The great-man theory of Wall Street

AT THIS time of year, as they await their Christmas bonuses, people on Wall Street ponder their worth. Two questions can sharpen the mind of even the most senior employee. Imagine first accepting a position in Donald Trump’s new administration. How great a financial loss would your employer suffer? Before Trump picked Scott Bessent as his treasury secretary, two of America’s biggest financial institutions weighed that question. Analysts quizzed Jamie Dimon, the boss of JPMorgan Chase, about whether he would leave the bank for public office. Shareholders of Apollo worried about a future without Marc Rowan, who has transformed the investment firm in recent years.

The second question is dicier still: how much damage could you inflict on your employer? Whether by fat fingers or fraud, the quantum of losses an individual is trusted to avoid is a good proxy for their importance. Anyone can steal a paper clip. Few are able to tank a hedge fund (and, indirectly, a big bank) with huge, concentrated trades like Bill Hwang, an investor who received an 18-year prison sentence on Nov 20. Wall Street rewards those who are very good at doing risky jobs.

 Hero worship

This parlour game also elucidates one of the most important truths of finance. For an industry obsessed with managing risk, it remains greatly exposed to the triumphs and failures of a small number of individuals. From Warren Buffett at Berkshire Hathaway to Ray Dalio at Bridgewater Associates, firms reflect the style of their leaders to an uncanny extent. Tech firms may run finance close, but nowhere else in business is hero worship quite as common.