Morning Coffee: Goldman Sachs' new-old way of cutting staff costs. Would you take retirement in the middle of your career?

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if you're working on Wall Street, how far from the physical Wall Street can you actually be? According to an article in Business Insider today, Goldman Sachs reckons that the definition of the financial district can stretch as much as 2,200 miles (32 hours by Uber, if the traffic is good), to Salt Lake City and that's about to get stretched further still. Goldman's also begun hiring in Richardson Texas (24 hours cab ride to NYC) and Utah (33 hours). 30% of Goldman Sachs' headcount already works in these kinds of 'high value' locations and it's about to get even higher still.

The impetus behind the push into ever more widely dispersed offices is of course costs, and cutting them. Goldman's high value locations are anything from 45% to 75% cheaper than places like New York City or London. Utah has lower local taxes than New York, and a combination of low living costs and cheap real estate make it an attractive option for a number of financial services firms. “Near-shoring” is in many ways the new “offshoring” and considerably less politically sensitive. Alliance Bernstein have a large centre in Nashville, Tennessee, while Deutsche Bank, for example, carries out a considerable amount of both back office and front office business in the UK from its “Brumsourcing” location in Birmingham. Even the Canadian banks have got in on the act by transferring treasury and back office functions to Nova Scotia and Newfoundland.

The choice of location is part of the key to success. By becoming big local employers in otherwise economically deprived areas, banks can cut back costs nearly as much as by moving to offshore processing centres in Asia, while preserving time zone advantages. They can also, importantly in the current climate, broaden the base of their political support beyond a narrow region.

But what about the employees? There are lifestyle benefits to living outside a polluted and overpriced major financial city, but the stigma of the proverbial “Equities in Dallas” from Michael Lewis' book “Liars’ Poker” will always be there for anyone being asked to consider a move from New York. Goldman are being somewhat cagey about their plans for Salt Lake City, neither confirming nor denying reports until employees have been informed. For the moment, though the Goldman's new near-shoring push into Utah, Salt Lake and Richardson seems to be focused on compliance. With luck it will stay this way. - As revenue producing employees at Deutsche Bank's Jacksonville office have discovered physical proximity to senior management who decide promotions and determine bonuses is crucial to your career.

On the general subject of balancing lifestyle choices against career ambitions, the Financial Times has an interesting and provocative longread on the subject of what retirement might mean for a new generation. Sarah O'Connor suggests that, in an economy that is likely to be characterized by greater longevity (and therefore bigger pension liabilities) but also by technical change, disruption and robots replacing human employees, we should be thinking not only about working more years before retirement, but about taking some of the leisure time people usually save up for the end of their lives and using it when we are young and able to enjoy it.

The idea would be that we might start with a presumed retirement age of 70. Then, if at the age of 35 you found your job becoming obsolete, you could take 2 or 3 years to retrain for a new career and add them onto your retirement date. The same could be done for family leave, or even just taken as a sabbatical.

The idea of taking regular career breaks without necessarily damaging your career progression is enticing. People who work in the financial industry and move jobs frequently already experienced a minor version of this phenomenon due to gardening leave; if you move jobs four or five times over the course of a career, that’s like having a year off on full pay. Bankers often have extravagant ambitions for doing something productive with their gardening, which usually tend to founder on the reality of the fact that you can’t write a novel or learn French cooking in 3 months.  Maybe if this was a more normal part of working life, would get closer to being the people we imagine ourselves being.


Morgan Stanley analyst have put together a table of companies exposed to “key man risk”. Of course the most dubious use of this list, and therefore the one to which it will certainly be put, is to look for which bosses make the most difference and compare it to their compensation. Jamie Dimon comes out very near the top. (Business Insider)

The 1MDB case rolls on, with the NYT reporting that Brooklyn prosecutors are considering an indictment against Goldman Sachs, after individual criminal charges against Goldman banker Tim Leissner were dropped earlier in the year. (New York Times)

The trend for high value startups to remain private as long as possible rather than heading straight for IPO has spread from the USA to Europe, with consequent significant expansion of private capital teams in European investment banks. JPM, Rothschild and Goldman Sachs have all built up European private market capabilities. (Financial News)

Market makers are being asked to help train AI bots to recognise patterns and route orders, with the ultimate aim of doing the human beings out of a job (Risk)

Perhaps at a slightly lower level of ambition, Mosaic Data is a FinTech start-up which aims in the fullness of time to provide real-time analytics on customer profitability, but which currently promises an artificial intelligence rule to spot fat finger trades.(Financial Times)

Brexit announcements continue to rumble on, with HSBC choosing its French legal entity to be the new head of the European group. (Les Echos)

If you were delayed in Frankfurt Airport yesterday, it was because of a mistake by a security guard who allowed a French family to go through security despite having triggered an explosives alarm. Everything had to be shut down until the family could be found and the alarm determined to be a false positive (Bloomberg)

For fans of the prurient and tabloid end of financial life, the New York Post has a long run down of the ins and outs of the Bill and Kate Gross divorce case, detailing all the practical jokes played by the bond King and his ex on each other (New York Post)

Academic research has shown that people react badly to vocal characteristics associated with under privileged minorities. A university professor was able to show that he got offered better properties by real estate agents simply by using his “white voice” on the telephone. (The Economist)

Do you have strong self-control? Or do you just get less tempted because you feel less hungry? New psychological research suggests that it's likely to be the second. (BPS Research Digest)

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