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Monday, December 09, 2019

Weekend Reader: Young Money: Inside The Hidden World Of Wall Street’s Post-Crash Recruits

Today, the Weekend Reader brings you Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruitsby New York magazine and business and technology writer Kevin Roose. Roose immersed himself in the Wall Street recruitment process of young college graduates, which has found itself in its own predicament following the 2008 financial crisis. Since then, recruitment rates have fallen–becoming a Wall Street banker is no longer as glamorous as once perceived.

The excerpt below details just one of the eight relationships Roose cultivated during his three-plus years shadowing entry-level employees at several investment firms including Goldman Sachs and Bank of America Merrill Lynch.

You can purchase the book here.

One night, over dinner, I asked Derrick if he felt ethical about working in private equity—an industry that had been attacked as a form of “vulture capitalism” during Mitt Romney’s 2008 presidential run (and that would soon taint his 2012 run). He thought for a minute, took a sip of his beer, set it back down.

“Being ethical is kind of on a spectrum, right?” he said. “Like, I really like my firm, I really like the people I work with, and I think that within private equity, we do a good job of actually improving businesses rather than just going for quick money. But what conflicts me is that we don’t play by the same set of rules as everyone else. It’s a completely rigged system.”

I asked him what he meant.

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“Well,” he said, “we buy these little companies, we put the best lawyers and consultants in the world on it, and if it goes bankrupt, we never lose. We put in stipulations that don’t leave us liable, there are seventeen blocker corporations between us and the company.” He paused, then chuckled. “How are you going to out-money private equity? Good luck.”

But surely, I said, it wasn’t easy to identify the right investments, find the right ways to engineer a portfolio company’s finances, and time an acquisition with trends in the market. Wasn’t there also some skill involved?

“Well, look at it this way,” Derrick replied. “My dad’s up there, intelligence-wise, with anyone I work with, but the money doesn’t flow to him like it does to the guys I work with. It’s the system. People in private equity are smarter than your average person, but they’re not that much smarter. And as long as the system is structured like this—where, two years after the world’s worst financial crisis, you can get four-times-debt on a bankrupt business—it’s not going to change.”

Derrick let that hang in the air for a moment, then added with a wry chuckle: “Of course, I say all this knowing that the fucked-up system is how I have an apartment that I don’t worry about the rent for, how I take cabs everywhere and go out for nice meals and wear clothes that I don’t care how much they cost.”

Derrick’s rant threw me off guard. I knew he was less than convinced about the basic goodness of the financial industry than many of the analysts I knew, and I suspected that the Occupy movement had resonated with his left-of-center political conscience, but it was rare to hear anyone in finance using phrases like “the system,” or undercutting the myth that people who engineered complex financial transactions were smarter and more capable than people in other sectors. The supremacy of Wall Street’s intellect was, in many ways, the financial sector’s founding myth, and it was part of the reason that thousands of high-achieving Ivy League graduates flocked there after college.

But although Derrick’s words were surprising, I couldn’t say they rang false. My shadowing of first-year analysts—and my interviews with top executives for my day job at the Times—had convinced me that many Wall Street workers were, by and large, as smart as top achievers in any other sector. They read the news constantly, they studied foreign affairs and domestic economic trends, and they were conversant on lots of nonfinancial topics. But, on the whole, they weren’t brilliant. Only four or five of the people I met struck me as actual, bona fide geniuses, the kinds that could foment a groundbreaking, industry-changing insight or invent a revolutionary new product. And many of the rest were essentially escalator riders—people who worked hard to get on a machine with an automatic upward trajectory, and, once they got there, only had to hold on.

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Part of this is surely the fault of the stodgy workplace culture of banks, which can stifle creativity and genius if it appears outside the hierarchy they’re accustomed to. But another part of it, I suspected, was the kind of people banks tend to attract—confused, insecure college seniors, who are smart and capable in a general, all-purpose way, but aren’t phenomenally talented at any one thing.

Derrick knew that if he wanted to be a visionary, or even particularly creative, he would probably have to exit the private equity industry sooner or later. But it was far too early to consider that. He’d just gotten to New York, and he was still enjoying the high life. When it came to balancing ideological comfort with material comfort, the contest still wasn’t close.

If you enjoyed this excerpt, purchase the full book here

Excerpted from the book Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruits by Kevin Roose.  © 2014 by Kevin Roose.  Reprinted by permission of Grand Central Publishing.  All rights reserved.  


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