Will AI Lead to an IB Golden Age?
Had a speaker come into one of my classes who is high up at a company developing AI for financial services and he claimed that AI will replace 90% of jobs in investment banking in the next 10 years. Not sure how true that is, but it is scary to think about as I will be starting in fulltime in IB next summer. I was thinking though, wouldn't that lead to really insane comp for senior level bankers? I interned in banking this past summer and all the seniors pretty much have us junior level people as their own ChatGPTs. With one of the biggest costs of IB being salaries (at least I would think so) and AI potentially wiping out the salaries of junior bankers in the future (I'm sure there will always be the need for some juniors though), wouldn't this be amazing for seniors in terms of pay. Thinking of this makes me optimistic for the future, as in 10 years I will hopefully be a senior level banker. Obviously I don't have much experience at all still being a student, but am wondering what are your guys thoughts on this.
Based on the most helpful WSO content, the impact of AI on the future of investment banking is a hot topic. While it's true that AI and automation are likely to change the landscape of the industry, it's not all doom and gloom.
AI is expected to automate a lot of the manual tasks currently done by junior level bankers, potentially reducing the need for as many junior roles. However, this doesn't necessarily mean that 90% of jobs in investment banking will be replaced. The relationship-driven part of the job and the decision-making side of investment banking, which is often handled by senior bankers, cannot be automated.
As for the impact on compensation, it's a bit of a double-edged sword. On one hand, if banks are saving money by reducing junior level roles, there could potentially be more money available for senior level compensation. On the other hand, if AI is doing a lot of the heavy lifting, it could potentially put downward pressure on compensation at all levels, as the value added by individual bankers may be perceived as less.
In the end, the key will be to adapt and evolve with the industry. Those who can leverage AI to their advantage and focus on the aspects of the job that require a human touch will likely be the most successful. So, while the landscape may be changing, there's still plenty of reason to be optimistic about a career in investment banking.
Sources: Google partners with Goldman Sachs in automating Investment Banking, GPT-4 & Microsoft Co-Pilot, Thoughts on AI and the future of the job market?
Interesting answer coming from AI lol
What an answer by bot😍
Interesting thought. I think there will always be a need for senior level bankers to give advice to executives. I don’t think we as a society are prepared to take important advice from an AI, just yet. Who knows what will happen a 100 years from now. In the mean time, given the important role bankers play in a transaction, and the value of the advice and counsel they provide, bankers are here to stay, ergo juniors will always be needed to ensure there’s a promotion pipeline (MD’s have to come from somewhere). I think the near term impact would be less juniors, perhaps compressed compensation as a result, bc as you said, analysts basically do work that ChatGPT can spit out
Alternative, legislation is announced that certain jobs HAVE to be done by humans. I see this as likely given politicians want to protect their constituents. Don’t know how effective that would be, and IB analysts wouldn’t be on the top of that list. This is all my opinion though, what the fuck do I know?
I agree, there will always be need for senior level bankers, especially with so much money at play with larger deals.
Only with larger deals lol? You think a family own e $200mm business is gonna have AI run their sale process?
Fun fact: A computer as powerful as the human brain would be able to perform about 38 thousand trillion operations per second and hold about 3584 TB of memory.
Also a fun fact: human brain can never be replaced
a 1TB flash drive costs $20 on Amazon. It would take 12 Moore's Law doublings for the amount of memory you mention to also be available for $20 on Amazon. Similar logic applies to operations per second, Nvidia H100 GPU already runs 60 trillion FLOPS. Give us 10-20 years and we're there.
I know tech will be super crazy in 15-20 yrs but lets be honest human mind can’t be replaced.
Moore's law is plateauing because of hardware limitations. There may be limits to how much a computer can compute.
Relevant meme:
Yeah just like Dow 36k or crypto becoming the main form of currency. People like that are just hilarious to me.
What will actually happen is that underlings will need to know how to use these new tools just like when Lotus was created. If you kept using pen and paper you’d no longer be competent. You wouldn’t have a job if you didn’t learn the spreadsheet software. There is a reason why many of the studies that look at this show that the best outcomes are human + ai, not pure ai.
Jobs change. Entry level IB roles are going to be just fine.
Junior bankers are going to know how to code and use AI?Doubt it.
AI can write the code. I can’t code, but the issue isn’t “what do I do to physically write the code” it’s “what code do I need the AI to write for me to make this work”
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