Morning Coffee: Morgan Stanley bankers might need to carry multiple phones. HSBC boss gives a masterclass in tact

A few years ago, there was a minor fashion among some bankers for having multiple mobile phones. As well as your normal work and personal phones, you might have a “batphone” – a special number that you only gave out to top clients, so that they could reach you when the ordinary phone was set to voicemail.  Since everyone likes to feel special, the batphone quickly became available to all clients, leading some trend setters to get a “double batphone”, the equivalent of a nightclub’s secret VVIP lounge. If you then decided to extend the principle to a “family batphone”, and wanted to occasionally purchase a “burner” for disreputable or illicit conversations, you could be carrying as many as five or six Nokias and Blackberries.  It was a great period for people who repaired suit pockets.

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Now, it seems like this trend might be coming back.  The staff of Morgan Stanley in Hong Kong have been given a new phone and iPad each, to be used when they go to the mainland.

This isn’t the first such policy; Deloitte and KPMG have been telling employees to use burners and leave their main devices behind when going to China for a while now.  It’s not completely clear what the concern is; cybersecurity people tend not to talk about threats in very detailed terms.  But it seems that there is some combination of hacking, viruses and potential exposure of client data which is increasingly seen as a risk.

So, when Morgan Stanley bankers visit Chinese clients, they are going to leave their main business phones in Hong Kong.  But when they return, they are still going to need to be contactable by those clients. And they’re quite likely to need to send files back and forth, which will need to be kept separate from the main IT system.

Which means that unless there’s a very clever technological solution which allows there to be completely separate data environments on one device (which is possible, but difficult), the bankers will have to carry their China batphone around with them when they’re in Hong Kong, as well as their normal Hong Kong/international phone.

And it might not stop there. Some companies have begun to worry about phone checks at the US border, after all.  The EU has quite strict data protection laws. It’s not impossible to imagine a future where the world gets significantly fragmented, and where bankers with clients in multiple jurisdictions need to carry separate physical devices for all of them.

Which would obviously mean that having lots of phones would become a status symbol once more. Perhaps the hottest fashion trend for 2027 will be a utility belt.

Elsewhere, while Bill Winters of Standard Chartered is engaged on a somewhat predictable apology tour for his unfortunate comments about “low value human capital”, HSBC CEO Georges Elhedery is showing how it’s done.  Although his message was similar in content – “We all know generative AI will destroy certain jobs and will create new jobs”, the tone couldn’t have been more different.  Rather than stigmatising the people who are likely to be replaced, he said that if HSBC’s staff were “not fighting us, not disenfranchised, not anxious, overwhelmed, and resisting the change”, then they could become “more productive ​versions of themselves”.

It almost sounds nice, until you remember that Elhedery is at least as much of an enthusiast for new technology as Winters, and if anything has more of a reputation for cost cutting.  And people with the most valuable human capital are least likely to be fooled.

The problem in banking is always that the best people have the most options, and they are easily spooked. For every hundred people that you want to get rid of, you have to be ready for another twenty or so to leave even though you would really rather have kept them.  The art of managing cost reductions is always to minimise this extra attritional loss, because it’s the sort of thing that really damages franchises. However tactful you are, sometimes it’s best to just leave a big job killer like AI as the unmentioned elephant in the room.

Meanwhile …

European bankers with “low value human capital” might have less to worry about than colleagues elsewhere in the world.  The regulators are beginning to warn against “excessive automation”, and that processes like credit underwriting need to be checked by humans all the way through, not just at the end. (Bloomberg)

One of the dangers when you start to use influence gained by succeeding in the financial world to promote political views is that you make enemies.  A group of teaching unions, whose pensions are investors in Apollo funds, are raising governance issues with respect to Marc Rowan’s intervention in lobbying for the resignation of university presidents. (FT)

Teresa Sweeney, the COO of Blackstone’s data science team, has gone to Elliott Management, to help them build out a single data repository for the whole firm to train an AI on.  (Bloomberg)

A while ago, a few enterprising quants realised that crypto exchanges offered easy pickings for algorithmic traders.  Now it seems that the same thing is happening on Polymarket and Kalshi; if you’re not one of the sharks, you’re probably chum. (WSJ)

Apparently, one of the interventions which helped Kim Posnett and her team at Goldman to get top-left position on the SpaceX IPO (although Morgan Stanley are saying they are equal co-leads and it’s just alphabetical) was for David Solomon to revive the X account he used to use to promote DJ clips, and slide into Elon Musk’s DMs. (Bloomberg)

Harvard faculty have voted for the proposal to stop grade inflation.  In a short while, the howls of the world’s most “never got a B” people will be audible as far away as Wall Street. (WSJ)

OpenAI is now planning to IPO soon.  Despite Sam Altman’s feud with Elon Musk, the lead bankers are apparently Goldman Sachs and Morgan Stanley, same as SpaceX. (WSJ)

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