Morning Coffee: 28-year-old banker died of cocaine and fentanyl. HSBC’s peculiar return to the office

An experienced hospital pathologist once said that although he tried to provide as much detail on the paperwork as he professionally could, in his view there were really only two things that could honestly be called the “cause of death”.  Everything came to end because of either “old age” or “bad luck”. 

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When Carter McIntosh, an Associate on the TMT team in Jefferies’ Dallas office, died last year at the age of 28, there was no shortage of speculation about the causes, most of which were thought to be related to overwork.  Jefferies' CEO Rich Handler issued a memo pointing out that “nobody knows exactly what happened and engaging in speculation with cynical assumptions serves no useful purpose”.  To an extent, this has been vindicated by the autopsy report, in which a medical examiner attributes McIntosh's previously “unexplained” death to the “combined toxic effects” of fentanyl and cocaine.

In other words, McIntosh was killed by an unusual but by no means unknown piece of bad luck. It is bad luck of the kind that affects a worryingly high number of people every year, who work in all industries and none.  A few years ago, Ross Mtangi, a well-liked and successful derivatives trader, died in a similar fashion.  It’s notable that in Mtangi’s case, two people were later prosecuted for supplying fentanyl-laced cocaine; the fact that a toxic substance was in someone’s body isn’t even evidence that they took it with intention.

So, it seems like this might have been one of those sad episodes which have no greater lesson to teach us all.  It doesn’t prove anything about working conditions on any team, at any bank or in the industry as a whole.  Lots of young people take all kinds of substances, either recreationally or to give them a professional boost; most of them are aware that they are taking a risk in doing so.  And unfortunately, the risk that they are taking is exactly that of something like this happening. 

Elsewhere, banking reorganisations can be quite chaotic affairs, and the “fog of war” is often thick. But it’s pretty special to find out that you’ve got 7,700 employees more than you anticipated.  And this seems to be the situation that HSBC is currently in. 

It’s a problem that has been several years in the making, and reflects the fact that strategy is a lot more flexible than real estate.  Under now-departed Greg Guyett, HSBC was one of the more work-from-home friendly banks on the Street, and it downsized its property footprint accordingly. But Georges Elhedery (and even more so Michael Roberts, the new head of corporate and investment banking who has replaced Guyett in London) are much more in favour of returning to the office.

Which is how we got to where we are – a situation in which there are 7,700 more bottoms than seats to put them in.  Nor can the problem necessarily be solved by getting people to squash up a bit. Trading desks are notorious for trying to get a feeling of energy by stacking the workers up like battery chickens – many banks allow 8 square metres of space per employee there, compared to a recommended 12.5 m^2.  But if you are serious about telling people they need to come into the office to socialise and have spontaneous interactions, you need to provide space for them to do so.  That might push the individual footprint up to 15 or even 20 square metres.

And there’s also the small matter that even if you can physically fit the extra desk spaces in, a building designed for about 5,000 people is unlikely to have enough toilets and canteens for double that number.  It’s particularly surprising that a problem like this crept up on HSBC during a cost-cutting program; perhaps they forgot that although middle managers, regional executives and co-heads have an outsized effect on staff costs, each of them physically only constitutes one headcount reduction.

Meanwhile…

Possibly the beginning of a new and worrying trend – PwC in America had hoped it would be able to manage its headcount plans through natural attrition.  But in the current market, people with jobs are staying put a lot more than normal, so they haven’t been able to achieve targets and now they’re moving to make 1,500 compulsory redundancies. (Business Insider)

Pass this one on to your favourite quant – a ferociously technical but extremely interesting and detailed interview with Jean-Philippe Bouchard, the greatest living expert on market structure, who puts his understanding of “price impact” to work along side a community of young researchers at Capital Fund Management. (Global Trading)

Since Eisler operates on the “pass through” pricing structure common to multistrategy firms, yesterday's headcount cuts will directly improve the returns to investors. (Bloomberg)

Although everyone is needed back in the office because human face-to-face interaction is what matters, it seems that bosses aren’t keen to follow this logic if it costs them money. Companies from Invesco to Meta are cutting back on business travel budgets. (WSJ)

For no very obvious reason, Xu Xiaoxi, the former chairman of commodity trader Xiamen ITG Holding Group, is moving to Xiamen C&D Corp (another commodity trader) while Zheng Yongda, the general manager of C&D, is going to take over at ITG.  This swap seems to have been organised by the city government of Xiamen, which owns both firms. (Bloomberg)

Bill Ackman appears late on as a minor character in a story about a really dysfunctional work environment at the New York Times, where reporting a story about Harvard University ended up with death threats being shouted across the office. (NY Post)

Skilled trades in the USA have such a dire labour shortage that they are approaching juniors in high school to give them summer training and job offers.  Although this is currently mainly a phenomenon of manual industries, there’s no reason why banking couldn’t follow suit – private equity broke the “job offer before starting work” barrier a few years ago and the Wall Street recruitment process begins with first year undergraduate internships. (WSJ)

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