Morning Coffee: JPMorgan’s new plan to cut junior bankers & shift jobs to India. The long haired hippy running a $20bn trading firm

How far will the jobs of junior bankers be diminished by AI? Last year, the New York Times put the fall at two thirds. For the moment, JPMorgan seems to have its eye on half that.

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CNBC reports that JPMorgan is discussing proposals to reduce its ratio of junior investment bankers to managers from 6:1 to 4:1. However, under this plan, CNBC says half the remaining junior JPMorgan bankers would be working in low-cost locations like India and Argentina. If you're in London or New York, a two-thirds reduction might therefore be correct.

The job cuts and offshoring are - predictably - the result of AI. CNBC recounts how Derek Waldron, JPMorgan's ex-McKinsey & Co. chief analytics officer, gave JPMorgan's LLM the following prompt in the presence of its journalist:

“You are a technology banker at JPMorgan Chase preparing for a meeting with the CEO and CFO of Nvidia. Prepare a five-page presentation that includes the latest news, earnings and a peer comparison.”

The model duly produced a 'credible-looking PowerPoint deck in about 30 seconds.' Waldron duly observed that this sort of thing would have, "taken teams of investment banking analysts working long hours at night....” 

JPMorgan isn't the only bank with a LLM that can do the job of exhausted 23-year-olds. Most banks have something similar. Goldman Sachs CEO David Solomon observed in January that an LLM can draft 95% of an IPO prospectus in minutes. 

Until now, though, banks haven't gone public on the proportion of junior banking jobs that might disappear as the LLMs take hold. JPMorgan's unconfirmed musings suggests the impact could be calamitous for London and New York. In the new world envisaged by Waldron and others, teams of AI-powered junior bankers working in low-cost locations will be available to support senior bankers at all hours of the day and night. Costs will fall, margins will rise. JPMorgan's shares will soar. Senior bankers will step in only to manage relationships and oversee the magic. Juniors in London and New York will be reduced to hyper-productive analysts and associates working with machines and colleagues overseas.

While it sounds like the sort of thing that an AI evangelist from McKinsey & Co. thinks is great, it's not yet clear whether clients will want to read 50 page AI-generated memos or PowerPoint decks created by a machine. Nor is it clear where tomorrow's senior bankers will come from if tomorrow's junior bankers are mostly machines or in Bangalore. When Citi created a team of cheap offshore analysts in Malaga a few years ago, the Spanish analysts competed bitterly to be transferred to London, before the team was eventually disbanded. As David Solomon noted earlier this year, when an LLM can do 95% of the work, the 5% that's done by humans becomes all-important. That's fine, if the humans have experience of actually doing the job themselves.

Separately, following suggestions that Jane Street is some kind of communist wonderland where a committee of shadowy individuals run everything, it's becoming apparent that one person at Jane Street might have a higher profile than others. 

That person is Rob Granieri, Jane Street's co-founder. Bloomberg says Granieri - who co-founded Jane Street in 1999 with Mike Jenkins Mike Gerstein and Tim Reynolds after earning $700k at Susquehanna International Group - is the only of the four founders to remain at the firm.

Granieri was first in the news in July when Bloomberg reported that he'd been duped into funding AK47s for a coup. This seems to have inspired the WSJ to investigate who exactly Granieri is. 

It turns out that Granieri is a long haired libertarian hippy who likes Metallica and Burning Man and who donates money to psychedelic studies. He wears scruffy clothes and lives in a rented house, which he once omitted to pay the rent on. Granieri is described as, “Someone you’d expect to see on a park bench reading Shakespeare,” rather than a Citadel Securities-style quant.

He's not the only eccentric from Jane Street. Bloomberg reports that Jenkins, who has left the firm, is known for walking a pot-bellied pig in a Manhattan park.

Meanwhile... 

If you work at Hudson River Trading, you'll need to know a combination of C++ and Python. Those combinations differ by role. "I’d say that Trading Tech’s language focus is something like 70% C++ and 30% python, and that Research & Development’s is roughly 70% python and 30% C++." (HRT) 

Open AI completed a deal to help employees sell shares in the company at a $500 billion valuation. (Bloomberg) 

Mike Pizzi, Morgan Stanley's global head of technology and operations, says that as AI writes more code, engineers are freed up to spend more time on complex tasks such as code reviews. (Bloomberg) 

Claire Coustar, Deutsche Bank's head of global head of ESG and sustainable finance for fixed income is leaving after the bank created a new and bigger job and appointed Esra Turk global head of sustainable finance in investment banking. (Bloomberg)

Citi equities trader Benjamin Waters says he didn't act inappropriately to a female broker. “My interactions with her never crossed any inappropriate lines and her accusations against me are completely false." A court has ruled that Citi can't be sued for his alleged bad behaviour. (Bloomberg) 

The number of millionaire renters in New York City has doubled since 2019 and people on $100k+ can't afford to live in the city. (Bloomberg) 

Bridgewater has returned 26% this year. (Bloomberg) 

The head of alternative investments at asset manager Neuberger Berman says private equity firms are at risk of chasing money from wealthy investors simply to collect the management fee on assets they can't profitably invest. (Financial Times) 

Since being knighted in the UK Steve Schwarzmann has created a coat of arms depicting a bird of prey with a chivalric saying, “For God and the Empire,” and “Excellentia et philanthropy,” which is spelt wrong. He's also fallen out with his neighbours after shipping in tankers of water during a drought.  (WSJ) 

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