So take a look at the Forbes list of the world's richest billionaires.
Where are all the investment bankers? You might think at least one might crack the top 10? The top 20? 30? Anybody there?
In this light, the effort/reward ratio for banking seems low. Bankers seem almost union/blue-collar by comparison. Working like dogs for a pay structure that's basically military-like in terms of being rigid, uniform, and seniority-based.
So.....what I really want to know is...
Why does everybody want to be an investment banker?
All thoughts, opinions, and flames welcome. Try to go easy on the flinging of feces, let's keep the monkey cage clean here.
well banking alone won't get you on that list. But look at all the pe guys and some of the hedge fund managers and you will see that alot of them started off in banking.
to amass a fortune large enough to be one of the richest people on the planet you need to be an entrepreneur and create big business from scratch, not run dcfs. the vast majority of entrepreneurial wealth is created in industry, financial services is represented mostly by hf/pe titans.
For all of you wondering about the Forbest list. Finance is the industry with the most amount of billionaires......that should tell you something if you are wondering whether or not you made the correct industry choice
Investment banking is actually very low risk compared to hedge funds and anything buyside really.
We get paid with fees on deals, we can't take advantage of any big returns on great investments or anything.
The advantage is it's also much lower risk because the consequences of a deal are almost irrelevant to us... actually a lot of times if it doesn't work out we can pick up a double fee when the company decides it wants to divest whatever it just bought!
Successful entrepreneurs and anyone buyside who's successful will tend to earn more, simply because they risk a lot more and thus have a much greater potential reward.
Everyone wants to be a banker because they either don't know what else to do or want to be on the buyside eventually. :) Ok I guess there are some who actually do like the job itself.
Damn what a civilised, nuanced and helpful response. Seems like this site was polite only during the 08 crisis lmao.
All good thoughts. It just keeps striking me - banking is not the path to super-riches. It's sort of upper-middle class.
And all these kids from cream-of-crop universities bust their ass like crazy to join the upper-middle-class. If you think about it long enough it starts to sound really absurd.
Then I think about the Forbes list - these guys went out and did things like build steel companies, software companies, and discount retailers (I'm basically counting the Walton kids collectively as Sam Walton). If you think banking recruiting is competitive try going to war with Microsoft, WalMart, or Mittal Steel.
These are the real big swinging dicks. I'm kind of in awe.
It's not uncommon at all, though - certainly not limited to IB. Think about the amount of work it takes to get into, say, Johns Hopkins Med School. Why do those people think it's worth the sacrifice? The same thing applies to getting into Harvard Law and going to work for a law firm where you will never make partner. Some people are perfectly content making their measly $300,000 a year with not much risk, which still puts them in the top 1 or 2% of the nation.
And of course they aren't going into IB to "run DCFs" for a career, despite what the person above said. But that still doesn't mean they will break into a real upper-class role some day. Hell, it's arguable that by the nature of the job and lifestyle most F500 CEOs are upper-middle class, while people like this have a bit more status http://ace.mu.nu/archives/151622.php
lol
I agree with the content of your statement (Entrepreneurs>>I-Bankers/Finance) but I disagree that banking is the path to being upper middle class. People from top universities are disproportionately from at least the upper middle class, and if another career offered the sort of (relatively) predictable returns that sell and buy side in finance did people would be all over that instead.
Banking and related industries are the only jobs with career paths, i.e. you don't have to invent something or found a company, that tend to get people million dollar annual compensations. Think of it another way, can you name another area in which a (largeish) number of people often get annual compensations over 500K-750K?
I consider 500-700 as upper middle class. You make it to "multi-millionaire" if you save appropriately. But in terms of living standards, you're not exactly balling. You probably have a nice house/condo (or two) and a nice car (or 4). Upper middle class.
Other places that offer this level of comp, without being an entrpreneur: Partners in law firms - large to medium size Doctors/surgeons/specialists Dentists/orthodontists Big4 accountants and consultants, if they make partner/principal.
Plenty plenty plenty of places that offer "career paths" - not sure what exactly you meant there.
Also, lots of middle-manager executive types can pull down 300-500 at F500 companies. Do well, play the politics and you can move up to the 500-700 level.
One thing is true - banking will get you to this level sooner. It'll take you 5 (gruelling) years instead of 10-20.
lol
Uhhh. there are a lot of people whoe are "bankers" on the Forbes list if not i-bankers specifically. You can also include hedge funds, private equity, etc. For example, George Soros (hedge fund manager), Carl Icahn (corporate raider/hedge fund manager), Simon (hedge fund manager), Henry Kravitz and George Roberts (private equity). I believe that this follows the idea of risk=reward. Hedge funds are the riskiest and i-banking the least with private equity in the middle.
"not i-bankers specifically" - but that's exactly my point.
I agree about the risk. Obviously, Soros, Icahn, and Kravis all took big risks. But no one would mistake them for investment bankers.
There are basically two categories on that list (excluding people who inherited money): 1. Industry - that's Gates, Mittal, Walton, etc. 2. Capital - the investors, Buffet, Soros, Icahn, Kravis
Investment bankers stand between 1 and 2, trying to come up with creative ways to get into the the middle and make fees without taking risks. But even though they generate lots of fees and bonuses for themselves, they do not generate the mega-returns that groups 1 and 2 do.
For Johns Hopkins Med - it seems to me that such a person really wants to be a doctor, even a super-doctor, but not necessarily super-wealthy.
However, I think a lot of people run after banking like they're going to get super-rich. My thinking is, if you're willing to work like a dog for years and years, why not direct that effort toward something that rewards you in kind?
I had to laugh at that homeless millionaire story. He should go get a job for once in his life. That's pathetic.
I might be in the minority here but I don't want my name on some list that says I make a ton of money. I rather value my privacy. So I'm just going to be a lawyer, make my $400k a year, and enjoy life without worrying about getting on some list that doesn't mean much. Publicity is a pain in the ass.
I don't want to live under a microscope.
"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-
Whatever helps you sleep at night.
Brett A Hickey. He may not be on that list, but if you have seen "Wall Street Warriors". The Canadian kid is 28 and already a partner of a PE firm.
That is the kind of opportunities banking opens for you.
Haven't seen the show, but I've heard that his "fund" has less than $100 mm of AUM and only does mezz and minority equity deals.
"In this light, the effort/reward ratio for banking seems low. Bankers seem almost union/blue-collar by comparison. Working like dogs for a pay structure that's basically military-like in terms of being rigid, uniform, and seniority-based."
"And all these kids from cream-of-crop universities bust their ass like crazy to join the upper-middle-class. If you think about it long enough it starts to sound really absurd."
You're living in a dream world, Restructure. Find yourself a few middle-class values and a work ethic before you end up a burned out, bitter old cynic.
Haha, ballyho, touche. Be assured, my tongue is firmly planted in cheek as to everything I've written above (hence monkeying around).
I won't provide personal details, but trust me, I am the very essence of middle class values and work ethic. However, I'm also ambitious - and that's when the devil shows up. I get caught up in the hysteria like everyone else.
It takes a few rounds to convince even myself that banking is not the holy grail. And truthfully, neither is being a billionaire. It's a big world out there.
Lastly, a wise man once said we should all be more cynical.
I don't want my wealth to be a matter of public record. Even if I did have a billion dollars and was qualified for Forbes 400 or whatever, I'd decline to interview them. And take any actions necessary to make sure my wealth stays a matter of private record. It's none of anyone's business what I'm worth, so they can take their lists and shove it up their ass.
If I wanted to be rich, I want to be the multimillionaire that nobody knows or cares about. No, I don't want to be rich per se. I want to be well-off. I want to be able to live in the upper middle class or lower strata of the upper class and be able to afford nice things and go on nice vacations. And I want a life beyond Excel, money, WACCs and DCF analyses. What good is $2.5mil per annum if I don't spend it? I figure I'll be happy with $400k a year.
I'm sure I'm in the minority here.
Mark Klein: Sue me.
"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-
So far as the initial question regarding the Forbes list is concerned, it really comes down to an issue of scale economics and the principal / agent dynamic.
The fact of the matter is that an individual banker can do very well for himself, but at the end of the day he is merely an agent providing a service, and thus lacks the requisite scale to earn the massive paydays available to principals (e.g., entrepreneurs, PE / HF partners).
There are so many American and European billionaire families that are not present on that list. Not to mention the Gulf, Blankfein recently said they they estimate there are 200 Billionaires in the Gulf region alone.
I view banking as the perfect setup to becoming mega-rich (if you want). Sure, I could save for a few years, take a big chance on a start-up, and then most likely fail with no money or experience to show for it....or I could get an MBA and work in banking, be able to retire with a middle class lifestyle at 40 years young, and then have the freedom to take chances on my own companies and still have financial security if I fail. Not to mention All those years experience and business contacts will increase your odds of success.
What is "Ballin"? I think it is relative. If I could have 10MM in savings and make 250-300K a year just on some tax free muni bonds, thats ballin to me--to be able to enjoy life relatively young and not have to work at all.
I have always said this. Becoming a banker will make you rich, not wealthy. Like even if you're an independently successful banker like Paul Taubman or Ken Moelis, you're still not a billionaire. And that doesn't discount what they've accomplished but yeah, reality is that you probably won't be a billionaire as a banker.
Ken Moelis is a billionaire, at least according to Bloomberg’s wealth rankings.
But he got there by being an entrepreneur, not a banker. The business he founded just happened to be in banking.
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