Speaker 1: Bloomberg Audio Studios, Podcasts, radio news, A little behind the
Speaker 1: scenes Money Stuff podcast. Here we are waiting for me
Speaker 1: to hit send on the Money Stuff email.
Speaker 2: A peek behind the curtain if you will.
Speaker 1: Hello, and welcome to the Money Stuff Podcast, your weekly
Speaker 1: podcast where we talk about stuff related to money. I'm
Speaker 1: Matt Levine and I heard the Money Stuff column for
Speaker 1: Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: Katie, how was friends?
Speaker 2: Oh my god, Matt, it was the best. I went
Speaker 2: to the Olympics. As we said from the last time
Speaker 2: we did this, I went to the Olympics as a
Speaker 2: horrorse I did super good in my event, but in
Speaker 2: a more real sense, I went as a human and
Speaker 2: I went to go watch track and field. It's a
Speaker 2: huge bummer not being at the Olympics.
Speaker 1: I thought you were going to say it's a huge
Speaker 1: bummer that you didn't participate as a human.
Speaker 2: I mean, just in general, it is a huge bummer
Speaker 2: that I am not a horse, but also that I'm
Speaker 2: not a good enough athlete to compete at the Olympics.
Speaker 2: But then I think, actually, I have this podcast that
Speaker 2: I do every week with Matt Levine, So it's not
Speaker 2: that bad.
Speaker 1: Cats and apples.
Speaker 2: That's great, that's true. I get treats.
Speaker 1: This is the between vacations money stuff podcast because I'm
Speaker 1: going to be off next week going to the beach,
Speaker 1: and you're that's incredible. Yes. So it's almost like we
Speaker 1: could have just taken August off, but instead we're doing
Speaker 1: this one. I know here we are doing this one
Speaker 1: despite it being the mid August money stuff. There is
Speaker 1: some news.
Speaker 2: Should I tell you about it?
Speaker 1: Yeah? Why don't you tell me about it?
Speaker 2: Okay, We're going to talk about Starbucks and they're very
Speaker 2: expensive new CEO. Yes, we're going to talk about creditor
Speaker 2: on creditor violence, which is pretty exciting. And then we're
Speaker 2: going to talk about Bank of a America and the long,
Speaker 2: long hours that their junior bankers work.
Speaker 1: All right, So Starbucks, Starbucks.
Speaker 2: So this was a big one. Basically, Brian Nichols, he
Speaker 2: was the CEO of Chipotle. He's been CEO since March
Speaker 2: twenty eighteen. He's moving over to Starbucks as their chief
Speaker 2: executive officer but also as chairman of their board, which
Speaker 2: I mean there's so many different ways we could talk
Speaker 2: about this. From governance like you discussed in the Money
Speaker 2: Stuff newsletter. There's also just the sheer amount of money
Speaker 2: that he's making, which is a lot. And then there's
Speaker 2: also the fact that he's going to be a remote CEO,
Speaker 2: which is also super interesting.
Speaker 1: Also invented like Durrita's Locos tacos. He's like a marketing
Speaker 1: guy who came up at both Pizza Hut and Taco Bell,
Speaker 1: and I think they view him as a visionary of
Speaker 1: like funding products to market at food restaurants. So that's exciting.
Speaker 2: I kind of get more the inventor of the Daria
Speaker 2: Locos taco I hope I got that right. Going to Chipotle.
Speaker 2: Starbucks is a different animal. Starbucks has been in the
Speaker 2: hurt locker for a couple of years now. It has
Speaker 2: spawned a lot of good jokes on social media. I
Speaker 2: saw someone tweet that they're going to start charging for
Speaker 2: extra milk at Starbucks.
Speaker 1: Right, Chaps, Like main thing in pop culture is like
Speaker 1: portion sizes, and so yeah, well, I don't know how
Speaker 1: you carry that over to it's tart.
Speaker 2: Yeah, he did work magic over at Chipotle. At least
Speaker 2: when it comes to the stock price. I was looking
Speaker 2: at the numbers before I came to this little room
Speaker 2: to record this podcast. And since March twenty eighteen through
Speaker 2: Monday's close, Chipotle stock was up something like eight hundred
Speaker 2: percent versus Starbucks being up like fifty six percent over
Speaker 2: that timeframe, obviously underperforming the S and P five hundred
Speaker 2: and massively underperforming Chipotle. So it makes sense that the
Speaker 2: Starbucks board was like, Wow, things aren't going too well
Speaker 2: right now. Who's really crushing it the industry?
Speaker 1: Yeah, I mean it's like such a good illustration of
Speaker 1: the possibility of CEO talent, right, I mean, it's all
Speaker 1: it sort of seems abstract from the outside. But then
Speaker 1: like you see, like you know, there's two companies that
Speaker 1: are and you know, probably comparable businesses. One is doing
Speaker 1: really well, one is doing less well, and they picked
Speaker 1: the good CEO to run the bigger company, right, I mean,
Speaker 1: like you know, you talked about the money he's getting
Speaker 1: paid something like one hundred and thirteen million dollars, Like
Speaker 1: that's the valuation of his package to come from Chipotle
Speaker 1: to Starbucks. When they announced him, Starbucks stock was up
Speaker 1: twenty billion dollars, like it was up, you know, like
Speaker 1: twenty added like twenty billion dollars of market cap, which
Speaker 1: is like he's a bargain at one hundred million dollars, right,
Speaker 1: If the difference in CEO talent and CEO skill is
Speaker 1: twenty billion dollars of market cap, then like, of course
Speaker 1: it makes sense for him to move. Also, it's like interesting,
Speaker 1: you know, Chipotle lost like six billion dollars of market cap,
Speaker 1: so it was like an efficiency enhancing trade, right if
Speaker 1: you just go to this prices right, Like he had
Speaker 1: sort of done his work at Chipotle, he'd righted the ship,
Speaker 1: and him leaving Chipotle was sad, but not that sad,
Speaker 1: whereas him going to Starbucks was like extremely good for Starbucks.
Speaker 1: So you know, everyone's a sort of long term winner.
Speaker 2: I guess, yeah, it was a good pair trade to make,
Speaker 2: specifically on Tuesday, with Starbucks stock up I don't know,
Speaker 2: a bazillion percent and Chipotle down by almost double digits.
Speaker 2: But I mean, it's going to be fascinating to see
Speaker 2: what he does at Starbucks. It is in the same industry.
Speaker 2: Coffee is different from burritos though, and also, as you
Speaker 2: wrote about in the newsletter, he has to contend with
Speaker 2: the former CEO as well the founder. His name is
Speaker 2: Howard Schultz.
Speaker 1: Yeah, he's been CEO I think three times now. He
Speaker 1: keeps going back after they're unhappy with other CEOs, and
Speaker 1: he's a big shareholder. He has like a lot of
Speaker 1: kind of retained influence over the board and like ability
Speaker 1: to kind of kibbets and Starbucks operations and send emails
Speaker 1: to the CEO. I Mean, one thing I wrote about
Speaker 1: is like Brian Nichol is going to have more power
Speaker 1: than the previous CEO did. Right, He's going to be
Speaker 1: the chairman of the board. He's going to be paid
Speaker 1: a bucket of money, and he's gonna work from home
Speaker 1: because I mean, he's not going to have to move
Speaker 1: to Seattle to their headquarters. He's gonna kind of set
Speaker 1: up a remote office by his house.
Speaker 2: And Newport Beach. Baby.
Speaker 1: Yeah. It like insulates him a little bit from the board.
Speaker 1: It gives him a little bit more like Imperial CEO power,
Speaker 1: and probably also insulates them a little bit from Harart Schultz. Right,
Speaker 1: Like I don't know what the conversations between him and
Speaker 1: the board were like, but I imagine they were like,
Speaker 1: you can't have that guy emailing me at all hours
Speaker 1: telling me what to do. Like, if you want the
Speaker 1: magic that I brought to Chappola, you have to kind
Speaker 1: of lead me alone and let me do it and
Speaker 1: have the leverage to ask for that. What I wrote
Speaker 1: is like, abstractly, like shareholders want good governance at public companies, right,
Speaker 1: And like one thing that good governance means is like
Speaker 1: there's an engaged board that supervises the CEO, and if
Speaker 1: the CEO isn't doing well, they get rid of him
Speaker 1: and get someone else. And that kind of looks like
Speaker 1: what happened here, right, I mean, there's an independent board.
Speaker 1: They talked among themselves and talked to the CEO. They
Speaker 1: were like, we don't like this guy. He's not doing
Speaker 1: well enough. We're gonna find someone else. And they went
Speaker 1: out and found someone else, and they found a guy
Speaker 1: who you know, made the stock up by twenty billion dollars. Right,
Speaker 1: So they've found someone who the market seems to think
Speaker 1: is a really good choice. But to get him, they
Speaker 1: have to give up some of that governance, right, Like,
Speaker 1: they built up some governance to sort of get to
Speaker 1: the place where they are, and then they have to
Speaker 1: spend some of that governance to get a really good CEO, right,
Speaker 1: because like they get a really good CEO, you're like,
Speaker 1: we're putting the company in your hands now. And you
Speaker 1: see that with like he's gonna be the chairman of
Speaker 1: the board. But also you see it with like the
Speaker 1: pay package and the not having to relocate. He's just like,
Speaker 1: this is gonna be a little bit more his company
Speaker 1: than it was the previous CEO's company.
Speaker 2: Yeah. I mean, he did agree to commute to Seattle
Speaker 2: as much as needed to do the job, and I
Speaker 2: do wonder what that will look like in practice.
Speaker 1: But he gets to decide, right, he's the CEO. I
Speaker 1: mean probably a lot, right, I mean, like he's not
Speaker 1: gonna be like lazy about it, but like, yeah, he's
Speaker 1: the CEO. Where is that gonna be checking up on
Speaker 1: him every week?
Speaker 2: Yeah? I do think it's interesting the juxtap issi that
Speaker 2: he will be in Newport Beach, California, and Starbucks required
Speaker 2: of their white collar employees that they need to be
Speaker 2: in the office at least three days a week at
Speaker 2: the beginning of last year. I feel like that might
Speaker 2: be harder to enforce when you have a remote CEO.
Speaker 1: But well, he might change the previous guy's policy. He
Speaker 1: might change the policy. Yeah, But it also reminds me
Speaker 1: of this story about David Solomon, the CEO of Colbyn.
Speaker 1: This is like two summers ago or something. He went
Speaker 1: around complaining that he was at a restaurant having lunch
Speaker 1: in the Hampton's and like associated Colbyn came up to
Speaker 1: him and introduced themselves and said, Hi, I work at
Speaker 1: Colvin too, you're the CEO. And Solomon was so offended
Speaker 1: because he's like, what are you doing having lunch at
Speaker 1: a restaurant in the Hamptons during the week, Like, shouldn't
Speaker 1: you be doing work? And he's like telling this anecdote
Speaker 1: to everyone and looks like a grieved tone. People are, well,
Speaker 1: you were there too, write like what what are you
Speaker 1: complaining about? I don't know. Also, like you know, one
Speaker 1: reason to follow the coming into the office policy is
Speaker 1: like you might run into the CEO there, and if
Speaker 1: he because while you're desking, you're not there, I'll get mad.
Speaker 1: But if he's not there, it's a little easier to
Speaker 1: not be there yourself.
Speaker 2: That's true. That's true. You kind of don't have the
Speaker 2: moral high ground there. So we'll see if he changes that.
Speaker 2: I do want to talk about the economy a little bit,
Speaker 2: if you'll indulge me. There's this great story on the
Speaker 2: terminal about CEO turnover. So there's one hundred and ninety
Speaker 2: one CEOs who have left companies in the Russell two
Speaker 2: thousand index this year. Stay with me. Seventy four of
Speaker 2: them were considered to be fired or forced out. That
Speaker 2: apparently is the most at this time of year since
Speaker 2: the beginning of this data set in twenty seventeen. So
Speaker 2: we are at a moment where it feels like a
Speaker 2: lot of CEOs are being fired, and I think that
Speaker 2: kind of says something about the economic environment that we're in.
Speaker 2: I don't know what exactly, but I'm putting the thought
Speaker 2: out there.
Speaker 1: I'm sorry, Okay, I need no, I'm sorry, I need
Speaker 1: to take one minute to send my newsletter.
Speaker 2: Let's leave this minute in here, of.
Speaker 1: Cour I think we're just like right, so we can
Speaker 1: leave both my asking for a minute and also the
Speaker 1: awkward silence and joke's during this minute, and like the
Speaker 1: cooking of the keys, like this is the behind the
Speaker 1: scenes money stef contact that you came for.
Speaker 2: Well, thinking more about the economy, you know, we are
Speaker 2: in the heart of earning season, and it just feels
Speaker 2: like there are a lot of idio syncretic issues that
Speaker 2: keep popping up earnings calls, like it's hard to paint
Speaker 2: any one industry with a broad brushtroke right now. And
Speaker 2: it just feels like at this moment, at least people
Speaker 2: on TV keep telling me that management really matters right now,
Speaker 2: because overall things are pretty good, but there are a
Speaker 2: lot of company specific issues to work through. Matter. I
Speaker 2: wish I was a horse. Creditor on credit or violence
Speaker 2: another very human story about basically trying to cut in
Speaker 2: line and extract value from other people who might have
Speaker 2: been ahead of you.
Speaker 1: Yeah, I'd never liked the phrase creditor on credit or violence.
Speaker 2: What would you call it?
Speaker 1: Well, the actual term that people in the industry mostly
Speaker 1: use is LMES, which is sense for liability management exercises.
Speaker 1: When I was a banker, there is a thing called
Speaker 1: liability management, which is like you have like bonds, and
Speaker 1: you like do a tender offer for your bonds, and
Speaker 1: you shoul just the new bonds of paper, Like you're
Speaker 1: you're managing your liabilities. You're like repaying your old debt
Speaker 1: and adding some new debt, or you're you know, sometimes
Speaker 1: trying to restructure your dot. But in the modern usage,
Speaker 1: there's like a bad association with that phrase because when
Speaker 1: people say liability management exercises, they mean calling up some
Speaker 1: of your creditors and saying, hey, we could use more money.
Speaker 1: If you give us more money, we will put you
Speaker 1: at the front of the line to be paid back,
Speaker 1: and all those other creditors who were ahead of you
Speaker 1: in line will get put behind you in line, and
Speaker 1: the creditors that way you can do that, and they'll
Speaker 1: say yes, because there's a loophole in our documents and
Speaker 1: like our credit agreement says that those guys are first
Speaker 1: in line, but actually we can do a thing that
Speaker 1: makes them second or third or tenth in line. People
Speaker 1: really dislike this for a lot of reasons. Why as
Speaker 1: they get like bumped out in line too. It's because,
Speaker 1: like you're a lender, you're sort of like expecting a
Speaker 1: certain amount of like stability and predictability, and you keep
Speaker 1: finding out that these documents that you negotiated that said
Speaker 1: that you had to be first in line actually mean
Speaker 1: you can be fourth on line. And so there's this
Speaker 1: real sense of like having the football pull out from you.
Speaker 1: Because people keep getting like surprised by new ways to
Speaker 1: get liability managed. The only reason people don't like it
Speaker 1: is because it is this like prisoner's dilemma where if
Speaker 1: you you don't like this happening to you, the thing
Speaker 1: that you have to do is do it to someone
Speaker 1: else first. Right, if there's some company that's in trouble,
Speaker 1: it's going to do this transaction. It's going to do
Speaker 1: some sort of transaction that puts some creditors ahead of
Speaker 1: other creditors, and you want to be the one who's ahead,
Speaker 1: not the one who's behind. So you will like go
Speaker 1: form a club with other creditors, and you will go
Speaker 1: to the company and say, hey, let's do a deal.
Speaker 1: And so there's the sense that like no one wants this,
Speaker 1: but everyone feels forced to do it.
Speaker 2: It's like hurt people, hurt people exactly exactly.
Speaker 1: Everyone is like, I don't mean to hurt the other people,
Speaker 1: otherwise they will hurt me. And they're very sad. But
Speaker 1: this is all answering the question what do you call it?
Speaker 1: And I think like the official term is liability management exercises.
Speaker 1: But what I loved in this Bloomberg News article is
Speaker 1: that there are like firms like credit hedge funds that
Speaker 1: are setting up businesses to I don't want to say
Speaker 1: do this, but they're called capital solutions businesses. And capital
Speaker 1: solutions is like you have like you go company, like, hey,
Speaker 1: we have a solution for your capital. We can give
Speaker 1: you money if and the if is always like if
Speaker 1: you stiff your other creditors. There's not always doesn't have
Speaker 1: to be like you could imagine, you know, a capital
Speaker 1: solution that has win win and just friendly. But like,
Speaker 1: in practice, a lot of the capital slutions seem to
Speaker 1: be taking money from some creditors to give to other creditors.
Speaker 2: I do like that name, right.
Speaker 1: All the other really benign names are the scary things.
Speaker 2: So is this good for the companies themselves, the companies
Speaker 2: where they're borrowing money from these lenders?
Speaker 1: Well, I always love it because it's like back in
Speaker 1: the day, a lot of trades like this didn't run
Speaker 1: through credit agreements. They ran through credit default swaps. What
Speaker 1: I mean by that is like there were some really
Speaker 1: cool trades where a lender would come to a company
Speaker 1: and say, we have bought a bunch of credit default
Speaker 1: swaps on you. If you just default on your debt
Speaker 1: for fifteen minutes, we'll make a ton of money and
Speaker 1: we'll give you half of it. Right, And the companies
Speaker 1: are okay, found we'll do that. We're desperate, and they
Speaker 1: would default on their debt for fifteen minutes and the
Speaker 1: to make a lot of money and give the company
Speaker 1: some of it, and then the company would like live
Speaker 1: to fight another day. And I always thought that was
Speaker 1: so cool that like a like zero sum bet between
Speaker 1: hedge funds could create funding for a real company. And similarly,
Speaker 1: here there's something kind of fun about like these companies
Speaker 1: can generate funding to like keep their actual business going
Speaker 1: by like sort of inter credit or fight among hedge funds.
Speaker 1: But mostly it's bad because first of all, these companies
Speaker 1: are not like you know, mom and pop businesses. They're
Speaker 1: like most traditionally owned by private equity firms who are
Speaker 1: like the sort of Sharbel Bode bars who are going
Speaker 1: to do this. But then secondly, you knew like a
Speaker 1: lot of these things end in bankruptcy anyway, and so
Speaker 1: it's just like who is first in line to be
Speaker 1: paid back in bankruptcy? And so it's like if all
Speaker 1: of these things like solved, that the company's problems and
Speaker 1: like made everything better. Then you'd be like, okay, so
Speaker 1: like a hedge fund lost money for you know, the
Speaker 1: greater good of the company. But in practice, it seems
Speaker 1: that a lot of the men in bankruptcy anyway.
Speaker 2: So I was thinking about this. I was reading the story.
Speaker 2: I was reading money stuff as I do to prepare
Speaker 2: for the podcast, and my naive thought was, is this
Speaker 2: going to lead to lawsuits?
Speaker 1: Oh my god, at least there's so many lawsuits. There's
Speaker 1: everyone on the leads a law suits.
Speaker 2: But here's the thing I was thinking about it when
Speaker 2: it comes to crypto, because there's that notion you know,
Speaker 2: it's in the code, and here it seems like you're
Speaker 2: exploiting an overlooked part of the documents, right, Like it's
Speaker 2: in the documents. Uh, and you just happen to find
Speaker 2: like this loophole.
Speaker 1: Yes, And this is like an interesting difference between debt
Speaker 1: and equity. I think like in general, companies are not
Speaker 1: supposed to treat their shareholders unfairly, right, and like even
Speaker 1: if like something in the you know, certificate corporation says
Speaker 1: you can do something if it's really unfair to shareholders,
Speaker 1: if it like treat some shaholders better than others. If
Speaker 1: it violence FORDU shared duties, you can't do it right
Speaker 1: beyond just like the language of the documents, Judges are
Speaker 1: going to say, you have to treat your shareholders fairly. Traditionally,
Speaker 1: debt doesn't work that. Traditionally you don't have fiduciary duty
Speaker 1: to your creditors. And traditionally, if your bond agreements let
Speaker 1: you do some wild thing, courts are going to let
Speaker 1: you do the wild thing. There's some exceptions to that.
Speaker 1: Some courts will look at the bond document and say, oh,
Speaker 1: I couldn't possibly have met that, so we're not going
Speaker 1: to let you do the wild thing. But in general,
Speaker 1: the rule is kind of like whatever the documents say
Speaker 1: you're allowed to do, you're allowed to do. And so
Speaker 1: there is much more of this sort of thing in
Speaker 1: de restructuring than there would be for like stock, because
Speaker 1: there is this traditional rule that you're allowed to do
Speaker 1: whatever you want to creditors because they're sophisticated people who
Speaker 1: negotiated a contract with you, and if they didn't put
Speaker 1: it in the contract, then they don't get the protection.
Speaker 1: I think there's some sense that like one thing that
Speaker 1: could happen. Is that could change, right, that courts could
Speaker 1: get less receptive to this sort of thing and say,
Speaker 1: you know, it's just like, as a policy matter, bad
Speaker 1: for companies to always go around posing their creditors and
Speaker 1: like treating some people more unfairly than others. And so
Speaker 1: we're not going to let them do that anymore, and
Speaker 1: we're gonna like apply some sort of like fairness standard
Speaker 1: or like what do people really want to reading these
Speaker 1: credit documents instead of just you know, reading what they say,
Speaker 1: and so they allow it. That's like one possibility. The
Speaker 1: other you keep reading about people like creditors trying to
Speaker 1: prevent this by you know, forming groups and sort of
Speaker 1: saying we're gonna knock this off or like demanding better
Speaker 1: covenants so they can't have this happen to them. And
Speaker 1: so you keep reading about these liability management exercises, but
Speaker 1: there's enough grumbling from like, you know, people who participate
Speaker 1: in them that like maybe the industry will find some
Speaker 1: way to reduce their frequency.
Speaker 2: Well that's all I have to say. Do you have
Speaker 2: anything more?
Speaker 1: The one thing I want to say, and this is
Speaker 1: I don't know where this goes in, but I talked
Speaker 1: a while back to a credit fund manager and they
Speaker 1: get this story slightly wrong. But like he said that,
Speaker 1: people would ask him as a lender, as a credit investor,
Speaker 1: do you look first at the assets or the liabilities? Right? Like,
Speaker 1: do you look at like what this company does but
Speaker 1: it has, like how much productive capacity it has to
Speaker 1: pay back loans? Or do you look first at like
Speaker 1: how many bonds it already has outstanding? And he's like,
Speaker 1: I was always an assets guy, and like, increasingly the
Speaker 1: business is a liabilities business. Like increasingly what you do
Speaker 1: as a credit investor is you look at the company's
Speaker 1: capital structure and you say, who can we hose here?
Speaker 1: What debt can we get ahead of? And as a
Speaker 1: lever of like complexity and nonsense, I enjoy that, but
Speaker 1: it seems kind of bad for like the world. I
Speaker 1: was reading somewhere like research analysts complaining about this, because
Speaker 1: it's like as a credit research analyst at bank you
Speaker 1: have to spend all of your time thinking about liability
Speaker 1: manage exercises. You don't spend as much time thinking about like,
Speaker 1: you know, does this company have the capacity to cover
Speaker 1: its deeps? And it seems like a loss in capacity
Speaker 1: when the industry is not about like finding good things
Speaker 1: to finance, but rather about like finding people to host
Speaker 1: to you know, restructure the financing. It seems like that's
Speaker 1: like a less good use of people's time and energy.
Speaker 1: But I hope that's true. Just like so as a
Speaker 1: first impression, it seems like it would be better to
Speaker 1: spend time on like growing the pie than on splitting
Speaker 1: up the pie. But like, maybe that's not true. So
Speaker 1: the Wall Street Journal this week had a story about
Speaker 1: Bank of America junior bankers being asked to like fake
Speaker 1: their hours. So okay, Investment banking has always had very
Speaker 1: horrible hours, right, and like junior bankers in particular were
Speaker 1: sort of known for working one hundred plus hour weeks
Speaker 1: and it was very hard and bad, and over the
Speaker 1: last few years people have complained about it, in part
Speaker 1: because it's caused serious health problems and some deaths in
Speaker 1: the industry. And so a lot of banks responded to
Speaker 1: these complaints by instituting some sort of humane hours policy
Speaker 1: exactly the details varied from bank to bank. But like
Speaker 1: people often talk about protected weekends, where like you're supposed
Speaker 1: to have like one weekend a month you get like
Speaker 1: both days off, or like you're supposed to have one
Speaker 1: day off each week or whatever. Right, so it's like
Speaker 1: there's some policy that says you're not supposed to work
Speaker 1: one hundred and twenty hour weeks every week. And this
Speaker 1: has come into a lot of focus at Bank of
Speaker 1: America because a young banker there died recently after working
Speaker 1: one hundred hour weeks on a deal. And the story
Speaker 1: in the Wall Street Journal this week is that although
Speaker 1: Bank of America has these policies to protect people from
Speaker 1: working all the time, a lot of people were disregarding them,
Speaker 1: and in particular, like bankers are being told to fake
Speaker 1: their hours and fill out a form saying how many
Speaker 1: hours you work, and you write fewer hours than you
Speaker 1: actually work so that you don't get a call from
Speaker 1: HR saying you can't work anymore because you know your
Speaker 1: VP wants you to keep working, and if you get
Speaker 1: taken off the deal, your immediate managers will be angry
Speaker 1: and sad and think less of you.
Speaker 2: My reaction here is that there has to be a
Speaker 2: better system of tracking hours than self reporting hours. I
Speaker 2: was thinking about like we spent and I don't know
Speaker 2: a good hour talking about that wells Fargo Mouse Jiggler
Speaker 2: story where they were able to detect when people were
Speaker 2: using technology to jiggle their mouses at home to make
Speaker 2: it look like they were working. Shouldn't there be a system,
Speaker 2: whether you track how often people are badged into the
Speaker 2: office or I don't know how much they're using their
Speaker 2: work devices, that would kind of solve this problem. It
Speaker 2: seems like a lot of this trace is back to
Speaker 2: the fact that you're self reporting your hours.
Speaker 1: Yeah. I agree. I get an email from a reader saying, like,
Speaker 1: do the vps that Bank of America have mouse unjiggler
Speaker 1: software to make it look like their work less?
Speaker 2: Yeah?
Speaker 1: But right? I mean he also makes a point like,
Speaker 1: as you said, like if well as Fario, wants to
Speaker 1: know how much people are working, and so it installs
Speaker 1: software to track how much they're working, so it makes
Speaker 1: sure they're working enough. Right. If Bank of America wants
Speaker 1: to make sure that people aren't working too much, it
Speaker 1: could install that software too, right. And if it doesn't
Speaker 1: install that software, that'd suggests something about its actual priorities. Right.
Speaker 1: I mean, one thing that happened like is Bank of
Speaker 1: America has like a very clear policy that you can't
Speaker 1: work all the time, right, and HR tells people you
Speaker 1: can't work all the time, you have to spit your hours,
Speaker 1: everything like that. But it seems to be, I don't know,
Speaker 1: universally ignored, but it seems to be ignored some of
Speaker 1: the time. And one thing that they did in reaction
Speaker 1: to this Wall Street Journal article is they kind of said, no,
Speaker 1: we need it right. And I think you get a
Speaker 1: lot of mileage out of just saying no, we need
Speaker 1: it right. Like if the CEO leaves a voicemail for
Speaker 1: everyone saying this policy is for real, it's not just
Speaker 1: a fig leaf. You have to follow it. If you don't,
Speaker 1: I'll be mad. That gets a lot of the way there, right,
Speaker 1: Because I do think that a lot of what happened
Speaker 1: here is that there was a policy put in place,
Speaker 1: almost as like a public relations thing, but the culture
Speaker 1: didn't change, and everyone sort of assumed, you know, all
Speaker 1: the mid level bankers sort of assumed the senior bankers
Speaker 1: didn't really mean it, and they wanted everyone to keep
Speaker 1: working really hard. And I think if you just have
Speaker 1: the senior bankers say no, no, we mean it, that
Speaker 1: gets a lot of the way there. But yes, installing
Speaker 1: monitoring software could also get even more of the way there.
Speaker 1: I think people might prefer to work more hours and
Speaker 1: not be monitored, them to work through your hours and
Speaker 1: be monitored. But I'm not sure.
Speaker 2: I don't know if you really want to change the culture.
Speaker 2: The technology is there, and when it comes to culture,
Speaker 2: I have two comments. I mean, something that the Wall
Speaker 2: Street Journal article brought up was that this is how
Speaker 2: a lot of people grew up. A lot of these
Speaker 2: you know, mid level bankers who are now working these
Speaker 2: junior bankers so hard. This is how they grew up.
Speaker 2: And it kind of gets back to the hurt people,
Speaker 2: hurt people argument. Hurt people, hurt people. I say it
Speaker 2: all the time, but obviously this story blew up on
Speaker 2: social media and I follow a lot of the accounts
Speaker 2: such as Liquidity for example, both on Twitter and on Instagram.
Speaker 2: And like you said, Bank of America did put out
Speaker 2: this statement that they really mean it. The reaction that
Speaker 2: I've seen so far on social media is that, Okay,
Speaker 2: these are just words. I think if they are serious
Speaker 2: about changing the culture, they do something like they would
Speaker 2: do some action, such as either installing that technology or
Speaker 2: actually firing people.
Speaker 1: The last time there was a big rash of stories
Speaker 1: about bankers complaining about hours. A lot of banks instituted
Speaker 1: protective weekend policies, but some banks are also said, we
Speaker 1: are going to hire more people, right, because that's actually
Speaker 1: often the way that you fix this problem, right. I mean,
Speaker 1: part of the thing that is going on here is
Speaker 1: some sort of like cultural thing, some sort of like
Speaker 1: hazing thing where it's like, we want them to work
Speaker 1: long hours because one that trains them better than if
Speaker 1: they worked a few hours, and two there's in a
Speaker 1: culturation and like a hazing process of like, you know,
Speaker 1: we worked long hours, they should work long hours. We
Speaker 1: should make them feel part of the firm by making
Speaker 1: them work on undred twenty hour weeks. But some of
Speaker 1: it is just there's a lot of work to do, right.
Speaker 1: It feels move fast, and you need a lot of
Speaker 1: people to do a lot of work on them. That
Speaker 1: part of the problem can be partly not entirely, but
Speaker 1: like partly solved, but just hiring more people so that
Speaker 1: you have more people to do the work. You know,
Speaker 1: if you have like the certain amount of work to do,
Speaker 1: more people do it and then each of them can
Speaker 1: work less. You occasionally see that as a solution, but
Speaker 1: you don't see it a ton of the time as.
Speaker 2: A solution, should I say AI?
Speaker 1: AI is the other one, right, I mean, and you
Speaker 1: definitely see that as a thing banks talk about. I
Speaker 1: don't have a great sense on the ground of like
Speaker 1: how much junior banker's lives are improved by And I
Speaker 1: do think there is a thing where like work expands
Speaker 1: to fill the time. And it's like, if you have
Speaker 1: the ability to generate a pitch book through AI in
Speaker 1: twenty minutes, you will probably be asked to generate a
Speaker 1: lot more pitch books than you would have been otherwise.
Speaker 1: But it is probably the case that a lot of
Speaker 1: junior banker work could be is being will soon be
Speaker 1: sort of absorbed by AI, and then figuring out exactly
Speaker 1: what to do about that with people's hours will be
Speaker 1: an interesting problem. Yeah, Like the cultural stuff is real,
Speaker 1: Like they do want them there all the time, because
Speaker 1: that's how like you become a like a loyal, excited,
Speaker 1: committed member of the banking team. Right, And if like
Speaker 1: AI does all your working, you go home at four
Speaker 1: every day, Like I think, like your VP will be
Speaker 1: sad even if the work is good, because like they
Speaker 1: wanted Also, like the training and hazing effect of all
Speaker 1: those hours.
Speaker 2: Yeah, it'll be interesting to see how this evolves. And
Speaker 2: we're talking a lot about Bank of America, but this
Speaker 2: isn't just a Bank of America thing, obviously.
Speaker 1: It's like not a Bank of America thing at all.
Speaker 2: The Wall Street Journal did have a lot of great
Speaker 2: anecdotes in there about people who just left. There were
Speaker 2: some people that they quoted anonymously who were still working there,
Speaker 2: which I thought was interesting as well. But I saw
Speaker 2: something on one of the liquidity type accounts I followed
Speaker 2: that someone did what was known as a victory lap.
Speaker 2: This isn't something I'm familiar with. It doesn't really exist
Speaker 2: in journalism. But you would take the car service home,
Speaker 2: like very early in the morning, and then like take
Speaker 2: a shower and like change your clothes at your apartment
Speaker 2: and then go back into the car service to take
Speaker 2: it back into the office. That just seems crazy. I
Speaker 2: don't know.
Speaker 1: I worked at places where go on, go on. When
Speaker 1: I was a young lawyer. I had you know, you know,
Speaker 1: like the car service policy was like you could take
Speaker 1: a car after I don't know whatever, it was eight
Speaker 1: o'clock at night, and I would occasionally take cars at
Speaker 1: three pm because like I'd been there for three days
Speaker 1: straight and I was like, no one will question this
Speaker 1: out of policy car service. The story about my sad
Speaker 1: hours that I tell a lot is that I once
Speaker 1: I had one night where I got ninety minutes of
Speaker 1: sleep and it was under my desk, and it was
Speaker 1: on my birthday. So that's a bad birthday.
Speaker 2: That just went from sad to funny.
Speaker 1: Yeah, yeah, yeah right. I had lots of night's price
Speaker 1: got ninety minutes or less of sleep under my desk,
Speaker 1: but only one of them was on my birthday.
Speaker 2: Did you have a cupcake or anything like? Did you
Speaker 2: celebrate it at all?
Speaker 1: They had good snacks there, so I probably had a
Speaker 1: pepper Trump cookie, but it was pretty sad. Well in
Speaker 1: that note that dude, I'm going on vacation.
Speaker 2: I'll see you in two weeks.
Speaker 1: Yes, there will be no money Stop podcast next week,
Speaker 1: be on vacation, but we'll see you back here in
Speaker 1: two weeks with.
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Speaker 1: And that was the Money Stuff Podcast.
Speaker 2: I'm Matt Levian and I'm Katie Greifeld.
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