offshoring the ick

guest post by Darren Sharma

Hi all - I was going to put this out on Friday but I didn’t so here it is! Darren is the CEO and founder of Frontline Analysts, and has been responsible for my last decade of adventures in the global financial services outsourcing industry. He’s working on a book proposal about the application of the concepts of “purity” and “danger” to financial markets …

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You put the milk in first, he put the milk in first
I didn’t think anyone actually put the milk in first
You put me off mate
You gave me the ick”

– Panic Shack, The Ick

All of us like to believe that professional companies reward talent without fear or favour. That is, you have the right skills, experience, and drive, you’ll rise. We understand, and are grateful for, our free market system allowing companies to pursue their destiny of maximising profits, to the benefit of all. But nothing is perfect - crooked timber and all that. So, we have initiatives to promote fairness in order to deal with the regrettable, unintended rough edges — gender balance, ethnic diversity, outreach to people from non-professional family backgrounds.

I think that all of these rough edges to our winning system have something in common which anthropologists talk about but people in professional services aren’t aware of – The Ick. Let me illustrate how this works using my own experience of the past 20 years, which is running a firm providing risk analysts to the City.

Here's the funny thing about “offshoring” of analysts – it’s more than 25 years old as a practice; there are plenty of people to choose from (India alone has 1.4bn) and it’s nearly all low-end work. By low-end, I mean that the jobs are ones which good US/EU/UK university graduates wouldn’t take as they’re lower value-added. Indeed, graduates of the top 100 MBA schools in India generally avoid the offshoring industry. When they do join, their typical tenure in a job is 2.2 years[1]. Moreover, mass-market providers declare that they are staffed by elite experts while many G7 banks will talk about offshore centres of excellence, but in reality, meh…[2] This industry configuration is being rapidly displaced by AI, but this is where we stand.

How did it come to this? One perfectly valid reason is that distance is a pain to manage. But banks and funds with NY headquarters seem to manage London and Tokyo offices, so it seems that some mitigation of distance is possible. Also, we can look to the darkest days of Covid, we were all working remotely. Most workers do more than a day per week at home yet capitalism seems not to have collapsed. Dan often makes the point (at pitch meetings – thanks mate…) that an hour every day chatting to a grad next to you can, to some people, subjectively feel easier than half an hour once a week on a Teams call to more experienced colleagues in India.

The second often-cited reason for most offshore work being lower-end is that offshore colleagues present problematic ‘cultural differences.’ These are indeed the bringers of friction (as well as intellectual energy, but let’s leave that side of the balance sheet alone for now). The question arises of what this means.

It doesn’t mean being from somewhere else as banks are multinational recruiters – the joy of working in a bank is that you are always working with people from elsewhere. For offshoring, which is predominantly Indian, Indianness itself is not a problem – ex-pat Indians are an important part of the teams of banks in London & NY, right up to the floor that gets the white table-cloth canteen perk.

Here is the most telling interaction in this curious situation of underuse of talent – ex-pat Indian and diaspora Indian decision makers in the G7 are neither more nor less likely to outsource high-end or intellectually demanding work to offshore providers than any other decision makers. This is the smoking gun which tells us that there is more going on here than cultural difference.

Something’s missing from the model, and it’s something to with culture, not with ability or productivity. In physics, dark matter is the invisible force that explains the otherwise inexplicable behaviour of the cosmos. In professional services, the force is “The Ick”.

The Ick is a discomfort, of varying degrees of force. The Ick is what anthropologists call a pollution response[3]. It treats outsiders not as competitors, but as sources of discomfort. Not because they’ve done anything wrong, but because their presence creates discomfort.

Why do we need to resort to an icky feeling, rather than anything explicitly stated, to explain why mass market offshoring is lower-end?

The Ick is not a weapon, as no individual causes it. The Ick is not a strategy devised by anyone. It is a spontaneous feature of many social systems which allows that system to persist. That’s because Ick reactions to pollution allows societies to live with dissonance. For professional services, the dissonance comes from the co-existence of two situations;

1. Most people, including most professionals, value and want meritocracy for all.

2. Professionals, including finance professionals, enjoy high wages and high prestige.

The first is inconsistent with second. Look at the wages of new lawyers in the City for example [4]. What would happen to wages and status if the magic circle law forms recruited more women or Afro-Caribbean people or people from a non-professional family background? What would happen if they ‘offshored’ this year’s graduate recruitment round all the way to a Manchester office, all of two hours away by train – unthinkable because it would be super-weird. You see, you can’t have system stability and also let in any old highly talented person. Explicitly excluding say, women, from finance would not only be illegal, but would horrify most men in law or finance. So the system stays stable only through feelings of discomfort and lack of fit – the Ick.

Dan’s book The Unaccountability Machine made an assertion which is crucial to understanding the Ick. The purpose of a system is what it does – POSIWID. A professional system/society without the Ick would not continue to exist in its current form of high wages and status. The culture of the Ick is not invented by conspiratorial bankers and lawyers – that would appal everyone I’ve worked with in the City. It’s part of the environment that we grow into.

A confession to illustrate how ingrained the Ick can be - I get quietly annoyed when young professionals come to meetings in suits and brown shoes – gives me the Ick. Johnny Foreigner and estate agents can do what they like, but a gentleman in London should dress properly. Does it make them bad, say, credit analysts? No, but I don’t like it.

Because it lives in emotion and culture—not in law or formal policy—it evades most of our change strategies. How to manage that is a story for another time, but, spoiler alert, the first step is to recognise that what we’re dealing with is the Ick.

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[1] LinkedIn company profiles have this data incontrovertibly.

[2] Before anyone gets upset with me, yes, there are exceptions amongst client bank departments and even some providers (us!).

[3] I hate to merely footnote the person who worked this out. It was Mary Douglas in Purity & Danger, 1966.

[4] https://www.ft.com/content/281e00d0-c716-4120-b6a6-9105d7bbc53f