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.

How NOT to get an i-banking job

This is one of those things you have to see to believe.

Aleksey Vayner, an ambitious Yale undergrad, sent his resume to UBS to apply for an i-banking job and included a link to a video interview with the Master himself.

His narcissism didn't get him an invite from UBS, but he did manage to immortalize himself on Wall Street and in mainstream media. A number of websites can't seem to get enough of him -- more here, here, here and here. Heck, you could probably spend a day just Googling Aleksey.

Perhaps he and Tim Shields should start a company.

Investment bankers are known not to shy away from a bit of self-love, but at least they had the decency to give this guy what he deserves.

Unbelievable...

Day at Kellogg (2/2)

--- Continued from part one ---

Besides the classes, there was a session to illustrate Kellogg's emphasis on teamwork, also known as the egg-dropping challenge.

Groups of five were given an egg and some materials that had to prevent the egg from breaking as it would be dropped from 12 feet.

My group fiddled around with some ideas and then put something together in the last two minutes which balanced the egg in the center of the box without touching the sides, using pieces of tape. Our egg was one of the few that didn't break, and because we had used the least material we had the highest score in our section. Yay. Some closing remarks were rushed in to emphasize that this was what teamwork at Kellogg was all about.

I'm sure the whole thing was as much about having fun and interacting with fellow students as it was about teaching us what teamwork was, and in that sense it was successful. On the other hand I must also confess that dropping eggs never appeared in my fantasies about business school. Yes it was fun, but not exactly what you would expect from people who want to wear business suits and be taken seriously for the rest of their lives.

I got the feeling that the informality and casualness of this exercise (and similar moments during DAK) gave us a good flavor of how things are done at Kellogg. Yes, students are serious about academics and their career, yet they see no reason to get all uptight and formal about it.

Apparently, there's no reason why you can't become a serious Globally Responsible And Innovative Leader, and throw a couple of parties at the same time. I can't help but wonder whether students at Harvard are also asked to drop eggs. Either way would be as much an argument for it as against it, since yes, you want to have a serious education, but you also want to let loose once in a while.

To me it doesn't make a whole lot of difference, because I've only got one admit ticket, and I think I could easily fit in at pretty much any b-school. In ten years time, I don't believe that school culture is going to be incredibly relevant for your career. Still, it was interesting to listen how Kellogg's informal culture was analyzed, defended, praised, and questioned by current and prospective students at DAK. My personal conclusion was (and I cannot vouch for its accuracy) is that Kellogg is about as informal as you can make a business school.

Another interesting thing was the career sessions with professors and students. I attended the Finance and Consulting sessions.

The Finance sessions had the obvious remarks that Kellogg really was a great place to become a banker, despite not having the reputation. The faculty had enough industry experience to claim Street credibility, and academically speaking, Kellogg is only second to Chicago GSB in number of awards from the Journal of Finance, and thus ahead of traditional finance schools like Wharton and Columbia. Additionally, since banking is a less popular career path at Kellogg than at other schools it's easier to land one of the offers that the top banks distribute between top schools. All these points had merit, but, bottom-line, Kellogg still has something to be defensive about, and some other schools don't. My overriding feeling, however, is that the general b-school top-10 truth also applies here -- the difference between a top-10 school and a top-30 school is significant, but within the top-10 there's really not that much difference. Goldman hires at the top-10 -- it doesn't hire at no. 30.

The Consulting sessions sounded much less defensive and surprisingly relaxed. Basically, if you want to break (or return) into consulting, you have nothing to worry about. 30%+ of the class becomes a consultant, and Kellogg is among the top-3 in terms of job offers from the top-5 firms. (Do you want that in a 2-by-2 matrix?) Every year, plenty of poets make the leap to McKinsey. You'll practice case interviews until you can do them backwards, in Polish, standing on your left hand.

Career opportunities -- check.

Saturday afternoon I decided to skip a couple of sessions to catch a break, walk around campus, and digest my first impressions. The weather had cleared up and it was a great day, making the campus, lakeshore and Chicago skyline stunningly pretty. I sat down on a rock by the lake, looked over Lake Michigan and thought, Wow -- it is not going to be difficult to endure this place for two years.

I got back in time for photographs and drinks, before we headed to downtown Chicago in traditional school buses (which was probably mundane for the Americans, but a Hollywood experience for me.) A closing ceremony with buffet diner had been organized in the Mid-Day Club on the 56th floor of the Chase building. Spectacular views, good food and drinks, and nice socializing with future classmates.

To top it off, a slick video presentation was shown to congratulate us on surviving DAK and to exploit our screen vanity. (It worked on me. Here's the video. I'm in it. Twice.)

Sunday morning I had a couple of hours to look at housing before my flight back to Amsterdam. McManus, which is cheap and set up around the needs of Kellogg students, was a big disappointment. Dorm-like, sterile, cramped, dark, smelly, you name it. If you're prepared to lower your standards for two years then it's a cheap and incredibly convenient place to stay, but I decided that I would take the extra cost and hassle. I saw some other buildings, which ranged from cheap and dorm-like (if you can call $900 for a studio cheap), to expensive and jaw-dropping beautiful. Despite the "sign now, only one unit left" pitches, I decided to just take some information with me and do the rest of the hunting at home.

An hour later my fellow Dutch admit and I were at O'Hare and found that the Exit-Row Gods had looked favorably on us. I felt tears of happiness. An exit row seat and 20 mg of Temazepam would allow me to actually sleep on the plane so I could join my buddies on Queen's Day the next morning in Amsterdam. (Ah.. The canals, a boat, some wine, and thousands of people having a great time. What more do you need...)

Overall, DAK was a great experience. Very well organized (by students, of course), great people, promising academics, and easy to feel at home at.

Not that I needed to be sold.