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Morning Coffee: The Goldman partner who couldn’t work with top performers. The world’s craziest trillion dollar scavenger hunt

As the saying has it, the graveyards are full of indispensable men. In the case of Masanori Mochida it was almost literally true; after twenty years as president of Goldman Sachs Japan and at the age of 70, he would still tell people asking about his retirement plans that he planned “to die at my desk”.

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He didn’t – he retired and “left abruptly” last November, and Hidehiro Imatsu, another Goldman veteran has now been appointed to the post. But the last five months have been an object lesson in the problems of replacing the irreplaceable and the dangers of top bankers who go on too long.

It’s quite noticeable that succession planning was non-existent; back in November when Mochida left, the business had to be led by a “quintet” of the most senior Japanese partners. It’s also somewhat noticeable that none of the five was considered to be a viable successor; they were all apparently “eliminated from the search at a relatively early stage”.

This was a predictable problem – although nobody reaches the rank of Partner at Goldman without being at least a bit ambitious, people who are really aiming for the top tend not to stick around in a business unit where the boss has been there for two decades and claims he’ll never retire. Hidehiro Imatsu had sought his fortunes outside Japan and was based in Hong Kong up until his promotion.

And staff talking to the FT have suggested that Mochida “failed to groom a cohort of potential successors”. That might just have been a matter of poor planning and not being good at mentorship. But it’s also possible that someone who stays that long in a job can get into the habit of surrounding themselves with yes-men, or even promoting people precisely because they’re not going to be a threat. 

Of course, this is even more frustrating for good and ambitious underlings, and apparently “a number of senior figures left the bank after becoming frustrated with the lack of opportunity to progress”. The Tokyo office also didn’t play well with the rest of Goldman; executives in New York and elsewhere in Asia complained that it was run as a silo.

Fiefdoms like this are known to be one of the most pernicious management problems in banking. But it was quite natural that nothing was done about it. For many years, Mochida led the best foreign franchise in the Japanese industry, building an unparalleled network of advisory relationships and cementing Goldman in a dominant position. This made him difficult to challenge. And while Japan declined in importance as a revenue pool, doing something about it was never at the top of anyone’s to do list.

Now Japan is coming back, and it’s noticeable that in Imatsu, Goldman have appointed someone with a background in FICC trading rather than someone with a big personal advisory franchise. The only way he will be able to succeed is to rely on integrating the business with his Goldman colleagues, rather than maintaining it as a fortress. There will be no more irreplaceable bankers at Goldman Japan.

Elsewhere, if you want to get a meeting with the key decision makers at the Abu Dhabi sovereign wealth fund, the process seems to be a bit more complicated than asking them to join your LinkedIn network. If you bond with a local banker over a midnight motorcycle ride, then he might introduce you to the former prime minister of Lebanon for a cup of Argentine maté. If you handle the maté gourd properly, you could get a few minutes a former British diplomat and if he likes the cut of your jib, that will get you into the room with a Moroccan woman who is not mentioned on any websites, but who is understood to act as the CFO of the private investment vehicle of Sheikh Tahnoon bin Zayed Al Nahyan. Simple enough.

Although this sounds like it has more in common with the Midnight Madness scavenger hunt than a normal investment process, there is a degree of logic to it. “It’s a very weird social dance”, according to a fund manager who has successfully navigated it once and advises that “If you come in with a great idea but a bad gatekeeper, it will rub people the wrong way”. Lots of investors have these formal and informal introduction networks, and it makes sense that one of the biggest fortunes in the world would have a few more stages than most.

Meanwhile…

One of the underrated public benefits of the financial services industry is the number of novels that it protects society from.  Peter Harrison, the outgoing CEO of Schroders, apparently has a half finished lockdown project in his bottom drawer which he might complete if he doesn’t get another entrepreneurial idea quickly enough. Apparently “when I joined the City it was the stockbrokers who were the rainmakers. Then portfolio managers came into the frame, now it’s the wealth managers. It’s trying to capture that” (Financial News)

The safety valve for Hong Kong bankers during layoffs always used to be moving to corporate CFO or investor relations jobs; now it’s just as likely to mean a move to Dubai. (Bloomberg)

Apparently proportionately to its size, the hiring market for “sports investment bankers” is slightly hotter than for industrials right now.  Here’s a list of the top eleven banking teams; interestingly, there seem to be surprisingly few former athletes, although nearly everyone in the sector has been a sports nut since childhood. (Business Insider)

Lateral hires at Partner level happen rarely enough for Goldman Sachs that they’re probably a sign of strategic intent.  Carsten Woehrn now joins his former JP Morgan colleague Haider Lee doing M&A coverage for private equity companies. (Financial News)

Would you like to have the opportunity to converse with a cartoon digital avatar of your CEO, powered by artificial intelligence?  What do you mean, “no”? If you change your mind, a new startup called Synthesia will do you an “eerily realistic” one. (Bloomberg)

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AUTHORDaniel Davies Insider Comment

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