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{{Drop|A|s she neared}} her [[Schwarzschild radius of alcohol consumption|gin horizon]], Wickliffe Hampton HR manager Anita Dochter embarked upon a long and elliptical disquisition to her old pal [[Cass Mälstrom]]. Dochter was, as usual, agitated. Today, it was the unstaunchable stream of defections from her firm, a sleepy mid-market broker headquartered in Peterborough. It was haemorrhaging hundreds of compliance and onboarding staff each month to venture capital-funded dotcom start-ups. Indeed, Mälstrom herself was an example: not three months earlier she had been bid away from a [[workstream lead]] role in the firm’s client money compliance change management programme. She was now [[Co-head|Co-deputy CIO]] of [[legaltech]] darling [[lexrifyly]]. | {{Drop|A|s she neared}} her [[Schwarzschild radius of alcohol consumption|gin horizon]], Wickliffe Hampton HR manager Anita Dochter embarked upon a long and elliptical disquisition to her old pal [[Cass Mälstrom]]. Dochter was, as usual, agitated. Today, it was the unstaunchable stream of defections from her firm, a sleepy mid-market broker headquartered in Peterborough. It was haemorrhaging hundreds of compliance and onboarding staff each month to venture capital-funded dotcom start-ups. Indeed, Mälstrom herself was an example: not three months earlier she had been bid away from a [[workstream lead]] role in the firm’s client money compliance change management programme. She was now [[Co-head|Co-deputy CIO]] of [[legaltech]] darling [[lexrifyly]]. | ||
[[lexrifyly]] had no product to speak of, no business model, customers and no obvious plan | [[lexrifyly]] was flush with stupid amounts of cash and a great elevator pitch but had no product to speak of, no business model, no customers and no obvious plan beyond the unshakable conviction in goosing its burn rate with overpaid bums on seats it didn’t yet have was what one did when one was a techbro. Poaching ex-colleagues turned out to be Mälstrom’s sole function. | ||
Dochter was livid. “But, Cass, we actually ''need'' our people. They do productive things for us. You know, [[MIS]] reports. Operational [[deep dive]]s. [[Netting]] audits. | For her part, Dochter was livid. “But, Cass, we actually ''need'' our people. They do productive things for us. You know, [[MIS]] reports. [[Steerco]] [[deck]]s. Operational [[deep dive]]s. [[Netting]] audits. Who will lead the client money remediation programme workstream? Who will manage the [[risk taxonomy]]? But unless we pay ''your'' stupid rates, which we cannot afford to do —” at this point, she fell off her stool briefly — “and give them free fruit, safe spaces, a soft play area and let them work from home four days a week, they won’t stay with us. But, ''you'',” she hissed, clambering back up and jabbing [[Cass Mälstrom|Mälstrom]] on the lapel, “right now, ''you'' don’t need ''any goddamn'' staff. You just need to show your investors you are imaginatively on point doing fashionably insane things. That does not take actual staff. So stop taking ours.” | ||
“Well, how else am I meant to splurge away all this free money?” | Mälstrom shrugged. “Well, how else am I meant to splurge away all this free money?” She lit a cigarette with a fiver. | ||
As luck would have it Barkley, fresh out of gaol and making ends meet waiting tables, was rostered on their table for the evening. Presenting them with the check and some after-dinner mints, he cleared his throat. | As luck would have it Hunter Barkley, fresh out of gaol and making ends meet waiting tables, was rostered on their table for the evening. Presenting them with the check and some after-dinner mints, he cleared his throat. | ||
“Forgive me for imposing, but I could not help overhearing. If you are not actually hiring anyone, why not hedge your employment rate risk to someone who is?” | “Forgive me for imposing, but I could not help overhearing. If you are not actually hiring anyone, why not hedge your employment rate risk to someone who is?” | ||
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{{Drop|S|o was the}} very first “[[employment rate swap]]” conceived. For an initial period of three years, Wickliffe Hampton would pay its entire operations wage bill, controlled for performance, to lexrifyly. In return, lexrifyly would pay its absurd, grossly inflated but as yet unallocated budget for an equivalent team — there was no such team, of course: this was exactly the point — to Wickliffe Hampton.<ref>This was slightly complicated as it was denominated in [[crypto]] and needed to be converted back to Sterling. </ref> | {{Drop|S|o was the}} very first “[[employment rate swap]]” conceived. For an initial period of three years, Wickliffe Hampton would pay its entire operations wage bill, controlled for performance, to lexrifyly. In return, lexrifyly would pay its absurd, grossly inflated but as yet unallocated budget for an equivalent team — there was no such team, of course: this was exactly the point — to Wickliffe Hampton.<ref>This was slightly complicated as it was denominated in [[crypto]] and needed to be converted back to Sterling. </ref> | ||
This way, Wickliffe Hampton had the cash required to preemptively bid back restless staff, and lexrifyly could, in time-honoured fashion, guilelessly piddle its investors’ cash up a wall without troubling the operating resiliency of the banking sector, or for that matter, | This way, Wickliffe Hampton had the cash required to preemptively bid back restless staff, and lexrifyly could, in time-honoured fashion, guilelessly piddle its investors’ cash up a wall without troubling the operating resiliency of the banking sector, or for that matter, a [[Human resources|HR department]], that it did not currently have. | ||
If this seemed like a bad trade for lexrifyly, | If this seemed like a bad trade for lexrifyly, over time it was not: firstly, cash was cheap, and lexrifyly didn’t care: what was money, when it came to it? Secondly, Barkley’s models demonstrated that the looney bid could invert in any number of circumstances: a market crash, hawkish monetary policy, the arbitrary dissipation of mass hysteria or the sudden onset of incipient tech winter. | ||
For these contingencies the ERS was a natural hedge. While wide-scale redundancies and hiring freezes gripped the fintech sector, the boring old banking industry would box on as it always had done. At that point, a fintech that was short ''[[π]]” under an [[Employment rate swap|ERS]] would have a sensible amount of cash coming in from its bank counterparty to keep the lights on. | |||
====The “PIEBOR” submission process==== | ====The “PIEBOR” submission process==== | ||
{{Drop|I|t was easy}} enough to quantify a bank’s presumptive wage bill since, once you controlled it for hysteria, it was more or less a fixed rate. But what about the ever-changing hypothetical wage bill of a startup? How to gauge that in real-time? And what was to stop a startup gaming the rate easily, by just pretending its actual preparedness to pay stupid money was lower than it really was? | {{Drop|I|t was easy}} enough to quantify a bank’s presumptive wage bill since, once you controlled it for hysteria, it was more or less a fixed rate. But what about the ever-changing hypothetical wage bill of a startup? How to gauge that in real-time? And what was to stop a startup gaming the rate easily, by just pretending its actual preparedness to pay stupid money was lower than it really was? | ||
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The market needed an observable, objective measure of “prevailing startup insanity”, which Barkley approximated for “''[[π]]”''. Barkley supplied it. Under the auspices of the British Human Capital Managers’ Association (BHCMA), a committee of fashionable startups would meet each afternoon in a WeWork in Shoreditch and over kombucha martinis to state publicly, in front of a panel of [[venture capitalist]]<nowiki/>s, how much they would be prepared to pay an underperforming settlements and reconciliations clerk to join them and drive customer engagement. They expressed this as a premium or discount to ''[[π]]''', being the equivalent value for the preceding day. | The market needed an observable, objective measure of “prevailing startup insanity”, which Barkley approximated for “''[[π]]”''. Barkley supplied it. Under the auspices of the British Human Capital Managers’ Association (BHCMA), a committee of fashionable startups would meet each afternoon in a WeWork in Shoreditch and over kombucha martinis to state publicly, in front of a panel of [[venture capitalist]]<nowiki/>s, how much they would be prepared to pay an underperforming settlements and reconciliations clerk to join them and drive customer engagement. They expressed this as a premium or discount to ''[[π]]''', being the equivalent value for the preceding day. | ||
The BHCMA would weight the submissions by reference to the volume of cash the venture capitalists lobbed at each startup, trim the top and bottom estimates, average the remainder and compile and publish the trimmed arithmetic mean rate as the [[London Inter-Employer Basic Offered Rate]]. Quickly | The BHCMA would weight the submissions by reference to the volume of cash the venture capitalists lobbed at each startup, trim the top and bottom estimates, average the remainder and compile and publish the trimmed arithmetic mean rate as the [[London Inter-Employer Basic Offered Rate]]. Quickly “[[PIEBOR]],” as it was known, became the ''de facto'' measure of ''[[π]]'' and was soon factored into the “floating” leg of [[employment rate swap]]s as standard. | ||
==== Credibility spread ==== | ==== Credibility spread ==== | ||