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

She climbed the career ladder while maintaining her femininity, glamour, and charm. In contrast to many women who prefer to assimilate and blend in, she sets herself apart in a rather dull environment, which takes great self-confidence and courage. Her style and sophistication have made countless headlines and landed her a coveted place on the Vanity Fair best-dressed list and a profile in Vogue . Pulitzer Prize-winning author Liaquat Ahamed, in his book On Tour with the IMF, characterizes her as “intriguing” and “charming,” and the Financial Times ’s Gillian Tett praises her chicness and her elegantly coordinated wardrobe. Even the respectable Guardian went so far as to ask, “Is this the world’s sexiest woman?” Forbes surmises that “she uses her style to assert her individuality and dominance amid a seas of suits” and to help “convey her confidence and authority.” Fashion blogs call her a style icon, and others laud her as proof that women can be both stylish and competent at the same time. However, her costly Chanel outfits, pricey Hermès bags, and expensive jewelry have also prompted critics to accuse her of flaunting her wealth and status in an environment beset with economic problems, poverty, and austerity.48

To this day, even in her top senior position, Lagarde still must put up with male condescension and patronizing remarks. When she rightly pointed out that European banks were in urgent need of capital, Christian Noyer, the governor of the French Central bank, responded, “Quite frankly, I do not understand what she said.”49 Translation: She does not know what she is talking about. Former French finance minister Laurent Fabius mused on her chances of landing the IMF job: “She’ll make it. She is an elegant woman.”50 Translation: She is not qualified. When Lagarde is confronted with such snubs and insults, she usually grinds her teeth and brushes them off with a humorous remark. I cannot count how many times male economists and bankers have felt compelled to opine that—while she is doubtlessly an accomplished woman—she is unsuitable for the job since, as a lawyer, she does not have a full grasp of economic issues. I beg to differ. By all accounts, she has a spotless track record and is well respected inside and outside of the IMF. In 2016, she was reelected by consensus as the only candidate for Managing Director of the IMF for a second five-year term.

Lagarde often laments the lack of women in finance in an effort to bring awareness to the issue, which has earned her criticism from within the IMF for supposedly distracting from more pressing problems. She has argued that “Gender-dominated environments are not good, particularly in the financial sector, where there are too few women. Men have a tendency to . . . show how hairy-chested they are, compared with the man who’s sitting next to them. I honestly think that there should never be too much testosterone in one room.”51 She has also warned that women cannot have it all and that those who try should brace themselves for failure. She has conceded that juggling her career with her family life has been challenging. The divorced mother of two sons is now in a long-term relationship with a Corsican businessman.52

Lagarde’s oscillations between the private and public sector have exponentially expanded her worldwide network. It is unclear what her next career step will be after her IMF term ends, but it is not entirely impossible that she may become the first female French president. I wish I could infer some lessons from Madame Lagarde’s steep ascent other than get the best education, have grit, and stay true to yourself, but many other women have done the same and not achieved her level of success. She is indeed uniquely qualified and possesses a high degree of both social intelligence and resilience, but I also think that in her case all the stars were aligned. Once she found an upward trajectory, she had the ability and good fortune to maintain that positive momentum. Generally, I must say that I am not too optimistic that things will significantly change for the better in the near future. This is a pity, as there is ample proof of the objective business benefits produced by more diversity of gender, backgrounds, experiences, thought, and opinions. By disrupting male groupthink and counteracting excessive risk-taking, female advancement will make the system as a whole more balanced and stable.

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This chapter explored the reasons for the lack of women at the highest levels of finance. While also discussing the gender, wage, and opportunity gaps, we specifically focused on the “network gap”: the fact that women are largely excluded from men’s networks, have no sufficient networks of their own, and lack mentors. Christine Lagarde has proven a rare exception to the norm, perhaps because her experiences in both the public and private sectors significantly increased her network links. In Chapter 10, we will more closely examine the tight interconnections between the financial, corporate, and political sectors, which provide superhubs with enormous power.

CHAPTER 10

Revolving Superhubs

Creating Network Monopolies

PSYCHOLOGICAL KIDNAPPING

Financial networks interact with other networks, thereby reinforcing their structures. Two sectors inextricably intertwined by personal connections are finance and politics—a relationship that perpetuates itself through such means as the “revolving door,” lobbying, and campaign financing. CEOs of financial institutions have financial power, while politicians have regulatory power. So long as financial firms provide funding for politicians, their interests are aligned. These interconnections raise various issues that we shall explore in some depth.

The symbiosis between the financial and political spheres poses a serious risk of “relational capture.” The term reflects the fact that humans instinctively try to foster positive work environments through cooperation and conciliation. In essence, relational capture is a more amenable version of Stockholm Syndrome: After a certain amount of interaction, people become attached and, eventually, beholden to one another. Although leaders from the public and private sectors are supposed to keep an appropriate distance, each has something that the other wants—and political and regulatory influence is often exchanged for job positions and campaign contributions. Research has shown that within a short time of interaction, “relational capture” sets in. Mere “relational capture” evolves into “cognitive capture,” when regulators work so closely with the regulated that they start to see issues through their lens. Cognitive capture can culminate in “regulatory capture,” where regulators become dominated by the very financial sector that they are required to regulate.1

Another issue is undue concentration of power, which is accelerated by systemic forces that are difficult to break. The reality is that markets promote efficiency, which in turn rewards scale, which in turn leads to a concentration of economic—and therefore political—power.2

The Clintons perfectly exemplify this symbiotic relationship between the public and the financial sector. Since Hillary Clinton recognized during her tenure at the State Department that the U.S.’s global leadership was inextricably linked with its economic strength, she made economic considerations an integral part of foreign policy and created the Office of the Chief Economist. Financial firms have made large campaign contributions to both Hillary and Bill, paid them millions of dollars in speaking fees, and heavily donated to the Clinton Global Initiative.

This intermingling of government and private matters has led to frequent accusations of conflicts of interest. Personal and professional lives of public and private sector figures regularly overlap on the social circuit and at various professional events like conferences and fund-raisers all over the world. While the financial sector hedges its bets with contributions to both sides of the aisle, political animals like Hillary Clinton must carefully walk a tightrope to appeal to the populace while placating her benefactors at the banks. Issues such as financial regulation are an especially double-edged sword for politicians.