Equity for Punks
While the supermarket shelves are bulging with new product lines brand loyalty is shrinking faster than an MP’s expense account.
The markets have moved beyond mature to overcapacity. Choice might still be king but increasingly it's confusion that rules.
Unless of course your offering equity for punks.
Stuff that Sticks
Kweku Adoboli It's always the ones you least suspect
Anyone who is in any doubt as to the power of values and the extent to which they drive a business and its financial outcomes need look no further than UBS. The latest ‘rogue’ trader to run up losses of £1.3 billion is a junior who rose up the ranks from the back office-trading floor.
UBS are not the only bank or company to be blighted by rogue syndrome. In the last year and a half we have had rogue reporters, rogue MP’s, and rogue policemen. In each case there has been a call for stricter regulations, more checks and balances more transparency. Historically these measures have a poor track record treating as they do the symptoms rather than the cause.
UBS who has a history of rogue traders, dating back to at least 1998, had according to their latest press release put in stringent safeguards to prevent such a thing ever happening again. Interestingly the only difference between UBS’s 1998 losses and those incurred in 2011 is the amount which is three times larger than that lost in 1998.
In the game of Monopoly that is investment banking the win lose stakes are high. Those that are prepared to take the risks can expect to pick up their own slice of Mayfair. Those that gamble and lose don’t pass go, don’t collect their £200 and risk going straight to jail.
Risk, the core value that drives this carrot and stick game has created an American ‘frat’ house culture. The basic entry level requirement for ‘frat’ members is the willingness and the ‘balls’ to take risks. As part of this rite of passage new members can also expect to undergo a series of hazing (harassment) rituals from other more seasoned members of the club.
The real power of these value driven cultures lies not in their financial rewards, which is the icing on the cake, but in the fraternity they create, frat coming from the Greek ‘frater’ which means brother. The club’s uncompromising rules to entry are designed to foster feelings of privilege and belonging. Once inside there are some clear, if unspoken guidelines, on how to improve your standing.
Junior members more than anyone else are required to prove they have the balls to embrace the company’s risk taking culture. The more able they are to effectively embrace that culture, the bigger their balls, the more power they can exert. The more power you can exert the safer you are. Ironically for those traders working in investment banking safety comes from taking ever-greater risks.
The value driven cultures that epitomize those found in investment banking are inward looking. The ability to accumulate the all important cultural trophies of money and status, are what really counts. Loyalty is to the group anything that might threaten the group becomes the enemy.
How effective will new legislation, increased safety checks and balances be in curbing the excessive risk taking and the hazing that helps to perpetuate it? If the same legislation that was used to ban the excessive hazing techniques in frat houses in the states is anything to go by, not very effective at all. Frat houses have longevity and resistance to change built into their DNA.
The UBS PR machine would have us believe that Kweku Adoboli, the junior trader at the centre of the latest UBS debacle, is a bad apple, a rogue trader that slipped through the net. The reality is that most rogue traders are not unprincipled outcasts waiting for the chance to buck the system, they are the system.
I don’t think anyone would argue that it takes a certain kind of balls to rack up £1.3 billion in loses. Unfortunately for Kweku Adoboli the only balls he’s likely to be carrying around for the forceable future will be those attached to his ankles.
On the bright side a stretch in goal might give him plenty of time to reflect on the values that have lead to his demise. We can only hope those companies and organisations who have been effected by rogue syndrome will do the same. If the UBS track record is anything to go by I wouldn’t bank on it.
