by Brian DeChesare Comments (19)

Why You Should Stop Reading BusinessWeek and Start Using Common Sense Instead: What the Mainstream Media is Missing About Recession Recruiting

“Wall Street is over.”

“Students once interested in finance are now thinking about moving to nonprofits and pursuing other interests.”

“Investment banking is so over.”

While I was on my lovely 24-hour flight and airport adventure (don’t you love it when you miss connections?), I had the misfortune of reading some recent headlines.

As usual, though, the mainstream media is getting a few things wrong about the current environment.

What’s happening now is no different from what happens in any market cycle. So don’t pay too much attention to BusinessWeek.

A History Lesson: What Happened from 1996 to 2000

Spurred on by the Netscape IPO in 1995, suddenly everyone in school wanted to join a startup – and those already working wanted to quit their jobs and join startups.

If a 24-year old kid could create a $2.6 billion company (on only $16 million of revenue and no profit) and get rich overnight from an IPO, it couldn’t be that hard to replicate, right?  Right?

Computer science and engineering departments saw a huge increase in enrolled students; even those who couldn’t figure out how to use Microsoft Word were jumping into these programs.

Investment banks even started to compete with startups for top talent – students could no longer decide which would make them more money!

History Lesson, Part 2: The 2001-2003 Era

Following the market implosion, enrollment in technical programs at universities plummeted. I remember reading stories about confused professors wondering what was happening.

“Do they no longer care? Do they think everything is going to be outsourced?”

Nope. It’s just that the money had left the room and people stopped thinking they could get rich quick.

There was always a core group of students interested in technical fields – the bubble just added tons of people who really had no business trying to be the next Marc Andreessen anyway.

And when the bubble burst, so too did this influx of newcomers.

History Lesson, Part 3: What Happened from 2003 to 2007

Driven by bonuses growing to record levels and a few lavish parties thrown by Steve Schwarzman and his friends, finance became the dream destination for students, accountants and yes, even Chinese gold farmers (I admit it, I am obsessed), from 2003 to 2007.

I was almost part of this wave as well. I entered for somewhat different reasons (that’s another story for another day), but I hadn’t seriously considered banking until it was rather late – and after I had already eliminated consulting and technical work as possibilities.

I don’t have the exact numbers, but I remember reading how firms kept expanding their hiring each year… every year… over those 4 years – until recently, of course.

You had lab researchers who never gave finance the time of day suddenly start wondering if “investment banking might be something they would be interested in” and others who wondered if investment bankers had “hot stock tips” start pursuing the field.

They got caught up in the hype before investigating what was actually involved.

What’s Happening Now

The current situation is similar to the 2001-2003 period for the tech industry, when the bubble burst and all the get-rich-quick guys dropped out.

There’s always a core group of students and professionals who are interested in finance / banking, and nothing is going to change that – recession or no recession.

Similarly, companies always have a need to raise capital and to buy other companies.

So financial services will continue to exist in order to meet these market needs.

But since the number of jobs has fallen significantly, only those who have a serious interest – who haven’t just heard about it from their roommate’s uncle – stand a good shot at getting into the industry now.

What This Means for You

So what will happen in the near-term?

The number of people applying to finance jobs will decrease, so in theory it should be easier to stand out and get interviews – at least in terms of raw numbers.

But it will be more difficult than ever before to actually land offers.

Why You Should Stop Reading BusinessWeek

I don’t expect you to actually stop reading BusinessWeek.

Just remember that they’re not telling you anything that you don’t already know.

Of course the number of people interested in finance will decrease – when a get-rich-quick scheme no longer “works,” interest fades away – whether it’s startups in 2001 or finance these days.

And that’s both good and bad for your own recruiting efforts.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. I really like what you wrote. I am an international student and is now applying to colleges. I am very interested in finance and considering ibanking. My question is do banks on wall street recruit international students? I have heard some international students who graduated from target schools with gpa of 3.9 got recuited to banks on wall street but were later sent to HK or London. What is the possibility if this happens? I thought it would be challenging if I could spend some years working on wall street before I go back to my country, so what do you think is the best way for international undergrad students to get into ib on wall street? Thnank you.

    1. Yes they do but the US visa situation makes it tough especially following the crisis when banks in the TARP program were restricted from hiring non-citizens. If you can’t get into NY the next best option is London as they tend to hire more foreigners there.

  2. Quick question..

    Are summer analyst programs binding? For instance, does the firm expect the summer analyst to continue working FT after the summer assuming they perform well?

    1. If they get offers, yes, most banks expect you to come back – but it’s not officially binding. Some places actually give you time to shop it around.

  3. It seems like you have tried to build your own business right now with the book, websites and marketing projects. Are you considering ever going back to financial sector again in the near future (2-3 years maybe)? or another career?

    1. Hey Tristan, right now I’m pretty focused on everything I’m doing online but I may consider going back or doing something else in the future.

      I don’t do much long-term planning, I sort of just take things day-by-day and adapt based on what happens. :)

  4. Do most banks use the prebuilt models, comps, and reports that Capital IQ has or do they make analysts design entirely new ones?

    1. Usually they have templates already made, but sometimes you modify them and/or create new ones depending on how complex whatever you’re doing is.

  5. And yes I do realize the press probably is blowing this slightly out of proportion, but nevertheless the numbers are quite astonishing.

  6. Unrelated, however…dunno if you watched 60 minutes earlier tonight, but they showed an interesting chart representing the notional amount of Alt-A and option ARMs set to reset over the next few years – nearing $1 trillion- and the default rates on those are expected to be b/w 50%-70% which obviously rivals the number of current sub-prime loans in default…part of this question hinges on how common securitization was with these loans, but do you think that financial institutions can handle this kind of a blow in addition to all the current writedowns?

    1. We don’t have 60 minutes here in China. :)

      I’m not an expert on all these complex securities, so I can’t offer too qualified an opinion here. But hey, if the government continues bailing out banks, sure… otherwise, who knows.

  7. I think the point is that the recent run-up in finance was not limited to six years of history but is part of a broader relative decline of financial services. This unwinding came at the end of what was a thirty-year bull run for financial services. After most of the broker dealers consolidate, finance won’t be seen as a “sexy” career alternative for college seniors.


    1. I think that remains to be seen, because few alternatives have as good advancement opportunities. There are of course many options, but most are more risky or have business models which don’t facilitate pay that’s even close.

  8. Thanks a lot!
    Truly inspiring… better half of me was thinking pretty much the same – “do not give up, keep trying to get in”, though another half was kinda opposite :)

    1. Yeah, I really think the press is overly negative about almost anything they can be negative about – whether it’s crime, taxes, politics, recruiting, economy etc.

      That’s one reason I rarely read the news. :)

    2. I wonder what will be the next area for “get-rich-quick guys”… High-tech, IB & consulting, what is next? Clean/alternative energy? Nanotech?

      1. Intergalactic teleportation, of course :)

      2. Clean/alternative energy is getting hammered by the drop in oil prices. Even beyond this, I would never expect to see a boom in these industries. They are capital-intensive and will tend to consolidate around a few massive players who have the wherewithal to install the facilities. These are industries where a competitive advantage is conferred by having marginally more efficient processes rather than any individual sangfroid. The ultimate engineering job (yuck!).

        I’ve done research in (not on) nanotech and it’s dreadfully expensive and primitive now. Truly pure science, not near to engineering, and nowhere near commercialization. I think it has lots of potential – when I’m an old man.

        I’m wary of predictions that assume every new technology will result in a boom. Biotech has been the Next Big Thing since the 80s.

        Software is still king for making something from nothing. Software by its nature was and is special, and there will never be anything else like it. Sadly most of the software market has already been colonized.

        Generally you want to go for things that are abstract rather than concrete. Selling abstractions has negligible running costs and once you’re started it’s pure gravy. Software is abstract. Finance is abstract. Law is abstract.

        My prediction for the Next Big Thing:
        In my mind there were two major software booms, the first in the 80s making applications for the PC and the second in the 90s making applications for the internet. In both cases, a gold rush resulted from a paradigmatic new hardware configuration (PC, internet) requiring software to control it. Microsoft captured the PC’s natural monopoly (OS) and Google captured the internet’s natural monopoly (search engine). The good news is that a new paradigmatic hardware configuration has emerged in the last decade – the cellular phone/mobile device. In many places around the world, a cellular phone is the only electronic device present, and thus software developers who can target this device have a monopoly on delivering information to these markets. The next question: what is the natural monopoly for the cellular phone?

        1. Even better than software, digital products. Yes, they don’t work in some regions (China) but in the West they are huge and getting bigger each year.

          No support, no hassle, no server issues, and near 100% profit.

          Wait why am I publicly revealing this… hmm.

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