One of the most difficult things in banking or investment banking is not to follow your competitors over a cliff.
This is incredibly difficult because if one, or a few, increase their risk profile and start taking your clients, there is strong pressure within your own company – and from the market place to, increase your own risk profile to maintain your competitive position.
In boom years this process rachets up the risk profile across the entire industry on a continuing basis. As Jacoline Loewen discusses in Money Magnet, "The business goes to the private equity fund prepared to take the most risk."
It’s the same thing in investment banking. If one firm increases their risk profile on new equity issues, usually the others fall in behind.
I don’t know how many times I’ve heard we’ve got to go into this business, or we’ve got to make that loan or we’ve got to go into that deal because everyone else is in it.
My conclusion is that the most important word in the financial business, apart from please and thank you, is the ability to say no.
- No, we are not going to do that deal.
- No, we are not going into that new business.
- No, we are not going to make that stupid acquisition.
- No, we are not going to make that loan.
Many times the best deals you do are the ones you don’t do.
In the course of my career I wish I had said “no” more often.