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

Rubin has since fashioned himself as a public intellectual, and he holds the positions of cochairman of the Council on Foreign Relations and cofounder of the Hamilton Project at the Brookings Institution, which focuses on growth policies. Rubin’s great wealth, power, and networks lead us to wonder: What is the magic formula that allowed him to navigate the highest realms of the system with such seemingly effortless ease? He has substance, competence, and credibility—characteristics shared by countless other people in finance. But what sets him apart? First, it is noteworthy that he developed an intellectual construct (mentioned in Chapter 4), which he outlines in his best-selling book In an Uncertain World: Tough Choices from Wall Street to Washington. Second, Rubin has been excellent at building relationships. He placed himself at central network intersections like Goldman Sachs, the White House, and the Harvard Corporation, among many others. In an interview, he said that one reason for returning to Citibank was to be more at the center of things.7 With every move, he raised his reputation and status and increased his “transactional capital,” by exchanging valuable favors and information with other superhubs. By cross-capitalizing on his various positions, he optimized his network exponentially. In the same interview, he also stated that working at Citi would keep him current and better equip him to handle public policy.

Rubin’s personality was ideally suited to becoming a superhub because he ranges among the most emotionally intelligent financiers. His introspective and self-aware nature allowed him to evolve from a coarse trader into a worldly executive and statesman. In contrast to overtly aggressive colleagues, his self-effacing and understated demeanor was disarming and reassuring. He freely lent his ideas to others and generously gave credit when it was due. Throughout his life, Rubin has been committed to building an inclusive society and economy that benefits all. According to Clinton, Rubin quite frequently acted against his own interests when drafting policies.7 He has also been actively involved in philanthropy on behalf of the underprivileged. Was he merely selfishly selfless to advance his career? And how do his altruistic pursuits square with his high remuneration at the time of Citi’s life-threatening losses and public bailout? Is the dichotomy between self-interest and altruism a paradox or perfectly logical?

Up to what point are self and public interest aligned, and where do they diverge? And finally, at what point does self-interest veer into wrongdoing? We can at least assume that someone who has worked so ambitiously and successfully in finance all his life cares about money, and Rubin has referred to himself as a “reasonably commercial person.”8

To his critics, Rubin’s public and private crisscrossing signifies everything that’s wrong with the revolving door. Defenders argue that transferring knowledge across sectors benefits each respective institution, but that does not negate the fact that the individuals involved disproportionately profit from the arrangement. Rubin is also extraordinarily gifted in his reputation management. He has made relatively few enemies, maintained excellent relations with the media, and suffered only a limited number of PR crises.9

Like most top executives, Rubin has tirelessly expanded his relationship footprint. He placed his acolytes in key positions of power, ensuring the flow of information, access, and “political capital,” all reinforcing his own position. With support from the Brookings Institution, Rubin started a new network, the Hamilton Project, where influential people congregated around him as a hub. At the Council of Foreign Relations, he sits atop many different converging networks in terms of industries, geographies, and mission. While at Goldman Sachs, he gave a number of younger employees seed money when they left the firm to start their own funds. Today, some of these managers preside over the biggest and most successful hedge funds in the world (Dan Och of Och-Ziff, Eric Mindich of Eton Park, Frank Brosens of Taconic Capital, and Richard Perry of Perry Capital),10 and Rubin can count on their loyalty. Billionaires, sheiks, CEOs, and the like—Rubin’s capital network is capable of mobilizing financial forces of almost unfathomable dimensions. Such access is particulary useful when it comes to enlisting political forces.

Open Doors: Tony Blair

The former British prime minister Tony Blair has taken the concept of the revolving door to a whole new level. He has been a fixture at the JPMorgan cocktail party in Davos for the last few years. The charismatic and dynamic politician-turned-entrepreneur-turned-financier stood in the receiving line for three full hours, tirelessly shaking hands with hundreds of JPMorgan’s top clients, including private equity kings, hedge fund titans, billionaires, and oligarchs. He enthusiastically focused his full attention on every single guest and patiently smiled for a myriad of pictures. The luster of his premiership was still glistening, his status palpable, and his network power larger than ever.

After leaving public office, he set up a business consultancy, Tony Blair Associates, where he used his stellar international connections to advise governments, broker negotiations, open doors, and act as matchmaker between cash-rich investors and governments. As chairman of the JPMorgan Advisory Council, he has made himself available for corporate events and high-level client meetings, rendering advice on international matters for a reported $3 million a year. He was also on retainer for Petro Saudi, an oil company related to the Saudi royal family, for $66,000 a month plus an additional 2 percent of any deal resulting from his efforts, as well as to Zürich Insurance for $750,000 a year.

Moreover, he has advised Abu Dhabi’s sovereign wealth fund, Kazakhstan’s President Nursultan Nazarbayev, and Paul Kagame, the president of Rwanda. He has had business dealings with China, Kuwait, Azerbaijan, Mongolia, Sierra Leone, Liberia, Mozambique, and East Timor. For a three-hour engagement, facilitating the $66 billion merger negotiations between Glencore, Xstrata, and the Qatari ruling family, he received $1 million. He is also a highly sought-after speaker and on average charges $200,000 per speaking engagement. As one paper put it, he logs enough frequent flyer miles in one year to make it to the moon.

In addition to providing consultancy services, his firm has also obtained a Financial Services Authority (FSA) license, which authorizes it to advise clients and invest money on their behalf. Bloomberg estimates that from 2007 to 2013, his business generated at least $90 million. That number is likely an incomplete reflection of his actual earnings, as many of his activities do not have to be disclosed.11 Until early 2015, he headed the “Diplomatic Quartet,” an organization that tries to foster peace in the Middle East. Peace has yet to come, but for Blair the position had the convenient side effect of cementing his status and giving him a calling card for the Arab elites.

Blair has stated that he uses the significant cash flow from his business to finance his philanthropic efforts, which mainly focus on promoting religious tolerance and open, rule-based economies. Because of the seemingly opaque and complex structure of Blair’s companies and foundations, he has been widely criticized by the media and a disaffected British public. Some decry the alleged conflict of interest resulting from his overlapping for-profit and nonprofit activities and his engagement with autocratic regimes with spotty human rights records. In response to such accusations, Blair has countered that he engages with these regimes to promote political reform, arguing that incremental improvement is better than no progress at all.12 Fringe countries benefit from the respectability Blair confers on them and the connections he provides. In turn, they are attractive clients with deep pockets and enormous growth potential, which converts into deal-making opportunities.