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Investment Banker

The Real Poop

Pale. That's a good word to describe most investment bankers. They don't see the sun. Instead, they get cathode ray and LCD tans. Why? Mounds and mounds (and mounds) of work. 

And a lot of it is busy work: making financial models (i.e. if this company grows at the rate that the CFO says it will grow, how much cash will it produce in the next five years?); making pitch books (you should sell your company to XYZ MegaGlopCorp today for $23 a share because competition is coming and they will devour you); and making coffee (cream? sugar?).

Fortunately for the U.S. Mint, banks don't convert $10 billion a day in actual pennies. (Source)

Investment bankers do one primary thing: they sell money. Think about it as a more complex form of those machines that convert your couch change into bills. For every dollar they convert from coin to paper, they take a penny. 

That may not seem like much...unless you frame it in the context of how big banks work. Imagine converting $10 billion a day. Now that's a lotta pennies. And they do add up.

Right about now, you're probably thinking something like, "Billions? If the bank's making that kind of money, then the bankers who work there must be raking it in." Nope. Most are actually barely scraping by on minimum wage. Just kidding—yes, of course, they make a ridiculous amount of money. 

A junior analyst (we're talking bottom of the investment banking ladder) makes about $125,000 a year, a third year analyst pulls in about $310,000 a year, and a department head pulls in around $2,500,000 a year (source). Yes, you counted those digits correctly. There were seven of them.

As you can probably tell from the leaps in salary, the gig inside of an investment bank changes dramatically as you move up the food chain. At the lowest level of amoebae are the analysts. An analyst is typically a financial geek who actually combs their hair (with an honest-to-goodness comb and not just their fingers), and hails from one of a dozen top universities. 

Clients expect investment bankers to be "best of the best" kind of people—they pay top dollar for top talent—so if you only have a degree from Podunk U. or a junior college, investment banking ain't the place for you.

Analysts are fresh out of college and (let's be honest) mostly clueless when they arrive. They attend a kind of accounting boot camp for a few weeks, then go through learnings on compliance, which is basically about what they're legally allowed to say when it comes to telling other people what they know. Ever heard of insider trading? Yeah, this is about avoiding that, and the prison sentence that comes with it.

That job usually goes for two years, at which point the analyst generally applies to go back to school. Yes, you heard that correctly. Back to school. Specifically, business school. Sometimes a bank will ask them to stay and become what's called a third year analyst instead. Then it's decision time: get an MBA, or stick around and keep putting in work hours.

Analyst work revolves around grinding, and no, your extensive dancing experience in sleazy nightclubs will not help you here. "Grinding" in this sense is basically every crummy task that your bosses and their bosses and their bosses' bosses simply don't want to do—they rationalize giving allll of it to you because "it'll be good for you to know how the financial sausage is made in the long run."

Grinding involves everything from making coffee, to typing in quarterly and annually reported financial metrics from (mostly) public companies, to dealing with pitch book creation. Pitch books are the stacks of paper that bankers use to market their services to clients. 

They give you, the analyst, the basic framework of a potential deal, and then expect you to put together a picture-perfect document with no typos—by morning. Time for more coffee. Black, please.

If that doesn't sound pleasant, you could enter the industry as an associate instead. The pay is higher, but so are the prerequisites. Nearly half of all investment bankers come from one of three business schools: Harvard, Stanford, and Wharton (source). 

Get your degree from just about anywhere else, and it's going to be hard getting an offer at a top bank unless you graduate into a roaring bull market (when times are boomin', economically speaking) where banks are dying to snatch up anyone with a pulse. You also get to be an associate if, after your third year as an analyst, the powers that be love you. Hopefully not in an unprofessional manner.

It doesn't hurt to have a little shlep in your step. (Source)

The associate is really the backstop for producing perfect work; in theory, the associate wrangles the analysts in what is lovingly termed a "bullpen." That is, analysts are grazing forms of cattle, which must be fed and watered regularly. 

And if they're managed properly, they'll produce nice money steaks in a few years. Associates are happy to shlep the briefcases of their bosses—vice presidents—who shlep for their bosses—directors—who shlep for their bosses—managing directors.

There's a pecking order and a structure to investment banking that fits the culture. Those workers going into the field tend to be...stiff. They want structure. They want a clear path to wealth with relatively low risk. And they're happy to have to kiss a lot of butt along the way to get there.

In the end, the power and wealth of the banker world comes from being able to sell a deal; that is, the power derives from getting the client to say "yes."