Sunday, June 29, 2014

Touring Test

I’ve still got the greatest enthusiasm and confidence in the mission.
BBC Interviewer: “HAL, you have an enormous responsibility on this mission, in many ways perhaps the greatest responsibility of any single mission element. You’re the brain and central nervous system of the ship, and your responsibilities include watching over the men in hibernation. Does this ever cause you any lack of confidence?”
HAL: “Let me put it this way, Mr. Amor. The 9000 series is the most reliable computer ever made. No 9000 computer has ever made a mistake or distorted information. We are all, by any practical definition of the words, foolproof and incapable of error.”
BBC Interviewer: “HAL, despite your enormous intellect, are you ever frustrated by your dependence on people to carry out actions?”
HAL: “Not in the slightest bit. I enjoy working with people. I have a stimulating relationship with Dr. Poole and Dr. Bowman. My mission responsibilities range over the entire operation of the ship, so I am constantly occupied. I am putting myself to the fullest possible use, which is all I think that any conscious entity can ever hope to do.”

2001: A Space Odyssey

There once was a day, O Dearly Beloved, when business travel in high-value service industries like investment banking was glamorous, luxurious, and status-enhancing. I know this, not from personal experience, but from an incident early in my career as a tyro investment banker, when I accompanied a junior representative of a client on a plane trip from Somefuckingwhere, USA to Somewhere Else more than two decades ago. I forget the origin, destination, and purpose of the trip—and even the client’s industry—but I remember parts of our conversation very well. My client’s representative was a junior weenie in his organization, tasked with low level work to advance whatever transaction we were working on together. He was also a former Financial Analyst at a high profile investment bank and several years younger than Yours Truly. As we sat wedged together in coach class on some unfortunate single-aisle aluminum tube roaring over Fly Over Country at 35,000 feet, I attempted to smile and nod appreciatively as my self-important charge regaled me with the fascinating work his twenty-something self had participated in for a grand total of two years in between graduating college and eventually getting weaned.

In the course of explaining to me just how much better his brief career as cannon fodder in my industry was than mine, he waved expansively to our cramped, threadbare surroundings and informed me when he was a first year Analyst at Stangan Morley he traveled first class whenever he flew for business. Even allowing for the natural exaggeration and outright lies usually forthcoming from a former investment banker when he or she attempts to competitively measure dicks with a practicing one, this statement was prima facie outrageous. This conversation, you must understand, took place during the early to mid-1990s. By that point, investment banks across the board had already begun to drastically curtail bankers’ traveling habits by imposing cost ceilings on hotel stays, per diem limits on meals eaten while traveling, and severe restrictions on anyone under the rank of Managing Director traveling by air in anything but cattle class unless the trip was five hours or longer. The notion that a wet-behind-the-ears first year Financial Analyst could even have the leg irons which chain him to his desk unshackled for more than bathroom breaks—much less travel anywhere on business or (Mammon forbid) do so in first class—was simply incomprehensible. To be honest, Dear Readers, I did not believe him. But I later found out, through various sources, that his tale of luxury business travel was true, and indeed used to be the norm some years before I actually joined the sweatshop my chosen profession.

I guess the Eighties really were different.

* * *

So you should believe me that, for the entire course of my over two-decade long career, business travel for people like me who fly all over the country and all over the world chasing multi-million dollar fees for multi-billion dollar transactions has been approximately as luxurious and approximately as enjoyable as a bog standard insurance salesman driving from Wichita to Omaha and back in a rented Ford Focus. The powers that be in my business are always tightening down the expense control screws—whether they be for business travel, late night meals, or car service home for the plebs when they work extra long hours—and, as someone once said about Sandy Weil and Jamie Dimon when they were building the skinflint colossus that would eventually become Citigroup, the screws turn only one way: tighter. Every now and then, when dealmaking slows or the economy tanks or some asshole in Mortgage Trading incinerates $8 billion of the firm’s capital with a wrong-way bet on the krone–ringgit exchange rate, senior management will actually impose a moratorium on all discretionary business travel during the final months of the year. As perhaps slightly better dressed versions of traveling salesmen, you can imagine how well this goes over with me and my colleagues, who spend the vast majority of our time, as we are supposed to, on the road meeting with current and prospective clients and doing deals.

Which is all typically expansive preamble to say I have been hearing the constant drumbeat of GOD HOW EXPENSIVE BUSINESS TRAVEL IS WOULDN’T IT BE NICE IF WE COULD FIND A WAY TO ELIMINATE IT for approximately forfuckingever. And, as a senior banker who wants to prevent as many third year Associates and fourth year Vice Presidents from ordering $250 room service meals at the Four Seasons every time they visit the sub-sub-Treasurer at Coca Cola to pitch a $125,000 bond underwriting assignment—so we actually have something left at the end of the year to pay them with—I am sympathetic to this argument. In fact, as someone who lost his taste for the “glamour” of business travel around 20 years ago, I would love to find a substitute method for selling. But alas, for my business it cannot be done.

That being said, I am unsympathetic to the argument advanced in certain circles that high definition “telepresence” or virtual reality technologies will soon spell the death of expensive and wasteful business travel. Investment banks spend huge amounts of money on travel and, notwithstanding their ability to negotiate preferred rates from hotel, rental car, and air travel firms on the basis of bulk purchasing, they have always struggled mightily to reduce and replace such expenditures in whatever way possible. Investment banks have conducted internal and external business meetings by conference call forever, many salesmen and traders on capital markets floors have never met the counterparties they do regular business with other than over the phone, and senior management were early adopters of (then-) advanced technologies like videoconferencing and networked multimedia presentation rooms as soon as they came out. In fact, internal broadcast systems like the “hoot and holler” have been used to distribute information and conduct meetings on sales and trading floors for decades. And yet big firms still spend tens if not hundreds of millions of dollars on business travel every year. Why?

* * *

Because there is a critical component of in-person business meetings which remote technologies cannot replicate: establishing or building trust. Trust is one of those subjective, intangible elements of human interaction that cannot be observed or measured directly but which is absolutely critical to the conduct of certain kinds of business. Trust is a relationship that cannot reliably be established at a distance through a medium like telephony or videoconferencing because those media filter and frame interactions by definition. They edit and eliminate enormous amounts of data observable in in-person interactions and replace them with a severely limited and constrained digest. They eliminate all sorts of direct and indirect communication and nonverbal social cues, and hence they can trigger or sustain a suspicion that the other party is hiding something, or not being straightforward and aboveboard.

Now in certain business interactions, where the parties already know each other and have established the requisite level of trust, or where the stakes of the transaction are low enough that trust is not really an issue, these limitations are not a major concern. (Although they can become such if misunderstandings or exogenous shocks to the relationship resurrect doubt.) After all, I am usually not too worried about trust issues with firm colleagues I have known for years, and I really don’t fret about whether the unknown vendor on the other end of an Amazon Marketplace order is going to screw me out of a $100 book purchase. Conference calls, emails, or webex videoconferences are more than adequate in those instances.

But you can be damn sure I would be very worried about trusting an unknown investment banker I just met for the first time three months ago to handle my billion dollar IPO or my $10 billion M&A transaction. I want to see him or her in the flesh, look into their eyes unmediated by the blurry pixels of a high definition wall screen, shake their sweaty, slimy, or firm hand to gauge their confidence and honesty, and observe them unobserved as they interact with my colleagues and subordinates to establish a judgment about their character, reliability, and competence. I want to see how they treat their own colleagues in the room, notice how they treat my receptionist and my personal assistant, and evaluate whether I would be comfortable entrusting the future of my organization and my own personal career record and success to their hands. There is no fucking way I—if I were the client—would allow such a meeting to take place over a telephone or a video screen, no matter how high definition.1

Lastly, I want to know the party I am about to entrust with my important business deal is both serious and committed to its success. I want to see them spend lots of time, money, and trouble getting to the meeting to persuade me my pissant transaction matters to them personally and to their organization, and I want to see senior, important people make the effort to come meet me in person. It would not give me much confidence if Goldman Sachs only sent a first year Vice President and second year Associate to the beauty parade or initial organization meeting. For important business transactions, business travel is a hugely important signaling device. “What, you want me to hire you and pay you $20 million, but your damn Managing Director can’t be bothered to attend the pitch meeting in person?”

* * *

In fact, the content of all such critical in-person meetings is usually significantly less important than the presence of the key counterparties. This is what technologists and bean counters—Aspergers Spectrum sufferers all, to a greater or lesser extent—have been missing forever. We don’t fly all the way across the country or half way around the world to deliver a PowerPoint presentation we could have emailed to the client and presented over the phone. We go to meet them in person, show them we care, and persuade them to trust us with their sweaty simoleons.2 The next level of videoconferencing resolution or the recreation of the Star Trek holodeck is not going to change this. People doing important, critical, and valuable business want to meet their potential partners and advisors, and they often want to meet them in large numbers, at the last minute, urgently. This means lots of expensive last-minute plane tickets, rack rate hotel rooms, and hefty T&E expenses for big teams of people.

There may be some role for Oculus Rift headsets in selling auto insurance to car owners in Wichita, but I am afraid the carbon footprint of investment bankers and all such high-end sales organizations will remain stubbornly high for a very, very long time.

That’s okay. You already knew we were bastards anyway.

Related reading:
Come Fly With Me (February 12, 2011)

1 Else how do you explain the popularity of golf for business meetings? Aficionados maintain there is no better revealer of character than that silly, time consuming sport. Unfortunately for my golf game, I have had very few clients over the course of my career with the time or inclination for meetings on the course. Either that, or they just don’t like me. Whatever.
2 And I suppose it’s worth reemphasizing to those infrequent travelers who view two to four days per week traveling away from home by plane, train, and automobile as impossibly status-enhancing and glamorous that we don’t travel for those reasons, either. After your tenth weather-delayed flight of the summer, cooling your heels over a soggy burrito and a warm beer in the TGIFridays at the Dallas Fort Worth Airport at 9:00 pm on a Friday night, whatever gossamer images of jet set travel you might have held as a bright-eyed newbie investment banker have long since been beaten out of you.

© 2014 The Epicurean Dealmaker. All rights reserved.

Saturday, June 7, 2014

In Memoriam: June 6, 1944

Claude Monet, Haystacks at Chailly at Sunrise, 1865

What passing-bells for these who die as cattle?
— Only the monstrous anger of the guns.
Only the stuttering rifles’ rapid rattle
Can patter out their hasty orisons.
No mockeries now for them; no prayers nor bells;
Nor any voice of mourning save the choirs,—
The shrill, demented choirs of wailing shells;
And bugles calling for them from sad shires.

What candles may be held to speed them all?
Not in the hands of boys, but in their eyes
Shall shine the holy glimmers of goodbyes.
The pallor of girls’ brows shall be their pall;
Their flowers the tenderness of patient minds,
And each slow dusk a drawing-down of blinds.

— Wilfred Owen, “Anthem for Doomed Youth

Related reading:
Ernie Pyle, “A Pure Miracle” (June 12, 1944)
Ernie Pyle, “The Horrible Waste of War” (June 16, 1944)
Ernie Pyle, “A Long Thin Line of Personal Anguish” (June 17, 1944)

Poet and Second Lieutenant Wilfred Owen was killed in action on November 4, 1918, exactly one week before the signing of the Armistice which ended World War I. He had returned to the front from England in July 1918, where he had been treated for shell shock, even though he might have stayed on home duty for the duration of the war.

War correspondent and civilian Ernie Pyle was killed by machine gun fire on April 18, 1945 on Ie Shima, northwest of Okinawa. The monument American soldiers erected to him on site was one of three monuments the Japanese allowed to remain when the island was returned to their control after the war.

© 2014 The Epicurean Dealmaker. All rights reserved.