Morning Coffee: Three banks announced major job cuts yesterday. The zombies and monsters trying to put bankers in jail
Environmentalists have a saying that “climate change will manifest as a series of disasters viewed through phones with footage that gets closer and closer to where you live until you're the one filming it”. Similarly, it’s possible to worry that the effect of AI on employment is going to manifest itself as a series of seemingly unrelated stories about mass redundancies that gets closer and closer, until you’re the one being fired.
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On a day when we’ve had announcements of 1,400 job cuts from Visa, 1,400 more from Santander and an unspecified but “inevitable” number from HSBC, it might be a good opportunity to ask ourselves whether the clouds are getting closer. Is this just a coincidence, the vagaries of the business cycle, or something more structurally sinister?
None of the announcements actually say that the jobs are being replaced by artificial intelligence, which ought to be quite evidential itself – most companies love to mention their AI strategy on the slimmest pretext. But if we look a bit deeper, and think about the length of strategic planning horizons, the picture’s not so clear.
The majority of the Santander cuts are being made possible “as we simplify and automate” the UK operations, taking advantage of the global shift to online banking. That’s a trend that’s been going on for more than a decade, albeit that a large part of the reason that banks expect to be able to do more with less as customer service moves online is that language models are getting better at providing canned responses and triaging messages.
Similarly, although Visa is cutting some merchant sales roles and slimming down its global partnerships, at least 1,000 of the job cuts are in technology roles, including making less use of contractors. The company isn’t giving many clues as to exactly how this has been made possible (apparently they “continuously evolve our operating model”). But once more, if this is a sustainable reduction in the staff needed to develop and maintain Visa’s payments technology, it’s going to have to be based on assumptions about improved coder productivity in the future. Part of that story is AI-enabled coding tools.
And even HSBC’s restructuring can be seen as potentially an AI story. The global multidivisional structure that Georges Elhedery inherited wasn’t created simply because past HSBC management teams really liked matrices; it reflected the complexity of the underlying business. Any strategy that removes these layers of management has to be based on an assumption that the tools to handle complexity will be there in the future.
In other words, the climate change analogy might be a bit too accurate for comfort. All these redundancy announcements are events with their own specific causes, where other explanations are more direct and there are plenty of reasons to say they’re not part of a wider trend. But on the other hand, they do also fit into that bigger picture. And ignoring it won’t make it go away.
Elsewhere, the less often you hear the phrase “Southern District of New York” in your career, the happier you’ll be. It’s the local courthouse in Manhattan, former home to prosecutors like Preet Bharara, and last stop for Sam Bankman-Fried, Raj Rajaratnam and Neil Philips on their way to a short break from financial employment.
What are they up to at the moment? Well, presumably the business of prosecuting financial malefactors hasn’t completely ground to a halt, but it seems that the building is mainly taken up with staffers designing incredibly intricate Halloween dioramas with costumes, animatronics and legal in-jokes, while some of America’s most important judges have been going round scoring them.
It is very tempting to say “your tax dollars at work” and grumble about whether they shouldn’t have something better to do. But friendly fun competitions between incredibly driven and ambitious people often get out of hand – look at Goldman Sachs Midnight Madness, for example. And if anyone is going in to the court this month to discuss a plea bargain, they might be able to reflect that the phrase “play stupid games, win stupid prizes” is a little bit applicable to a Beetlejuice dummy stuffed with shredded paper, but very applicable to the average insider trading case.
Meanwhile …
Are we seeing “The Great Unpodding”? It’s been increasingly clear this year that not all the best people are going to multistrat funds when they choose to move from the sell-side. Now, it seems that star managers from the pod shops are following the example of Woodfine Partners and setting up single-strategy funds based on the thing they personally do best. The business risk might be a bit greater, but the upside is more better and the control environment not so aggressive. The latest example is New Holland Capital, being set up by the former head of European credit at Centiva (Bloomberg)
If your bosses have expressly forbidden you to let yourself be seen hanging around drinking champagne this bonus season, then Domaine Evermond First Edition – the new British cuvee from Taittinger – is apparently pretty good. (FT)
The “viral free money glitch” which saw loads of TikTockers writing cheques into their account and withdrawing case from ATMs (ie, committing a really unsophisticated checking fraud) is coming to court, with JP Morgan suing a few of the more prominent posters. (WSJ)
It looks like Colin Bell’s departure as head of Europe at HSBC was planned ahead of time – he’s already found a non-executive role as a director of Singaporean tech investment fund Serendipity Capital. (Bloomberg)
And Antoine de Guillenchmidt, who recently announced he was leaving Goldman where he’d been EMEA ECM co-head, will be showing up at Rothschild. (Financial News)
After “quiet quitting” we now have “silent firing”, which is where your boss gradually makes the job more and more unpleasant until you quit. An early sign is apparently when companies start getting tougher and tougher on remote working. (NY Post)
It’s “Davos in the Desert”, and Goldman Sachs has celebrated the Future Investment Initiative week by having the official opening of its new Riyadh office. (Bloomberg)
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