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"Superhubs" - How Financial Elites, Networks Achieve Dominance

Joe Reilly

5 September 2018

Family office consultant Joe Reilly  and regular FWR contributor interviews Sandra Navidi, author of $uperHubs:  How the Financial Elite and Their Networks Rule the World.  They talk about how global elites gather and do business, how they build trust and why most people hate to network. 

Joe Reilly:  What is a superhub?  What do they do differently from someone who is just well connected?
Sandra Navidi:  The term “superhub” is derived from network science. Superhubs are the most well-connected nodes in the center of networks. Everything in our world consists of networks, be it our brain, an ant colony, or our ecology. In my book $uperHubs, I focus on the “human superhubs” in the center of the global financial system, who pull the levers of power.

Superhubs like Jamie Dimon, the CEO of JPMorgan, George Soros, the billionaire hedge fund legend or Christine Lagarde, the managing director of the IMF, have direct access to virtually everyone, either directly or via their contacts. That also means that they have direct access to other superhubs, privileged information, opportunities and resources. Superhubs are already powerful, but by linking up with other superhubs, they increase their influence exponentially.

How do they build their networks of trust?
Superhubs have a holistic approach to networking. They generally have a positive view of humanity, are genuinely interested in and learning from other people and build relationships for the long term. Superhubs spend decades on building social capital before expecting or asking for anything in return. Social capital is a form of accumulated labor expended for the benefit of another, and ultimately defines the extent and depth of a person’s network. Our social construct is based on social capital, which acts as a glue that cements relationships and facilitates cooperation, and is, thus, one of the forces that drives economic growth. Social capital contains the expectation of reciprocity based on trust and shared values. We all feel obligated to return favors and keep track of them. The higher the status, the more value is attached to the favor. 

Moreover, superhubs use the power of association with other superhubs to expand the breadth and depth of their networks. With the help of their “convening power”, they build their own networks and platforms, be it in the areas of business, politics, philanthropy or arts. Because of their influence, reputation and status, other titans are usually eager to join their causes and contribute. Examples described in my book are Paul Tudor Jones with Robin Hood, Steve Schwarzman with the Schwarzman Scholars and George Soros, who has founded countless networks, most notably the Open Society Institute.

What does a person have to sacrifice to become a superhub?
Being a superhub requires great sacrifices and comes at a cost to one’s physical and mental health, family and quality of life. Superhubs don’t have much of a work life balance. They are on call 24/7; under a constant magnifying glass; subject to public scrutiny and under intense performance pressure.

In New York alone, three CEOs of financial institutions fell ill with cancer after the financial crisis: Lloyd Blankfein, former CEO of Goldman Sachs, Jamie Dimon, CEO of JP Morgan and Paul Calello, former CEO of Credit Suisse Investment Bank. Shortly before his death, Paul told me at the World Economic Forum in Davos that he thought the stress of the financial crisis had triggered his stomach cancer, which would later lead to his untimely death at the age of 49.

Is a superhub more interested in money or influence?
Research has shown that people tend to value social standing and respect more highly than monetary rewards, and that very much applies to superhubs. Most of the true superhubs at the very top of the pecking order – the billionaires, blue chip CEOs and top policy makers – are first and foremost motivated by recognition and power. The money that comes with their position and success, while most welcomed, is more a yardstick of distinction. 

Do you think the way elites network contributed to the ’08 crash?
Yes, I do. The crash was a result of network dynamics. All networks have a tendency to grow and, over time, become more interconnected and homogenous. Generally, systems are adaptive and self-correcting; when they become too lopsided, autocorrecting feedback mechanisms kick in and stabilize the system. Systems with unchecked reinforcing loops, ultimately destroy themselves.

Through feedback loops and power-laws, superhubs and their networks have significantly contributed to skewing the system. Potentially corrective shocks like the financial crisis have failed to rebalance it because the overly influential superhub networks have blocked fundamental changes to protect their vested interests. One manifestation is the size of “too-big-to-fail-banks”, which today are even bigger and more complex than before the crisis. If systems don’t self-correct, they will ultimately collapse.

Do you think online networking will replace most face to face networking?
No, it won’t. Every human being longs for deep and genuine connections, and research has shown that people still very much prefer personal to digital interaction. Also, the more time people spend on online networking, the more valuable personal relationships will become. Online social networks have no barrier to entry, the potential of misrepresentation, the inherent flaw of superficiality and little loyalty. In contrast, a deep and trusting relationship is a privilege that must be earned with an investment of time and effort, fostered through mutual experiences and tested through adversity.

Most people only grudgingly network.  Why do people find networking so unpleasant?
According to a recent study, professional networking can create feelings of moral impurity and physical dirtiness. People feel conflicted when they were motivated by a selfish rather than an altruistic concern. However, those already in power are more comfortable with networking, which reinforces and advances their positions, thereby fortifying existing power structures.

Many people are uncomfortable with transactional relationships. They view the opportunistic pursuit  of relationships with strings attached as disingenuous, if not unethical. Introverts, who are less prone to self-promotion, tend to see networking as shallow and burdensome.

However, networking by its very nature must be reciprocal. We are all dependent on one another, and the purpose of mutually beneficial connections is the creation of win-win situations and opportunities for all. Only balanced relationships with real give and take will be sustainable and stand the test of time.

Your next book is going to be about networking.  Do you have any advice for those networking for wealthy clients?
My next book is about positioning and networking the era of digitization, but I do have a lot of experience networking with ultra-high net worth individuals. 

Taking a page out of the superhubs’ playbook, I’d say first focus on building your reputation. In addition, work on your emotional intelligence. Wealthy clients can be idiosyncratic and must be handled with extra care. Realize they are constantly barraged with requests, so don’t come on too strong or impose. Also, manage your time, efforts and resources prudently. According to “Dunbar’s Number,” our minds only have the cognitive capacity to retain approximately 150 true relationships, hence, we have to value quality over quantity, connecting over collecting, and farming over hunting. 

Generally, it’s imperative to invest in social capital for a long time, before expecting, or worse asking for, anything in return. Often, many of the highest value relationships start out without any specific business purpose before yielding benefits years later. If you build goodwill throughout your life, you will have access to support, resources and opportunities whenever needed. 

The book has been an international best seller, but there are those critics who say that the book is too soft on the financial industry and the individual actors themselves.  What do you think of the reaction to the book?
I see their point. But I disclose in the very beginning that $uperHubs is not a “bank-bashing” book. That wasn’t the book’s purpose. I tried to provide a balanced portrayal of the financial world and to explain the network and human dynamics that drive it. But naturally, the account is filtered through my experiences. It’s a polarizing subject. There are also those, who think that the book is too tough on the superhubs. Interestingly, none of the superhubs have complained. To the contrary. Many of them have confirmed that the book is right on, have “blurbed” and endorsed it. Nobel laureate in economic sciences, Edmund Phelps even recommended it on Bloomberg’s Best Books list. One of my main points was that superhubs generally by their nature aren’t bad people, but that they make decisions that are in their self-interest, and when they all act in the same way, it inevitably has negative consequences for society as a whole. 

However, I will say that since finishing my book in 2016, I have come to view some of the superhubs a little more critically. Many of the CEO’s and other captains of industry have opportunistically bent to political pressure and ridden the system to their advantage in disregard of ethical considerations and the common good. Since networks can also be a force for good, let’s hope that in the end, the good will prevail. 

The answers to this interview are partially based on excerpts of Sandra Navidi’s book $uperHubs: How the Financial Elite and their Networks Rule Our World, January 24, 2017