Bill Rhodes, Banker of the world
A rare master of both the financial and political realms reports on what a half-century of experience taught him.
By ADRIAN WOOLDRIDGE
William Rhodes is the answer to every conspiracy theorist's dreams: a long-standing member of the global financial establishment; a proud ornament of such sinister-sounding bodies as the Group of Thirty; and a man who, just a couple of years after a financial crisis that almost wrecked the global economy, merrily entitles his book "Banker to the World."
Mr. Rhodes worked for Citi, one of America's biggest banks, for more than 50 years, doing as much as anyone to extend the bank's reach in Latin America, Israel, South Africa and China. But he also doubled up as a globe-trotting troubleshooter who was called upon by administrations of both political parties to help with a succession of crises—from the Latin American "debt bomb" of the early 1980s through the Asian crisis of the late 1990s to more recent financial earthquakes.
In fact, Mr. Rhodes is much more of a rarity than the conspiracy theorists might allow. His ability to flit between the public and private sectors, grasping the inner workings of each, marked him out from the rest of his peers. Most public servants find it impossible to appreciate the extent to which business is buffeted by competitive pressure and disruptive innovation. By the same token most business people find it impossible to appreciate the extent to which public officials are constrained by interest groups and red tape. Mr. Rhodes was born amphibious.
He also seemed to inherit a clairvoyant gene. Mr. Rhodes was one of the few members of the financial establishment to sense that the world was on the brink of a calamity in 2007 (most of the prophets of doom were either academic theoreticians or maverick financiers). From as early as 2005 he publicly warned that credit was too cheap, that consumers were over-leveraged and that a big market correction was around the corner.
By William R. Rhodes
(McGraw-Hill, 249 pages, $25)
In "Banker to the World," Mr. Rhodes tries to distil the "leadership lessons" he has learned from his remarkable career on the "front lines of global finance." Act quickly and decisively—financial contagions can move so quickly that they will get the better of you if you don't get the better of them. Build consensus and share problems: Mr. Rhodes has repeatedly found that meetings work better if you let everybody at the table suggest solutions rather than having one person lay down the law. Stand up for core principles: Grand-standing politicians sometimes need to be crushed. And be on the alert for outside-the-envelope solutions: Dealing with financial crises is a process of exploration rather than applying fixed rules.
Such advice sometimes comes across as a trifle predictable (hands up, those in favor of indecisive leadership or dithering execution). But Mr. Rhodes enlivens his lessons with some excellent stories. He describes a dramatic seminar in which he tried to limit the long-winded Zimbabwe President Robert Mugabe to his allotted time. Mr. Mugabe immediately played the imperialist card, asking whether Mr. Rhodes was related to Cecil Rhodes but found no support among his fellow African leaders, perhaps because they were waiting for their turns at the podium. The author also provides an insider's account of Citicorp's 1998 merger with Travelers Group. Mr. Rhodes favored merging with Bank of America. But John Reed, Citi's boss, struck up a personal rapport with Sandy Weill, the Travelers boss, and engineered what turned out to be a disastrous merger.
"Banker to the World" would have been a better read if Mr. Rhodes had been a bit more ambitious—and perhaps if he had abandoned the shopworn "leadership lessons" formula for something more sweeping. He says far too little about how the banking world has changed over his half-century working in it. How has the cult of the behemoth bank changed the industry? Have today's huge financial rewards degraded the profession that he entered so long ago? And for all his boasts about predicting the 2007-08 financial crisis he says almost nothing about what lies ahead. The three-page postscript on the sovereign-debt crisis is as slight as it is short.
Still, Mr. Rhodes does succeed in hammering home three lessons that we need to take to heart if we are to have any chance of navigating the troubled waters that lie ahead. The first is that there is no substitute for the human touch: For all banking's bells and whistles today, it is much the same business it was in Florentine Italy. Consider one of Mr. Rhodes's greatest exploits: coordinating the rescue of Rupert Murdoch's News Corp. from bankruptcy in 1990. Mr. Rhodes was worried that the collapse of Mr. Murdoch's heavily-indebted media empire would tip the world economy back into recession. But he decided to bet on Mr. Murdoch only after the two had sat down for a three-hour heart-to-heart over dinner in New York.
The second lesson is that bankers, like all business people, need to get to know their customers, immersing themselves in the places where they do business rather than sealing themselves off in steel-and-metal towers. Mr. Rhodes proved to be so successful in dealing with Latin America's successive debt crises because he spent his early career living in the region, in the process gaining a Latina wife and dozens of well-placed friends. During one trip through Venezuela, he visited all 23 states and had breakfast, lunch or dinner with everybody who mattered. Companies that try to downgrade local managers in their pursuit of global synergies are courting disaster.
The final lesson is the most disquieting: that the conspiracy theorists have got it completely wrong. Far from making the weather, bankers to the world like Mr. Rhodes are buffeted from one unpredictable storm to another. They are forever on the verge of being ruined by events. And they rely on the seat of their pants as much as the power of their intellects. Mr. Rhodes is rightly proud of his record in defusing debt bombs and calming financial storms. Let's hope that his successors will be able to make similar boasts in the decades to come.
Mr. Wooldridge is Schumpeter columnist for the Economist. His "Masters of Management" will be published by HarperBusiness in November.
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