‘save costs, make it cheaper’ but sometimes it is ‘increase margins, charge more’. finance people tend to be ‘sell fast buy fast’ so the impact of confidence is high into which direction they jump.

    If we looked more carefully at why and who we appoint in these risky positions, we might be better off.

    23 Oct 2008, 09:03

  8. fishing tackle

    Interesting

    08 Jan 2009, 14:44


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