Can bankers take a leaf out Niccolò Machiavelli’s eponymous book The Prince? It’s 500-years'-old in 2013, but it can still provide some handy hints on how to survive in the cut-throat world of investment banking. Getting to the top in banking is a notoriously political affair, so what can he teach us on how to climb, rather than fall off, the increasingly rickety career ladder?
Barclays may be preaching the idea of a new, moralistic banker, but Machiavelli – as a realist, rather than idealist – believed that you should embrace your darkside. He said that while most people are trustworthy in the good times, they’ll quickly turn selfish and deceitful in periods of trouble. It’s not exactly a great time to be working as a banker, so it’s worth bearing this in mind.
“For a man who wishes to act entirely up to his professions of virtue soon meets with what destroys him among so much that is evil. Hence it is necessary for a prince wishing to hold his own to know how to do wrong”, wrote Machiavelli.
Building on the theme of stepping on your contemporaries as you move up the career ladder, historian Volker Reinhardt said that Machiavelli’s point was that: “Success justifies anything, even the most evil methods. After the triumph, no one will ask how it has come to this. The most successful is he who knows how to use the instruments of violence and insidiousness at the right time and in the right situation.”
The former RBS CEO Fred Goodwin is a good example for this principle. Notoriously aggressive and controlling, Goodwin was instrumental in dragging RBS from a relatively provincial bank into a global powerhouse. He was knighted and achieved notoriety in the banking sector until the acquisition of ABM Amro, which was ultimately too big a fish to swallow. After the £45.5bn tax payer RBS bail-out, it all started to unravel for Goodwin. His outrageously generous pension of £700k a year was slashed and Sir Fred became Mr Goodwin again.
Fortune (fortuna) and talent (virtu) were at the heart of Machiavelli’s ideals. A banker could be highly talented, but without a little luck he will never succeed. However, you people have to seize that luck when it presents itself. “Nevertheless, not to extinguish our free will, I hold it to be true that Fortune is the arbiter of one-half of our actions, but that she still leaves us to direct the other half, or perhaps a little less”, wrote Machiavelli.
Take the new CEO of UBS, Sergio Ermotti. He only joined the Swiss bank in April 2011, but five months later the Kweku Adoboli rogue trading scandal blew up. Oswald Grübel fell on his sword and Ermotti was there at the right time to take the role of interim CEO and eventually take the job on full time. His Swiss passport also helped the case, which could be viewed as another slice of luck. Whether he has sufficient talent remains to be seen.
Machiavelli was the first campaigner for maintaining a personal brand, and this was before the advent of social media. You may use a variety of methods to succeed, some of them underhand, but at all times you need to maintain a good reputation. “For this reason a prince ought to take care that he never lets anything slip from his lips that is not replete with the above-named five qualities, that he may appear to him who sees and hears him altogether merciful, faithful, humane, upright, and religious,” he said.
When the former head of investment banking at Deutsche Bank Anshu Jain was elevated to co-CEO many people, particularly the German media, were sceptical. But Jain did everything he could to rid himself of his investment banking image. Together with his co-head Jürgen Fitschen, Jain claimed a rejection of egotism and bonus-fuelled mentality. “We want Deutsche Bank to be at the forefront of this culture change in our industry,” they preached on Deutsche’s website. The results of the Libor investigation will finally show if Jain is the right person to lead this change.
When a banker becomes promoted to a new managing role, they need to do a little house cleaning. It may be considered harsh or cruel, but it’s better to get them out of the way quickly and painfully, rather than eke out cuts over a prolonged period of time.
“Hence it is to be remarked that, in seizing a state, the usurper ought to examine closely into all those injuries which it is necessary for him to inflict, and to do them all at one stroke so as not to have to repeat them daily; and thus by not unsettling men he will be able to reassure them, and win them to himself by benefits”, said Machiavelli.
Ermotti is another good example here. He cut 10,000 jobs shortly after rising to the CEO role and unveiled a radical plan to shake-up UBS’s investment bank and pull out of certain business areas entirely. The UBS employees who found themselves locked out of the office with no warning of the impeding cuts may take some time to forgive and forget, though.
Modern management styles would get a short shrift from Machiavelli. Success depends on having your employs both fear and depend upon you. He praises the contemporary Turks who were seen as tyrants. The sultan exchanged all his officials as and when he liked. This drew Machiavelli’s admiration: “Therefore a wise prince ought to adopt such a course that his citizens will always in every sort and kind of circumstance have need of the state and of him, and then he will always find them faithful”, he wrote.
Even with talent, luck and dubious morals any banker could ultimately fail with their career. Machiavelli cites the example of the son of Pope Alexander VI Cesare Borgia, who was seen as an evil personality in his own time: “Cesare Borgia … acquired his state during the ascendancy of his father, and on its decline he lost it, notwithstanding that he had taken every measure and done all that ought to be done by a wise and able man to fix firmly his roots in the states which the arms and fortunes of others had bestowed on him.”
An example of an inglorious fall from grace is Dick Fuld, the former high-flying CEO of Lehman Brothers who ultimately oversaw its dramatic collapse. Similarly, Jon Corzine, who maintained an iron grip on MF Global and maintain absolute faith in his own abilities to build a bulge bracket investment bank, eventually led the firm into bankruptcy.