Lieutenant Island Views : Commentary About Finance, Politics and Baseball

Wall Street Crash = No Jobs; The Blessing for Recent and Upcoming Graduates | April 19, 2009


When Winston Churchill lost the Parliamentary election of 1945, his wife advised him that it was “a blessing in disguise.” His response was that the blessing was “very well disguised!” Many recently laid-off young bankers and college seniors who are NOT receiving investment banking jobs are feeling a lot like Churchill in 1945.

Unlike Churchill, the blessing may be closer to reality than they realize. As a long time investment banking group head, recruiter and, for the last two years, a college finance professor, I have seen far too many bright young twenty year olds pursuing a false dream on Wall Street. The allure was the trappings of the job, not the experience or nature of the work. High compensation, an exciting life style, prestige, material possessions and other superficialities were part of a bargain made in exchange for 100+ hour work weeks, sublimination of personal creativity, foregone time with friends and, at times, abuse by obsessive compulsive ego maniacs who may have suffered similarly and view mistreatment of junior bankers as an outward sign of their power and success.

The real question is whether investment banking is what they really want(ed) to do or whether it is just a means to achieve the fruits of a Faustian bargain. Was or will it be worth it for them? Will they be happy? Will they even last long enough to achieve the fruits?

For a few, the answer is yes. They will be either the lucky or those who genuinely enjoy the challenges and sacrifices attendant to the career. They will tend to be people who possess various requisite skills and aptitude for specific jobs on the “Street.” Facility with numbers, problem solving talents and an enjoyment algebra and statistics are crucial prerequisites for success at virtually any Wall Street position. Knowledge of psychology, legal concepts, salesmanship and recognizing recurring historical patterns are also important. An entrepreneurial spirit, a proven ability to recover from severe setbacks and a desire to make money are a must for all.

Sadly, the last point is probably the only common thread with the vast majority of young Wall Street job seekers and the freshly unemployed. Few actually would ever see the relevance of most of the skills enumerated above except maybe for the quantitative aspects and regrettably, few would ever mention a love of algebra or statistics less they be viewed as “geeky” or unsophisticated.

Typical arguments made by “twenty-somethings” when seeking investment banking jobs include variants of the following:

• “I am really a hard worker and love putting in 100+ hour weeks as a “work unit”
• “I have always received top grades and have never been anything but the best academically”
• “I know what it takes to be a success and I have it”
• “I have always wanted to be an investment banker”

Too infrequently asked or sincerely answered are questions like:

• Would you work 100+ hours per week as a banker next year if your pay were to be $20,000 per year with no bonus and limited economic upside?
• If you have never experienced a serious setback in life or evidenced an ability to recover from adversity, why should one believe you can do so in a high pressure and now low paying job?
• What does it say about your intellectual curiosity or self realization that the only thing you ever wanted to be is an investment banker? Explain why this will still be the case in a low pay environment
• When asking about skills to be an effective banker, see how many, if any, cite knowledge of legal concepts, historical methods, psychology or even statistics, algebra and salesmanship

The point to glean from such questions and observations is that the preponderance of the 35-50% of the classes at Princeton, Harvard, Yale or any other college that now seeks Wall Street jobs are not appropriate candidates regardless of their inherent intellect. They would likely be happier in other pursuits if they could only get over trappings of Wall Street. Sadly, many recruiters have been as misguided as the students in recognizing this verity or in selecting appropriate candidates.

The good news is that the allure and job availability are now significantly diminished. Only those who “really” want jobs, regardless of compensation, are likely to land such positions. Ridicule of bankers, a scarcity of positions and limitations on economic upside will do much to reorient thinking.

Where will the young people go for employment? Is it really a blessing that they won’t be on Wall Street?

It will be a blessing if the students and newly laid-off exercise self realization and pursue jobs which excite them because of the content rather than the compensation or perceived prestige. It will be a blessing if they experiment, explore and take chances pursuing dreams rather than dollars. Who knows, maybe some would be bankers will instead join the Peace Corps, start a business, become teachers, coaches, artists, work with autistic children or even become community organizers. Most importantly, maybe they will find satisfaction and happiness doing something because they enjoy it. They may even find a great truth to be that enjoyment and happiness with one’s job can lead to significant career success. History would suggest that this is what happened to Barack Obama, Bill Gates and Bill Belicheck. None can argue that they pursued traditional jobs or were the highest paid when they left college. They were bright, hard working and blessed because they sought careers doing what they enjoyed when they were young!

The attached article from the New York Times provides further insights on this topic:

http://www.nytimes.com/2009/04/18/business/economy/18grads.html?_r=1&scp=1&sq=looking%20beyond%20wall%20street&st=Search

Note: While the author did spend a significant number of years on Wall Street, he was a history major who liked algebra and statistics and remained a practicing Democrat to the chagrin of his loyal clients. His immediate post college years included selling advertising, travel to Brazil without a job in pursuit of adventure and an around the world trip mostly by public bus. He arrived on Wall Street in the sustained and severe downturn of the late 1970s and early 80s with 20% interest rates, low salaries and minimal bonuses. He stayed because he enjoyed the work, liked the clients (despite their political predilections)and was excited by the markets. Eventually the compensation got better and he did not complain!

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6 Comments »

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  3. […] Original post by bosox4 […]

    Pingback by Wall Street Crash = No Jobs; The Blessing for Recent and Upcoming Graduates — April 19, 2009 @ 10:10 am

  4. The blogger’s reflections are very thoughtful and appear to be an attempt to call on a new generation to re-think the ambitions they may have developed to create a good life by earning big bucks in an old and respectable profession. He is absolutely right to warn them that seeking a good life involves much more than making lots of money, but the prescription he offers is neither realistic nor is it good for the future of our country.

    The ideas expressed no doubt reflect some frustration at seeing investment banking, over the course of the author’s career, change from a profession of relationships in which bankers worked with clients to create value over the lives of their businesses and in which bankers took personal risks as partners of private firms, to a profession of greedy tricksters, finding quick angles to cut and run on profitable transactions, using other peoples’ money. The “game” of banking replaced the “profession” of banking. The author not this type of banker but he had to have witnessed the change with frustration (as some of us have witnessed the way in which the “game” of politics has taken over another high-stakes and far more destructive sector which, as we now are experiencing, possesses an unlimited power to do mischief).

    It is no surprise that a high percentage of students from elite schools were drawn to this game. Partly, they are kids who are the products of unprecedented entitlement at every stage of their lives; partly, the generosity of financial aid and aggressive recruiting of new applicant pools has increased the number of academically elite students who have to be driven by economic ambition, either because they enter the work force with high levels of debt or because they aspire to a lifestyle that our spoiled, baby boom generation appeared to set as a bar.

    Now, the author tells them, “step back and take a deep breath. We have betrayed your trust. We held out the promise of a better life and now we want you to reassess because, guess what, we screwed you. We left a big mess and are saddling you with the bill, a bill that can’t be paid. We are going to not only demand entitlements on an unprecedented scale but we are going to weild the political power to make you kids pay for them. By the way, don’t have ambitions to make money and build wealth for the benefit of your children. Pursue a life with different values; the values some of us, in retrospect, wish we had.”

    Well, guess what? That sucks. And it does not work.

    The author suggests these kids who might have been bankers “join the Peace Corps, start a business, become teachers, coaches, artists, work with autistic children or even become community organizers.” With the single exception of “start a business” all his suggestions are the kinds of things that are easy to do when you come from great wealth. They are also the kinds of careers that can only be sustained by wealth created somewhere by someone else. If they take his advice, they had better hope that those small number of people who “start a business” become wildly successful and continue to take risks even after the government confiscates 50, 60, 70% of their earnings. Otherwise, those other jobs that feed off the productivity and wealth-creation of others will be completely unsustainable.

    Comparing Barack Obama to Bill Gates because they both had low paying jobs when they got out of college is bizarre. (Gates never graduated from Harvard.) With cool, deliberate calculation, both men went about pursuing their ambitions from an early stage. President Obama knew exactly what he had to do to acquire political power from the day he decided to change his name from Barry to Barack, if not earlier. Bill Gates knew (as Malcolm Gladwell notes) that he had to put in his 10,000 hours and then do things that would place him where his love of software would create value. Neither of them were motivated by altruism. The politician sought power; the businessman got it by succeeding in the market.

    That said, the author is right that students getting out of college should “find satisfaction and happiness doing something because they enjoy it.” But he goes down the well-trodden path of assuming that virtually the only respectable way that can be done is by doing something that others see as “selfless”. The fact is that there are many good, satisfying, dignified jobs in which people can earn a good living and create the value that ends up supporting a decent quality of life and, maybe, if the state does not confiscate it, leaving some legacy for their children.

    Mark Helprin, in his brilliant recent book defending freedom and the rights of intellectual property (Digital Barbarism) makes the point that the moral high ground has been wrongly seized by those who work for so-called non-profits or government agencies who, while they are paid and provided with hansome benefits and job security, are venerated for living a life of altruism. By contrast, people who create jobs, pay taxes, take personal and financial risks, drive the creation of wealth, etc., make no such claims but do just as much (if not more) good for mankind. (Milton Freidman made this point when he asserted that Mother Teresa did less good for mankind than a capitalist who creates thousands of jobs.) Helprin points out that the patient of a surgeon who works for a profit-making hospital benefits just as much from his (or her) work as the patient of a surgeon at a non-profit hospital (who, by the way, is probably paid just as much as his profit-making counterpart). But the latter is somehow accorded a higher moral status because he/she is supposedly working for “the greater good” by being affiliated with a hospital that enjoys a tax exemption.

    In the old days, banking helped businesses start and grow; bankers fed the engine of wealth creation; they created capital markets that built enormous prosperity for more than just bankers and traders; they served the greater good by helping create value. Sure, they played the “game” and took advantage of quirks, loopholes, and the flaws often created by tax laws and policy regulations and that is part of the game. But they did nore than create exotic trading models. And the aspiration to be a banker had moral content that was as great as that of entrepreneurs, salesmen, factory workers, product managers and engineers.

    Teachers, coaches, and artists all contribute greatly to our quality of life. They are important to what makes us human (as are classical musicians and circus performers). (I don’t feel the same way about “community organizers” or mimes.) But why should it be less important or satisfying to be an entrepreneur, engineer or salesman? Without those, you will have nobody to tax to pay for those other jobs the author recommends.

    The graduates who now do not have the option to be bankers have the extra burden of figuring out what they want to do, a burden for which many are ill-equipped both becuase they are 21 years old and know very little and because they have grown up being told they were masters of the universe. If they only think of careers in which they rely on the largesse of a shrinking number of people (taxpayers and those who somehow persist in creating wealth) or on the largesse of those who deal out favors through political power, their destiny will be bleak, as will the destiny of our country. If they figure out that there is dignity and satisfaction in doing things that create value, despite the forces arrayed against anyone who does that, they have a chance to have a good life and make one for their children. Only then can their children make choices to be artists, acrobats or even, god forbid, mimes.

    (This comment’s author is a practicing libertarian, never worked on Wall Street, trained as a lawyer but has been a long-suffering entrepreneur. He thinks there is dignity in any work and that nobody’s work should ever entitle them to use the violence of the state to compel another to support their private notion of virtue, no matter how generous their motives or how powerful their political allies.)

    Comment by skeptic — May 16, 2009 @ 11:20 pm

    • In the light of morning, I thought I would re-visit my late night reply to LIV’s blog post in order to see whether I had overstated or misinterpreted LIV’s advice.

      I did not get the impression that the author was suggesting that graduates seek jobs with low pay and his message is quite sound and clearly stated that everyone should seek a career that they enjoy and find fulfilling. I just found it discouraging that the tone of the piece and the examples he gave seemed to reflect the tiresome liberal cant that a desire to improve one’s material lot, to save for the future and provide for future generations, to build institutions that create a better life for many through private as opposed to public means, somehow lack virtue.

      Unless a person is in dire straights and has obligations to others that become his/her primary motive for action, one should always do what is satisfying. But satisfaction can come in many ways, including engaging in work that provides a means for “keeping score” — and that includes making money. The author is right that the illusion that making money is enough is just that: an illusion. But that does not mean that, to be happy or fulfilled — as many liberals say — can only come from “serving others.” One elite university has long held that “in the Nation’s Service” can only be achieved through political action and enlisting the coercive power of the state to force others to serve (something akin to slavery at at least one level). I would suggest that true value to others comes from many things, not the least of which is living one’s life with integrity and allowing others to do the same.

      When the author gives advice on the right reasons for being a banker, he is also correct. he also points out real flaws in the way bankers recruit students. Perhaps this is why so few new hires stay: they are hired for the wrong reasons or know too little about banking and themselves when they pursue those jobs. Perhaps some take those jobs because they hope to pay down some of the crippling debt they incurred in order to get an education, an education that did not necessarily equip them to do anything that would provide remuneration that might have justified the “investment” (but that is another subject for a blogger). I know students like that. They certainly exist.

      (By the way, only a small number of graduates who go into Teach for America stay as teachers, despite their rigorous and expensive screening and mentoring process. I think this is partly in the nature of first jobs and partly in the nature of the rational behavir of a generation that is entering the work force in the last ten years.)

      Not being a football fan, I can’t really comment on his example of Bill Belichik. Putting aside the question of whether he cheated on those tapes that got such attention, he may be a great example of someone who loved football and pursued his dream. That is a good thing. A junior high football coach in a rural school does much the same or he/she would not be doing it. Not sure what the point is unless it is to say that a person who gets the same personal satisfaction from the same activity can make $6,000,000 or $15,000, just as the wildly ambitious person seeking power can be President or County Alderman, depending on his/her talent, drive and (in a Malcolm Gladwell sense) “luck.”

      My larger point was that, unless we make it clear that it is OK for graduates to make choices based on a desire to have a good life in more than just a spiritual sense, our children and their children will end up poor, cold, hungry and about as personally fulfilled as the starving African bushmen they want to study and help with the money only Western Civilization has figured out a way to provide.

      One other thing: I am sure there are many people who have careers in “pubic service” and in private efforts to help others who have whole, satisfying lives and live within their means, pay taxes and even manage to save. I know some, as do you. I just think we have to be realistic about this. Someone has to pay for this. If a graduate gets a fellowship that allows him/her to work for an NGO (which is just a sneaky term for something that is paid for by governments or quasi governments or, through tax examptions, by taxpatyers indirectly) that does wonderful things, that is great, but there is a price. One difference between public and private virtue is that, in the case of the NGO, the price is ultimately paid by people who have no say in its being paid — it is taken from them in one form or another –while, in private efforts, it is paid by those who use the services and is a voluntary act. At one level, it is the moral equivalent of being a theif rather than a customer. That said, there are of course NGOs who do good things, microlending among them, but, if that work can only be done with the help of a fellowship paid for by someone (even a foundation that exists because someone managed to save, invest and use tax exemptions to create a body of resources for some privately-established good purpose), one has to wonder why this is viewed as more virtuous than becoming a banker and lending money at market rates to people who can re-pay it (or at higher rates for those who are higher risk). The only differnece is that the NGO uses the resources of those who have not consented to exercise their version of virtue.

      Comment by skeptic — May 17, 2009 @ 10:07 am

      • My intention in this post, which I thought was clear, was to suggest that top graduates pursue careers that gave them fulfillment. I did not in any way suggest that Wall Street or business was bad . I sought to emphasize a panoply of alternatives including business,. There was no intent to inject politics into the discussion. I am sorry that the above cited respondant viewed my post as some kind of left wing screed against business. I guess I would have had to provide more than one macro citing of a career alternative in business to convince him. It is appreciated that he recognizes that I did not forget business and did name three individuals who each filed 1099s this year for over $1million (if that is his definition of success). Most distressing, is the thought that after, over 30 years on Wall Street, I might possibly be construed to be anti-capitalist!! Many of my most right wing leaning clients may see me as liberal on issues of choice, pre-emptive military engagement etc but they will defend me against any charge that I am soft on capitalism or business.

        My greater point, which perhaps I should have emphasized more, is that Wall Street is a very tough career choice for undergrads. To start with, no more than 1-2,000 college seniors were hired in 2007 and 2008 (the last “good” years on Wall Street). This year, the number was less than half that due to the demise of Lehman, Merrill and Bear Stearns as well as the general reduction in hiring. In the “Salad Days” of Wall Street, only about 15-20% of the initial 1-2,000 remained on the Street after three or four years. Many burned out, others were fired and still more decided that it was not the career for them. Perhaps fewer jobs on Wall Street accelerated the process of weeding out or redirecting would be bankers. For many, it would be a blessing to not spend four years working as defacto indentured servants doing something they did not like.

        As a final point, I absolutely believe that, as a general rule, it is not a good idea to pursue goals and/or careers, whatever they may be, if you do not enjoy what you are doing. I do recognize that economic necessity plays a role, however, for those with the talent to be among the elite who might have received Wall Street jobs, the odds are high that they, more than most, have significant potential in multiple areas . Why waste that talent and ability on something you do not like?

        Comment by bosox4 — May 17, 2009 @ 11:28 pm


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About author

Mr Thaler is currently the Managing Partner of Lieutenant Island Partners, an organization providing corporate finance advice and general consulting to corporations and not-for-profit organizations. Mr Thaler retired as Vice Chairman of Deutsche Bank Securities in early 2008. His background includes experience as an investment banker, senior manager, business builder, college professor, not for profit board chair and trustee. In his thirty plus years as an investment banker for Deutsche Bank and Lehman Brothers, he has been involved in numerous significant debt and equity financings, mergers & acquisitions, leverage buyouts, restructurings and cross border transactions. Of particular note, Mr Thaler has been one of the most active participants and strategic advisors to the homebuilding industry. In a period of significant turmoil and losses, he was one of the few active bankers to the industry who did not have either a loss or credit write down. He is currently advising several public builders on strategic matters and is an adjunct professor of finance at Morehouse College in Atlanta, Georgia. Though he lives in New York, he is a life long Red Sox fan! www.LieutenantIslandPartners.com

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