Sometimes, my timing for publishing articles on this site is horrible.
A few days ago, for example, I published our 2013 bonus recap and made a few comments about BoAML paying higher bonuses than other places… having just gotten off a 12-hour flight and not realizing the other big news involving that firm.
Assuming you’re not living under a rock, you’ve heard about it and have probably had friends forward you similar articles dozens of times by now.
A reporter (Liza Jansen in London) contacted me the next day and asked for my own views.
Normally, we don’t cover “current events” or news here but this story made such a splash in the mainstream media (and even made it to the front page of the Drudge Report) that I wanted to share a summary of my conversation with her.
This format is a bit different from the normal Q&As and interviews here since I am the “interviewee,” but here are my own thoughts.
You can check out my quote in her article right here (NOTE: We spoke for around 30 minutes and this is not exactly the quote I would have selected – but you know how that goes).
There are a few quotes from other people in the industry, other finance website owners, and my favorite: a sleep therapist who carries out “corporate health assessments at large investment banks” (They do that? Really? Since when?).
Liza’s basic argument in the article is that the 2008 financial crisis was responsible for the intern’s death.
Fewer jobs, tougher competition, and less deal activity means that you need to work even harder to stand out… which sometimes leads to tragedies like this, right?
Personal Experience and Crashing Cars Into Trees
I have a bit of personal experience with this issue: back in 2007, I crashed my car into a tree on the side of the road after pulling multiple all-nighters in a silly attempt to impress my superiors.
And then I started this site later in the year when I decided to get out of the industry.
(OK, those two statements don’t sound great taken out of context – read Part 1 of my story if you haven’t already done so.)
The point is that I’m well aware of how easy it is to fall into the trap of working to death to impress everyone – because it almost happened to me.
I could have been that intern.
Has It Really Gotten Worse Since 2008?
This one’s harder for me to answer because I left the industry around this time.
But I have conducted 100+ interviews with readers over the past 4-5 years, and my sense is that things haven’t changed by all that much.
It’s easy to look at an incident like this and say, “Aha! It’s all because of recent trends! People never used to work themselves beyond what was humanly possible.”
But it happened all the time – you know about my own experience in 2007, and even before that analysts at places such as UBS LA worked crazy hours due to the deal flow and office culture, plus everyone aiming for PE opportunities at the mega-funds.
The difference, in my view, is that much of the “crazy work hours” culture back then was less about impressing people and more about doing what had to be done.
Recently, it may have shifted into more of a “Do anything possible to get ahead and win the offer in the first place, even if you have to abuse yourself to get there” mindset.
But before I go on, let’s skip to a summary of my conversation with the reporter (Lisa):
Has It Gotten Worse Lately?
Reporter: Start from the beginning. Can you explain why exactly the hours in IB / finance in general are so bad?
Brian: I can try. The short version: clients pay banks so much money (millions of USD / Euros / GBP) that they can ask for whatever they want, whenever they want it. And banks feel compelled to cater to their every demand.
Meanwhile, it’s very difficult to “distribute” work or to predict the workload because you need to be intimately familiar with a company to answer last-minute urgent requests, and because it’s hard to predict when something will “heat up.”
So if banks hired twice the number of junior-level people, for example, those junior bankers would work at full capacity only half the time, and the other half of the time they’d have nothing to do.
Note: I’ve received some questions from readers asking, for example, why you don’t see those crazy hours at normal companies or on huge projects such as building oil refineries or pipelines at Exxon Mobil.
The key difference is that that’s not client work – it is internal, and the company can finish those projects whenever it wants (within reason). It does not have to answer last-minute demands at 3 AM from paranoid clients paying millions of dollars for a specific deliverable.
Oh, and you actually do see those crazy hours at normal companies sometimes – see the “crunch time” phenomenon in the videogame industry, for example.
Reporter: Since the crisis erupted in 2008, do you think the notion that you need to work whenever the client wants you to work has grown significantly in the finance industry?
Brian: In some sense, yes, but the truth is that notion has always been there.
There is more competition now, there are fewer job openings, and candidates are much better prepared than they were in, say, 2005 or even 1998.
Given the environment, yes, some professionals are compelled to work non-stop to get ahead and preserve their jobs.
And it is especially bad with interns since banks tend to be disorganized and do not always have great assignments for them.
Reporter: How have the IBD working hours and culture changed compared to pre-crisis times? Were these 100-hour workweeks less common before 2008?
Brian: No, not really. I think people are sometimes “short-sighted” when they discuss this topic and they forget how it has been like this for a very, very long time.
Here’s a story for you: Back in the late 1990’s during the dot com bubble, tech companies were going public and being acquired at massive valuations every day. Tech bankers were raking in the fees. Some equity research analysts got paid upwards of $10 million USD.
One Managing Director I knew from back then worked his analysts so hard, often keeping them at the office for days/weeks at a time, that he sent them all to Cancun for a week at the end of each “cycle.”
He gave them his corporate credit with no spending limit and told them to go wild, rest, and come back in one piece (believe it or not, most of them did come back rather than running away to somewhere else in Mexico).
So yes, it has gotten more competitive and people are far better-prepared and gung-ho in 2013 than they were in 1998 – but the long hours and sacrifice have always been there.
Reporter: So do you think hiring standards have also gone up over time?
Brian: I think the better way to phrase it is: “Banks pay a lot more attention to their new hires when the economy isn’t great and deal activity is down.”
Another story for you: Also in the late 1990’s, I heard a story of one “poorly considered” analyst hire who was given a simple task by his superiors: create TTM (Trailing Twelve Month) financial statements for a company.
This is not terribly difficult if you understand the concept… take the most recent fiscal year, add the most recent interim period, and subtract that same interim period from the year before.
He made one small mistake: he tried to TTM the Balance Sheet.
This makes no sense because the Balance Sheet is a snapshot at a specific time – it doesn’t show the change over time, so “trailing” numbers are meaningless.
You see more people like that getting hired whenever there’s a bubble, whether it’s the late 1990’s or the mid-2000’s.
Reporter: When do you think this culture of working non-stop, working weekends, and completely sacrificing your life first kicked in?
Brian: I’m too young to know what happened in the 1960s-1980s, so I can’t say for sure.
But compensation in finance was NOT much different from what you were paid in other industries (only about 10% higher) until the 1980s (Source: see this study from the Oxford Journals).
So that might have been part it – with deregulation and higher pay, the demand for these jobs went way up and you were expected to sacrifice more and more to “make it.”
By the mid-to-late 1990’s, a similar culture to what we see now existed at most banks in the US. So that could have been the “starting point.”
Reporter: Do you think this tragedy will have an impact on how banks allocate their work and manage interns going forward?
Brian: I certainly hope so. Banks are notoriously bad at giving interns “real work,” and they are often so disorganized that they invest a ton of time and energy into recruiting star interns, only to waste their talents on administrative work and other nonsense, or nothing at all.
I expect there will be some sort of change or more sensitivity to this topic, at least in London, and perhaps at the bank where it took place.
Back when I had my near-death experience, I even managed to get a weekend off out of the incident…
Reporter: But will it last beyond this next summer / next year?
Brian: That’s the question. As I mentioned, unfortunately people tend to be short-sighted and forget what has happened in the past.
Often, these types of changes tend to take effect at the specific bank or office location for a short period, but are then not enforced properly over time.
But I certainly hope that any changes do last – even if they end up paying interns / full-time employees less because they hire more of them, I don’t think anyone would object.
Reporter: It sounds like you’re skeptical.
Brian: Yes. This mentality is so ingrained in the culture that I don’t see it changing anytime soon.
There would have to be a business model change at banks to support this as well – for example, if the model shifted and banks started charging lower fees but doing more deals or advisory assignments, you might see clients’ expectations decrease.
Don’t hold your breath, though, because the mega-deals with mega-fees are the most profitable, by far, and there’s too much pressure from the top to change the focus of most firms.
Reporter: Any final thoughts or words?
Brian: Yes. My thoughts and prayers are with his family, and I really do hope that banks will monitor their employees and staffing levels more closely in the future.
And if you’re reading this right now and wondering about the wisdom of entering the industry, it’s the same thing I’ve been saying for years: yes, you do want to impress… yes, you will work crazy hours and sacrifice your social life…
But you also have to take a measured approach and learn when to slack off, how to give the appearance of working hard even when you’re not, and how to make people like you so you feel less pressured to out-perform.
Do that, and this will not happen to you – even if you crash into a tree or two along the way.