Tuesday, January 14, 2014

A Fine Disregard for the Rules

Can I call you back? I've just been joined by a law-enforcement official.
I’ve been trying to figure out how to share with you, O Dearly Beloved, just why it is that the current snowballing trend of reducing working hours for junior bankers in my industry1 is so wrongheaded. Clearly, I am swimming against the tide here, as now Credit Suisse and Bank of America have joined the political correctness police at Goldman Sachs and J.P. Morgan to dissuade our nubile young apprentices from their traditional practice of working hours that would make a Southern slave overseer of the 1860s blush.

The unwashed commentariat continues to flog the canard that investment banks are doing this so they can compete against the innopreneurial juggernauts of Silicon Valley for all the special young snowflakes of Dartmouth, Yale, and Oxbridge. Perhaps there is a contingent among the benighted paper pushers of investment bank human resources departments who believe this too, but I have attacked this superficial notion thoroughly and, in my opinion, effectively in the past. Suffice it to say here that 1) since Wall Street is shrinking we don’t need as many junior resources as before, 2) the number of college graduates who simultaneously aspire to be J. Pierpont Morgan and Steve Jobs (or even Bernie Madoff and Mark Zuckerberg) is now and always has been nil, and 3) if having an in-house masseuse, pool table, and artisanal toast barista is important to your career satisfaction, you were never going to last longer than 15 minutes on Wall Street anyway.

Good riddance to all such rubbish, say I. And I am not alone. Like many industries in secular eclipse, we will fall back on our traditional recruiting pool of hardcore finance junkies who find an elegant DCF model and a sharp suit far more exciting and satisfying than virtual farm animals and flip flops. À chacun son goût, dontcha know.

* * *

There is another angle which a few more perceptive observers have been pursuing on this topic, however, that deserves to be addressed. This is the contention that the fabled 80, 90, and even 100+ hour workweeks and almost constant weekend work which junior bankers have been known to suffer (and competitively crow about to all who would listen) do not mean said tyros are working hard that entire time. Rather, they are the result of massively inefficient work processes. This observation is absolutely correct.

Rare is the Analyst or Associate in Corporate Finance or M&A who rolls into the office before 9:30 or 10:00 am on a workday,2 and rarer indeed is the one who actually starts to do anything really productive prior to the time senior bankers begin streaming out of the office at 7:00 pm. So well known is this phenomenon that even ex-lawyer-cum-derivatives-structurers from the capital markets side of obscure banks can write authoritatively about it. This is not, pace certain sociologically-oriented observers,3 due solely to the fact that senior bankers want to haze juniors like they were hazed in their youth, or that it is a conscious program of brainwashing designed to leach out whatever shreds of self-preservation and flimsy moral scruples said youngsters might have left after four years of elite higher education so they can promote our deviously immoral plots against all that is holy and good in society for senior bankers’ personal gain. Not solely, anyway.

No, this massively inefficient workflow arises organically out of the nature of the work we do. Typically, a junior banker will roll into work relatively late because she was at work until midnight, one, or two o’clock the previous night finishing the corrections or first draft of a presentation or model which a senior banker dumped on her desk before he went home and demanded be put on his chair overnight for when he arrived in the morning. It will often take several hours, if not all day, for the senior banker to review the changes and give them back (for why, see infra), so the junior banker will fill her morning with odds and ends of other projects or deals she is working on plus the inevitable conference calls with clients and internal meetings on live and prospective deals. Afternoons are more of the same, with the addition of new assignments and working meetings on current projects with immediate superiors like Associates and Vice Presidents, who will always have their own corrections, suggestions, and annoyances to impart to the beleaguered young banker, plus informal conferences and bullshitting sessions with her peers in the bullpen. Add to this workflow pattern the complication that most junior bankers are working on multiple live and prospective deals or projects at the same time, all of which are in various stages of completion, activity, and panic level, and you begin to see that a junior banker’s workday is one of constant juggling and interruption.

This pattern applies in corporate finance and M&A generally, as bankers at every level have their mornings consumed by reacting to overnight developments in the news and their own ongoing projects and their afternoons and early evenings consumed by internal and external meetings and conference calls which are designed to push said projects further toward completion. Senior bankers like me, who are responsible for originating and closing all the deal revenues which pay for this goat rodeo, come in to a stack of presentations and models to review, a stack of emails and phone calls to and from clients and colleagues to reply to or initiate, and a calendar chockablock with conference calls and meetings with deal teams, colleagues from other departments (who actually do much of the work we get paid for), and, of course, the all-important client. And this is just on non-travel days, when we actually have a full day in the office to “catch up” on this shit. Rare is even the most well-intentioned senior banker who is able to carve out 20 or 30 minutes to review the presentation a junior banker turned overnight for him before his clients and capital markets colleagues leave work at the end of the day and the telephones stop ringing. Many a time have I rolled into the office at 7:30 am fully intending to turn my comments on an urgent pitch waiting for me on my chair by the time the Analyst or Associate comes in at 10, only to get to it for the very first time at 7:00 pm. This is commonplace.

Similarly, senior bankers, if they are lucky and doing their job, will come up with new assignments, projects, and prospective deals during the course of their phone calls and meetings each day. Given the relentless interruptions senior bankers are subject to themselves (see supra), it is the extremely rare (read nonexistent) Managing Director who calls up the poor slob Vice President tasked with distributing assignments to Analysts and Associates (known to IBD management as “The Staffer” and junior bankers as “That Asshole”) to request staffing on a new project before he runs out the door at 7:37 pm to catch the booze car back to Darien. This is when the put upon Staffer tries to snare an elusive Associate or Analyst before she sees him coming and stick her with a new assignment. (The role of Staffer is the poisoned chalice of Vice President-hood in my business.)

And given that my business, as I have attempted on many an occasion to pound gently but relentlessly into your Well-Meaning and Charming Little Heads, is a client service business, the temptation, thrust, and almost universal practice for anything we do is to do it as soon as possible. After all, if we don’t spread the S&P 500 into Swedish kroner for the client by tomorrow morning, those fuckers at Morgan Stanley certainly will. That means overnight, and that means little Suzy and Billy are going to forgo getting laid for the sixth Friday in a row so their Managing Director can deliver an LBO analysis to the Corporate Treasurer of Google on Saturday which he will not read until Tuesday at the earliest, if he even remembers to take it home. This is what is known colloquially among the denizens of investment banking bullpens as “Living the Dream.”

* * *

So, to a perceptive observer, the life of a junior investment banker in corporate finance or M&A looks pretty lopsided:4 lots of interruptions, busy work, and futzing around during normal working hours, and hard, sustained project work overnight and during weekends. It is certainly different from that of their peers in capital markets, who typically work very intensely from 7 am to 7 pm Monday to Friday, then go home and relax or party with friends and family on nights and weekends. From the perspective of a capital markets banker (I was one, briefly, many moons ago), it seems like corp fin and M&A bankers dick around at very low intensity most of the day. They rarely notice the latter only turn on the afterburners after they and pikers like me go home.

And, speaking as a former junior banker myself, I must say working overnight and on weekends, while often a pain in the ass, could actually be pretty pleasant. On weekends in particular, you could roll in after noon, dressed in jeans and a t-shirt if you wanted, and put in three to twelve hours of solid, uninterrupted work on the presentations and models you had in your inbox before you left to down some beers or equivalent with your non-working pals. Being able to focus intently on a difficult model or a tricky presentation without some asshole Managing Director or Vice President breathing down your neck or regaling you with some dipshit story about the strippers he had in his Hamptons hot tub last weekend could be pretty sweet. Given that you’re going to grind through the work anyway, it’s nice to be able to do it without constant interruption.

Of course, there is another very real, very important reason lots of work gets done in investment banks during weekends. It is the obvious, best time to consummate mergers and acquisitions, when public markets are closed and the last minute scrambling on deals can’t kick up disruptive rumors or market movements.
That, plus the complications introduced by the frequent occurrence of clients having the audacity to conduct their deal business in different time zones:
Which is why, at the end of the day, Your Contumacious Correspondent thinks the no- or limited weekend policies Goldman, J.P. Morgan, Bank of America, and Credit Suisse are foisting upon their minions are so stupid. They certainly won’t stop clients making insane demands (or, what is the same thing, Managing Directors agreeing to or even suggesting such demands in order to curry favor). They certainly won’t change the ineluctable dynamic that meetings and phone calls during the day not only prevent much productive work from being done but also create new work to be delivered tomorrow. They absolutely won’t make Managing Directors refuse to take a client phone call or host a meeting to close a deal just so they can give a new assignment to some 23-year-old before 5 pm. All they will do, if everybody observes them to the letter, will be to push work that could be otherwise done productively and relatively painlessly over the weekend into the lobster shift on weeknights. That sounds like a pretty shitty tradeoff for twenty somethings in my book.

* * *

Of course, nobody who has any drive, ambition, or cleverness is going to pay the least fucking attention to these nonsense rules. The Analysts and Associates who find ways around them, and who deliver high quality work when it is requested and needed—not when some never-been-a-banker HR weenie says it should be—will be noted, cultivated, and rewarded disproportionately by their superiors. The clock watchers and slackers who religiously follow the weekend work prohibitions will be isolated, paid badly, and given lukewarm recommendations. The only possible good outcome they will have is being able to lie about being one of the rule-breaking, 100+-hour-working Wall Street badasses to impress their Zynga and Snapchat interviewers after they get constructively fired from the Street. Given how justice seems to operate in the world, such clowns will probably end up internet multimillionaires anyway.

Nobody ever said Wall Street was fair.

Related reading:
The Invention of Leisure (November 12, 2013)
In the Nation’s Service (December 29, 2011)
Come Fly With Me (February 12, 2011)

1 As usual, I speak of junior bankers on my side of the house—corporate finance and M&A—who actually do work insane hours on a regular basis. While the novice denizens of the sales and trading side of the house also work hard, although differently (see supra), none of them regularly clock 80, 90, or even 100+ hour weeks in pursuit of the almighty shekel. The sales and trading floor is almost always emptier than a western movie set at high noon and quieter than a tomb after 7:00 pm on weekdays and anytime on the weekends. If anyone other than skeleton staff passing trading books from their time zone to traders in another is actually at their desk during those times, you can damn well bet Risk Management and Compliance would like to know why.
2 I have picked up and made my own a phrase which a senior banker once offered me in centuries past: “You could fire a cannon through the bullpen before 9:30 am on a weekday without fear of hitting anybody.” Interestingly, senior bankers like him (and now me) often try to get into the office much earlier on non-travel days—like 7:30 or 8 o’clock—because we can get more work and planning done before our clients start calling and our assistants start pestering us for three-week-old expense reports.
3 The argument that junior bankers’ hours have no functional utility but rather are simply of a kind with the widespread hazing rituals many social organizations impose on their initiates is spurious itself for three major reasons. First, it ignores the why of the tradition, which I have laid out at length above and elsewhere, in favor of the how. This simply begs the question. Second, as at least one commenter to the linked piece notes, if hazing investment banking juniors is supposed to make them unthinkingly loyal to the bank and industry which does it, it is remarkably ineffective. Junior bankers do wear their trials, real and imagined, as a badge of pride, but it conveys no loyalty to the bastards or firm who did it to them. It is an undeniable fact that bankers of any seniority will jump to another firm at the drop of a hat (or large signing bonus). If anything, the hazing of junior Analysts and Associates weakens and destroys the reflexive loyalty and gratitude to their employer most of the innocent young lambs bring to their jobs when they are first let in the magic door. Lastly, the hazing we do does little to degrade the moral compass of our young charges. At most it just makes them more cynical about large bureaucratic organizations and disillusioned about the charms of my profession. Rare is the first or second year Analyst or Associate who has to make a decision with the least moral content whatsoever; they just have to decide at 3:00 am whether to do the 30 page Excel model or the 60 page Powerpoint presentation first.
4 Of course, you can see a couple of things worth noting if you have been paying attention. First, the 80, 90, or 100+ hour workweeks are never planned. They arise organically out of the junior banker’s project load, normally because two or more of her assignments go live and active at the same time. There is nothing to do but gut it out when that happens, and that means working 16 or more hours a day and going home at 6:00 am to shower, change, and return to the office. Second, these stupid work limitation rules are really only coming into effect now because most corporate finance and M&A bankers don’t have enough productive, money-making work to do in the first place. As soon as the market turns, you will see these rules die an ignoble and unremarked death.

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