Time to Do Activism in Reverse

One broad, cruel stereotype of the financial industry is that it is about getting people to do things, and charging them for it, and then getting them to undo the things, and charging them for that. What is market making if not selling stuff to people, buying it back moments later, and charging a spread on both trades? On a longer time horizon, there is a popular reductive view that leveraged finance bankers are in the business of loading companies up with debt in the good times, restructuring that debt in the bad times, and charging fees all the time. Or that mergers-and-acquisitions bankers are in the business of convincing CEOs to build sprawling conglomerates, and then convincing them to break up those conglomerates, with big fees on the way in and on the way out.1

It’s a little unfair but there is an important truth to it. The financial industry is in the business of intermediation, and it earns its living by doing trades. It is a volume business, “moving not storage”; the job is not to do the platonically correct transaction but to keep doing transactions. If you could find the platonically correct transaction, the thing that makes your client happy forever, you wouldn’t have the client anymore. If the allocation of capital ever became perfectly, permanently correct, a lot of people would be out of jobs.2