WSO Podcast | E250: Running Errands - Private Equity Associate Crisis - Resilience & Rejection | WSO Weekly Wrapup
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4:40 Private Equity Associate Crisis
13:55 Resilience & Rejection
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WSO Podcast Episode 250 Transcript:
Patrick (CEO of WSO): [00:00:04] Welcome to the WSO weekly wrap up, where I talk with my team about the five most trending discussions in the Wall Street Oasis community. Enjoy! All right. After long hiatus, we're back. It is September 7th, 2023. We're going to try to do a quick weekly recap of some of the top threads. Sorry about the delay. We've been swamped with WSO academy interviews. If you are interested in checking that out, go to Wall Street oasis.com/academy. But Matt's going to kick us off with the intro of the one of the top trending topics for today.
Matthew: [00:00:38] Yeah, thanks for that, Pat. It's been quite some time since we popped on this but excited to get back into it here. This first trending topic actually had me chuckling. It's something that I remember doing quite often. Especially in the first six months of of being an investment banker was specifically on on a sales and trading desk here. But the first topic that we have here is my MD had asked me to wait in line at his favorite halal spot for an hour to pick up his food. I'm not sure if I should stay in the industry after that. So as I mentioned, typically it's pretty normal practice for juniors to be grabbing food for, especially some of the senior members in the firm. There something I did for quite some time, spent easily an hour or two sometimes at these hot spots that employees want to be eating at. But what are your thoughts on that? That's something that's always been around. I know you have a lot more years of experience than I do, so it's a common practice.
Patrick (CEO of WSO): [00:01:22] It's common practice, I think especially as an intern or a first year analyst, you're expected to kind of shit flows downhill. So you're expected to do all the grunt work. Sometimes you're doing admin work, sometimes you're picking up suits, you're dropping off books at an apartment at 4 a.m. because they have a flight out the next morning. You're doing all the kind of the grunt work even sometimes, if it means getting lunch for everybody. How about you, Nabil?
Nabil: [00:01:49] Yeah, in the early years when there's no work, that's usually the work you get. Just running around doing stuff for. Yeah, the partner.
Matthew: [00:01:57] Yeah, so a couple of the comments here were all about like the how do you go about handling those asks. I'm assuming obviously it's busy you know for any junior individual other days. And it's hard to kind of spend like an hour or two kind of running errands for senior folks there. Some people's responses were toughened up a bit. That's just what the role entails. Some people saying if this person's asking you to do it often, maybe have a conversation around them, what would be your guys recommendations here? The way I kind of handled it was just kind of put a smile on and understood this is what it is involved and it's not going to be something that lasts forever. Definitely wasn't in the opinion of wanting to make a conversation out of it with my seniority. There so just kind of kept doing it but, what are your guys thoughts on that? That's something where you just keep a smile on your face, keep doing it. Or is it something where you think it warrants a conversation eventually?
Patrick (CEO of WSO): [00:02:43] Now think of it, if it keeps going like past your first year of like full time experience, think maybe but like I wouldn't as a first year. It's kind of a little bit of like the hazing culture that goes on. And I think it's also sometimes a test of like some people are like, oh, you don't have a spine. Just tell him, get his own lunch. I'm like, this is an MD our partner. Their time is more valuable than yours, realistically. So your whole point is like to save them time. So if it means you're the one waiting in line then you know that's how it is. That's how I see it but if it continued and you were like a critical element to the team and you were already like doing stuff, I think you could be like, hey, haven't you know. I'm trying to knock out there's a fire drill going on. I'm trying to knock this out. So if you're like, super busy then, yeah, you could have a conversation and be like, could your admin go get it?
Matthew: [00:03:30] Yeah, I guess also it'd be important to know too. If it's been like over a year of you doing this and there has been some more junior folks that have come into the team there and they're not really being tasked with that. And they're still requiring you to do it then I could probably see how a conversation should arise out of that, especially if some more junior ranks have kind of joined the team. But I think if you are at a smaller shop sometimes hiring is not that frequent and you still may be the most junior individual after a full year or two, especially at some boutiques. And I think that was like my situation. There was still well over a year but mean was still the only junior on the team there. So it's still that responsibility fell on me. The way I like to look at it is, I think it's just more so like even just like camaraderie. Like it's just something that you do like as a group together. Everyone's been in that position even the MDS when they were interns and first years, they probably had it a lot worse than the new first years. And interns have it nowadays. Just kind of given that hazing culture and how culture has kind of changed and I'm sure they probably had it worse 20 or 30 years ago. So I think it's just understanding that everyone's in that position. You gotta just put in that sweat now and then. That's not going to last forever and if it does, of course. And like I said, there's some junior resources that have joined then of course warrant a conversation there. But don't think you should be having that conversation until there. You don't want to have a bad reputation or have someone thrown off by having that conversation randomly.
Patrick (CEO of WSO): [00:04:43] For sure, what's the next topic?
Matthew: [00:04:44] Yeah, so let's jump to it here. The next topic is actually another interesting one as well. More so focused on the private equity side of things. But one of the trending topics was around, why the grass isn’t greener? So essentially what's happening with private equity individuals, they do a lot of those gruesome years in banking. Get really excited to join the buy side, spend a few years there and then realize nothing's really changed in terms of lifestyle. Maybe the stresses, mental health, all that great stuff there. So I know you've worked in private equity for a bit. What are your thoughts on that as the grass truly not greener? Or do you see some pros kind of going into private equity?
Patrick (CEO of WSO): [00:05:14] I think it's really fun dependent. And I think in a lot of mega funds, upper middle markets, the kids who are the most hard driving. They've been working all like undergrad grinding to get into the top banks then there's grinding to get into the top PE funds. Oftentimes they get out of banking. Having worked two grueling years, they get to private equity thinking it's going to be better or like they've reached the promised land. And oftentimes it is really still just banking 2.0. It's all they're all former bankers. The culture is similar, it works a little bit different in terms of like you're now on the buy side. You're evaluating deals but you're still like that same culture of like extremely hard work and long hours kind of persists through there. And so private equity burnout’s a real thing. I think the thread was called, why the grass Isn't greener, the Private Equity Associate Crisis, and even branded PEAC. So it's something that happens. And he's trying to like frame it as, it's very a lot more common than people realize when jump to private equity.
Patrick (CEO of WSO): [00:06:18] The first fund was at the true shock culture shock for me was almost not the long hours. It was almost just the lack of any direction at all. Like it was like going from a place where they were telling you when you could go to the bathroom, to not telling you anything ever. It was just like, here I am, and I'm like, do I? I'm on these portfolio companies. Should I be talking to people? What kind of models should I build? And so the fund ended up not doing well. I ended up getting fired like three months into my first gig but that was like a huge wake up call for me in terms of, like, not really like being it so fun dependent. Not just like your trajectory but also like, are you going to burn out and what the lifestyle is like. There are good shops out there though. There are good shops like you're going to be doing 50 hours, 60 hours, not 80, 100 hour weeks.
Matthew: [00:07:04] So guess another thing that probably gets overlooked a little bit too. Is in order to get into like these really big or really successful private equity firms, it doesn't even just start at those first two gruesome years in banking, a lot of the times there against that top bank. You're also putting in four hard years of university, right? So it's like I think at that point it starts adding up really quickly. It could be anywhere from 68 years of just grinding and you kind of get to a little bit older point in your life where maybe you have some other priorities there. And now that really starts taking a toll on the time you want to spend working. So I think that also gets discounted sometimes as well. People don't really sometimes people forget about those four years of grinding in university too, which is what it often takes to kind of land at the Goldman and the Morgan Stanley's of the of the world, which then obviously. Give you the exit to have those really high end private equity roles as well. But one thing I wanted to ask you here, Pat. Because I see a lot of the comments in this thread as well, kind of touching on this topic here. And you've mentioned this to me personally before, is that a lot of these funds do also have politics involved with them. And so do you see politics kind of involved differ from private equity shops there or is it the same as the investment banking.
Patrick (CEO of WSO): [00:08:02] If you get like infighting with the partners, like they're angry that some partner made an investment that's like tanking and they're like taking jabs and then you're the associate under that like one of those partners and a portfolio company that's struggling and they're like angry at you because you're not helping turn it around fast enough or you're like supposed to be helping the CFO. But there's like some inherent issues with the business. Or it's like very hard as an outsider to come in like all the employees don't necessarily really care. And so it's very hard to go in and think it's stressful, right. Because it's like the fund's performance is relying on you. You're suddenly stuck with this dog of a business that's not doing well that everyone's looking down on. And even if you improve it, think this person was saying like, no one's really going to give you credit for it because it's still not like a home run. Yeah, and so a lot of it's like a little bit of luck in terms of which deals you get on, what partners you get put on with and then which one's close and which ones don't. And so yeah, think it's the politics matter a lot. And it's you can be the best you can be the best at navigating different politics. But if you're have bad luck and you're just placed in a certain deal team, it's not like you have that much say as a private equity associate when you're first coming into the fund.
Matthew: [00:09:15] Got it.
Nabil: [00:09:16] What do you think is the role of like expectations? Because I guess people just join IB and then have this expectation that be is going to be like big, like the break away from the hustle bustle. Do you think that's something like expectations need to be managed or like?
Patrick (CEO of WSO): [00:09:33] A little bit, yeah. I mean I think the reputation is pretty well known for the mega funds being like banking 2.0. So I think people probably know what they're getting into. But it's just the same thing with banking. It's like you don't know until you live it. It's the same thing, like after you've been burnt for two years straight, like working 80, 90 hour weeks. That doesn't sound like it sounds bad but like when you live it, actually much worse than what he even sounds like because I think people don't understand the marginal cost is exponential. After about like 80 hours, 70, 80 hours. Each additional hour you work feels about like twice as painful as the additional hour, three times as painful. So like when you go from 90 to 100, those additional ten hours, it's not like an extra ten hours when you're going from 50 to 60. That's like taking away not just from like. Sleep but like general hygiene, and like even being like forget about working out like any sort of exercise. Like so it's taking away from like some core fundamental things from you that allow you to keep any sort of kind of sane or sanity like throughout the program.
Matthew: [00:10:39] Yeah, and one other thing here I want to mention because I think it is relevant, is I think similar to the point you were making where that like those extra ten hours aren't going to like are going to have a big difference in terms of working from 80 to 90 hours here. But I think it's the same thing where I think people know what they're getting themselves into from a private equity standpoint. I think just naturally they are making a lot more compensation. So they think they're willing to put up with it. And I think that very quickly gets overlooked, gets old very quickly. And I think it's a point you made to me a few years ago that's always stuck with me now where you said the marginal increase in your pay after a certain threshold is not really going to be that impactful. So if an individual from a large bulge bracket was making, say, an associate, all in 300 grand, 350, whatever it may be, it was private equity firm now making 550 or even 500. You know, it sounds great on paper but that extra 100 grand after tax, all that stuff is not going to really be impacting life that much. And now you're still doing the exact same amount of work, if not more. Have additional stresses on your mental health, everything else I think that gets overlooked. Or people think on payroll, I'm making 450, 500 grand. But that gets very old very quickly if you're miserable. Kind of some people are built for it. Some people aren't, though.
Patrick (CEO of WSO): [00:11:44] There was even a thread. I think somebody who had an offer. I don't know if it was a troll but there was a thread of a guy who had like a seven figure offer to join.
Matthew: [00:11:51] I saw that.
Patrick (CEO of WSO): [00:11:52] And he was like, I don't know if I should take it. Like he's literally that burnt out. He's like, I just want to like disappear and just like chill and think.
Matthew: [00:12:00] He said something and go like Southeast Asia or something like that and just live in a beach there.
Patrick (CEO of WSO): [00:12:03] Yeah, he's been grinding. He's like, I've been grinding literally like he did IBP. I think now he has this crazy offer to make like seven figures. People are like, what are you doing? Just like, yes, you'll kick yourself in two years. Like, just go do it and then like go see a therapist first. Like you're making enough money.
Matthew: [00:12:20] Yeah.
Patrick (CEO of WSO): [00:12:21] So yeah, it's easy to say when you're kind of on the outside and you see those big numbers to be like, oh, do this. You've been grinding this is what you've been waiting for. It's like, why not just cash the lottery ticket? But it's another thing when you're waking up depressed every day and like it's hard to roll out of bed and face the day because you're just dreading it. So it's easy for us and a lot of these kids that make it to that point. They've had such a structured and they've been whipped for so long, it doesn't even it's not even high school. It's not even like college where they started working these a lot of these kids started in elementary school where their parents are hard driving parents. They were doing three hours of math a day, three hours of two hours of piano or violin, whatever. You know, when I played violin it was like my parents were lucky if they could get me to do like a half hour. Now, some parents they're like enforcers. You're doing it and so imagine the kid like, it's not just even like high school. It's earlier, it starts like earlier and so like the burnout could be like even further. You know, it's like it could be 15 years and the person is just like I'm done.
Matthew: [00:13:28] Yeah, and I feel like it's like deep rooted resentment that they may not even realize where they could attribute it to. But if they've been kind of having a grind since high school, like going maybe to a prep academy or something like that, having that oversight from 11th grade, 12th grade, it could definitely get it adds up on you. I mean, let's get real here. You know, no one's going to be a robot and kind of say they enjoy doing that day in, day out. You need to have some sort of personal and social life as well to reap the rewards that you've worked for. But anyways, that's the top to the third topic here. I think this one's very relevant, just given the day of age here in terms of just the macroeconomic conditions, a lot of interns or at least a handful of interns weren't getting, you know, receiving full time offers as a result of just banks being a little bit more stringent on hiring. Obviously, for the up and coming year here. So this started what's called resilience in the face of rejection. I think it was just a great thread in the IB form just talking about how to get a hardened skin and have that disciplined approach still to trying to land that offer don't really get too down yourself for not receiving that full time offer, maybe not even getting any internship offers. And so there's some success stories there but three points I really liked the top.
Matthew: [00:14:30] The top comment in that thread was a few things that he suggested or this individual suggested. One was kind of have a resilience muscle just get reps in to getting rejected. I think that's something that any sales individual gets very accustomed to quickly. I mean, people may be in banking that maybe don't have that front client-facing BD role really understand. But you have to be comfortable with getting rejected often and kind of have that hardened skin. The second is self-confidence. You know, if you have been rejected, step up to the plate next time and have a smile on your face and project that confidence. You can't be down on yourself. No one's going to feel sorry for you. There's a lot of people in those similar stories, so you got to always come up with confidence. And the third is that it's always fake it till you make it. And same thing with kind of this self-confidence thing. You know, people look up to these associates VPS, MDS and they really look glorified. But behind the curtain, there are a lot of people are still faking it till they make it. I think that's what this individual said. It's a cliche for a reason, but it's something to kind of always keep top of mind. Pat, you know, what are your thoughts on kind of being resilient in this? I know it's very tough. People are not getting those offers. But what's your suggestions or your advice for these individuals?
Patrick (CEO of WSO): [00:15:33] Yeah, I think it's hard when you think that the intern offer rates to full time this year are looking closer to be like below 80%, even in some firms or historically, it's 90 plus percent at most. So that extra, let's say you have 100 interns, that extra 10 to 15 interns that aren't getting offers are flowing downstream. They're going to have to go to middle market banks, boutique banks, and get something that's below what they expected to land. After grinding and getting that top internship offer, they probably didn't think they were going to be on the outside looking in because it was pretty rare historically in years like this and years back when we were in the great financial crisis in 09, 2010, this was very common. Saved to all the way to like 60% or you know.
Matthew: [00:16:19] Even yourself remember you were saying you were still in Wharton then when the great financial crisis happened. And so you kind of weren't you saying, like, I'm staying here in business school thinking like, what the heck am I doing right now? Is this going to be a waste? So I think this is actually probably a perfect thread for you because you kind of speak to how you kind of overcame that.
Patrick (CEO of WSO): [00:16:35] Yeah well, I mean for myself, like I knew I kind of wanted to do WSO full time. So it was less like I just saw all my classmates at Wharton, like, stressing out because suddenly what seemed like, oh, we're at Wharton, we're going to be able to waltz into banking wasn't so easy. Yeah, and so the number of seats kind of really got much smaller. And so I think from that point, I mean, it's important to realize that it's your career is 30 years. And a lot of people, especially college kids, they get caught up in that first job. And what I tell a lot of our academy kids too, is like or even the interviews. I'm like, you have no shot at banking right out of school. I tell them that, like straight up, like you are behind, you're a junior. You don't have enough experience even though your GPA is high, like you're up against kids from top schools with three eight, three nines that have already stacked two internships in their freshman and sophomore year and even they're grinding, right? And so I'm very straight with these kids, but I think the best sign I can see from those kids that still want to come in and join the group and like work hard is they're like, hey, I'm willing to work 20 hours a week on top of my shift. Hey, I'm willing to for it to take two, three years. If you're willing to do that, you're willing to go work at some no name boutique, get the relevant experience, and then wait till the volume picks back up and keep lateraling and networking. You can get really far and I think as long as you're not like way past graduation and trying to completely pivot and have nothing, even kids from non-targets low GPAs, we've seen success stories all over the place. So it's important that you get used to rejection. I think the important part is that you're not like just relying on like applications.
Matthew: [00:18:14] Yeah, Think it's the theme also just like control what you can control type thing if you know you can't control the macro environment. And if firms are hiring you know that's out of everyone's control here. I think it's just control what you can control. And that's like the point that you made there where it's like still putting in those 20 extra hours, 30 hours or kind of just hustle and grind and look at that more as like something that it's going to be a challenge to you. And when you do overcome that because if you do put in the time and the dedication, you will, it's going to be that much sweeter at the top. Looking back at that journey versus just kind of being waltzed in and give it.
Patrick (CEO of WSO): [00:18:42] Matt, this brings me to the whole thing of like people seeing networking as a transaction. So networking is a transaction is a failing mentality of like, I need I'm going to network to land more interviews. Yes, networking will land you more interviews but it's doing so much more than that. It's opening so many potential avenues for you five years, ten years down the road. If you build that foundational network and more importantly, it's developing your interview skills, you're getting better at talking about yourself. You don't even realize all the secondary and tertiary benefits you're getting from that networking. Like everyone's like, hey, did the networking lead directly to an interview in this cycle or not? Like, that's the wrong mentality. Some of it will and so that's great. But usually it's like planting seeds and it takes sometimes years for those.
Matthew: [00:19:24] Yeah, and nothing's going to be clear cut in terms of this step. It's going to be multiple little steps all culminating to get you to that point there and think, yeah, people need to understand that every little at-bat, every little conversation may seem minimal but that is going to be adding to your success or just to your overall. Like you said, familiarity with speaking with strangers. That's essentially what an interview is. You're kind of going in front of an individual you haven't met before and you're talking about yourself and your experiences. And it's the exact same thing with networking. I think psychologically, people get a lot more worked up on interviewing versus networking but if you really just kind of take a bird's eye approach is the exact same thing. So again, it's that rep based kind of getting those at-bats to be then prepared for when it is now time to really kind of crush that interview. You're going to be prepared for it because you've had now 50, 60 at-bats to get you to that point there. So I think, yeah, people need to take a little bit longer term picture on or view on things is ultimately.
Patrick (CEO of WSO): [00:20:15] That's why I tell kids who are like, they're not competitive for banking. I'm like, but if you hit the limits of LinkedIn, you do 100 connection requests every week, and you get the 20 new connections every week, and you get them onto email and you follow up with them, guess what? You're going to be doing 2 to 3 phone calls every single week. That's 100 people you've got on a phone and developed a at least a soft relationship with. And all the studies show all the opportunities that people get. It's not from your the people you know best. It's from those weak connections is where you get job opportunities. And you're dramatically increasing your weak connections with those phone calls.
Matthew: [00:20:50] Yeah, and I think another thing that's often overlooked is people think the industry is big. Don't get me wrong, it is a very big industry. But at the same time it's also a very small industry. So think the fact that you could hop on with 100 people on the phone on any given year and do that over a 2 to 3 year span, like I will guarantee you that some way or another in your career over those next 30 years. You are going to be in contact with one of those individuals, or somehow it's going to benefit you. That's almost a guarantee, so it is like a very tight knit community. At the end of the day even though it may seem large on paper. Yeah, it definitely is not at all. And I think I could even attest to that. Just kind of from for most people a lot of the outreach that we do that. Yes, there's a lot of investment banks but there's not as many as people think there are, right? So like these relationships will definitely reap benefits in the future. But it's just also like having that disciplined approach, right? You get rejected. It's fine, stand back up and do it again, right? You get rejected again. Step up and do it again. It has to be disciplined. You can't be a subject to your emotions and kind of go through that roller coaster where you lose interest because you're down and depressed that you didn't get something.
Patrick (CEO of WSO): [00:21:49] 97% of the people that you send a connection request to will never get on the phone with you 97%. The 3% is a good conversion to two phone calls.
Matthew: [00:21:59] But getting but not getting responses is a nice way to start learning about rejections, right? A lot of times like I talk to people that aren't in sales or any business development roles or like very client facing roles. And I'll tell them that I'll email this person and they don't respond or like we have a meeting and how many times have people not showed up to our meetings like they're just no shows. And some people are like, oh my God, that's so disrespectful. But I'm like, no, that's just a part of the game here. Like, you know what I mean? No one's going to respond to your email. No one's going to hop on a phone with you and I've just now hardened myself on rejection. But to some people, I still recognize that they're like, what do you mean? They just no showed you like that's crazy. I'm like, this is what it's all about, right? So it's take out the emotional aspect, be disciplined in your approach and think you will definitely see success. Just obviously control what you can control. That's how I would wrap that one up. All right guys well this is a great convo. It was nice to be back, let's hope to do this one again next week with some more training topics. But yeah guys we'll look forward to seeing you everyone next week.
Patrick (CEO of WSO): [00:22:53] And thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. [email protected] And till next time.
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