Advice from an ex-IB MD - DON'T make these mistakes

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Someone asked me last week about all the mistakes I made and saw in my career. In my fifteen years, I made and saw lot of them. This post is going to be about what not to do and what I learnt from making those mistakes. The most important lesson for me: its always better to learn from someone else's mistake.

Thoughtless

When I started I was just in a rush to get instant gratification, I wanted my boss to tell me I had done a great job. I would rush into a project, try to finish it as soon as possible, and take it to him to get my pat on the back. About three months into my first job, he asked me to put a deal model together for a client call. He gave me the day to do it. Honestly I was pretty nervous. I read through the documents, the presentations, and started putting it together. Three hours later, I thought I had something good. I checked it and emailed it to him, feeling quite smug. Why did he think this would take me the day!! This was as easy 3 hour job, maybe 4 hour at best. I went to lunch, talked to some friends. I received an email reply from him saying 'wow you are so fast'. I was feeling pretty satisfied. I got the affirmation I needed. I was just coasting now till the 5 pm call. I got the print outs ready. Here we go, my first client call.

We start the call, my boss looks at my model. Flips a few sheets in. We start looking at the numbers. Damn. This makes no sense. The client is on the call, asking us why the numbers look so strange. Turns out I had totally screwed it up. I had totally misunderstood what was needed, hadn't clarified details, and didn't ask questions. Screwed it all up. Well luckily my boss said 'Hey Jim, let us go check on a few things and we'll come back to you'. The call got rolled to the next day.

This happened sixteen years ago, and I still remember that feeling like it was yesterday. That was probably one of the most embarrassing events in my career. I learnt a couple of things from it. Firstly don't be in a rush to get things done, I needed the gratification of sending him the email so much that I didn't even think about whether the numbers actually made sense and if I had done the project right. Secondly ask for help, whenever in doubt ask, clarify. Have someone look it over for you.

Being a geek

I started out an introverted geek, who was awfully shy and withdrawn. Wall Street can be a high energy, loud place and I wasn't sure if I had what it took to fit in. I hadn't played any sports, spoke with an accent, and didn't have much going for me. In the beginning, I convinced myself that the way to move forward was to be a cubicle slave. Work long hours, be chained to the desk, out work the competition.

In hindsight, I was just being weak. It was an easy way out for me. It was just more convenient for me to not be social, not to interact with my peers or anyone else for that matter. I was just refusing to do what made me uncomfortable. That was a mistake. My peers were building networks, getting to know each other and more senior people, and I thought I could just outwork them. It doesn't work like that. You have to get to know people, you have to build relationships, and you have to build trust. Who you know is more powerful than what you know. If you know the right people you can always get the right information and get whatever you want done. People give you more leverage than any amount of physical work or information. It took me till I was 30 to get that fact down.

I still see this with a lot of my friends, they convince themselves that meritocracy means that it's just about the best spread sheet, the best analysis. Don't get me wrong, that stuff is important, but its just a part of the whole. You need to have relationships. Generally I have found that the more something makes you uncomfortable, the more you should do it. Your brain is clearly telling you its afraid of your weakness, and you need to go fix that weakness. Now every time I am afraid of something, I push myself to do it.

Choose and Invest wisely

This isn't a mistake I made, but I saw a lot of guys make this mistake early on. A lot of guys were in a rush to make big decisions, make big money. Their goal was to get rich quick. Wall Street pays well, but you still have to invest for the long term and really develop a career. I remember being six years into my career, and one of my fellow VPs got a bid for 50% more money to go to a European bank. He took it. His view was its more money today, and yes it's a weaker bank, and he'll be new to the team and firm, but the money made it a good risk. My view was that, it was 2006 and it felt close to the top of the market, if he got laid off it was going to be harder to get back in the game from where he was. Well as we rolled forward, 2008 happened, his new team lost a few hundred million, and he left the Street forever.

Similarly I had another friend who left the bank in 2002. He had been in FX sales and was getting a shot to be a hedge fund trader. He survived there till 2007, but again while the job were great initially we both know he was losing a lot of optionality leaving the Street at 24. When 2008 happened, hedge funds began to close. CJ had been great as a trader, but he hadn't spent enough time building a network and building skills outside of being a flow trader. The hedge fund closed, and CJ is still unemployed six years later.

I learnt a few lessons from this. Firstly, that decisions are important. You will have many job offers along the way, head hunters will dangle all sorts of things in front of you. This doesn't mean that every opportunity that comes your way is a good opportunity. In fact on Wall Street when someone dangles an opportunity in front of you, always ask what their incentives are. Secondly, we have to invest in ourselves on a daily basis. You can have a great time just living in the here and now, you can skip the learning, the reading, evolving. But that will catch up with you. Choose and Invest wisely.

Manage your lifestyle

The last mistake I have seen people make is around lifestyle. I have a friend who is 33, let's called MG. Now MG is a VP at a big bank, in fact he just got a guarantee to move from a European bank to a US bank a few weeks back. MG is talented at what he does, but MG also has a large problem. He's been working for eleven years, and he doesn't have a single cent in savings, in fact he's got $500,000 in gambling debt. When MG was 25 he decided he was going to live the NY IB lifestyle. The parties, the alcohol, the weekend getaways began. Initially he was just spending his salary, but soon he used some of his bonus for parties, then he decided he wanted to bet on college basketball. A few bad bets, and he was in the hole for $500,000. This is a capricious industry, bonuses go up and down, but interest on your debt only goes up. I tell you this story, because it will be easy when you go from making $100k, to $300k to $700k at a bank for you to start living a bigger life style. You'll soon wonder how you even lived on $100k when you started. My advice don't let your lifestyle grow with your income. If you let that happen, you will be forever trapped at the desk.

I'll tell you the story of a MD I used to know. Lets call him FD. Now FD was a great sales guy. He had been at the bank forever. Clients loved him and he would always deliver for them. Now FD worked so hard, that his last two wives had divorced him, the stress of making his budget on the desk and paying alimony and child support for his families caused him to smoke a pack of cigarette a day. Whenever FD wasn't at the desk you would know where he was. FD was so hooked to this lifestyle that he hardly took any time off. Not only did he need the cash, but his entire identity was defined by being who he was at the bank. Well a few years back, the bank sent out an email to all employees letting them know how sad they were that FD had passed away - while sitting at his desk at work. You don't want to go out like that.

I don't want to finish on that note, but I will. Finance is a great profession, but you have to watch out for the pitfalls.

Would love to hear your views on mistakes you made and have seen made

Comments (24)

Oct 23, 2015

Good post. I've seen a lot of people fall down that "Manage your lifestyle" hole. While I don't personally know anyone who's put themselves half a million into a bookie (that's obviously a moronic thing to do) it's really easy to start spending money like a dumbass, especially if you make a lot in your 20's. You don't have to live like an ascetic monk but it's easy to start seeing a lot of other people throwing money around like it's nothing, especially if you're in NYC or London, and since you're making $700k or whatever amount think that you too should. What you don't realize is that some of those people throwing money around are making far more than you or they're basically living paycheck to paycheck/bonus to bonus. And where people really hurt themselves is when they buy big ticket items with a lot of cash up front and/or have a long term payment liability attached. So that $150k top of the line 911 Turbo doesn't seem like much because you make $700k, work really hard and you should treat yourself to nice things, but it's really half a year's after tax income, and locking yourself into a $2MM+ mortgage for the next forever years, and then perhaps buying a second vacation house, absolutely kills you and chains you to your job forever. And when you have professionally lived through a time like '08 you realize that bonuses are exactly that, not guaranteed every year and they may not go back to what they were previously. Or worse, you lose your job and are still stuck with a high monthly nut, no income and very little saved.

    • 4
Oct 26, 2015

Thank you as well for what you contribute, but I meant to reply to willow.

    • 1
Oct 26, 2015

Thanks for the advice.

    • 1
Oct 26, 2015

One of the best lawyers I know had this exact conversation with me while I was networking with professionals. Thanks for the write up!

    • 1
Oct 26, 2015

Excellent write up! Thank you for all you contribute to the community. I cannot express how helpful it is to hear from someone who has been where I envision myself going.

    • 1
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Oct 27, 2015

+1 SB

    • 1
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Oct 27, 2015

A lot of good points, but one thing I disagree with is using the guy that went from FX sales at a bank to a hedge fund trading gig as a discouraging story or example of a bad decision. It was a risk yes, but just because in hindsight it didnt work out doesnt mean it wasnt a smart move a priori.

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Oct 30, 2015

nothing wrong with moving to a hedge fund after a bank..it was his fault he didnt learn any skills on the side

dude should just learn enough excel and get a job as a financial analyst in corp america.

making 80k a year in flyover land in corp finance isnt a bad gig..it aint IB but it beats being on the dole

alpha currency trader wanna-be

    • 1
Oct 30, 2015

I knew people that started working at McDs when they were 16 - it's the same thing, short-term payoff but didn't put themselves in a position for best college, etc.
I then went to college, thought I had made it - and pulled a 2.25 my first semester.
When I went back to school (twice), put a lot more effort into it - it was my investment in myself.

With work, my caution is the "tyranny of the immediate." My high point was recording 330 hours in a month. What did I do? A bunch of stuff other people could have done. What did I not do? Anything that was meaningful long-term. No networking, no client development, no skillset expansion. It is very easy to do what looks important now - and the stuff one needs to do on a 1, 3, 5, 10 year plan never gets done.

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Best Response
Oct 30, 2015

Great post, +1 especially for the bit about doing things that make you uncomfortable

The one mistake I would volunteer is to not send long angry emails. It's so easy to be a keyboard jockey when you're pissed off and frustrated about a situation but it is never beneficial to fire off a lengthy negative message. Better to wait a few hours or overnight until you have a cooler head and then talk in person or at least on the phone, with no permanent record left behind. Work emails should be short and plain, and meant for asking questions, delivering results, or coordinating logistics.

    • 8
Oct 31, 2015

Posted 11/1/15 at 2:00pm?

@wilowallstreet's posts have now transcended space-time

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Nov 2, 2015

A+. Continuous learning is key.

schmooze or lose

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Nov 8, 2015

Hey! Great post, thanks a lot for the advice as I am currently in University wishing to pursue a career within IB as an equity trader, these tips will come in handy! Had a quick question i wanted to ask, are Investment banks now hiring very few equity traders? due to technology taking over? and is that also the same for hedge funds? I was quite keen on getting into equity trading. However recently I've heard the role is becoming more and more redundant? any feedback will be appreciated, thank you.

Dec 8, 2015

yes banks hire fewer equity traders. I think its too early for you to have decided to pursue equity trading only.
Lots of other types of trading and at various other places.
Think about what makes equity trading so interesting to you, and what you even know about equity trading at an IB.
Go meet some equity traders and see what you think.

Nov 8, 2015

Thoughtless; I can relate to that, just yesterday I was practising my income statement, balance sheet preparation on Excel from 10k,10q and 8K forms. The teacher told us how it was easier to arrange the order of the year as it was in a different way (2011-2012-2013||2013-2012-2011) I thought oh no, no need for that I can just remember the others in my head! I start copy pasting like a mad man from the forms to the sheets like it was nothing, at the end when we received the file on how it should look like... BOM mine was just a cock up. I thought I had it under control and I didn't need to follow his advice to avoid confusion, I was so wrong. The good thing is that it didn't happen at work because it would have affected the whole thing, it would have been embarrassing to have failed in the simplest task... As for the others, yes have a few more stories up my sleeve.

"To know, is to know that you know nothing. That is the meaning of true knowledge"
-Socrates.

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Nov 25, 2015

How difficult is it to maintain a healthy lifestyle if you're an analyst at a BB? Thanks!

Dec 28, 2015

One of the pitfall?
Drugs, alcohol, the party life.
"One of my friends" fell into it and now, getting back in the street is harder than after graduation.

Dec 30, 2015

Great post. Quite a simple things but not so many people follow these rules. The thing is that you should always follow the rule of Golden Mean. Lifestyle should be balanced. Investment of of your effots shoud be distributed carefully between long-term things in your career and current benefit. Golden mean.

Jan 4, 2016

"The hedge fund closed, and CJ is still unemployed six years later" - is this even possible?
I can't imagine anyone not bouncing back after 6 years...

Great post! I loved the people & network part. This is so easy to forget.

Jan 5, 2016

Great post! I have always been a geek myself and what you posted really described me. How did you started networking though? I am trying to pickup some soft skills, making small talks and all.

Jan 10, 2016

Read How to Win Friends and Influence People by Dale Carnegie. Wilowallstreet, myself and many others recommend it!

Jan 5, 2016

Thanks! I bought the book last week and have started reading it. I noticed things were much simpler back in Dale's time and some things are still applicable now.

Jan 5, 2016
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Nov 12, 2016
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