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

$uperHubs is an incredibly timely book precisely because it’s not only about the people within the system but also about the system itself. The financial world can only be fully comprehended by understanding all three strands—how Wall Street and global financial policy making operates, the superhubs who push its levers, and the networks that form within it. This is not a passing phenomenon. Superhubs will always form within networks, making this an evergreen topic and an invaluable, insightful book for generations to come.

Introduction

GENESIS

$uperHubs is the result of four years of research and the insights gained in the course of my work at the intersection of international law, finance, and the economy. As an attorney admitted to the New York and German Bar, my professional journey began at Deloitte in Germany almost two decades ago, where I advised institutional clients such as insurance companies and pension funds on alternative investments. Subsequently, I moved to New York for a position as general counsel at an investment firm, then transitioned to investment banking and, lastly, worked with noted economist Nouriel Roubini at his global macroeconomic advisory firm before launching my own consultancy, BeyondGlobal.

When I moved to New York, I had to proactively set out to develop connections. As I knew relatively little about networking and the world of finance, this was an organic rather than a strategic process. It was during this time that I came to wonder how a small number of executives, policy makers, and thought leaders manage to rise to the absolute top, lead their institutions to continuous success, and have unprecedented access to power. Eventually my own connections evolved and began to extend to global leaders and other elite decision-makers. My work, which had begun at the micro level of individual transactions and culminated at the macro level of the global economy, has provided me with a bird’s-eye view that has enabled me to recognize different patterns of network formation and certain behavioral principles. I began to realize that in a world where everything can be commoditized and automated, and in which human interactions are increasingly digitized, these select few preside over the most exclusive and powerful asset: a unique network of personal relationships that spans the globe, the cultivation of which cannot be delegated or outsourced.

I have directly interacted with most of the superhubs written about in this book at invitation-only conferences and events, which I routinely attend because of my work as a macroeconomic consultant and strategic relationship manager.

ABOUT THIS BOOK

$uperHubs tells the story of our seemingly impervious financial system with a specific focus on the executives at its very top and their unique personal networks. It introduces the main protagonists, the “superhubs,” who pull the levers of finance and are by far the best-connected and most powerful players. The narratives paint a picture of the human beings behind big institutions, capital, and macroeconomic events; their relationships; and their rarefied world of power, luxury, and privilege. $uperHubs takes you behind the scenes to their exclusive platforms: the World Economic Forum (WEF); the meetings of the International Monetary Fund (IMF); and think tank gatherings, power lunches, charity events, and private parties.

We learn how the superhubs’ alpha personalities, inexorable quest for power, and desire to leave a legacy propel them to top network positions that come with access to unprecedented opportunities. We see the core characteristics most of them seem to share, such as a high degree of emotional intelligence, charisma, and charm. Molded by similar backgrounds within elite schools, the old boys’ network, and exclusive social circles, they understand and trust each other, form deep and resilient alliances, and employ their relational capital to maximize the return on their relationships.

$uperHubs also draws the curtain on the personal sacrifices, pressures, and struggles that come with power and privilege. Women are grossly underrepresented in the highest ranks of finance despite the clear business case in their favor, because they are largely excluded from the predominantly male networks. Superhubs increase the efficiency of their networks exponentially by weaving a tightly-knit fabric of relationships by way of the “revolving door,” lobbying, and campaign financing.

Expulsion from these elite networks is exceedingly rare, but it does happen if legal, ethical, or societal rules are gravely violated—as in the case of the former chief of the IMF, Dominique Strauss-Kahn.

Lastly, $uperHubs examines the instability of the financial system by focusing on the interconnections of individuals rather than those of institutions, the consequences of this instability, and the measures that should be taken to make our system more resilient.

THE FINANCIAL INDUSTRY AND THE POWER OF NETWORKS

Finance is the operating system of our society because it is essential for everything we do. Our dependence on it gives the captains of the financial industry pervasive power. Their decisions influence everything from industries, to jobs, currencies, commodities, food prices, and much more.

With their “network power,” people such as Jamie Dimon, CEO of JPMorgan Chase; Larry Fink, Chair-man and CEO of Blackrock, the largest asset management company in the world; and billionaire hedge fund honcho George Soros shape history, transform the world we live in, and determine the future of our financial system, economy, and society.

Heads of central banks—such as the U.S. Federal Reserve, the European Central Bank and the Bank of England—directly impact the interest yield of our savings, the price of our mortgages, and the performance of our pension plans.

Every action of any one of these financiers directly affects the lives of each and every one of us. Through their interconnections with the corporate sector, they increase their individual power exponentially. According to a study by the Swiss Federal Institute of Technology, a select few financial institutions control a large part of the world’s biggest companies through cross-holdings and board seats.1 Because financial institutions consist of individuals, this ownership structure provides these individuals with enormous influence.

APPLYING THE LENS OF NETWORK SCIENCE: SYSTEMS THINKING

Understanding our complex financial system can be an intellectually overwhelming exercise, and this book will make it more accessible by exploring the underlying personal relationship patterns through the lens of network science. Network science mathematically substantiates the structure and behavior of networks, thereby demonstrating how seemingly amorphous webs of relationships form. Networks consist of “nodes,” which are connected by pathways called “links.” All networks, whether natural or man-made, behave in the same manner. According to the law of “preferential attachment,” all nodes prefer to attach to other nodes with the most connections, because a greater number of connections increases the chances of individual survival. The best-connected nodes at the center of networks are called “superhubs.” Superimposing network science onto the financial system allows us to see how people become superhubs by instrumentalizing status, access, and the transaction potential of social capital.

As you will see, finance is a complex, self-organizing system—like an ant colony, for instance—where the interactions of individual players can produce large-scale effects. Yet individuals have no control over the whole system, as they themselves are subject to its laws and systemic forces. Recognizing the power of the elite few is all the more important as there is no one controlling force, no real checks and balances.