The headlines are deafening – Goldman Sachs has committed massive fraud, Jamie Dimon’s JPMorgan bought Washington Mutual on the cheap because he belongs to a secret cabal of politicians and Wall St bankers, and Stanford and Madoff stole money from old ladies under the regulators’ noses. And yet, every day, juniors at investment banks participate in a huge Ponzi scheme -the analyst and associate programmes.
Wrap a cold towel around your head and think about this for a second. A deliberate confidence trick whereby a few people at the top make out like bandits and the rest receive relatively little or no returns. Sound familiar?
The compensation pyramid is why a lot of graduates go into banking in the first place. Sure, they tell themselves, the people at the top are paid millions. And if I work hard, I could achieve their success (and rewards) too.
So you slog it out at a top school, sweat over your online applications, work the rooms at campus employment presentations. In much the same way as Bernie and Allen could pick and choose their investors, the banks pick and choose their talent.
The smarter ones might have an inkling that the fees and commissions charged by the banks are way out of proportion to the services provided.
They might even suspect that the clients will one day make a fuss, and that these fees may come under pressure as a result. One would hope that most of them realise that their contribution as juniors will be relatively minor. There’s a lot of grunt work to be done.
Worst of all, we juniors are complicit in the Ponzi scheme. When bonus season rolls around, we each go into the corner offices for the ten minute chat we’ve been waiting all year for. It’s probably the only time in the whole year that face-time matters to your boss. He’ll spend ten minutes that he could be spending jaw-boning with clients or in the gym, telling you that you made a solid contribution, but that these are a few development points picked out by the VP’s you worked with as part of their 360 degree cross-evaluation.
In truth it’s pretty 180 degree. I doubt you’ll have the stones (or idiocy) to elaborate in writing how inefficient and sociopathic your seniors are, especially when those same seniors will be deciding your bonuses.
And when you’re given your number for the year and it isn’t what you were expecting (it’s never, ever enough), I’ll bet the comp of a top trader at GS that the first thing you’ll do is to go outside and tell your peers you were paid a multiple of your actual number. Why wouldn’t you – braggadocio comes easily to our personality types, we want our colleagues to think we’re the best.
In doing so, you’ll be reinforcing the universal suspicion in finance that everyone else is somehow doing much better than you are; that your performance is somehow lacking.
For many, this simply reinforces the urge to do better in the next bonus round. Never underestimate the capability of young, arrogant and ambitious bankers to note a statistic and then quietly dismiss it. Sure, it’s a numbers game, and it’s a slippery slope to the top. But I will be in the minority of people who make it.
You go tiger.
The author is a former junior investment banking, now on his way to riches on the buyside.