By James Kwak
Before 2006, people used to talk about the Greenspan put: the idea that, should the going get rough in the markets, Chairman Al would bail everybody out. But there’s something even better than having the Federal Reserve watching your back. It’s the résumé put.
The Wall Street Journal reported that Vikram Pandit, former CEO of Citigroup, is starting a new firm called TGG which will . . . well, it’s not entirely clear. In one email, they claim “a novel approach to address the challenges that large complex organizations face in compliance, fraud, corruption, and culture and reputation.” (That’s the standard marketing tactic of describing what benefits you will provide without mentioning what you actually do.) Now, Pandit certainly has experience in a large, complex organization with compliance, fraud, corruption, culture, and reputation problems. Citigroup checks pretty much every box. But is it experience you would want to pay for?
Pandit hardly covered himself in glory as CEO of Citigroup. Basically, he took over a bank that was already heading into an iceberg, rammed it head-on into the iceberg, and then called in the Coast Guard to rescue him. He doesn’t deserve all the blame for the fact that Citi was the shakiest of the big four commercial banks in 2008, but he certainly doesn’t deserve the credit for keeping it afloat: that goes to one Timothy Geithner.
Pandit got into Citi when the bank bought the hedge fund he co-founded, Old Lane, for $800 million. Old Lane earned 3 percent in 2007, lost money in 2008, and was shut down that very summer. Hardly a performance that would merit a CEO position, but there it is. Pandit did have a successful career at Morgan Stanley before starting Old Lane, but that just seems like more evidence for the theory that working at Morgan Stanley (or Goldman Sachs) makes you seem smarter than you actually are.
So why would anyone hire Pandit to do anything—let alone “use insights into human behavior, economics and so-called big data . . . to help large, complex companies analyze employee behavior, management decision-making, business models and strategy”? (Presumably, having made something like $160 million on the sale of Old Lane, he isn’t going to work for peanuts.) To be clear, no one has hired him yet. But in general, if you become CEO of a big company, you’re pretty much guaranteed lucrative employment for as long as you want it, regardless of your performance. This is the résumé put: you have downside protection because you can always go and get another job.
The other big question is why Steven Levitt and Daniel Kahneman would want to have anything to do with Pandit. It probably isn’t the money—Levitt must be worth a gazillion dollars with the Freakonomics franchise, and I doubt Kahneman is hurting. And if they really want to bring behavioral economics and instrumental variables to big corporations, they don’t need a mediocre washout as CEO of America’s laughingstock bank.
At the end of the day, it all probably comes down to our culture’s fascination with money. Make enough of it, and people will always assume you must have deserved it one way or another. And you will always get another shot (see Spears, Britney).