Industry Saturation

I'm a pre-university student. I've noticed a lot of my peers are OBSESSED with getting into IB/PE, and it made me think - how saturated are IB/PE shops going to get?

I'm going to be studying at the LSE, and it seems like literally every single person doing a "hard" course is gunning for IB/PE. On top of this, it seems like lots of semi-targets are getting love - every time I open my LinkedIn, a redbrick alumni is flexing a new role at some prestigious firm. Surely the amount of people gunning for these roles are exceeding the already insanely disproportionate ratio of successful candidates.

I find it annoying because it messes up the dynamics of higher education. Some may say this is good, but it means we are essentially adopting a culture of working 24/7 because that's what you need to do to get these roles. I spoke to someone the other day who said when he was at university, it was pretty much about having fun and developing as a person whilst enjoying your subject. He is a top partner at a consulting firm now. Now days, it feels like if you apply this approach, you will simply fall behind. I personally feel like I have to commit to a career early, because if I don't, someone else will - and they will take my place (rightfully so).

How is recruitment going to look moving forward (next 5-10 years)? Will it become even more competitive?

Comments (14)

kellycriterion, what's your opinion? Comment below:

The basic question which this post implies is this: "with the advent of online forums like WSO, dissemination of IB information, and observable 'gunner culture' at universities, is the US M&A industry on an unsustainable trajectory?"

My answer is a resounding "no." If you look at the value of M&A deals completed in the US for the past 20 years, you see that it is largely flat with a slightly positive trajectory, with a lull from 2008-2013 because of the financial crisis. The number of US investment bankers has grown by ~20% in the last 8 years, and deal fees are up by more than that. I think that deal volume is going to decline and that headcount will too over the next few years, but we're just going into a lower part of the cycle. This is not proof that IB is systemically unsustainable. I think the lean years of 2008-2014 are coming back in deal-land, and headcount will need to be rationalized. At some point, the capital markets will heat up again and you'll see growth.

Investment bankers often have a tendency of sowing the seeds of their own destruction. They support monopolists in rolling up industries until other people can't compete with the monopolists and the deals dry up. Then they have to find a new vertical to play in. Now I get the Schumpeter argument of creative destruction and that monopolies often go away on their own, but the fact remains that investment bankers often get things rolled up so that no more deals can be done. This is a technical point on micro-sustainability, not macro-sustainability.

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Pierogi Equities, what's your opinion? Comment below:

This is a great question, and this is a great response.

Personally, I hate that kind of "gunner culture" since there's much more to life than being a hardo. If finance is all you care about, I feel sorry for you.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

Dean Keaton, what's your opinion? Comment below:

I agree with what you've written here but I'm not sure this is really answering OP's question. Sounds like their concerns were more about the bottleneck to get into the industry, not whether the industry itself is sustainable based on the actions of people who've already made it in. You do mention the ~20% rise in headcount industry-wide although I'd imagine it's the case that that's nothing compared to the explosion in the amount of people over the same period who are all now hyper-aware of the recruitment process due to info in forums etc. 

kellycriterion, what's your opinion? Comment below:

I like the sound of your username, first of all. Perhaps this is callous because I'm on the other side of things, but I don't find "the sustainability of recruiting" to be a useful or interesting question. Seems odd for me to say, but I'll explain why.

1. It has never been the case that 100% of people who wished to become investment bankers actually became investment bankers. The people in the "100% - % of people who succeed" bucket ultimately found stuff to do with their lives. They don't, by and large, live in cardboard boxes. They're college educated people in business who tend to be very capable of supporting themselves who happened to not get to precisely the echelon they wanted in one aspect of their life. Such is life.

2. What is the bear case here? OP's post promotes an interesting idea, which is that preparing for IB when one is unlikely to get in is a waste of the down time that people typically have in college. I am somewhat sympathetic to this view insofar as people should probably be preparing for things they will actually accomplish, but learning financial modeling skills and how to do a good interview don't seem like the least useful skills in the world. I don't see it as that big of a waste.

To summarize, gunning for IB, even if it's a behavior that is not entirely likely to result in an IB job, is ultimately net productive, as the people who pursue it tend to get skills which are valuable elsewhere in business and still do very well for themselves vis-a-vis their peers in college, their non-college educated peers, and the world at large. This behavior is sustainable because it's always been this way. I don't know what sustainability has to do with it.

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Most Helpful
pinkdoughnut11, what's your opinion? Comment below:

Thanks for the response.

I'm not saying it is directly a waste of time, it just means more effort has to be made to reach the minimum standard. A gold candidate 30 years ago is probably lower-middle bucket now. In turn, if you want to maximise your odds, you have to put in the hours and sacrifice a lot of the freedom/joy of being in higher education to make sure you stand a chance. I thought university was meant to be a time to meet new people, make memories, find a career you are passionate about whilst enjoying studying your subject. Instead, it's turned into a rat race for who can whip out the smoothest CV before spring weeks.

I imagine 30 years ago, internships were a great tool to assess if a career is truly for you. Now, you have to be prepared to have a chance of even getting into the internship. I would have to be a robot to be able to educate myself to ace IB technicals, nail the consulting case study, know the programming for SWE, have the problem solving acumen for a quant and so on. There simply are so many people applying for these roles, that unless you have a genuine spark (a connection within IB, or a IMO gold medal under your belt for quant), it is almost impossible to have a strong chance unless you focus yourself early.

I'm studying Maths with Data Science at a top IB target. I have no idea what I'm passionate about. I would like to be able to dip my toes into a range of industries to find one I enjoy. Maybe I silo myself into IB and find that the hours break me? Maybe I silo myself into SWE and feel like my actions don't affect the bigger picture? These are things that I feel I would only be able to find out through experience. Experience that I'm not able to get because I haven't learnt the 12 principles of Excel needed to stand out in the endless horde of spring week applications.

Perhaps for those that want the big bucks studying a "soft" degree, the choice is easy. Grind your IB/consulting technicals.

Similarly, for those who get that programming high and hate dealing with people, it's obvious that SWE is the place to go. 

But for the jack-of-all-trades who are able to do it all, there is no step, only a leap of faith.

I apologise for my poor writeup, I'm very tired.

kellycriterion, what's your opinion? Comment below:

I think these are two separate matters. Being a cog in the wheel who can be replaced by other people applying for your job is one thing. The sustainability of the profitability and size of the entire industry is another.

Isaiah_53_5 💎🙌💎🙌💎, what's your opinion? Comment below:

Tech, finance, law are all saturated. You are just a clog at the end of the day. Easily replaced.

A "clog" haha ok negative Nancy.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

PrivateTechquity 🚀GME+BBBYQ💀, what's your opinion? Comment below:

You are just a clog 

I Can't believe I clogged up the sink - Clogged up the sink again. - quickmeme

The obedient always think of themselves as virtuous rather than cowardly - Robert A. Wilson

If you don't have any enemies in life you have never stood up for anything - Winston Churchill

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Isaiah_53_5 💎🙌💎🙌💎, what's your opinion? Comment below:
PrivateTechquity 🚀GME+BBBY🚀

You are just a clog 

I Can't believe I clogged up the sink - Clogged up the sink again. - quickmeme


"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Mr_Agree_to_Disagree, what's your opinion? Comment below:

Double facepalm

The poster formerly known as theAudiophile. Just turned up to 11, like the stereo.
Restless, what's your opinion? Comment below:

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