FILTH or Lost in Translation
New markets require local staff. Suitable candidates with local savvy, mainly language and contacts, are scarce. A derivative specialist fluent in Korean and English, a very rare commodity, can receive a $1 million signing bonus. Language skills and attendance at the same school as the clients was all that it took to qualify as a derivative professional.
Carlos was in his mid twenties. He was the son of a wealthy Argentine family. An uncle on his mother’s side had once served briefly as a Minister. Carlos was US educated. He spoke beautiful English and fluent Spanish. He dressed well and was knowledgeable about food and wine. He knew little about financial markets. He kept telling us that he knew a lot of important people in Argentina. “When I had dinner with [insert name of important personage]. You don’t know him? He is very well connected. He could be the next Minister of Finance.” The senior management decided that Carlos was the “right” sort of person and hired him to cover Latin America for our derivatives group. There were many Carlos’s. There were many Karls, Mikhails and Vladimirs to cover Eastern Europe. The locals are trackers for the hunters. They guide traders to the victims. The traders explain the products, highlighting the key selling points. They speak to the clients. If the client is interested then the traders work with the local coverage guy to close the trade.
This is “smile and dial” with a difference. Doing business in Eastern Europe requires a bottle of vodka at 10 a.m. in the morning. In Asia and Africa, “commissions” in brown paper envelopes, are sometimes required. Our man covering Indonesia was affronted when questioned about a particularly odd expense. “What do you call giving a client tickets to a basketball game? Isn’t that a bribe?” Traders acquiesce. The money, they are making, is just too good.
Traders look to the local hires to interpret the country’s Byzantine political machinations to assess the impact on prices and rates. In July 1998, the head of the Russian sales desk at an investment bank, an ethnic Russian, announced that everything was fine. He had spoken to his cousin at the Ministry of Finance. The market weakness was just a buying opportunity. Russia defaulted in August 1998.
The year before, I was in earnest conversation with the person covering Indonesia. Thailand had just devalued its currency. I asked about Indonesia. Everything was fine. His relative, a senior government official, had said things were under control. The Indonesian central bank would not follow the Thai example. The funds exiting Thailand would head for Indonesia. Within the week, the Indonesian Central Bank had widened the trading band as a prelude to devaluation. The Rupiah was on its way from 2,000 toward 10,000. The same person also pronounced that the Suharto regime was secure. There was no chance of a violent uprising in Indonesia. “Indonesians are not like that.” Within the year, Suharto was gone. There were riots in Jakarta. His firm chartered special planes to fly out expatriate staff. We thought they knew. It was another beautiful lie.
In the 1980s, I asked a colleague how banks came to make ridiculous loans to Latin American countries that couldn’t possibly pay them back. He described how he had visited a Latin country. He had found the government officials charming and intelligent. They had worn suits and ties. He had been entertained at a lovely country club where the food and wine had been French. He had visited a race meeting. It was all very civilised. During his fact finding visit lasting 48 hours, he formed a favourable impression of the country. This had been the basis of his recommendation to lend billions of dollars.
Expatriates are sent to run foreign operations, to provide a firm hand and maintain standards in the lawless frontier lands. A friend relocated with his wife and young children to Asia to run the firm’s equity derivative business. His wife described the experience as “living in resort-land”.
Even by the extravagant standards of banking, expatriate postings are generous. Housing allowances and a raft of benefits make expatriate lifestyles very comfortable.
Among the more unusual case of expatriate “benefits” was one case of a trader relocating to Hong Kong. His negotiated an employment “package” that included accommodation for his wife as well as a mistress. Human resources fastidiously classified the “benefit” as “accommodation – domestic help”! It is unknown whether the mistress provided “domestic” services and, if so, of what specific sort.
Expatriates live in exclusive, foreigner only compounds where expatriate businessmen and their wives socialise with equals. They interact with local business leaders, senior government officials and professionals. The only other locals they know are maids, servants and drivers. Language, cultural prohibitions and a fear of the unknown keep the expatriates separate from the local populations.
During the Asian crisis, I recall a surreal evening with a group of expatriate bankers in Indonesia. The talk was about the French ambassador’s new posting. Whether to go to Hong Kong for the Rolling Stones’ concert? The absence of fast Internet access at home was a problem. Women were complaining about the difficulty of getting good maids. One woman could not find a cook who could do a good spaghetti puttanesca. A short distance outside the gated foreigner compound, 100,000 people were jammed into a slum living on less than $1 a day. The bankers were also skeptical about regime change. Suharto was under no threat.
For bankers with families, expatriate life is a delicate balance between generous benefits, low tax rates, and career opportunities. Some were ‘FILTH’ (“failed in London try Honkers” – Hong Kong). They have no easy way back. Wives are bribed with multiple maids, cooks, drivers and a lifestyle that would not be possible in the suburbs of New Jersey or South London. For young bankers, expatriate life is a continuation of adolescence and college days; a constant rounds of parties farewelling or welcoming expatriates. For men, sexual license is regarded as part and parcel of an Asian posting. Weekends are spent in Bangkok, Pattaya Beach or Manila. The talk is of LBFMs (little brown f**king machines).
A few expatriate bankers turn “local” developing a passion for the indigenous culture. They become bores about Mayan civilisations, Javanese art, Russian Icons, sake grades or the subtleties of the tea ceremony. They dress according to the local custom and learn the language. One American had undergone just such a conversion during his posting in Tokyo. He was telling me about Japanese bathing customs. He invited me to his house to join his family in their bath, naked. This was one step too far for me in “bonding”. I found a pre-existing commitment that was unavoidable.
Most expatriates fall somewhere in between the extremes. They bumble along. The more conscientious make some efforts to blend in, such as learning something of the local language.
Greg, the head of Tokyo derivative sales, was fluent in Japanese. Asked about living in Tokyo, the laconic East-ender, said that it wasn’t that different from London. When pressed, he observed that in London he lived with a view of the Battersea Power station whereas in Tokyo he lived with a view of the Kawasaki Power station. Despite his language skills, Greg conducted meetings in English. Few of his clients were aware that he spoke Japanese.
A colleague, Nero, and I were visiting Tokyo for a series of meetings trying to sell a new derivative structure to Japanese banks. At one meeting, we faced off against three Japanese executives. The most senior man was older and spoke little English. His junior colleagues translated for him. During the meeting, he frequently turned to ask questions of his colleagues. On the way back to our office, I asked Greg about the side conversations. “Nothing important,” Greg responded. I did not press him. Nero’s curiosity was aroused and he pressed Greg for a translation. Greg said it was unimportant. Nero pressed even harder. The more Greg resisted the harder Nero pressed. Tired of this game, Greg translated the side conversation. Now, Nero is a rather large man about as wide as he is tall. Another of his nicknames was the ‘slug’. The older man had been asking his colleague “what did the big fat whale say?”
Steve, visiting Hong Kong for the first time, asked a Chinese colleague to teach him some basics. Every morning, as he and his colleague, a young woman named Cathy, got into a taxi, Steve would thank the Chinese doorman in Chinese. Steve’s attempts always brought a giggle. A Chinese colleague overheard Steve. In Cantonese, the words translated into “here is my old, dry, smelly s**t”.
An accounting firm decided to use a shot of the tax partners in a brochure promoting the firm’s services. The shot was taken in Shinjuku in Tokyo. The Japanese signs in the background, a local partner eventually pointed out, were for massage parlors. Cynics noted the poetic justice in this unexpected conjunction.
Perhaps the most embarrassing cross-cultural incident involved a trader visiting Japan. He thought it might be useful to have his business cards translated into Japanese. His official title was “Trader- Fixed Income”. The Japanese translation was “Trader on Fixed Salary”. The card brought strange looks from the bemused Japanese clients. It seemed more than a little was lost in translation.
© Satyajit Das 2006; All rights reserved.
The above is adapted from Traders Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das (2006, FT - Prentice Hall, London, ISBN 0273 70474 5) available at all good book stores or online at www.pearson-ed.com.
Satyajit Das works in the area of financial derivatives and risk management. He is the author of a number of key reference works on derivatives and risk management. His works include Swaps/ Financial Derivatives Library – Third Edition (2005, John Wiley & Sons) (a 4 volume 4,200 page reference work for practitioners on derivatives) and Credit Derivatives, CDOs and Structured Credit Products –Third Edition (2005, John Wiley & Sons). He is the author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006, FT-Prentice Hall), an insider's account of derivatives trading and the financial products business filled with black humour and satire. The book has been described by the Financial Times, London as " fascinating reading … explaining not only the high-minded theory behind the business and its various products but the sometimes sordid reality of the industry". He is also the author (with Jade Novakovic) of In Search of the Pangolin: The Accidental Eco-Tourist (2006, New Holland), an unique travel narrative offering passionate and often poignant insights into the natural world and the culture of eco-travel.
