The Dinner Table
In the world of banking, it shouldn’t surprise you to learn that most big firms manage somehow to insure that their top two people are not so fervently politically aligned that when (notice I did not say “if”) the opposing party takes office, the firm is not left without sympathetic inroads into the halls of power, perhaps when they need it the most. I have never figured out exactly how that process happens even though I have served at the management committee level of three institutions. Therefore, it must happen in the upmost reaches of the board and it must happen so subtly and continuously that it is not shockingly obvious that the leadership ranks are being manipulated to serve the broader long-term political alignment needs of the firm. I have been in discussions about board memberships where every imaginable dimension of diversity and balance are considered in the decision, but they have always proven to be discussed as preferences or even strong preferences, but never really imperatives. And yet, if there are two top people in a firm, their gender, nationality, area of expertise and other dimensions are not so obviously dichotomous as their political affiliation. These positions are more worn on the sleeve than not and they are generally evolved over years in relatively visible manner. So is this to suggest that the leadership ranks of major companies are manipulated for years forward to insure political balance. Is that even possible?
It cannot be a case of simple chance. It has to be intentional, and yet the ability of the top ranks to work collegially is critical. I once got a lecture from a Vice Chairman about my collegiality. I always had great rapport from my troops and I’m sure I wouldn’t have gotten ahead as I did without the respect of my seniors (I would have known quite quickly if it had been otherwise), so it must have been a speech fashioned to let me know that I needed to work harder at getting along with my peers. Strangely enough, I suspect that the vote would have been split on that count if you had polled my peers. I know it is always more complex than this, but generally there are two kinds of successful leaders, those that are genuinely good leaders (Type Y) and who hold the right values to honestly represent the interests of all of their stakeholders simultaneously and with hard-won balance, and those that are in what I would call the say-anything, do-anything camp (Type X). There’s little sense in explaining the former, we all know it when we see it. The second can take many forms but the common element is an abundance of aggression and motivation to get ahead. Usually, those types believe that it is a zero-sum game and anything they can do to diminish a peer is a net improvement to their cause. It’s a sad reality, but as natural as anything in life.
One of the most contentious moments in my career came when I was put into the role of the head of Derivatives for the bank. In 1989 there was no hotter ticket in banking than Derivatives. I had been instrumental in creating our derivatives business in a vary material way in 1983-84 when I started and ran the bank’s futures and options business, BT Futures. I had then gone off to work the LDC Debt problem for the bank for five years to reasonably good effect. In the meantime, this business that I had helped spawn had grown to full and headstrong adolescence and needed senior leadership to keep it from getting nuclear. That required someone who understood such esoterica as delta-neutral hedging. Things like the Black-Scholes model for options valuation were still very new on the academic front, but particularly new to be put into practice. What most market participants knew from experience was that the basic partial-differential-equation-driven mathematical model needed to be “localized” to the specific market in which it was to be used. This meant that by 1989, our Derivatives Department had fully sixty advanced-degree professionals who had worked at places like The Fermi Labs and Las Alamos, just to do the analytics needed to trade and run the books on these derivatives. Saying this stuff could go nuclear was not really an overstatement.
I loved what I had built in the Emerging Markets Department. Our symbol was the Phoenix rising from the ashes of the debt crisis. We had skyrocketed the profitability of that heretofore nonexistent Department to $100 million per year and that was just the beginning. But Derivatives was a careening $300 million business that the bank’s leadership wanted to control. That meant splitting the functions and giving the guy I had founded the business with (a classic Type X manager that I described earlier) one piece and giving me the other to balance him back. I was told by the President to help him “moderate” that manager’s behavior. It is hard to collegially and pointedly do that and not get crosswise with your supposed partner. Even then, at a partner’s meeting a year later, my Type X partner privately declared me an “honest broker” that refused to blindly side with the President. But it is that sort of collegiality that makes management question your loyalty…not to the organization, but to them. C’est la vie or perhaps C’est la guerre. But I said then to the head of Human Resources who was orchestrating the delicate transfer, that this transfer and the impossibility of treading that fine line between doing the President’s bidding and doing what was right for the organization would be the end of me. He scoffed at the warning.
I see a connection. Type X managers are, by nature, pragmatists that emphasize self-interest. Type Y managers think more broadly and care more broadly. They may aspire to responsibility and power, but they do so mostly for the benefit of all and with a purity of conscience in serving the larger organization or collective rather than the monarch of the moment. This is not to suggest one is pure evil and the other has a halo, but that in general their motivations are as I have described. I know that somewhere about 50% of the people will disagree that Type X equates to Republicans and Type Y to Democrats, but that is the only way I can see an alignment of the two measurement standards. If that is true, then seeking a balanced political ticket among the firm leadership has the benefit of also balancing the internal dynamics that drive any organization. Most would argue that equal amounts of drive and ethics are needed to succeed in commerce.
I was only half right in my prediction. It was a traumatic balancing act to be sure, but it led only to a setback and not the end of my career. I went on years later to rise again (Phoenix should perhaps be my personal symbol) and join the Management Committee at a time of maximum impact a decade later.
So the next time you decide whether you want to sit down to dinner with an old friend who has perhaps taken the Type X path in life and turned to the views of the Republican Party, know that many before you have had to strike a balance in managing and abiding by sharing power and life with their opposites. In fact, the dinner table may be the perfect venue to find a place of common ground, or at least try to do so.