The Silo Effect

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The Silo Effect Page 32

by Gillian Tett


  mortgages, ix

  defaults on, 101

  subprime, 2, 17, 73, 83, 85, 91, 94, 96, 219, 226

  MySpace, 170

  National Health Service, U.K., 15, 206

  Nestlé, silos at, 60

  Newsweek, 200–201

  New York, N.Y., 246

  Bloomberg administration in, see Bloomberg administration

  building and fire inspectors in, 2–3, 8, 9, 10

  Buildings Department of, 2–3, 9, 10

  Finance Department of, 9

  fragmented bureaucracy of, 3, 6–7, 9, 55, 63

  Health Department of, 246

  housing fires in, 2, 7, 8–9

  Housing Preservation and Development Department of, 8

  illegal apartments in, 1–2, 7, 10

  illegal dumping of restaurant grease in, 11–12, 246

  Investigations Department of, 9

  911 call bureaucracy in, 246

  Prospect Ave. fire in, 1–2, 7

  tobacco smuggling in, 10–11

  Water Department of, 8

  New York City Fire Department, 3, 7, 8, 9, 55

  New York City Police Department:

  “broken windows” strategy of, 146

  compstat program of, 147, 153

  New York Daily News, 151

  New York Times, 72

  New York University, 245

  New Zealand Superannuation Fund, 242

  Nissan, 68

  Obama, Barack, 214, 223

  Obama administration, 16

  Office of Financial Research, U.S., 133

  Ohga, Norio, 58–59

  OpenTable, 135, 139, 140–41, 144, 152–53, 159

  opportunities:

  blindness to, ix, 12, 18, 85, 109, 142, 168, 247, 249

  silos in creation of, 106, 218–44

  organizational systems, see classification systems

  Osborne, George, 133

  Ospel, Marcel, 86, 88, 95, 103

  Other Financial Corporations (OFCs), 121–22

  see also shadow banking system

  Other Financial Intermediaries (OFIs), rapid growth of, 121

  Ouriel, Kenneth, 207

  Ouroussoff, Alexandra, 47

  OxyContin, illegal sales of, 11

  Pagan, Rosemary, 2

  Parker, Sean, 170

  participant observation, 37, 38, 43, 48, 49, 186, 251

  Partners in Health, 195

  Patinkin, Don, 116

  Patterson, Ryan, 185

  Paulson, John, 226

  pay and incentives:

  at BlueMountain Capital, 238

  at Cleveland Clinic, 205–6, 214, 217

  in finance industry, ix, 60, 61, 91, 92, 93, 205, 223, 225–26, 227, 237, 238, 244, 248

  Pension Plan Investment Board, Canada, 243

  Pershing Square, 226

  Phillips, John, 198–99

  Phillips & Drew, 86

  physicians, distinction between surgeons and, 204–5, 206–7, 210

  PIMCO, 126–27

  Playstation, 53, 59, 66, 67, 70, 74–75, 76–77

  as example of successful silo, 71

  Podolsky, Seth, 211, 216

  Pozsar, Zoltan, 128

  Pritchard, Evans, 37

  Proust, Marcel, 245

  Prudential Regulation Authority, U.K., 132

  Radcliffe-Brown, John, 37

  rating agencies, ix

  “rational expectations” theory, 112, 115

  regulators:

  modern finance misunderstood by, ix

  silos and, x, 81–82, 83–84, 88, 93, 97–98, 99, 103

  Ricardo, David, 111–12

  Riles, Annelise, 47

  risk, blindness to, ix, 14, 81–106, 131, 142, 168, 221, 247, 249

  risk managers, 81–82, 89–90, 93, 95, 97, 98–99, 101, 102, 103–4, 218, 233, 234

  Robbin, Scott, 159

  Rohner, Marcel, 83

  Rubenstein, David, 230

  “Russian doll finance,” 125

  Salesforce, 188

  Samsung, 66, 77–78

  Sandberg, Sheryl, 170, 180, 185, 187

  Santa Fe Institute, 224

  Sarkozy, Olivier, 87

  Sartre, Jean-Paul, 32, 34, 45

  Sauseda, Marcelina, 151

  Savage Mind, The (Lévi-Strauss), 38

  Saverin, Eduardo, 170

  savings glut, 128

  Sayad, Abdelmalek, 42

  Schroepfer, Michael “Schrep,” 178–79, 180–81, 183, 185, 188, 254

  Scoby, Joseph, 102

  securitization, 87–88, 90, 100, 108, 264n–65n

  September 11, 2001, terrorist attacks, 3, 139–40, 158

  U.S. intelligence failures and, 145, 146

  SG Warburg, 86

  shadow banking system, 134

  diagramming of, 128–29

  and financial crisis of 2007–8, 127–28

  McCulley’s distrust of, 126–27

  size of, 129

  Shearer, Tony, 105

  Siderow, Stephen, 235, 237, 242

  BlueMountain Capital co-founded by, 222, 223

  on price distortion of CODs, 229

  Silicon Valley:

  rapid growth of start-ups in, 172, 173

  silo-busting in, 187

  see also specific companies

  silo-busting, x–xii, 18, 19, 135

  in Bloomberg administration, 3–4, 6–12, 245, 246, 250

  by BlueMountain Capital, 218–44

  at Cleveland Clinic, 18, 192–217

  collisions and, 171, 253

  by corporations, 247–48

  cultural translators in, 249

  at Facebook, 17–18, 164–91

  in finance industry, 218–44

  Goldstein and, 162–63

  by individuals, 139–63, 168, 247

  innovation fostered by, 143, 215, 221

  in institutions, 168–69

  in Silicon Valley companies, 187

  Stringer and, 68–69, 72–74

  technology and, 250

  travel and, 253

  silos:

  as classification systems, xii, 14, 18–19, 142, 247, 252

  collaboration and communication stifled by, 62–63, 71–72, 85

  as cultural phenomena, xii, 19

  definition of, 13

  difficulty in dismantling of, 79–80

  efficiency and, 14, 60, 61, 254

  in finance industry, ix–x, 14, 16, 17, 18, 107–35, 221, 222, 223, 224, 227, 242–44

  in financial system, 109, 110, 130–31, 133, 134–35, 222

  innovation stifled by, 14, 51–80, 204, 250

  mental maps and, 17, 142

  need for, 13–14, 19, 71, 175, 247, 252

  opportunities created by, 106, 218–44

  origin of, x–xi

  prevalence of, 246–47

  seen as natural and inevitable, 55, 63, 69, 93

  self-interest fostered by, 15, 72, 76, 85

  at Sony, 17, 54–55, 60–61, 68–69, 70, 79, 109, 135, 167–68, 174, 249

  tunnel vision and, see tunnel vision

  turf warfare and, 118, 134, 167, 168

  Sinclair, Upton, 81, 98

  Singer and Friedlander, 105

  Smith, Adam, 14, 111–12

  social anthropology, see cultural anthropology

  social engineering experiments, at Facebook, 17–18, 169, 174, 181, 188, 190–91

  social grooming, 172, 174, 200

  social interaction:

  classification systems and, 29–30, 31

  Dunbar’s number and, 172

  Facebook in reshaping of, 170–71

  Facebook’s quantitative analysis of, 171, 188

  social media, 246–47

  corporate use of, 188

  social networks, xii, 169

  sociology, merger of cultural anthropology and, 48

  Sony, xi, 18, 50, 51–52, 191, 222, 247

  Apple’s eclipsing of, 77

  collaboration stifled
at, 62–63

  consumer electronics division of, 63, 67, 70

  corporate restructuring at, 60–61

  entrenched resistance to reforms at, 73–74

  expanding product lines of, 57, 59

  and financial crisis of 2007–8, 73

  founding of, 55–56

  innovation and creativity originally fostered by, 52, 58

  Playstation of, 53, 59, 66, 67, 70, 71, 74–75, 76–77

  proprietary digital music systems of, 65

  risk-averse thinking at, 62

  Samsung’s eclipsing of, 77–78

  share price of, 66, 73, 77, 78

  silos at, 17, 54–55, 60–61, 68–69, 70, 79, 109, 135, 167–68, 174, 249

  stalled e-reader project of, 76

  Stringer appointed CEO of, 66, 68

  Stringer’s attempted silo-busting at, 72–74

  Trinitron TV of, 57, 59

  Sony Music Entertainment, 63

  Sony Walkman, 52, 59, 64, 78, 222

  competing versions of, 53–55

  creation of, 57–58

  revolutionary impact of, 58

  Soros, George, 131–32, 226

  sovereign wealth funds, 242–43

  specialization, 71

  need for, 14, 19, 249, 253

  premium put on, 253

  see also silos

  Staley, Jes, 235, 242

  Star Wars films, 52

  Steel, Robert, 6, 253

  Stehli, Jim, 89, 92

  Steinkamp, Jennifer, 212

  stock markets:

  1929 crash of, 199

  as zero-sum game, 220

  Strachan, Timothy, 53

  Straumann, Tobias, 84–85, 101, 103

  Stringer, Howard, 53, 63, 78–79

  appointed Sony CEO, 66, 68

  background of, 67

  at CBS, 67, 69–70

  IBM as example for, 70–71

  insider-outsider perspective of, 69–70

  Playstation and, 74

  silo-busting efforts of, 68–69, 73–74

  silos as concern of, 55

  structured investment vehicles (SIVs), 118–19, 121, 123–24, 268n

  Stuart Little (film), 51, 52

  Sun Microsystems, 180

  super senior tranches, 91–92, 99, 101–2

  surgeons:

  arrogance of, 203, 208

  distinction between physicians and, 204–5, 206–7, 210

  Swiss Bank Corporation, 86

  Switzerland, UBS as powerful symbol of, 85–86

  Tajikistan, xi–xii, 49

  Talbot, Lauren, 7, 246

  Task Reaper, 166–67

  taxonomies, see classification systems

  technological change, 12, 14

  silo-busting and, 250

  Sony’s failure to keep up with, 62

  technology elite, 190

  Thiel, Peter, 170

  Thinking, Fast and Slow (Kahneman), 1

  3M, 187

  Tibet, xi

  tobacco smuggling, 10–11

  tranches:

  of CDOs, 225–26, 227n, 229, 231

  high-return, 91

  super senior, 91–92, 99, 101–2

  travel, silo-busting and, 253

  Treasury, U.K., 114, 130

  Treasury, U.S., 114, 133

  tribalism, x, 13, 17, 55, 68, 79, 98

  in Chicago Police, 144, 156, 158

  in economics, 113

  Trinitron TV, 57, 59

  Tristes Tropiques (Lévi-Strauss), 38

  Trobriand Islanders, 37, 186

  Tucker, Paul, 110–11, 116, 129, 130, 248–49

  Bank of England career of, 110–11

  broad-money growth as concern of, 120–22, 123–24

  as head of market surveillance division, 114–15, 117–18, 120

  passed over for Bank of England governorship, 133

  on silos, 134–35

  tunnel vision, ix, x, 13, 92, 107–35, 252

  economists and, 17, 122–23, 127–28, 130–31

  and financial crisis of 2007–8, 108–9

  mental maps and, 125, 127

  opportunities concealed by, ix, 12, 18, 85, 109, 142, 168, 247, 249

  risk concealed by, ix, 14, 81–106, 131, 142, 168, 221, 247, 249

  Turner, Adair, 116, 132

  UBS, xi, 18, 80, 81–106, 168, 223, 228, 247

  blindness to risk at, 84–85, 96–97, 103

  capital reserves of, 102

  as cash-rich, 87, 92

  CDO holdings of, 88–93, 96–103, 106, 219

  collaboration encouraged at, 104

  corporate loan concerns of, 100–101

  creation of, 86

  Dillon Read hedge fund of, 95–96, 99

  Ernst & Young credit rating of, 94–95

  globalization and, 86–87

  interdepartmental communication stifled at, 85, 97–98

  IT systems overhauled at, 104

  mortgage-backed securities held by, 82–83, 87–88, 89; see also UBS, CDO holdings of

  mortgage-linked losses of, 83, 101, 102–3, 106

  private bank of, 87, 92, 104

  retail bank of, 104

  risk managers at, 81–82, 89–90, 95, 97, 98–99, 101, 102, 103–4

  silos at, 17, 85, 103–4, 105, 109, 131, 135, 219, 222, 224, 248

  Swiss regulators and, 81–82, 83–84, 88, 93, 97–98, 99, 103

  as symbol of Switzerland, 85–86

  systematic failure at, 84

  tax-evasion scandal at, 84

  top leadership as operating in bubble at, 85, 94, 100–101

  tribalism at, 98

  2011 trading losses at, 105

  UBS Investment Bank, 89, 90, 95, 96, 99

  Unilever, 188

  Union Bank of Switzerland, 86, 94

  United States, housing bubble of 2006–7 in, 82, 94, 95, 97, 99, 100–101

  U.S. News & World Report, 201

  hospital rankings of, 213–14

  Vai, Steve, 53–54

  Vaio MusicClip, 54

  “vehicular finance,” 125

  Vietnam War, 202

  VMware, 164–65, 172

  Wall Street Journal, 73

  Watching the English (K. Fox), 47

  Weed, Frank J., 197

  Wehrli, Ursus, 192, 205

  Weis, Jody:

  appointed Chicago Police superintendent, 144–45

  Chicago murder-rate and, 151–52

  at FBI, 144–45, 146–47

  Goldstein and, 152–53

  interagency data sharing promoted by, 146–47

  murder map and, 155, 157, 161, 162

  racism ascribed to, 161

  resignation of, 158

  on silos in Chicago Police, 154

  Western Electric, 57

  White, William, 119

  Wiesendanger, Christian, 104

  Wiesenthal, Rob, 75

  Williams, David, 83

  WindyGrid interactive map, 159–60

  Wolf, Robert, 90, 91

  Woodford, Michael, 116

  World Bank, 195

  World Trade Center, 9/11 attack on, see September 11, 2001, terrorist attacks

  World War II, Japan in, 55–56

  Wuffli, Peter, 96

  Xerox, 70, 80, 174

  Young, James, 207

  Zakaria, Fareed, 253

  Zaloom, Caitlin, 47

  Zorub, David, 238, 240–41

  Zuckerberg, Mark, 162, 165, 171, 173, 177, 180–81, 186–87, 188

  Facebook posts by, 185

  and founding of Facebook, 169–70

  Zurich, 86

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