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Morning Coffee: BlackRock’s job cutting rationale is the new normal for 2024. Backstory of banks’ least favourite person

Sometimes “are we hiring more people or laying off staff” isn’t actually a binary choice.  BlackRock, for example, is planning to do both this year.  According to the New Year’s all-hands memo from Larry Fink and Rob Kapito, it’s a “rapidly changing environment”.  That means that although headcount at BlackRock is still going to grow over the year from its current level of 20,000, “businesses across the firm have developed plans to reallocate resources”.  Because of this, about 600 BlackRockers are going to be getting the message that the future’s exciting, but they’re not part of it.

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There’s a sense of déjà vu here – last year’s cost-cutting memo at BlackRock, sent around this time of year, said that “the uncertainty around us makes it more important than ever that we stay ahead of changes in the market” and announced 500 layoffs.  Could this turn into the sort of annual “rank and yank” of underperformers of the sort that you see at some investment banks?

Not yet. Fink and Kapito make a point of saying that “These departures include valued friends and colleagues who have made important contributions to the firm, and we wish them our best for the future”, and that “saying goodbye to colleagues is hard, especially when many are friends as well”.  They're not underperformers. It's just that BlackRock doesn't want them anymore. 

That might not be as comforting as it seems. If your entire skill set is obsolete, then what can you do?  If BlackRock is getting out of these areas, then who is going to be getting in?

Similar thoughts may be occurring at Barclays, which is also claiming to still be hiring while also laying people off. It's the new trend. Some jobs are directly at risk of being automated, while others are imperiled by endless strategy changes. BlackRock CEO Larry Fink has said that artificial intelligence “will increase productivity by 30%”, which looks ominous however you read it. 

Elsewhere, bank equity analyst Mike Mayo has spent his whole career fighting to maintain a relevant public profile in a changing sector.  It’s a competitive industry, and having not grown up with a personality that suited him to schmoozing chief executives, he decided to take the opposite route of telling them the blunt truth about their performance, rather than saying “great quarter guys”.

As well as analysing bank stocks, Mayo is a competitive powerlifter, which seems to demand even more radical lifestyle sacrifices than being an equity analyst. Despite having grown up in a family that ran a Romanian restaurant, he now eats seven-egg omelettes and doesn’t drink alcohol.  And it seems like it’s kind of worked.  Although in the past he’s received hand-written letters from Warren Buffett telling him to stop being so mean to Bank of America CEO Brian Moynihan, he’s been the Institutional Investor champion for the last four years, and Jamie Dimon confesses to always reading his research notes and says “he knows what he speaks about”.  In a job where everyone needs to have the confidence to say “I’m not wrong, the market’s wrong”, Mike Mayo is the guy who says it out loud.

Meanwhile …

“Pillow talk” insider trading used to mainly involve the intentional passing of information between spouses, but with more people working from home, it’s become much easier to simply overhear something that you can use to your (temporary and illegal) financial advantage.  What apparently hasn’t changed is that it’s always the male half of the couple. (WSJ)

On the one hand, pod shop hedge funds are always complaining about the extent to which salaries have been bid up for even mediocre talent.  On the other hand, there are a lot of wannabe and me-too multistrategy funds which are struggling to make ends meet.  Could these two problems add up to a solution?  Some M&A bankers think so. (Bloomberg)

Providing free lunches to entice workers back into the office cost $1.5m for Piper Sandler last year, so they’ve stopped doing them.  Apparently, they will still cover transaction and delivery fees for anyone who wants to order in. (Short Squeez)

India continues to be one of the most underestimated hot markets for bankers.  Local players ICICI are hiring 30 capital markets specialists, and expect to have more than four $1bn IPOs in the next year. (Bloomberg)

He’s an “acquired taste” who is “difficult to confide in”, and about a dozen other euphemisms for “I really hate this guy”.  But Simon Mordant has done well enough out of a career in the Australian M&A market (specialising in aggressive takeover defences) to be able to spend most of his time in a mansion in Umbria, distilling artisanal gin and sending emails at odd hours of the night. (AFR)

apparently if you use all lowercase and dont bother with punctuation in text messages people will think you’re gen z (nypost)

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AUTHORDaniel Davies Insider Comment

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