Young Money

Reading about work-culture in industries which are unrelated to software is one of my favourite activities. Young Money is an inside story of life as a financial analyst on Wall Street. It’s an easy-to-read and quite entertaining book, which I finished reading in a couple of hours. It reveals the harsh realities of working at the prestigious investment banks in the aftermath of the financial crisis of 2009.

Every year, thousands of college graduates are hired by the giant investment banks on Wall Street. They are paid gigantic salaries and large annual bonuses, making them some of the lucrative jobs in the world. Thousands of graduates of the world’s most prestigious colleges and universities try to land an offer from one of these firms. However, not many know what they’re getting themselves into. Here are some excerpts from the book, with my comments in small, non-italic font.

Most of the young Wall Street workers, especially first-year analysts in the investment banking divisions work the longest hours. It’s not uncommon for a first-year analyst to work one hundred hours a week - the equivalent of sixteen hours a day during the week, then a mere ten hours on each weekend day. However, this doesn’t mean they are actually doing one hundred hours’ worth of work every week. In fact, many sit around idly for hours a day, listening to music or reading their favourite blogs while they wait for a more senior banker to assign them work. Most of these hand-offs happen at 6.30 or 7.00 pm as the senior banker is leaving for the day, giving the analyst a graveyard shift’s worth of work before he or she can go home and sleep.

This is interesting. If we calculate the hourly wage of wall street analysts, based on the number of hours they actually work, it often comes down to $15-$16 hours after taxes. The salaries don’t look that good now, considering the opportunity cost in terms of time and energy.

Most of the work revolves around gathering, organizing, and presenting financial data. If an investment bank is trying to convince one of its clients, that it should buy another company, the bank’s analysts first have to gather every available nugget of financial information about those companies, their competitors and the entire sector. Revenues, expenditures, margins, buybacks, dividends, trends, changes, stocks - all of this information, and much more, must be gathered, transformed and fit into ‘models’, which are nothing but big Excel spreadsheets that are used to calculate the specifics of the deal being proposed. Once the model is made, the most information in it is put into tidy, organized charts and graphs, inserted into a template, and turned into a ‘pitch book’ - a professionally bound, attractive-looking book that, over the course of several hundred pages, tells Microsoft why, exactly, it should buy Github and how much it should pay. However, taking into account the incentives of the investment bank, this information is highly biased, skewed, and manipulated to cause the deal.

The normal perception of someone ‘working hard’ is usually putting in longer hours. I guess what goes ‘into’ those hours matters much more than just the number of hours. I have certainly had a number of days where I was physically present in the company for eight straight hours, but didn’t get any work done. On the other hand, there are many days where four concentrated hours are enough to get huge amounts of actual, meaningful work done.

The investment banks are ruthless about making sure models and pitch books - both called “deliverables”, are perfect, down to the last comma and decimal point. And that’s where analysts come in. An MD wants a bar graph instead of a line graph on page 63, and it’s 3 am? A good analyst will wake up and snap into action. A VP finds a broken cell reference in cell L57 of an Excel model on Christmas Day? The analyst had better wait to open presents. It’s not the hours that kill you - it’s the lack of control of the hours, one analyst told the author.

For first-year financiers - who just months earlier were happy, autonomous college students - the process of becoming human stock for Wall Street’s labor mill can be a blunt trauma. Among the young bankers the author interviewed, he saw disillusionment, depression, and feelings of worthlessness that were deeper and more foundational than simple work frustrations.

Every year on Wall Street, first-year analysts who were once courted by college recruiters with lines about how they would be given meaningful, creative work and the chance to learn from top executives are shown the harsh truth: They are Excel grunts whose work is often meaningless not just in the cosmic sense, but in the sense of being seen by nobody and utilized for no productive purpose. Some of the hundred -page pitch books analysts spend their late-night hours fact-checking in painstaking detail are simply thrown away after being given a quick skim by a client. In other cases, the client doesn’t read the deliverables at all, and the analysts’ work is literally garbage.

There you go. This book is worth a skim, especially if you are thinking of investment banking as a career. Is it really worth it?