I have a simple theory of interpersonal relations that I want to share, thanks to a tweet by @allthatissolid
In it – he, a portfolio manager, asks whether he ought to take views and research etc from a young salesperson at a new bank. To explain how this works for those not versed in markets, banks or “the sell side”, provide market making services. They intermediate buyers and sellers, either by directly matching them up, or holding an inventory of positions in financial instruments that they can sell to their customers. They are engaged in the business of providing liquidity. The “Price” of this service is generally set in an oligopolistic way, ie, a small and slightly differentiated pool of firms compete to provide the same services – but the price tends to be set in a kind of dynamic game rather than in a marketplace. The price of liquidity can be either a fixed fee to do a certain kind of transaction, as with exchange traded products, or the bid offer – ie the distance between the price at which one can buy and sell, as in the OTC market. Whatever the market though, the point of the salesperson at a bank is to get him or herself in front of those who need to trade in financial markets – and have them trade with them rather than the competition. In order to bring in business, salespeople offer as much as they can in terms of information, research, pricing tools, market colour and anything else they can do to differentiate their bank from the competition – a task that given most banks have roughly the same capabilities, mostly comes down to a kind of pseudo intellectual beauty contest. In some cases, with more old fashioned male end users, and cynical sales managers, it can be an actual beauty contest.
That explanation furnished, let me lay out my theory. It’s simple enough. There are two kinds of people. “big world” and “small world”. Big world is my approach. I believe that the world is big – full of unknowns and unknowable things, and with vast numbers of people, all of whom have some knowledge and understanding. In a big world, you don’t know who has access to what kind of information, and how useful it is, you can only find out via trial and error. You can apply some sensible filters based on peoples likely motivations and incentives, but by and large its important to be open and receptive. Furthermore, if someone close to you does well because of your actions – that’s good – because there is a big world out there, and it’s better to have the parts close to you doing well. Small world is the approach of most people in banks. Small world thinkers see a series of zero sum games, following well known rules, in a world where those beyond their immediate connections are basicaly irrelevant. They seek to understand things in a limited framework, and limit that understanding to a limited network. If someone does well, that’s advantage that they left on the table – and they won’t get caught out again.
A big world person encountered with someone offering up information and ideas sees another potential piece of the puzzle. Wherever this person is coming from, unless they have obviously ulterior or sinister motives, they represent another link, another angle on the world, another unique perspective and set of facts, beliefs and ideas. A small world person sees a fixed set of zero sum games. Time spent with this person is time not spent elsewhere – on things that are known to work. There is a fixed pie of attention, or money, or time, and it must be doled out accordingly. For each kind of person – the reaction to a chirpy young salesperson calling up offering to give stuff away for free in the hope of being given the opportunity to trade – the response is obvious.
In my own personal experience I’ve been lucky enough to make calls in to many big world thinking people. Those people have given me time, feedback, information, and all kinds of new perspectives on the world. I’ve generally found that they are receptive to new ideas and information – and dismissive of flattery, puff and nonsense. I’ve also had the misfortune to had to deal professionally with small world people. Such people demand their own prejudices and idaes reflected back at them, and offer nothing – focussing instead in maximising their own gain from any interraction. I’ve not been around long enough to credibly say which group succeeds in the long run – but the attrition of the former is certainly lower than the latter.