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Wall Street Banks and Private Equity Firms Compete for Young Talent

nytimes.com

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Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#11

Post by MaxScheiber »

One reason that you see this sort of behavior in the first place is that very few people are able to successfully become lifetime bankers. The skillset required to be an excellent investment banking analyst is extremely different than the skillset needed to be an investment banking vice-president (or higher). Modeling skills and pitchbook formatting knowledge will do little for you if your job is to try to bring business to your bank. Analysts know that the internal track will end at the associate level (or, more likely, they'd be booted out after two years with no internal promotion to associate at all). Therefore, it makes sense for them to jump ship, and the subsequent prisoner's dilemma also makes sense.

What's interesting is that a similar thing happens after two years as a private equity associate, in that almost all PE associates are booted out after two years, being told that they don't have the skillset to be promoted within the shop. At this point, I believe that many employees move onto internal corporate development, but my knowledge here is pretty incomplete about what happens after that break in the track. ("Greatness", perhaps?[0])

[0] http://www.leveragedsellout.com/2007/07/breaks-in-the-track

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#12

Post by mr_doobey22 »

I can't speak for the PE side, but on the IB side be prepared to work with some truly awful tech and systems. Seriously crappy. Given the tech budgets and spend, it is amazing how much duct tape and band-aids hold together the IT systems across the bank.

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#13

Post by foobarqux »

rayiner wrote: post #5

This situation is always painted as a "prisoner's dilemma" because otherwise talking about coordinating with regards to hiring smacks of anti-competitive collusion. However, I don't think the timeline is, on the net, disadvantageous to recruits. It's hard to argue that folks on a two-year contract at a bank are somehow disadvantaged by being able to line up their next gig a year or more in advance. It's also hard to…

It's disadvantageous because the banks fire them if they find out, usually after simply asking them.

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#14

Post by dworin »

mr_doobey22 wrote: post #12

I can't speak for the PE side, but on the IB side be prepared to work with some truly awful tech and systems. Seriously crappy. Given the tech budgets and spend, it is amazing how much duct tape and band-aids hold together the IT systems across the bank.

Someone in IT at a large bulge-bracket bank once told me that the reason tech was so shoddy despite the amount they spent was because by the time they did something the "right" way, the market opportunity was gone, or regulations changed and the old rules didn't apply anymore. So fast was much more important than good.

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#15

Post by foobarqux »

michaelochurch wrote: post #7

I think it's important to dispel a certain myth about this sector of finance. Around and past an IQ of about 135, work boredom is a chronic risk and sometimes a disability. If you're in this set, entry-level banking ("analyst" programs) and private equity aren't where you want to go. Past 135 (much less at 140, 150, or even 160) even 8 hours per day of grunt work is impossible, much less 17. There are plenty of 135+…

Plenty of high IQ people in PE and hedge funds, especially those who entered direct from college, skipping IB. They seem to be people who can tolerate grinding though.

It may be true that the work gets boring but the alternatives aren't significantly better (how many people at Google are doing substantially more interesting work?) and pay and career advancement are much better.

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#16

Post by crapshoot101 »

foobarqux wrote: post #15
michaelochurch wrote: post #7

I think it's important to dispel a certain myth about this sector of finance. Around and past an IQ of about 135, work boredom is a chronic risk and sometimes a disability. If you're in this set, entry-level banking ("analyst" programs) and private equity aren't where you want to go. Past 135 (much less at 140, 150, or even 160) even 8 hours per day of grunt work is impossible, much less 17. There are plenty of 135+…

Plenty of high IQ people in PE and hedge funds, especially those who entered direct from college, skipping IB. They seem to be people who can tolerate grinding though. It may be true that the work gets boring but the alternatives aren't significantly better (how many people at Google are doing substantially more interesting work?) and pay and career advancement are much better.

Yup. Some of the smartest people I've ever met went into finance, because the money is crazy - these are the kids who were building stuff for fun in college, or first gen immigrants who were on full rides and knew that college was about getting skills and getting a job, not just about 3AM drunk discussions about Sartre. The idea that these people are not as intelligent as "tech people" is silly.

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#17

Post by JTon »

lmg643 wrote: post #4

The whole time I read this article, I could only think of PG's "The Submarine." http://paulgraham.com/submarine.html This article describes a process that's being going on for decades, but manages to do so while imbuing a "drama" that only a headhunting firm could truly muster (or the guy who wrote the book selling for $299). It's true, that the pressures have ramped up over time as private equity becomes a monster a…

Just read The Submarine for the first time. For those who haven't, it's well worth it. Very enlightening. Still very relevant today seeing how it was written in 2006

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#19

Post by michaelochurch »

foobarqux wrote: post #15
michaelochurch wrote: post #7

I think it's important to dispel a certain myth about this sector of finance. Around and past an IQ of about 135, work boredom is a chronic risk and sometimes a disability. If you're in this set, entry-level banking ("analyst" programs) and private equity aren't where you want to go. Past 135 (much less at 140, 150, or even 160) even 8 hours per day of grunt work is impossible, much less 17. There are plenty of 135+…

Plenty of high IQ people in PE and hedge funds, especially those who entered direct from college, skipping IB. They seem to be people who can tolerate grinding though. It may be true that the work gets boring but the alternatives aren't significantly better (how many people at Google are doing substantially more interesting work?) and pay and career advancement are much better.

I acknowledge that there are plenty of very smart people in finance (especially in quant roles). I said:

There are plenty of 135+ in finance, but either they go for trading and quant or even IT roles, or they move to "the soft side" at a higher level: usually at least VP.

Smart people tend to avoid competing on hours. Why? Because if you're putting out a 17-hour day (which is necessary at the entry level on "the soft side") anything that is a disadvantage can (no, will) derail you. That includes being too smart for the work. So they prefer trading and quant jobs where the hours are reasonable and also where the work is more interesting and they're not as much at risk of high-IQ problems.

[P]ay and career advancement are much better [in finance than software].

Absolutely. This is completely true. Any idea what we should do about this in engineering? (Or just call it hopeless and exit for finance?)

Re: Wall Street Banks and Private Equity Firms Compete for Young Talent

#20

Post by MaxScheiber »

hacknat wrote: post #18

The Epicurean Dealmaker's thoughts (he's an MD for some big shot bank): http://epicureandealmaker.blogspot.com/2014/07/you-go-first....

"The solution to this dilemma, of course, is simple. Private equity firms have become large and rich enough that they should do their own damn recruiting at colleges to hire junior personnel."

This is already the case, at least at Wharton. A number of the PE megafunds recruit undergraduates here, specifically Blackstone and Silver Lake. I only really know of one or two offers being extended per year, but that's because private equity shops simply have fewer entry-level positions -- they can therefore afford to be picky.

I'm sure that PE middle-market companies also recruit here (my knowledge here is more limited, as I gravitate toward the technology portion of my education rather than the finance portion), but it seems likely that students would take a bulge-bracket investment bank over a middle-market PE shop.

It's simple supply and demand.

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