Many users on WSO shoot for investment banking because of the large salaries and even more massive bonuses achieved by finance’s best and brightest. It is not hard to understand why banking is such an enticing profession for those of us who are looking to bank as quickly as possible. These analysts endure punishing hours for a paycheck that can be near minimum wage on an hourly basis. After a couple of years, most analysts will attend a prestigious MBA program and drop down several hundred thousand in tuition and lost wages/opportunity cost. Is this really the best use of our time?
I am trying to find out why more monkeys aren’t pursuing opportunities to run their own businesses, whether it is a tech startup or a small local business. As many of us know, the wealthiest Americans are those who have at some point run their own business, and many, never even graduated from college.
Here is a scenario. After graduating from undergraduate school, work a well-paying job (not compared to investment banking however) for 40-50 hours a week and use that 50 additional hours you would be spending in Excel and PowerPoint to start something you actually have equity in. You should have enough money to live comfortably and use that capital to start your business or leverage your income to get loans.
I know not everyone goes into investment banking JUST for the money. Many want to grind themselves to a pulp for a few years in order to exit to an industry such as private equity. Most see investment banking as the perfect platform to beginning your PE career. However, if you started your own successful business, you could very well use that experience as a platform to work in private equity.
Do you monkeys see investment banking as your golden ticket or just too scared to start a venture on the side? I am interested in hearing your thoughts.
These types of threads come up all the time anymore
Are you familiar with the concept of risk aversion???
Investment banking is one of the safest ways to become a wealthy American. All you do is play by the rules, continue to advance, and eventually you're 50 and you're an MD or a managing partner at a PE or a CFO at a company.
Plus if you want to start your cheesy little business what's wrong with waiting until you've done a few years in a real job so you have something to fall back on and have some actual business knowledge.
Pretty sure you can do this in several different fields.
Pretty sure you're still going to be busting your ass hours wise in big law or medicine also... not too many other routes are on that level of safe career path to become wealthy
I was too scared to start a venture. (I don't believe I could do a successful venture on the side. It'd be all-encompassing if it were to be successful.)
Of course, now I feel quite differently... but I needed those early years of grinding to get me to this point.
All my friends who have done their own startups work 80-100 hour weeks on them . And it's FAR from guaranteed that you'll come out the end with any money at all. If you really want to play the odds , you'd have to take 3-4 swings before you finally land one.
So yeah , people are partially afraid of risk , partially afraid of the long hours under EXTREMELY high stress . (Nothing teaches you stress till you invest 80% of your net worth in a venture) , and the very real prospect of walking away from it with nothing at all. It takes a special person to get through the 2-3 unsuccessful ventures , and not lose faith till he/she lands a successful one.
You could say the same thing about College
Banking is the worth the time. Most people who go into banking are not entrepreneurial types, and for what it is you are paid very well. I wouldn't go as far as to say your hourly wage is minimum wage but at the analyst level closer to what a plumber makes. Also, going into banking is viewed as the perfect training ground for a multitude of other finance gigs. If you go into a good firm and leave you can pretty much write your own ticket for two - three years of commitment.
I think some people might go to investment banking because it gives some industry knowledge, and of course in order to invest or open your own venture you need capital and investment banking is one of the best ways to earn money and then make your money work for you.
I want to get into IB because I believe being a part of the buying/selling/turning-around or restructuring of companies is invaluable experience if you someday want to run one. That kind of experience makes future fire drills somewhat comparable to a situation from the past since you get to see so much "action" in banking.
Now if only I could get that interview...
What about opening a local small business. This could potentially provide several hundered thousand an income a year. Potentially more than you could make in banking and either less hours, or at the very least more enjoyable hours.
I'll field this one.
My father owns and operates a successful small business that I helped run for a time.He does work less hours than an investment banker, and because he has employees, he can leave work to shop, sleep, eat, etc. He typically vacations for 3 months a year now, which is definitely more than your standard MD. No one tells him what to do.
That's the good, now for the bad.
His hours at work are definitely NOT more enjoyable. There is something to be said for working in an environment where there is an intellectual and educational barrier to entry, and in your standard small business this does not exist, my father's included.
Everyone tries to rip him off. Employees try to steal. Customers try to steal. He is constantly chasing clients that owe him money. He is constantly harassing suppliers that owe him product. There have been numerous break-ins, fires, etc., and insurance companies are not exactly eager to write checks.
One day he made a bad purchasing decision and saw 2 years worth of profits evaporate in 2 days. Luckily he wasn't leveraged to the hilt, because if he had been the business would have gone up in smoke. It's possible that one wrong move on his part will bankrupt him, so there is constant fear and stress.
There was a time when he was making money hand over fist, and then a major international player moved in down the block and he saw profits dwindle. Before the credit crisis he was making several hundred thousand per year, now it's significantly less. Circumstances beyond his control can ruin him in the blink of an eye.
But the worst part in my mind? He has to take full responsibility for everything. In banking, if something goes wrong, just blame the analyst/associate/vp/md/client/government/economy/whatever. He doesn't have that luxury.
I'm sure there is more but I'm tired and can't think of anything else right now.
Believe it or not, there are people out there who are employees who absolutely love their jobs (some on this site, working in finance). Just playing devil's advocate, but it should be something you can love doing every day, not just working for yourself for the sake of not having a boss.
Very good points. It all states the author being risk averse. All of the above are the costs of doign business.
depends really what you would actually do with the extra time.
honestly, i work about 50 hours a week and spend the rest of my time hanging out or jaggin' off. i think a lot of people are undisciplined like me and would fare well being forced to work the i-banking hours.
Serjik91 had it right when he noted that IB gives you invaluable industry insight, no matter what industry it may be. If you go into oil and gas M&A, you'll learn the ins and outs of Master Limited Partnerships to a degree that no charter or degree will teach you. Hell, you'll know as much about oil and gas companies as the CFOs of the oil and gas companies.
ValuationGuru, you too are right in saying that starting your own venture is where the big bucks lie--I'm just not sure if a Wall Street website is the best platform for your argument. My friend's dad started a company that schedules the landscaping and cleaning crews for commercial buildings; Simple enough, right? He's now contracted to most every Wallgreens in the midwest, among other chains, and has a 60 foot yacht, plane, and more money than most bankers would know what to do with.
The other reality that most would neglect to mention is the put option in a career in banking vs entrepreneurship.
For instance, banking requires no skin in the game, just human capital (labor). If you suck and get worked out of the group that will take a while to happen in a decent economy. As a VP or Associate you can even hide for long time by having a stellar team under you. I've seen it here firsthand and that guy just got let go after 2.5 yrs in PE. In the meantime he collected a hefty paycheck and you absolutely can't take what he's added to his resume from him.
The entrepreneur meanwhile, has to come up with some capital and work just as hard as a banker. While there is incredible upside there is also a huge downside in the form of lost capital, a credit score that can go to shit if you can't make the banks/investors whole, and what's worst is that you most likely won't be given a shot again somewhere else anytime soon. Whereas in banking you can go interview someplace else and come up with a reason or excuse as to why you left your previous spot.
I don't understand this debate, there are successful and failed start-ups from all ranges of backgrounds, IB or not. Brilliant ideas are hard to come by nowadays, so any idea that's at least marginally creative requires strong execution to take off. Enter, technical know-how learned from working in IB. At least it gives you a fighting chance.
Either way, it takes balls to start a venture, I give full respect to anyone who does it, even if it's a sandwich shop.
they say years of soul-crushing monkey abuse builds a fortified cynicism that only prison can top.
You don't fuckin say. You got any other brilliant insights, Einstein? Someone tell HR to pull their heads out of their asses and give this genius a fucking corner office.
i don't. and with that, i'm done.
i've been spending way too much time on this site, as it is addictive. mostly because i find it entertaining, but also because it has helped me out in the past. oh well. maybe my ramblings helped someone somewhere, maybe they didn't, who knows.
goodbye all.
I can make a few comments on these topics.
First, a little background on me: by all means, most of you young kids would consider me your worst nightmare. I went to a target school and got a coveted summer analyst position at an MM, but flamed out and couldn't get a return offer. Banking is really not for me. Some people can operate at at least 80% on 3 hours a sleep a night, averaged. I cannot, and I found out the hard way.
Nice thing about crashing and burning is that it forces you to rebuild from scratch and get it out of your head that you have to do X and Y because of all the momentum and sunk costs, etc. I ended up following my passion in research and going to grad school, which took me into my current consulting career, first as an employee in a major firm, and now on my own as a startup owner.
+1 to the guy who said that startups don't have to be tech. My own startup is definitely not high tech. It is STEM consulting in the government space.
The beautiful thing about working in such an unsexy industry is that the best and the brightest AREN'T in here competing with you. They are all doing tech startups or writing fancy algos for HFTs or back in grad school/postdocs trying to become MIT faculty, etc. Therefore I was able to get very revenue positive very quickly (any Ph.D.s who are US citizens, shoot me a PM, btw, I am hiring).
So the moral of the story is:
No, it's not.
I'm working full-time on a startup right now. I wasn't nearly as prepared to do this at 22-25 as I am now, after a decade in banking. I didn't have the confidence, skills, network, understanding of capital formation, or ability to develop a go to market strategy that I have now. I also had zero money to tide me over as I took the risk.
Any early stage venture is risky and most finance people simply don't have the appetite. It's tough to go from years of making great money to no income, but if you believe in your idea/team, it is way more rewarding. As I've said in several posts on this site, I wouldn't be in a position to do what I'm doing today without banking.
I'll respond to this. Yes, a decade in banking can give you the things you said. But a lot of the things you list CAN be sought and found right out of college.
I did a SA internship at a BB and at the same time, some friends and I started a venture (a tech startup, because we think we have some good coders and we can execute well). When we were out of college, we were sort of faced with this decision: do we go out and get jobs and get "work experience" for several years before trying a venture? Or do we just hit the ground running now, knowing full well that we're young and may fail? We chose the latter. It's way more fun. We knew we didn't have certain things, but we also knew that we can get them if we tried hard enough, without having to spend 5-10 years slaving away at a job that we know we'd be quitting.
We had no network, no money, but we had confidence and skills. We actively sought and found both the network and the money (from investors) right out of college. So I ended up doing the startup thing instead of the finance thing. We didn't really know "business" that well -- developing a go to market strategy, for instance, but we learned for ourselves. We tried things and see what worked. We didn't really understand capital formation either, but we talked to lots of people who were willing to help us. They taught us about dealmaking, how to manage a startup's finances, how to interact with investors, etc.
We're doing OK now, but we've sort of turned into lifelong startup folk. If we fail too many times, we'll probably go out there and start working for startups and rearing up to give it another go.
As for stomaching risk, college or right out of college certainly seems like the best time to risk it all -- you have no responsibilities (no kids), and if you fail after a few years you can generally get a job or go back to grad school. On the other hand, if you wait 10 years to build up confidence, experience, and risk tolerance, who knows what kind of situation you'd be in? Maybe you'd be married with kids! Maybe you aren't a millionaire yet!
If you want to get rich quick with no experience, get a job as a roughneck in North Dakota. My roomate in college started with 200k in the bank that he was able to save by working long hours drilling in Wyoming. He was able to accumulate that money in two years, he started college when he was twenty.
UFO, very good question in your last paragraph.
I have many friends and family who work in the oil field, aka oil field trash. Some have GEDs and make $150k a year. Long hours, long time away from home, and working with "oil field trash".
In all seriousness, I am actually thinking about a few certain positions in the oil field due to "exit opps".
LOL.
Bschools are not in the habit of admitting roughnecks. It is probably the least selective job on the planet. Your typical roughneck is in his late 20's with no high school diploma and at least one period of incarceration on his record. The job is dirty and dangerous, but you can make money with little to no education or training.
Unless you have an engineering degree you will probably not make it that high in the rank. I think it could be interpreted either way by b-schools. It is definitely a unique experience that will stand out, and it also shows that you can work hard. However, I don't think it is all that mentally stimulating. My understanding is that you are guiding a pipe down a shaft and making sure chains don't take off any of your fingers.
What happens in Wyoming stays in Wyoming?
Don't fail.
What ever happened to having a work/life balance?
Great post, this should be getting a lot more attention!
I'm not so sure, I dont think people sniff out many 9 year old posts
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