You could be forgiven for thinking – based on my writing here – that I think investment banks are full of unenlightened dinosaurs, and so not fit for study if one wants to ‘see the future.’ In fact this is quite far from the truth – sure there are lots of reasons to pull your hair out if you love change and disruptive innovation and work in an investment bank. BUT there are lots of reasons not too as well; indeed I think much of my passion for accelerating such innovation comes from my many years of first-hand experience of seeing the power of it on the front line in investment banks. Yes, they can innovate (although often they are most succesful when they don’t realize this is what they are doing.) Traders in investment banks invented and nourished social networking 20 years ago. (And they figured out how to make money from it – I’d take Bloomberg’s bottom line any day…)
Anyone who has ever worked on a trading floor also had to manage to live with and remain (ideally improve) their productivity while working in a state of continuous partial attention. This excellent commentary by Stowe Boyd got me thinking about this, I love his ‘Law’:
Connected people will naturally gravitate toward an ethic where they will trade personal productivity for connectedness: they will interrupt their own work to help a contact make progress. Ultimately, in a bottom-up fashion, this leads to the network as a whole making more progress than if each individual tries to optimize personal productivity. (Trust me, its provable. I studied queuing theory in graduate school.) I call this Boyd’s Law, by the way.
While (big) investment banks suffer all the normal pathologies of command and control endemic to large hierarchical organizations, the trading floor – at least on a day-to-day basis – has a parallel life free from this institutional prison. Sure the two collide from time to time (bonuses, promotions, seating plans…) but even power-hungry, centralizing managers in these firms are smart enough that you don’t kill the (ahem…usually) golden goose: working on a trading floor is all about connectedness and continuous partial attention – it wouldn’t work any other way.
The old school thinking is about individual productivity: but the social revolution has moved past that into network productivity, which entails connectedness and social meaning. The personal hit on productivity is real, but it’s not a cost: it’s an investment; and the juice is worth the squeeze.
Although they wouldn’t articulate it in the same terms (they probably wouldn’t articulate it at all!), the denizens (and managers of) the trading floor are somewhat past the ‘old school’ thinking and have been for years. I say ‘somewhat’ because at bonus time the decoherence collapses as everyone scrambles to appropriate ‘individual productivity’. The best groups of traders however – for example the top hedge funds and a certain boringly successful Wall St. firm starting with a ‘G’ – don’t and instead manage for network productivity (almost) exclusively (leading to most members of these networks to be rewarded individually exceptionally well.) It really boils down to trust in the end.*
I bang on about “Wall Street” needing to learn from “the Valley”, but wanted to underline my conviction that there is much to be learned from “Wall Street” for others. Indeed that is why I find my new situation so exciting, sitting at the heart of such a potentially fertile cross-road.
* Which btw is why I’m suspicious of any service organization of more than c. 150 people (Dunbar’s number); although I’m inclined to believe that the internet age and its associated tools will give us a new node on his scale that is perhaps up to an order of magnitude bigger. But beyond that, I don’t buy it. Maybe that’s why no one has offered me the job of running one of these behemoths…first thing I’d do is take their 150,000 people and break them up into “A thousand tiny pieces”…