On January 23, 1996, President Clinton made a famous declaration in his State of the Union address:

“The era of big government is over.”

The promise, of course, turned out to be untrue: although Clinton moved to the center on welfare reform, among other issues, he later proposed hundreds of billions in additional federal spending.

With the results of the 2008 US election, many in the finance community have been asking a similar question lately:

Is the era of big bonuses over?

Before hitting the “panic” button, we need to break this question down so we can analyze it rather than running around with our heads cut off.

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“What’s missing from your resume is a focus on the results… I see all your recommendations and the projects you worked on, but I don’t see what happened as a result of your work.”

-McKinsey Recruiter to Me, 3 Years Ago

Some of you have asked about consulting (as in management consulting, not IT consulting - who in their right mind would do that?) vs. investment banking and which is “better” to pursue.

I’ve done both, but I worked in banking for much longer than I worked in consulting - so I am biased.

As we’ll see, the quote above shows why I didn’t go back to consulting and why I always recommend finance to anyone in “What should I do with my life?” mode.

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Around a month ago when bonus discussions were heating up, I took a different approach from most others and looked at each bank’s…. investment banking revenue.

Based on this analysis, I concluded that bonuses would be down 20-30% overall:

“…But if I had to guess, I’d say that bonuses will be down 20-30% overall. Something in the range of $60-75K for 1st Year Analysts’ top bonus seems reasonable.”

So I don’t see why anyone (at least anyone who read the post) was particularly surprised at the outcome: top bonuses for 1st Year Analysts were indeed in that range.

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What is Investment Banking?: Ari Gold: What Bankers Actually Do, Why NOT Do Investment Banking

Investment Banking Lifestyle: A Day in the Life - Worst Day and Best Day, How to Stay Fit, Investment Banking Wardrobe for Men, Investment Banking Lingo Part 1 and Part 2, A Week in the Life (Sunday, Monday, Tuesday, Wednesday, Thursday, Friday, Saturday)

Breaking into Finance: How to Get an Investment Banking Job, Networking into Investment Banking, Recruiting in a Tough Market, Breaking in from Engineering, Breaking in from Law, Breaking in from the Back Office

Investment Banking Resumes: How to Write an Investment Banking Resume, How Investment Bankers Read Resumes

Investment Banking Interviews: Investment Banking Interview Guide, The Interview Selection Process, How to Close Your Interviews

Summer Internships: Summer Intern Success Guide, How to Dominate Your Summer Internship, Tips from a Former Summer Analyst, What You Do as a Summer Analyst, 10 Summer Internship "Don't's", How Summer Interns Get Full-Time Offers

Investment Banking Salaries: Investment Banking Salaries vs. McDonald's, Why Investment Bankers Make So Much Money, 2008 Analyst Bonuses

Private Equity / Buyside Jobs: Private Equity Resumes, Private Equity Interviews, The Myth of the Buyside Job, Headhunters: Friend or Foe?

Specific Groups: UBS LA, Boutiques, Restructuring, The Back Office

Quitting Finance: The Conference Room: How You Get Fired, The Farewell Email, A Day in the Life of a Former Investment Banker