The Golden Handcuffs

George was a 22-year old investment banker at an elite boutique...

...just 8 months out from his undergrad at an ivy league. George dreamed of one day owning a bakery – actually a string of high-end boutique bakeries around the globe. He figured one day in the future he would find the time, have enough money, and right amount of experience to pull the trigger. He was already making boatloads of cash compared to all of the other 22-year olds he knew, was doing a super prestigious job, and he needed to focus on recruiting for PE. He didn’t want to do PE, he didn’t even really love high finance, but its what made him the most money (which he needed, if he ever wanted to own his own bakery), and scratched his itch of working the most prestigious role from everyone he knew. PE was just the right next step and everyone else at the desk next to him was recruiting for it, so he was in the process too.

3-years later George was now a 25-year-old at a PE mega-fund and was raking in $300k+ working 70-80 hrs a week, and had made the 30 under 30 for Finance. At this time, he was presented with the opportunity to come work for a restaurant group in their corporate development team, after he helped close a deal with them. Working for the restaurant group would get George closer to understanding the operating side of brick and mortar food businesses but the catch was he would only make $85k…George immediately declined. How in the world could he go from bringing home $300k to making under $100k. The difference was absurd, thought George. He also told himself that doing strategy and corp dev at the restaurant group wouldn’t really* help him get any closer to getting any real operating experience (right?).

Opportunities came and went, and George had moments when he would ponder the trade-off of quitting his job to start the bakery vs staying just 2 more years, getting promoted and making millions, just another 3 year till VP, just another... Today George is 39, he is married, he has a child, and has worked his way up the chain at the PE mega fund he was at. He sits down and starts to reflect on his dream of starting that bakery, he finally has the money he thought he needed. Except now he has a family, a mortgage, obligations, how could he spend any money on such a risky venture that he knew nothing about and take away his family’s security? George was a victim of the golden handcuffs.

The Cuff Perspective

The golden handcuffs are the perspective that many junior bankers adopt after being at the desk for a period of time.

1. Finance, as we've previously discussed, isn't rocket science, and after a while, the functions of doing the day-to-day job become a lot easier (although the strains and pressures still exist when it comes to learning new materials or meeting client/senior banker expectations, the actual work just isn't as difficult).

2. The money is good. It's very good. A lot of time's people like to compare the hourly rate to other careers but that's not a fair comparison. Most first years will earn at least double what a finance undergrad earns in other finance careers (although they do work nearly double the hours), but after their 2-years they are given the same career opportunities that MBA grads have. That is invaluable validation, and they are now making 3x what any of their peers are...

After a while the extremes become the new normal for bankers, and they get stuck in their bubble. Many junior bankers get caught up in recruiting for PE when in reality they have no desire to be career, high finance people. It becomes a question of “What else can I do? I have no real transferable skills or operating skills?” and “No one else will pay me this much!

Regrets

The reality is no-one who does what they really want to do has any clue about how to start or has any operating experience. By the time money no longer is the issue, something else may be, some new obligation has popped up…the handcuffs are an issue for most people (not just bankers) and why so many people live late into their lives with career regrets. The only difference for Investment Bankers is their handcuffs are Golden.

Bonus: Real-life conversation

”First I wanted to be a management consultant, then I wanted to be an investment banker because they made more money and the job was more prestigious. So I went and got an MBA at Booth, and I did that and became an MD at {Bulge Bracket Bank} in record time and now, I wish I was one of those f*cking kids in a hoodie in Silicon Valley that has a billion dollar startup and tells me what to do...the grass is always greener...that moment when I said I would quit to pursue my dreams, it never came.” 


This post was inspired by recent conversations with junior bankers who were seeking advice on PE recruitment.

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This winter we will be rolling out our DCF video, a paper LBO, as well as a guide for Sophomores on Networking before junior year fall recruitment rolls around.