A True Prisoner’s Dilemma

Banks are no strangers to controversy – we only get a glimpse of their colossal levels of errors of judgement during times like the great financial crash of 2008.

Most big banks have a mandate (without your consent) to use funds deposited to trade and participate in complex and highly risky investments like stocks, currencies, futures and derivatives – but to what extent?

This also brings to the fore a potential issue of what is known as the principal-agent problem. Where the agents – bank employees, are given a ‘license to “ deal’ in all sorts of investments, often under the radar of both local and global financial authorities.

When one of such agents makes an overwhelming error in judgement, causing a large chunk of investment monies to be lost;  the agent is said to ‘go rogue’.  Questions arise as the agents often do not operate alone without supervision or consent from their seniors/managers.

A good example is that of a convicted bank fraudster; imprisoned and released on good behaviour, 38-year-old Kweku Adoboli who was eventually deported from Britain to Ghana.  A country he has lived in for 26 years in comparison to Ghana where had lived for a mere 4 years. This ends a long-protracted appeal process to allow him to remain and continue living in the UK after serving his sentence.

Some say he was a scapegoat for the deportation policies in the UK and argue that the colour of a person’s skin has no bearing on the immigration policy of Britain. This assumption holding some substance after what happened with the Windrush scandal

Others have also contended that he was the perfect scapegoat to throw in jail as a warning shot that the UK was willing to crack down on fraudulent bankers especially after the 2008 financial collapse which banks played a significant role in.

N26_banner-300x250-ENThis is also the reason why no top manager went to jail at UBS. Had Adoboli believed regulators did not know about money laundering and illegal trading in central London? The banks want to continue raking in profits and the last thing they wanted was a former insider with an appetite to take them on. These are the practices that have made them powerful. Adoboli failed to recognise that.  

“Adoboli did not syphon money to a private personal account, he did not pay himself a golden parachute, he did not launder money for terrorists or drug cartels, he did not manipulate interest rates and did not cause financial loss to the UK government. Other UK bankers who were never prosecuted however did.”

The word scapegoat is applicable because the banks that needed bailouts like RBS were savings banks, unlike UBS which was at least at that time, an investment bank. Adoboli did not syphon money for himself, he did, however, recklessly trade to make money for the Bank.

UBS is a bank which ordinary folks do not readily have access to. The very practices by Adoboli that lost the bank $2 billion led them to eventually record an overall profit of over $3 billion that same year. We, therefore, need to deprive our minds of the fact that Adoboli defrauded taxpayers of the UK and was a rogue agent of the bank.

He was, however, not alone in this practice and UK taxpayer bore no responsibility for the money that he lost. Therefore, in several ways, the own architect of his misfortune; either advertent or inadvertently.  

Let us, however, turn our attention to finance because this is what this post is about. And even before that, it is essential to get some perspective before jumping on to ‘lynch’ Adoboli. The Royal Bank of Scotland which manages cheque accounts of ordinary workers had to be given taxpayers money of £45,5 billion as a bailout.

It appears that the government will not get the money back according to the current chair of UBS, Sir Howard Davis. Interestingly enough, no one was arrested for causing financial loss to the state (that happened). UK taxpayers had to take a hit for this.

 Another interesting issue worth considering is the LIBOR scandal which was the manipulation of interbank lending rates by a host of global financial institutions. These banks, incidentally, including UBS by the way, have been implicated in manipulating interest rates for profit sharing. This was as far back as 2003 according to the counc39935_1200x628il of foreign relations. Again, no one was jailed for this ‘heist’. Before addressing Adoboli ’s case again, some large multinational banks were publicly known to launder money (for terrorists and drug cartels) guess who was convicted? That’s right, no one.

We do not refute that what he did constituted a crime –  it apparently was and perhaps he deserves the jail time he got. But the way he was plastered all over the newspapers in the UK in 2011 as some poster boy for out of control banking in the UK was why the term “scapegoat” was used.

  In investment banking, trading of commodities and currencies can go wrong which is why he should have insured his bets. But then, what no one is willing to talk about is the reward associated with high risk (uninsured) betting in the financial markets. That is the modus operandi of these banks; which does not make for sufficient juicy material for the corporate press. 

This is the height of the power of the big financial institutions and what they can get away with. Lose taxpayer’s money and there is no consequence. Fund terrorist or drug cartels and you will just be fined a fraction of your profits; fix international interest rates and all you receive is a fine. However, dare to lose their money through a risky bet and you will be undone just like Adoboli was.

Until the current financial framework is considerably changed to end monopolies of big financial institutions, the risky bets will continue. With blockchain and cryptocurrencies, who knows what the future hold? All the best to the “rogue trader” in his future endeavour nonetheless.

**This is a summarised section of a column by Julius Owusu-Paddy.  He is a staunch advocate for challenging social norms that elevate the powerful and suppresses the powerless. The full article can be read here. This section attempted to cover the issue of principal-agency problem and related issues in the financial industry.

One unanswered question is why investigators never scrutinised the practices of the entire UBS bank rather than just hauling two comparatively low-level managers to court (the afore-mentioned Kweku Adoboli and another Ron Greenidge). UBS did, however, make a profit that year despite the loss of $2 billion attributed to Adoboli.

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Vocations of the Future

There is a lot of banter, which is backed up by well-research papers on how Automation and Robotics (powered by machine-learning systems) will replace jobs in the manufacturing and labour-intensive industries.

Blue-collar jobs are not the only ones however, that face imminent and progressive extinction.

A recently survey report conducted by the World Economic Forum predicts futuristic trends affecting certain jobs in the modern workplace.

Robert Solow predicted decades ago, in his Solow-Swan model, a massive driving force of global growth: technology.

And the evidence is prevalent with the likes of Apple, Microsoft, Google and Amazon championing stock markets with Billion-dollar market capitalizations and in the process creating an abundance of jobs globally.

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Disruptive technological advances such as AI (Artificial Intelligence); the ubiquitous high-speed mobile Internet (5G); widespread adoption of big data analytics; cloud technology; and the recent Blockchain technology will be the drivers of this job evolution.

Based on the report, by 2022, this job evolution will be firmly in place as it has already.

In a matter of just 4 years, we could have a situation where jobs such as postal service clerks, data entry clerks, and bean-counters (accountants and auditors) would be made redundant.

Impact on services

Software like Microsoft’s Dynamics 365, aims to remove ‘silos’ within customer relationship management (CRM) and enterprise resource planning (ERP) processes.

The latter takes over (fully automates) back-office operations such as stock-taking and supply chain management.

Such tasks will be performed via software, reducing the need for more human supervision. Consequently, the focus would be more on managerial roles.

In the sales and customer service realm, technologies like Microsoft’s AI will provide automated insights to guide employees on improving customer experiences.

Furthermore, it may lower support costs by using virtual agents or Chatbots to eliminate in-house AI experts and those writing code. This will  result in more redundancies!

World's jobs

On a positive note, newer and more exciting jobs such as data analysts, machine learning and AI specialists, digital transformation experts and in general information system services will be on the rise – up to 135 million globally, according to the Report.

The fields to benefit directly from new technologies would be information technology; information security; innovation; customer services and risk management (financial services).

Impact on finance

Another group of professionals whose nature of work will be affected due to the advent of ‘disruptive technology‘ are financial middlemen. Likewise, smaller banks and money transfer institutions.

Decentralised systems were primarily put in place to eradicate extra fees associated with transferring money across borders, and from one account to another. This because fees increase due to such intermediaries (financial middlemen).

Cutting them out completely undoubtedly renders them redundant. It is therefore pertinent for them to innovate their products in order to open up sufficient job position.

Read more about the effect of Cryptocurrencies on the banking sector here

Recently, Malta’s finance minister whilst in a private interview during a Blockchain Conference, echoed this. He said that the advent of cryptocurrency has changed financial middlemen into traditional “photo developers”.

“I can see this, just like in photography when you could tell that […] those who process the photos will lose their jobs; a lot of financial intermediaries will be facing the chop in the not too distant future,” says Edward Scicluna.

The good news for governments will be that the trend shows that the jobs created will surpass those lost.

Be proactive and skill yourself accordingly or get the right personnel who can quickly adopt some of the mentioned skills so that you do not fall behind!

Sales misconception – debunqed!

The ‘great’ art of selling is about earning and keeping your client’s trust. In business or commerce, there is nothing greater than the feeling of completing that successful sale.

By successful, we refer the whole process: from convincing the customer that your product or service will meet his/her long or short-term needs. This is after listening carefully to their requirements through thorough discovery.  The client is then able to the payment without hassles and take timely delivery of the goods.

Finally, the customer acknowledging and thanking you for it with the hopes of coming back should be the most rewarding part of the sale. That coupled with your commission of course!

A successful sale is a step-by-step process and must have all the above elements.

Anything short of that is paramount to a quick-fix or even a scam. It is only lazy salespeople (taking shortcuts) that give the trade a bad reputation.

Granted, not all of your sales interactions will turn out to be complete success. Some elements of the above process could be stymied by aspects out of your control.  For instance, the client’s lack of funds, suppliers’ delivery delays or a faulty product can mess up a good sales cycle.

A true story

Some of the most successful sales are even conducted by faceless agents. Once, while based in Johannesburg, we sold a product (that was mass produced in China) and had it delivered from New York to Cape Town via air-freight.

This was based on a demand (order) that was placed on a then operational website. The actual sales were brokered via correspondence by email and phone.

Luckily, the product (and delivery) quality was good enough not to warrant a face-to-face visit, though in those days having Skype for Business would have been a great resource to at least give ‘a face’ to the sales rep.

They were, however, willing to deal with the agent several times without having met them personally based on the quality of the (medical) product. This was in addition to the vote of confidence and guarantees provided throughout the intensive sales interactions.

This little anecdote proves that it doesn’t matter what you sell, if the product is of good quality, and meets all (compliance) requirements including the recent GDPR law – the sale actually becomes the easy part.

You will, however, still require a little bit (and the right kind) of presentation skills to position the product/service adequately enough to execute the sale.

There is no real art to selling – we all do it all the time without realizing it. From the time we apply to a kindergarten or high school, to university and finally to all the jobs in our working career.

Reinforce the brand

As salespeople, we must present ourselves (our unique skills and character) and persuade a ‘buyer’ to take us on. This is also something no automated sales agent or Chatbot can do and is an area that Artificial Intelligence (AI) will not beat us on.

And just like a brand, everything we do is intended to enhance our value and the more we beef-up our brand (with educational, mentorship and technical qualifications). The better our brand, the more demand for your offering.

250x250But back to selling. We sell people ideas: something as simple as convincing your mate to meet at the pub after work or your girls to join you for a weekend spa takes skilful persuasion. And even more so if they had other plans or options.

That is essentially what sales is about – persuading a buyer to choose your product or service over that of others using tools such as the consumer black box.

Such persuasion obviously can be genuine or fraudulent. Those salespeople trained by their leader Jordan Belfort as illustrated in the 2013 Wolf of Wall Street movie are a testimony. The revealed how persuasion can be used effectively when capitalizing on with an inherent human trade – greed.

Being truthful, however, (even if it means letting go of a sale) will determine whether you get repeat customers. This is something most successful salespeople make use of to boost their conversion rates and pipelines.

Mentorship

Debunqed.com likes to follow unconventional salespeople who use unorthodox but effective methods.  These are not necessarily the textbook style of selling but will help to inspire you to address the potential client’s needs honestly.

Such ‘on the ground’ learning is done with the help of a mentor. Shadowing one or two mentors that are passionate about what they do can rub off a few skills that can supplement traditional sales theory.

Sales is a skill best learned on the ground and you will hardly find an institution offering it as an elective course.

Such revenue-multiplying potential that repeat-customers can provide for your sales portfolio or pipeline beats getting a quick-fix by conning people no matter how big the ‘score’ is.

What you should be doing as a salesman is gaining your customers’ trust whilst solving their problem.

A trusting customer will always look you up for more purchases.

If you operate in an industry where you have multiple products or one that needs to be renewed – you earn revenue for life!
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