Saturday, August 13, 2011

Top Ten Things I Have Heard in an Investment Bank Elevator

1) "Good morning."
2) "Good night."
3) "How's it going?"
4) "How's the family?"
5) "Going anywhere this summer/weekend/over the holidays?"
6) "Call me when you get a chance."
7) [indifferent silence]
8) [awkward silence]
9) [smiling silence]
10) [clicking of Blackberry keys]

Seriously, folks, the mere notion that you can hear anything remotely interesting for which you are not the explicitly intended audience in a public setting—much less a small enclosed space like an elevator—in an investment bank is just ludicrous.

First, there is the issue of confidentiality. Notwithstanding the unshakeable belief of the great unwashed and their axe-grinding bloviators, we "banksters" do not make a habit of trading insider trading tips, confidential client information, or techniques for running Ponzi schemes every time two or more of us congregate over coffee or fried baby seal. Believe it or not, virtually all of us take the civil, criminal, and contractual prohibitions against such behavior extremely seriously, and if we do not our internal compliance departments do. In addition to the letter of the law, most investment banks worthy of the name even prohibit bankers in the same department (like mergers & acquisitions) from sharing information about the very existence of clients or status of deals with colleagues who do not have a "need to know."

This prohibition gains even greater force when you talk about personnel on different sides of the various "Chinese Walls" within an investment bank, like corporate finance/M&A versus sales and trading or industry coverage bankers versus equity research. Separate areas like these which are not supposed to share information are usually physically isolated from each other, with separate elevator banks, mutually incompatible security access cards, and even telecommunications and e-mail blocks. For example, not only do many banks prohibit investment bankers and equity research analysts from talking on the phone or being in the same room with each other without legal or compliance chaperones present, some prevent direct communication altogether. At some firms, a banker can't even call or email a research analyst directly using the firm's own phone and email systems.

Second, this regulatory and business compulsion for secrecy spills over into the working culture of any investment bank. People who work for the same firm keep secrets from each other even when they do not have to because information is power and currency in my business. Information is used to negotiate with superiors, horse trade with peers, and undermine enemies. Any banker worth his or her salt would never squander any tidbit of information or gossip which could possibly be worth something in front of uninvolved bystanders. Gossip and character assassination are exchanged in private, sub rosa, where they can be put to the most effective and destructive use, not trotted out in front of summer interns in the Conde Nast elevator bank where it can accrue to the social or organizational status of the speaker.

This may explain in part why most investment bankers who operate outside the professional braggadocio environs of sales and trading come across as exciting as moldy toast. There may be a lot of really heart-pounding, pulse-racing secrets seething beneath the placid surface of that drab M&A banker holding forth in the corner of your cocktail party. Secrets he or she wouldn't dream of disclosing, even to his or her spouse or lover, because they're just too juicy to waste.

But then again, you never know when the big secret your friendly investment banker is really hiding is the fact that he or she is worried frantic because they have no gossip or deal information to keep secret. This is anathema to investment bankers, because a lack of secrets means a lack of currency, and a lack of currency means you've got a target on your back. So while absence of evidence is not evidence of absence, neither is it evidence of evidence. It may just be strategic silence.

Perhaps you would be wiser to consider us as dull as dishwater, after all. That's certainly how most of us come across anyway.

© 2011 The Epicurean Dealmaker. All rights reserved.