Saturday, August 31, 2013

To Whom It May Concern

That’s you, and you, and you. And me.
“There are two kinds of people who are staying on this beach: those who are dead and those who are going to die. Now let’s get the hell out of here.”

Col. George A. Taylor

“Sarge, do you think there’s a bullet out there with your name on it?”
“No, Private, but I worry a helluva lot about the bullets with ‘To Whom It May Concern’ written on ’em.”

— Possibly apocryphal

If any big investment bank was foolish enough to hand me control of its new recruit training program, O Dearly Beloved, I think I’d open the “Managing Your Career” portion of the schedule with a screening of the first 27 minutes of Saving Private Ryan. This is the famous extended opening scene depicting the assault on Omaha Beach on the first day of the Normandy invasion in World War II. The scene is so brutal and realistic many D-Day and Vietnam War combat veterans got up and walked out of theaters rather than finish watching it.

Now, notwithstanding the opinion some of you scamps may have of my character, this is not because I’m a sadistic control freak who enjoys pulling power plays on a bunch of dewy-eyed young lads and lasses.1 Nor is it because I want to equate the challenging but relatively cosseted work lives of a bunch of aspiring members of the socioeconomic elite with the life and death business of flinging young mens’ bodies against bullets, bombs, and shredding metal in pursuit of killing other young men.

No, it is because I think it would behoove most of these eager tyros to understand just what kind of forces are arrayed against them as they attempt to make their way in my business. There is a mythos in investment banking, consciously cultivated by investment banks and believed in no more fervently than by its recent recruits, that my business is a purely meritocratic one. It is how we attract so many of the “best and brightest” to the industry in the first place. It is the mantra we drum into their heads in every recruiting interview, performance review, and compensation discussion: Be smart, aggressive, hardworking, and a team player, and you will succeed beyond the dreams of avarice.

But stated this way, this is bullshit. These traits may arguably2 be necessary, but they sure as hell aren’t sufficient.

* * *

Luck—good, bad, indifferent—plays a huge role in anyone’s success in my business. So much of what affects what investment bankers do is beyond our ability to control: the state of the markets, the path of the economy, the success or failure of our clients’ firms compared to their competitors, changes in the regulatory environment, the hiring or firing of personal friends or enemies in decision making roles at clients and potential clients. These are just a few of the boons or impediments which can deliver success far beyond our deserts, or scuttle years worth of unpaid work and preparation in a single afternoon. And this is just business as usual. Forget huge secular tail- or headwinds like the Great Moderation and the Housing Bubble or the Panic of 2008 and the Great Regulatory Unwind we are living through today.3

In both cases, the good and the bad, most of what happens to individual investment bankers can be boiled down to being in the right (or wrong) place at the right (or wrong) time. Over a career spanning more than 20 years, I have seen good and bad bankers alike buoyed far above their proper station by sheer blind good luck or crushed and harried into early retirement by its opposite. There is no sense to it that I can see. It is true that a finely tuned political sense can blunt the bad and accentuate the good, but this skill evolves into one of those necessary traits an investment banker needs as he or she climbs the ladder. It is not sufficient either.

You can see both the naïve belief in meritocracy by one of our members and the gradual realization that perhaps all was not as advertised in paired interviews of the same banker, conducted two months apart, on Joris Luyendijk’s banking blog at The Guardian, here and here. The smug, eager triumphalism of the first interview gives way to resignation and a dawning understanding in the second that his fate was never fully in his own hands. He volunteers a quote which mirrors my metaphor above:

Looking back I may have fallen victim to the self-serving idea that we control our fate; as long as you’re good nothing bad can happen to you, and since nothing bad has happened to me, it must mean I am good and therefore safe; that sort of thing. In the same way military men tell themselves that they can’t die because they don’t make mistakes. But the best soldier can drive over a land mine.

Go back and watch the beginning of Saving Private Ryan if you’re up to it. The fates of all those soldiers maimed and killed on Omaha Beach had virtually nothing to do with their skill, their character, or their perseverance. That is what makes the scene so realistic. And so deeply disturbing.

All the skill in the world won’t save you if your number is up.

* * *

But this is not to say that a career in investment banking is a total crapshoot, or that skill and hard work are meaningless, or even that my silly business looks anything like a wartime charnel house on most days. Like soldiers, investment bankers do need to be highly trained, hard working, aggressive, and persevering. A quick and nimble intelligence helps too. Without those traits, the odds are stacked against you. Just like landing Higgins boats full of fat, out of shape, untrained soldiers on the beaches of Normandy would have resulted in even greater slaughter, you don’t want to go into battle on an IPO or an M&A trade with dim, lazy, unengaged, incurious loners who are going to lower your odds of success. You can’t guarantee deal or career success in my business without some measure of smarts, guts, and tenacity—you can’t guarantee against abject failure, either—but at least you can tilt the odds somewhat more in your favor. Every little bit counts.

I’ve always told my junior bankers they should not worry too much about working on successful deals early in their career. While working on successful deals is always more fun than working on failures, they are not responsible for producing revenues the way someone like me is. That is why most investment banks work very hard to protect their junior bankers from wholesale cuts under most circumstances.4 Besides, it is my firm belief that you learn far more about my business and the people in it—clients, counterparties, and colleagues—from observing broken deals than you do from the successful ones. You become a better banker by experiencing and learning how to deal with failure, and the best clients are always looking for the banker who knows what to do when the train jumps the rails.

So, future Jamie Dimons of the world, I’ll give you the same advice I’ve given my Analysts, Associates, and Vice Presidents for years: keep your head down, work hard, and keep your wits about you. If you do get hit, at least you can take pride you did everything in your power to survive and thrive.

And I promise I’ll stand you a drink on the other side.

If anyone’s gonna catch a bullet, it’s most likely gonna be me.

Related reading:
Joris Luyendijk, Happy banker: ‘There's something narcotic about landing a big deal’ (The Guardian, July 19, 2013)
Joris Luyendijk, Happy banker, post-redundancy: ‘I still don’t think investment banking is a terrible environment’ (The Guardian, July 19, 2013)
Overheard at 85 Broad Street (June 18, 2008)
Go Ahead, Live a Little (May 12, 2013)

Photo credit: Saving Private Ryan.
1 Although that could be a useful ancillary effect.
2 The recent articles on investment banks hiring the idiot sons and daughters of powerful clients and potential clients is only the most recent proof that such an argument has always been counterbalanced by other considerations, at least in a minority of cases.
3 Or the elevation of friends or enemies into positions of power at your own firm. That’ll help or hurt you more than anything most of the time.
4 The exceptions to this, while generally execrable, usually only happen when industry or firm conditions are particularly dire.

© 2013 The Epicurean Dealmaker. All rights reserved.