4 Big Picture Things I Should've Known Before My IB Internship (COVID-19 Edition)
It's good to learn from your mistakes. It's better to learn from other people's mistakes. - Warren Buffet
With almost everyone still working from home and many banks announcing significant changes to their internship formats, it's likely this year's investment banking summer analysts will have an internship experience like never before.
But whether you end up doing your internship at home, in New York City, or at your nearest National Park, the fundamentals of being a great intern won't change very much.
I made it to the final round of our intern LBO pitch competition, received all-around good feedback, got along with my team, and secured the return offer, but I was by no means a perfect intern. In fact, I had a hard time "getting it" during the first half of the internship. I was making mistakes that, had I understood the big picture, I could have avoided.
Here are some things that I wish somebody would've drilled into my head before the internship started.
1. Formatting Is Far More Time Consuming Than You Think
For instance, look at the header titled Financial Metrics ($Bn) in the slide above. That ($Bn) at the end could have been written as ($B), ($bn), or even ($b). There's no real difference, but different groups and MD's tend to have one way that they prefer using.
Pretty much every title, number and box in this slide probably had a similar amount of thought put into it. There's no law that says you need to use Potentially Interested Parties as your title - it's mostly judgement based. I remember having to revise and edit a single sentence in a slide upwards of 10 times, because we kept trying to get to a structure that felt just right. (Even though there isn't such a thing as a perfect sentence!)
The key distinction is that while most qualitative stuff doesn't really have a right answer, factual information does. Your client might ask you a question about any given number within your 100-slide deck, and you better damn know what you're talking about if they're paying you millions for it.
After all, how could you trust someone to execute a billion dollar plus transaction if they can't even get their numbers right on a PowerPoint? This means that you'll often have to triple-check things every time you send work to another person, because you might be using the 2021E revenue projections sourced from an RBC equity research report in slide 37, but your co-worker is using the numbers from Cowen in slide 50 and now your numbers don't match.
The key is to learn the work practices that your group and MD tend to use, and to ensure consistency across your work. You don't want to use ($m) in the title and then ($MM) in another part of your slide, because people can interpret these subtle things differently and it can be confusing if they are not the same across time.
Which takes me to my next point…
2. The Answer is Almost Always "It Depends"
The field of Finance is quite unlike the field of physics, which contains a number of immutable laws about how the universe operates. You can't just create an algorithm that tells you "if we're dealing with a client in X industry that is looking to expand its capabilities in Y business line and isn't willing to pay more than 10x EBITDA for a target, then this strategy will win the pitch".
It's as much of an art as it is a science. So instead of asking things like "Should I do X or Y?", ask things like "What are the types of situations in which doing X would make sense?" This will help you develop the sort of business acumen that full-time analysts and Managing Directors have.
Often you won't have time to think and reflect on the big picture, because you'll be very busy. But taking the extra time to learn from every project that you're involved in will pay huge dividends. You'll move up the learning curve much quicker, and you'll develop a sense of judgement that will eventually enable you to work more autonomously. Ask a lot of questions and write down the principles that you're learning and can apply to other situations, Ray Dalio-style.
Don't worry about feeling like a burden to your analysts. They would much rather spend their time teaching you now, than spend their time correcting your countless mistakes later. If they're too busy, they just won't respond to you. The truth is, they are usually expecting that…
3. You Do Not Know Anything
This is a bit hyperbolic, because everyone comes in with different levels of experience and some interns actually do know a thing or two about the field.
But I believe that coming with this mindset can make a huge difference.
The last thing you want to do is assume that you know how to do something, spend 3 hours on it, then give it to your analyst and realize that you were doing it all wrong and now both of you have to spend your Saturday night fixing your mistakes.
It's okay to say that you don't know something and that you'll take care of it. It's also super important to cover all of your bases - don't take anything for a fact unless you've looked at all possible sources of information. That means if you can't find the number in CapIQ, look at FactSet, or go directly to the SEC filings, or just Google it and go through the first 5 pages of results.
If the numbers are different, figure out why. Don't just look in one website and assume that the information doesn't exist because it's not there. Early on, I made mistakes like merely skimming a company's website to answer a question that I was tasked with, only for my analyst to double-check my answer and find out that I was wrong.
You don't want to be wrong often.
Your analysts will start thinking that you don't know what you're talking about, and they will start giving you less and less important projects. At this point, you've probably noticed that the takeaways in this article are similar. And that is because…
4. You Are In a Fundamentally Human-Centered Business
I believe this is the most important concept from which you can build a mental model on the nature of investment banking. It all comes down to trust, credibility and rapport.
By way of analogy, let's say you've been thinking about getting in shape for a while. Beaches are opening back up and you want to refine your #summerbod to impress your friends on Instagram. The problem is, you don't know the first thing about fitness! So you decide to hire a personal trainer. But then you realize there's dozens of personal trainers in your area, and they all seem to know their stuff. Who do you pick? The one that your fit friend recommended, of course.
Investment banking works in a similar way. When it comes to winning deals, most investment banks have such similar execution capabilities that it often comes down to personal relationships.
Sometimes you'll lose a pitch not because your 10-case Reverse Morris Trust analysis wasn't good enough, but rather because the company's CEO loves Formula 1 and so does the MD at JPMorgan. This dynamic applies to your own success as an intern.
Although this summer your work product might seem like the defining factor of your performance as an intern because you won't see your co-workers in person, building rapport with your team is as important as ever. As long as you don't make the same mistakes twice, it's not about being perfect. It's about being coachable and a person they can stand being around for 80+ hours a week once you start working full-time and people are back in the office - and that's something that can't be taught.
And for the love of what is good in the world, remember to Ctrl + S as often as possible.