Fellow Monkeys,
I don't often post, and I keep my commenting to a minimum. However, I recently picked up and finished a new book many of you have likely heard of, Young Money. I found the writer to be biased against the banking lifestyle, and the analysts he tracks, for the most part, don't seem happy to be where they are. But that's okay, to each their own bias, I guess.
Further to that, I've been seeing more and more comments about how financiers and investors alike add no value to society, and that entrepreneurship is now the alternative, more noble and enjoyable path. Well, I'll share my thoughts. To give you some context, I did banking for a few months after graduation, and a couple of internships before that, before being laid off. Immediately after, I launched a start up with a couple of friends.
It was a harrowing, challenging experience that drained our resources and left us in more debt coming out than going in. Yes, we were passionate about the idea. Yes, the idea was validated and we did have sales and good growth. And we did enjoy many facets of the experience. But regardless, it was the hardest thing we've ever had to do. Paul Graham, the renowned godfather of start ups, and the founder of Y-Combinator, arguably the Harvard of incubators, himself never did a second start up, because he recognized the agony and stress it brings about. Our idea is now a good side business, and I'm back in finance full time. Did we add value to society? Sure, but we charged a price for it, just like J&J selling shampoo, or bankers charging for their advice.
But do you know what we learned? Every business on this earth, no matter the product, service, or cause, exists to make money. The focus is on the bottom line, and the competition is intense. After a while, your idealism fades, and you find your self trying to keep the business afloat to appease investors. You'll do almost anything at this point, assuming it's legal. Very few start ups succeed. And far fewer reach the level of a Whatsapp. Really, the way to succeed is to have a value proposition so clear that you need not state it. Most concepts out there, even the ones that look successful, suffer from a lack of monetization, but happen to be lucky enough to have $2 mln in funding to pay salaries and keep the thing going. A friend's business generated $30,000 in revenue last year, and later they raised $1mm+ in funding. He laughs at the absurdity of the valuation he received, he also works 80+ hours a week to try and meet the loft goals of his investors; he's currently as miserable and stressed out as my banker friends, while making less. And he's not alone.
The point of this post is to throw some cold water at those that believe having your own business is preferable to building a career. If you want to do it, know that it's the most difficult thing you'll do, that it will teach you a lot, but it will also have a high risk of failing, and your resources will be drained pretty fast. One upside, though, is that you have the opportunity to learn more about your self. For example, I learned that this was not for me, and that I was passionate about finance and investing. The experience added clarity to my direction, and that is likely the number one benefit I derived.
So, having experienced both sides of the coin, I can say that the value added in banking is no less than that we added to our customers. Sure, there are those that want to push ideas on clients just so that they can extract a fee, but I'd like to think that they will fizzle out in the long term. I also like to think that id you wanted to add value, you'll be able to in any field. Whether as an ingenuous MD that adds real value to their clients, or as a hedge fund manager that focuses on making money for endowments, pension funds and charities. To some extent, I'm being idealistic again. Reality is more complicated.
However, It all comes down to perspective, and the way we think about things. If you want to think negatively about a field you're in, you'll burn your self out. I did that to my self before, and it was un-constructive. Your frame of mind, in my opinion, shapes your actions, which affects your performance and decisions. Sorry if this was a long post, but I felt the need to share my thoughts to hopefully add some clarity to the subject. To the bankers, traders, investors and entrepreneurs on this board, I wish you luck.
Great post.
one thing tho - when you said "Any field", maybe give more examples than ones in finance ?
Basically is what he is saying is that in an idealistic world, any field you go in to, whether it be finance, engineering, chemistry, etc. you should be adding value to the world or you're doing it wrong.
I actually cared a lot about adding value to society and contributing to the advancement of humanity for most of my life. Somewhere around junior year, I just stopped caring and decided I just want to be happy and don't care how I do it. Don't know why that happened, but them's the facts.
Anyway, if you're making money, you're creating value either directly or indirectly.. right? My buddy plays poker for a living and lives in a Leftie state and gets a lot of shit for being a leech or whatever. So his opponent wanted to play poker and got to do it against my buddy, so that's the value he gained, right? Even though he lost money, he gained value... although he probably doesn't see it that way. Also, at the pro level, gambling obviously has viewers and sponsors and shit.
Yeah... anyway.... I have a midterm in an hour and I'm typing this bullshit
AWESOME post. VERY refreshing. Reminds me of
from http://www.fourhourworkweek.com/blog/2014/02/13/anxiety-treatments/I know an old guy who started a manufacturing company decades ago and did well. Let's say they make plastics. Is he passionate about plastic? No ... that'd be fucking weird.
The OP is not the only entrepreneur to pursue banking. I've seen other guys come on here and start a thread asking, "I started this business that does X in revenue; it's cool but would I be able to do something like ibanking some day?"
It's easy when you're young to glamorize the idea of owning your own company, so I love it when guys like this can come on here and deliver the real deal. Definitely not shitting on entrepreneurship, but remember, it's not about being happy or about starting a revolution, it's about turning your hard work into cash.
Great post, and some good perspective for those wanting to try their hand at entrepreneurship and thinking the grass is greener.
I'm curious about your friend's business (the one you mentioned who is working just as hard as bankers to meet his investors' goals). Having little exposure to the tech space (what I'm guessing the business is in) and how startups - aside the ones that build up huge awareness - go about getting the attention of the VCs.
Well it comes down to showing that your idea has traction. He tracked the growth/engagement levels of his user base well, and managed to sell investors on how his business is well positioned to take advantage of certain growth trends. Salesmanship is really important in this process, investors have to believe in you as a business operator and visionary. VC's aren't hard to contact, they rely on making investments to generate returns. You have to be resourceful and creative in how you get their attention, though.
Stick to the fundamental capital intensive businesses: oil, gas, metals, mining, manufacturing.
A few years on Wall Street and you have the credibility, the intelligence, the cash, and the experience... don't waste it all trying to be the next WhatsApp.
It's the equivalent of studying finance in college and working as a financial advisor, then quitting to put all your cash into a biotech stock. If you're looking to strike gold in a single payday play the lottery - it's cheaper.
Interesting post, but it has to be pointed out that there are also former bankers that became successful entrepreneurs. This website is an example, so is Mergers and Inquisitions. Both started by former bankers.
I think really the bottom line is quite simply whether your business idea will likely be more lucrative than a career in banking, and whether you'll have the resources (including your skill/luck) to make it successful. It's pretty much as simple as that...
Both are difficult. Perhaps banking is a bit more structured and possibly easier to attain success (since you don't have a bottomless pit to fall into). If it were possible to quantify the risk and reward, would a career in banking be a better value proposition? Quite possibly. But it depends on the individual.
Banking is not that "easy" to make bank in the long-run. This is a false presumption. IMO, What we need are more SMART entrepreneurs who AREN'T risk averse. Investment bankers, you can argue are build to not be entrepreneurs.
It's not necessarily an either / or proposition. As in many things, it often has to do with timing and experience. Spend a few years building a network, gaining experience (making stupid mistakes on other people's dime), making some money etc. Then if you really want you can start a business with a group of smart people you can work with (ie not 'buddies' with an idea). It might still fail, but it's all about stacking odds in your favor...
Worst case, you have the option of staying with a solid career OR higher chances of succeeding at building your own business - and if business fails, you have a career to go back to. I know people who did it in their respective fields, some became wildly successful, some didn't succeed, almost went bankrupt and then went back into their industry and fought their way up, now still pull down high 6 figures to low 7 figures being an executive or whatever.
This, @globalmacro right of the spot (I underlined it).
This is tangential to OP, but the whole concept of "prestigious" start-ups is mind numbingly stupid. Everything about the word "prestige" is the opposite, by definition, of any start up; "reputation," "tradition," "track record," "relationships," etc.
Anyone who gives a fuck about prestige is NOT a good fit for running a start-up. I know early twenty-somethings who run their own businesses, and are having great success at it. Not one of them went into it with this "I'm going to change the world with my gawdly startup trailblazing genius." They saw an opportunity to make money with relatively simple, intuitive business models that complement their skillsets, and they enjoy what they do.
Great post, I agree with you that in any "legal" field, there is some value to be added either to society or to the economy and adding value to the economy improves society somehow...
Was it easy to reenter after the startup? How did you explain it during interviews?
I explained it by being honest, when I was laid off I decided to try something new while the market improved, and I enjoyed the experience overall. However, it showed me that my true passion lies in finance and investing, and that's why I'm pursuing full time opportunities in the field.
I've had no problems, if anything I've impressed my interviewers when discussing it. The website is also professionally built, and gives off a positive impression as well.
Great post. Very genuine.
Startups are such a badge of honor in the U.S. Even if it is a failed startup (which is not respectable in some other countries). In the high cost of living environment we live in, to me entrepreneurship is such a courageous profession someone could go after. Entrepreneurship requires much more bravery than enlisting in the military.
I don't have a ton of friends that have co-founded startups, but the ones I do collectively admit that they probably should have just gone into banking. That way they could secure reward for the countless hours they put in.
LOL wow. Do us all a favor and go play in traffic.
You must still be in college.
Leveraged Sellout published a humorous post on this very topic, a couple of weeks ago. It's titled "The Book of Graham", after Paul Graham, the founder of Y Combinator.
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