Around exam time at university, the conversation always seemed to fluctuate between points of revision, questions that might be asked, and what the meaning of life actually is. “Exams aren’t a test of your real ability,” you’d tell a friend who was almost certainly doomed.
For those who graduate and go to work in investment banks, the yearly cycle of reflection about the meaning of it all moves from beginning of the summer to the beginning of the year — about the time that bonuses are paid out.
The idea of leaving money on the table is abhorrent to most bankers. What one’s bonus should be ferments in the mind and takes shape over the year. As such, there is a constantly updating accrual calculation going on. The accrual changes with each victory or failure. Each deal done and each cent out on a calculation due to applying the wrong day count convention. (Um, it’s Act/Act, not Act/360… moron.)
Provided there are more victories than failures though, it’s very difficult to leave before the positive mark-to-market on the accrued “incentive” pay is realised. As a consequence, a raft of people always leave after bonuses hit the bank accounts. They’d be counting down to daycount = zero.
So it is that alongside the accrual calculation, one’s future career path is pondered. Would another bank reward better or have a more interesting role, or daresay both? Is it time to do some travelling? Maybe, gasp, it’s time to leave the industry completely… After all, what is life meant to be about anyway? Surely it’s not all Excel, Powerpoint, drafts of docs, and Bloomberg terminals?
In order to assist in annual life debate, FT Alphaville would like to share with you some excerpts from a rather interesting blog post on The iBanker about why people tend to get into investment banking to begin with. First a handy diagramme (click to expand):
The post first points out the ugly truth (for at least some, if not most):
Most of those motivations can be grouped into a handful of categories (see diagram above for examples). They also explain why so many bankers agree to work unusually long hours, put up with abnormally high levels of stress and sacrifice personal and leisure time. Take a look at the faces of people who have been in the business for over 10 years, especially in a front office role. Some wear their sacrifice on their face.
For those of you currently in the business, next time you attend the Monday morning meeting just take a nice, long look around the room at the seniors bankers present. Most of them are probably 10 years younger than you think…than they look. I know that in my first 3 years in finance, a noticeable number of grey hairs popped up.
So why do some accept, amongst other things, the stress-induced premature ageing that comes with the territory?
High price to pay, isn’t it?
Of course, there are many industries that are very stressful and involve long hours. FT Alphaville can think of a fair number of small business owners who work 100-hour weeks for little financial reward. The difference of course being that the small business is their own… on that note, some bankers actually want to be small business owners, but they were too chicken risk averse to do it. Here’s how iBanker puts it (emphasis ours):
Tour of duty: Operations In & Out
The people in this group are those who’ve planned the mission from day 1. They have given themselves two or three years to immerse themselves in that world, work like a horse, learn as much as possible about finance, hone their presentation and Excel skills, add some eyebrow-raising bullet points in the resume / cv and get out before it’s too late. Once the tour of duty comes to an end they tend to head back to university for graduate studies, launch a start-up, spend a year backpacking around Latin America flirting with locals and smoking some good shit, set about writing an ebook they’ll make available for download on a personal blog for $39.99, move into an Ashram in Uttar Pradesh and massage each other thinking it will lead to enlightenment and practice minimalism, etc.
Sadly, only some of the people who swear an oath to the tour of duty on that very first day fulfill their mission. Everybody reading knows what I’m talking about. To those in the business: how many times have you told yourself, ‘just one more year…just one more bonus’? To those who have friends in the business: how many times have you heard them insist they’ll soon leave their job? Most end up MIA (missing in action). Once behind enemy lines and captured people slowly forget the original plan, easily overshadowed by the perks of the job. That is precisely what happened to Carlos, a friend of a friend.
He was on a two year plan. So he said. Six years later – though you’d think it more like 15 years looking at his face and what’s left of his hair – he still insists departure is imminent. A few months ago I ran into him in a lounge in New York. Rihanna’s What’s My Name started to play and he began to dance. You could call it that…if you were looking through a kaleidoscope. In some parts of the world he’d get violently beaten with a dead monkey and have his head shaved with a butter knife for looking that bad.
He used to dance with a modicum of style. But after sitting on a chair crunched over a computer 12+ hours per day modelling on Excel for six years a few screws go loose.
FT Alphaville confesses, we do know a fair number of these people. They buy us dinner. And sometimes coffee. And ice cream! We appreciate it.
Since we relate to people who are obsessed with what they do, we want to mention this breed of iBanker too:
True love
Some people know they want to work in finance from a young age. True, it’s rare but when you meet them in a bank you’ll recognize it. More often than not they’re very sharp. Everyone in the team will either love or hate them. There is no in between. At a junior level (i.e. analyst / associate) they are typically the guys who make far fewer mistakes in presentations and models, digest information and data the quickest and generally appear to feel most at home in the building. It is almost a given that they’ve breezed through their finance studies in university. Some of them probably could have joined a bank straight from school rather than attend university.
When these worshippers of finance walk across the trading floor or past the Head of M&A’s office they’ll fight hard to keep a stupid smile from manifesting itself. They cannot help it…the trading floor is like a playground for them…the Head of M&A’s office like a throne. And if receive a nod of acknowledgement from the man inside that office they may rush to the bathroom, lock themselves in a stall and cry out of joy for the job they consider a blessing. They probably hear Vivaldi’s Four Seasons (Spring!) in their heads when they walk around the bank on a busy Monday morning. Or perhaps Beethoven’s Ode to Joy – the part where the entire ensemble comes together in joyous harmony.
For these special souls, the enjoyment they derive from reading the Financial Times on a Friday morning is tantamount to a sustained mini ejaculation.
I once spotted one of them in the bathroom. He was an Equity Capital Markets (ECM) associate and we occasionally worked on deals together. He was probably headed over to chat to a Sales guy. He thought he was the only person inside the toilets. I was slightly out of his range of vision at the urinals. Anyway, he’d finished washing his hands and was now staring at himself in the mirror:
ECM associate: “Star ECM associate ladies and gentlemen. Rain maker! ”
His smile reminded me of the smile on a friend’s face the day he became a father. He went on chatting…
ECM associate: “Walking down the trading floor. Smile at the FX guys, “hey Cyrus how’s cable*”, wave to the EM traders, ‘yo Ravi how the Abu Dhabi bonds doing? Has the sheikh farted again?”
*note: cable is the exchange rate between the US Dollar and British Pound
He suddenly bit both lips and looked down. He was overwhelmed by it all. I nearly bit through my lower lip trying to hold myself from bursting with laughter.
Get the paper out of the way, will you?!
And then there are these guys:
Chance, circumstance or the alignment of the stars
Some stumble into the business by sheer chance, much like one accidentally steps in dogshit. It just happens. They’re at the right place, at the right time, and opportunity presents itself.
It just so happens that nerds (an intelligent but single-minded person obsessed with a nonsocial hobby or pursuit) are most likely to have this happen to them.
Watch where you step, Gilbert, or you may end up in a bank.
Finally, there’s the group of rather smart younglings, who perhaps weren’t challenged enough early on in school, who as they got older and got into better and better schools, realised that being around clever people can be fun.
The people
One attraction of working in an investment bank is that you’re sure to work alongside some bright minds. The reason for that is very simple –> investment banking promises enormous wealth and an exciting career –> therefore, it attracts some of the sharpest, most intelligent and driven individuals in academia and the workplace.
I can’t deny that I’ve met some impressive people in the bank. Having said that, I’ve also met a great deal of legendary imbeciles.
Nonetheless, some ibankers join and stay in the business because of the people.
In ten years, what will investment banking look like?
Being a banker used to carry a certain status; it now carries a certain derision. If the intelligent graduates give ibanking a miss, it will surely become even less appealing to future generations.
So what rooms are the smart students going to? The shape of banking to come will surely depend on their decisions.
Choose wisely, how old you look when you’re 30 could depend on it.
Related links:
Why People Become Investment Bankers – The iBanker
Dealbreaker’s Bonus Watch Series: Bank of America, Credit Suisse, Goldman Sachs, Morgan Stanley, JP Morgan
Student Life homepage > Careers & Choices > Dream Jobs > City Careers: Investment Banker – BBC
The preference for unequal pay - FT Alphaville