From I.B.G.Y.B.G. to I.B.H.Y.B.H.

I was 22 years old. I had my first job on a Wall St. derivatives desk. A large client calls us to do a 5 year OTC trade (for the non-wall st folk, these were customized over-the-counter transactions that the bank had to underwrite itself). As the trader and salesperson bickered back and forth about the "right price," they finally agreed at a level after one of them joked: "I.B.G.Y.B.G.?" They shared a laughed, nodded at each other, and went back to their desks.

 

 

Being the young eager grasshopper on the team, and frequently confused by the barrage of acronyms used by my colleagues, I asked what it meant:  

I'll Be Gone, You'll Be Gone.

Its common to job jump on the Street so long-dated trades had a high probability of maturing well after the salespeople and traders moved onto bigger better jobs at competing firms. The thought was why not just dump a bunch of trades onto the bank's balance sheet, collect a boatload of commissions, and let someone else figure it out later. By the time the trade had significant risk, it would be the mess of some other sorry sap.

I get the feeling the days of I.B.G.Y.B.G. are behind us.  Couple reasons:

-People are just not able to jump around as they did pre-2008.  Less opportunity to move means taking better care to bring quality business that won't blow up the firm.

-Wall St. compensation has shifted from less upfront cash bonuses, to more deferred stock bonuses that vest over the following 3-5 years.  

-Clients are gravitating toward more transparent and liquid transactions that are NOT over-the-counter. The counterparty risk of facing a bank is higher than facing a central clearing house (like the OCC).  Products that trade on exchanges are in demand as customers want to rely less on banks for liquidity and pricing.  This means less room for the I.B.G.Y.B.G trades as volumes increase in the highly competitive listed products that do not require a bank.

Converting employees to think about transactions from start to finish is important to ensure long-term success of an organization.  This holds true for all industries.  Salespeople who just want to close crappy business to pad numbers and make the quarter have misaligned incentives with stakeholders.  Employee compensation should be tied to the long-term profitability of the business motivating them to stick around.   

Cheers to making business more about I.B.H.Y.B.H:  I'll Be Here, You'll Be Here.     

Exit the "Knowledge Economy"...Enter the "Creative Economy"

I recently heard Gary Hamel speak at the Ross School of Business (University of Michigan) in Ann Arbor.  I had never heard of Gary before walking into the auditorium, and after listening to him for 45 minutes, I wanted to know everything about him.  This guy is good! (http://www.garyhamel.com/)

I took some interesting notes during his talk.  Gary is an expert corporate strategist who specializes in the topic of management, specifically how to "reinvent" management.  The point that resonated most with me was a slide he posted called "Gary's Hierarchy:"

Essentially, Gary argues that intelligence is pretty much par for the course in today's economy and the real way to differentiate is through creative ability.  You can outsource all of the technical skills we were told would take us deep into the 21st century (programming, engineering, finance, etc.).  He believes that business is more turbulent today and companies are not able to mitigate the turbulence fast enough.  Modern management styles are no longer modern (most taught management styles are from the beginning of the 20th century). Couple this with a faster business cycle and you too may see the need for more agility and creativity from leadership.

Listening to Gary, I immediately took pity on the millions of Americans who are making one of the various paths through higher education their own.  It seems like an all too common solution for the current recession we are in is to go back to school...and universities know this so school is not getting cheaper anytime soon.  Is all of the money spent on tuition to get a certificate and get "smart" worth it when the more applicable skills come from unlocking creative ability?