An Anthropologist on What's Wrong with Wall Street

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In 1996, Karen Ho got a job on Wall Street. The student of anthropology, who would later go on to get her Ph.D., was fascinated by how even in the midst of an economic boom, corporate downsizings were rampant — and how each time a company announced a major layoff, its stock rallied. What she found from her perch at Bankers Trust — and later in interviews with people at firms such as Morgan Stanley, Merrill Lynch, Lehman Brothers, Goldman Sachs, JPMorgan, Salomon Brothers, Kidder Peabody and Lazard — was that it wasn't just an ideological commitment to boosting shareholder value that drove decisions to merge, break up and restructure companies, but also the work culture of Wall Street itself. Ho, now a professor at the University of Minnesota, talked with Barbara Kiviat about her findings, presented in Liquidated: An Ethnography of Wall Street, and how she thinks the recent financial collapse has — or hasn't — changed things.

What do you mean when you say the American worker has become liquid?
I mean that there's constant job insecurity, constant downsizing, constant restructuring, a constant need to retrain to have an adaptable skill set and be flexible. In a sense, job security and stability have been liquidated.

And that comes from Wall Street?
What I found in my research was that in many ways investment bankers and how they approach work became a model for how work should be conducted. Wall Street shapes not just the stock market but also the very nature of employment and what kinds of workers are valued. These firms sit at the nexus — they are the financial advisers and sources of expertise to major U.S. corporations and institutional investors — and from this highly empowered middle-man role, what they say has a lot of influence. The model that came to be dominant in the 1980s was one of constant change. The idea is that there's a lot of dead wood out there and people should be constantly moving, in lockstep with the market. If a company isn't constantly restructuring and changing, then it's stagnant and inefficient, a big lumbering brick.

And you think that attitude follows from the way Wall Street works?
What a lot of folks don't realize is there are tons of layoffs on Wall Street even during a boom. What they value is not worker stability but constant market simultaneity. If mortgages aren't the best thing, it's, "Let's get rid of the mortgage desk and we'll hire them back in a year." People were working a hundred hours a week, but constantly talking about job insecurity. Wall Street bankers understand that they are liquid people. It's part of their culture. I had bankers telling me, "I might not be at my job next year so I'm going to make sure to get the biggest bonus possible." I had bankers who advised the AOL–Time Warner merger saying, "Oh, gosh, this might not work out, but I probably won't be here when it doesn't work out." I looked at them like, "What?" Their temporality is truncated.

How does that translate to the rest of corporate America?
The kind of worker they imagine is a worker like themselves. A worker who is constantly retraining, a worker who is constantly networked, a worker whose skill set is very interchangeable, a worker who thinks of downsizing as a challenge — a worker who thrives on this. This becomes the prototype, but in many ways that's quite removed from the daily lives of most American workers. Before this crazy crash of 2008, bankers always landed on their feet, almost always. Job insecurity isn't the same thing for the average American worker. They often experience downward mobility or don't land on their feet.

Do you think things have changed in the recent collapse?
I think it remains to be seen, but I don't think the culture of Wall Street has substantially shifted. Even in the midst of this major global financial crisis, Wall Street has still continued to resist change. And I'd argue part of the reason they've been able to, even though investment banking as we knew it no longer exists, is that their ethos still does. Their daily cultural practices still do. Just look at how fiercely investment banks have resisted changing their bonus structure. But I think one of the key reasons why the culture of Wall Street has not changed is precisely because we — as in most Americans — are so tied up in it. Our 401(k)s and our pension funds are tied up in Wall Street doing well, even if we don't think this particular system of short-term bonuses and liquid culture is a good long-term strategy. Wall Street's values have reached out to so many corners of people's daily lives that actually changing the system means everyone has to change.

So when someone in the Obama Administration says something like "We want to reform Wall Street pay," what goes through your head?
I hope they can actually follow through with it. But here we have folks in Washington — in the Fed, in the Treasury — who are also investment bankers, especially from Goldman Sachs. So it makes me wary. We're all implicated in this.

What would you want to see change?
I would hope that folks in the Obama Administration would somehow link bonuses to long-term corporate productivity or long-term shareholder value — long-term meaning four to five years instead of five months or a year — and reinstate the Glass-Steagall Act [that separated investment and commercial banking]. These are big reforms, but they'd give you a more stable landscape to make even more changes. Part of what I learned is that the very kinds of daily practices that created the boom in the first place — wanting to book as many deals as possible for short-term bonuses, a workplace structured so that they're knowingly not there for very long — paved the way for the bust. I talked to bankers who said, "When we do deals like this, we're probably at the top of the market." They knew. It's not simply that busts always follow booms.