It’s an easy mistake to make. You have a good year, maybe two, and in a fatal coupling of light-hearted optimism and unfettered naivety, you assume that’s how the world is now. Except it’s not, and it was just an interlude before reality was restored.
This is the situation in which Stripe, the fintech for payments, finds itself. Built by early Irish siblings, the European unicorn has spent the last few years in growth mode. The Collison brothers have been known to make gestures towards more established financial firms and accuse them of being “flabby and lazy”. But guess who’s carrying the extra weight now?
“We’ve overhired for the world we find ourselves in,” Patrick and John Collison said yesterday. “We were far too optimistic about the short-term growth of the internet economy…We increased operating costs too quickly…” Even if it “pains” them, the Collisons will now correct these errors: 1,000 people at Stripe are eliminated; 14% of the workforce.
All of this is very reminiscent of Coinbase, the crypto exchange, which said something similar the summer before shedding 20% of its staff, and is still suffering from low revenue five months later. The envisioned terms have not materialized and the fintechs that had prepared for their arrival find themselves too obese for the world that has arrived instead.
The big question now is whether it’s all about fintechs. Why not banks too? Goldman Sachs, for example, increased its workforce by 15,500 people or 45% between the end of 2017 and the third quarter of 2022. Isn’t Goldman obese too? Has he over-hired for the world he finds himself in?
We will know soon. In the meantime, and despite Moelis & Co’s admission that a banker is for life, Morgan Stanley has decided that it does not need all the bankers it has in Asia and is preparing to perform a painful extraction. In the new world order, these bankers may find new jobs more easily than engineers; At least Moelis is hiring.
Separately, next week is Goldman Sachs Partner Week, and as the company prepares to promote what will likely be a very small group of people to its highest echelon, some of the existing partners are dropping out to make way for them. Except that partners are never licensed at Goldman Sachs. Alan Kava and Chris Crampton are taking their “retirement”, much like all the partners before them. They can probably afford to. Crampton is only 44, but has spent the past 19 years working for Goldman Sachs’ private equity business. Kava is 57 and has had a long career in Goldman’s real estate investment business. Despite his retirement, Crampton already has a new job.
The bullish case for fintech: “Fintech is relatively nascent and today represents only 2% of the market capitalization of public financial services. We think the most recent downturn will separate the winners from the losers. (Bloomberg)
Coinbase is waking up to a new reality. “Low and sustained income for several years – that’s a very likely scenario.” (Bloomberg)
Morgan Stanley has drawn up lists for its layoffs. So far, they are mainly in its China-related business. (Reuters)
Deloitte has gutted eight of its 16-person UK management team. He will add six new and younger ones. Only one of the new people will be a woman and two will be ethnic minorities. (FinancialTimes)
Goldman Sachs CEO David Solomon said activity in the primary markets is on a “journey” to recovery and it’s just a matter of asset allocators adjusting to the new reality of slowing growth, rising rates and tightening liquidity. (Bloomberg)
Goldman Sachs suddenly increased its legal coverage from $300 million to $2.3 billion. Nobody knows why. (Bloomberg)
Markets don’t force anyone to bow down to Mammon. As long as there are people who value more than maximizing wealth, markets will cater to their preferences. (Policy)
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