I had a conversation with a friend recently about Wall Street. We discussed some of the odder aspects of the Street, not so much about investing itself, but about having a career in finance.
I have a somewhat skewed and skeptical perspective on Wall Street. I started out as a lawyer (I loved law school but hated practicing); got a job as a trader under very random circumstances; eventually moved to research and then onto asset management.
But I spent a long time learning what this industry was about — reading everything I could get my hands on, critically analyzing what works and what doesn’t. Learning and studying was a crucial aspect of a job in this industry; Long before Malcolm Gladwell wrote about it, I had a colleague who used to say that it took 10 years to become an overnight sensation.
As a newbie, I critically read everything I could get my hands on. Over that period of study, there were quite a few things I learned about Wall Street that surprised me:
1) Deep thought: Surprisingly few people rolled up their sleeves and thought deeply about why things in market are the way the are. What causes markets to go up and down? Why do things blow up? Why do most investors under-perform markets? Lots of myths and urban legends, not nearly as much quantitative evidence.
If you get really deep about it and study the data, there are some rules to learn. To succeed in markets, one needs to become a philosopher-mathematician.
2) Long-Term Greedy: Too many people went for the easy money, but that was never what motivated me. It was more about intellectual curiosity and honing ones craft, and less about the quick hit. I made less money compared to many of my peers, but I kept more of it and never blew up.
The phrase "long-term greedy” was coined by former Goldman Sachs director Gus Levy many years ago. You can make (lots of) money over time, but only by serving clients’ interests. Its amazing to me that view is so far out of fashion today.
3) Hard Work: There is no other field where a person of average skills and intelligence who is willing to put their head down and work hard can makes 100s of thousands or even millions of dollars a year — but only if they are diligent and patient and willing to put in the hours.
However, most of Wall Street is taught how to sell products to clients; rarely are they instructed what they buy, why they are buying, when to sell (or why). This is the industry’s fatal flaw.
4) Get Rich Slowly: Few people have the patience to get rich slowly — everyone on Wall Street who ever got into to trouble was impatient, and couldn’t wait the requisite 10-20 years it took to become a millionaire. They ended up in jail or as mortgage brokers. Patience is virtue.
5) Mentorship: Finance is filled with amazing, generous, really smart people — who mentor and teach and bring along the next generation. I hope the crisis & collapse and bailouts and mergers didn’t ruin that — My fear is that has gotten a lost over the past decade.
I have found Wall Street, warts and all, to be a deeply satisfying place to work, filled with intellectual challenges, wonderful people, and deep rewards. Sure, there are frustrations, and there are people who focus on the piles of money to be made, to the detriment of all else.
If that’s your focus, you will have missed out on some very important life lessons.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Nice points. It still shocks me how few of my colleagues are students of the market. They are salesmen with a cursory knowledge and a razor sharp instinct to close.
Prime directive should be “client’s best interest”. End of story.
Hard work is not always rewarded. Smart work almost always is… There is no hard work guarantee here.
Getting rich is even slower now. With major avenues for work being public companies, all employees are subject to “cost controls”, and now the government. It amazes me the many ways my company finds ways to withhold more from me and cloud it in a fog of bureaucratic mumbo jumbo…
Can’t speak loudly enough about Mentorship. Never would have made it without it. Find wizened experts and get every drop of knowledge you can from them.
My experience on Wall Street was a pervasive arrogance that everyone had. A belief that they knew how to make good investments. A belief that other investors were dumb and didn’t get it. A belief that main street didn’t understand the value of Wall Street. Most of this shows up in the mentality “the winning bets worked because of me, the losing bets failed because of some unforeseen circumstance”. I’ve never before seen such delusion and selective memory.
As a hard science doctorate hired into the field, I was and still am amazed at the confidence with which people talk about unsure things or worse avoid counter-arguments entirely. No one asks themselves deep fundamental questions about the finance industry – “Do our jobs actually create value”, “Is it really possible to beat the market”, “Was I good or lucky”. No one wrestles with this questions.
People are smart in a strict book-sense. They did well in college. But it’s a group participating in self-deception on an order I have never seen before. The industry makes people dumb. Does James Simon really believe hedge funds add value through liquidity? Did he really just say that?
Needless to say I didn’t find it rewarding and went back to science.
“Surprisingly few people rolled up their sleeves and thought deeply about why things in market are the way the are.”
Why should they? When you know you get a bailout from your rich Grandpa everytime you fuc$ up, what’s to know.
“…As a hard science doctorate hired into the field, I was and still am amazed at the confidence with which people talk about unsure things or worse avoid counter-arguments entirely. No one asks themselves deep fundamental questions about the finance industry…”
chavan,
why do you think that Individuals, like Taleb, are, so, roundly ~’hated’, by the majority, in the dedans of Wall Street?
http://search.yippy.com/search?query=Nicholas+Taleb&tb=sitesearch-all&v%3Aproject=clusty
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus-ns-aaf&v%3Aproject=clusty&query=Nassim+Nicholas+Taleb
http://www.thefreedictionary.com/dedans
For me, just like Greg Smith, you come to realize that you must compromise your morality and values to often. When you see your firm, UBS, have their REIT Analysts Johnathan Litt, upgrade PAH, the branch manager gets on the office speaker saying PAH is a super trading buy to jam PAH into client accounts all in the name of getting an Equity Forward done when the firm recommended to PAH not to do it. But, for fear of losing the deal, to a competitor, they go ahead and do it. You know it’s all about the money and nothing about what’s right! The kicker is you had to read the WSJ two years latter to find out the true story of what happened!
Results: PAH explodes trades at $2 roughly from $38+…….Good work UBS!
It seems no different from any other line of work, with the only difference – nowhere else you can make so uch money as a rank and file employee.
Barry,
Thanks for this. I sometimes have difficulty describing to my more psychological colleagues my fascination with markets and their various participants. There is deep thinking to do, and the fact that few people do it is a constant across the fields I have been involved in. As Kahneman might point out, we’re just not built that way.
While Wall Street has always had a colorful history of events and characters, I personally put its current decline as having started in the mid 80′s when the street, led by Merrill Lynch, changed their corporate focus from servicing clients thru their reps to accumulating assets. Every other firm fell in line with this business model. The morning meeting became the modus operandi for the permanent ensnaring of a clients assets. Money markets, checking accounts, mortgages and an endless host of entrapment’s, such that leaving the firm was impossible for both the client and the broker. Your book became impossible to move for all intents and purposes.
Once established, remuneration was then based on assets gathered rather than performance. The nature of brokers has been forever changed. Self study, once a requirement to survive was replaced by the vig from the product of the week presented usually on Monday’s.
My guess–we will be returning to the old ways if we trully go into a bear market akin to Japan. There will be fewer assets/customers and those there are will demand better brokers/thinkers.
wonder if you penned this watching CharlieRose last night .. I watched the whole segment on that rogue soldier and PTSD (not really post for him) … but that next segment on this whole subject and jobs jobs jobs / well I was feeling the PTSD set in and had to click
why does this sound past tense?
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