Sandra Navidi - SuperHubs - How the Financial Elite and Their Networks Rule our World

Klaus Schwab pioneered the stakeholder principle, “according to which the management of an enterprise is not only accountable to its shareholders, but must also serve the interests of all stakeholders . . . who may be affected or concerned by its operations.” He later built on this theory to create the concept of “global corporate citizenship.”16 The stakeholder principle is the ideological foundation upon which the WEF is built and gives it legitimacy.

Ray Dalio, founder of the world’s biggest hedge fund, developed an ideology that views the economy, businesses, and people as operating like machines. A manifest outlining his belief system, titled Principles, is published on the Bridgewater Associates website.17

Mike Milken, the bond king of the eighties, billionaire investor and philanthropist, also created a philosophy as the basis of his thinking and doing. He devised a formula, P=EFT (DHC+ESC+ERA), according to which prosperity is the sum of financial technology times the sum of human capital plus social capital plus real assets, a mantra that he has repeated throughout his life.18

Larry Fink, the founder of BlackRock, is the rock star of risk management. After reflecting upon his own monumental trading losses, he theorized that according to which asset managers have an incomplete understanding of risk, especially when things are running smoothly. He came to the conclusion, therefore, that developing risk management systems is a fundamental necessity of successful portfolio management and proceeded to build the world’s most reputable and comprehensive systems.

These theories often reflect an understanding of the psychology of human nature, markets, trends, and turning points—in short, the system and the mastery thereof. The theories themselves may not be the most important factor—and, indeed, are not always that innovative—but they reflect the typical superhub’s underlying skepticism, intellectual discipline, and intuition, which lead to clarity of thought and result in prudent decision making. Structured thought parameters also seem to provide orientation and a focal point that helps superhubs stay in control of their emotions. However, it is not always entirely clear which came first, the theory or the experiences on which the theory is based. Such discipline unfortunately does not make a person’s judgment infallible as all of these superhubs have experienced failures regardless. For many superhubs, having their own intellectual creation is also a matter of prestige and a way to distinguish themselves.

THE CULT OF FAILURE

Financial executives almost without exception abide by the “cult of failure” and stress the formative nature of failures, setbacks, and disappointments, because in their opinion we learn the most from them. At a graduation speech at NYU, Fed Chair Janet Yellen pointed out the importance of grit, commitment, and perseverance.19 Indeed, many of the most successful people on Wall Street have experienced significant failures on their journey to the top, and they would likely not be where they are today if it had not been for their perseverance.

For example, Jamie Dimon was fired from Citigroup by his longtime trusted mentor, Sandy Weill. The highly publicized move came as a complete shock to Dimon, who until then had consistently enjoyed great success. After taking some time off, he picked himself up and accepted an offer to become CEO at Bank One, whose value he doubled within a short time and thereafter successfully merged with JPMorgan. Dimon became JPMorgan’s CEO and chairman and subsequently made Time magazine’s list of the World’s 100 Most Influential People several times, and Institutional Investor named him the best CEO in America.

Another example is George Soros, who against all odds and through his own initiative was already one of the most successful money managers when he tried to establish himself as a serious intellectual and philosopher. Since childhood, Soros had expressed high ambitions regarding intellectual accomplishments and recognition. In 1998, due to perceived urgency on his part, he stitched together a book, The Crisis of Global Capitalism, with a red-hot needle and had it published shortly thereafter. Not only did his predictions of impending economic collapse fail to materialize, but his overall intellect and basic reasoning were ridiculed and derided by distinguished academics in the most respected publications. The Economist and the Financial Times characterized his writings as “incoherent,” “ramblings,” and “embarrassingly banal.”20 In the face of such scathing reviews, most people would have been happy to quietly fade into the background—but not Mr. Soros. On the contrary, he took the criticism to heart and tried even harder to hone his thinking and writing skills. Frequently, the most burning motivation and passionate perseverance result from perceived injustice, humiliation, and the desire to rehabilitate oneself and prove doubters wrong.

CEOS — CHIEF EGO OFFICERS: BILL GROSS

A small degree of deviation from the norm in terms of personality can bode well for success in the financial world.21 Some research even claims that executive floors house three times more psychopaths than the general population.22 While this is likely an exaggeration, top executives in the financial world generally have big egos, a phenomenon that seems more pronounced in the commercial sector than in the policy world. However, due to the financial crisis, the zeitgeist has changed in recent years. As a result of political and shareholder pressures, the imperial and hard-charging celebrity “chief ego officer” has fallen out of favor and been replaced by “boring is the new sexy”: low-key, risk-conscious, and conciliatory personalities.

Top performers often have a distinct need for attention and praise, which motivates them to achieve extraordinary results. However, overly strong self-confidence and a sense of invincibility lead to a greater inclination toward risk taking. Often, people with a slight psychopathic touch have excellent political skills, which they use to finesse others in order to further their goals. Their attitude of entitlement, some argue, also manifests itself in the size of their pay packages.23

An exaggerated sense of self can in some instances border on narcissism and hubris.24 In these cases, executives lack empathy, are excessively arrogant, and feel superior. Extraordinary boldness and risk-taking behavior often conceals deep-seated insecurities: Many of the most successful people make it to the top because they have a chip on their shoulder, be it their backgrounds, past failures, or negative experiences. This is slightly disconcerting because a leader’s personality has a direct effect on their company’s performance. For instance, if too many psychopathic character traits are too pronounced, they may lead to increased volatility. If that is an indicator of where the system is headed, it may not be a good omen. I would like to believe that none of our financial institutions are headed by psychopaths, but it definitely is an environment rich in eccentric characters, and Bill Gross is one of them.

Bill Gross (net worth $2.3 billion), the founder and former chief investment officer of the world’s largest bond fund, PIMCO, has some entertaining idiosyncrasies. He possesses many prerequisite qualities to be successful in investing, but his interpersonal skills—or lack thereof—are said to have eventually caught up with him. The world of investment funds is pretty cut-and-dried and, except for hedge funds, has produced few publicly known superstar managers. However, the lanky seventy-year-old yoga devotee with a high-pitched voice is one of them. In the stuffy investment community, his unorthodox remarks and offbeat sense of humor garnered much attention. A few months prior to his exit from PIMCO, he spoke at an indoor investment conference wearing black sunglasses and comparing himself to twenty-year-old bad-boy pop star Justin Bieber. Then, in a riff on The Manchurian Candidate, he proceeded to ask journalists to repeat after him that he was “the kindest, bravest, warmest, most wonderful human being you’ve met in your life.” The joke left the audience baffled and prompted a Wall Street Journal journalist to tweet: “Something weird is going on with Bill Gross.”25