As plumes of smoke billow from the international banking system, it is wise to assess how we got here. The current economic crisis has been attributed to many things, from the deregulation of the financial-services industry to sheer greed and stupidity. Karen Ho *03 offers a different and more pungent diagnosis in her new book, Liquidated: An Ethnography of Wall Street (Duke University Press): The crash is the natural result of a Wall Street culture in which the self-proclaimed smartest people in the world came to believe that high share prices trumped all other corporate values and, in doing so, imposed their ethos of live-for-today risk-taking on the economy at large.
Among the slew of recent books assessing the crisis, it is Ho’s methodology as much as her analysis that stands out. Her book — which is based on her Princeton dissertation — is neither an economics primer nor a tell-all. Ho is an anthropologist; she calls her book an “ethnography” — a study of the culture of Wall Street. Think of Liquidated , then, as Margaret Mead meets Morgan Stanley. And much as Mead studied the cannibal tribes of New Guinea, Ho worked among the investment bankers of Lower Manhattan so she could observe them in their native habitat. Judging from her assessment, Wall Street bankers are a lot like cannibals — except with better suits and less impulse control.
Ho’s interest in studying Wall Street from an anthropological perspective was piqued, she recalls, by the 1995 restructuring of AT&T, which resulted in 40,000 layoffs about a year after she arrived at Princeton. The layoffs, she thought, were horrible news — and yet the company’s share price soared. Looking more closely, she saw a similar process at work in other corporate restructurings, and noticed that the investment banks not only prospered, but celebrated the restructurings they had brokered. How was it, she asked, that corporate America could do so well during a period of widespread downsizing?
Like a good anthropologist, Ho set out to explore the connection between rising share prices and increasing worker insecurity, and its nexus on Wall Street — the ways in which Wall Street shaped not just the stock market, but the nature of employment and job security. Shortly after beginning her field interviews, however, she discovered that she did not know enough about finance to phrase the proper questions, much less understand the answers. To correct that deficiency, she interviewed with the banks recruiting on Princeton’s campus, landed a job as an internal management consultant at Bankers Trust (now a part of Deutsche Bank), and took a break from her studies in 1996 to work there.
Ho’s department at Princeton had some qualms about her going to work on Wall Street. Her work — especially her methodology — was unprecedented, says her adviser, Emily Martin, who is now a professor of anthropology at New York University. “There really had been very little research done by anthropologists in the field of financial institutions,” Martin says. Ultimately, the department agreed that Ho could work on Wall Street but could not conduct interviews while she was employed there. She would be permitted to keep notes and make contacts that would prove invaluable later. Although Ho told potential employers that she intended to return to graduate school and write a book about Wall Street culture, it seemed that her more salient qualifications — a Princeton pedigree and a pulse — assured her of a job.
Therein, Ho discovered one of the most striking aspects of Wall Street culture. It values “smartness” above all other attributes — and while smartness may be hard to define, a fancy diploma provides a good substitute. Wall Street says it wants only the best — no, make that the best of the best — and that, dear reader, means you. Princeton and Harvard are the only two universities, Ho reports, from which the top investment banks recruit students regardless of major or area of concentration. If you went to a “lesser” school — and in the eyes of the big banks that includes Yale, Stanford, Chicago, and the rest of the Ivies — applications are accepted only from students who have demonstrated some interest in finance, such as economics majors. If you went to a second-tier state school, forget it. And so, Ho says in an interview, for a generation of Princeton students, “Wall Street positioned itself as the place [for undergraduates] to land.”
As Ho describes it, Wall Street needs Old Nassau as much as the other way around, a fact that keeps a steady flow of eager juniors and seniors flooding to Goldman Sachs recruiting parties even during an economic meltdown. Princeton and Harvard create a “halo effect” around all that Wall Street does: If investment bankers really are the best and the brightest, then what they say about the market must be believed, and those hefty bonuses are rationalized. “Investment banks’ sheer reliance on the ‘aura’ of Princeton itself,” she writes, “the name, the prestige, the evocation of ability and intelligence, the global cultural capital — is brought into starkest relief during socioeconomic recession. When faced with economic hard times, Wall Street downsizes immediately, relentlessly, and constantly. However, Wall Street’s dependence on elite universities means that even during downturns, when they unabashedly downsize to preserve the bonus pool of capital for their executives and to bolster shareholder value, they do not stop actively recruiting at the usual campuses.”