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

Pao sued for lost back pay and punitive damages that some experts estimated had the potential of reaching $100 million. Kleiner partners alleged that she had been an entitled misfit, who conveniently blamed her professional issues on colleagues rather than taking accountability for her shortcomings. The media speculated that the suit had been brought at a terribly opportune time, right when it became clear that her husband would likely lose his fortune and the family might run out of cash.16 Curiously, the plain and reserved Pao had until then never stood out for anything other than academic and professional achievements. Suddenly, after five years of supposed suffering, she launched a sensational discrimination suit, just as her husband had done twice before. The media had a field day.

In network terms, the story of Buddy Fletcher and Ellen Pao is remarkable. They began as outsiders on the margins. As minorities—Fletcher African American and Pao an Asian woman—they seemed to do all the right things to propel them to the center of the network. Specifically, Fletcher appeared to do everything by the book to cultivate homophily with superhubs. By attending the right school, he stacked the odds in his favor, and becoming a successful trader at Kidder Peabody further increased his chances. However, suing one’s employer is viewed as a betrayal which would typically catapult one back to the fringes. But Fletcher then made the right move by starting his own firm, which, if sufficiently successful, is one smart way to become a superhub.

And then he pulled out all the stops by acting as if money were no object. Abiding by the motto “fake it till you make it,” he donated to charities so generously that it was sure to attract attention, and with those donations he became an increasingly bigger creditor of social capital. The old boys’ network in finance has very few African American members, and knowing that he would never fully fit in, Fletcher carved out his own philanthropic niche by focusing on the nexus of race relations, Hollywood, the arts, and academia. He was not a warm and fluffy person per se, but he pursued people and dazzled them with invitations to glamorous salons and soirées. His Ponzi scheme extended not only to investments but also to his social status, and he projected a powerful image he had not yet earned. Pretending to be more than you are may work initially, but if appearances are not filled with substance, at some point the artificial edifice will crumble. He tried to signal to others that he was on their level with his car collection, impressive real estate holdings, and charitable endeavors, but he failed to pay his dues and, distracted with his extracurricular activities, did not complete the necessary groundwork. However, his scheme was so grand and bold that few people doubted it.

At the time of this writing, Fletcher owed more than $140 million in judgments and tax liens and $2.7 million in unpaid legal bills. He lost his racial discrimination suit against the Dakota, which sued him for unpaid maintenance, assessments, and legal fees for over $2.5 million. Three of his Dakota apartments were on court-ordered sale for an $10 million to $20 million to satisfy his creditors, who had won an order attaching $50 million of his assets. His Connecticut “castle” was on the market for $6 million. Fletcher has denied all wrongdoing.

After leaving Kleiner Perkins, Pao became interim CEO at the Internet platform Reddit, where she remained controversial and was eventually forced out by a revolt of Reddit users. A San Francisco jury ruled against her, and she lost her $16 million discrimination suit on all counts. In 2016, Pao landed a book deal with Random House to write a memoir called Reset, a “fearless first-person account exposing the toxic culture that pervades the tech industry.”17

The future of the once so promising couple is uncertain. Even under the best of circumstances, Fletcher will likely be considered tainted, with superhub-network reentry denied.

OMNI-CONNECTED: MICHAEL KLEIN

Many senior executives completely identify with their jobs and define themselves through their positions of power. They cling to their careers, fearing that losing their jobs will result in a loss of prestige, social standing, and sense of self. However, once arrived in top ranks, the chance that a senior executive is completely dropped by the network is highly unlikely, as we’ve seen earlier. Through board interlinkages and other interconnections, most executives either resurface in the top ranks or leverage their priceless networks to establish themselves independently.

Much of Michael Klein’s professional identity had been tied to Citigroup for almost two decades. As the chairman and co-chief executive-officer of markets and banking, he operated right below CEO Chuck Prince. Before a trip to the WEF in Davos, a senior executive of Citi in Germany told me that I absolutely had to meet Klein. When our paths crossed at the Citigroup reception, I was surprised. I had imagined someone so senior to be much older, not a youngish-looking man in his early forties. Not only was Klein an excellent, sharp, and creative banker, but he also possessed consummate networking skills. It’s difficult to determine what mix of qualities precisely makes a person likeable and trustworthy. But whatever it is—that certain je ne sais quoi —Klein had it. He had a charming personality and self-effacing demeanor and if he had a big ego or was ruthlessly ambitious, he hid it well amongst the alpha males of his set.

At Citi, Klein was a superstar miracle rainmaker. He convinced Steve Schwarzman to take private equity giant Blackstone public, making its founder $8 billion and Citi a pretty penny in fees. The timing—just months before the financial crisis hit—was impeccable. When Citigroup almost tumbled due to its massive subprime losses, Klein activated his formidable connections and raised $7.5 billion on a short trip to the Abu Dhabi Investment Authority. He had been one of Sandy Weill’s favorites and a likely prospect for the Citi CEO position; however, when Robert Rubin installed outsider Vikram Pandit as new CEO—who in turn brought in his own loyal followers—Klein was pushed to the side. His departure was a bitter one, albeit well compensated. He received a record payout of $42 million and proceeded to set up his own shop.

The talk at the time was that Klein’s greatness had only been possible due to his affiliation with one of the world’s largest banks. It would be an entirely different story for him to sit in a lonely office and make calls without having a premium brand behind him. But Klein exemplifies the fact that virtually everything can be taken away from you except your relationships. The ones he had built could not have been higher caliber, and his successful use of them as a solo agent was truly astounding.

He now reportedly employes a sizable team, although it’s hard to say because he shuns the spotlight and stays under the radar. He is close to many government leaders in Washington as well as abroad and hedges his bets by donating to both political camps. His role as adviser to the United Nations World Food Programme provides him with further exposure to the international political establishment. He advised Prime Minister Gordon Brown on the U.K.’s bank rescue plan and the government of Dubai on its debt restructuring. Klein is so close to former prime minister Tony Blair that rumors of a formal professional cooperation won’t subside. He has a tight relationship with many of the world’s leading industrialists and wealthy Middle Eastern sheikhs such as Prince Al-Waleed of Saudi Arabia.

Citi agreed to cut short Klein’s noncompete clause when the CEO of Dow Chemical, Andrew Liveris, asked him to advise on an acquisition. Barclays CEO Bob Diamond retained Klein to advise on the acquisition of Lehman Brothers’ operations, a two-week engagement that earned him $10 million. Even more attention grabbing was his role as strategic adviser to the CEOs of Glencore and Xstrata, who needed someone to broker a mutually agreeable compromise for their $42 billion merger. Klein’s success in organizing such large and important transactions is exceptional, but it shows the extremely high value of personal, trusted connections. Any of those parties could just as easily have gone to any of the premier investment banks like Goldman Sachs. But they chose an individual they knew and trusted, one who was respected and had standing in the international banking community. Klein is a perfect example of how a superhub can lose a coveted position and yet remain firmly entrenched within the high-level network precisely because of his multitude of connections.