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At thistimeFTXUBSYour browser does not support the element. of year, as they await their Christmas bonuses, people on Wall Street ponder their worth. Two questions can sharpen the mind of even the most senior employee. Imagine first accepting a position in Donald Trump’s new administration. How great a financial loss would your employer suffer? Before Mr Trump picked Scott Bessent as his treasury secretary, two of America’s biggest financial institutions weighed that question. Analysts quizzed Jamie Dimon, the boss of JPMorgan Chase, about whether he would leave the bank for public office. Shareholders of Apollo worried about a future without Marc Rowan, who has transformed the investment firm in recent years.The second question is dicier still: how much damage could you inflict on your employer? Whether by fat fingers or fraud, the quantum of losses an individual is trusted to avoid is a good proxy for their importance. Anyone can steal a paper clip. Few are able to tank a hedge fund (and, indirectly, a big bank) with huge, concentrated trades like Bill Hwang, an investor who received an 18-year prison sentence on November 20th. Wall Street rewards those who are very good at doing risky jobs.This parlour game also elucidates one of the most important truths of finance. For an industry obsessed with managing risk, it remains greatly exposed to the triumphs and failures of a small number of individuals. From Warren Buffett at Berkshire Hathaway to Ray Dalio at Bridgewater Associates, firms reflect the style of their leaders to an uncanny extent. Tech firms may run finance close, but nowhere else in business is hero worship quite as common.A financial equivalent to the great-man theory of history might seem counter-intuitive. Compare the current leadership of America’s largest banks with those hauled before Congress after the global financial crisis of 2007-09. That the country now has bigger banks run by smaller bosses is an inescapable conclusion. Of the crisis-weathered class, only Mr Dimon remains. The replacements are less macho. Dick Fuld, the hard-driving leader who led Lehman Brothers to bankruptcy, would struggle to be promoted today.In reality, the action (and idolatry) have moved elsewhere in the financial system. That includes firms such as Apollo in private markets, and also institutions designed specifically to avoid concentrations of power. “Multi manager” hedge funds spread investment decisions between hundreds of largely independent and often competing stockpickers. Yet it is hard to imagine Citadel or Millennium prospering as much without their prominent founders, who shape the structures in which their underlings compete. The top brass at quant-heavy firms such as Jane Street are more secretive, but doubly keen to shield their most talented mathematicians from the glare of competitors. Although Gordon Gekko might not have the numerical acumen to thrive in today’s financial system, he would certainly recognise its egotism.It is also still eminently possible for individuals to blow up firms. Mr Hwang’s folly earns him a statue in the pantheon of financial disaster alongside Sam Bankman-Fried (who ran , a cryptocurrency exchange that collapsed in 2022) and Nick Leeson (whose derivatives trades nuked Barings Bank in 1995). The location of rogues might change: these days working-class Mr Leeson would be underqualified to join the credential-clinging cadres of junior bankers; Mr Bankman-Fried, by contrast, was too qualified and started his career at Jane Street. Rest assured, though, that more like them are lurking somewhere.For all the succession planning and risk management, finance will never really be a team sport. That is because, perhaps with the exception of staid activities like deposit taking, its institutions are in a permanent state of renewal. When firms survive the loss of visionary founders, supine managers often take their place. The same thing happens when they become big and diversified. Risk takers leave and the cycle starts afresh. After the death of Siegmund Warburg, the peerless post-war banker, his outfit was bought by what became , a Swiss lender. The operation lost its lustre and its best struck out: founders of Moelis and Centerview, two top advisory houses, used to work there. Mr Hwang hails from Julian Robertson’s Tiger Management, a hedge fund known for its successful offspring. Today private-market firms and hedge funds may be ascendant, but in time the same thing will happen to them.
