Posts Tagged ‘Book Reviews’

Book Review | Taking the Floor: Models, Morals and Management in a Wall Street Trading Room

In Taking the Floor: Models, Morals and Management in a Wall Street Trading RoomDaniel Beunza analyses how the use of economic models and the moral disengagement this has created have significantly transformed the global financial industry through an ethnographic study conducted at an equity derivatives trading room of an international bank located in New York City. This is a significant contribution to social studies of finance and economic sociology, writes Manuel A. Santana-Turégano.

Taking the Floor: Models, Morals and Management in a Wall Street Trading Room. Daniel Beunza. Princeton University Press. 2019.

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In Taking the Floor: Models, Morals and Management in a Wall Street Trading Room, Daniel Beunza analyses how the use of economic models and the moral disengagement this has created have significantly transformed the global financial industry. The book is based on ethnographic research spanning two decades, and with plenty of valuable insights, it is recommended reading for anybody interested in how the use of economic models shapes contemporary society.

The core idea of Taking the Floor – namely, that the use of economic models and electronic devices in the financial industry leads to the suspension of moral judgement and has profoundly altered the way in which the industry is organised – helps us to better understand the global financial crisis of 2007-2008. The book is based on research that Beunza conducted between 1999 and 2003 at the equity derivatives trading room of an international bank located in Lower Manhattan in New York City (designated by the pseudonym ‘International Securities’), combining participant observation and oral history interviews. From 2003 until 2015, more visits and interviews were conducted; as a result, the research design conforms in part to Michael Burawoy’s concept of a ‘punctuated revisit’, since Beunza returned to the original site over a time period of more than ten years.

The main questions that the book attempts to answer can be boiled down to two. First, how does the use of economic models and information technology affect the organisation of the financial industry? And second, what can we learn from this about the causes of the global financial crisis? The core idea of the book is that the way in which the use of economic models and information technology has been implemented has created a model-based moral disengagement. Beunza analyses how the environment – what he calls ‘organizational strategies’ – shape moral judgement and the way decisions are made, from how desks are arranged to how managers set objectives. As he sees it, the organisational strategies adopted by the financial industry have created a moral disengagement that disabled the mechanisms of self-condemnation associated with immoral conduct and therefore encouraged the unrestrained pursuit of self-interest.

Image Credit: Image of the New York Stock Exchange, taken as part of a visit by Melania Trump, 23 September 2019. Photograph by Andrea Hanks (The White House Public Domain)

The book, comprising thirteen chapters, is organised into two sections. The first half is dedicated to the use of knowledge on the trading floor, focusing on models, traders and the connection between them. This section introduces the original fieldwork and explains how modelling was organised at International Securities. After the Introduction, Chapters Two to Five analyse traders, whilst Chapter Six analyses the managers who supervised them. The participants of the study were the manager of the floor, Bob, a statistical arbitrage trader; sale traders including Scott, Joe and Jim; and Max, a senior trader at the merger arbitrage desk (all pseudonyms). Chapter Seven then considers the performative effect of economic models on the financial properties of securities.

The second half of the book focuses on the moral consequences of economic models. Chapter Eight analyses how norms were enforced in the trading room, whilst Chapter Nine introduces the concept of resonance. Chapters Ten and Eleven develop the idea that the global financial crisis was a consequence of the moral side effects of the organisational changes that had been taking place in Wall Street since the 1980s, and Chapter Twelve considers the impact of the global financial crisis for Wall Street employees. Chapter Thirteen concludes by setting a framework for how future crisis could be avoided, proposing the concept of ‘proximate control’: that is, the supervision of quantitative traders not by models but by a combination of social and technological devices, such as the use of personal evaluation of quantitative results or the qualitative judgement of financial calculations. This concept is opposed to that of ‘government at a distance’, as proposed by governmentality scholars such as Peter Miller and Nikolas Rose.

Following the concepts developed in the book, performative spirals, borrowing ideas from the social studies of science tradition, permits to understand the recent evolution of the financial industry, and supersedes economist Robert C. Merton’s concept of the ‘financial innovation spiral’. Beunza’s concept represents the relationship between economic models and the properties of financial securities as a spiral. At a certain point in time, new financial devices, tools or economic models lead to changes in investment practices. In turn, these new practices often create changes in the properties of the securities. Later on, these new properties are profitably exploited by new tools, financial devices or practices. In sum, there is a reciprocal influence between economic models and financial properties, and since this can be performative, it is called a performative spiral.

The concept of resonance is another key contribution of the book. According to Beunza and David Stark, resonance can be defined as ‘the amplification of error arising from a combination of cognitive similarity and confrontation with market rivals via economic models’ (183). Borrowing the idea from physics, and giving the historical example of the collapse of a suspension bridge, the concept of resonance helps us understand how a collection of individually minute errors can add up and eventually collapse large infrastructures, such as the architecture of the global financial system. In the aftermath of the global financial crisis, it was inevitable that both finance experts and laypersons would ponder the question how could this happen? According to common perceptions, the subprime crisis went as follows: worldwide, millions of banks gave mortgages to millions of borrowers, whose probability of default, for every individual loan, was small enough as to grant the loan. However, errors were made that were important enough as to cause a global collapse of the financial system.

The concept of resonance helps us to understand how all this happened. Under the assumptions of traditional approaches to finance, minute errors in the modelling of economic reality – for example, whether a borrower will pay back a loan or not – should cancel each other: some banks would overestimate some risks, others would underestimate them. But since at every bank those who built up the models had cognitive similarity and compared themselves to market rivals via economic instruments, they did not notice that they were all making the same mistake until it was too late. Beunza’s idea of resonance therefore gives a better explanation of the financial crisis than many previous theories. It was not only that models were based upon the assumption that past events permit us to forecast the future, as per Nassim Nicholas Taleb’s ideas. It was not only the organisational silos in the credit ranking agencies, as in Donald MacKenzie and Taylor Spear’s explanation; nor solely the unethical activity on Wall Street, as in Neil Fliegstein and Alexander F. Roerhkasse. It was resonance that better explains the causes of the crisis.

Taking the Floor is a significant contribution to social studies of finance and economic sociology more broadly. It will certainly be worthwhile reading not only for specialists, but also a much broader audience, since the way abstract models shape reality is becoming one of the more salient issues in contemporary societies within and beyond the realm of finance.

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Note: This review was first published on the LSE Review of Books. 

About the Reviewer

Manuel A. Santana-Turégano is Lecturer in Sociology at La Laguna’s University (Tenerife, Canary Islands) Department of Sociology and Anthropology.  Manuel’s research and teaching covers the areas of Economic Sociology and Tourism, and is currently focused on how financialisation is changing tourism. Most of his published research can be found online, open access.

 

Book Review | After Extinction

What comes after extinction? In After Extinction, editor Richard Grusin brings together contributors to address this question by considering extinction within cultural, artistic, media and biological debates. This is a timely contribution to contemporary discussions regarding the future of our planet, writes Anda Pleniceanu, that will leave readers with a renewed perspective on the relevance of the humanities to understanding our present environmental and humanitarian predicament. 

After Extinction. Richard Grusin (ed.). University of Minnesota Press. 2018.

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After Extinction is a timely contribution to contemporary discussions regarding the future of our planet. The volume, edited by Richard Grusin, comprises nine papers from a conference inspired by the question of ‘what comes after extinction?’ While many of the contributions are informed by ecological discussions, in the book the notion of extinction is treated more broadly and includes the extinction of languages, cultures and many non-material aspects of life on Earth.

Due to its connections to fields outside of ecology, the notion of extinction becomes strongly associated with that of the archive, making possible a more substantive inquiry that leaves the reader with a sense of scope that the repeated slogans of disaster, prevalent in popular culture and media, do not provide. In fact, I would argue that, besides the obvious topic of extinction, the question that runs through the book is this: what can the different fields of the humanities contribute to the present environmental and humanitarian context? Or, to put it in utilitarian terms, what do the humanities have to offer to a world in crisis?

As this book is based on an interdisciplinary conference, the above question comes with its very own supplement, an unspoken deliberation on what the humanities actually are in the twenty-first century. Each chapter, I would argue, offers a distinct approach to answering this inquiry, and, in the end, the reader is left with a renewed perspective of the humanities, of their continued relevance and of the power of critical, interdisciplinary and historical research, but also of some of the limitations that inevitably appear when the boundaries of knowledge are pushed.

Although the contents of the book are not partitioned into sections, the nine chapters could be split into two groups, with the first five offering a more speculative examination of the different aspects related to extinction and the last four providing a more dissecting approach, with each chapter based on a specific and current area in scholarship. The two sections complement each other, and overall the book is useful for both those who are only starting to get to know the field and those who are already familiar with it and looking to engage in more depth.

Image Credit: (Jez Arnold CC BY SA 2.0)

The first article, by William E. Connolly, criticises the gradualist, linear and human-exceptionalist aspects of sociocentrism. Instead, he proposes a nonlinear, contingency-based model of entangled humanism that opposes both aggressive nihilism – the conservative and belligerent reaction to any evidence that threatens faith and familiarity, resulting in carrying on with business as usual – and passive nihilism – incapable of taking any counter-action whatsoever due to an excess of doubt, which also results in business as usual. Connolly is insightful in articulating the problems that appear when evolution is projected along a continuous and gradual line of development, which leads to species extinction events being conceptualised in terms of the anthropic principle. If humans are taken to be the crowning glory of the evolutionary line, then extinction events are merely meant to reinforce the supremacy of the survivor. To counter this view, Connolly looks at two extinction events – one 250 million years ago that wiped out the majority of life on Earth, and the more recent extinction of the Neanderthals – to put into perspective our current era of climate change.

Combining elements of object-oriented ontology and posthumanism, with a pinch of Deleuzian spiritualist enchantment, Connolly calls for human agents to recognise an entangled and fragile world by expanding our capabilities to experience said world. This is to be achieved by, for example, ‘becoming attuned’ to the vultures in India, whose population is endangered:

Their extinction will shut down a symbiotic relation whereby humans provide cattle for them [the vultures] to scavenge, the scavenging protects the populace against disease, the cleaned bones provide the poor with items to collect and sell as fertilizer, and the feral dog and rat populations are kept within manageable limits (18).

It would be an understatement to call this argument problematic, as it fails to consider that when issues of class, race and gender are taken into account, the rhizomatic assemblage becomes knotted rather than smoothly entangled.

Jussi Parikka asks what kinds of time imaginaries sustain our understanding of the extinction horizon, or how we conceive the future in temporal and political terms. The chapter draws on the Finnish artist and philosopher Erkki Kurenniemi’s vision of a post-planetary future as a grand archival project where the Earth-dwellers become fixed curiosities as well as on the book The Collapse of Western Civilization by Naomi Oreskes and Erik Conway. Parikka relies on the device of the chronoscape, whereby ‘the concept of the posthistorical refracts into multiple historical and temporal ecologies that are not merely linear directions but atmospheres of time’ (39). It is unclear, however, what this device is supposed to achieve in more concrete terms other than, echoing Connolly’s article, a supposedly rejuvenated imagination via a totalising ‘entanglement’ of everything.

In the third chapter, Joanna Zylinska compellingly draws the event of extinction closer to the present. She juxtaposes photography and fossilisation as two practices of impressing softer matter onto a harder surface and describes photography ‘as containing an actual material record of life rather than just its memory trace’ (52). The author then considers what happens to human thought and art if we take extinction not only as real and present, but also, in light of the material traces it produces, as generative.

Zylinska cautions against ‘a view that ends up smuggling back the (usually white, straight, male) human into the debate under the umbrella of its supposed nonhuman perspective’ (53), which, in my opinion, comes at the right time in the book and offers a balancing perspective after the first two chapters. Zylinska’s exploration of photography as nonhuman technicity, while poetic and speculative, is well-grounded in theory and in examples taken from the works of four contemporary photographers who also explore the different aspects of extinction.

Joseph Masco’s contribution to the volume provides a critique of the currently popular practice of conceptualising the planetary future using the geological term ‘Anthropocene’. He remarks that this concept has had a great impact on the humanities over the past few years, where it has been used ‘both as an era and a qualifier – linking water, air, land, society, culture, the humanities, Schelling, feminisms, megafauna, and bats as Anthropocenic subjects’ (74). While recognising the concept’s significance, Masco raises multiple concerns, noting that the geological term rings somewhat uneasily when used in the humanities. One of his most discerning points is that, as we lack the understanding and the narrative to conceptualise the current environmental crisis, the tropes used for dealing with climate change are often drawn from the era of the Cold War and its nuclear imagery, which is a complete misrepresentation of the slow yet cumulative development of industrialism and its consequences.

Cary Wolfe’s text is an inspiring deconstructive exploration of extinction based on a series of photographs of fourteen dead California condors who perished due to lead poisoning. The photographs were part of Bryndís Snæbjörnsdóttir and Mark Wilson’s exhibition Trout Fishing in America and Other Stories (2014–15). I was very sceptical when, at the beginning of the chapter, Wolfe laid out the main themes in a personal (and characteristic) fashion: ‘I felt a powerful resonance between Derrida’s explorations of death, mourning, responsibility, and the concept of ‘‘world’’ […] and the condor photographs’ (109). However, this is one of the most moving chapters in the book as Wolfe, by the magic that is Derridean spectrality, turns the perspective of the reader from a personal engagement to an expanded sense of the world and the archive as a scene of responsibility. Reading this chapter, one is left thinking that supposedly ‘dated’ fields in the humanities, such as deconstruction, have at least as much to offer as the most cutting-edge approaches.

Opening the book’s second part, which focuses more directly on the political, Nicholas Mirzoeff’s contribution identifies the Anthropocene as a term rooted in the history of slavery and colonialism. He starts by asking: ‘What does it mean to say #BlackLivesMatter in the context of the Anthropocene?’ (123) Echoing Zylinska’s criticism of the so-called neutrality of the nonhuman and universalist turn in the humanities, Mirzoeff cautions against turning away from issues of race and colonialism. His argument is that the scientific notions of the geological era, and the Anthropocene in particular, are largely determined by another ‘natural’ concept – that of the distinction of races among humans and the colonial history that is often erased in discussions of ‘humanity’, ‘the world’ and ‘the planet’. Mirzoeff’s argument is convincing and troubling: it shows the importance of proceeding with a lot more caution when naturalising discourses of extinction and negating, or at least sidestepping, their bloody histories.

Claire Colebrook starts her chapter by noting that the idea of extinction implies the questions of ‘what life is worth living?’ and ‘what is worth saving?’ She connects the notion of extinction with that of disability, arguing that humans’ intrinsic dependence not only determines existence but informs and orients extinction as well. Criticising the utilitarian aspect of liberal politics and tracing its origins to the Greek idea of the rational and capable subject, Colebrook argues that the very question of whether a life is worth living is ‘offensive’ in the military sense of the term, as an attack aimed to exclude those who do not fit a narrow idea of the ‘normal’ (153). Extinction and its salvation, by having to measure the importance of those who die and live, itself becomes associated with genocide. Colebrook’s chapter is lucid, compelling and clearly argued. I would urge everyone to read it, whether they’re familiar with the philosophical language deployed by Colebrook or not.

Ashley Dawson’s contribution shows a few ways in which mainstream environmentalism uses the extinction crisis towards neoliberal ends. Dawson paints a grim picture, whereby extinction narratives are co-opted by biocapitalism – further strengthened by Silicon Valley’s ‘California Ideology’ (185) that celebrates the emancipatory potential of Big Data and Big Tech – in its acceleration towards infinite growth and expansion. While the intensifying exploitation of natural resources is ongoing, Indigenous populations (Dawson specifically discusses the peoples of the Amazonian Basin) and, generally, the populations of the Global South suffer the brunt of the damage wrought by biocapitalism. As a solution, Dawson argues for an anti-capitalist movement against extinction, one that ‘must be framed in terms of a refusal to turn land, people, flora, and fauna into commodities’ (195). While offering a sobering analysis of green capitalism, the chapter falls, towards the end, into generalised talk of anti-capitalist resistance, reminiscent of Michael Hardt and Antonio Negri–style rhetoric. As previous contributions in the book point out, totalising concepts are the easiest to co-opt, often to the most violent ends.

The closing chapter by Daryl Baldwin, Margaret Noodin and Bernard C. Perley analyses the problematic aspects of extinction discourse from the viewpoint of endangered language communities and the colonial histories that brought them to the brink of extinction. The authors show that extinction, as related to these communities and their languages, has behind it a long and violent history of displacement and invasion, and that languages suffer enormous harm when their natural context is destroyed. They argue that, in order to address the extinction crisis of Indigenous languages, documentation is not enough; rather, linguistic and cultural revitalisation must take place. Instead of documenting frozen language fragments, the authors propose the concept of emergent vitality, which focuses on diversifying and expanding language and culture by reintegration and continuity. This concept brings the focus back to the community of speakers and their wellbeing rather than isolating morsels of language after its extinction.

In the end, After Extinction offers not only an expanded understanding of the concept of extinction, but also provides an excellent overview of the state of the humanities today. While cutting-edge approaches to scholarship that intend to reinvent the entire university along with the whole world (of which speculative realism-inspired research is only one example) have their place to stimulate and renew theory (and, perhaps, the imagination), we should not be so quick to dismiss the methods and scholars of the past. ‘Dated’ approaches, from ‘old-school’ critical debunking of popular discourse to hermeneutics and deconstruction, still have relevance today, as clearly shown by the chapters in this collection. By combining the old and the new, the speculative and the historical, the humanities have the capacity to provide insights that are not available via quantified, empirical and naturalised explanations. In the face of possible extinction, a variety of intellectual weapons to oppose the forces of reckless capitalism and reactionary politics can only be a welcome development.

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Note: This review was first published on LSE Review of Books. 

About the Reviewer

Anda Pleniceanu is a PhD candidate at the Centre for the Study of Theory and Criticism in Ontario, Canada. Her dissertation project attempts to rethink subjectivity via the concept of radical negativity.

 

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