Mirror, Mirror

La belle et la bête (1946) – Jean Cocteau

“You’ve never seen death? Look in the mirror every day and you will see it like bees working in a glass hive.”

— Jean Cocteau

Much of an investment banker’s¹ life, O Dearly Beloved, consists of spurts of feverish activity interspersed with agonizing stretches of boredom, an activity often characterized as hurry up and wait. We get called by potential clients to come present our credentials for their pissant deals on scandalously short notice, we mobilize a small army of overworked child laborers to produce voluminous pitch materials of ludicrous length and specificity, and we cram ourselves into economy class cattle cars to East Bumfuck, Nowhere, where we subsequently cram ourselves into plywood-paneled boardrooms decorated in early J.R. Ewing or late Bernie Madoff style—along with several other small armies of supplicants from our competition—to simper and grovel and polish the shoes of our would-be client millionaires with our Hermes ties. Then we wait anywhere from 48 hours to four weeks to hear whether we have won the assignment, at which point—assuming the answer is yes—we have to scramble back out to the weeds to kick off the real work with an organizational meeting.

The situation does not improve in the midst of a deal, either. Investment bankers are always scrambling to pull together materials for somebody or other—client, counterparty, or our own internal counterparts in capital markets or leveraged finance—which always seem to be due immediately and which are invariably returned, commented on, or revised by said somebody or other at a noticeably more leisurely pace while we sit counting ceiling tiles with our thumbs up our asses. It’s just the nature of an episodic, project-centered, client service job. Of course, we always hope to have more than one iron in the fire at a time, and we hope even more that all our active deals don’t decide to heat up at once and require our immediate, in-person attendance in Sacramento, Atlanta, Minneapolis, Dallas, and Düsseldorf this coming Saturday at 10:00 am local time. Failing that, I suppose I should be thinking clever thoughts about the next stunningly original M&A deal or financing technique I can spring upon an unsuspecting client base, or figuring out ways to wheedle my way into favor with the firms I don’t already do business with. But even after all that, and after I have rearranged my snowglobe collection for the sixth time into reverse alphabetical order based on the last letter of their purchase location, there are occasionally dead spots in my job where there is. Absolutely. Nothing. To do.

And that is when I check Twitter.

* * *Which led me today, as it so happens, to an article by one Michelle Goldberg entitled “In Defense of Jonathan Franzen,” in which Ms Goldberg defends said literary lion’s rambling and apparently much maligned attack² on social media and the internet by claiming, in a phrase, that Twitter Is Horrible. Well this, I said to myself, said I, is interesting. Because I couldn’t disagree more.

Ms Goldberg did not hedge her condemnation of the social medium in question, either:

In his essay, Franzen compares Twitter to cigarettes. This is inaccurate. Twitter is like doing cut-rate cocaine at a boring party where a lot of the guests dislike you. (As I said, I lived in San Francisco in the ’90s.) You’re not having any fun, but it’s really hard to stop.

And this:

Twitter began to seem like a machine that runs on rage. You see something that disgusts or infuriates you. Tweeting about it provides momentary relief, followed by the brief validation of the retweet. As you scan your feed, you take in other little microbursts of nastiness. So you get angry all over again and respond, perpetuating the cycle.

As I read these choice nuggets, my first thought was not that Ms Goldberg sounds like she had a pretty shitty time in San Francisco in the 1990s, which she apparently did, or that her description of Twitter and its uses sounds remotely like the one I’m familiar with, which it does not. No, my first thought was how thankful I was that I do not follow Ms Goldberg on Twitter. Or even, were I to be completely honest, have to interact with her regularly in real life at cocktail parties. Because I mean, what?

Ms Goldberg has fallen into the trap—common to many with an unreflective view on life—of damning an entire cultural phenomenon on the basis of her own, particular, idiosyncratic relationship with it. Telling me that you believe Twitter runs on rage tells me much more about you—that you are likely to be a person full of rage or very susceptible to feelings of rage—than it does anything useful or universal about Twitter. It is also empirically untrue. My Twitter stream and experience does not run on rage, and I am observant and interested enough in other peoples’ use and experience of Twitter to know that it does not run on rage for many, many others either. From what I can tell, while admittedly not being a Twitter expert, I would venture to guess there are as many uses and forms of Twitter as there are types of people, personalities, and imaginable uses: Cat Pic Twitter, Celebrity Stalking Twitter, Sports Twitter, Investing Twitter, etc., etc., ad infinitum/nauseam.

This is not to say that I and many others do not occasionally fall into the trap of becoming enraged by something we see on Twitter—or, more broadly and correctly, the Internet—and spiraling into an anger-soaked argument or tirade on some issue or other. I certainly do (and usually regret it afterward). But this does not mean such a relationship with this medium is either inevitable or necessary, as Ms Goldberg seems to imply it is for her. This is too bad, but it is easily remedied. If you are following people who enrage you regularly, stop following them. If certain people troll you or constantly try to engage you in energy-sapping arguments, block them. Nowhere is it written that you have to listen to or engage with angry people. Not even on Twitter. If Ms Goldberg is in fact trapped in Rage Twitter, perhaps it would not be presumptuous of me to suggest she try following some different people. Or try to find something in her experience and use of the medium other than rage.

* * *What is generally true—given that its members choose whom they follow and, to a certain extent, whom they allow to follow them—is that Twitter can easily become an echo chamber, reflecting and repeating back to you what you expect and want to hear. This is a well understood weakness of human nature, which has long pre-dated the internet or any of its more recent excrescences. I work hard to curate³ the list of people I follow on Twitter to exclude those who, like Ms Goldberg, seem to approach the universe in a permanent state of rage, or those who distract or annoy me with information or opinions that I have little interest in or use for. This does not mean that I want to follow only people with whom (I think) I already agree. I like having my opinions and preconceptions challenged. But when I find people who can engage in back and forth argument and edification without making bile rise in my throat, I cultivate them. Sometimes I persuade them to my point of view; sometimes they persuade me to theirs. I like to use Twitter to engage with people I would otherwise have little ability to engage. I also use Twitter to learn things, to have fun, and to occasionally make an ass of myself. From my personal perspective, this seems like a much more wholesome way to approach a trivial social media app than the Relentless Pursuit of and Flight from Towering Rage. But hey, that’s just me.

In any event, Twitter is nothing more than a silly messaging service. You are not required by God, Capitalism, or the Powers That Be to participate. Therefore, if Twitter is reflecting something unpleasant back to you (like rage), perhaps you should log off and do a little self-reflection instead. As someone I often engage with but do not follow on Twitter said,

“Twitter is a mirror disguised as a window.”

Just don’t ask me where (s)he got it from.

Happy tweeting.


¹ I speak here, as is often my wont, of my form of investment banking: capital raising and mergers and acquisitions advisory, which center around intermittent projects for various and sundry clients. I do not speak of sales and trading, or capital markets, which tends to be a more uniformly frenzied activity (at least during market hours) interspersed with agonizing stretches of wining and dining counterparties. These are crude caricatures, but I trust regular readers of this forum know to expect such and have done with it. You novices can go sob quietly in the corner (or try to figure out the details from my back catalogue).
² Yeah, I started reading it a while back. As the cool kids say: TL;DR. No link.
³ Sorry, I’ve been told I must use this word when discussing social media. Who told me, you might ask? The cool kids, of course.

© 2013 The Epicurean Dealmaker. All rights reserved.

Go Ask Alice

One pill makes you larger
And one pill makes you small
And the ones that Mother gives you
Don’t do anything at all
Go ask Alice, when she’s ten feet tall

— Jefferson Airplane, “White Rabbit”

“Life’s a box of chocolates, Forrest. You never know what you’re gonna get.”

— Forrest Gump

Well, Children, it’s silly season again. Yes, that’s right: Twitter just filed an initial registration statement (or S-1) for its long-awaited initial public offering. Confidentially.¹ And commemorated it with a tweet on its own social media platform, of course:

We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.
— Twitter (@twitter) September 12, 2013

Tools.

* * *This of course means every numbnuts and his dog are currently crawling out of the woodwork and regaling us with their carefully considered twaffle about what Twitter is doing, what it should do, and how much money we’re all going to make buying and selling Twitter’s IPO shares when and if they ever come to market. A particularly amusing sub-genre of said twaffle consists of various pundits of varying credibility and credulousness pontificating on what Twitter is actually worth, as if that is a concrete piece of information embedded in the wave function of quantum mechanics or the cosmic background radiation, rather than a market consensus which does not exist yet because, well, there is no public market for Twitter’s shares.²

But there seems to be something about IPOs that renders even the most gimlet-eyed, levelheaded market observers (like Joe Nocera, John Hempton, and... well, just those two) a little goofy and soft in the head. Perhaps they just can’t understand why such an obvious and persistent arbitrage anomaly as the standard 10 to 15% IPO discount on newly public shares—which everybody seems to know about even though they can’t explain it—persists as it does. Or why, given how many simoleons the evil Svengalis of Wall Street get paid to underwrite IPOs, there are so many offerings that end up trading substantially higher (e.g., LinkedIn) or substantially lower (e.g., Facebook) than the offer price they set once shares are released for trading.

So, out of the bottomless goodness of my heart—and a heartfelt wish to nip some of the more ludicrous twitterpating I expect from the assembled financial media and punditry in the bud—I will share here in clear and simple terms some of the explanations I have offered in the past.

* * *

First, the famous IPO discount.

I have written:

Now there is a longstanding tradition, rule of thumb, heuristic—whatever you want to call it—in IPO underwriting that issuers should sell their shares in an IPO at a discount to intrinsic or fair value. In normal, healthy markets, this discount is normally discussed in a range of 10 to 15%. ... The intended purpose of the IPO discount is twofold: 1) to help place the relatively large bolus of shares which an IPO represents with investors who have alternate potential uses for their money and 2) to bolster positive demand in the marketplace for follow-on buying. You see, an issuer of an IPO is not, unlike a company which is selling 100% of itself, trying to maximize total proceeds for existing shareholders (and fuck the newcomers). It is trying to attract a new set of shareholders who will be co-owners of the company for at least some non-trivial period of time. An IPO issuer only sells a minority of the total ownership position in the firm, and it wants to develop a positive, receptive marketplace for future stock sales in the public markets.

Now this is a critical point, so I’d like you to focus on it carefully. In virtually no instance I am aware of do the existing (pre-public) shareholders sell a majority of either i) the firm’s newly created, “primary” shares or ii) their own already existing, “secondary” shares in a IPO. For one thing the underwriters would strongly discourage it. Why? Because it looks bad. Here you have this brand new, shiny, exciting, expensive company coming to market, and the people who know it best, the insiders, want to sell out big time? Danger, Will Robinson! Institutional investors aren’t (usually) that stupid, for one thing, and for another we Wall Street underwriters typically have to deal with our clients on the buy side of the house much more frequently and for a longer time than our intermittent issuers on the sell side. We have no interest in intentionally selling Fidelity, Vanguard, or anybody else a lemon IPO, no matter how much Sleazebag LLC wants to pay us in underwriting spread. We are middlemen, remember? We have a reputation to uphold, believe it or not.

So in normal circumstances Wall Street banks encourage issuers to make primary company shares, which raise money directly for the company, the entirety or vast majority of its initial offering. That way, new investors feel they are coming into the ownership structure as relatively equal co-owners of the firm alongside existing insiders.³ If demand is strong enough, we can often slip a relatively minor slug of insiders’ secondary shares into the IPO also, usually in the form of the underwriters’ 15% overallotment option, or “green shoe.” In some instances, the company may not need any primary proceeds, and the IPO is actually done as a precursor to selling insider shareholdings over time (as, for example, in the case of a firm owned by a private equity investor). But even in such cases, investors are much happier to see the company raise primary proceeds by issuing new shares, even if the principal use of proceeds is to repay a loan taken out to fund a pre-IPO dividend to the inside shareholders. In any event, nobody—underwriters or new investors alike—likes to see senior company executives or large, controlling inside shareholders sell down much more than a modest percentage of their remaining holdings on the IPO itself. IPO investors want to see the rats invested in the ship they’re buying passage on, too.

And the reason for the discount itself is simple, as I stated before. You are selling a large slug (often hundreds of millions or billions of dollars) of a brand new, unproven investment to new investors all at once. Like most new product introductions, it should not be that surprising to see sellers offer an initial discount off the expected sale price to incentivize buyers to try their unproven product. And, as I hope I have explained to you above, the owners of newly public companies are trying to establish a receptive market for future share sales, whether primary or secondary. Surely a little dilution (eighty-five cents on the dollar for primary proceeds or a minor portion of your existing secondary shares) is a small price to pay to establish a healthy public market for your future fund raising activity, no? And the discount is not pocketed cost-free by investors, either. Underwriters make sustained efforts to allocate discounted IPO shares to investors who indicate strong demand to buy more in the aftermarket, and who promise to do so. And we do keep track, and punish backsliders and reward those true to their word in future, unrelated IPOs and security offerings. This is one of the core reasons to employ underwriters in the first place, no matter how sophisticated an issuer may be: we play a long game with the buy side, and we have the opportunity to enforce behavior helpful to our issuers by the way we play it. Intermittent issuers simply don’t have this kind of market power.⁴

* * *

Of course, all this focus on the IPO discount might give the naive observer a comforting sense of precision and predictability about the post-offering performance of the shares. But this is unwarranted. When I wrote that underwriters suggest a 10 to 15% discount to the “intrinsic or fair value” of IPO shares, the alert among you should have immediately cried, “Bullshit!”

And you would be right. We are guessing:

Before they ever approach the market, investment banks do a lot of work evaluating new issuers to come up with a price which they think the company will be worth once it is trading normally in the marketplace. They do this based not only on the company’s own historical and projected financial results but also on the trading multiples and profiles of comparable companies already public. ... Now, you can see that this exercise is an art, not a science. Investment bank IPO pricing is the epitome of (very) highly educated guessing. We often get it wrong, but, on average, IPO pricing is normally pretty accurate. After all, it’s our job, and we do it well. The picture gets complicated, however, when the company in question, like LinkedIn, does not have any comparable peers among listed public companies. Our guesses become much less educated and much more finger-in-the-air type things. There is no cure for this but to go to market and see what investors themselves tell you they are willing to pay.

You see, investment banks try to guess what the market will pay for a stock. But, to be completely honest, we have no idea.

... once we go to market, the issuer and the investment banks essentially hand the steering wheel over to investors. We pitch, and wheedle, and cajole, and praise the company to the skies, but it is investors who set the price, initially in individual conversations with the underwriters’ salespeople—where they indicate the number of shares, if any, they want to get in the offering and any price sensitivities or limits they may have—next when the banks set the final price for the offering, and finally—and, by definition, definitively—when they bid up the price in the aftermarket after the shares are released for trading.

Let me make this perfectly clear: Investment banks do not set the ultimate price for IPOs; the market does.

And sometimes, as in the case at hand, you get what we call in the trade a “hot IPO.” Investors work themselves into a buying frenzy, the offering becomes massively oversubscribed (e.g., orders for 10 or more shares for every one being offered), and the valuation gets out of control. Underwriters have a limited ability to respond to these conditions, which typically emerge during the pre-IPO marketing or “bookbuilding” process, including revising estimated pricing up, like LinkedIn’s banks did (+30%), and increasing the number of shares offered. But eventually you just have to release the issue into the marketplace and let the market decide what the company is really worth.

Investment bankers are not idiots. We have tons of experience and expertise to bring to bear on valuation, and we are in constant contact with institutional investors on the buy side to gauge market demand. We work with the issuer’s financial and operating metrics (like the ones nobody has seen for Twitter) and the market trading multiples of comparable companies, which are similar social media darlings, to derive a normalized trading value for the firm. But we cannot say whether the market, in its infinite, obscure, unexplained wisdom, will agree with us or not.

And it is the market which decides:

Re Twitter's IPO: you need to understand that a good firm, a profitable firm, and an attractive stock investment can be 3 unrelated things.
— Epicurean Dealmaker (@EpicureanDeal) September 13, 2013

Don’t like that? Have some cake.

Related reading on IPOs:
Jane, You Ignorant Slut (May 21, 2011) – The LinkedIn IPO kerfuffle, part 1
Dan, You Pompous Ass (May 22, 2011) – The LinkedIn IPO kerfuffle, part deux
Size Matters (March 21, 2012) – The JOBS Act and why we see fewer IPOs nowadays
As Long as the Right People Get Shot (May 30, 2012) – No, John Hempton (inter alia), underwriters do not have a moral or fiduciary obligation to get the sellers of an IPO the highest price


¹ Which novel-ish practice is allowed under the JOBS Act for what the SEC characterizes as “Emerging Growth Companies,” or tender little start-ups with less than $1 billion in sales. The JOBS Act, by the way, has done virtually nothing to create jobs. Sic transit the Legislative Branch.
² Yes, yes, I know there is some sleazeball outfit selling participation units backed by previously sold Twitter employee shares (all other shares being prohibited from trading in advance of the IPO). But if you think you can establish the post-IPO trading value of the company based on illiquid trading in such a derivative gray market, I encourage you to meet me next Tuesday at the Manhattan entrance to the Brooklyn Bridge. I will then and there be delighted to sell you the deed (or rather a deed to the Deed) to this magnificent cultural artifact for the bargain price of $200 million in cash. Small, unmarked bills, please.
³ Yes, I also know there is a disturbing tendency, particularly among hot technology issuers, to sell IPO investors second-rate stock which does not carry the same voting rights as insiders’ shares. This is a reprehensible tactic which guts the potentially important corporate governance function fully voting shares convey, but it is a bull market phenomenon many issuers love to take advantage of if they can. For what it is worth, most underwriters don’t like it, but we hold our noses all the way to market. Hey, nobody made you buy Google or Facebook shares, did they, bub?
⁴ This is why caviling by several of my previous interlocutors about the unseemliness of Wall Street dispensing favors to the buy side on IPOs is both shortsighted and dense. It is because we dispense favors, and try to make our buy side customers happy too, that we have the power to twist their arms when we need to, and attract their attention to those issuers which do not have every newspaper in Christendom bloviating about their offering plans. Middlemen, duh.

© 2013 The Epicurean Dealmaker. All rights reserved.

You’ll Rise as Smoke to the Sky

In memoriam, September 11, 2001:

• A Grave in the Clouds

• The Burning Ones

• A Good Death

Twelve years is a long time. And no time at all.

Salaam. Shalom. Peace be with you.


© 2013 The Epicurean Dealmaker. All rights reserved.

I, Fembot

“I think personality is much more important than intelligence, don’t you?”

— Bicentennial Man

I confess freely to you, O Dearest and Most Patient of Understanding Readers, that I have read Margo Epprecht’s Quartz piece “The real reason women are leaving Wall Street” front to back at least three times, and I still cannot discover a coherent answer therein to the article’s title. It is well enough written, with plenty of quotes from concerned characters and an adequate admixture of data and trend analysis to illustrate its principal empirical point: that notwithstanding a constant flow of women entering the industry over the past several decades and achieving some measure of success, it does not seem that many (enough?) stay. Nevertheless, I do not think it is confessing my own lack of sympathy or attention to assert that one searching for reasons for such a situation or even the author’s conclusions in this regard might remain just as nonplussed as I am.

There are allusions to Wall Street’s “hierarchical world” and “a specific culture of men” (whatever the hell that psychological gem, unelaborated and unexplained in the text, is supposed to mean). Ms Epprecht also points to the apotheosis of risk-taking over the past two decades, which, given the accompanying assertion that women shun risk more than their testosterone-addled colleagues, I suppose is intended to be dispositive. Anecdotes are offered of successful women on Wall Street who achieved high rank, power, and good industry reputation only to find, in vague ways left undescribed, that their achievement felt hollow, and the industry just didn’t offer the rewards they were looking for in exchange for their hard work and sacrifice.

Now, Mrs. Dealmaker Mère didn’t raise no fools. Having spent enough decades on this planet to be much closer than many of you to my AARP card, I am well aware that trying to determine what that mythopoetic, monolithic assemblage entitled “Women” wants is not only a mug’s game, guaranteed to relegate one to sleeping in a real or metaphorical doghouse for a week, but also empirically and epistemologically unsound. There is a huge range of capacity, preference, and personality among women—just as there is among men—and even without the personal examples known to me of women who are tougher, more aggressive, and bigger risk takers than the vast majority of men ever could be, I am certain there are more than enough women who would not only thrive but enjoy Wall Street culture without a second thought. By the same token, there must be plenty of smart, driven, and ambitious women who would look under the festering rock that is my industry and dismiss it completely with a judicious and decisive “Eww.” Frankly, the examples Ms Epprecht cites in her article support my prior point. The women she mentions are no cupcakes.

And investment banking is not a giant industry. Surely there are enough ambitious, tough-as-nails women who like money and social prestige sprinkled among the fairer sex to populate the cubicles and corner offices of Wall Street. Women who are not averse to sacrificing family, friends, and relationships—and the bulk of their normal childbearing years¹—for the brass ring at Goldman or Morgan Stanley. Or maybe not. Maybe Wall Street gets all the women who can and want to fit into this culture already. Maybe the suitable portion of the distaff distribution just isn’t that big. Maybe smart, ambitious women have more real or perceived choices than men do, and they realize that investment banking is a tough, uncompromising way to spend your youth and health in exchange for a promise you will make it to the top which is just too uncertain. There is a perspective on my industry that, far from being Elysium, it is actually a pernicious and deadly trap which draws its victims in with unsupportable visions of endless riches and power only to chain them to a gold-plated galley oar. A devotee of this perspective might therefore look upon the relative dearth of women in investment banking and declare, “You go, girl. Smart move.” Perhaps the shortage of women on Wall Street is a good thing, and a marker of their superior judgment and perception.

I will let you decide. Given that this is a discussion about women and Wall Street, I suspect you already have a firmly held opinion.

* * *

Be that as it may, however, I would like to share a couple tidbits of advice inspired by Ms Epprecht’s article for any sharp-toothed woman currently plotting her way to the top of the Wall Street heap.

First, a perceptive reader will notice that many of Ms Epprecht’s examples—including herself, naturally—are of women who made their names and careers on the research side of investment banks. This is true even of the Poster Girl for Women on Wall Street, Sallie Krawcheck, who many fail to remember made her name as a highly respected bank analyst at Sanford Bernstein before Sandy Weill poached her to run Citigroup’s Smith Barney unit after Elliot Spitzer blew up Wall Street’s long-running game of using research analysts to promote clients’ stocks and new underwriting. This is particularly ironic, because the big boom in Wall Street sell-side equity research in the 1980s and 1990s which Ms Epprecht cites as a trend supporting the influx of women was driven by banks’ relentless promotion of equities to retail and institutional investors. The Eighties and Nineties were the zenith of Equity Research on the Street: analysts were never held in higher regard nor better paid than when they were used as the sharp end of the spear for distributing stocks. Analysts like Jack Grubman and Mary Meeker were rock stars, paid just like the investment bankers they helped to win underwriting assignments, and even better known.

But this, as you know, struck many in retrospect (like Mr. Spitzer) as an unacceptable conflict of interest, and the settlement he forced on Wall Street demoted research analysts from front line revenue producers back to the second class citizens they used to be. Once investment banks could no longer use nor pay analysts for winning lucrative business, they stopped paying and promoting them like investment bankers, and their numbers, pay, and prominence dwindled. Add the rise of hedge funds (who tend to disregard sell-side research completely) in the Aughts as Wall Street’s biggest and most lucrative trading partners—displacing large institutional investors like pension funds and mutual fund complexes—and the retreat of individual investors from meaningful participation in the equity market, and equity research departments transformed from profit centers and sales arms back into cost centers. And if there is one place in a sales- and profit-driven institution like an investment bank where the Board and Executive Committee do not look for senior executives, it is in staff divisions and cost centers.² Sallie Krawcheck, ironically enough, made the leap to senior executive management just as (and largely because) the career platform she had risen to prominence on collapsed beneath her.

The rise and fall of female-friendly research departments as profit centers alone might explain the relative paucity of women among top executive ranks in investment banking. This plus the empirical tendency of women in finance to be attracted to other staff departments like legal, compliance, human resources, and information technology, like Ms Epprecht’s other example. Your chances of making it to the executive suite, except as the CFO (the ultimate staff position, held by Krawcheck and Lehman’s Erin Callan, for example) or head of one of the ”softer,” more boring divisions like retail banking or asset management, are materially hurt by building a career in one of your firm’s cost centers rather than a line position in a profit center. Is this fair? Does it make sense? I don’t know, but I guarantee you it is not limited to investment banking.

If you want to make it to the executive suite, don’t try to make yourself “useful” to your firm. Find somewhere where you can make a lot of money.

* * *

Second, the historical success of women in research in the 1980s and 1990s illustrates another point which I feel it is incumbent on me to make here. I will illustrate it with an example provided by Alison Deans (asset management):

As a manager, Deans noticed that one of her best female employees rarely sought her out. The men who reported to her often stopped in to ask about her weekend or to tell stories about business successes. The female employee didn’t take the time to nurture her relationship with her boss. “I realized that I was spending very little time with one of my most effective employees,” relates Deans. “She was so busy getting work done that the only time I saw her was when something got in her way. I started thinking like a male manager: ‘These women are always running in here with their hair on fire and the guys are all good guys.’”

This, in my experience, is all too often how women in my business mishandle the socialization aspect of the job. Ms Deans chose to make a special effort to engage her employee, and the article draws the conclusion that such organizational cultures must be changed to become more inclusive. But let me be blunt: expecting your firm to do this for you is stupid.

If you want to succeed and grow in any business, you have to manage up and sideways as well as down. Doing a great job is simply not enough. Part of succeeding in an organization involves establishing trust, and you cannot do that if you are 100% focused on just doing your job. Ms Deans’ employee was an idiot not to try to engage with her boss on a social level. Call this politics if you will, it is a critical element of career management in any organization: making friends and allies and cultivating networks of friendship, support, and acquaintance. The networking aspect is particularly critical in my business, where building and growing internal and external networks is practically the definition of the job. Research analysts, if they are any good, tend to be good at cultivating external networks among investors and clients, but the job itself—especially now given the new, hermetically isolated regulatory environment—discourages the development of internal networks. Just read Ms Epprecht’s admiring description of Maryann Keller’s workday: it is almost all externally directed.

In fact, equity research is particularly susceptible of supporting the tendency of many women who come to finance to focus on their jobs to the detriment of their careers. Schmoozing, shooting the shit, going to Chipotle with your group for lunch, discussing movies or TV shows or sporting events in the office at 3:00 am while you wait for Presentation Resources to turn that massive underwriting pitch are all indispensable parts of your job, if you want to make it anything but a short-term stint on the way to another industry. Women are not alone in making the mistake of ignoring these career management rules, but in my limited anecdotal experience a much higher percentage of female than male investment bankers tend to be highly intelligent, hyper-serious, relentlessly efficient robots. Perhaps they feel it necessary to behave this way in order to be taken seriously, I don’t know. In many respects they are better potential bankers than the middling-intelligent frat boys, lacrosse players, and oarsmen we seem to default to hiring. But those men often have far better political savvy, and they are naturals at swimming in the high pressure team environment that my business depends on. Nobody wants to work with (or for) a loner.

So keep this advice in mind, my would-be female colleagues and peers: Don’t be a fembot.

It may make you particularly effective at your job, but it also makes you that much easier to unplug.

Related reading:
Margo Epprecht, The real reason women are leaving Wall Street (Quartz, September 5, 2013)
Fingernails that Shine Like Justice (May 21, 2007)
Can’t Buy Me Love (April 29, 2012)
She’s Trading Her MG for a White Chrysler LeBaron (March 2, 2013)


¹ I cite myself:

Another answer may be that the duration, timing, and demands of an investment banking career are simply incompatible with many women’s other important interests. In particular, while an analyst typically has a two- or three-year stint directly after college, after which most are encouraged to leave and get an MBA (and some elect to make the jump into private equity or hedge funds), a woman entering investment banking as an associate after business school can anticipate at least a decade before she can begin to exercise some measure of control over her life. Associates usually start in their mid- to late twenties, spend three to five years before promotion to Vice President, and then spend four to seven years or more getting to Managing Director. All during that time, they work incredibly long hours, travel like maniacs, and basically do not have any personal life to speak of. For many women, this span from their mid-twenties to their mid-thirties coincides with what they envision as the period when they will get married and start a family. While this is true for many men, also, I think most of us can agree that committing to a career in investment banking is a much more fraught and difficult decision for a woman than it is for a man. This stage is also one when junior bankers are not making enough money to make it feasible to hire full time help to care for young children. A female Vice President is certainly physically capable of having a baby while traveling 150 days a year and working upwards of 80 hours per week, but unless her spouse or partner is rolling in dough him- or herself (or willing to stay at home), she simply will not be able to afford to outsource its care.

² The rare exceptions, like Sandy Weill’s designation of in-house lawyer Chuck Prince as his successor at Citigroup, demonstrate the wisdom of this practice. Sales-driven organizations look for leadership among their moneymakers.

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