Liquidated: An Ethnography of Wall Street.
Book Review by: Mansel G. Blackford
For Citation: Business History Review 85 (Autumn 2011): 627-629.
Karen Ho, a faculty member in anthropology at the University of Minnesota, presents a comprehensive portrait of the participants in investment banking on Wall Street during the 1980s and continuing through the 1990s and well past 2000. In exploring how these financial operators thought of themselves, Ho casts a wide net. By Wall Street, she means “investment banks, pension and mutual funds, stock exchanges, hedge funds and private equity funds” (p. 4). Moreover, she shows how Wall Streeters’ imposition of their favorable self-image on businesses around the globe, under the guise of increasing shareholder value, harmed both individual companies and the global economy. Specific actions of investment bankers, rather than “natural” market developments, she persuasively argues, caused the financial crises.
In the first two chapters, she analyzes the biographies of Wall Street workers, documenting their backgrounds and revealing how they understood their positions. The picture of Wall Streeters that emerges is one of smart men and women, who worked hard for long hours. (Most came from Ivy League schools—40 percent of Princeton’s 2005 and 2006 graduating classes entered financial services!) Well compensated, they accepted job insecurity as the norm, accepting job losses and job-hopping as a matter of course, in good times as well as bad. In making her nuanced argument, Ho carefully differentiates among those in the front office who made the deals and were richly rewarded, those in middle-office positions who directly supported deal-making and generally did well financially, and those in the back office who worked mainly on clerical tasks and were viewed as expendable. These chapters, with their detailed look at how investment banking houses operated, are the most valuable part of Ho’s account.
Most business historians will probably find less that is new in Ho’s next two chapters, in which she discusses the changing relations between investment banking and large American corporations. Her critical point, however, that investment bankers from the 1980s on misread history, leading them to conclude that their embrace of stockholder value (reinforced by rising stock prices) was the only proper goal for corporate management, has little basis in the historical record. Circumstances were never that simple, for corporate managers had diverse objectives.
In the remaining three chapters, Ho describes how, in recent decades, Wall Streeters forced their self-image on corporate managements across the United States and in other parts of the globe. While much has been written about recent financial crises, Ho’s analysis goes farthest in her claim that the character of Wall Street actors was the root cause of the implosion. Far from increasing shareholder value, the actions of investment bankers hurt it. Particularly damaging, Ho avers, was their acceptance of job instability as the norm. Deal after deal resulted in short-term decision-making and work layoffs, to the long-term detriment of both individual companies and national economies.
Ho is well suited for her task, having served as a business analyst at Bankers Trust. She complemented her experience with the field work she conducted from 1998 to 1999, during which time she interviewed more than one hundred participants in investment banking. (Following a common research practice in anthropology, Ho assigned her informants pseudonyms, but she lists their actual places of employment in the endnotes.) The result was her dissertation, which she revised to produce this well-organized and readable book. Other than a few passages where Ho engages the literature of anthropology, Liquidated could be used in classrooms. Still, she might have done more. Although she acknowledges the unfortunate role that government deregulation played in the financial meltdown, she does not explore the government’s failures at any meaningful level. Instead, her view is focused laser-like on the shortcomings of Wall Streeters. Nor does she fully examine the nature of American society and culture, which for decades allowed, and even applauded, the actions of Wall Street operators. However, doing justice to those topics would have required additional volumes. Meanwhile, Liquidated goes a long way toward informing readers about the events that took place in investment banking over that twenty-five year period.