August 16, 2024 • 29 mins
A between-vacations episode in which Katie and Matt discuss Starbucks's new CEO, the capital solutions business, banking hours and being a horse.
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, radio news, A little behind the
scenes Money Stuff podcast. Here we are waiting for me
to hit send on the Money Stuff email.
Speaker 2 (00:16):
A peek behind the curtain if you will.
Speaker 1 (00:21):
Hello, and welcome to the Money Stuff Podcast, your weekly
podcast where we talk about stuff related to money. I'm
Matt Levine and I heard the Money Stuff column for
Bloomberg Opinion.
Speaker 2 (00:31):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (00:35):
Katie, how was friends?
Speaker 2 (00:37):
Oh my god, Matt, it was the best. I went
to the Olympics. As we said from the last time
we did this, I went to the Olympics as a
horrorse I did super good in my event, but in
a more real sense, I went as a human and
I went to go watch track and field. It's a
huge bummer not being at the Olympics.
Speaker 1 (00:57):
I thought you were going to say it's a huge
bummer that you didn't participate as a human.
Speaker 2 (01:02):
I mean, just in general, it is a huge bummer
that I am not a horse, but also that I'm
not a good enough athlete to compete at the Olympics.
But then I think, actually, I have this podcast that
I do every week with Matt Levine, So it's not
that bad.
Speaker 1 (01:16):
Cats and apples.
Speaker 2 (01:17):
That's great, that's true. I get treats.
Speaker 1 (01:22):
This is the between vacations money stuff podcast because I'm
going to be off next week going to the beach,
and you're that's incredible. Yes. So it's almost like we
could have just taken August off, but instead we're doing
this one. I know here we are doing this one
despite it being the mid August money stuff. There is
(01:43):
some news.
Speaker 2 (01:44):
Should I tell you about it?
Speaker 1 (01:46):
Yeah? Why don't you tell me about it?
Speaker 2 (01:48):
Okay, We're going to talk about Starbucks and they're very
expensive new CEO. Yes, we're going to talk about creditor
on creditor violence, which is pretty exciting. And then we're
going to talk about Bank of a America and the long,
long hours that their junior bankers work.
Speaker 1 (02:04):
All right, So Starbucks, Starbucks.
Speaker 2 (02:08):
So this was a big one. Basically, Brian Nichols, he
was the CEO of Chipotle. He's been CEO since March
twenty eighteen. He's moving over to Starbucks as their chief
executive officer but also as chairman of their board, which
I mean there's so many different ways we could talk
about this. From governance like you discussed in the Money
(02:28):
Stuff newsletter. There's also just the sheer amount of money
that he's making, which is a lot. And then there's
also the fact that he's going to be a remote CEO,
which is also super interesting.
Speaker 1 (02:41):
Also invented like Durrita's Locos tacos. He's like a marketing
guy who came up at both Pizza Hut and Taco Bell,
and I think they view him as a visionary of
like funding products to market at food restaurants. So that's exciting.
Speaker 2 (02:56):
I kind of get more the inventor of the Daria
Locos taco I hope I got that right. Going to Chipotle.
Starbucks is a different animal. Starbucks has been in the
hurt locker for a couple of years now. It has
spawned a lot of good jokes on social media. I
saw someone tweet that they're going to start charging for
extra milk at Starbucks.
Speaker 1 (03:17):
Right, Chaps, Like main thing in pop culture is like
portion sizes, and so yeah, well, I don't know how
you carry that over to it's tart.
Speaker 2 (03:25):
Yeah, he did work magic over at Chipotle. At least
when it comes to the stock price. I was looking
at the numbers before I came to this little room
to record this podcast. And since March twenty eighteen through
Monday's close, Chipotle stock was up something like eight hundred
percent versus Starbucks being up like fifty six percent over
(03:46):
that timeframe, obviously underperforming the S and P five hundred
and massively underperforming Chipotle. So it makes sense that the
Starbucks board was like, Wow, things aren't going too well
right now. Who's really crushing it the industry?
Speaker 1 (04:00):
Yeah, I mean it's like such a good illustration of
the possibility of CEO talent, right, I mean, it's all
it sort of seems abstract from the outside. But then
like you see, like you know, there's two companies that
are and you know, probably comparable businesses. One is doing
really well, one is doing less well, and they picked
the good CEO to run the bigger company, right, I mean,
(04:22):
like you know, you talked about the money he's getting
paid something like one hundred and thirteen million dollars, Like
that's the valuation of his package to come from Chipotle
to Starbucks. When they announced him, Starbucks stock was up
twenty billion dollars, like it was up, you know, like
twenty added like twenty billion dollars of market cap, which
(04:42):
is like he's a bargain at one hundred million dollars, right,
If the difference in CEO talent and CEO skill is
twenty billion dollars of market cap, then like, of course
it makes sense for him to move. Also, it's like interesting,
you know, Chipotle lost like six billion dollars of market cap,
so it was like an efficiency enhancing trade, right if
you just go to this prices right, Like he had
sort of done his work at Chipotle, he'd righted the ship,
(05:04):
and him leaving Chipotle was sad, but not that sad,
whereas him going to Starbucks was like extremely good for Starbucks.
So you know, everyone's a sort of long term winner.
Speaker 2 (05:14):
I guess, yeah, it was a good pair trade to make,
specifically on Tuesday, with Starbucks stock up I don't know,
a bazillion percent and Chipotle down by almost double digits.
But I mean, it's going to be fascinating to see
what he does at Starbucks. It is in the same industry.
Coffee is different from burritos though, and also, as you
wrote about in the newsletter, he has to contend with
(05:37):
the former CEO as well the founder. His name is
Howard Schultz.
Speaker 1 (05:41):
Yeah, he's been CEO I think three times now. He
keeps going back after they're unhappy with other CEOs, and
he's a big shareholder. He has like a lot of
kind of retained influence over the board and like ability
to kind of kibbets and Starbucks operations and send emails
to the CEO. I Mean, one thing I wrote about
is like Brian Nichol is going to have more power
(06:03):
than the previous CEO did. Right, He's going to be
the chairman of the board. He's going to be paid
a bucket of money, and he's gonna work from home
because I mean, he's not going to have to move
to Seattle to their headquarters. He's gonna kind of set
up a remote office by his house.
Speaker 2 (06:16):
And Newport Beach. Baby.
Speaker 1 (06:18):
Yeah. It like insulates him a little bit from the board.
It gives him a little bit more like Imperial CEO power,
and probably also insulates them a little bit from Harart Schultz. Right,
Like I don't know what the conversations between him and
the board were like, but I imagine they were like,
you can't have that guy emailing me at all hours
telling me what to do. Like, if you want the
magic that I brought to Chappola, you have to kind
of lead me alone and let me do it and
(06:39):
have the leverage to ask for that. What I wrote
is like, abstractly, like shareholders want good governance at public companies, right,
And like one thing that good governance means is like
there's an engaged board that supervises the CEO, and if
the CEO isn't doing well, they get rid of him
and get someone else. And that kind of looks like
what happened here, right, I mean, there's an independent board.
They talked among themselves and talked to the CEO. They
(07:01):
were like, we don't like this guy. He's not doing
well enough. We're gonna find someone else. And they went
out and found someone else, and they found a guy
who you know, made the stock up by twenty billion dollars. Right,
So they've found someone who the market seems to think
is a really good choice. But to get him, they
have to give up some of that governance, right, Like,
they built up some governance to sort of get to
the place where they are, and then they have to
(07:21):
spend some of that governance to get a really good CEO, right,
because like they get a really good CEO, you're like,
we're putting the company in your hands now. And you
see that with like he's gonna be the chairman of
the board. But also you see it with like the
pay package and the not having to relocate. He's just like,
this is gonna be a little bit more his company
than it was the previous CEO's company.
Speaker 2 (07:40):
Yeah. I mean, he did agree to commute to Seattle
as much as needed to do the job, and I
do wonder what that will look like in practice.
Speaker 1 (07:47):
But he gets to decide, right, he's the CEO. I
mean probably a lot, right, I mean, like he's not
gonna be like lazy about it, but like, yeah, he's
the CEO. Where is that gonna be checking up on
him every week?
Speaker 2 (07:57):
Yeah? I do think it's interesting the juxtap issi that
he will be in Newport Beach, California, and Starbucks required
of their white collar employees that they need to be
in the office at least three days a week at
the beginning of last year. I feel like that might
be harder to enforce when you have a remote CEO.
Speaker 1 (08:16):
But well, he might change the previous guy's policy. He
might change the policy. Yeah, But it also reminds me
of this story about David Solomon, the CEO of Colbyn.
This is like two summers ago or something. He went
around complaining that he was at a restaurant having lunch
in the Hampton's and like associated Colbyn came up to
him and introduced themselves and said, Hi, I work at
(08:36):
Colvin too, you're the CEO. And Solomon was so offended
because he's like, what are you doing having lunch at
a restaurant in the Hamptons during the week, Like, shouldn't
you be doing work? And he's like telling this anecdote
to everyone and looks like a grieved tone. People are, well,
you were there too, write like what what are you
complaining about? I don't know. Also, like you know, one
(08:57):
reason to follow the coming into the office policy is
like you might run into the CEO there, and if
he because while you're desking, you're not there, I'll get mad.
But if he's not there, it's a little easier to
not be there yourself.
Speaker 2 (09:08):
That's true. That's true. You kind of don't have the
moral high ground there. So we'll see if he changes that.
I do want to talk about the economy a little bit,
if you'll indulge me. There's this great story on the
terminal about CEO turnover. So there's one hundred and ninety
one CEOs who have left companies in the Russell two
thousand index this year. Stay with me. Seventy four of
(09:32):
them were considered to be fired or forced out. That
apparently is the most at this time of year since
the beginning of this data set in twenty seventeen. So
we are at a moment where it feels like a
lot of CEOs are being fired, and I think that
kind of says something about the economic environment that we're in.
I don't know what exactly, but I'm putting the thought
(09:53):
out there.
Speaker 1 (09:55):
I'm sorry, Okay, I need no, I'm sorry, I need
to take one minute to send my newsletter.
Speaker 2 (10:06):
Let's leave this minute in here, of.
Speaker 1 (10:08):
Cour I think we're just like right, so we can
leave both my asking for a minute and also the
awkward silence and joke's during this minute, and like the
cooking of the keys, like this is the behind the
scenes money stef contact that you came for.
Speaker 2 (10:23):
Well, thinking more about the economy, you know, we are
in the heart of earning season, and it just feels
like there are a lot of idio syncretic issues that
keep popping up earnings calls, like it's hard to paint
any one industry with a broad brushtroke right now. And
it just feels like at this moment, at least people
on TV keep telling me that management really matters right now,
(10:46):
because overall things are pretty good, but there are a
lot of company specific issues to work through. Matter. I
wish I was a horse. Creditor on credit or violence
(11:14):
another very human story about basically trying to cut in
line and extract value from other people who might have
been ahead of you.
Speaker 1 (11:24):
Yeah, I'd never liked the phrase creditor on credit or violence.
Speaker 2 (11:27):
What would you call it?
Speaker 1 (11:28):
Well, the actual term that people in the industry mostly
use is LMES, which is sense for liability management exercises.
When I was a banker, there is a thing called
liability management, which is like you have like bonds, and
you like do a tender offer for your bonds, and
you shoul just the new bonds of paper, Like you're
you're managing your liabilities. You're like repaying your old debt
(11:48):
and adding some new debt, or you're you know, sometimes
trying to restructure your dot. But in the modern usage,
there's like a bad association with that phrase because when
people say liability management exercises, they mean calling up some
of your creditors and saying, hey, we could use more money.
If you give us more money, we will put you
(12:10):
at the front of the line to be paid back,
and all those other creditors who were ahead of you
in line will get put behind you in line, and
the creditors that way you can do that, and they'll
say yes, because there's a loophole in our documents and
like our credit agreement says that those guys are first
in line, but actually we can do a thing that
makes them second or third or tenth in line. People
(12:30):
really dislike this for a lot of reasons. Why as
they get like bumped out in line too. It's because,
like you're a lender, you're sort of like expecting a
certain amount of like stability and predictability, and you keep
finding out that these documents that you negotiated that said
that you had to be first in line actually mean
you can be fourth on line. And so there's this
real sense of like having the football pull out from you.
(12:50):
Because people keep getting like surprised by new ways to
get liability managed. The only reason people don't like it
is because it is this like prisoner's dilemma where if
you you don't like this happening to you, the thing
that you have to do is do it to someone
else first. Right, if there's some company that's in trouble,
it's going to do this transaction. It's going to do
(13:13):
some sort of transaction that puts some creditors ahead of
other creditors, and you want to be the one who's ahead,
not the one who's behind. So you will like go
form a club with other creditors, and you will go
to the company and say, hey, let's do a deal.
And so there's the sense that like no one wants this,
but everyone feels forced to do it.
Speaker 2 (13:29):
It's like hurt people, hurt people exactly exactly.
Speaker 1 (13:32):
Everyone is like, I don't mean to hurt the other people,
otherwise they will hurt me. And they're very sad. But
this is all answering the question what do you call it?
And I think like the official term is liability management exercises.
But what I loved in this Bloomberg News article is
that there are like firms like credit hedge funds that
are setting up businesses to I don't want to say
(13:54):
do this, but they're called capital solutions businesses. And capital
solutions is like you have like you go company, like, hey,
we have a solution for your capital. We can give
you money if and the if is always like if
you stiff your other creditors. There's not always doesn't have
to be like you could imagine, you know, a capital
solution that has win win and just friendly. But like,
in practice, a lot of the capital slutions seem to
be taking money from some creditors to give to other creditors.
Speaker 2 (14:17):
I do like that name, right.
Speaker 1 (14:18):
All the other really benign names are the scary things.
Speaker 2 (14:22):
So is this good for the companies themselves, the companies
where they're borrowing money from these lenders?
Speaker 1 (14:28):
Well, I always love it because it's like back in
the day, a lot of trades like this didn't run
through credit agreements. They ran through credit default swaps. What
I mean by that is like there were some really
cool trades where a lender would come to a company
and say, we have bought a bunch of credit default
(14:48):
swaps on you. If you just default on your debt
for fifteen minutes, we'll make a ton of money and
we'll give you half of it. Right, And the companies
are okay, found we'll do that. We're desperate, and they
would default on their debt for fifteen minutes and the
to make a lot of money and give the company
some of it, and then the company would like live
to fight another day. And I always thought that was
so cool that like a like zero sum bet between
hedge funds could create funding for a real company. And similarly,
(15:13):
here there's something kind of fun about like these companies
can generate funding to like keep their actual business going
by like sort of inter credit or fight among hedge funds.
But mostly it's bad because first of all, these companies
are not like you know, mom and pop businesses. They're
like most traditionally owned by private equity firms who are
(15:33):
like the sort of Sharbel Bode bars who are going
to do this. But then secondly, you knew like a
lot of these things end in bankruptcy anyway, and so
it's just like who is first in line to be
paid back in bankruptcy? And so it's like if all
of these things like solved, that the company's problems and
like made everything better. Then you'd be like, okay, so
like a hedge fund lost money for you know, the
greater good of the company. But in practice, it seems
(15:55):
that a lot of the men in bankruptcy anyway.
Speaker 2 (15:57):
So I was thinking about this. I was reading the story.
I was reading money stuff as I do to prepare
for the podcast, and my naive thought was, is this
going to lead to lawsuits?
Speaker 1 (16:06):
Oh my god, at least there's so many lawsuits. There's
everyone on the leads a law suits.
Speaker 2 (16:10):
But here's the thing I was thinking about it when
it comes to crypto, because there's that notion you know,
it's in the code, and here it seems like you're
exploiting an overlooked part of the documents, right, Like it's
in the documents. Uh, and you just happen to find
like this loophole.
Speaker 1 (16:30):
Yes, And this is like an interesting difference between debt
and equity. I think like in general, companies are not
supposed to treat their shareholders unfairly, right, and like even
if like something in the you know, certificate corporation says
you can do something if it's really unfair to shareholders,
if it like treat some shaholders better than others. If
it violence FORDU shared duties, you can't do it right
(16:52):
beyond just like the language of the documents, Judges are
going to say, you have to treat your shareholders fairly. Traditionally,
debt doesn't work that. Traditionally you don't have fiduciary duty
to your creditors. And traditionally, if your bond agreements let
you do some wild thing, courts are going to let
you do the wild thing. There's some exceptions to that.
Some courts will look at the bond document and say, oh,
(17:14):
I couldn't possibly have met that, so we're not going
to let you do the wild thing. But in general,
the rule is kind of like whatever the documents say
you're allowed to do, you're allowed to do. And so
there is much more of this sort of thing in
de restructuring than there would be for like stock, because
there is this traditional rule that you're allowed to do
whatever you want to creditors because they're sophisticated people who
(17:35):
negotiated a contract with you, and if they didn't put
it in the contract, then they don't get the protection.
I think there's some sense that like one thing that
could happen. Is that could change, right, that courts could
get less receptive to this sort of thing and say,
you know, it's just like, as a policy matter, bad
for companies to always go around posing their creditors and
(17:57):
like treating some people more unfairly than others. And so
we're not going to let them do that anymore, and
we're gonna like apply some sort of like fairness standard
or like what do people really want to reading these
credit documents instead of just you know, reading what they say,
and so they allow it. That's like one possibility. The
other you keep reading about people like creditors trying to
(18:18):
prevent this by you know, forming groups and sort of
saying we're gonna knock this off or like demanding better
covenants so they can't have this happen to them. And
so you keep reading about these liability management exercises, but
there's enough grumbling from like, you know, people who participate
in them that like maybe the industry will find some
way to reduce their frequency.
Speaker 2 (18:38):
Well that's all I have to say. Do you have
anything more?
Speaker 1 (18:41):
The one thing I want to say, and this is
I don't know where this goes in, but I talked
a while back to a credit fund manager and they
get this story slightly wrong. But like he said that,
people would ask him as a lender, as a credit investor,
do you look first at the assets or the liabilities? Right? Like,
do you look at like what this company does but
it has, like how much productive capacity it has to
(19:02):
pay back loans? Or do you look first at like
how many bonds it already has outstanding? And he's like,
I was always an assets guy, and like, increasingly the
business is a liabilities business. Like increasingly what you do
as a credit investor is you look at the company's
capital structure and you say, who can we hose here?
What debt can we get ahead of? And as a
(19:23):
lever of like complexity and nonsense, I enjoy that, but
it seems kind of bad for like the world. I
was reading somewhere like research analysts complaining about this, because
it's like as a credit research analyst at bank you
have to spend all of your time thinking about liability
manage exercises. You don't spend as much time thinking about like,
you know, does this company have the capacity to cover
its deeps? And it seems like a loss in capacity
(19:46):
when the industry is not about like finding good things
to finance, but rather about like finding people to host
to you know, restructure the financing. It seems like that's
like a less good use of people's time and energy.
But I hope that's true. Just like so as a
first impression, it seems like it would be better to
spend time on like growing the pie than on splitting
up the pie. But like, maybe that's not true. So
(20:20):
the Wall Street Journal this week had a story about
Bank of America junior bankers being asked to like fake
their hours. So okay, Investment banking has always had very
horrible hours, right, and like junior bankers in particular were
sort of known for working one hundred plus hour weeks
and it was very hard and bad, and over the
last few years people have complained about it, in part
(20:42):
because it's caused serious health problems and some deaths in
the industry. And so a lot of banks responded to
these complaints by instituting some sort of humane hours policy
exactly the details varied from bank to bank. But like
people often talk about protected weekends, where like you're supposed
to have like one weekend a month you get like
both days off, or like you're supposed to have one
day off each week or whatever. Right, so it's like
(21:03):
there's some policy that says you're not supposed to work
one hundred and twenty hour weeks every week. And this
has come into a lot of focus at Bank of
America because a young banker there died recently after working
one hundred hour weeks on a deal. And the story
in the Wall Street Journal this week is that although
Bank of America has these policies to protect people from
(21:25):
working all the time, a lot of people were disregarding them,
and in particular, like bankers are being told to fake
their hours and fill out a form saying how many
hours you work, and you write fewer hours than you
actually work so that you don't get a call from
HR saying you can't work anymore because you know your
VP wants you to keep working, and if you get
taken off the deal, your immediate managers will be angry
(21:47):
and sad and think less of you.
Speaker 2 (21:50):
My reaction here is that there has to be a
better system of tracking hours than self reporting hours. I
was thinking about like we spent and I don't know
a good hour talking about that wells Fargo Mouse Jiggler
story where they were able to detect when people were
using technology to jiggle their mouses at home to make
(22:10):
it look like they were working. Shouldn't there be a system,
whether you track how often people are badged into the
office or I don't know how much they're using their
work devices, that would kind of solve this problem. It
seems like a lot of this trace is back to
the fact that you're self reporting your hours.
Speaker 1 (22:29):
Yeah. I agree. I get an email from a reader saying, like,
do the vps that Bank of America have mouse unjiggler
software to make it look like their work less?
Speaker 2 (22:38):
Yeah?
Speaker 1 (22:38):
But right? I mean he also makes a point like,
as you said, like if well as Fario, wants to
know how much people are working, and so it installs
software to track how much they're working, so it makes
sure they're working enough. Right. If Bank of America wants
to make sure that people aren't working too much, it
could install that software too, right. And if it doesn't
install that software, that'd suggests something about its actual priorities. Right.
(22:59):
I mean, one thing that happened like is Bank of
America has like a very clear policy that you can't
work all the time, right, and HR tells people you
can't work all the time, you have to spit your hours,
everything like that. But it seems to be, I don't know,
universally ignored, but it seems to be ignored some of
the time. And one thing that they did in reaction
to this Wall Street Journal article is they kind of said, no,
(23:22):
we need it right. And I think you get a
lot of mileage out of just saying no, we need
it right. Like if the CEO leaves a voicemail for
everyone saying this policy is for real, it's not just
a fig leaf. You have to follow it. If you don't,
I'll be mad. That gets a lot of the way there, right,
Because I do think that a lot of what happened
here is that there was a policy put in place,
(23:45):
almost as like a public relations thing, but the culture
didn't change, and everyone sort of assumed, you know, all
the mid level bankers sort of assumed the senior bankers
didn't really mean it, and they wanted everyone to keep
working really hard. And I think if you just have
the senior bankers say no, no, we mean it, that
gets a lot of the way there. But yes, installing
monitoring software could also get even more of the way there.
(24:05):
I think people might prefer to work more hours and
not be monitored, them to work through your hours and
be monitored. But I'm not sure.
Speaker 2 (24:11):
I don't know if you really want to change the culture.
The technology is there, and when it comes to culture,
I have two comments. I mean, something that the Wall
Street Journal article brought up was that this is how
a lot of people grew up. A lot of these
you know, mid level bankers who are now working these
junior bankers so hard. This is how they grew up.
And it kind of gets back to the hurt people,
hurt people argument. Hurt people, hurt people. I say it
(24:36):
all the time, but obviously this story blew up on
social media and I follow a lot of the accounts
such as Liquidity for example, both on Twitter and on Instagram.
And like you said, Bank of America did put out
this statement that they really mean it. The reaction that
I've seen so far on social media is that, Okay,
these are just words. I think if they are serious
(24:58):
about changing the culture, they do something like they would
do some action, such as either installing that technology or
actually firing people.
Speaker 1 (25:07):
The last time there was a big rash of stories
about bankers complaining about hours. A lot of banks instituted
protective weekend policies, but some banks are also said, we
are going to hire more people, right, because that's actually
often the way that you fix this problem, right. I mean,
part of the thing that is going on here is
(25:28):
some sort of like cultural thing, some sort of like
hazing thing where it's like, we want them to work
long hours because one that trains them better than if
they worked a few hours, and two there's in a
culturation and like a hazing process of like, you know,
we worked long hours, they should work long hours. We
should make them feel part of the firm by making
them work on undred twenty hour weeks. But some of
it is just there's a lot of work to do, right.
It feels move fast, and you need a lot of
people to do a lot of work on them. That
(25:50):
part of the problem can be partly not entirely, but
like partly solved, but just hiring more people so that
you have more people to do the work. You know,
if you have like the certain amount of work to do,
more people do it and then each of them can
work less. You occasionally see that as a solution, but
you don't see it a ton of the time as.
Speaker 2 (26:07):
A solution, should I say AI?
Speaker 1 (26:10):
AI is the other one, right, I mean, and you
definitely see that as a thing banks talk about. I
don't have a great sense on the ground of like
how much junior banker's lives are improved by And I
do think there is a thing where like work expands
to fill the time. And it's like, if you have
the ability to generate a pitch book through AI in
(26:32):
twenty minutes, you will probably be asked to generate a
lot more pitch books than you would have been otherwise.
But it is probably the case that a lot of
junior banker work could be is being will soon be
sort of absorbed by AI, and then figuring out exactly
(26:53):
what to do about that with people's hours will be
an interesting problem. Yeah, Like the cultural stuff is real,
Like they do want them there all the time, because
that's how like you become a like a loyal, excited,
committed member of the banking team. Right, And if like
AI does all your working, you go home at four
every day, Like I think, like your VP will be
sad even if the work is good, because like they
(27:13):
wanted Also, like the training and hazing effect of all
those hours.
Speaker 2 (27:17):
Yeah, it'll be interesting to see how this evolves. And
we're talking a lot about Bank of America, but this
isn't just a Bank of America thing, obviously.
Speaker 1 (27:24):
It's like not a Bank of America thing at all.
Speaker 2 (27:26):
The Wall Street Journal did have a lot of great
anecdotes in there about people who just left. There were
some people that they quoted anonymously who were still working there,
which I thought was interesting as well. But I saw
something on one of the liquidity type accounts I followed
that someone did what was known as a victory lap.
This isn't something I'm familiar with. It doesn't really exist
(27:47):
in journalism. But you would take the car service home,
like very early in the morning, and then like take
a shower and like change your clothes at your apartment
and then go back into the car service to take
it back into the office. That just seems crazy. I
don't know.
Speaker 1 (28:01):
I worked at places where go on, go on. When
I was a young lawyer. I had you know, you know,
like the car service policy was like you could take
a car after I don't know whatever, it was eight
o'clock at night, and I would occasionally take cars at
three pm because like I'd been there for three days
straight and I was like, no one will question this
out of policy car service. The story about my sad
hours that I tell a lot is that I once
(28:24):
I had one night where I got ninety minutes of
sleep and it was under my desk, and it was
on my birthday. So that's a bad birthday.
Speaker 2 (28:33):
That just went from sad to funny.
Speaker 1 (28:35):
Yeah, yeah, yeah right. I had lots of night's price
got ninety minutes or less of sleep under my desk,
but only one of them was on my birthday.
Speaker 2 (28:43):
Did you have a cupcake or anything like? Did you
celebrate it at all?
Speaker 1 (28:47):
They had good snacks there, so I probably had a
pepper Trump cookie, but it was pretty sad. Well in
that note that dude, I'm going on vacation.
Speaker 2 (28:55):
I'll see you in two weeks.
Speaker 1 (28:56):
Yes, there will be no money Stop podcast next week,
be on vacation, but we'll see you back here in
two weeks with.
Speaker 2 (29:02):
More stuff send us mail.
Speaker 1 (29:06):
And that was the Money Stuff Podcast.
Speaker 2 (29:08):
I'm Matt Levian and I'm Katie Greifeld.
Speaker 1 (29:10):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 2 (29:14):
And you can find me on Bloomberg TV every day
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Speaker 1 (29:20):
We'd love to hear from you. You can send an
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Speaker 2 (29:27):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (29:33):
The Money Stuff Podcast is produced by Anna Maserakus and
Moses andm Our.
Speaker 2 (29:37):
Theme music was composed by Blake Maples.
Speaker 1 (29:39):
Brandon Francis Nunham is our executive producer.
Speaker 2 (29:42):
And Stage Bawman is Bloomberg's head of Podcasts.
Speaker 1 (29:45):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
Bloomberg Audio Studios, Podcasts, radio news, A little behind the
scenes Money Stuff podcast. Here we are waiting for me
to hit send on the Money Stuff email.
Speaker 2 (00:16):
A peek behind the curtain if you will.
Speaker 1 (00:21):
Hello, and welcome to the Money Stuff Podcast, your weekly
podcast where we talk about stuff related to money. I'm
Matt Levine and I heard the Money Stuff column for
Bloomberg Opinion.
Speaker 2 (00:31):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (00:35):
Katie, how was friends?
Speaker 2 (00:37):
Oh my god, Matt, it was the best. I went
to the Olympics. As we said from the last time
we did this, I went to the Olympics as a
horrorse I did super good in my event, but in
a more real sense, I went as a human and
I went to go watch track and field. It's a
huge bummer not being at the Olympics.
Speaker 1 (00:57):
I thought you were going to say it's a huge
bummer that you didn't participate as a human.
Speaker 2 (01:02):
I mean, just in general, it is a huge bummer
that I am not a horse, but also that I'm
not a good enough athlete to compete at the Olympics.
But then I think, actually, I have this podcast that
I do every week with Matt Levine, So it's not
that bad.
Speaker 1 (01:16):
Cats and apples.
Speaker 2 (01:17):
That's great, that's true. I get treats.
Speaker 1 (01:22):
This is the between vacations money stuff podcast because I'm
going to be off next week going to the beach,
and you're that's incredible. Yes. So it's almost like we
could have just taken August off, but instead we're doing
this one. I know here we are doing this one
despite it being the mid August money stuff. There is
(01:43):
some news.
Speaker 2 (01:44):
Should I tell you about it?
Speaker 1 (01:46):
Yeah? Why don't you tell me about it?
Speaker 2 (01:48):
Okay, We're going to talk about Starbucks and they're very
expensive new CEO. Yes, we're going to talk about creditor
on creditor violence, which is pretty exciting. And then we're
going to talk about Bank of a America and the long,
long hours that their junior bankers work.
Speaker 1 (02:04):
All right, So Starbucks, Starbucks.
Speaker 2 (02:08):
So this was a big one. Basically, Brian Nichols, he
was the CEO of Chipotle. He's been CEO since March
twenty eighteen. He's moving over to Starbucks as their chief
executive officer but also as chairman of their board, which
I mean there's so many different ways we could talk
about this. From governance like you discussed in the Money
(02:28):
Stuff newsletter. There's also just the sheer amount of money
that he's making, which is a lot. And then there's
also the fact that he's going to be a remote CEO,
which is also super interesting.
Speaker 1 (02:41):
Also invented like Durrita's Locos tacos. He's like a marketing
guy who came up at both Pizza Hut and Taco Bell,
and I think they view him as a visionary of
like funding products to market at food restaurants. So that's exciting.
Speaker 2 (02:56):
I kind of get more the inventor of the Daria
Locos taco I hope I got that right. Going to Chipotle.
Starbucks is a different animal. Starbucks has been in the
hurt locker for a couple of years now. It has
spawned a lot of good jokes on social media. I
saw someone tweet that they're going to start charging for
extra milk at Starbucks.
Speaker 1 (03:17):
Right, Chaps, Like main thing in pop culture is like
portion sizes, and so yeah, well, I don't know how
you carry that over to it's tart.
Speaker 2 (03:25):
Yeah, he did work magic over at Chipotle. At least
when it comes to the stock price. I was looking
at the numbers before I came to this little room
to record this podcast. And since March twenty eighteen through
Monday's close, Chipotle stock was up something like eight hundred
percent versus Starbucks being up like fifty six percent over
(03:46):
that timeframe, obviously underperforming the S and P five hundred
and massively underperforming Chipotle. So it makes sense that the
Starbucks board was like, Wow, things aren't going too well
right now. Who's really crushing it the industry?
Speaker 1 (04:00):
Yeah, I mean it's like such a good illustration of
the possibility of CEO talent, right, I mean, it's all
it sort of seems abstract from the outside. But then
like you see, like you know, there's two companies that
are and you know, probably comparable businesses. One is doing
really well, one is doing less well, and they picked
the good CEO to run the bigger company, right, I mean,
(04:22):
like you know, you talked about the money he's getting
paid something like one hundred and thirteen million dollars, Like
that's the valuation of his package to come from Chipotle
to Starbucks. When they announced him, Starbucks stock was up
twenty billion dollars, like it was up, you know, like
twenty added like twenty billion dollars of market cap, which
(04:42):
is like he's a bargain at one hundred million dollars, right,
If the difference in CEO talent and CEO skill is
twenty billion dollars of market cap, then like, of course
it makes sense for him to move. Also, it's like interesting,
you know, Chipotle lost like six billion dollars of market cap,
so it was like an efficiency enhancing trade, right if
you just go to this prices right, Like he had
sort of done his work at Chipotle, he'd righted the ship,
(05:04):
and him leaving Chipotle was sad, but not that sad,
whereas him going to Starbucks was like extremely good for Starbucks.
So you know, everyone's a sort of long term winner.
Speaker 2 (05:14):
I guess, yeah, it was a good pair trade to make,
specifically on Tuesday, with Starbucks stock up I don't know,
a bazillion percent and Chipotle down by almost double digits.
But I mean, it's going to be fascinating to see
what he does at Starbucks. It is in the same industry.
Coffee is different from burritos though, and also, as you
wrote about in the newsletter, he has to contend with
(05:37):
the former CEO as well the founder. His name is
Howard Schultz.
Speaker 1 (05:41):
Yeah, he's been CEO I think three times now. He
keeps going back after they're unhappy with other CEOs, and
he's a big shareholder. He has like a lot of
kind of retained influence over the board and like ability
to kind of kibbets and Starbucks operations and send emails
to the CEO. I Mean, one thing I wrote about
is like Brian Nichol is going to have more power
(06:03):
than the previous CEO did. Right, He's going to be
the chairman of the board. He's going to be paid
a bucket of money, and he's gonna work from home
because I mean, he's not going to have to move
to Seattle to their headquarters. He's gonna kind of set
up a remote office by his house.
Speaker 2 (06:16):
And Newport Beach. Baby.
Speaker 1 (06:18):
Yeah. It like insulates him a little bit from the board.
It gives him a little bit more like Imperial CEO power,
and probably also insulates them a little bit from Harart Schultz. Right,
Like I don't know what the conversations between him and
the board were like, but I imagine they were like,
you can't have that guy emailing me at all hours
telling me what to do. Like, if you want the
magic that I brought to Chappola, you have to kind
of lead me alone and let me do it and
(06:39):
have the leverage to ask for that. What I wrote
is like, abstractly, like shareholders want good governance at public companies, right,
And like one thing that good governance means is like
there's an engaged board that supervises the CEO, and if
the CEO isn't doing well, they get rid of him
and get someone else. And that kind of looks like
what happened here, right, I mean, there's an independent board.
They talked among themselves and talked to the CEO. They
(07:01):
were like, we don't like this guy. He's not doing
well enough. We're gonna find someone else. And they went
out and found someone else, and they found a guy
who you know, made the stock up by twenty billion dollars. Right,
So they've found someone who the market seems to think
is a really good choice. But to get him, they
have to give up some of that governance, right, Like,
they built up some governance to sort of get to
the place where they are, and then they have to
(07:21):
spend some of that governance to get a really good CEO, right,
because like they get a really good CEO, you're like,
we're putting the company in your hands now. And you
see that with like he's gonna be the chairman of
the board. But also you see it with like the
pay package and the not having to relocate. He's just like,
this is gonna be a little bit more his company
than it was the previous CEO's company.
Speaker 2 (07:40):
Yeah. I mean, he did agree to commute to Seattle
as much as needed to do the job, and I
do wonder what that will look like in practice.
Speaker 1 (07:47):
But he gets to decide, right, he's the CEO. I
mean probably a lot, right, I mean, like he's not
gonna be like lazy about it, but like, yeah, he's
the CEO. Where is that gonna be checking up on
him every week?
Speaker 2 (07:57):
Yeah? I do think it's interesting the juxtap issi that
he will be in Newport Beach, California, and Starbucks required
of their white collar employees that they need to be
in the office at least three days a week at
the beginning of last year. I feel like that might
be harder to enforce when you have a remote CEO.
Speaker 1 (08:16):
But well, he might change the previous guy's policy. He
might change the policy. Yeah, But it also reminds me
of this story about David Solomon, the CEO of Colbyn.
This is like two summers ago or something. He went
around complaining that he was at a restaurant having lunch
in the Hampton's and like associated Colbyn came up to
him and introduced themselves and said, Hi, I work at
(08:36):
Colvin too, you're the CEO. And Solomon was so offended
because he's like, what are you doing having lunch at
a restaurant in the Hamptons during the week, Like, shouldn't
you be doing work? And he's like telling this anecdote
to everyone and looks like a grieved tone. People are, well,
you were there too, write like what what are you
complaining about? I don't know. Also, like you know, one
(08:57):
reason to follow the coming into the office policy is
like you might run into the CEO there, and if
he because while you're desking, you're not there, I'll get mad.
But if he's not there, it's a little easier to
not be there yourself.
Speaker 2 (09:08):
That's true. That's true. You kind of don't have the
moral high ground there. So we'll see if he changes that.
I do want to talk about the economy a little bit,
if you'll indulge me. There's this great story on the
terminal about CEO turnover. So there's one hundred and ninety
one CEOs who have left companies in the Russell two
thousand index this year. Stay with me. Seventy four of
(09:32):
them were considered to be fired or forced out. That
apparently is the most at this time of year since
the beginning of this data set in twenty seventeen. So
we are at a moment where it feels like a
lot of CEOs are being fired, and I think that
kind of says something about the economic environment that we're in.
I don't know what exactly, but I'm putting the thought
(09:53):
out there.
Speaker 1 (09:55):
I'm sorry, Okay, I need no, I'm sorry, I need
to take one minute to send my newsletter.
Speaker 2 (10:06):
Let's leave this minute in here, of.
Speaker 1 (10:08):
Cour I think we're just like right, so we can
leave both my asking for a minute and also the
awkward silence and joke's during this minute, and like the
cooking of the keys, like this is the behind the
scenes money stef contact that you came for.
Speaker 2 (10:23):
Well, thinking more about the economy, you know, we are
in the heart of earning season, and it just feels
like there are a lot of idio syncretic issues that
keep popping up earnings calls, like it's hard to paint
any one industry with a broad brushtroke right now. And
it just feels like at this moment, at least people
on TV keep telling me that management really matters right now,
(10:46):
because overall things are pretty good, but there are a
lot of company specific issues to work through. Matter. I
wish I was a horse. Creditor on credit or violence
(11:14):
another very human story about basically trying to cut in
line and extract value from other people who might have
been ahead of you.
Speaker 1 (11:24):
Yeah, I'd never liked the phrase creditor on credit or violence.
Speaker 2 (11:27):
What would you call it?
Speaker 1 (11:28):
Well, the actual term that people in the industry mostly
use is LMES, which is sense for liability management exercises.
When I was a banker, there is a thing called
liability management, which is like you have like bonds, and
you like do a tender offer for your bonds, and
you shoul just the new bonds of paper, Like you're
you're managing your liabilities. You're like repaying your old debt
(11:48):
and adding some new debt, or you're you know, sometimes
trying to restructure your dot. But in the modern usage,
there's like a bad association with that phrase because when
people say liability management exercises, they mean calling up some
of your creditors and saying, hey, we could use more money.
If you give us more money, we will put you
(12:10):
at the front of the line to be paid back,
and all those other creditors who were ahead of you
in line will get put behind you in line, and
the creditors that way you can do that, and they'll
say yes, because there's a loophole in our documents and
like our credit agreement says that those guys are first
in line, but actually we can do a thing that
makes them second or third or tenth in line. People
(12:30):
really dislike this for a lot of reasons. Why as
they get like bumped out in line too. It's because,
like you're a lender, you're sort of like expecting a
certain amount of like stability and predictability, and you keep
finding out that these documents that you negotiated that said
that you had to be first in line actually mean
you can be fourth on line. And so there's this
real sense of like having the football pull out from you.
(12:50):
Because people keep getting like surprised by new ways to
get liability managed. The only reason people don't like it
is because it is this like prisoner's dilemma where if
you you don't like this happening to you, the thing
that you have to do is do it to someone
else first. Right, if there's some company that's in trouble,
it's going to do this transaction. It's going to do
(13:13):
some sort of transaction that puts some creditors ahead of
other creditors, and you want to be the one who's ahead,
not the one who's behind. So you will like go
form a club with other creditors, and you will go
to the company and say, hey, let's do a deal.
And so there's the sense that like no one wants this,
but everyone feels forced to do it.
Speaker 2 (13:29):
It's like hurt people, hurt people exactly exactly.
Speaker 1 (13:32):
Everyone is like, I don't mean to hurt the other people,
otherwise they will hurt me. And they're very sad. But
this is all answering the question what do you call it?
And I think like the official term is liability management exercises.
But what I loved in this Bloomberg News article is
that there are like firms like credit hedge funds that
are setting up businesses to I don't want to say
(13:54):
do this, but they're called capital solutions businesses. And capital
solutions is like you have like you go company, like, hey,
we have a solution for your capital. We can give
you money if and the if is always like if
you stiff your other creditors. There's not always doesn't have
to be like you could imagine, you know, a capital
solution that has win win and just friendly. But like,
in practice, a lot of the capital slutions seem to
be taking money from some creditors to give to other creditors.
Speaker 2 (14:17):
I do like that name, right.
Speaker 1 (14:18):
All the other really benign names are the scary things.
Speaker 2 (14:22):
So is this good for the companies themselves, the companies
where they're borrowing money from these lenders?
Speaker 1 (14:28):
Well, I always love it because it's like back in
the day, a lot of trades like this didn't run
through credit agreements. They ran through credit default swaps. What
I mean by that is like there were some really
cool trades where a lender would come to a company
and say, we have bought a bunch of credit default
(14:48):
swaps on you. If you just default on your debt
for fifteen minutes, we'll make a ton of money and
we'll give you half of it. Right, And the companies
are okay, found we'll do that. We're desperate, and they
would default on their debt for fifteen minutes and the
to make a lot of money and give the company
some of it, and then the company would like live
to fight another day. And I always thought that was
so cool that like a like zero sum bet between
hedge funds could create funding for a real company. And similarly,
(15:13):
here there's something kind of fun about like these companies
can generate funding to like keep their actual business going
by like sort of inter credit or fight among hedge funds.
But mostly it's bad because first of all, these companies
are not like you know, mom and pop businesses. They're
like most traditionally owned by private equity firms who are
(15:33):
like the sort of Sharbel Bode bars who are going
to do this. But then secondly, you knew like a
lot of these things end in bankruptcy anyway, and so
it's just like who is first in line to be
paid back in bankruptcy? And so it's like if all
of these things like solved, that the company's problems and
like made everything better. Then you'd be like, okay, so
like a hedge fund lost money for you know, the
greater good of the company. But in practice, it seems
(15:55):
that a lot of the men in bankruptcy anyway.
Speaker 2 (15:57):
So I was thinking about this. I was reading the story.
I was reading money stuff as I do to prepare
for the podcast, and my naive thought was, is this
going to lead to lawsuits?
Speaker 1 (16:06):
Oh my god, at least there's so many lawsuits. There's
everyone on the leads a law suits.
Speaker 2 (16:10):
But here's the thing I was thinking about it when
it comes to crypto, because there's that notion you know,
it's in the code, and here it seems like you're
exploiting an overlooked part of the documents, right, Like it's
in the documents. Uh, and you just happen to find
like this loophole.
Speaker 1 (16:30):
Yes, And this is like an interesting difference between debt
and equity. I think like in general, companies are not
supposed to treat their shareholders unfairly, right, and like even
if like something in the you know, certificate corporation says
you can do something if it's really unfair to shareholders,
if it like treat some shaholders better than others. If
it violence FORDU shared duties, you can't do it right
(16:52):
beyond just like the language of the documents, Judges are
going to say, you have to treat your shareholders fairly. Traditionally,
debt doesn't work that. Traditionally you don't have fiduciary duty
to your creditors. And traditionally, if your bond agreements let
you do some wild thing, courts are going to let
you do the wild thing. There's some exceptions to that.
Some courts will look at the bond document and say, oh,
(17:14):
I couldn't possibly have met that, so we're not going
to let you do the wild thing. But in general,
the rule is kind of like whatever the documents say
you're allowed to do, you're allowed to do. And so
there is much more of this sort of thing in
de restructuring than there would be for like stock, because
there is this traditional rule that you're allowed to do
whatever you want to creditors because they're sophisticated people who
(17:35):
negotiated a contract with you, and if they didn't put
it in the contract, then they don't get the protection.
I think there's some sense that like one thing that
could happen. Is that could change, right, that courts could
get less receptive to this sort of thing and say,
you know, it's just like, as a policy matter, bad
for companies to always go around posing their creditors and
(17:57):
like treating some people more unfairly than others. And so
we're not going to let them do that anymore, and
we're gonna like apply some sort of like fairness standard
or like what do people really want to reading these
credit documents instead of just you know, reading what they say,
and so they allow it. That's like one possibility. The
other you keep reading about people like creditors trying to
(18:18):
prevent this by you know, forming groups and sort of
saying we're gonna knock this off or like demanding better
covenants so they can't have this happen to them. And
so you keep reading about these liability management exercises, but
there's enough grumbling from like, you know, people who participate
in them that like maybe the industry will find some
way to reduce their frequency.
Speaker 2 (18:38):
Well that's all I have to say. Do you have
anything more?
Speaker 1 (18:41):
The one thing I want to say, and this is
I don't know where this goes in, but I talked
a while back to a credit fund manager and they
get this story slightly wrong. But like he said that,
people would ask him as a lender, as a credit investor,
do you look first at the assets or the liabilities? Right? Like,
do you look at like what this company does but
it has, like how much productive capacity it has to
(19:02):
pay back loans? Or do you look first at like
how many bonds it already has outstanding? And he's like,
I was always an assets guy, and like, increasingly the
business is a liabilities business. Like increasingly what you do
as a credit investor is you look at the company's
capital structure and you say, who can we hose here?
What debt can we get ahead of? And as a
(19:23):
lever of like complexity and nonsense, I enjoy that, but
it seems kind of bad for like the world. I
was reading somewhere like research analysts complaining about this, because
it's like as a credit research analyst at bank you
have to spend all of your time thinking about liability
manage exercises. You don't spend as much time thinking about like,
you know, does this company have the capacity to cover
its deeps? And it seems like a loss in capacity
(19:46):
when the industry is not about like finding good things
to finance, but rather about like finding people to host
to you know, restructure the financing. It seems like that's
like a less good use of people's time and energy.
But I hope that's true. Just like so as a
first impression, it seems like it would be better to
spend time on like growing the pie than on splitting
up the pie. But like, maybe that's not true. So
(20:20):
the Wall Street Journal this week had a story about
Bank of America junior bankers being asked to like fake
their hours. So okay, Investment banking has always had very
horrible hours, right, and like junior bankers in particular were
sort of known for working one hundred plus hour weeks
and it was very hard and bad, and over the
last few years people have complained about it, in part
(20:42):
because it's caused serious health problems and some deaths in
the industry. And so a lot of banks responded to
these complaints by instituting some sort of humane hours policy
exactly the details varied from bank to bank. But like
people often talk about protected weekends, where like you're supposed
to have like one weekend a month you get like
both days off, or like you're supposed to have one
day off each week or whatever. Right, so it's like
(21:03):
there's some policy that says you're not supposed to work
one hundred and twenty hour weeks every week. And this
has come into a lot of focus at Bank of
America because a young banker there died recently after working
one hundred hour weeks on a deal. And the story
in the Wall Street Journal this week is that although
Bank of America has these policies to protect people from
(21:25):
working all the time, a lot of people were disregarding them,
and in particular, like bankers are being told to fake
their hours and fill out a form saying how many
hours you work, and you write fewer hours than you
actually work so that you don't get a call from
HR saying you can't work anymore because you know your
VP wants you to keep working, and if you get
taken off the deal, your immediate managers will be angry
(21:47):
and sad and think less of you.
Speaker 2 (21:50):
My reaction here is that there has to be a
better system of tracking hours than self reporting hours. I
was thinking about like we spent and I don't know
a good hour talking about that wells Fargo Mouse Jiggler
story where they were able to detect when people were
using technology to jiggle their mouses at home to make
(22:10):
it look like they were working. Shouldn't there be a system,
whether you track how often people are badged into the
office or I don't know how much they're using their
work devices, that would kind of solve this problem. It
seems like a lot of this trace is back to
the fact that you're self reporting your hours.
Speaker 1 (22:29):
Yeah. I agree. I get an email from a reader saying, like,
do the vps that Bank of America have mouse unjiggler
software to make it look like their work less?
Speaker 2 (22:38):
Yeah?
Speaker 1 (22:38):
But right? I mean he also makes a point like,
as you said, like if well as Fario, wants to
know how much people are working, and so it installs
software to track how much they're working, so it makes
sure they're working enough. Right. If Bank of America wants
to make sure that people aren't working too much, it
could install that software too, right. And if it doesn't
install that software, that'd suggests something about its actual priorities. Right.
(22:59):
I mean, one thing that happened like is Bank of
America has like a very clear policy that you can't
work all the time, right, and HR tells people you
can't work all the time, you have to spit your hours,
everything like that. But it seems to be, I don't know,
universally ignored, but it seems to be ignored some of
the time. And one thing that they did in reaction
to this Wall Street Journal article is they kind of said, no,
(23:22):
we need it right. And I think you get a
lot of mileage out of just saying no, we need
it right. Like if the CEO leaves a voicemail for
everyone saying this policy is for real, it's not just
a fig leaf. You have to follow it. If you don't,
I'll be mad. That gets a lot of the way there, right,
Because I do think that a lot of what happened
here is that there was a policy put in place,
(23:45):
almost as like a public relations thing, but the culture
didn't change, and everyone sort of assumed, you know, all
the mid level bankers sort of assumed the senior bankers
didn't really mean it, and they wanted everyone to keep
working really hard. And I think if you just have
the senior bankers say no, no, we mean it, that
gets a lot of the way there. But yes, installing
monitoring software could also get even more of the way there.
(24:05):
I think people might prefer to work more hours and
not be monitored, them to work through your hours and
be monitored. But I'm not sure.
Speaker 2 (24:11):
I don't know if you really want to change the culture.
The technology is there, and when it comes to culture,
I have two comments. I mean, something that the Wall
Street Journal article brought up was that this is how
a lot of people grew up. A lot of these
you know, mid level bankers who are now working these
junior bankers so hard. This is how they grew up.
And it kind of gets back to the hurt people,
hurt people argument. Hurt people, hurt people. I say it
(24:36):
all the time, but obviously this story blew up on
social media and I follow a lot of the accounts
such as Liquidity for example, both on Twitter and on Instagram.
And like you said, Bank of America did put out
this statement that they really mean it. The reaction that
I've seen so far on social media is that, Okay,
these are just words. I think if they are serious
(24:58):
about changing the culture, they do something like they would
do some action, such as either installing that technology or
actually firing people.
Speaker 1 (25:07):
The last time there was a big rash of stories
about bankers complaining about hours. A lot of banks instituted
protective weekend policies, but some banks are also said, we
are going to hire more people, right, because that's actually
often the way that you fix this problem, right. I mean,
part of the thing that is going on here is
(25:28):
some sort of like cultural thing, some sort of like
hazing thing where it's like, we want them to work
long hours because one that trains them better than if
they worked a few hours, and two there's in a
culturation and like a hazing process of like, you know,
we worked long hours, they should work long hours. We
should make them feel part of the firm by making
them work on undred twenty hour weeks. But some of
it is just there's a lot of work to do, right.
It feels move fast, and you need a lot of
people to do a lot of work on them. That
(25:50):
part of the problem can be partly not entirely, but
like partly solved, but just hiring more people so that
you have more people to do the work. You know,
if you have like the certain amount of work to do,
more people do it and then each of them can
work less. You occasionally see that as a solution, but
you don't see it a ton of the time as.
Speaker 2 (26:07):
A solution, should I say AI?
Speaker 1 (26:10):
AI is the other one, right, I mean, and you
definitely see that as a thing banks talk about. I
don't have a great sense on the ground of like
how much junior banker's lives are improved by And I
do think there is a thing where like work expands
to fill the time. And it's like, if you have
the ability to generate a pitch book through AI in
(26:32):
twenty minutes, you will probably be asked to generate a
lot more pitch books than you would have been otherwise.
But it is probably the case that a lot of
junior banker work could be is being will soon be
sort of absorbed by AI, and then figuring out exactly
(26:53):
what to do about that with people's hours will be
an interesting problem. Yeah, Like the cultural stuff is real,
Like they do want them there all the time, because
that's how like you become a like a loyal, excited,
committed member of the banking team. Right, And if like
AI does all your working, you go home at four
every day, Like I think, like your VP will be
sad even if the work is good, because like they
(27:13):
wanted Also, like the training and hazing effect of all
those hours.
Speaker 2 (27:17):
Yeah, it'll be interesting to see how this evolves. And
we're talking a lot about Bank of America, but this
isn't just a Bank of America thing, obviously.
Speaker 1 (27:24):
It's like not a Bank of America thing at all.
Speaker 2 (27:26):
The Wall Street Journal did have a lot of great
anecdotes in there about people who just left. There were
some people that they quoted anonymously who were still working there,
which I thought was interesting as well. But I saw
something on one of the liquidity type accounts I followed
that someone did what was known as a victory lap.
This isn't something I'm familiar with. It doesn't really exist
(27:47):
in journalism. But you would take the car service home,
like very early in the morning, and then like take
a shower and like change your clothes at your apartment
and then go back into the car service to take
it back into the office. That just seems crazy. I
don't know.
Speaker 1 (28:01):
I worked at places where go on, go on. When
I was a young lawyer. I had you know, you know,
like the car service policy was like you could take
a car after I don't know whatever, it was eight
o'clock at night, and I would occasionally take cars at
three pm because like I'd been there for three days
straight and I was like, no one will question this
out of policy car service. The story about my sad
hours that I tell a lot is that I once
(28:24):
I had one night where I got ninety minutes of
sleep and it was under my desk, and it was
on my birthday. So that's a bad birthday.
Speaker 2 (28:33):
That just went from sad to funny.
Speaker 1 (28:35):
Yeah, yeah, yeah right. I had lots of night's price
got ninety minutes or less of sleep under my desk,
but only one of them was on my birthday.
Speaker 2 (28:43):
Did you have a cupcake or anything like? Did you
celebrate it at all?
Speaker 1 (28:47):
They had good snacks there, so I probably had a
pepper Trump cookie, but it was pretty sad. Well in
that note that dude, I'm going on vacation.
Speaker 2 (28:55):
I'll see you in two weeks.
Speaker 1 (28:56):
Yes, there will be no money Stop podcast next week,
be on vacation, but we'll see you back here in
two weeks with.
Speaker 2 (29:02):
More stuff send us mail.
Speaker 1 (29:06):
And that was the Money Stuff Podcast.
Speaker 2 (29:08):
I'm Matt Levian and I'm Katie Greifeld.
Speaker 1 (29:10):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 2 (29:14):
And you can find me on Bloomberg TV every day
on Open Interest between nine to eleven am Eastern.
Speaker 1 (29:20):
We'd love to hear from you. You can send an
email to Moneypod at bloomberg dot net, ask us a
question and we might answer it on the air.
Speaker 2 (29:27):
You can also subscribe to our show wherever you're listening
right now and leave us a review. It helps more
people find the show.
Speaker 1 (29:33):
The Money Stuff Podcast is produced by Anna Maserakus and
Moses andm Our.
Speaker 2 (29:37):
Theme music was composed by Blake Maples.
Speaker 1 (29:39):
Brandon Francis Nunham is our executive producer.
Speaker 2 (29:42):
And Stage Bawman is Bloomberg's head of Podcasts.
Speaker 1 (29:45):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
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