Finance lost. Tech won. Here’s why...
I failed at investment banking. And it wasn’t this soft, cheery type of failure that we celebrate in Silicon Valley. It was a real failure.
In 2004, I was part of an internship class of about 100 college juniors at Credit Suisse First Boston. All but one of them was offered a fulltime job at the bank. Guess who the exception was? The exception was me.
It was not an environment where you got credit for trying. When you failed, you got to be the "talk of the bank" that week. Everyone wanted to know “which intern didn’t get an offer?” And if I hadn’t been that guy, I would have asked the same damn question to my peers.
But as cold and merciless as the process was, the actual "firing" was not so bad. The Managing Director pulled me into his office, and gave me a “criticism sandwich." That is where a manager begins by saying what he likes about you, so that you feel better when he lays out the real dirt.
Here is what he liked about me:
- I was creative — my emails had more life in them than he was used to seeing.
- I was resourceful — if things went wrong, I found a way to bail myself out.
- I was fun — people enjoyed working with me.
- My attention to detail was sub-par. My PowerPoint presentations had occasional inconsistencies.
- My note taking sucked. Plain and simple.
- My demeanor was out of control — I felt way too comfortable around senior bankers who couldn’t believe when I spoke in meetings.
But, you know what? People can be a bad fit for a job. Banking was not a fit for me. And somewhere along the way, many of America’s best and brightest young people decided that Finance was not a fit for them. That is why Wall Street has gone from being the job-of-choice for young people, to being something that they don’t really want to do.
In 2005, investment banks accounted for nine of the 30 most desired employers in America. This year, it is down to three. The fact that IDEO ranks ahead of Morgan Stanley pretty much sums it up. Google, of course, is No. 1.
But we can learn a lot from why young Americans have rejected investment banking, and why technology and startups have carried the day.
It’s not because of money. Those who want to get rich will find that Finance is still a great way to make big bucks. Have bonuses been reduced? Great, so now you will make a million dollars in a big year, instead of two million. Hedge Fund managers still make a fortune.
The reason is because people — especially smart and ambitious people — have determined that the skills which make you a great banker are not the skills that they want to develop or manifest.
A young banker succeeds for all the reasons why I failed:
1. A banker follows the playbook to a tee. He learns the playbook quickly and without a lot of hand-holding, then he executes the playbook without a hitch…
… a startup guy knows that there is no playbook. Every startup will bump into unique problems and challenges. His job is to resourcefully create his own playbook while simultaneously putting out fires.
2. A banker pays his dues. He barely opens his mouth in the first three years, and he learns through careful observation. He gets burned once or twice, endures the pain, and then never repeats his mistakes…
… a startup guy needs to demonstrate her value on day one, and she does this by immediately finding a weak spot — of which there are countless — and solves the problem. Within months, there are countless processes, data sets, or features that only she can speak to, so she better speak up.
3. A banker transacts. The senior banker wins clients and the junior banker delivers the services. Together, they sell one industrial manufacturing company to a larger manufacturing company. Even though neither of them has ever set foot in a factory…
… a startup guy builds. Feature-by-feature, user-by-user, his little world grows by the day. When he does have to do a financial transaction — usually a fundraise — he hates every damn minute of it, and can’t wait to start building again.
4. A banker waits. He knows that it takes three years to go from Analyst to Associate. Then three more years for the next rung. Then three more years for the rung after that. It is almost impossible to climb the ladder any faster or slower than that. His salary doubles every three years until he is making a seven-figure income in his early 30s.
… a startup guy is impatient. He would rather fail altogether than have to wait. Those moments when he has to wait a few weeks for an exciting new feature to launch, or when a closing gets pushed out to next month… He is ready to explode. Waiting is torture.
The young people who quit investment banking to join startups — and I know many of them — don’t do it because they want to be the next Mark Zuckerberg. Several of them enter late enough to own 0.1 percent of a company. They know that a big payday is a distant prospect.
They do it because it’s a better fit for their skills and interests. People want to be resourceful. People want to solve problems. People want to build. People are impatient by nature…and most of all, ambitious people want to win. But there is no end to investment banking, just another day, another paycheck, and another deal. There is no IPO that instantly changes your life forever. There is no grand slam.
So here is my prediction. I think that our generation has given up on Finance as the career of choice. This is not just about a short-term cyclical rotation out of banking. Once Goldman Sach’s stock is back up and their bonus pools increase, they will still trail Silicon Valley as the place to be. This is it.
And this is a monumental achievement for Generation Y. For the first time, young people are de-prioritizing income. People in their 20s think about things like “What do I enjoy doing?” or “Is that the best use of my talents?”
You can give somebody a raise, but you can’t change who they are or why they wake up in the morning. The skills that are rewarded in a tech company are the very skills that people want to develop. And in finance, people are paid to go against their nature. They are paid to suppress their real ambitions…
And even Goldman Sachs lacks the funds to do that at scale.