Oh My God

Just days ago I was writing about how incredibly prepared I felt. Now, before I've even had one single class, the first feeling of "Oh My God -- what have I gotten myself into" has already crept into my mind.

Today I went on a full-day recruiting event from one of the bulge bracket (i.e. top) Wall Street investment banks. We were taken up to the 27th floor of their office building in downtown Chicago where senior executives of the firm were put in front of us to tell us how delighted they were to speak to us and why their firm is truly one of the best to work for. Fortunately it wasn't all sales pitch and they had some interesting (and way over our heads) explanations of what investment bankers actually do, how the different divisions work, and what historic current events are currently taking place in the financial markets.

During lunch and dinner (on the 57th floor with spectacular views over the Chicago skyline at night) we were put into groups with junior investment bankers who we could ask more forward questions and who would be able to give more forward answers. Invariably, the one topic that kept popping up was "lifestyle issues", the euphemism for not seeing your friends and family because you work seven days a week. The responses were basically different spins on the truth most of us already knew: during the first years you have to be prepared to make big sacrifices, but if you last long enough to make Managing Director (which in the i-banking world is higher than VP or SVP), you will be able to "leverage the resources that are available to you", i.e. let others do the grunt work. Moreover, you'll actually have time to spend the extraordinary sums of money you are making.

The associates (which is the level you start at after your MBA) defended their career choices by saying that workweeks are not always 120 hours and can get "as low as 60-70 hours", and that "if you work until midnight on Friday and are prepared to work long hours on Sunday, you can actually have the full Saturday off, if you plan well." And, unlike consultants, who are on the road 4 days per week, bankers mostly get to sleep in their own bed, albeit for short nights.

No shattering new insights if you had read up on i-banking like I had, but the kicker for the day for me personally was that you truly get an idea of the competitive nature of recruiting. There are limited spots available, and the lengths you have to go through to secure one are daunting.

There were tips on how to behave at recruiting events, how you should and shouldn't network, how one screw-up in approaching recruiters can easily destroy your shot at a summer position, and even how and when to send thank-you notes after recruiting events. One associate recommended flying to New York and trying to set up 30-minute meetings with bankers in order to build your network. He laughed: "I know it sounds crazy, but I've seen people who do it and they were generally successful." If you want to work in Sales & Trading it's even more difficult because this division doesn't recruit on campus and you have to reach out on your own to find recruiting opportunities.

On the bus ride back to Evanston, I sat next to fellow Kellogg students to discuss the day. I sat next to an Israeli guy who had been an intelligence officer in the Israeli army, then had done real estate investing in Eastern Europe, and another guy who had been setting up divisions at various service companies and was looking to break into a competitive hedge fund. Another guy had been run the armed forces training academy in the country of Georgia. It's great to study business with people of such impressive backgrounds -- until you start competing with them for a job.

The bank tried its best to convince us that career switchers have a perfectly good shot at landing a job, but among the career switchers there were many with a finance background, which I don't have, and according to the bankers that means you'll have to work extra hard to get up to speed. In the last 6-12 months I had been reading up on financial markets and thought I had a pretty good rough understanding of how the banking industry worked and what forces were at play in the current downturn in the credit markets. Today, however, I learned that I know nothing.

So in short -- not only is it going to be tough to get considered for a job at a bulge bracket bank, I'm also going to have extremely qualified Kellogg students competing against me for the same positions.

In a way I have known this all along, but seeing it with your own eyes has a way of letting reality kick in, nice and hard.

Bring it on!

Flight into Chicago - check.
Getting through immigration - check.
Finding apartment - check.
Spending spree at IKEA / Wal-Mart - check.
Making apartment livable - check.
Tell utilities, bank, Kellogg I'm here - check.
Getting some rest - check.

I'm as ready as I can be. Let the games begin.

In one week, most incoming students are going on KWEST trips to various exotic places, and I'm going to Argentina, for a bit of skiing, ranching, salsa and steak eating. Hmm...

Before that, I've been invited to a pre-recruiting event from one of the major investment banks. Again, I am humbled to even be considered, but I guess that 1) I should get used to it, and 2) an invitation to a recruiting event is far from a job offer.

Another blogger (forgive me, I forgot who it was) likened the recruiting events to the b-school MBA fairs. At these outreach events the prestigious b-schools and employers are all warm and cuddly, trying to convince you that you should really join their family, but once you actually try to get in you have to jump through a thousand hoops to even be considered.

But I guess we'll just have to wait and see. Whenever I start to worry about how I will stand up against my fellow Kelloggians and whether I will come out on top in the 'fight' for the most prestigious jobs, I remind myself of the most heard response from current students at Day at Kellogg to job-related concerns from incoming students. "Don't worry," they said. "Everyone gets a job."

Perhaps it's not something I should be worrying about before b-school has even started, but I do hope they're right.

Sales & Trading

I just found a nice "banking vs consulting" resource that I wanted to share: Angel Angie is an LBS MBA student who switched from consulting to Sales & Trading. She posted a consulting week-in-the-life (one that is actually insightful for a change), and two posts (here and here) on her new S&T life, which she seems pretty happy about.

S&T surely has its appeal. Work far less hours, for essentially the same pay as i-bankers in corporate finance. Downside is that, compared to corp fin i-banking, S&T gives less mobility if you want to break out of finance again one day (so I've been told), and, from a personal perspective, Kellogg is hardly a feeder school for S&T jobs.

Today I've registered for Finance as a core course for my first semester. That will help for i-banking interviews. If I decide to do them, of course.

The conundrum continues

I wrote to my Kellogg alum interviewer about my consulting / i-banking dilemma. He strongly advised me not to go into i-banking, unless I didn't really want a life or didn't like my girlfriend too much. Moreover, "you don't really learn anything useful besides selling and of course Excel and Powerpoint".

He has a point. None of the i-banking books I read refute this, and I vividly remember asking an i-banking couple at Kellogg how much of "Monkey Business" is true. Their response: All of it.

Yes, the pay and coolness factor are luring, but --

1. Compensation in the first three years in consulting is actually pretty competitive with banking. Bonuses can tip the scale toward banking but these are subject to economic conditions, industry performance (which, as far as I understand, is under serious pressure in the post-Glass-Steagall era), and stellar individual performance. I'm sure I can survive at Goldman Stanley, but as a non-Finance hire I think I have to assume I will not be the top 1% performer.

Even if you were to assume generous bonuses, compensation per hour seems to be higher in consulting than in i-banking.

2. Kellogg is not a Finance school. At DAK, Kellogg students spun this as an advantage, because 'competition between students is less intense than for example at Columbia or Wharton', but I'm not sure I'm buying this. Yes, the bulge bracket firms allocate spots between the top-7 schools and competition for these spots is less at Kellogg than at other schools, but on the other hand Kellogg gets fewer spots than the other schools. Moreover, if this were really true, people would come to Kellogg because it would be easier to get into i-banking, and they don't.

3. I doubt if I can physically handle 100+ hour workweeks for months straight.

4. I do care about my girlfriend.

So, right now my cards are on consulting. Friends warn me for the incredibly hard work at the top consultants but, compared to i-banking, the 60-70 hours per week for consulting are actually light-weight.


Hidden door number three

My Kellogg interviewer works in an industry that is currently steaming hot: private equity. If you get in and do well in PE, compensation can make a Goldman Sachs MD look like a bum.

But there are other compelling reasons to consider PE. An investment bank has to do deals. A PE firm has to do good deals. I can certainly imagine that if your own money is at stake, your standard for what constitutes a sensible acquisition goes up a notch. And once the investment is made, you have to actually realize those synergies that looked so good on paper. In other words, becoming a good B.S. artist will not get you very far.

Of course, there are also plenty of downsides to a PE career. Positions are incredibly tough to obtain, especially for people without a finance background. Few if any PE firms recruit on campus, and the leading PE firms seem to consider only top performers at Harvard and Stanford. But, to quote Aleksey Vayner, "impossible is nothing", and through relentless networking it is possible to land a job.

But what worries me perhaps more than anything is the possible end of the current PE bubble. Influential publications like the Economist keep warning that the end of the private equity boom may be near. Rising interest rates are making acquisitions more expensive and debt-laden companies more vulnerable, regulators are trying to reign in these greedy asset strippers and bring an end to tax advantages, and successful PE firms are piling up cash with only so many deals in the market. In the 1980s it took one massive deal to go sour for the LBO craze to end. Who will be the RJR Nabisco of the 21st century?

I'm hardly qualified to judge, but I do know that I don't want to bet on job prospects in an overhyped industry. In the late 90s, the top i-banks and consultants had difficulty recruiting at the top business schools because everyone wanted to go into high-tech. Are PE firms the dot-coms of this decade?

I don't know. If someone does know, please tell me.

Meanwhile, I guess my conundrum continues...

Let the recruiting begin!

Have you ever heard that an MBA is really a two year recruiting event? Well, better make that two years and two months.

I just got invited by McKinsey for a summer event. Such an invitation would have been unimaginable six months ago, so I guess the MBA is starting to pay off already, and I haven't even started yet!

Consulting versus i-banking

Now that I am a Kellogg student, I have the privilege of choosing between a career in consulting and investment banking. It feels a bit like deciding between becoming a pop star or an astronaut, but when it comes to making a decision, it's not so easy.

The problem is that if you want to go into banking, you pretty much have to make up your mind before you come to business school. Unfortunately, you can't browse the shop for two years, try some stuff on, and buy what looks nice. Companies are looking for passion and commitment, so you'd better take the right classes, attend the right recruiting events and join the right clubs.

On their "Investment Banking and Capital Markets" career path website, Kellogg's Finance department puts it like this: "Students who are interested in pursuing a career in these competitive areas must plan their academic program from the moment they begin classes at Kellogg, in order to be prepared for crucial summer-internship interviews that take place in the winter."

In other words, if you want to become a banker, your job hunt starts pretty much when you arrive at Kellogg.

Fortunately, I'm not the first person deciding between banking and consulting, and Kellogg's consulting and i-banking clubs have created a great resource about differences and similarities between the two career paths. Take a look here. [Update: site is limited to Kellogg students. Sorry. I'm trying to make some of it public.]

Here's a short personal analysis.

In i-banking, the corporate finance side (advising companies on M&A and on issuing stock/debt) appeals to me for the high-level advice you are giving to high-level people, but the infamous workweeks that can easily go up to 110 hours per week are truly intimidating. I don't shy away from hard work, but if you realize that this translates to 15 hours per day for 7 days straight, only to start a new workweek the next day, images of delirious insomnia a la Fight Club start to pop up.

Then you've got Sales & Trading, which has the same outrageous pay, but condenses the 100+ hour workweeks into extremely intense 7-5 workdays. S&T does not get you into boardrooms, but does make you an expert in global capital markets, which is fascinating enough. I-bankers look down on traders as neanderthals, but traders think i-bankers are idiots for sacrificing any form of social life for essentially the same pay. They have a point. I could live with less boardroom exposure, but the big downside to S&T seems to be that these skills are less transferable to outside the banking industry.

Then, on the other side of the spectrum, you've got consulting, which has less extreme hours (late nights instead of all-nighters and generally free weekends), but heavy travel. The work is sometimes described as 'advising company leaders on challenging strategic questions', and sometimes as 'being locked up in a poorly lit room in Bumblefuck, Idaho, crafting endless Powerpoint presentations that tell clients what they wanted to hear in the first place.'

But once you start scratching the glamorous surface of consulting and worry about the underlying dirt, you'd have to do the same for i-banking. Liar's Poker and Monkey Business both do an excellent job in showing that for every Porsche and cocktail party there's a year of verbal abuse and endless nights of mind-numbingly boring work.

So, after a couple of months of reading up, I still have no idea.

Any career counselor would probably tell me to ignore the preconceptions and go for what really excites me, but the problem is that both fields genuinely interest me. Sure, the prestige and pay are nice, but between M&A advice, trading stocks on Wall Street, and advising Fortune 500 companies on strategy, I honestly couldn't tell you what I'd enjoy more. It both sounds, well... kind of fun.

I'm still exhilerated about having this problem of privilege, but even those problems need solving.

Networking

Two years ago, Jack Welch told MBA students to concentrate on networking while in school, as 'everything else you need to know, you can learn on the job'. A controversial report from Stanford GSB's Jeffrey Pfeffer found that an MBA has no economic advantage unless from a top-ranked program, and that, with similar curricula across schools, business school is as much about networking and recruiting as it is about education.

Despite having attended numerous management conferences, industry conferences, business dinners, etc. in my career to date, I never really stopped to think about my networking skills. I have no problem making small-talk with table partners, and sure, I have squeezed myself into a huddle around the occasional CxO to get a bit of face time. At a recent management conference, I noticed how a colleague and close friend of mine mostly avoided me and was always engaged with others. Later he confided that he always diligently prepares for these conferences and pretty much knows in advance who he is going to speak to, and what he is going to talk about. At that point, I realized my networking skills sucked.

In the past weeks I have been browsing Kellogg's club websites, and on the investment banking club website, I found a Powerpoint presentation with tips on how to handle company recruiting events. Among the tips were "Don't just stand in a corner talking to other Kellogg students", and "Meet at least two new people at every event". Apparently, I'm not the only MBA student whose networking skills need a bit of work.

I recently picked up a book called Never Eat Alone, and half-way through I can already say it is one of those books I should have read a lot earlier. Networking is not a subject taught in class, and not a skill you're born with (unless your name is Clinton, perhaps). Reading this book has convinced me that it is something you have to learn, and many people would probably be well-advised to learn -- especially students who want to get some value out of their top-10 MBA.