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Morning Coffee: Goldman Sachs' most exciting new jobs may be a little boring. Hey, Deutsche Bank bonuses aren’t too bad

If you were playing a game of “draw random words out of a hat to make the best investment banking job description”, you couldn’t really ask for a better hand than “Goldman Sachs”, “AI”, “Data Science”, “strategy” and “engineering”. And indeed, the guy who is holding all those highly coveted cards, Chief Data Officer Neema Raphael, seems to be pretty happy about things.

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He’s also surprisingly cool for a Goldman partner; on the day he was interviewed, he had “his hair pulled back in a bun” and was wearing a “blue plaid shirt”; if the photo on his LinkedIn is accurate, he also occasionally favours sunglasses and a lot of open buttons.

Although he’s presumably compliant with all the remote working policies, Raphael appears to have a pretty good concept of work-life balance; he “wakes up at 6:30”, and then “hangs out with his two-year-old for half an hour”, presumably arriving at his desk while the junior bankers are sipping their third espresso of the morning.  This is practically Silicon Valley stuff.

But reading between the lines, you get the sense that once he’s started the working day, Raphael is much more “strictly business”, and that the actual tasks behind the buzzwords are considerably more prosaic than one might have hoped.  For example, one of the teams in his 500-strong staff is responsible for doing things like ‘ensuring the abbreviation for "management" is consistently "MGT," not "MGMT’.

This is unfortunately the reality of data science – you go in hoping you’re going to be creating the thinking machines of the future, but your average working day is spent correcting spelling mistakes.  As one quant proverb puts it, “Seventy percent of algorithmic trading is checking you’ve made the right adjustments for bank holidays”.

It’s necessary work because the raw material of data science is data, and that data has to be really right, not nearly right.  As Raphael puts it, “There is no AI strategy without a data strategy. We always use this code: garbage in, garbage out”.  And the extraction and cleaning up of data from whatever source is, in its own way, just as arduous, dirty and unexciting as any other kind of mining.  There’s just a bit less danger of a ton of rock falling on your head.

Having said that, the kind of coder who only wants to have beautiful thoughts and do cutting-edge modelling probably wouldn’t be someone that Goldman wanted to hire in the first place.  Neema Raphael made his name as one of the slang-talking engineers working on the original SecDB database which drove Goldman’s trading and risk management.  That’s an environment in which mistakes really couldn’t be afforded, and he’s preserved that spirit into the AI age.  Lots of quants actually enjoy the hard work and precision of getting things to work as much as the big-thinking algorithmic design. And of course, the problems that you solve at work don’t really reflect your own coolness; as long as your code is flawlessly tailored, your hair can be as ruffled as you like.

Elsewhere, Deutsche Bankers should probably not expect any sympathy from friends at other firms when they want to complain about their bonuses not being quite what they expected.  The overall group bonus pool is reportedly down 5% on last year, and the investment banking division is described as “more than 10%” lower, in a context where that phrase probably means “less than 15% lower”.

Which seems … not bad, by the standards of the Street?  According to the disclosures, the front-office headcount rose by about 14% over the year, but that wasn’t so far out of line with other banks, and there’s nothing much to make one think that the bonus pool was heavily leveraged with guarantees paid to senior hires.

Of course, according to CFO James von Moltke, Deutsche is going to take advantage of the labour market to concentrate the pool on top performers and those employees it really wants to retain, and franchises like M&A where the revenues were very slow can expect to do quite a bit worse than 10% down.  But all in all … it seems that while the US banks were handing out Krispy Kremes, Deutsche appears to have found some German sweet treats with a little more jam in them.

Meanwhile …

Banks might be glad that they took decisions to retain staff.  As well as Jane Fraser’s prediction of “low teens” growth in advisory revenue for Q1 … (Reuters)

… Bank of America and JPMorgan have also guided to somewhere like 10-15% up. Markets revenue is likely to fall, but that is versus a significantly more difficult base for comparison. (Reuters)

Macro investing is still a game of timing; Brevan Howard took a contrarian position at the start of the year that the Fed would cut rates more quickly and aggressively, and so far it’s given them one of their worst performance months ever in the core fund. (Bloomberg)

More comments from Jane Fraser – another benefit of the Citi reorganisation is apparently that it’s allowed revenue producers to concentrate on making money by removing “unnecessary governance”. That’s a phrase which feels like it could come back to be taken out of context. (Reuters)

How do you feel about the regulators having access to your Instagram?  Compliance professionals in London think it’s only a matter of time before the FCA demands to be given all social media profiles of bankers “to ensure that employees’ can illustrate acceptable behaviour both in their professional and their private lives”.  Surely this means we ought to get the supervisors’ secret Twitter accounts? (City AM)

Bad news on the buy side – Fidelity International is planning job cuts of as much as 10% of its workforce.  Not clear where they will be concentrated, but “our overriding objective will continue to be prioritising and protecting areas focused on client retention and satisfaction”, and tech projects are going to be put back and cancelled where they don’t directly contribute to clients. (Reuters)

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AUTHORDaniel Davies Insider Comment

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