Respect age (of the system)
When the missionaries arrived at Aitape in Papua at the turn of the century they were appalled to see the villagers carry there boats from the mountain settlement to the beach each day, fish and return to the hills each evening boat in tow. No-one knew quite why so the missionaries decided to resettle the village on lower ground near the beach to make the fishing process more efficient. In July 1998 an undersea earthquake caused a tsunami that killed 2200 Aitape residents. The system of boat carrying to higher ground that had evolved over centuries was there for a reason.
If you rise to the top of a sales and trading business at Goldman Sachs or JPMorgan you have displayed incredible trading, sales, personal and political skills. You may also have computer skills beyond Microsoft Office but this is unlikely. Whatever your background you inherit ‘the system’ which has been created and honed over many generations of traders and years of experience. You have probably been frustrated with the system in your own dealings but there is nothing you can do about it. The system predates you by decades. It is version 26.14 of the modern computerised system, built upon the trading ledger that at one point was kept manually but migrated to COBOL in the 60’s. While it is a dinosaur it integrates a trade order system, risk management and collateral management around a core accounting system. It works and when it says ‘no’ there is nothing you can do to overide.
When you start work at a new crypto trading platform you have a ‘clean sheet of paper’ to do really cool stuff. Luca Pacioli may have written the defining tome of double-entry book-keeping in 1494, but what does he know? Accounting is something that can be easily constructed from the trading records so we want to trade first. Anyway, protocol sillycoin.leverage50x.check.collateral.dump will protect the platform from losing money. And no we don’t want to spend $20 per month on Xero to keep track of our customer deposits, revenues and liabilities because that is boring and uncool and so 1494. We are a crypto trading platform that is so new that it can be hacked and robbed and backdoored by management. The ‘system’ wont say ‘no’ because there is nothing in it stopping unusual trades or capital movements. A clean sheet of paper can be dirty as…
The FTX collapse is becoming an ageist story about inexperienced 30 somethings creating a house of cards that eventually collapsed. I think this is unfair. If you get promoted to a senior role in Goldman’s or JPMorgan you haven’t spent decades in one role and your experience is possibly limited to one aspect of the game. There is not much difference between 30 and 40 somethings in actual fact when it comes to creating a new trading platform. The issue is that there was no system that the FTX people inherited containing all the procedures, checks and balances that established financial institutions have evolved with. It is not a question of how old the people are, it is a question of how old the system is. Old systems that work are to be respected.
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