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.     

For the Unemployed Turning Entrepreneur

A good friend sent me an article he pulled out of Worth magazine the other day.  The article summarized the 10 Rules of Successful Entrepreneurship from Bill Murphy Jr.'s new book The Intelligent Entrepreneur.  I enjoyed the piece and thought it would be worthwhile to share.  I am finding a high correlation between articles about how difficult the job market is and new startup business ventures friends and former colleagues are embarking on.  In addition, there are tons of talented "out-of-work" people who are teaming up to start businesses.  These folks gave up looking for the next mindless job... they are going out and creating exciting new careers.  

It is great to talk with enterprising people who are optimistic about the prospects of growth both in the developed and emerging worlds.  Even in Michigan (despite what you may read in the dreaded papers) at a recent entrepreneur's conference held in Dearborn, the halls were buzzing about alternative energy, life sciences, social media, mobile marketing strategies, etc.  I did not even hear the word "automotive" mentioned once.  Who says Detroit cannot reinvent itself?

For those of you who are considering taking the plunge into one of the many entrepreneurial ecosystems, here are the 10 rules that came from Bill Murphy's research and are flushed out in his book (which I am definitely going to buy):

1.)  Successful entrepreneurs commit to entrepreneurship rather than to a specific business.

2.)  Successful entrepreneurs look for market opportunities before creating business solutions.

3.)  Successful entrepreneurs focus on innovation and scale.

4.)  Successful entrepreneurs pick founding teams with a history of working well together.

5.)  Successful entrepreneurs realize that they play the most important role.

6.)  Successful entrepreneurs manage risk.

7.)  Successful entrepreneurs commit themselves to learning management skills.

8.)  Successful entrepreneurs learn to sell.

9.)  Successful entrepreneurs redefine failure.

10.) Successful entrepreneurs aren't in it just for the money.