In his incisive article on “Occupational Hazards of Working on Wall Street” the Bloomberg columnist Michael Lewis concludes quite a few interesting aspects about working on Wall Street, specially for new entrants. But his final conclusion is more of a warning. He says, “As a new employee on Wall Street you might think this has nothing to do with you. You would be wrong. Your new environment’s resistance to market forces, and to the possibility of doing things differently and more efficiently, will soon become your own. When you start your career you might think you are setting out to change the world, but the world is far more likely to change you.” But I seriously think his analysis and observation that “People in finance are paid a lot of money to disrupt every sector of our economy“ is not so sound as it is made out to be.
It is true that the reputation of those on Wall St have taken a severe beating from Main street and the rest of the general public, but if I had to generalize I would say the general public does not fully understand the function of Wall Street. As he said: "designing securities to fail so that they might make a killing off the investors they dupe into buying them, and rigging various markets at the expense of the wider society, and encouraging all sorts of people to to stuff with their capital and their companies that they should never do." This seems to be a broad cheap shot at Wall St, and I do not believe any one individual who rigs markets, designs securites to fail, and making faulty recommendations would last very long at their jobs. If they do, it is because their managers perform in much the same way, so they are encouraged to act in an inherintly selfish way at the expense of others, making these actions systemic within a team.
I do believe earning a CFA charter seperates one from the occupational hazard of wall street. The CFA did a great job of insulating cfa charterholders from the shortcomings (occupational hazards) in the financial industry by implementing he code of ethics and professional standards.
as to Lewis’ first hazard: "anyone who works in finance will sense, at least at first, the pressure to pretend to know more than he does." Misrepresentation covers this point fairly well, as member/candidates must not knowingly misrepresent their analysis, recommendations, actions, activities. This covers a member/candidates entire body of knowledge. Playing stupid is not an acceptable defense in the eyes of the CFA institute - knowledge of the law, along with dilligence and reasonable basis mean ignorance is not an excuse.
as to Lewis’ second hazard: “anyone who works in big finance will also find it suprisingly hard to form deep attachments to anything much greater than himself.” This seems to be covered by independence and objectivity, loyalty prudence & care to clients, loyalty to employer, and priority of transactions. CFAI believes loyalty to clients goes above all else, followed by loyalty to employers. Even on Wall Street, someone needs to make sure they stay independent and objective, forming opinions on their own, even making sure one is transparent with clients if there is a difference of opinion.
Any thoughts on Lewis’ third point: “mo__re generally, anyone who works in big finance will feel enormous pressure to not challenge or question existing arrangements" ?
I generally agree with the pressures towards groupthink and the difficulty in challenging the status quo, but that is true of most large organizations. It’s why smaller companies are often the most innovative.
I do have a bit of an issue with people taking shots at the people working in finance causing the financial crisis or being immoral. I’m sure there are some that are guilty of this. However, it you put basically anybody in a seat and say “Sell these subprime bonds and I’ll pay you a million dollars” then they are going to sell those bonds, if they are able. The incentives are such that you can take generally good people and make them do dishonest things.
It’s annoying that ignorant statements like this one and others are made about Wall Street and the investment community as a whole. There are so many logical fallacies with his “occupational hazards” it’s ridiculous. I love the CFAI Ethics pull on this one though - nice one tiki. Overall, this article further demonstrates the information asymmetry between Wall Street and the general public. No one understands any of the jargon and finance lingo must of us know so every lemming in the general public who knows nothing approaches Wall Street the same way - it’s a mysterious, unknown world like a castle on the mountain surrounded by fog and flying creatures. So, if they don’t understand what’s going on it’s obviously bad and they must destroy it! There’s blissful ignorance at it’s best for you.
I’m sure used car salesmen also find it annoying when they hear ignorant statements about their profession.