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Morning Coffee: The HSBC job that people might feel insulted by being asked to interview for. Traders punish their bosses for mediocre bonuses

One of the most annoying things that can ever happen to a banker is to suspect, halfway through an interview process, that the decision has already been made and you are just being put through the hoops.  Consequently, although the search consultants retained by HSBC to find a replacement for Noel Quinn are being asked to consider external candidates “to benchmark” the merits of Nuno Rato and George Elhedery, they might find it difficult to persuade many senior global bankers that it’s worth their while to update a resume.

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Anyone who feels tempted to meet the board and spend an afternoon on some PowerPoint slides might be advised to bear a few things in mind.  Things like – Mark Tucker wants to “wrap up the selection by the end of the year”, so a candidate with a notice or gardening leave period starts at a disadvantage.  The chair and directors are apparently happy with the current strategy, so they’re not necessarily all that interested in a fresh set of ideas from outside.  And apparently Elhedery spent some of his sabbatical learning Mandarin, which would make him the first HSBC CEO to speak the language of its second home market.

So, it seems most likely that the search firm will find one or two people who owe them a favour, a couple who want the interview practice and to make their current boss nervous and perhaps a temporarily unemployed star banker or someone passed over for the top job at another bank, then make an internal appointment.  It’s not like the last process, in which Jean-Pierre Mustier remained a genuine possibility right up to the final decision.

Separately, when financial services employers stumble, it’s almost always because they failed to take the human factor into account.  Maybe they underestimated how contagious fear can be in a crowded trade, or maybe they couldn’t anticipate that Redditors would be prepared to throw money at a bankrupt stock for the lols.  Or, as the current Jane Street lawsuit might be showing us, they sometimes underestimate the power of good old-fashioned spite.

The court documents are coy about the specific sums of money, unfortunately, but it seems that Douglas Schadewald and Daniel Spottiswood were offended by the size of their 2023 bonus.  Despite having had the most successful year of their careers, the two men were apparently “disappointed with Jane Street’s compensation decisions” and “felt that they were not given a clear path to advancement”.

This might have been a hard pill to swallow.  Many people are content to spend their whole careers exploiting a small market inefficiency, and to retire early when it disappears.  But some traders are built different – they want to be given more and more capital and rewarded accordingly.

But Jane Street might have reasoned, like the poker players they are, that the pair were bluffing.  A profitable trade that the market isn’t aware of is much better than a trade that’s common knowledge.  And if two teams are both trying to exploit the same mispricing, they will have a disproportionate effect on the revenue pool.  This actually appears to have happened – since Schadewald and Spottiswood went to Millennium, their quarterly P&L might have cratered from $150m to $4m.  As rationalists and game theorists, Jane Street might have reasoned that nobody would willingly do that sort of damage to their own franchise.

Unfortunately, bluffs get called, and traders are sometimes prepared to cut off their noses to spite their face.  The two Jane Streeters might have had a more optimistic view of their potential profits (and consequently, a greater sense of unfairness at how they were being treated). But it’s just as likely that they didn’t want to stick around in a place where they thought they were being disrespected, and were prepared to tear the trade apart. The litigation continues, but it’s a lesson worth remembering; it’s possible to be a bit too rational for your own good.

Meanwhile …

Changes to the UK visa regime (requiring a higher minimum salary) have meant that workers at HSBC and Deloitte have had offers withdrawn after acceptance, with candidates sometimes only finding out through an automated “we are sorry you have chosen to leave us” email. (FT)

It seems that before he died Leo Lukenas had told a recruiter that he was having a hard time working more than 100 hours a week and was looking for a new job. (Reuters)

“Some of the skills that are really salient” to working with AI, according to Goldman Sachs’ George Lee, are “critical thinking, understanding logic and rhetoric, the ability to be creative”.  He thinks the new tech will provide more opportunities for humanities graduates. (Bloomberg)

The private equity to college sports pipeline is almost as active as the one running in the opposite direction.  Howard Endelman, a former Merrill Lynch banker and private equity guy, has built a successful tennis team as coach at Columbia. (WSJ)

In our never ending quest to bring news of jobs that are worse than even the most overworked junior banking teams, news that there are Ivy League graduates out there who are paid to train an AI to pretend to be an OnlyFans influencer and chat to their subscribers. (WIRED)

Bizarre and horrible story of IM Academy, the retail brokerage that called itself “the Harvard of Trading” but was actually a pyramid scheme that seems to have ruined thousands of teenagers’ lives. (Bloomberg)

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AUTHORDaniel Davies Insider Comment

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