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Archegos: Difference between revisions
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And here we see the behavioural crux: we tell ourselves that what matters in risk management are the formal boundaries we draw; the official channels; the technical superstructure of the relationship; the architecture of the parties’ rights and obligations versus each other. But this isn’t true. In practice the relationship is governed by soft, morphing, invisible, ''informal'' boundaries, good and bad. Interpersonal relationships. Insecurities. Understandings. ''Mis''understandings. Past practices. Fear of screwing up. Precedents. Arse-covering. Expectations. Self-serving narratives. Trust. The [[commercial imperative]].<ref>This isn’t the place for it, but note: these fundamental qualities of commercial life are utterly [[Legible|illegible]] to [[neural networks]], [[Policy|policies]] and [[algorithm]]s.</ref> These things don’t show up in org charts or on [[opco]] [[deck]]s. You can’t measure them. To try is to get the wrong end of the stick. | And here we see the behavioural crux: we tell ourselves that what matters in risk management are the formal boundaries we draw; the official channels; the technical superstructure of the relationship; the architecture of the parties’ rights and obligations versus each other. But this isn’t true. In practice the relationship is governed by soft, morphing, invisible, ''informal'' boundaries, good and bad. Interpersonal relationships. Insecurities. Understandings. ''Mis''understandings. Past practices. Fear of screwing up. Precedents. Arse-covering. Expectations. Self-serving narratives. Trust. The [[commercial imperative]].<ref>This isn’t the place for it, but note: these fundamental qualities of commercial life are utterly [[Legible|illegible]] to [[neural networks]], [[Policy|policies]] and [[algorithm]]s.</ref> These things don’t show up in org charts or on [[opco]] [[deck]]s. You can’t measure them. To try is to get the wrong end of the stick. | ||
Example: much was made of the unmonitored gap in responsibility between the co-heads of | Example: much was made of the unmonitored gap in responsibility between the co-heads of prime services. The guy in America thought he was covering ''physical'' prime brokerage. The guy in London thought we was covering ''all'' of prime services, physical and synthetic, but only for EMEA. No-one, ergo, had their eye on ''synthetic'' prime brokerage ''in America'', being ''just the bit that happened to blow up''. | ||
Thus, opined the Special Committee, a ''structural'' shortcoming: a formal black spot on the radar. But, come ''on''. This is no failure of organisation. This is not a lapse in formal structure — this is two fallible, mortal humans doing what all fallible, mortal humans do: ''desperately dissembling to duck their patent responsibility for an utter fuck-up''. This is ''plainly'' a post-facto rationalisation: The [[JC]] has known a lot of senior bankers in his time and never yet met one who didn’t run every business he could, and ''claim'' to run every nearby one he couldn’t. Does anyone suppose, for a moment that, had Archegos made the bank a five-and-a-half billion ''profit'', that both these gentlemen would be claiming all the credit God showers on successful investment bankers? | Thus, opined the Special Committee, we can attribute this to a ''structural'' shortcoming: a [[formal]] black spot on the radar. But, come ''on''. This is no failure of organisation. This is not a lapse in formal structure — this is two fallible, mortal humans doing what all fallible, mortal humans do: ''desperately dissembling to duck their patent responsibility for an utter fuck-up''. This is ''plainly'' a post-facto rationalisation: The [[JC]] has known a lot of senior bankers in his time and never yet met one who didn’t run every business he could, and ''claim'' to run every nearby one he couldn’t. Does anyone suppose, for a moment that, had Archegos made the bank a five-and-a-half billion ''profit'', that both these gentlemen would be claiming all the credit God showers on successful investment bankers? | ||
Here is the category error: to substitute a formal structural lapse, because Executive boards understand formal structural lapses: they validate the structure that sits below them; they bestow primacy on those at the top in a way a tendentious human vanity in some random in the organisation doesn’t. You can see, and eliminate, structural gaps. You can solve for them. But if capicious human failings riddle your organinsation; if it can be let down at a moment by vanity, greed, fear or misunderstnanding, by anyone — if its continued success is a reflection of the happy absence of those traits, then what value the members of that executive board? | Here is the category error: to substitute a formal structural lapse, because Executive boards understand formal structural lapses: they validate the structure that sits below them; they bestow primacy on those at the top in a way a tendentious human vanity in some random in the organisation doesn’t. You can see, and eliminate, structural gaps. You can solve for them. But if capicious human failings riddle your organinsation; if it can be let down at a moment by vanity, greed, fear or misunderstnanding, by anyone — if its continued success is a reflection of the happy absence of those traits, then what value the members of that executive board? | ||