Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (14 page)

IN THE FALL,
the e-mails began arriving in young bank analysts’ inboxes. Most read something like this:

In 2011, as Wall Street banks were still struggling to turn profits in the post-crisis era, they had a new stealth threat passing right under their noses: Silicon Valley tech companies, who were staging a massive land grab for their junior analysts. Typically, tech firms compiled lists of analysts at Goldman Sachs, Morgan Stanley, and other top firms and blasted out messages to large groups of analysts at once, inviting them for a drink and a sales pitch. Those pitches proved to be catnip to disgruntled spreadsheet jockeys.

“I just e-mailed a bunch of people at Wall Street firms and said, ‘I’ll have a table at such-and-such restaurant, come out,’” one surprised tech executive told me. “And I got like fifty people.”

The timing of Silicon Valley’s siren song to Wall Street’s young workers couldn’t have been better for the tech industry, or worse for the banks. In late 2011, the technology sector was the hottest thing going. Facebook was preparing to go public the following year, at a valuation that many people expected could reach $100 billion. Apple had become the biggest consumer-facing company in the world, and venture capitalists were throwing money wantonly at brand-new tech start-ups, in a manner reminiscent of the dot-com boom of 1999 and 2000. The tech industry was also riding a wave of popular interest that had climaxed the year before with the release of
The Social Network
, the Aaron Sorkin–written film about the creation of Facebook.

“I’ve heard people say
The Social Network
is the
Wall Street
of this generation,” Evan Korth, an NYU computer science professor, told the
Wall Street Journal
.

Meanwhile, Wall Street banks were the opposite of sexy. They were laying off thousands of people, cutting back on salaries and bonuses, and nixing recruiting events for college students. And they were still unpopular as a result of the crisis. A 2011 survey conducted by the consulting firm Universum ranked Google, Apple, and Facebook as the most coveted workplaces in America among young professionals; JPMorgan Chase, the highest-ranking Wall Street bank on the survey, was forty-first.

Given the choice between crunching Excel spreadsheets at a bank in a shrinking and reviled industry and working at a beloved tech company where they could wear jeans to work, get perks like free catered lunch and massages at work, and live on a much less demanding schedule while still making lucrative wages, many bank analysts were finding the balance tipping in Silicon Valley’s favor.

“The new status jobs aren’t at Goldman Sachs,” one bank analyst, who was himself considering making the jump to tech, told me.

For Wall Street analysts, the tech world seemed to represent everything finance wasn’t. Tech companies appeared democratic, nonhierarchical, and unconcerned with appearances. Many of them brought new concepts and companies into existence, rather than simply serving as financial intermediaries. They were places where a talented twenty-three-year-old could make a real impact, rather than just doing rote repetition of the same ten financial exercises. And, more important, they were growing rapidly, even in New York, meaning that some finance refugees wouldn’t even have to move to the West Coast. Between 2007 and 2012, the number of jobs in New York City’s tech industry grew by 29 percent, according to the state’s Department of Labor, whereas the number of city jobs in the securities industry fell by 6 percent.

Finance workers have a lot to offer tech companies—bankers and traders can provide sorely needed financial skills, and quants are generally highly advanced technical engineers. Having been trained in a hard-driving, details-obsessed bank culture doesn’t hurt, either.

“They’re insecure, they’re risk averse, and they’re afraid,” the tech executive said of young people on Wall Street. “But they have the work ethic, and they’re smart as hell. If you can peel them away, they can be rock stars.”

Several months earlier, I’d gone up to Cambridge to visit Harvard Business School. I’d gone because historically, business school has been one of the typical next steps for bright young investment banking analysts who have successfully made the jump to the buy side. And among MBA programs, Harvard is a financier’s paradise. For decades, it has trained the very best of Wall Street’s elite, giving them a two-year respite from their work and teaching them the skills they need to reenter the finance world on the management track.

I arrived at HBS expecting to find a tableau straight out of a late-capitalist dystopian novel—a bunch of corporate drones in suits, all preparing for their interviews at Blackstone and KKR. Instead, I found a campus that had been bitten by the tech bug. Many of the students I spoke to pitched me on their start-ups, or told me that I should come back for the annual HBS business plan contest, in which students compete every spring for $50,000 in start-up cash by devising models for new businesses.

Their excitement over tech’s rise extended into the classroom. One class I visited, a course on entrepreneurship geared toward second-year students, was so packed that students were sitting in the aisles of the lecture hall.

“There was probably a time when the smartest people here all went into finance or consulting,” one HBS student who had formerly worked in private equity told me. “It’s pretty scattered now, and most folks appreciate and respect people who take risk.”

Partly, the shift away from finance on campus was a reflection of a deliberate policy change. Nitin Nohria, who was named HBS’s dean in 2010, made a conscious effort to make the school more than a pass-through for Wall Streeters. He oversaw the growth of a voluntary pledge called the “MBA Oath,” signed by more than half of HBS’s students in its first year, that asked students to aver that they would “serve the greater good” after graduation. Dean Nohria’s efforts to unhook HBS from the financial sector were visible in admissions, too. In 2009, 20 percent of the incoming class had come directly from the financial services industry. By 2011, that number had slipped to 12 percent.

There was also a psychological sea change among young business students who increasingly saw growth and possibility when they looked at Silicon Valley, and regulation-choked stagnation when they looked at Wall Street. Noam Wasserman, an HBS professor who taught the entrepreneurship class I visited, sat down with me in his office and told me how massive the recent shift in interest into tech and entrepreneurship had been.

“When I was a student here fifteen years ago, there was no entrepreneurship unit. Now, there is one, and it has thirty-five professors,” he said. “This whole building is devoted to entrepreneurship, in fact. It’s the second largest unit on campus after the finance unit.”

Wasserman, a smiley, excitable guy with a neat side part in his hair, explained that much of his work now involves convincing gung-ho HBS students that starting a company isn’t as easy as it sounds, and warning them of the pitfalls they might face along the way. He said that while many of his students are already convinced of entrepreneurship’s merits, others—especially those who have come from the financial services sector and have the choice to go back after school—need to be reassured that they can become entrepreneurs without giving up all hope of financial stability.

“If they’re still thinking about going to a big company after school,” Wasserman says, “they have to ask themselves, ‘How can I avoid the golden handcuffs that working for a consulting firm or an investment bank is going to impose?’”

Going into tech isn’t charity work, of course, and it’s possible that certain pockets of the tech world are every bit as materialistic as Wall Street firms. Midlevel workers at large technology companies often earn six-figure salaries, and people who start their own companies or join early-stage start-ups can become phenomenally wealthy—a possibility that surely hadn’t escaped HBS students or restless analysts on Wall Street. At large tech companies, like Google and Facebook, there is also the added stability of being part of a corporation with a clearly defined culture, which can ease the transition from finance.

But when the young bankers I knew spoke about their desire to work in a different industry, money and stability weren’t usually their focal points. They expressed the very concerns Wasserman talked about—the fear that staying in banking would make them lifers, and entrap them financially in jobs that weren’t fulfilling. And they wanted to do something involving real risk—not the indirect risk that most people on Wall Street take by betting with other people’s money.

“The people who do shit in the world,” Derrick Havens, the Wisconsin-born private equity analyst, once told me over a drink, “those people—Zuckerberg, Steve Jobs, the guy who built Instagram—they’re not sitting there taking orders from someone who’s incrementally more experienced than them, at a company where they won’t have any actual power until they’re thirty-five or forty. They’re doing their own thing.”

I often wondered if Wall Street analysts looking enviously at the tech world knew how unrealistic the popular imagery of Silicon Valley’s happy-go-lucky start-ups was. It’s an old Valley truism that three-quarters of technology start-ups fail, and even the ones that manage to be successful require an enormous amount of very intense and largely self-directed work. Working at a Google or a Facebook, while safer, isn’t necessarily a ticket to freewheeling happiness, either, given the extent to which large tech companies have become corporatized and highly structured. And many of the traits that made a good banking analyst had little correlation with the skills required to succeed in tech.

Still, the rise of the tech industry and concurrent decline of the financial sector had given young people trapped in finance jobs an alternative path to visualize—one that also held the potential of vast riches, and was also filled with bright young people with fancy degrees, yet had an aura of novelty and innovation to it. For the first time since the initial dot-com boom, another industry was Wall Street’s equal in the imaginations of talented young people.

Of course, if the financial sector recovers fully, and the second tech bubble ends the way the first did—with the corpses of failed and bankrupt companies littered all over Silicon Valley—Wall Street may look appealing once again. But if tech companies can keep up their recruiting efforts and their stock prices, the youth of Wall Street will keep finding themselves tempted to leave an industry whose best days may be behind it for one whose greatest hopes lie in the future.

IN LATE SEPTEMBER
, while on his way to a dinner downtown, Ricardo Hernandez saw something that startled him: several hundred protesters gathered in a public park, chanting about Wall Street greed.

Ricardo, the Cornell grad from Texas who worked in J.P. Morgan’s Lat-Am banking group, had heard rumblings of an antibank demonstration, called Occupy Wall Street, for several days. It had made the national news the day before, when there had been a large march through the streets of Lower Manhattan that resulted in the arrest of at least eighty protesters. But Ricardo had been too busy at work to pay close attention, and he assumed it was one of those quick-to-fizzle protests that periodically happened after the crash—the ones where burned-out hippies and libertarian types marched down Wall Street, toting “End the Fed” and “Where’s Our Bailout?” signs and shouting incoherencies. He’d seen several of those scuffles, and they usually lasted a few hours, tops, before everyone dispersed and the ruckus died down.

But Occupy Wall Street was shaping up to be bigger and more permanent than anything he’d seen before. In the park, Ricardo saw tents, sleeping bags, and structures for specific communal use, including dedicated spaces marked as a kitchen and library. A drum circle played on the north side of the park, and signs littered the park benches, with messages like “Power to the People!” and “Banks got bailed out—we got sold out!” It looked more like a miniature civilization than a protest.

Over the next few months, of course, Occupy Wall Street would grow from a park gathering into a global protest movement whose reach extended far beyond New York. Within a month, the Zuccotti Park protest had spawned satellite protests in every major American metropolis, and international cities as far-flung as Sydney, Tokyo, and Davos, Switzerland. Occupy’s galvanizing slogan—“We are the 99 percent”—became an international cultural meme, and for weeks, the movement garnered front-page news coverage and made Wall Street bankers very nervous.

“I just hope they don’t bomb us,” one Goldman Sachs analyst told me, half-seriously. “We’re the easiest target, if you think about it.”

Many of the older, senior-level financiers I spoke to in the following weeks either ignored Occupy, pooh-poohed its aims as too unspecific and vague, or dismissed it as a group of drug-addled dropouts and vagrants who had nothing better to do with their time. They saw that Occupy was gaining steam and attention, but they generally dismissed the idea that it would result in any actual change. How could it? It didn’t even have a mission or a concrete list of demands. To most of the logical, action-oriented people I came across who had spent years or decades on the inside of the financial sector, a leaderless, consensus-governed protest with a vague and disparate anticorporate mission sounded like vitriolic gobbledygook. (The exceptions were people like Vikram Pandit, the then-CEO of Citigroup, who called the movement’s anger “completely understandable.” Later, JPMorgan Chase CEO Jamie Dimon would say that the movement had “legitimate complaints.”)

For young Wall Streeters, Occupy was slightly closer to home. Financiers in their early and mid-twenties tended to be around the same age as many of the protesters, and several young Wall Streeters I spoke to had friends or relatives who had been down to Zuccotti Park as part of the protest. Unlike earlier efforts, Occupy was a movement that had drawn in their peers—the people who had been in their college classes and in their dorms just a year or two earlier. Young bankers and traders could log on to Facebook and see their friends posting messages of support for Occupy. And for some young financiers, the protests forced them to choose sides.

“It was weird,” Jeremy Miller-Reed told me, after Occupy protesters held a march outside Goldman’s headquarters. “They were at our building yesterday, so I’m, like, standing in front of this glass window looking down at these protesters, and they’re looking up at me pointing signs. It was so crazy to be on that side of things.”

Not all young financiers took Occupy seriously. Several days after he glimpsed the protests for the first time, Ricardo told me that he felt “sort of neutral” about the merits of Occupy’s message, which he interpreted as being mainly about lingering anger over the bank bailouts. He understood that anger, but he didn’t see how else the financial crisis could have been resolved. What did Occupy want? For millions more people to lose their jobs and savings as a result of bank failures? “I don’t have anything against them,” he said. “But I doubt they’re doing anything productive.” Another young bank employee I met just outside the Occupy protests laughed when I asked him if he was doing a lot of deep thinking as a result of what was happening in Zuccotti Park. “I work for UBS,” he said, referring to the beleaguered Swiss bank that had just announced a $2 billion loss stemming from the actions of a rogue trader. “We have bigger problems right now.”

One dissenting note several young financiers brought up with respect to the Occupy movement was that it made no distinction between the executives whose decisions had brought about the financial crisis and the tens of thousands of back-office, middle-office, and junior front-office employees who made much less money than C-suite executives and had no decision-making capabilities at all.

“There’s sixty thousand–odd employees at my bank,” a different J.P. Morgan analyst told me. “It doesn’t make sense to brand us all with the same stroke. Like, if a person in the NHL got charged with rape tomorrow, would ESPN say that all hockey players are rapists?”

There was some logic in this defense. After all, many back-office and support workers at Wall Street banks earn $40,000 or $50,000 a year, have no idea what a credit default swap is or how to construct a collateralized loan obligation, and can’t truly be lumped in with the foolhardy executives who ran their firms into the ground during the crisis. The analysts I was following were well within the 99 percent statistically, even if their colleagues weren’t. (The cutoff for the top 1 percent of American tax filers in 2010 was about $370,000 in adjusted gross income—well above what any first-year analyst makes.) In that way, blaming Wall Street underlings for the crisis seemed like blaming George W. Bush’s personal chef for the war in Iraq.

Still, by virtue of taking part in a financial system that Occupy found oppressive, young analysts had opened themselves up for criticism.

Jeremy Miller-Reed had always been discreet about telling people that he worked at Goldman Sachs. But now that the Occupy movement was increasing the heat on banks, with Goldman often bearing the brunt of the criticism, he found himself cloaking it even more often.

“I lie whenever I go out now,” he told me. “I tell people I’m a consultant, a lawyer, whatever—anything but a Wall Street guy.”

Jeremy’s paranoia had been boosted during the third week of the protests, during a routine doctor’s visit. While getting his checkup, he mentioned to the nurse that he’d recently visited a physician on staff at his office.

“You have a physician at your office?” the nurse asked. “Where do you work?”

He responded truthfully, and watched her face contort into a grimace, as if he’d just emitted a racist slur. It stayed plastered to her face for the remainder of the appointment, and Jeremy left feeling depressed. If a nurse in downtown Manhattan was judging him for working at Goldman Sachs, what did the rest of the world think?

Aside from periodic embarrassment, the biggest change Occupy Wall Street created in the lives of young bank analysts was that it forced them to think about the morality of their work, daily, and in holistic terms. For the first time since the financial crisis, big investment banks were the focus of the world’s attention, and Wall Street workers were forced to consider the net social effects of their chosen profession every time they turned on the TV, read a news site, or walked past a protest. The compartmentalization process that allowed them to put off the touchy-feely ethical considerations and simply do their jobs no longer worked. And while not everyone was caught up in self-doubt, those whose consciences were piqued by the sight of a global protest movement rising up against them were seeing their misgivings about finance rise to the surface.

“I hate having to lie about what I do,” Jeremy told me, the day after his doctor’s appointment. “It doesn’t completely ruin the experience of working at Goldman. But I won’t lie—it makes me think about what else I could be doing with my life.”