Sunday, February 2, 2014

Even Cowgirls Get the Blues

Home, home on the range
I want a girl who gets up early
I want a girl who stays up late
I want a girl with uninterrupted prosperity
Who uses a machete to cut through red tape
With fingernails that shine like justice
And a voice that is dark like tinted glass

— Cake, “Short Skirt / Long Jacket”

Those of you Charming and Intelligent Readers who have followed me at this opinion emporium for longer than a month will recall I am renowned for the consummate artistry and zeal with which I beat dead horses. Having already flogged the eohippine offspring of Perissodactyla mortua quite thoroughly on the topic of junior investment bankers’ excessive working hours and the growing trend by their employers to limit them, I thought I would circle back from another direction and sneak in a couple more licks on the moldering corpse for my amusement and your edification.

The proximate impetus for this odd-toed ungulate bashing was the recent release by Harvard economics professor Claudia Goldin of a research paper which attempts to identify the sources of the residual1 pay gap between working men and women. Interestingly enough, she identifies a substantial source of the gender pay gap in professional positions like law and investment banking to be—wait for it—working hours:
What, then, is the cause of the remaining [gender] pay gap? Quite simply the gap exists because hours of work in many occupations are worth more when given at particular moments and when the hours are more continuous. That is, in many occupations earnings have a nonlinear relationship with respect to hours. A flexible schedule comes at a high price, particularly in the corporate, finance and legal worlds.
In other words, Goldin finds that in service professions like banking and law, some hours are worth more than others. Specifically, such employers demand continuous time at work and constant availability, whether in person overnight and on weekends or via email and phone. Employees who deliver this kind of total commitment are rewarded. Those who do not are paid less or hustled out the door. Goldin concludes that “face time,” long workday hours (even if unproductive), and heavy, near-constant demands on junior professionals to work late nights and weekends differentially handicap women, because they are often difficult to reconcile with many women’s other interests, particularly those connected with raising a family.2

I have written similar things in the past:
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.3

So the answer is clear, Ladies: it’s not you, it’s us. And we don’t want to change.

* * *

Now it should be relatively uncontroversial that taking an extended sabbatical from a personal network business like investment banking is prima facie unsupportable, because anyone who does so loses contacts, relationships, and market knowledge which are critical to the performance of the job. The only possible way a woman who takes 2, 3, 5, or 10 years off to raise Junior is going to get her high-paid, front-office, client-facing, revenue-producing job back in my industry is to bring a rolodex chock full of solid new billionaire client prospects she made at Lamaze and SoulCycle classes and while standing in the nursery school pick-up line at the 92nd St. Y. There are just way too many talented (younger) men and women chained to their desks on Wall Street who are qualified and eager to take your seat if you choose to give it up.

I think most people apart from the militant wing of La Leche League understand and accept this. However, I have seen a significant number of people who read research like Professor Goldin’s or digest explanations like mine about why working hours for junior bankers are so crazy who then turn around and declare it does not have to be that way. Some of these critiques take the form that our admittedly inefficient work practices have little to do with the actual amount of work needing to be done and much more to do with institutionalized hazing and brainwashing practices. Others concede that, yes, our cannon fodder young professionals do have to do a lot of work, but there’s no reason 100-hour workweeks can’t be split up among more workers. Like, say, into two 50-hour slogs by well-rested, culturally rounded, housework-sharing New Feminism poster boys (or girls) who can pass the baton back and forth.

But this is foolish. First of all, the nature of the work does not allow it. Anyone who has ever programmed a multi-page Excel model knows how massively inefficient and dangerous it is to use multiple authors. It takes even the best financial modeler a substantial amount of time to get up to speed on someone else’s model, time he or she could use to build the next model waiting impatiently in the queue.4 The same is true, to a more limited extent, of the PowerPoint and Word presentations novice dealmakers spend unconscionable hours of their youth editing, re-editing, and turning back and forth to Presentation Resources at three in the morning. Meanwhile, it is these same people doing the actual work late at night and on weekends who participate in the endless meetings and conference calls with their superiors and clients during the daylight hours where the intent and nuances of said models, documents, and presentations are hashed over minutely. How would you propose to brief the lobster shift on what needs to be done on all six of your live projects each and every night? How much time do you think it would take, and how many errors would be introduced in the communication? Corporate finance and M&A work just isn’t like a trading book, which can be handed over from one time zone to another relatively efficiently and with little chance of information loss or error. Introducing multiple hands also complicates the assignment and monitoring of accountability, which is a critical quality control device in a business that aspires to both speed and error-free precision.

One might counter that the various tasks investment bankers do could be more thoroughly split up along functional lines, with, for example, modeling experts just working on models and presentation mavens focusing solely on presentations. In fact, many large investment banks already do a limited form of this, which is why you will typically find the best financial modelers in a large bank keyboarding frantically away at midnight in the M&A or Leveraged Finance support groups. But while this improves efficiency and boosts quality control, it makes each young banker that much less knowledgable about the entire deal process, and one of the key reasons investment banks lure smart young children into their meat grinders is to find, train, and apprentice the next generation of senior client-facing bankers who are supposed to know everything there is to know about their trade. It is also worth noting that specialist juniors are often the most overworked cogs in the machine.

* * *

Lastly, and most importantly, the notion that you could replace a bunch of bright, hard-working, frazzled young troopers with armies of specialized clock-watching 9-to-5-ers runs straight into an insurmountable obstacle: the client won’t tolerate it.

Let me share another personal anecdote with you. Ages ago, when I was a mid-level Vice President at a global ├╝berbank, I was working around the clock for weeks on a very large, high profile transaction for one of my group’s best clients. At the same time, Mrs. Dealmaker was working around the clock to take care of Cost Center Number Two, who had recently arrived from the hospital to swell our merry band to four, slot number three already being occupied by toddler Cost Center Number One. Naturally, she was frazzled beyond belief (CCN2 was a colicky newborn) and begged me to come home at a reasonable hour one night just to take care of CCN1 while she took a deserved rest. So I did.

In so doing, I bowed out of running the routine nightly conference call on my deal and handed the baton to my very competent Associate, who I was confident could handle any trivia that might arise. Which he did, as expected. No worries.

But later that night I received a call at home from my client’s General Counsel, who proceeded to rip me a new one for having the audacity to bow out of a routine conference call on which nothing of note was discussed or needed to be discussed, simply because the client had a bunch of corporate Vice Presidents dialed in, too. In any rational sense, the General Counsel’s complaint was ridiculous, as it ignored both the outstanding job my team and I had been doing to keep the deal on track (and hence relatively immune to potential hiccups) and the fact there were, in fact, no hiccups to discuss. But investment banking is not a rational business. It is a client service business, and the client is always right. Mea culpa.

And this was the lesson I learned from this incident: investment banking clients expect to own you in exchange for paying your bank the ridiculously large fees it charges. They own you completely, at any time of day or night, for as long as they want to, and with complete and utter disregard for whatever may or may not be going on in your life. Let me tell you something: I have never yet been on a deal where the client hasn’t chuckled in satisfaction, usually more than once, at the long hours and hard work the junior bankers on his deal are putting in. It is a standing joke for every client who engages my services. They expect it.

* * *

So where this leaves young women who want to make a career in my business, I will allow you Clever and Insightful Ladies and Gentlemen to determine. I suspect, for myself, not very far ahead. It could be a very, very long time—read never—before women make up a larger portion of revenue-producing investment bankers. It is just not a profession which encourages or supports work-life balance of any kind. For what it’s worth, it’s not the investment banks which are driving this. It is our clients. Who are, you know, always right.

By the way, the General Counsel of the client in my story was a woman.

Related reading:
A Fine Disregard for the Rules (January 14, 2014)
The Invention of Leisure (November 12, 2013)
Go Ahead, Live a Little (May 12, 2013)
She’s Trading Her MG for a White Chrysler LeBaron (March 2, 2013)
Fingernails that Shine Like Justice (May 21, 2007)

1 That is, that which remains unexplained after you adjust for identifiable sources of gender-based differences in pay, such as the fact many women tend to gravitate toward lower paying professions in the first place and many other women drop out of the workforce for extended periods of time to bear and raise their children.
2 The going presumption here being that men either have no conflicting interests to balance or have learned as a gender to simply pound sand if they don’t like it. Or so I am told.
3 This finesses the issue whether most women are interested in outsourcing so much of the care and rearing of their offspring to relative strangers. Remember we are not talking about someone who can drop off her angel at daycare at 8:30 am on the way to work and pick her up in time for dinner.
4 And please don’t suggest this could be avoided by using standardized, error-checked models. First of all, every bank worth its salt already has them. Second, every model, no matter how comprehensive and detailed, has to be structurally modified to fit the particular variations of each individual deal. You find a real life deal that fits the standard bank model. Go ahead, I’ll wait. And third, using a 50-page standard leveraged buyout model to model first order effects of an M&A or capital raising transaction is like mosquito hunting with a howitzer: potentially effective, but way too much trouble and almost guaranteed to vaporize the mosquito you wanted to collect in the first place. You build a new, custom-purpose model instead.

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