Morning Coffee: Goldman Sachs' president implies employees may not be that special. Blackstone’s CEO says big firms are best when you’re ambitious

Investment bankers, if they were to compare themselves to any other industry, would probably pick something complicated and bespoke.  Artisanal jewellers, perhaps, or makers of fine customised haute couture.  If you were to ask them what kind of car manufacturers they were similar to, it would definitely be something like Bugatti or Maclaren – highly customised one-off racing machines, lovingly designed for a single customer.

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John Waldron of Goldman Sachs seems to take a more prosaic view.  When asked how AI integration is going, Waldron declared this week that, “I often describe Goldman Sachs as a human assembly line”. In fairness, he did appear to be talking about back-office roles in processing and paperwork, but the implication was certainly that automation is how GS has managed to keep headcount constant so far this year despite a pick up in business volumes. Waldron went on to elucidate: “If you think about what’s happened in manufacturing, it’s become much more robotic, it’s become much more automated. The banks really haven’t been on that journey to the same extent.”

Although Waldron was talking mainly about the back office, he might not have been talking exclusively about the back office.  When asked about the implications for junior banker jobs (and therefore for senior jobs in a decade’s time), Waldron said that he didn’t know whether the age profile of the employees was going to be “a diamond or a pyramid”. 

The idea of working in the demographic equivalent of South Korea might seem pretty alarming to anyone starting out in a banking career.  But of course, the analogy between a firm’s age structure and that of a country isn’t exact.  In the economy as a whole, the working age population supports retirees.  But in an investment bank, the majority of the revenue is brought in by the oldest bankers, not the younger ones.  There’s always been a limited number of senior rainmakers in every bank, and although they might not like to admit it, the rest of the staff are just there to execute the deals that these rainmakers bring in.

So … although John Waldron is almost certainly much too nice to say this to their faces, there is a quite a reasonable analogy between bankers and people who work in overalls.  Bankers might like to claim that each deal is a unique priceless Faberge egg, but actually we all know that there is a lot of cutting and pasting of standardised components into pitchbooks, prospectuses and even M&A advice.  Although it’s by no means certain that AI replacement will climb all the way up the value chain to executive directors and MDs, it would be foolish to build a career on ignoring the possibility.

Elsewhere, Jonathan Gray, the president and COO of Blackstone thinks that there are more advantages to working at a big company than just being able to count on a Hollywood-style budget for your annual Christmas video.  Lots of people recommend that when you’re young, you ought to try working for a start-up or a boutique, in order to get exposed to all sorts of different aspects of the business.

But if you’re not actually getting involved in the deals, then this “variety” really only amounts to the opportunity to carry lots of different bags.  As Gray puts it, “"One of the problems with smaller firms is, there's not a space. That smaller tree can't get sunlight”.  A flat hierarchy sounds like it might be fun, until you realise that if there’s no ladder, there’s nothing to climb, and you can end up waiting for someone to retire or die before you can get promoted.

At Blackstone, on the other hand, Jon Gray says that “leaders make a point of calling out innovative, creative efforts in group meetings and rewarding the people behind them”.  Even if those people are younger and more junior. 

Of course, in order to enjoy this culture, you have to first get in the door.  And although Blackstone is a big company in terms of its profits and assets under management, it’s not exactly “big” at just over 5,000 employees worldwide.  But if you’re in the lucky position of choosing between employment at a prestigious boutique and the graduate scheme at Blackstone, it’s worth considering.

Meanwhile …

Professionals who are worried about being replaced by AI are “job hugging”.  In particular, lots of them are worried that if they take two years off to do an MBA, their job will have changed beyond recognition and they won’t get it back.  Accordingly, prestigious business schools are not only trying to rebrand their courses as “AI-proofing your career”, they are making some very big price cuts. (WSJ)

Investec is getting out of the GP-led private equity secondaries market, closing down Stefano Manna’s team which only launched three years ago. (PE News)

Amazon staff are encouraged to use “MeshClaw”, its proprietary AI agent, for routine and low-value added tasks.  Apparently one of the main such tasks they are using it for is to automate the writing of pointless AI token requests so that they can reach their targets on the internal AI usage leaderboards. (FT)

London’s JP Morgan bankers may be disappointed if they’re hoping to get a sweet refurbished office with a climbing wall and maybe a pub like the one in New York. Jamie Dimon has threatened that if rumours of a bank profit tax are true, he might cancel the new building there. (Bloomberg)

One thing that sportswriters have in common with equity analysts is that every now and then, they make a truly awful prediction, and they have to find a way to gracefully face the music. (WSJ)

Inflationary policy always has winners and losers, and Harvard students are being put through a particularly horrible deflationary episode.  Some of the most “never got a B” people in the world will be subjected to a regime in which no more than 20% of the class, plus four students, can get an A if the latest faculty ballot passes. (Bloomberg)

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