Sep
26
Summer Internships, from Ned Humbert
September 26, 2006 |
So these are my "Ten Great Observations about Big Bank Internships". Having just endured this miserable joke, I thought some of ye older and wiser specs would enjoy a laugh at my right of passage.
For a little context, I am studying a double degree in Law and Finance. I have been trading stocks and options since I was 15 and have been lucky enough to have some success largely because I have devoted myself to the study of what can go wrong in trading (i.e. studying crashes, crash/blowup participants, behavioral finance etc) rather than reading hyped up "How to Trade for Millions!" type tomes. As a result, I'm a quiet, introspective, respectful and humble kind of guy; so imagine my shock during my foray into Wall Street. These are my tongue-in-cheek observations of the whole internship joke:
If you have any kind of ingenuity or entrepreneurial pizzazz teamed with some market-taught smarts about you, you will instantly be ahead of the game. Paradoxically, this will do you no favors at all as an intern — most likely you will be ostracized for it. MD's do not like you consistently outperforming them, or poking a hole in their "Great Investment Thesis! ™" because you happen to internally appreciate the concept - and have first hand experience - of a Leptokurtotic distribution coming to bite you in the ass. Well, that or they have never heard of NPV. Or, disastrously, neither.
99% of "professionals" are deeply insecure about their views. Lean even moderately hard against any trader or sales person to good-naturedly criticize their idea or test their thesis and they will crumble. They will then lash out at you for being a dilettante amateur who has no experience of real market conditions. Best to just nod and smile at that.
Strange economic phenomena/paradox: Sycophancy is much more highly valued than skill / results despite its absolute and relative over-supply on grad programs. So much for Economics 101. Thanks University, for nothing.
It is difficult to respect men who plough their cash into limited edition Ferraris and long liquid lunches at the local strip club and then demand your respect for their integrity, decision making skills and level-headedness under pressure … when they are only five years older than you. I cannot predict the future, but I have never come closer to seeing a man's future downfall than when said MD buys a new Ferrari, then invites his desk to come down and look at it. Admittedly, we were all gagging to. But to then see his face flush with pride at us "ooohing" and "ahhhhing"….never has such a grin of self-satisfaction and hubris so clearly indicated a very hard fall just over the horizon.
As it turns out, reducing weeks of research / investment analysis down to a single Bloomberg MSG screen so as to explain an idea to someone who has the attention span of a gnat is a "value-adding skill". This is actually sensible. It is not particularly intellectually satisfying when you basically come up with 5 bullet points that say "Buy XYZ because a) it is going up (b) soon (c) because there are forces in the market right now (d) that will make it go up (e) er, that is it. Trust me on this one, boss." but it will surely give the illusion of you being a switched-on kid though!
Stupidity and Parochialism. It is what is for breakfast. I think a certain degree of stupidity is actually hoped for in intern traders. One's boss wishes to demonstrate his superior skills, knowledge and insight. He wants your fawning praise and wide-eyed admiration for his well thought out plan to buy oil because of Middle Eastern instability (yawn). At your suggestion that current prices may perhaps already reflect this not-exactly-cutting-edge bit of analysis, you are scorned and your tickets to the next big sporting event are given to your assistant.
Markets are correlated. Except as far as anyone on your desk is concerned. If your job is to trade energy closed-end funds, who gives a rat's arse if natural gas is rallying 50% in just a few days? (Seriously, this happened to me. I remarked that a strategy we had going on was going to be materially affected because of whipsawing energy commodities prices. I was given a curt "Don't care". They then scratched their heads at the next NAV report and wondered why they did not see it coming.)
Have a clever arbitrage idea that you have painstakingly modeled, backtested and synthetically traded? It works? Great! Do not tell your boss. Just go start your own hedge-fund.
The bad bosses cannot stand to admit you might know something more than they do and just squash you. The good ones just steal your idea as their own. This is fine. Infuriating, but fine. The good ones will at least admit that your idea "was, in fact, good" to you before doing you over. At best, you will get a promotion, or not be as disappointed with your bonus. Such is the price of rising the corporate ladder, apparently.
Internships are a waste of time. Why spend millions on campus recruiting, throwing cocktails and dinner in nice hotels round the City, making you have thirteen interviews and cause kids deep anxiety about achieving a 3.8 GPA from the University of GreatMerit just so you can do what any 15 year old high school cheerleader could do? Because getting initiated into a culture of self-importance, delusion and self-aggrandizement is a must if you are going to last on Wall Street baby. All the recruiting propaganda about integrity, results-driven cultures, entrepreneurial environments, etc., etc. is just a joke. In reality, desks want frat boys. This is fine, just do not lie about it! Save your shareholders some money and openly do your recruiting on Facebook — most of you do anyway
Bonus: If who you are is synonymous with what you do… I cannot wait to trade against you.
Edward Talisse responds:
What an erudite and illuminating essay! Ned luckily caught on quickly. It took me 20 years to figure out the ins and outs of the Street. Maybe I can help by offering mid career types some observations after a long career at the bluest of the blue blooded trading firms:
1. There is massive confusion and misunderstanding between the concepts of skill and luck. Traders which collected bid-offer spreads for years discovered the painful truth once dealing spreads collapsed. They are left with no skill and no luck. Make sure you always study and keep ahead of the pack. Don't count on luck.
2. Pay and promotion is solely based upon current performance. It has nothing to do achievement in relation to opportunity or potential. That's why turnover is so high on the street. Get yourself in the best seat. Go for the hot areas if you want the highest pay.
3. Senior management generally does not know the difference between risk measurement and risk management. Middle office risk monitoring functions are not involved in the business. They simply are there to provide regulatory and legal cover when something goes wrong. You need to be your own risk manager.
4. There are very few real risk takers at the big Banks. The real emphasis is on collecting fees, collecting bid-offer spread where available and front running large client transactions. The real risk takers are purged at the first sign of trouble. The best ones go to Hedge Funds. Get out if you really believe you are a great risk taker. There are fewer constraints and bigger rewards outside the big Banks.
5. There is no more lethal combination than ignorance and arrogance. It usually leads to disaster. You'll encounter plenty of people with that combination. Avoid them like the plague.
6. You have to manage your own career. There is no real mentoring in the big Banks. Turnover is just too high. Beside, your appointed mentors are too busy worrying about their own careers to help you with yours.
7. There is a shockingly low level of basic finance knowledge in the big Banks. Sure there are plenty of very smart people in the banks but there is an abundance of knuckleheads too. It's about the appearance of knowing what you're talking about. Accountants call that form over substance and it's a great skill to have on the Street. Learn to shoot the bull.
8. It's important not to overstay your welcome. That was my mistake. I turned down repeated offers to sign on with smaller less "prestigious" firms. I still regret those decisions. Go with the Firm that best allows you to develop your skills, not the one that looks best on a business card.
9. Take advantage of everything the Bank can offer you, particularly ex patriot assignments. The experience may change your life and there are enormous opportunities for personal betterment.
10. Don't dismiss back office jobs. They are well paid and you can sleep at night. It's an annuity and you can ride the wave for many years with little or no pressure.
Honore de Balzac, the famous French author, once famously quipped that "behind evey great fortune, there is a crime." I think that is only partly true. Rewards will always be there for diligent, hard working risk takers.
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