Why the focus on exit opps?

rickle's picture
rickle - Certified Professional
Rank: King Kong | banana points 1,751

So, I know you'll read this and say ' He's naive". Actually I'm not and have man y years of battle scars on the retail side. Been through the boiler room cold calling w business when it was legal and encouraged. Was told the best lead in the world was if someone answered the phone. Figured out how to make it work and built a lasting 29 yrs strong! Would have been easy to quit as most did. Was starving on 100% commission and no advance. had the lights shut off at home. You get the drill.

So my question is, why are so many bankers hyper focused on exit opportunities? It seems to me you have to work your ass off to get to the right college. Then work your ass off to get an interview / hired. Then you work your ass off in the job for a few yrs (making good money for a kid). I realize it's a grind but so is law school and med school and top MBA and consulting, etc. It's all a grind until you're a leader and have others to do the grind. If the answer is you really want to be at another place, why don't you just focus on getting there the whole time?

Have two friends who are F250 CFOs. Both took different paths (MBA vs. CPA) but neither of them did IB to grad school back to IB associate to PE to MBB to corporate dev. The CPA did Big 8 to client to wharton (paid for by client) to various finace roles within client to CFO of division to CFO at another global company. MBA was basically the same. Once he got to where he is he moved up the food chain to the CFO position. Has been employed there 20 yrs. Makes 2M / yr and does really interesting work making all the IBers jump through hoops.

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Comments (156)

Feb 28, 2018

A little confused on what your asking - you essentially said why focus on exit ops but proceeded to rave about your two friends who once had exit op-type jobs..? Nonetheless, IB has higher pay and sets you up better than starting out in finance at a F500 company. There is a reason such a high proportion of executives started out in IB. Your two friends worked their way up the corporate ladder, but by no means is that the 'standard'

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Feb 28, 2018

My point was they DIDN't bounce around. One spent 5 yrs at PW, joined a client and stayed there until he waA which he took at night and weekends while he worked for them). They other basically did the same thing.

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Feb 28, 2018

I guess my question is: Are these IBers doing IB for two years (and hating it) just to move on to one of many more steps to get closer to corp development lead? Why not stay in IB and become an MD?

Feb 28, 2018

Because serving clients until I die doesn't sound appealing. Also work/life balance.

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Feb 28, 2018
rickle:

I guess my question is: Are these IBers doing IB for two years (and hating it) just to move on to one of many more steps to get closer to corp development lead? Why not stay in IB and become an MD?

Because working in IB sucks balls at the junior level, and the only reason juniors do it is for future opportunities...ie "exit opps"

The previous jobs you described of your two CFO pals were cake compared to IB.

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Feb 28, 2018

Exactly my point. If so many think it "sucks balls", why do they do it. Why not chose a far more pleasant path that will still get you there? Could be mgmt consulting or FDLP or working your way up the ladder after a Big 4 stint. I get it if you want to be on the buy side, natural path.

If it's just about crushing it, way easier ways to crush it.

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Mar 1, 2018

Management consulting and FDLP pay less than IB

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Mar 8, 2018

You answered his question unintentionally - @rickle, a lot of them do it to give Tommy Toughnuts answers like this "Oh I work so much harder than ... other jobs cakewalks, etc"

Mar 8, 2018

Ummh ... wouldn't that make them idiots? Is the goal to work harder? I've always thought it was to work smarter, use leverage, get more done in less time so you can fill that free time with either more productive work or fun.

Best Response
Feb 28, 2018

Because investment banking culture at an industry level (not just at a certain specific firm, or group) is toxic.

When a banker's entire existence is based on chasing clients, and if you're lucky enough to get some, pandering to them, berating juniors for perceived shortcomings (because it only took you 25 years to "get it" - boy you sure catch on quick), and positioning yourself politically within your firm through an office version of the Hunger Games, you could see why that wouldn't be the most appealing way to spend the next 30 years of one's life for certain perceptive 22 year olds.

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Feb 28, 2018

1st of all, I "got it" very early in my career - mid 20s - and have made great money for a long time. But you are making my point. Why do it at all if it sucks so bad? Lots of other ways to make a great living without killing yourself. Shorter sales cycles, less aggravation.

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Feb 28, 2018

because thats where you develop tools and skills necessary for PE/HFs however, p72 is starting its own in house training program for undergrads so maybe thats where the finance industry is going-- lesser reliance on IB for "training wheels"

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Feb 28, 2018

I wasn't referring to you specifically, but the ubiquitous "you". I thought context made that pretty clear.

Not sure that there are "lots of other ways" to make low-to-mid single digit millions annually (or more) at the apex of your career earnings potential.

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Feb 28, 2018
  1. Just a guess but most will burn out, quit , change, whatever long before the millions are made. That't true in every industry. I have relatives and friends that have made millions in a wide range of roles (including vice chairman of a BB - not the wealthiest oddly enough). You can kill it, yes millions, if you're really good at (which generally means you need to love it) what you do. Retail RE (agent or broker), many flavors of insurance sales (something as mundane as owning multiple State Farm agencies or the like), insurance brokerage (that's my lane - know more multi million dollar guys than you can shake a stick at). And on and on. These guys have built successful businesses.

2.I would encourage young people to spend time doing what they like, not slaving at something they hate just to get to the next step. That said, my son is looking at getting into IB. Hope he likes it.

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Feb 28, 2018

If you say so

Feb 28, 2018

Ah yes, everyone loves the insurance brokerage business

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Mar 8, 2018
Woolymammoth1:

Ah yes, everyone loves the insurance brokerage business

Knock it if you want, but my father-in-law sold the D & O focused insurance brokerage he founded for more than $20M. It's pure sales, but he's had a pretty good life.

Mar 8, 2018

Not doubting that there is money to be made. OP was talking about doing what you love and the insurance brokerage industry doesn't exactly seem thrilling.

Feb 28, 2018
rickle:

1. Just a guess but most will burn out, quit , change, whatever long before the millions are made. That't true in every industry. I have relatives and friends that have made millions in a wide range of roles (including vice chairman of a BB - not the wealthiest oddly enough). You can kill it, yes millions, if you're really good at (which generally means you need to love it) what you do. Retail RE (agent or broker), many flavors of insurance sales (something as mundane as owning multiple State Farm agencies or the like), insurance brokerage (that's my lane - know more multi million dollar guys than you can shake a stick at). And on and on. These guys have built successful businesses.

2.I would encourage young people to spend time doing what they like, not slaving at something they hate just to get to the next step. That said, my son is looking at getting into IB. Hope he likes it.

"I would encourage young people to spend time doing what they like, not slaving at something they hate just to get to the next step"

I like looking at memes, listening to music and eating sushi.

Find me a way to make $150k doing this, and I will quit my IB job yesterday. Better yet, pay me a ~$3k paycheck every 15 days for doing this. It can't be done.

IB is a great paycheck for people who can't get paid "doing what they love"...yet
(I understand I could work hard creating a business making memes, curating podcasts and reviewing sushi places, but this will probably not pay me as consistently as I am paid currently)

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Mar 6, 2018

Sounds like the customer success guy at my office in sales to be honest.

Doesn't quite make 150k, but if you can get into a big co you probably can.

Usually looking at memes and listening to music when he's not on a client call. Doesn't eat much sushi tho.

Mar 5, 2018
rickle:

1st of all, I "got it" very early in my career - mid 20s - and have made great money for a long time. But you are making my point. Why do it at all if it sucks so bad? Lots of other ways to make a great living without killing yourself. Shorter sales cycles, less aggravation.

Are you a troll? The answer was stated like 5 times. IB is a stepping stone to PE/HF where the real money is. Same thing with big4 and Consulting in most cases....you go in, make a few bucks and learn a bunch of stuff real fast, then get out before you get stuck there.

Obsession with exit ops? You want the best option for an exit. You bust your ass for 1-10 years, you don't want some shitty podunk job, you want the best you can get.

All these guys "obsessed with their jobs".....they'll have the option to be golfing at 45 while most people are still worrying about making mortgage payments. Some might even stay in industry and try for billionaire/political goals. If you're in this for any other reason, you're doing it wrong.

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Mar 6, 2018

Pretty pathetic but I'll just say that's youth talking. What you don't know is there are so many other ways to kill it when you are in your 20s, make "real money", set yourself up so you never have to kill yourself, and actually like what you do. Yes you'll have to work hard but not IB hard.

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Mar 6, 2018
rickle:

Pretty pathetic but I'll just say that's youth talking. What you don't know is there are so many other ways to kill it when you are in your 20s, make "real money", set yourself up so you never have to kill yourself, and actually like what you do. Yes you'll have to work hard but not IB hard.

You might not be in the right forum. Most people here know there are other jobs but this is the one they've chosen, and the conversations here revolve around making the most of it. You're not obligated to do any of this, but you're generally wasting your breath coming on a finance site and trying to talk people out of doing finance. You're going to get a few takers who like to argue but most are too busy to waste too much time. Who are you trying to convince anyway...yourself?

Also, I'm almost certainly older than you and am closer to retirement than entry level FYI.

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Mar 7, 2018

Good points. I'm not in IB. I'm in retail and wholesale financial services (kind of a hybrid shop I started).You guys have decided to go down this path and are fully aware of the surrounding issues. Certainly not trying to talk anyone out of it. I just saw so much negativity in many posts, so I got to thinking, "Why is this guy doing this when he could be making great money doing something he liked?" Anyway, lots of ways to skin the cat.

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Mar 14, 2018
rickle:

Good points. I'm not in IB. I'm in retail and wholesale financial services (kind of a hybrid shop I started).You guys have decided to go down this path and are fully aware of the surrounding issues. Certainly not trying to talk anyone out of it. I just saw so much negativity in many posts, so I got to thinking, "Why is this guy doing this when he could be making great money doing something he liked?" Anyway, lots of ways to skin the cat.

Indeed. While a lot of these guys look at their paycheck/bonus from the bank, they neglect all sorts of opportunities at making $$$ via other means. I was one of them for a long time.

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Mar 14, 2018

Exactly. Now I have to admit two guys I know quite well have killed it in IB and HF. One was a vice chairman of a BB and retired several yrs ago. The other was a top fund manager and has since moved to running his own HF with about 3B of AUM. They've both made 10s of millions of dollars. But 99.9% will never get to that level.

For the rest of them, there are so many ways to make good money enjoying what you do. Most of my circle all make hundreds of thousands of dollars and they're all quite different ranging from C level execs (millions of dollars) to entrepreneurs with several consultants and CPA firms in the mix. I find the happiest people I know are the ones who own their own shop and are completely committed to growing it OR using it as a tool to enjoy their lifestyle. Lot of free time when you get to that point.

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Mar 8, 2018

Genuine question here, how many people make it to PE/HF? Is it not the same 'up and out' mentality at a fund, ie stick around for 2 years then get booted out and are there enough PE/HF spaces for IBD guys?

Where else do IBD guys go?

Mar 10, 2018

IBD analysts end up going everywhere from vanilla PE/HFs, funds of funds, corporate finance/development (at a slightly more senior level), tech, business school, marketing etc.

If you're interested in business there is pretty much no other role that will give you the flexibility to pursue any of the aforementioned career paths.

Beyond exit ops, the reason 22-year-olds are willing to slog in this industry is because no other job gives you this level of responsibility at an entry level. The work is boring no doubt, but it's a hell of a lot more interesting than what an entry level corporate finance job will have you do. The work load and crazy hours end up propelling you years ahead of your peers in terms of skill set by the time you are 24.

Mar 10, 2018

I have a lot of trouble even seeing how ibd is useful for hedge funds. That experience would
Teach you anything about taking money out of the market.

Top hedgie guys maybe represent 20-25% from ibd and a lot of that is just an overlap in interests. I feel like ibd would teach you some good analysis skills but nothing about how money is actually run.

Like as a trader I could see hiring an analyst to run some analysis to make sure I know what I'm betting on and there's not something I'm missing.

Array
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Mar 8, 2018

Love the hate on this guy for an honest question to angry overworked 20-somethings. LMMFAO

Feb 28, 2018

This.

It's not enough to find the work interesting and be able to handle long hours. If that were the case, I'd bet materially more analysts would stay on long-term.

It's exactly what iggs said. For most people, in most groups, at most banks, they realize that the amount of unbelievable nonsense you have to deal with just isn't worth the frustration/misery

Feb 28, 2018

To enter into PE/HF arena. Honestly, the CPA to latching in with a client seems like a great route for corp dev and financial planning. You still have to put in years of hard work and hours to get the necessary experience, but can be very rewarding in the long run. If you are in one of the larger accounting firms and happen to be a fit staying in can be have some great results as well.

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Mar 14, 2018

because 99% of this forum has a grass is greener mentality, faps to prestige, and has an inability to think long term.

or it could be because analyst programs are 2 years and they HAVE to think about exit opps.

I think it's a combination of the two

Mar 14, 2018
Random Name:

IMO the exit ops are so similar.

This is false.

But to your point. No one is "sad with themselves", people are just striving to do/be the best. I do agree that people seem to be a little elitist and are sometimes splitting hairs when debating coverage/product groups, but this is a finance forum--what did you expect?

Mar 14, 2018

Groups absolutely makes a difference when it comes to recruiting.
Aside from the obvious differences between for example, ECM vs coverage, your experience in top coverage vs shitty coverage can vastly differ.

PE interviews drill down on deal specific items. It's very difficult or next to impossible to answer these questions and answer them well without working on actual deals.

Mar 14, 2018

Well, considering there is no M&A group for analysts at GS and that DB LevFin is one of top LevFin groups, I'd be pretty happy that I landed a top group over a nonexistent one.

In all seriousness, coverage groups and relevant product groups (MS M&A) at GS, MS, and EBs do place better to top PE/HFs than average groups at a bank like BAML/DB/Citi, etc. Not saying that bright people at these places don't go to great places but having a platinum plated name behind you makes it easier. Not saying that gives people the right to be assholes about it but there is a discernible difference.

Also honestly, wtf. Like are you seriously so insecure that you have to turn to WSO to justify being at what you yourself perceive to be a lower tier bank? Be happy where you are and stop trying to prove yourself to others.

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Mar 14, 2018
RoleTied:

I'd be pretty happy that I landed a top group over a nonexistent one.

lol

Mar 14, 2018

I see. For the purposes here, I meant only the typical product groups (M&A and Lev Fin) and industry coverage groups (healthcare, TMT, industrials, etc.). DCM/ECM cases, global trade groups, etc. are a little bit different.

I really don't think a PE Megafund or a 5b+ hedge fund are going to mind someone from a product/industry group at a bulge bracket because of a name. As long as a group has multi-billion dollar deals right? I mean, certain cases like a distressed fund targeting restructuring specialists like Houlihan Lokey are understandable.

And I'm not insecure.. I see so many posts I was beginning to actually wonder if there was something I'm missing.

Mar 14, 2018

Are you asking what PE firms care about (groups and school and firm) or are you simply listing your perception of how they should approach recruiting? You sound very naive

Mar 14, 2018

While you are right your deal experience is pivotal, so is brand name. It's somewhat of a catch 22: you need deals to establish a brand name, but you need a brand name to have a shot at large deals. Your firm name/group is the easiest first filter for recruiters to judge whether you have had enough exposure/deal experience for certain shops

Mar 14, 2018

I don't know if you've gone through buyside recruiting yet but there is a pretty clear advantage that some banks have. It's not some coincidence that most of say Apollo or KKR's associates are from GS, BX, MS, Moelis, Evercore, GHL, Lazard, etc. You can argue causation/correlation but I know in some cases, funds will just recruit at GS or let GS/MS kids go first in interviews and the leftover spots are dished around to others.

Kids from top groups at other BB's absolutely have a shot at top funds just look around WSO. But it's sorta like college. Going to Wharton is different from going to Northwestern. Both are great, top notch schools that send kids to top notch firms but one does place better overall than another.

Mar 14, 2018

Haven't went through buy side recruiting yet. I just had a lateral offer to a pretty good group at one of the middle bulge brackets. I get its not Goldman Sachs or Morgan Stanley, but the group is getting good deal flow at one of the top 5 IBs. I know a lot of people that were here went to Megafunds, which is why some of this doesn't make sense.

Always good to hear from you guys which is why I posted this.

Mar 14, 2018

So their future career goals come to fruition.

Mar 14, 2018

You can theoretically go from any group / bank to any fund, and it does happen...but coming from a top group at a top bank makes it much easier. That said, if you don't manage to get GS TMT and end up at Deutsche LevFin, you shouldn't lose faith and will still have great exit opps.

Feb 28, 2018

IB usually will translate to corporate M&A or business development in the corporate world. Rise the ladder, and the head of business development or corporate M&A rarely if ever get tapped as CEO, CFO, etc;.

IB -> PE can lead to it.

Accounting is a better path truthfully if that's your endgame. Rise the ranks, become a Controller, then SVP of Finance, and you're heir apparent to CFO.

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Mar 1, 2018

Won't doing IB for a few years and transitioning to CF get you to SVP of Finance faster than starting off as an Accountant?

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Mar 11, 2018

Not sure why the monkey poo on this, I'm an accountant and I don't even know the standard answer. I will say anecdotally our CFO is a former IB/PE guy (financial services). For my own sake I hope we take accountants too.

Mar 14, 2018

Partially because the recruiting cycle has moved so far back that you have to be thinking about it as soon as the end of this calendar year if you are a graduating senior. Ridiculous, but true.

Mar 14, 2018

That site is fun.

I just went through this about 3 times this week:
http://wheninfinance.tumblr.com/post/22257556762/w...

Mar 14, 2018

that site is absolutely fantastic haha

Mar 14, 2018

This site is hilarious.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

Mar 14, 2018

They're trying to live the dream

Mar 14, 2018

Thanks for the link. It just made my month

Mar 14, 2018

Well some people have their whole life planned out ahead of them and that's the nature of people in the industry.

So cocky

http://wheninfinance.tumblr.com/post/22244406982/w...

Mar 14, 2018
burningcigar:

As far as I can tell 99% of us are college students anyway. Kinda silly to be asking about stuff 2-4 years out in the future, like seriously wtf?

Saw this just now and made me laugh because I'm not the only one, you guys might appreciate:

http://wheninfinance.tumblr.com/post/22255481930/w...

Why is this unreasonable? Why wouldn't they? Just to be clear, I'm an analyst now, not in school anymore. And I can assure you that exit opps are a huge deal. The easy thing to do here is bash college kids, but I actually do recommend that you ask about exit opps before you consider a certain path. Life does not end 2-4 years after you start your first job.

You might argue that it doesn't matter because we'll all go back to grad school and change our minds/restart anyway, but some people don't want to or have to go back to grad school. You know who doesn't plan 2-4 years ahead? The average joe at ASU who are happy with selling life insurance after graduation.

Mar 14, 2018

Why? Because doing thankless work and having no life fucking sucks. You're being used and 95% of the time it's with the expectation that you're going to be thrown away and replaced by a younger, cheaper, less burned out college grad. So line up the next thing now if you have an ounce of smarts in you, hopefully they'll pay you and treat you better. Unless you are kookoo in the head and like it, you won't want to see the inside of a bank ever again.

Hilarious site, BTW

Mar 14, 2018

What's wrong with ASU again?

Mar 14, 2018

http://www.leveragedsellout.com/2005/08/hicks-musi...
A lot of times, dreaming about the future is more pleasant than the present. Whether you're studying for finals and not getting laid, or in the office at 4am and not getting laid, you need to know and plan on what's at the end of the rainbow.

Mar 14, 2018

End of the rainbow? Which is more 4am in the office and not getting laid?

Maybe I should try this strategy

http://wheninfinance.tumblr.com/post/22281108291/w...

Mar 14, 2018
Mar 14, 2018

Cause banking makes you a balla.

Mar 5, 2018

Also important to note that a large percentage of junior bankers do not care about finance at all so they would naturally care about how they can leave.

They went into the industry because they went to a top school and followed the herd to chase a prestigious/selective job largely cause they didn't know what to do or their true passion (human rights/urban planning/whatever it is) doesn't pay for Nobu dinners and other luxuries.

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Mar 14, 2018

Bump. During my SA stint at a tier 1 BB everyone - literally everyone - talked about PE. Makes me wonder if there is anyone out there who really wants to do IBD.

Mar 14, 2018

I'll raise my hand. I'd love to do IBD long term since it's in general heading towards not needing an MBA to become an associate and the MM firms tend to be a lot less political than their BB and PE counterparts.

Mar 14, 2018

I started as an analyst in 08. This is not uncommon, as everyone in my analyst class was recruiting out. I will say that of my group, the split was roughly 60/40 buyside / industry.

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Mar 14, 2018

Agree 100% with this and can you really blame them? There's really nothing to lose by going through PE recruiting.

Mar 14, 2018

I'm still a youngin', but from all my older friends I think most people realize they can't do the rat race after a certain point and opt for other opportunities when the time comes. Busting your ass to get into a target, get internships, get a top SA, get placed into a top group, get an offer, be a top analyst, go through PE recruiting, do b-school apps and try PE recruiting again, etc. is cut throat and not meant for everyone.

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Mar 14, 2018

Some people realize while they're in banking too that they don't want to do PE. Sure, sounds nice in college when you're trying to plan your life out and even after 10 weeks as an intern, but then you face reality and realize that sounds shitty to you (that was me).

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Mar 14, 2018

Everyone talks about it coming into banking, because by definition everyone coming into banking is coming out of college or is otherwise very young, and therefore by definition (and I don't mean this as an insult) is dumb and doesn't know shit. Turns out some people want to stay in banking. Some want to go to plain old asset managers. Some want to be lawyers (pray for them). Some want to do corporate development where, if you're in the office past 4 on a Friday, something has gone horribly wrong. These are all fine! PE seems great (and it can be) but A) there just aren't that many MF jobs to go around, and B) for some it's not as glamorous as it seems.

The focus on exit ops around here is one of the dumbest aspects of this site. Exit ops depending upon the individual first and the firm, the group, the location, etc of your analyst stint are all distant secondary factors.

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Mar 14, 2018

I think a large amount of people on this site care way too much what others think of them & their career. It could be said that MM PE beats MF PE since there is higher chance (Albeit still low) of staying longer than 2 years w/o b-school and MF PE hours are usually just as bad as banking. My mentor works in post-MBA MM PE and honestly it appears so absolutely awesome. On the contrast a MF PE group head went to my non-target and is very much like Dimon or Blankfein in terms of his workaholic attitude. I don't see either leaving since it's what fits them.

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Mar 14, 2018

http://www.economist.com/news/briefing/21709007-pr...
In short, yes. Private equity is the more desired job in finance and imo will likely stay that way for the foreseeable future. The reality is the PE partner track is incredibly difficult and more people flame out vs those that succeed.

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Mar 14, 2018

Kinda curious and this question is open to anybody:

Do you think it'd be best to try to go to a search fund from like HBS or GSB since your chance of becoming partner drastically increases?

Mar 14, 2018

Yes/No. I've noticed a growing interest in hedge funds. I think part of the reason maybe some PE funds started doing a "2-year and out" (no chance of promotion) and that made some reconsider the career path.

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Mar 14, 2018

Too bad the hedge fund model is under pressure due to exorbitant fees/underperformance and it's much easier for investor redemptions.

Mar 14, 2018

Anyone ever seen someone exit to go work for the NFL or some type of interesting sports position?

Mar 14, 2018

Yes. Seen people go to both NFL and NBA.

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Mar 14, 2018

In what types of roles? Very interested in this.

Mar 14, 2018
nstengel:

In what types of roles? Very interested in this.

If you're GS IBD, KKR PE, HBS MBA typically you'll get GM offers but otherwise no one will be interested.

Mar 14, 2018

Have to hit the trifecta or just one of the three? Not to knock you, but curious how you know

Mar 14, 2018
nstengel:

Have to hit the trifecta or just one of the three? Not to knock you, but curious how you know

I mean, two of the three might get you into the NHL or MLS, but for the big leagues you need all three

Mar 14, 2018

Any chance you could point to examples of people who have done just that, or something similar? Everybody I know/look up is a former player

Mar 14, 2018
nstengel:

Any chance you could point to examples of people who have done just that, or something similar? Everybody I know/look up is a former player

You do know I'm fucking around, right? Outside of this bubble most people don't even know what KKR is, if you type it to most people they'd probably think it was a typo.

Getting a job with sports leagues are rather low paying, but if you want it you can get it. Just network like you would approach a bank.

Mar 14, 2018

Low paying...? GMs get paid in the millions annually. Epstein just got a 10mm a year contract. But as a former D1 athlete it would be a dream come true being in the pros.

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Mar 14, 2018

Financiers don't become GMs. Just like professional athletes don't become the head of equities at GS.

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Mar 14, 2018

Justin Tuck got into Wharton MBA so he could go straight to GS MD. 2X super bowl champ->Wharton->GS

Just think of the PRESTIGE. I will say though that the NY Giants are the UBS of the NFL at the moment.

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Mar 14, 2018

That was hilarious

Mar 14, 2018

NBA - Team Finance, whatever that is
NFL - international licensing type stuff

Mar 14, 2018

They take straight out of high school too. Google Kobe Bryant - he went straight NBA without IBD experience

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Mar 14, 2018
wso_user:

They take straight out of high school too. Google Kobe Bryant - he went straight NBA without IBD experience

He's the exception, usually at least a stint at a MS level firm is required to have a Bryant-like career in the NBA.

Mar 14, 2018

He's also a VC now without HBS.

Mar 14, 2018

Y'all are trolling too hard. Stop.

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Mar 5, 2018

I think most people prefer a sure thing to taking risk. The OP's career path is non-standard. The two CFOs the OP mentioned took more standard career paths. Most kids going into IB don't want to be CFOs at F500 companies. They want to be partners at PE funds, VC funds, maybe a few hedge funds as well. To be honest, I don't think most kids going into IB have any idea what they want to do. They just hear that IB pays well and sets them up for a high-paying career almost immediately after graduation. For a lot of the kids applying to IB or consulting analyst programs, they measure their lives in competition with one another. If you had to crush it in grade school and middle school to get into a competitive high school, then crush it in high school to get into a good college, then crush it again to get a good internship, and crush it one more time to get a return offer--well, that's how you're conditioned. The drive that got you to the full-time offer is the very same drive that propels you to ask, "What's next?"

And in the modern economy, it's not clear to most new graduates which (if any) career paths their parents may have taken will be available to them. Technological change used to take more than a full generation for corporate and societal adoption. That's not the case any more. People graduating today will probably experience triple or quadruple the disruption to their careers as their parents did. Since you can't control for almost any of the exogenous shocks to your career, it makes some sense to play it safe out of college and focus on your next move from a position of relative strength. That seems like a reasonably sound strategy to me.

    • 7
Mar 14, 2018

Ive heard astronauts and fighter pilots have excellent exit ops. Dunno so much about doctors

Mar 14, 2018

Could you imagine the IBD interview for an astronaut?

Activities: Spent 6 months on the space station

Interviewer: So tell me a time when you've worked on a team
Astronut: Well I spent 6 months in space
Interviewer: OMG NO WAI!!!!!!!

Interviewer: So what's your greatest accomplishment?
Astronut: I spent 6 months on the space station
Interviewer: OMG NO WAY!1111212

"I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom

Mar 14, 2018

You know, I never really thought about what an Astronaut does once their done being Astronauts. Everything else in life has to be kind of a let down I would think.

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MSFHQ

Mar 14, 2018

Go around give motivational speeches ribbon cutting ceremonies graduations blah blah blah?

Same stuff that ex Presidents do would be my guess

Mar 14, 2018

Also, aren't they usually engineers before they get accepted to the program?

Mar 14, 2018
zer0zero:

Also, aren't they usually engineers before they get accepted to the program?

depends..if they are on a mission to explore geology, then they are geologists..they can be anything...i think its moslty scientists and engineers, with doctorates..

Mar 14, 2018

"there arent supposed any fucking exit ops...its supposed to be your dream, it supposed to be what you always wanted and dreamt of doing!"

I like your attitude.

Mar 14, 2018

this should be stickied, on all forums on this site

Mar 14, 2018

People ask about exit opps because people don't stay at one company for an entire career any more. Kids graduating now are expecting to have 8 or so jobs before retirement. It is important to know where each job can place you afterward.

Mar 14, 2018

Exit opportunities are whatever you make them. I think people need to realize that when they go into careers with skill sets that don't transfer well you are going to have to hustle to change your job.

S&T is kind of like being a dolphin trainer. Cool job, lots of fun, but what the hell else are you going to do.

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MSFHQ

Mar 14, 2018
AnthonyD1982:

Exit opportunities are whatever you make them. I think people need to realize that when they go into careers with skill sets that don't transfer well you are going to have to hustle to change your job.

S&T is kind of like being a dolphin trainer. Cool job, lots of fun, but what the hell else are you going to do.

Dolphin Hunting is always an option...

Mar 14, 2018
suspenders:
AnthonyD1982:

Exit opportunities are whatever you make them. I think people need to realize that when they go into careers with skill sets that don't transfer well you are going to have to hustle to change your job.

S&T is kind of like being a dolphin trainer. Cool job, lots of fun, but what the hell else are you going to do.

Dolphin Hunting is always an option...

sounds like a blast...

Mar 14, 2018

Fuck you Dolphin lol

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Mar 14, 2018
AnthonyD1982:

Fuck you Dolphin lol

Fuck you Whale

Mar 14, 2018

This really should be stickied, excelsior is correct, though maybe just in the trader forum. I think it's even a legit question; the stupid part is that it's been asked and answered so many times already in this forum, asking just demonstrates the laziness of the asker.

Mar 14, 2018

I agree with the sentiment of the thread but do think it is smart to consider what you would do if wiped out by a black swan event. There is always sales or becoming a product specialist or even getting involved with prime brokerage trading support!

Mar 14, 2018

Sales? sales is not an exit op...its like trading...gimme a break, dont compare it to pb and especially not to T.support
Furthermore, nobody insuated im a prop trader or a risk taking trader...but i get your jist as well

Mar 14, 2018

Sales not being an exit op? Certainly is if you are a sales trader. Much less so if you are buy side. Also, you could potentially work with companies who design software to help them refine their trading platforms. You could parlay your knowledge of products in tons of ways.

I've met several "failed" traders and portfolio managers who couldn't cut the mustard with a decent P/L and went on to sales. Some get involved in risk management as well.

Mar 14, 2018

i know a few busted buyside traders who are now in sales so it does happen. But i think the point is that people on this board enter jobs like banking for opportunities to leave not if they failed but if they are successful. If you are a successful trader that's it, you have learned a skill and have a career that can be quite lucrative...the exit op is retirement. Obviously if you fail at anything including banking, trading, or stone welding you're gonna have to find another job.

Mar 14, 2018

i dont know where you guys work..but my traders are anti-socail geeks with no personality or humor...they couldnt cut it in sales or the backyard of a high school....

Mar 14, 2018
Batrick Pateman:

i dont know where you guys work..but my traders are anti-socail geeks with no personality or humor...they couldnt cut it in sales or the backyard of a high school....

LOL!

Mar 14, 2018

alot of times in the hedge fund world moving to sales is a natural progression because while someone couldnt cut it as a trader they have a good relationship with the fund they used to work for. So they can go say, "hey i used to trade for XYZ BigFund and if you hire me I'll bring you their business". It often nets them large guaranteed deals and then nets their new employer immediate disappointment when they realize the guy was full of shit.

Mar 5, 2018

Because on the buy side you actually get to have an opinion, unlike on the sell side where literally no matter what you have to tell clients the economy and markets are shitting gold at any given time. That is much less intellectually interesting, and that can be a huge piece into why people make the switch.

Mar 5, 2018

To further brotherbear's point, the linear advancement mindset of school carries over for most students into their career path. The more ambiguous, the far less traveled these paths would be. It's a trade off: good money, straightforwardness, learning experience, and brand equity for getting the shit beat out of you. In general, anything that's grossly competitive and straightforward usually means the competitive edge comes from outworking one another and I notice many people would rather settle for that than having to figure shit out on their own

    • 1
Mar 6, 2018

Your friends are the exceptions, not the rule. Not everyone can start off as an analyst and just work through high finance to become a CxO of a company. And honestly you'll probably be pushing 40 by the time you break 500k (if that) working as anything less than a divisional CFO / CEO. I'd like to be young if and when I earn / enjoy my millions.

Mar 7, 2018

tldr: if you want to take the work minimizing path (which sounds like what you're advocating), then the very obvious answer is to take the path one all these kids want to take, though it is only obvious when you think "outside the box". in my particular case, I work at a hedge fund and am 1,000% confident that my lifetime hours of leisures are higher than if I had worked my way up at F500 companies in corporate finance. (to be clear, I work in public markets so am fully aware of how hard it is to be confident about knowing anything!)

usually the response to this is "money is not everthing" and to portray me as a greedy, anxiety-ridden and money / prestige driven person. that's why all these kids pursue this path, right? this explanation is common and what plays to the narrative you are told about people that work in finance and hedge funds. it's also just wrong.

if you assume that both me and your F500 / corporate friends are both "work averse" (e.g., want to minimize lifetime hours worked), then the most work averse path is to do the path that i took by an disgustingly wide margin because my excess earnings allow me to retire far earlier. in simple terms, I am working 25-50% more hours but I make 2-10x as much; if you put all these earnings in savings that compound over time, then I get to retire way earlier and I work fewer hours over my lifetime. if you have a time preference for leisure at a younger age, you can also just switch jobs more often and use the in-between time as vacation (which is what I did before I started my current job and plan to continue doing going forward).

to "invert" my statement and view it from the opposite angle, it would seem extremely irrational to me to decide to cut my workweek by just 10-15 hours per week at the cost of several hundred thousand per year (or at the cost of several more decades in the workforce, if you prefer not to think in monetary terms).

money and time aside, it also matters that you enjoy what you do. my job is by literally any objective metric a lot cooler than yours even though I'm a lot younger. I get to be a detective and talk to some of the world's leading technology executives on a regular basis. i am playing a competitive sport against some of the world's brightest people, which is something that motivates me. most of my job involves a great deal of autonomy and intellectual freedom, even though I'm still in my 20s. it's something i've wanted to do since a young age and I actually do love it. i also personally don't find the job stressful (a good part about efficient markets is that is it both hard to make money AND hard to lose money in large quantities).

if you model it out, there is actually simply no set of mathematical assumptions where you can maximize either wealth, leisure, interesting-ness of work or career opportunities by actively choosing to reject a career in high finance and instead working directly at a F500 (unless you're one of those lucky people that just becomes the director of biz dev at a pre-IPO startup after a short stint at a mega-fund). there are a few reasonable reasons to go into corporate finance but they are: "I uniquely believe that my skills add more value to the world at company X" or "I actually did not want the extra responsibility at a young age -- it stresses me out" or "the type of person on Wall Street is typically pretty douchey and rude; this makes me not like work" or "this type of work makes me suffer health problems that make it not sustainable for me." these were not the reasons you stated, so I'll be firm in stating that your account of this tradeoff is actually just intellectually dishonest.

the kids on this forum aren't misguided -- i actually think they are pretty rational and I am glad i was one of them when i was younger a few years ago.

    • 3
Mar 7, 2018

Good arguments. Not professing anyone choose X over Y. Simply stated I see so many negative comments regarding the grind and an obsession about exiting to the next opportunity on this site, I decided to ask "why do it at all, lots of ways to make great money early in life?". You lay out your answers in an intelligent manner. A lot more insightful and reasoned than "cause I can make bank as a 25 yr old".

Mar 7, 2018

If you could create several passive income streams so that you only need to work 1/4 of the time for 1/2 of the money, would you do it? Genuine question

Mar 7, 2018

Funny you should ask this. I have in essence created a passive income stream by setting up sales distribution, They sell, they and I get paid ( I am a wholesaler of financial services products, funds, insurance m annuities, etc.). More than 50% of my income (high 6 figure) comes quite passively. I just maintain relationships with the producers. Virtually complete freedom, great cash flow, spend my time with who I want doing what I want. Basically part time hours.

    • 1
Mar 7, 2018

I dreamed about doing that as a kid. Part of me does want to do that and in a lot of ways, it might be a better fit for who I am.

For now, I feel like being around very bright people will make me a better person in at least some ways. It's easy to "move down the latter" and hard to move up the ladder in finance, so when I give up I want it to be after I've done my fair share. Honestly, though I do think my job is really cool, I actually think I might grow tired of it after a year or two. At that point I'll prob do something similar to what you're saying or something else.

    • 2
Mar 7, 2018

BobbybananamA, I'm curious to hear how you'd respond to TommyGunn's question as well.

Mar 7, 2018

I subscribe the same train of thought as you. None of the CFOs or Entrepreneurs I know (and I know a few) done a stint in IBD, or even remotely know what IBD is. I think this is especially true for Europeans. I mean I have seen ex IBD and Consulting guys move in to executive positions, but there are many ways to skin a cat.

Im moving to a Fund shortly and the 3 portfolio managers come from Big 4 accounting backgrounds, and not the sexy kind of accounting either.

No point in preaching about this on WSO, most are drinking from the IBD Kool-aid. The majority of the IBD or bust mentality on WSO comes from students who don't know if its New York or New Year.

Mar 8, 2018

None of the CFOs that you know are aware of what IBD is? wtf? How could their companies possibly operate without liquidity and treasury services? As a CFO its quite literally impossible to handle the daily business of your firm without knowing what an investment bank is.

Absurd.

Mar 8, 2018

This is actually a really fascinating question because it comes from a pretty unique perspective; that of an older guy who's seen manycareers play out.

The answer is... it's complicated. IBD is marketed extremely well to type-A high achievers and promises continual advancement. Exit Opps, in other words, embody this 'advancement'. By leaving the 'service-esque' nature of IBD to invest principal capital, finance professionals can make a ton of money doing ostensibly interesting work at a young age.

Your point about getting there through different paths etc. is valid but ignores the primary selling point for IBD; quickness and transparency. The IBD route is supposedly a far faster career builder that also has a degree of certainty embedded into it (you can always go to corp dev or fp&a if PE/HF don't work out). It is far more valuable, in other words, to grind towards an intriguing job in investing as opposed to grind for a less 'intellectual' or 'rewarding' job (staying on in IB). I hope that provides some clarity to your question.

Mar 8, 2018

Now that's an answer! Quite interesting to compare the thought and promise of a career with the realities of the grind in a career. Somewhere along the way, "Life Happens" and financial reward loses it's luster unless you truly enjoy what you do. Got to a fairly high level within my industry a long time ago. Did well. Many, and I mean many, were cracking the 7 figure mark (some closer to 8 figures). I examined their situation and realized I just didn't want to do what they did to get there. The idea of being there was great. The grind (not hours, but type of work) wasn't worth it (to me). Morphed into a work / life balance scenario where work isn't a place I go, but rather something I do when necessary to feed the beast. When I want more "juice" I just do it more.

Have to admit it was a blast going to all my kid's baseball games and golf tournaments while still making a great living, occasionally having to step away and take a call.

    • 1
Mar 8, 2018

Exactly. Thing is, IBD is marketed towards kids fresh out of college. A lot of what you're describing (realizing what matters in life, prioritizing, etc.) is stuff that must be learned through experience and time, not a priori.

    • 1
Mar 8, 2018

Very good point!

Mar 8, 2018

This is the most "boomer" thing I've ever read. Times have changed. The old notion of the tenacious "working stiff" that starts out in the mailroom and becomes the CEO is no longer a viable career path.

The job market -- particularly in finance and banking -- is extremely competitive with competition for US finance jobs occurring on a global scale. The best way to progress in today's job environment is to make opportunistic moves in order to further personal career development. There is no glory in being a loyal 20+ yr employee anymore.

    • 1
Mar 9, 2018
Futures Trader Man:

This is the most "boomer" thing I've ever read. Times have changed. The old notion of the tenacious "working stiff" that starts out in the mailroom and becomes the CEO is no longer a viable career path.

The job market -- particularly in finance and banking -- is extremely competitive with competition for US finance jobs occurring on a global scale. The best way to progress in today's job environment is to make opportunistic moves in order to further personal career development. There is no glory in being a loyal 20+ yr employee anymore.

Too true

There is no loyalty to employees anymore...There are no guaranteed promotions......It is an "eat what you kill" world

    • 1
Mar 8, 2018

I think it's realistically a matter of the 'jammed doorway' at IB shops. PE/AM/HF/CD, etc., all like to poach from top IBs because the perception is that there are a limited number of spots for the best kids at the best schools. These kids are then put through the large institution machine of professional decorum, so that perception is enhanced, making it easier for those kids to be respected more than anyone else. You get a situation where the story told enough times that it becomes true as more kids fight to go through this path to get to the coveted role, and then also bolster the narrative once they get in those seats and have decision making ability. And so, everyone wants to be one of those "pathway" kids, so I doubt there's even a thought about just being in the process, it's about focusing on the destination these kids have been planning for since they were young.

    • 3
Mar 8, 2018

good way to put it +1

Mar 8, 2018

2 Reasons:

1) They go in knowing how unlikely it is they'd ever make Partner/MD or whatever carrot firms dangle in front of you to keep you working like a horse. These days it's just not possible unless you're a mega revenue generator or Mr. Rolodex, and the business model counts-no, depends- on them burning you out long before that happens.

2) The exit opps themselves are damn good. Aside from the obvious PE/VC/HF/HSW jumps, they give you an advantage for some pretty cool unicorn gigs. I was in an FLDP and rotated into a Corporate Strategy role, so my colleagues were all ex-MBB-D. The caliber of recruiting opportunities (and comp) they got was a league better than what I was seeing, though I lucked into something decent. That kind of optionality is a valuable chip.

Proud as I am of my resume, I'll always regret not having started out in Big 4, IB, or Consulting. My colleagues with those experiences came out with technical skills, networks, the benefit of the doubt from employers, and a level of polish that took me several years to earn. If I could have had the same advantages slaving away for 2 years? Done

Mar 8, 2018

+1 after reading the first sentence alone. Did you start out in FLDP straight out of school?

Mar 9, 2018

Pretty much. I recommend FLDPs if you can't break in to prof. svces. because you'll get a somewhat similar range of exposure across functions, and if you really kill it there's a decent payoff/chance at upward movement.

Mar 8, 2018

Something I've noticed is that you assume that just because someone is after the exit opps, means they automatically don't like the job they take before the exit opp they want. While there was some monotonous work I'd do in my IB internship, I did enjoy a lot of the work and thought it was interesting but more importantly, I would have much rather done it than any corporate finance work, BO roles, insurance sales, etc. So just because someone is after an exit opp, it doesn't mean they would be happier or fulfilled doing other types of work.

Although, the most important to realize is that these exit opps these people are after aren't really achievable through other career paths. PE is difficult enough to break into while working in IB - it becomes much more difficult if not impossible through most other career choices. And going to your last point. not everyone wants to become an executive of a company or do certain types of work - for instance, I believe you said something about knowing people who became CFOs, but it's widely known that CFOs do accounting work (at a high level picture) which is something that not only I, but most other people don't want to do.

Mar 10, 2018

What a noob.

Mar 10, 2018

@brotherbear has addressed the most important point, which I'll make my first.

One:
The overwhelming majority of people in life are followers. There's a natural sorting mechanism. Few people have the mental and emotional composition to withstand the pressure of being a leader (defined as the person with whom the buck stops, call that 'founder' or 'entrepreneur' or whatever you like; in short, the person who applied their own ingenuity to move something from zero to one).

Two:
Technology is an incredibly democratizing phenomenon. This applies here in two ways. First, the simple advent of the Internet has granted tremendous visibility on all career paths that previously had significant cultural or informational moats around them.

Banking was historically a more insular field than most. Law school and med school were easy; you got good grades, took a test, and applied. This is why being a doctor or lawyer were the two automatic career expectations of a 'smart kid' from the Great Depression until the dot-com boom, whereas a banker (of any kind: corporate, commercial, or investment) was the path for a connected kid. Nobody in the middle class knew what the hell it was as a profession, and you had to know somebody on the inside to get a seat.

(e.g. Warren Hellman became a partner at Lehman at the age of 26, one year after he graduated from HBS. How did that happen? He was the great-grandson of one of Wells Fargo's presidents, and through distant in-laws, related to one of the three founding brothers of Lehman.)

(e.g. Ace Greenberg as the classic story of being a huge anomaly for being able to break into a bulge bracket bank coming from a midwestern Jewish family, and how rebuilt the entire firm over time around his values of "PSD" rather than the blue-blood heritage every other white-shoe firm prized.)

This is borne out in the data for graduate school admissions. Top law and medical schools have effectively maintained the same relative rankings and admissions rates for decades with very little fluctuation on either dimension. Business school, on the other hand, is a dramatically more recent phenomenon.

I don't mean that the schools themselves are young, I mean that their 'prestige' is nowhere near as historical as law or medicine. HBS was accepting candidates without a standardized test into the '90s. The acceptance rate in the '70s was in the 40%s. People were applying directly out of undergrad or with one job (and only 12-24 months total experience) and waltzing in.

Part of that was self-selective (in that you had to think of yourself as Harvard material, you had to know how to write an application that would resonate with the committee, you had to be able to afford the costs), but if you go talk to the generation of guys who graduated between the '60s-'80s, they'll tell you with candor how easy it was and how much of a step down it was image-wise from law school.

I heard a megafund founder everyone here would recognize by name in a small group setting say that "I went because it was the only graduate school program that I could fill out an application for five months before classes started. Hell, it was the only place I could get in."

This recent (in relative terms) rise in the perception of the business school phenomenon and swell in the ranks of business school applicants and alumni also correlates pretty well with the mushrooming size of banks' employee count. All the bulge bracket banks used to be literal partnerships with several hundred employees. Today they're all behemoths with bloated employee counts in the tens of thousands. (e.g. Ace took Bear from 1,000 employees to 6,000 in the '80s.)

Second, social media and the attenuating sociopsychological effects it has unlocked have made it both way easier and way more natural as an adolescent or teen to stay abreast of every great thing every single peer of yours is doing. Obviously, any rational individual knows that Instagram is a curated and glamorized portrayal of the life someone lives, but people who are highly externally regulated or who haven't fully developed as individuals (read: every young person everywhere) continually fall prey to benchmarking and to FOMO.

We see this in the rising prevalence of mental health issues in teenagers, in the remarkably brutal college application process, in the early career stage. When you see that your 8th grade classmate is volunteering in Chile over winter break, you have to to. When your 10th grade classmates are doing three APs, you need to do the same. When your high school's top-10% are running 4.0 unweighted GPAs and 4.6 weighted, you have to step up to match.

It's harder to stand out for college admission, your first internship, or your first job when everyone around you has a profile with perfect grades, four substantive leadership positions, two impressive philanthropic accomplishments, one major sport, and one second language.

In short, it's way easier to learn more about what everyone else is doing. It's also way easier to get caught in a recursive loop of comparison and competition. The unifying factor there is technology: it lets us see more and it shapes our behavior.

Three:
Economic and cultural factors have rewritten the rules of employment. You used to be able to get a job and spend an entire career there. The stories of Jim Skinner starting at McDonald's as a trainee in 1971 and reaching CEO in 2004, Jim Ziemer starting at Harley Davidson in 1969 as an elevator operator and hitting CEO in 2005, Sam Palmisano starting in sales at IBM in 1973 and earning CEO in 2002, and Ace Greenberg starting as a clerk at Bear in 1949 and making CEO in 1978 are not replicable for people starting at companies in this millennium.

People have wised up to the fact that the most dependable way to get a title and compensation raise is to move to a competitor every 2-4 years. In some fields (usually tech-related), that trends as low as every 12-18 months. Equity grants and their cliff dates really drive the duration of high performers' employment.

///

Investment banking plus its vaunted 'exit opps' is one of the smartest risk-adjusted paths to higher-than-average career success. The contributing set of factors behind performance in it are fully identifiable, measurable, and predictable.

In light of all I wrote above, it becomes eminently clear why so many people pursue banking as their first job.

  • It eliminates uncertainty ("all I have to do is X, Y, and Z and I can get the job; all I have to do is A, B, and C and I can excel at it").
  • It pays very well nominally (status is important; the wow factor behind a $185k total package for a first-year analyst overwhelms any thoughtful comment that a job with double the hours and four times the stress of an average college graduate's first gig may actually be worse overall).
  • It preserves optionality. For the kid who never knew what he wanted to study, just that he needed to do really well at it, the job that doesn't eliminate any subsequent high-paying field like private equity, hedge funds, venture capital, corporate development, corporate strategy, etc. is the predictably attractive option.

///

@ThatOtherGuy understands my first (not numbered) point very well. People continually defer decision-making. Said differently, people always want the broadest optionality. If you give people two choices, Ticket A with 10 fairly equally weighted outcomes ranging from $200k-500k in annual income and Ticket B with 4 outcomes, one at 70% and $0k / one at 25% and $100k / one at 4% and $500k / one at 1% and $10m+ ... everyone punches Ticket A day in and day out.

From how you described yourself @rickle, it's clear you're a Ticket B guy on a binary scale. You figured out how to build a thing of and on your own that works. Whether you're clearing six figures or eight figures from it a year is irrelevant. Given two choices, very, very few people make the same choice you did and go "Yeah, I'll jump".

Lastly, @BobbybananamA's heuristic is gold. Some people have the temerity to make a time-weighted analysis of expected payoffs, then use the output to drive their decision, agnostic of what their experience will be like.

///

In summary:

(i) What your friends did is actually fairly similar to what you're questioning. They went to professional services firms that afforded them the transferable and marketable skill-set that allowed them to move to the exit they were most interested in. Banking offers a better caliber of exits than accounting.

(ii) The way the world works has evolved, so people are adapting their behaviors.

(iii) Young people today themselves are wired differently (and in a different way than could be said about every generation in history).

    • 19
Mar 11, 2018

Well done!

Mar 12, 2018

Nice work

Mar 10, 2018

Did the "path" even exists 30 years ago?

Aren't the two number twos at Goldman both J Aron guys from non-target schools? And J Aron doesn't seem like much more than a big prop shop.

Where did all the super quants go 40 years ago? Industry or were true on rice farms?

Array
Mar 11, 2018

I'm not sure 'the path' really existed 30 years ago. I think it's a bit of a shame that people like Gary Cohn couldn't hope to get an interview at Goldman these days. There is a lot of talent in the world outside of HYP or Oxbridge/LSE. That said, it seems you're talking about sales & trading more than I-banking. I started my career in trading, and was something of a quant. Even a decade ago when I started my career, you have to realize how parochial the IT systems at banks and hedge funds were.

There were different position management systems across all desks. Rates used different risk management software from currencies, who had completely different systems than equities. Even within teams, the flow and options desks might use different systems. It was a complete disaster from a planning perspective, and the effects are still felt today. Some of the systems were built in-house and some were bought by third-party vendors. It was really up to the Desk Head which systems his team used. And in the years leading up to the financial crisis in 2008, whole teams used to get poached from one bank to another. When they moved, they wanted to keep the systems they already knew, so the new bank would simply buy seat licences for the new systems and figure out the integration.

All of this was done without any consideration for the costs, the cybersecurity risks, or the integration risks (sometimes, adding new systems to an already badly structured IT enterprise can cause portions of said system to act up). As such, banks are a total cluster fuck from an IT perspective, which is one of the primary reasons fin-tech is such an interesting space.

I explain this so you get an idea of the sorts of jobs 'quants' did even 10 years ago. Two decades before that, there were no 'quants'. A lot of the older traders when I was an analyst used to tell stories about how they started on the desk before there were computers on the floor. The used to tell me about the Quotron machines they had to use, and how even those were novel at some point. Some of these guys are still in the markets. Some of them run big banks. They're fucking dinosaurs, but they haven't yet gone extinct.

The era of quants only really started about 10-15 years ago. Before that, most computers didn't have the processing power to handle much at all. You have to realize that most closed-form solutions for most option structures were only worked out in the 80s and 90s. The Black & Scholes paper on option pricing came out in 1973, with Merton's method arising in 1974. Jump risks weren't well understood until the 1980s. But all of this was done by hand. Vanna-Volga models only really started being used in the markets in 2007-2008, but weren't fully adopted until a year or two later.

In any case, quants weren't really useful before about 15 years ago. And 'the path' at that time was to begin your career in the markets, establish yourself on one of the market-making desks, take more proprietary risk over time, and then launch your own fund (typically with the assistance of the bank itself). Back then, the Prime Brokerage would help you set up your fund so they could keep their best talent within the bank. In addition to capital introductions (intros to investors within their private bank or asset management business), they would also help out with all of the back office nonsense that no trader really understands (all the stuff the desk COOs deal with). But the Dodd-Frank Act changed that with the Lincoln Amendment, barring banks from owning more than a small percent of PE funds and HFs as a percent of the bank's overall assets. This essentially destroyed the path-to-market for most HF manager aspirants, since the capital raising and operational aspects of launching a new fund require different knowledge and connections than most traders possess.

On top of that, making money in a prop book trading off the bank's balance sheet and having a P&L worth mentioning is not the same as having a track record benchmarked against an index. This is an important point, because in the past 10 years, investment consulting has become significantly more mature as an industry. Even a decade ago, the majority of pension funds, endowments, foundations and family offices did not use an investment consultant. Now, they all do. If someone like Albourne, Mercer or Cambridge Associates (who seem to get no love on this website, but have a LOT of power in the alternative investment world) doesn't 'cover' your fund, you're not going to raise institutional money. Thus, the 'path' for people in the market has become a lot less clear.

It's annoying to people like me because I get tired of having to listen to the supposed wisdom of guys 10 years older than me who just happened to get in the markets at the right time. Not only are they not cleverer than anyone else in the markets, they're also not clever enough to understand most of what I just wrote. This means they don't understand how much serendipity played a role in their success. They were able to launch funds before institutional investing became as regimented as it is today. It's much harder to do so now because it's very difficult to establish a track record trading real money in real size.

In any case, I don't trade any longer. I invest in technology and services businesses, but some of my reasons for leaving the markets are highlighted above. Hopefully, this helps you choose your own path.

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