In the autumn of 1998, I departed from the asset management division of one global bank and arrived at the asset management division of another global bank. I didn’t know for sure at the time, but it later turned out – as I hoped it would – that I had moved to a much better job at a much better firm: a spring in the fall. After a couple of weeks, I was asked to travel to San Francisco to meet some of my new colleagues at the US headquarters. Thus, it came to pass, just over twenty years ago, very early on a Monday morning in mid-December, on a trading floor high up on Fremont Street, I was first introduced to Peter Freilinger.
I think it is fair to say that during the first months of our acquaintance there was an element of caution from both parties. In part this was due to some irritating but humdrum office politics, in particular the behaviour of a member of the senior management team, who proved to be an obstacle to the development of a constructive working relationship between us and, in due course, sabotaged each of our careers at the firm. However, in part this was also due to the hesitation that is all but inevitable when the formerly precocious meets the currently precocious: we circled each other, mostly respectfully but also a little warily. Time passed, we both changed jobs, Peter moved from one country to another, the financial crisis came and went, and as we become older, we also grew wiser: eventually respect won out over wariness, and we became friends.
Over the years, I discovered that he is a good banker in both senses of the word “good”: technically, he exhibits a very high level of proficiency across a wide range of skills and tasks; at the same time, he reflects carefully on the ethical dimensions of his work and takes his responsibilities – to colleagues, clients and wider society – seriously. This combination is rare; not as rare as some of the lurid representations of the financial services industry served up by Hollywood might lead one to believe, but nonetheless rare enough to be prized when we stumble across it. I saw in Peter the combination of competence and conscience that I admire; and, I suppose, he saw something similar in me: let’s call it elective affinity.
I want to say more about the importance of skill in the financial services sector, but first a short digression. While it seems straightforward to distinguish the two different senses of the word “good” – one meaning highly proficient, the other meaning morally commendable – I find myself repeatedly drawn to the view that someone who demonstrates high levels of skill at a given task should also be expected to behave well, to treat others with respect, to honour the highest values of the culture of which they are part. I find myself drawn to this view despite the wealth of evidence to the contrary. I know that Maradona is one of the most gifted footballers in the history of the sport and, at the same time, was a cheat and a tax evader, with a drug habit and some unpleasant political views. I know that Richard Wagner’s music is glorious, but that his opinions were odious. I know that the sublime often emerges from the slime. Despite what I know, I am tempted to think that someone being good at something creates a justifiable expectation of their being a good person too; that excellence in the particular should be accompanied by excellence in general.
There is a contrary view, namely that those who expend significant emotional and physical energy becoming very good at certain skills or tasks, can’t also be expected to have the capacity to invest in being a good person; that the pursuit of excellence in sport, or the arts, or at work, necessarily breeds a certain selfishness and competitiveness, which sit uneasily with the cultivation of good character. This view would claim not just that being very good at something is perfectly consistent with being a bad person, but that being very good at something is more likely than not a predictor of bad character. I find this idea troubling, not least because it seems to provide some people a ready-made excuse to indulge the less admirable aspects of their personalities.
It might be that there just is no correlation between the two senses of “good”, that one’s being very good at some skill or activity is not consistently indicative – one way or the other – of the quality of one’s character. In “Science as a Vocation”, Max Weber makes the point that today there is no credible reason for us to assume a common source for the values of truth, goodness and beauty. It is the fate of those who live in the modern world, Weber suggests, to be forced to acknowledge the reality of the “evil genius”, the “ugly truth” and the “flowers of evil”. Kant, we should remember, wrote three critiques, not one. Even so, despite all that I know, I remain attracted by the idea that excellence, at its most excellent, forms a unity.
End of digression. Back to banking.
The financial services industry is not popular. The scorn and loathing its practitioners attracted a decade ago, in the immediate aftermath of the financial crisis, has waned somewhat but there is no sign of the emergence of affection or admiration for bankers from among the non-bankers. Rather, they continue to be portrayed as greedy and irresponsible, over-paid and unrepentant, privatising the upside gains while socialising the downside costs. I do not want to deny that there is an ugly side to the industry: during my career in finance I have met – and sometimes worked with – people who were dishonest, mean, selfish, vindictive or cowardly. What I do want to deny is that this is the main problem with the financial services industry. What makes banking truly disreputable is not that some of its practitioners have moral failings, but that large numbers of its practitioners are inept: mediocrity, not malevolence, is the dirty secret of the sector.
Let’s put moral judgement aside and focus instead on competence. Within the financial services industry there is a wide range of roles, which require a wide range of skills: some are fairly technical, requiring high levels of numeracy or analytical ability, others call for skills in communication, team leadership, project management, technology and operations management. Almost all roles require a good level of interpersonal skills, not least to ensure that risks in one part of the business are well understood by people working in other parts of the business. Given the generous levels of remuneration that are widely available in the sector, firms should be able to hire and retain individuals who can evidence one or more of these skills, and who are willing to work hard to improve their skills-sets in some of the other areas. From the point of view of capability, then, the financial services industry should have a reputation for technical excellence: good bankers should be plentiful. But they are not. There are some individuals who are outstanding but, in my experience, they are notable for their rarity. In the financial services industry, the mean, median and mode for technical quality are all lower than they should be.
Further, those who rise to the top tend not to be the best: merit is a less reliable predictor of career success than endurance, combined with patronage. The route to advancement in many firms is to hang around for long enough – and to hang out with the right people – rather than to demonstrate consistently high performance. Some of this can be attributed to office politics, of the kind that Peter and I suffered from back in the day. But much is due to the growing role of regulation in the sector. The more rules there are to follow the more the industry becomes fixated on compliance rather than excellence: making sure things are not done wrong, rather than making sure they are done well. Being compliant is mostly a low hurdle, but it quickly becomes the standard beyond which there is little reward for effort: the sector congregates just above the regulatory line, and the excellent is crowded out by the acceptable. The good-enough has become the enemy of the best.
There is, for sure, an important role for regulation in the financial services industry. Banking needs rules as much as do baseball and cricket. Unlike team sports, however, there is a strong tendency in corporate life for rules quickly to become norms rather than constraints. By which I mean, in sport the players take account of the existing rules and are forced to adapt their playing style quickly to changes in the rules, but no-one thinks that they should be rewarded just for following them. In banking, following the rules is sometimes regarded as good enough because it has become the new standard of performative assessment: “we didn’t get fined by the regulator this year” is viewed as a more important measure of success than “ we did a really good job for our customers”.
There are people working in finance who care about the quality of their work, who want their customers to be pleased by the quality of the service they received and the level of price they were asked to pay for it; who want their colleagues to be well-trained, well-motivated, well-treated and well-compensated for their work; who think hard about how they can improve the products they provide, to the benefits of all the stakeholders of the business (shareholders, for sure, but creditors, clients and other partners, broadly construed, too); who consider the wider social impact of their company’s activities and practices, and who care that their firm is making a sustained positive contribution to the well-being of the community; and who, for reasons of personal pride, like to challenge themselves to work harder and achieve better results, day-by-day, month-by-month, year-by-year. There are some good people working in finance, but often they get disheartened, swamped by the preparedness of many of their colleagues to settle for far less, for just about good enough, for the complacency of being merely compliant.
What is true finance is probably true of many other sectors of the economy, especially those that have recently undergone a significant increase in the volume and complexity of regulatory oversight. This is not just a problem for bankers. But it is a problem – a very real problem – for bankers, and for everyone else too because, as we learned a decade ago, what goes on in the banks ends up impacting us all. Ever more regulation leads to an ever greater focus on compliance, which leads in turn to the abandonment of excellence in favour of acceptability; those who get ahead are those who keep their heads down, instead of those who take on the risk of leading their teams into new and better values and practices.
There are ugly people everywhere – that is, people whose behaviour is morally ugly – who deserve to be exposed and held to account. Finance has its fair share but, in my experience, it is not unique in this regard. However, if we want the financial services sector to work better we need to pay less attention to these miscreants, and to focus instead on rooting out the lazy and the mediocre; and we need to identify and celebrate the good bankers, who work hard, with skill and conviction, doing a good job for their customers and for society more widely. All of which is a long and roundabout way of saying, that while we must continue to recognise that the word “good” has two separate and equally important meanings, we should also acknowledge that in some spheres of life, such as banking, the pursuit of technical proficiency – that is, the development of products that are reliable and effective, delivered to customers in a professional and responsible way – is at the same time a moral good.
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