Tuesday, July 4, 2017

Sandra Navidi’s book titled Superhubs: The elite club: Financial Express 7th May 2017

A thought that will strike anyone about the corporate world is that it’s almost always the same set of business architects that feature everywhere, every time. This is even more glaring when it’s the financial sector. If this is an observation made by the perspicuous reader, then one will be completely in sync with Sandra Navidi’s book titled Superhubs. The term ‘superhub’ does, at first thought, strike one as being equivalent to a superhero, which, on closer reading, is actually true. But the word ‘superhub’ connotes the close and strong networks built by financial mandarins who rule the world.
Navidi has been closely associated with the financial world and has worked with economist Nouriel Roubini. Navidi has closely followed financial heroes over the years, especially during the crisis period of 2007-08 onwards, and has traced patterns and habits that make these superhubs work.
Her theory is that these people form a very tightly-knit closed user group, which influences the way policy is formulated, decisions taken and which creates strong symbiotic relationships across companies to make the system self-serving and perpetuating. Let us see how these hubs are built.
She gives a very accurate picture of the World Economic Forum and Davos—which almost everyone accepts is a futile exercise—where nothing much is achieved, with business leaders and government officials uttering bromides that serve little purpose. Yet everyone wants to be seen there. Navidi believes that these exclusive conferences in otherwise non-descript places, which host a lot of wealth-makers, are hard to enter and the purpose to be seen there is to network with the who’s who. This involves a huge cost—a helicopter ride could take you back by $10,000 if one does not have the patience to do the last stretch of travel from Zurich by road.
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Now, how can one identify these superhubs? They have some distinctive features and commonalities in the way they operate. Access to these hubs is critical because it provides an opportunity to get closer to wealth, people and privileged information. Getting a smile from George Soros is a big thing to start a business relationship. All these superhumans are ambitious and driven by both power and insecurity. Jamie Dimon is known to be irreverent to the point of being rude and had to reluctantly apologise to Mark Carney, former governor of Central Bank of Canada, for being brash. Hence, one can identify these superhumans by this trait. The author believes that these stars need to build ‘emotional intelligence’ in their styles of working. Bill Gross of PIMCO had a poor relationship with traders, colleagues and other constituents, and was always contrasted with the soft-spoken Mohamed-el-Erian, who was more respected for his investment acumen.
Now, once these cocoons or matrices are built, they progress towards the old boys’ club status and become self-perpetuating, where it’s hard for outsiders to intrude. This can happen through college links, as well as connections with government power centres. This is what the author calls ‘homophily’, or the love of being alike. Once these groups are established, the networks are expanded with equals and are an example of what the author calls ‘employing relational capital’.
These superhubs understand the importance of networking and earmark time and money for it. Curiously, one way of being in such networks is being in the right places, which can be Davos or a big party hosted by another superhub.
As may be expected, there are costs involved in leading to such a powerful state and the most important one is family. An interesting observation is that despite these imbalances, marriages among such people last, as the alimony bill can get monstrous! Further, they are always under media glare and, hence, must keep this in mind, as any improper behaviour can be hyped up. But this is all part of the game.
An interesting observation, which is the focus of a chapter in the book, is that there are not too many women in this community. The reason adduced is that it’s usually believed that women can’t take too much stress, though the author argues that when the International Monetary Fund had its crisis with Dominique Kahn, it was a woman, Christine Lagarde, who was brought in. The author agrees, however, that the glass ceiling exists in the financial sector. A factor working against women is that, normally, all these superhubs have mentors and men are hesitant to mentor a woman lest it be interpreted as an affair. Further, women have not created their own networks to perpetrate such superhubs.
There is a chapter on ‘revolving superhubs’, wherein these superheroes are always ‘in and out of the loop’. They switch jobs and roles, and are always there somewhere. Larry Summers could probably be described as being insufferable, but he is a brilliant person who has always been with powerful people. Unless they do something egregious, like Kahn, they remain in circulation. Here, Navidi gives examples of several investment bankers who have been associated with the government in various roles like Ben Bernanke, Hank Paulson, Timothy Geithner, etc. This really helps and it has been observed empirically that when there is any deviance from adherence to regulation, the penalties slapped on such banks are less severe than they would have been in case such a connection was not there. This is the result of effective lobbying. Personal linkages skew the system in the favour of superhubs and while conflict of interest is tricky, solid relationships help in times of crisis.
Finally, the author shows how these strong linkages can also lead to supercrashes, as was the case with Long-Term Capital Management when John Meriwether took the system down, which actually questioned the strength of capitalism. These superhubs can, hence, be destabilising and can distort the equilibrium quite badly through contagions.
Superhubs, as a concept, can be contextualised in any system and while Navidi has confined her narrative to essentially the American context, we can identify these superhubs anywhere and connect the dots to trace the patterns. While the ‘men’s only’ hub does not hold in the Indian financial sector, the nexus between the government and corporates manifests in the form of employment post-retirement or indirect lobbyists in the form of advisers, consultants or members of a board where such relationships can be leveraged. The reader can identify for herself what is being spoken about here.

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