How to deal with disruption

The banking sector continues to mutate.

For some, this is a source of intense excitement, promising zen-like customer experiences and lucrative opportunities for those innovative enough to deliver them. The media is all over this narrative. We’ve lost count of the number of thought pieces and industry reports heralding “disruption” in financial services. Yawn!

What of the human impact? For most of our friends who work on the sell-side, disruption has become a euphemism for something dark and foreboding. The asymmetries inherent in traditional financial services mean that what is good for the customer is not always good for the banker. Disruption has arrived; now many talented, hard working pros are seeing their lives disrupted beyond recognition.

Bank job losses recently hit a six-year high, with 2,800 jobs cut in the first quarter of 2020. This comes at a time when the economic backdrop is bleak at best. Life-altering injuries are being inflicted upon those who have given everything to the industry, and the Darwinian process of downsizing teams and entire departments seems to be accelerating with every earnings call that passes.

A precarious way of life.

Okay, we might be hamming it up a bit. This article certainly doesn’t intend to eulogise jobless bankers. Of course, there are billions of people out there in far worse positions. Most people who go into the business know that banking is a somewhat precarious way of life where job security is 100% not guaranteed. They’ve earned good money over the years, enabling them to put something aside and create an escape route for hard times. The industry tends to forge pragmatic, dynamic individuals with bags of energy and gumption. If they need to reinvent themselves, they will.

Harping on about the past is moreish, but it’s even more fun to look to the future. So, instead of asking why the banking industry is shedding workers like a deciduous tree in autumn, we want to explore how people can navigate the structural changes that are reshaping the industry – and how we might be able to help.

Bad news

If you’re in any doubt as to the scale of the job losses, check out this newsfeed of misery from the FT:

* Europe’s banks slash 60,000 jobs on negative outlook *
* Morgan Stanley to cut 1,500 jobs worldwide *
* Commerzbank vows to look ‘everywhere’ for new cost cuts *
* HSBC to shed 35,000 jobs in radical downsizing *
* Lloyds and Direct Line to cut hundreds of UK jobs *
* RBS cuts 130 jobs in investment bank *
* Deutsche restarts job cuts after six-week pandemic hiatus *

This reads like a decade’s worth of negative headlines, when in fact all of these announcements have occurred since December 2019. It’s shocking, actually, but not entirely unsurprising within the context of the technological, regulatory and cultural backdrop. It’s probably a little cruel to our friends on the sell-side (not to mention tedious) to characterise these exogenous drivers in excruciating detail, but suffice to say the hype wasn’t hype at all – investment banks aren’t going to become fully automated, but they are definitely learning to do more with less, and technology is playing an instrumental role in the unfolding corporate miracle.

The end product of all this innovation is that the street is awash with extremely accomplished and driven people with résumés that read like Pulitzer Prize winning novels. You would think that emancipated sell-side analysts, traders and sales people would be moaning about unfair treatment, crude automation and generally bad-mouthing their alma mater. But that’s not been our experience at all.

It’s facile to say that challenges bring opportunities, but they can certainly help us to gain a sense of perspective. Friends from our network who have left their jobs in recent months seem relieved to have achieved clarity on where they stand, and excited about reinventing themselves. Of course, there’s an element of selection bias – these are the same people who are exploring working with us. Still, it’s awesome and inspiring to see. Turns out Sun Tzu was right; “Victory comes from finding opportunities in problems.”

The network interface.

We started Three Body Capital to help people. That might sound corny, but it’s true. We think we can do it in a number of ways, but ultimately everything we do boils down to creating access.

We help people access new opportunities – markets, assets and other people. At the heart of what we do is our affiliate network, a collection of talented and connected people who bring us deals and investors. In return, we help them to monetise their networks and remain relevant to their clients. We also help them grow their reach by giving them access to our wider community.

This really makes us a network of networks, or, more grandiosely, a meta-network. Another way of thinking of us is an Application Programming Interface (API) that enables people to plug into a global network of relationships.

For those of you who don’t spend a lot of time hanging out on Stack Overflow, the definition of what an API is (and does) is instructive:

“An Application Programming Interface (API) is a computing interface which defines interactions between multiple software intermediaries. It defines the kinds of calls or requests that can be made, how to make them, the data formats that should be used, the conventions to follow, etc. An API can be entirely custom, specific to a component, or it can be designed based on an industry standard to ensure interoperability.”

To deconstruct the analogy, our business promotes interoperability between different networks by standardising processes and providing everyone with an interface where business can be facilitated efficiently.

What does all this have to do with the decimation of the sell-side? The answer is a lot. We’re providing our clients (issuers, investors and traders) with an alternative to the sclerotic legacy infrastructure and high cost bases of big banks – and we’re providing our affiliates with exactly the same thing.

We’re providing affiliates with a platform from which they can build a business; a shopfront, if you will, to host deals and investors. We’re making it possible to do business in exciting new markets. And we’re doing it digitally, enabling our people to work from home, from the road, or even from our office (once we take the plunge and find a new home in post-COVID London).

An open mind.

Over the past 18 months we’ve welcomed many talented people into our extended family. They share several salient characteristics (integrity, intelligence, determination and good humour being just a few of them), but the key thing we have noticed is that all of our affiliates came to us with an open mind.

A lot of trite nonsense has been written about the need to grasp opportunities, but the thing about opportunities is that they don’t come gift-wrapped. They’re hard to spot. They tend to look remarkably like hard work. And to many people, they look like intolerable risk. This reminds us of Paulo Coelho’s self-excoriative words; “How much I missed, simply because I was afraid of missing it!”

Success in business, as in life, isn’t about size, strength, intellectual horsepower, or even luck. As Darwin (kind of) pointed out, the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. That is exactly what we are encouraging in our relations with affiliates.

There are just six of us in the core team at Three Body Capital, but our family of affiliates is growing all the time. We’re always on the lookout for more co-conspirators. So if any of this sounds interesting to you, hit us up and let’s chat.

Edward PlayfairJune 12, 2020