Liquidated: An Ethnography of Wall Street
By Karen Ho
Duke Press £16.99, 392 pages

When I first started covering finance for the FT, I used to get embarrassed when asked about my academic past. Before I became a journalist, I did a PhD in social anthropology, a branch of social science that endeavours to understand the cultural dynamics of societies based on grass-roots analysis.

Back in the pre-credit crisis days, bankers tended to consider degrees in anthropology to be rather “hippy”. As one banker told me; the only qualifications that really commanded status were those linked to economics, maths, physics and other “hard” sciences – or, at a pinch, an MBA.

Not anymore. As the financial disasters of the past two years have unfolded, it has become painfully clear that bankers placed far too much faith on their quasi-scientific models. It has also been evident that a grasp of cultural dynamics is critical in understanding how modern finance works – or doesn’t. Consequently, the idea of using the social sciences to understand money is becoming fashionable in some quarters.

Given all that, Karen Ho has picked an excellent time to publish her fascinating new study – or “ethnography” – of Wall Street banks. Ho is currently a professor of social anthropology at the University of Minnesota. A decade ago, however, she was an employee of Bankers Trust, formerly a powerful Wall Street banking giant, and carried out research among a number of banks.

As field-sites go, Wall Street is not classic anthropological territory: ethnographers typically work in remote, third-world societies. Ho admits that studying banking tribes was hard: “The very notion of pitching a tent at the Rockefellers’ yard, in the lobby of JP Morgan or on the floor of the New York Stock Exchange is not only implausible but also might be limiting and ill-suited to a study of the ‘power elite’,” she writes.

Ho nevertheless embarked on her study in classic anthropological manner: by blending into the background, listening intently, in a non-judgmental way – and then trying to join up the dots to get a “holistic” picture of how the culture works. That patient ethnographic analysis has produced a fascinating portrait that will be refreshingly novel to most bankers.

Ho’s central argument borrows heavily from the work of Pierre Bourdieu, a sociologist/anthropologist who was part of a school of Gallic thought that emerged in Paris in the 1970s. Bourdieu conducted his fieldwork in classic anthropological style in a north African tribal group, where he developed the concept of the “habitus” – the idea that a society develops a cognitive map to order its world that is usually based on its physical experience, albeit in ways the participants are only dimly aware of.

In the case of Wall Street, Ho argues that the “habitus” is shaped by bankers’ educational experience and employment history. Modern financiers live in a world where jobs are insecure, and where bankers are paid by trading things or cutting deals. They tend to project their experience on to the economy by aspiring to make everything “liquid”, or tradable, including jobs and people. These projections are typically couched in the rhetoric of “shareholder values” or abstract concepts of “free-market capitalism” – presented as absolute “truths”.

Ho argues, however, that many of these “truths” are riddled with contradictions that bankers ignore because they are seduced by their own rhetoric. “Massive corporate restructurings are not caused so much by abstract financial models as by the local, cultural habitus of investment bankers, the mission-driven narratives of shareholder value and the institutional culture of Wall Street,” she writes.

Mainstream readers may find this language off-puttingly academic; it is written primarily for a university crowd. Yet Ho peppers her account with revealing eyewitness stories. She describes how investment banks operate an unspoken caste system that divides the elite “front office”, from the lowlier “middle” and “back” offices. She analyses the quasi “kinship” networks based on university alumni . Most fascinating of all is her account of how Wall Street becomes deluded by its own rhetoric about “market efficiency”.

Some bankers may still dub this “hippy”. But if only a few more had been willing to analyse their sector’s cultural foibles, the financial world might not be quite in the mess it is today. I, for one, would vote that Ho’s account becomes mandatory reading on any MBA (or investment banking course); if nothing else, it might be more entertaining than the other texts that bankers swallow so uncritically.

Gillian Tett is the FT’s capital markets editor and author of ‘Fool’s Gold’ (Little, Brown)