What Do Investment Bankers Do?
I’ve seen lots of explanations of what investment bankers actually do, but none have seemed particularly good or satisfactory. I think I can sum up what we actually do in 2 words (ok, and 1 picture):
Ari Gold.
If you haven’t seen Entourage (shame on you, but I guess that’s possible), an alternate explanation will be offered at the end of this post for those interested in understanding investment banking.
Investment bankers are agents, just like Ari. We don’t create anything and we don’t buy anything; we just sell things that aren’t ours to begin with. And we make a lot of money doing that, thank you very much (more on investment banker salaries). If the business world were like Entourage, bankers would be the agents, private equity firms and large companies would be the studios, and companies would be the actors and movies. Private equity firms buy and sell companies. Studios buy and sell actors and movies. Bankers make introductions and try to sell things. Agents make introductions and sell their clients.
Vince Chase would be Facebook: young but huge success in store, even with occasional missteps along the way.
Medellin would be WebVan. Or maybe Kosmix.
Just like in Hollywood, starting or running a company (movie/actor) carries the most risk but can also the most fun for those involved. If you look at all the characters in Entourage, it’s hard to argue that Vince doesn’t have the best life. But it’s not easy to get there and it’s far riskier than being the agent (banker) or the studio (private equity firm).
The agents and the studios, on the other hand, have a much easier but less fun job: they must distribute risk properly so that they don’t end up getting screwed. It’s just like Terence says when chatting with E at the end of Season 2:
“We all start out believing that our clients care about us, but in reality they don’t. There’s only one way to look at clients, Eric. Like stocks. Invest without emotion. Diversify.”
So when picking a career, instead of asking what job you want, instead ask yourself, “Would I rather be Vince, Ari or the head of Warner?”
If you’re an Ari guy (aka Navid Mahmoodzadegan), you might just be a banker.
And If You Haven’t Seen Entourage…
If you’ve somehow not seen Entourage, think of investment bankers as real estate agents but for companies instead of houses. Just as a real estate agent introduces buyers and sellers of property, bankers introduce buyers and sellers of companies and try to make a deal happen. Just like real estate agents, the only thing at stake is our time – we have no money invested on either side.
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Tags: Ari Gold, Entourage, finance industry, investment banker lifestyle, investment banking, investment banking career, private equity firms, what investment bankers do
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so if I most identify with Turtle does that make me Sergey Brin’s estranged plow-mechanic half-cousin that calls in the dead of night pleading for money to pay back the loan sharks I owe for my recent extravagant purchase of a rusted nazi era outhouse?
I am interested in a trading position and will like to ask how traders from i-bank decide what to buy and to sell? From what I have gathered, trading is different from investment management, which uses more of fundamental analysis.
I am also preparing for an interview for a trading position and will like advice to the below questions too.
1) Pitch me a stock which you would buy or sell today.
Thanks.
See the recent articles on trading… just do a search on this site. Strategies vary a lot, some are based on momentum trading while others depend on fundamental analysis.
For the pitch me a stock question, see the interview guide or the interview-related articles here – the Get a Banking Job one has a sample walkthrough.
I have no idea, I had to read that comment to understand what you meant. But Turtle would be like the IT guy at a bank maybe haha.
This description of IB is misleading. Maybe on the senior levels there is some Ari Gold involved… but if your dream job is coming in as an analyst expecting to be a high-powered financial agent, you are mistaken.
That’s not to knock the actual job as an analyst or associate, but envisioning an Ari Gold role is more a delusion of grandeur than anything else.
Of course it’s misleading – he’s describing what the very high-level people do here. Analyst/associate work is like entering Ari Gold’s agency is a mailroom boy. Still, the analogy holds in the sense that bankers are just agents/middlemen, just like Ari.
I’ve only seen one episode of Entourage, and I like the analogy already. The analogy fits my experience in investment banking very well.
In response to the previous two comments, very good points both of you. At times I felt like a mailroom boy, and for a while I was so focused on making sure my numbers were right and footnoted and my pitchbooks were grammatically correct that it actually took me a while to figure out what our whole IB business was all about. It should be the goal of any analyst to go the extra distance to make Ari Gold’s job easier, because that’s how the analyst will get a taste of what Ari Gold’s life is about.
This is easier said than done though – I have seen many analysts just get used and abused because they were too focused on finishing their tasks like obedient children, and then never ask for things for their own professional development. That’s tunnel-vision that only stunts your own career.
The extra distance could include doing super awesome research, suggesting approaches to a prospective client, even pitch ideas. If you’re pitching a web hosting company, put your team’s pitch on the prospective’s hosting service and deliver the pitch from online – that’s the sort of thing your staid senior bosses probably won’t think of and will both impress the client and earn you some extra respect capital, which you then expend to insist on being brought to more meetings while the obedient sucker in the next cube gets left with the menial tasks.
Even at more senior levels, investment bankers are far less glamorous versions of Ari Gold than are actual agents. Ari Gold wouldn’t spend all that time doing intensive diligence to win a bake-off before running an intensive, prolonged sale process (and hosting an enormous data room) just to get a buyer across the finish line.
Have you seen the same episodes of Entourage I have? Ari Gold is a slave to his clients, at least Vince. Remember in Season 1 when he runs off from his wife at the movies to go secure a deal for Vince?
He constantly sacrifices his personal life and family to close deals. So although there may be less gruntwork involved, it’s still a big sacrifice.
I think the Entourage analogy is probably the best I have read in a long time.
As all the seasons progressed, Ari sacrificed everything for Vince and making sure Vince got the best deals (Medellin not counted).
From the sounds of it, IB sounds like a lot of hard work and sacrifice.
i have a question regarding the financial modeling that ibankers do. Does the modeling typically involve vba coding / macros? Or is it usually pure spreadsheet-based (no macros) modeling? Cheers
It’s very simple – no VBA/Macros involved in most cases.
Sometimes you do use them, but they’re usually not necessary.
Fantastic post (as usual)! But I am curious; I interned at a commercial bank last summer that did capital calls for PE firms & their LP’s. By any means it wasn’t like UBS LA, but all the professionals worked from 7 pretty much till 8 or 9 everyday, so I feel the ethos was SIMILAR. There were “firedrills” & “bake offs” but everyone pretty much put there head down and got their work done, and wasn’t that chaotic. Is a m&a analyst pit really the NYSE floor incased in 2500 ft? The picture your painting seems just like a million Ari’s running around on the verge of histaria ha. I mean if this is the case, I wouldn’t argue, but from my limited professional finance experience it would seem like its a little more calm (I did read your “bad day” “good day” posts, this just more about the overall physical atmosphere of the office). Thanks!
I mean normally it’s pretty calm but it can definitely get crazy sometimes. But it’s nothing like the NYSE trading floor or anything.
Not quite that crazy… mostly pretty quiet but can get frantic at times.
One more question.
As an IBanker as you gain years of experience, does the working hours become less or more or no difference whatsoever?
They decrease a bit but never below the 60 hour per week mark.
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This is awesome! Definitely the best way to describe ibanking. Thank you, this will make it much easier to describe this job to my parents. Keep up the good work.