Monday, October 12, 2009

Wherein I Go Mosquito Hunting with a Howitzer

I guess James Kwak ate a bad oyster or two at the Yale Law School cafeteria this evening. He rants:
Further Proof That Nothing Has Changed

Overheard on the streets of New Haven, just ten minutes ago:

Two young women, almost certainly Yale undergraduates, are walking down York Street, discussing their efforts to get jobs as bankers.

Student #1: “Why does everyone want to go into banking?” [Note: When an Ivy League undergrad says "banking," he or she invariably means "investment banking," meaning underwriting or trading.]

Student #2: “We should advertise – ‘Being a lawyer is so much better than banking.’”

Student #1 (after a pause): “Seriously, everyone wants to go into banking.”

End scene.

Also further proof that no one does campus recruiting better than a Wall Street investment bank. Or do undergrads these days want to work in industries that are best known for torpedoing the entire economy through a combination of greed and incompetence (and abusing their customers along the way)?

At least, after the last twelve months, no one can claim that he didn’t know what kind of business he was getting into.

By James Kwak

I mean, seriously, Jim, what the fuck?

* * *

Let me respond to Mr. Kwak's apparently throwaway anecdote with a few of what I hope will be corrective observations.

First, unlike Mr. Kwak, I do not pretend to know what Yale undergrads mean by "banking" or "investment banking." But as a practitioner with almost twenty years in the business, I can most reliably assure him there is more to investment banking than securities underwriting and trading. Depending on which kind of investment bank we are talking about, its business can comfortably encompass not only these, but also mergers and acquisition advisory, restructuring advisory, corporate lending, leveraged finance, derivatives, structured finance, proprietary trading, and even private equity investment. These are all very different businesses, with different career paths, different duties and responsibilities, and different cognitive and personality requirements for individuals who might choose to enter them.

An individual who might make an excellent corporate financier is almost certainly incapable of being an outstanding trader, and vice versa. I should bloody well hope that any Wall Street recruiter worth his or her salt has identified the different career paths available at his or her firm for the benefit of the wide-eyed young undergraduates and clarified their different requirements. If not, they should damn well be fired.

Perhaps it would bolster Mr. Kwak's understanding if I were to draw an analogy with his current career path. Saying that investment banking consists solely of underwriting and trading is almost exactly analogous to saying the practice of law consists of no more than intellectual property management and environmental litigation. (Which, for those of you not well versed in the intricacies of the legal industry, is fucking preposterous.)

I don't know how current Ivy Leaguers think, Mr. Kwak (and I suspect you don't either), but if you're going to presume to talk about my industry in a public forum, I suggest you get it right.

* * *

Second, Wall Street investment banks do do campus recruiting better than anyone else, or at least they used to. Part of this can no doubt be attributed to the fact that successful investment bankers like me are devilishly charming, stunningly handsome, scathingly brilliant, and in every other respect fucking paragons of the best and brightest an Ivy League education has to offer. Of course, even those nattering nabobs of negativism like Mr. Kwak who would deny the preceding have to admit upon examination of the facts that Wall Street's recruiting efforts on university campuses have been massively successful for the simple reason that—for a certain type of Ivy League individual—these jobs are fucking awesome.

How so, you ask? Well, let me count (a few of) the ways.

For one thing, they are exciting.

Unlike, say, 99.6% of all other jobs available to a wet-behind-the-ears idiot in proud possession of little more than an expensive college degree, becoming an investment banker fresh out of college is a huge rush. Depending on what role they perform, new entrants just weeks into the job can participate in billion dollar underwritings, multi-billion dollar mergers, complicated cross-border restructurings, or devilishly complex trading programs, all the while possessing a level of experience formally known in the industry as "jack shit."

In what other industry, I ask you, can a 22-year-old who just stopped wetting the bed three weeks ago participate in a deal which runs for weeks on the cover of The Wall Street Journal or the Financial Times? To be sure, he is probably doing little more than making copies, getting coffee, and trying not to look as stupid and lost as he feels, but at least he is in the room. Contrast this, if you will, with a fresh McKinsey recruit tasked with interviewing shop floor supervisors to develop a human resources inventory for a ball bearing manufacturer in East Bumfuck, Illinois. Or a pre-law student who spends 80 hours a week in a windowless basement cross-checking sale-leaseback contracts for a patent dispute in Moldavia. On average, young investment bankers spend less time traveling that management consultants and more time sleeping than corporate attorneys. Plus, they get to tell their friends and family that they carried Bruce Wasserstein's bags. What could be better?

For another, investment banking jobs are challenging.

Excluding certain training programs for elite military units, there are few career choices available to a young person as emotionally and intellectually challenging as investment banking. The pressure is intense, the expectations of your bosses and clients completely insane, and you swim in a Sargasso Sea full of assholes who would as soon rip your head off as look at you. It is an environment, if you can survive it, that fosters an intense esprit de corps among your peers and immense personal pride in your own accomplishments. As such, it can be considered emotional crack cocaine to those hyperaggressive, intensely driven, super-competitive young psychopaths whose mommies and daddies have pushed them down the Deerfield–Harvard–Goldman Sachs path to Übermensch-dom from infancy.

Long gone are the days when investment banking was a quiet backwater for the idiot sons of wealthy WASPs. For decades now, socially ambitious families have been steering brilliant little Bobby and Sally toward positions at Goldman Sachs and Morgan Stanley as the pinnacle of social achievement. Bobby and Sally have drunk this goal in with their mother's milk. Surely you don't think a little recession or crisis is going to change that right away, do you?

And, finally, there is the money.

Surely I don't have to explain about the money.

* * *

Third, I really do take exception to Mr. Kwak's pusillanimous little swipe at my industry for "torpedoing the entire economy." Admittedly, several large investment and commercial banks utterly failed to cover themselves in glory during the recent crisis. I have said so myself, repeatedly, in these pages. However, notwithstanding Mr. Kwak's insinuation, investment bankers were far from alone in contributing to the epic clusterfuck we have just lived through. We had plenty of help from shortsighted and incompetent regulators, meretricious and ignorant politicians, and greedy and disingenuous investors, not to mention millions of ordinary Americans who apparently believed it was their God-given right to own a million dollar house and three plasma televisions, no matter how little money they made.

In fact, I think you might have to look long and hard to find someone who was not culpable in some way for what happened. I, for one, would not automatically exclude the other professional enablers of corporate and institutional idiocy in our economy: the management consultants and the lawyers. It is a well-known fact that Mr. Kwak's own alma mater, McKinsey, has been the strategic consulting firm of choice for almost every major Wall Street investment bank for decades. Bang-up job, Jim.

* * *

Anyway, I grow tired of shellacking Mr. Kwak's flimsy, ill-considered post with the Howitzer of Truth, so I will try to close on a more productive note.

For those youngsters still considering a career in investment banking, I would offer the following. On the positive side, the excitement, challenge, and relatively plentiful monetary rewards of a career in my business should remain. The fundamental nature of the business, and the need for our services in the economy, will not change. On the negative side—and diminishing somewhat the preceding attractions, at least for a time—the industry will shrink, and this will make it harder both to get and to keep a job. Some subspecialities on the trading side might disappear completely.

But if you are smart, aggressive, driven, and competitive, I can think of few industries better suited to your personality than mine.1 (And, unlike elite military units, people rarely shoot at investment bankers. At least not yet.) You may not receive the kind of social admiration and approbation of your career that you and your parents were looking forward to, but the personal rewards of doing well in one of the toughest professions out there will remain.

And, in any event, you will always be able to sneer with impunity at the lawyers.

UPDATE: To his credit, James Kwak has removed the egregious crack to which I took offense, calling it "gratuitous," and replaced it with a more anodyne remark. I will let my comments stand, however, since his original swipe was of a kind with many of the ludicrous comments attending his post. It is also sadly symptomatic of a persistent knee-jerk tendency in the media and the populace at large to scapegoat investment banking for all our current troubles, whereas by my most recent calculations we can legitimately be blamed for only 16.27% of the crisis.

POSTSCRIPT: Some correspondents have taken exception to my apparent boosterism of entry-level career opportunities in investment banking. Should any of you be of like mind, might I gently suggest you reread my remarks with a more critical eye? You might detect a faint whiff of a commodity somewhat rare in these over-strident times: irony. Just a thought.

1 Especially if you're a girl.

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