A review of Liquidated: An Ethnography of Wall Street, Karen Ho, Duke University Press, 2009.
In her ethnography of Wall Street, Karen Ho offers a powerful metaphor by way of a title. “Liquidated”, the book’s title, echoes the memorable advice of Andrew Mellon, US Treasury secretary in the early 1930s, as reported by then President Herbert Hoover: “Liquidate labour, liquidate stocks, liquidate farmers, liquidate real estate! It will purge the rottenness out of the system. High cost of living and high living will come down. People will work harder, live a more moral life.” This advice, of course, only deepened the Great Depression, and its failure led to the adoption of Keynesian policies and massive state intervention. Which confirms the late Michael Mussa’s diagnosis that “there are three types of financial crises: crises of liquidity, crises of solvency, and crises of stupidity.”
“You are fired!”
Liquidity means different things to different people. For the bond trader, liquidity is a fact of life. An asset has to stay liquid if it is to be sold without causing a significant movement in market price and with minimum loss of value. Money, or cash, is the most liquid asset, but even major currencies can suffer loss of market liquidity in large liquidation events. When even safe assets are considered high risk, flight-to-liquidity might generate huge price movements and lead to a panic. For an investment banker, liquidity refers both to a business’ ability to meet its payment obligations, in terms of possessing sufficient liquid assets, and to such assets themselves. If a business is unable to service current debt from current income or cash reserves, it has to liquidate some assets or be forced into liquidation. For ordinary people, being liquidated means to lose a job, which in the US can happen on a brutal basis: you pack your personal items in a box and go. But even then, there are differences: for a banker, the line “you are fired!” means it is time to return the calls of headhunters, while for a CEO liquidation often comes with a hefty severance package or golden parachute.
Liquidation therefore provides a meaningful metaphor of how Wall Street operates. According to Karen Ho, liquidity is part of investment bankers’ “ethos” or “habitus”. Borrowed from French social scientist Pierre Bourdieu, these two concepts refer, first, to the worldview, and second, to the set of dispositions acquired through the activities and experiences of everyday life. They are the result of the objectification of social structure or “field” at the level of individual subjectivity. By using these concepts, Karen Ho’s goal is to demonstrate empirically how Wall Street’s subjectivities, its specific practices, constraints, and institutional culture, exert powerful systemic effects on US corporations and financial markets. Investment bankers live in a world where jobs are highly insecure, and they get paid for cutting deals or trading assets. They tend to project their experience onto the economy by aspiring to make everything “liquid” or tradable, including jobs and people.
When Wall Street takes over Main Street
Downsizing, restructuring and layoff plans are not only business decisions based on economic rationality and abstract financial models: they are the predictable outcomes of a peculiar corporate culture that values liquidity above all else. It is important to note that the people heralding downsizing and job market flexibility themselves experience it firsthand. Investment bankers are constantly subjected to boom and bust cycles and to waves of restructuring, even during bull markets (before writing her PhD dissertation, Karen Ho did a stint at Bankers Trust and lost her job when her team was dismantled). They live their professional life with an updated CV at hand, and are constantly solicited by headhunters and placement agencies. By pushing deals and reengineering corporations, they are projecting their own model of employee liquidity and financial instability onto corporate America, thereby setting the stage for rounds of market crises and layoffs.
While no terrain is considered off limits for modern anthropology, Wall Street is not usual territory for doing fieldwork. As Ho notes, you cannot just pitch your tent in the lobby of JP Morgan or on the floor of the New York Stock Exchange and observe what is going on. Chances are, security guards will throw you out in the matter of an hour. Besides, you won’t be able to gain much relevant information, as a lot of what goes on in corporate banking happens behind close boardroom doors or as the result of abstract computer models. Negotiating access to the field is always an issue for anthropologists. In the case of Wall Street, the difficulty is compounded by the culture of secrecy and the strict control over corporate information exerted by financial institutions.
Getting access to the field
In addition, bankers are in a position of power relative to anthropologists. They can humble the apprentice social scientist with their cock-sure assertiveness and technical jargon. For an anthropologist, the challenge of “studying up” and researching the power elite is very different from the issues raised by “studying down” distant tribes or dominated social groups. The way Karen Ho went around this problem of access was pragmatic and opportunistic. She first landed a job in an investment bank to familiarize herself with the field. She then used her university connections, former colleagues and network of contacts to gather as much information as she could. Her field methods included structured interviews, casual conversations, and participant observation at banking events such as industry conferences or recruitment forums. She finally ordered her data into a narrative that described, in true anthropological fashion, the tribes, rites and myths of Wall Street.
Investment bankers form an elite tribe. They are the leaders of the pack, the smartest guys in the room. Their culture emphasizes smartness, hard work, risk taking, expediency, flexibility, and a global outlook. They look down on Main Street corporate workers, whose steady, clock-watching routinization produces “stagnant”, “fat”, “lazy” “dead wood” that needs to be “pruned”. They are the market vanguard of finance-led capitalism, and perceive themselves as exerting a useful economic function. They hang around in the same places: gourmet restaurants, uptown watering holes, week-ends in the Hamptons, and jet-set vacations in exotic locations. Investment bankers form distinct sub-tribes or “kinship networks”: they are the “Harvard guys”, or the guys from Yale, Princeton, or Stanford. Individual employees are not only known and referred to by their universities but are also seen as more or less interchangeable with others from their school. The investment bank is organized into a strict pyramid, with the overall dominance of the “front office” over the “back office” and the hierarchy between analysts, vice presidents, and managing directors. Few new hires ever make it to MD status: Wall Street functions as a revolving door, where organizations are constantly restructured and reconfigurated.
Tribes, rites, and myths
Karen Ho explores several rites that define investment bankers’ corporate culture: the recruitment process, the integration into the firm, closing a deal, getting promoted, negotiating a bonus, and hopping from job to job in an industry that applies a “strategy of no strategy.” Smart students from Ivy League universities do not choose Wall Street as much as there are chosen along a natural path that makes investment banking the only “suitable” destination. They go through several rites of initiation that ingrain in them a sense of superiority, hard work, and professional dedication. Most of Ho’s informants experienced an initial sense of shock at the extraordinary demands of work on Wall Street, though over time, they began to claim hard work as a badge of honor and distinction. A tremendous amount of energy is spent in determining compensation via end-of-year bonuses. As they themselves acknowledge, bankers do it for the money, and the amount they earn determines their sense of self-esteem and their position in the corporate hierarchy.
Bronislaw Malinowski, as quoted by Karen Ho, writes that “an intimate connection exists between the word, the mythos, the sacred tales of a tribe, on the one hand, and their ritual acts, their moral deeds, their social organization, and even their practical activities, on the other.” The myths of Wall Street are the lessons taught in business schools and financial theory courses: the superiority of shareholder value and the relentless pursuit of profit maximization. These myths of origin are not always coherent. Investment bankers and consultants in the sixties heralded diversification and growth in unrelated sectors, before moving to a new mantra of “core business focus” and downsizing. Breaking up the conglomerates they helped assemble in the first place created a whole new source of profit for bankers. Similarly, stockholders were once described as fickle, mobile, and irresponsible in relation to corporate managers. The shareholder value revolution inverted the picture, and financiers pressured companies and their managers for profits and dividend payments. These “sacred tales” taught in business schools are also myths of legitimization: for Wall Street, the role of bankers is to create liquidity, to “unlock” value that is trapped in the corporation and to allocate money (as in the takeover movement) to its “best” use.
Making ethnography mandatory reading for MBA students
Karen Ho’s ambition is to offer a “cultural” theory of corporate finance. In her view, strategy is produced by culture, and “the financial is cultural through and through.” She constantly emphasizes the fact that investment bankers actively “make” markets, “produce” relations of hegemony and “create” systemic effects on US corporations through their corporate culture and personal habitus. Wall Street narratives of shareholder value and employee liquidity generate an approach to corporate America that “not only promotes socioeconomic inequalities but also precludes a more democratic approach to corporate governance.” Of course, it can be argued that culture does not explain everything, and that Karen Ho’s perspective in turn only reflects the views of a particular tribe: that of the cultural anthropologist. There is also the fact that Liquidated focuses on yesterday’s battlegrounds: the focus is on corporate equity and M&A, which were the high-profile areas everyone could see, while the dark pools of CDOs and over-the-counter derivatives were left completely off the hook. The book was completed in 2008, and the subprime crisis is only alluded to in a coda. But despite these obvious limitations, Karen Ho’s book provides a salutary perspective on the banking world, and should be made mandatory reading for any MBA student or financial PhD before they embark on their master-of-the-universe carrier. Maybe investment banks should also do well to hire their in-house anthropologist.
The Duke Reader 