Morning Coffee: Goldman Sachs is giving things away, but it’s not just generosity. The worst chat messages Citi has ever seen
Why would you spend millions of dollars on a highly specialised piece of risk management software and then give it away for free? That’s what Goldman Sachs is planning to do with the Alloy platform and PURE programming language which it uses internally to extract information from a variety of databases and consolidate it into a consistent format.
By rights, it ought to be a really valuable piece of software, if it does the job as advertised. Financial firms proliferate databases like a forest floor sprouts mushrooms – in all different types and often in inaccessible locations. Jeff Wecker, Goldman’s co-chief data officer, estimates that the firm has over a hundred thousand databases of one kind or another, put together by different teams and external vendors. This is likely to be fairly typical for the industry, and it’s extremely wasteful of time and effort. Mr Wecker estimates that for a typical computing project at Goldman, half of the cost is attributable to finding and organising the datasets. (And that’s with Alloy; presumably it would be an even greater proportion for banks that needed to put things together by hand).
But Goldman has decided to hand it over to Finos, the Fintech Open Source Foundation, to eventually be distributed to the world. (Initially, an external version of Alloy is being made available, then selected partners will be invited to get a taste of PURE; Goldman and Finos want to get feedback on how other institutions might use the product, so as to maximise takeup). In the press release, Goldman competitors seem pretty happy about this; senior techies at Citi and Morgan Stanley are giving excited quotes. So what gives?
Well, if you ask anyone who was around in finance in 1994, they’ll remember two things – Roberto Baggio’s missed penalty in the World Cup final and RiskMetrics. Way back then, JP Morgan decided to distribute its proprietary value at risk model to anyone who wanted it, free of charge. Then as now, they claimed a degree of self-interested altruism, saying that they thought it would be good for the system as a whole, reducing counterparty and compliance costs. And it took off, becoming an industry standard that even the regulators used. Not only did this give JP Morgan the kind of influence that money just can’t buy, but it turned out that even if something is free, people will pay decent money for consultants to tell them how to use it properly. RiskMetrics spun out of JPM in 1998, got listed on the NYSE and was eventually acquired by MSCI for a bit more than $1.5bn.
So it’s possible to do well by doing good; the value in a seemingly generous move like this is that if you set the technological standard for a market, you pretty much guarantee that you will be the top technology player in that market for years to come; you literally wrote the book. In a world where data is the most valuable commodity, Goldman is staking its claim.
Elsewhere in the world, the Rohan Ramchandani employment tribunal case has reached the stage at which Citigroup get to make that case that even though he was acquitted of an actual criminal conspiracy in the US, the messages in the “Cartel” chatroom were still pretty bad behaviour, and quite bad enough to justify their firing him. This is probably the most important part of the case for Citi, because in many ways this tribunal is a bit of a phony war – awards are capped at a fairly low level, but the progress of the case here might affect the civil case Mr Ramchandani is bringing over the subject of his £2.5m in deferred compensation (and he was only 34 when he was fired – good going!). So it’s important for the bosses to be performatively outraged, particularly as the core of Mr Ramchandani’s case is an allegation that they turned a blind eye and went along with it all.
And there was no hint of banter or boys-will-be-boys to ex-President Jamie Forese in the court. “Even if Ramchandani’s statements in the Bloomberg chats were intended to be ‘bluster’ or ‘big talk,’ they leave the strong appearance of impropriety and evidence of disloyalty to Citigroup that was more than sufficient basis for terminating his employment”, he said, adding that “the failure to realise this is damning” and Ramchandani’s insistence that there was no wrongdoing “makes me question his common sense”. It’s all fun and games until someone loses a billion dollars.
It’s “Terrible Bosses” week at The Cut, asking the question: When you take the sex out of workplace power abuses, does anyone care about them? Or in other words, should there be a MeToo moment for bosses who are just harassers? (The Cut)
One of those strange stories that pops up once in a while, but you never see the protagonist again. A medical student expects to be a millionaire before he’s 21 from trading FX. Judging from the fact that he’s bought “a £22,000 Mercedes S-Class, a £13,000 BMW 6 Series and a £13,000 Jaguar”, he’s quite active in the second hand car market too. (Daily Mail)
Goldman CEO David Solomon swears that there is no gender bias in the Apple Card credit scoring app, adding that it sometimes gives wives ,much lower credit limits than their husbands for “a variety of reasons”. (Bloomberg)
“SPDR Man, SPDR Man, does anything a mutual fund can”. Jim Ross, ETF pioneer at State Street and one of the team that created the iconic SP500 product, is retiring, but “not sailing off into the sunset”. (FT)
You used to do it by fetching coffee or placing bets, but now young junior staff at Morgan Stanley wealth management are ingratiating their way onto good teams by teaching the revenue producers how to use the software. (Business Insider)
If current trends continue, airline miles will have a precise cash value, and it will be about one cent. (Bloomberg)
Image credit: Dan Totilca, Getty