Seriously, those of faint disposition should have a cushion handy to hide behind!
How often do we read about and debate the moral dilemma of mere mortals "playing God" in areas such as medicine, e.g. stem cell research, and physics, e.g. creating anti-matter – but do we ever have that debate in financial services?
On the publicly available evidence of incidents such as Barings, SocGen, etc. – maybe we should?
However, on the hidden evidence I have personally witnessed and been privy to this week – absolutely!
You will understand that I can not reveal any specific individual or company names here. But the evidence is so scary that I feel obliged to share it anecdotally.
[Scene 1]
This week, in the wake of the SocGen debacle, I met someone working in equity sales at one of the World’s most prestigious investment banks. This person predominantly sells to the buy-side, i.e. institutional investors and in particular pension funds.
[You just realised you’re sitting all alone in a house in the middle of nowhere!]
The reputation of their employer in the market, the perceived quality of their research and, dare I say it, size of expense account means that their job is not too hard – calls are taken and meetings are easy to arrange.
This person admitted, however, that a number of clients are currently suffering huge loses.
[Is that a knock at the door!?]
And, calls are coming in from desperate pension fund managers that go something along the lines of…
[Don’t answer the door!]
Fund Manager: “Why the f*** did you recommend we buy XYZ!?!”
Equity Salesperson: “Did I really say buy XYZ? I don’t remember that – but I am sure that if I did in the past it was based on what you considered sound research at the time.”
[Strange – the phone line seems to be dead!]
So here we have mere mortal messengers influencing other mere mortals, based on research by yet more mere mortals, who are “playing God” with our futures (pensions).
[Why are you still going to the door?!?]
The consequences for an equity salesperson of delivering advice that turns out to have been a mistake to follow are negligible when compared to the potentially huge impact on our lives!
[Scared? You should be – but the movie is just about to take a new twist!]
[Scene 2]
Later, the same day, I am having dinner with a very senior rising power and charming person working for one of the largest processors of financial transactions in the World. We are midway through our meal, its about 8pm, when they receive a call from their
head of operations.
[I told you not to open the front door!]
My guest calmly takes the call – they have an operational error to the tune of €1.9bn.
[Holy sh*t! There’s no one at the door! They’ve gone around the back of the house!]
The good news is that the problem is apparently fixable.
[Phew! It really is the pizza delivery person after all – no worries!]
My guest then reveals that they know a similar, even bigger, organisation to theirs that had an €65bn operational error to deal with not so long ago.
[Oh cr*p! Another knock at the door – but you only ordered one pizza!!]
They were also able to correct the error.
[You were ready to scream?! But its OK, it’s the pizza delivery person again – they forgot to give you your free garlic bread and drink.]
So now I am wondering – for every Barings, SocGen, etc., where the error(s) can’t be corrected and swept under the carpet, just how many potentially huge catastrophes are averted by mere mortals having to “play God” with the World’s financial and economic
health?
No disrespect to anyone intended but, however much people in financial services are paid to take such responsibilities, I think I prefer the idea of trusting highly trained seriously smart scientists with stem cell research and quantum physics.
I think we may have a moral dilemma here worth debating?