Young Money: Inside the Hidden World of Wall Street's Post-Crash Recruits (20 page)

DERRICK HAVENS’S APARTMENT,
a two-bedroom walk-up on Fourteenth Street, was the platonic ideal of a young Wall Street abode. Everything about the place, from undecorated walls to the constant smell of beer and old socks, screamed young, male, and overworked. The living room centered on a big-screen TV, and the fridge was nearly empty, alcohol excepted. On the coffee table sat a few magazines, including
Maxim
and
Men’s Health
, and a giant bucket of whey protein powder. Derrick’s bedroom, too, was an ode to minimalism, with a queen bed that sat directly on the floor and clothes that were stacked in crooked piles on his dresser.

While working at Wells Fargo in Chicago, Derrick had learned to live with as little as possible. Every extraneous object in the apartment was a potential time-suck. And when you were working a hundred hours a week in private equity, and your roommate was a paralegal who didn’t have much free time, either, there was no benefit to be had from interior decorating.

Derrick invited me over on a rare night off to eat Thai takeout and drink canned Bud Lights. I thought he wanted to talk about the buyout business, but it turned out that he wanted to discuss a merger of another sort.

“So, uh, yeah, I fucked a model last night,” he said.

A sly smile spreading across his face, he told me how he’d met Kyla, a model with one of the city’s premier agencies who had done some runway work for a top fashion line. She was a blonde with legs like stilts and a face that started cold and angular, then warmed into a coquettish smile whenever she was amused. They’d met at a club several weeks before, and had added each other on Facebook. Derrick thought he’d stood no chance with Kyla—who the hell did?—but he tried to charm her anyway. And the next week, when a friend of hers bailed on a concert they were supposed to attend together, she’d offered the extra ticket to Derrick. They went to the concert together, had a few drinks, and eventually found themselves making out. Several hours later, she finished the night wrapped in his sheets.

“I seriously can’t believe this is happening to me,” Derrick said. “Does she know who I am? Does she know who
she
is?”

Derrick’s liaison with Kyla had distracted him from his actual work at the private equity firm, which was far less tantalizing.

He had never fully believed in the moral goodness of private equity. At best, he thought it could produce accidental gains for society when a firm’s interests in buying a company happened to coincide with improving that company by adding workers and bettering its products. But recently, he had begun to question even that.

His firm’s newest deal—a buyout of a midsized company—had looked uncomplicated at first. The acquired company had many things going for it—competent management, a steady revenue stream, and decent profits. But it had huge liabilities and aging equipment, and it had lost market share steadily to newer competitors in the last decade. In short, it needed a classic private equity turnaround, and the kind of immediate cash infusion and corporate reinvigoration that only deep-pocketed Wall Street investors can supply.

As the deal progressed, though, the kinds of feedback Derrick got from his firm’s principals had nothing to do with the kinds of improvements he thought the firm could bring to the business. Their ideas were all about cutting costs quickly to increase short-term profits, and reselling the business for a higher price than they paid without having done anything to improve the company at a fundamental level.

“We can easily grind out 50 mil on rationalizing labor and liquidating assets,” one principal said, meaning that he thought the firm could increase the value of the company by $50 million simply by firing workers and selling off equipment. The reaction played right into Derrick’s worst fear: that he was working in an industry that paid lip service to turnarounds and corporate improvements but was really practicing a particularly venal kind of fee-seeking finance.

He’d occasionally harbored that fear when he first started, but it had intensified during Occupy Wall Street, when he’d seen protesters levying some of the same accusations against the financial services industry. He still maintained that his firm was better than most, but he couldn’t help feeling at times like he was participating in a rich man’s caper.

Recently, Derrick had gone home to Waupaca, his hometown in Wisconsin, for a long weekend away from the bustle of the city. He went to a football game at the local high school, devoured his mom’s home cooking, and went to sleep in his childhood bed. And he got the distinct sense that he was among his people again.

“I can find myself in a few people on Wall Street, but 90 percent of them I can’t,” he later told me. “At home, I can find my soul in 90 percent of those people.”

After Derrick updated his parents on his New York life, his dad caught him up on the family business. Things had been hard in the grocery business, he said, because of the slow economy and rising food prices. He’d been advised to close a few stores, to save on costs until things got better. But knowing he would have to look laid-off workers in the eyes around town afterward, he hadn’t been able to go through with it. Instead, he chose to take out a big, onerous loan in order to keep paying the employees while hoping that things recovered.

Derrick had always planned on moving back to Waupaca to take over the family business someday. His parents had been supportive of his move to New York and his budding career in high finance, but he still felt guilty for not being there through the hard times. His dad was nearing seventy, and his health was getting worse. He wanted to retire soon, but he didn’t have enough of a financial cushion to make it feasible.

Derrick had often daydreamed about going back home to Waupaca. He imagined a simple existence—one with a beautiful wife, a large home in the cornfields, and a couple of chubby-cheeked kids roughhousing in the yard. He imagined taking over his dad’s business and expanding the grocery chain into a national conglomerate, one with thousands of employees and a name known all over the country.

He wanted that eventually, he thought. But twenty-five still seemed too early to settle down. He loved his life in New York, with his lucrative job and his one-night stands with models. Living in the big city was exciting, and working on Wall Street had given him the confidence he used to lack. He liked knowing that his mom could tell people in the grocery store that her son worked on Wall Street—
the
Wall Street—and that the amount of money he made would drive his high school classmates insane with envy.

Derrick had plenty of problems with Wall Street and private equity, but he couldn’t deny that the financial industry had been good to him. At roughly $200,000 in annual pay, he was outearning the adults in Waupaca, many by a factor of five or ten. And that earning power, coupled with the respect he felt as a member of a mythologized industry, made it hard for him to imagine giving it up. Derrick was in danger of getting trapped by both golden handcuffs and status handcuffs—the inability to give up the benefits a Wall Street career afforded a guy who wanted, above all, to feel like he had standing and respect.

“I have this two-sided fear,” he told me that night in his apartment. “One fear is that I’ll stay in private equity and wake up when I’m thirty-five and find out that I’m not necessarily that much smarter or better than I was when I was twenty-five.”

“And the other?” I asked.

“The other is that, here I am on this path, and if I don’t fuck it up, I’ll be wealthy.”

Most times we hung out together, I’d been happy to simply serve as a sounding board for Derrick’s angst. He was one of the most thoughtful people I’d encountered in finance, and I was glad that he was being self-critical about his work. But this time, in the comfort of his living room, I felt the need to challenge his sense of hopelessness. He was, after all, the single biggest case of transformation I’d seen among the young financiers I’d interviewed. His was the story that most clearly showed the benefits of working on Wall Street as a young person—the opportunity for social and economic advancement, the introduction into a network of powerful and accomplished people, the ability to escape a normal existence for one that can be genuinely remarkable. And yet he was unsatisfied—not because he’d been asked to do anything particularly unethical or legally suspect, and not because his employer was worse than any other private equity firm, but simply because he was uneasy about the basic machinations of the financial industry.

“Can I play devil’s advocate?” I asked him. “The last four or five times I’ve sat down across the table from you, there’s always something wrong, there’s always an existential crisis. If a Martian came down from Mars right now and looked at you, he’d see a guy who’s healthy and good-looking, with a job that makes him richer than anyone he grew up with, who has an apartment in Manhattan—stuff that easily puts him ahead of not only vast swaths of America but vast swaths of
New York City
, at the age of twenty-five. If I’m that Martian, I’m saying to myself:
When is this guy ever going to be happy?
”

Derrick thought for a second, picked at his dinner, and replied: “You know, I think it’s a part of our nature, people not ever being satisfied. You’re right that I have the luxury of picking my life apart. I’m not on the margin trying to figure out where I’m going to get food tomorrow. It’s completely a luxury—like, when I was at Wells Fargo, I didn’t have time to think about this existential bullshit. I was just concerned with getting enough sleep to make it through the next day. And I do worry that I find something wrong with everything. When I was in Wisconsin, I wasn’t in the right city. When I was working in Chicago, I wasn’t making enough money. And then I moved out here, and it’s the best city in the world. I really like my job; I’m making a lot of money. But what value am I fulfilling?”

He lowered his eyes to the floor.

“Yes, I think that’s a fair question: ‘Are you ever going to be happy?’ I think it’s a hard thing to do to be like,
This is as good as it’s going to get
. But at some point, I have to be okay with what I’ve got, and quit looking to the next thing.”

I couldn’t fault Derrick for searching for new and better options. After all, most of the young, accomplished people I know—in all industries—do the same thing. People in our generation flit around from job to job, city to city, relationship to relationship, always looking to one-up their last moves. There is a certain anxiety that comes with being twentysomething and facing a wall of opportunities and risks, and Derrick was going through it just as much as all of my friends outside of finance were.

“This is a group of people that are given a lot of money and responsibility at a very young age,” he told me of his Wall Street cohort. “From the time you graduate from college until you’re thirty or thirty-five, it’s a weird metaphysical transition. Our parents did it at twenty or twenty-five. But the schedule in finance doesn’t leave a whole lot of time for self-reflection.”

As Derrick spoke, it occurred to me that my young Wall Street immersion was revealing just as much about being young as being on Wall Street. The analysts I was interviewing, after all, were not mature, developed titans of industry, with full conceptions of themselves and their values. They were kids, roughly my age, who wanted to build a good life for themselves but were unsure which bricks and beams to use. They were being bombarded with definitions of success and chances to tweak and expand those definitions. And slowly, they were trying to figure out where in the world they stood, and what they wanted their lives to represent.

And I realized that along with investigating their industry, and analyzing the work they performed, I was also watching these young financial hotshots do the grueling, painstaking work of growing up.

“CHEERS, MAN!”

Ricardo Hernandez, the J.P. Morgan Lat-Am banking analyst, hoisted a pint of lager in a plastic cup and tapped it against mine. We were at a bar in Midtown, day-drinking on a Sunday afternoon and watching a dense crowd of assorted banker types flit by. Next to us, a waitress carried out a wooden alpine ski with five shot glasses built into it, and helped a quintet of polo-clad frat bros line up and align themselves with the glasses. When they were ready, she lifted the ski high and tipped it over, sending Jack Daniels spilling into their waiting mouths and down their shirts.

“The shot-ski, huh?” Ricardo said, as the bros cleaned themselves up. “Bold move.”

Ricardo had invited me out drinking as a celebration of his recent promotion. His manager had informed him that after the end of his third year at J.P. Morgan, he would be made an associate in the Lat-Am investment banking group. The associate level, a designation typically reserved for bankers who had gotten their MBAs, came with a generous raise and added responsibility. As an analyst in the investment bank, you were a grunt whose work consisted of producing Excel models and pitch books. As an associate, you also were in charge of client deliverables, but you had a team of analysts working on projects below you, and you were given slightly more responsibility when interacting with clients. Associate jobs weren’t laid-back by any stretch of the imagination. But they lacked the torturous quality of the analyst role.

That year, Wall Street had continued to struggle with profitability and the effects of new government regulation, and the investment bank at J.P. Morgan had been threatened by several targeted rounds of layoffs. The cuts began at the senior levels, but they made their way down to the VP, associate, and analyst ranks. The previous month, the guy that sat near to Ricardo—an amiable VP who kept a photo of his two young daughters on his desk—had been laid off unceremoniously after nearly a decade at the bank. Ricardo knew the same fate could await him if things got worse.

Sometimes, when Ricardo looked around the office, he remarked on how different the J.P. Morgan he joined in 2009 was from the one he now worked for. In 2009, the bank had seemed like it was undergoing a momentary setback. The financial crisis had dealt the entire industry a punch in the gut, but everyone knew Wall Street would regain its full strength in time. Didn’t it always?

Now, though, Ricardo wondered whether things might have been changed for good. Pay certainly wasn’t coming back to its pre-2007 levels anytime soon, but there were more structural psychological changes that had taken place since the crisis. The people he knew in finance didn’t act like cocky, entitled Masters of the Universe. They were shell-shocked survivors, people who lived in perpetual fear of losing their jobs and incomes, who spoke of nest eggs and 401(k)s instead of helicopters and Hamptons houses.

For Ricardo, who had once wanted to become a doctor, making it to the associate level justified his decision to tough it out in banking. Now, like a new mother forgetting the pain of childbirth, he was letting go of the worst parts of his analyst days and focusing instead on what lay ahead. Might he get a promotion to VP? Could he run his division someday? What about becoming CEO?

Arjun Khan, the second-year Citigroup analyst, was also looking to the future. He had undergone four months of intensive treatment since being diagnosed with a rare autoimmune disease called Goodpasture’s syndrome, and he had recently been given a provisional all-clear by his doctors. He would have to go back for more preventive treatment in several months, but the worst of it was over, and with it his fear of an early demise or years hooked up to a dialysis machine.

When Arjun got his diagnosis, his job-search efforts fell off the wagon. With his options for traditional buy-side jobs narrowing, Arjun had begun looking for spots in infrastructure private equity—a lesser-known area of finance that invests in roads, bridges, dams, airports, railroads, and other basic assets when governments are either unable or unwilling to fund them entirely with public money. Private equity firms had flooded into the infrastructure business after the financial crisis, and Arjun figured he could identify a growing infrastructure fund and hop aboard. Eventually, he found an open job—at a firm based in São Paulo, Brazil, that was expanding and needed a new junior associate. He applied on a whim, they made him an offer, and several days later he accepted.

Before seeing the job opening in Brazil, Arjun had never seriously thought about moving away from New York. The city was where his friends and family were—and more to the point, it was where Wall Street was. But the more he turned it over in his mind, the more the job seemed like the best of both worlds. Staying in finance would give him the security and stability of a corporate environment and a paycheck that would allow him to maintain the lifestyle he had gotten accustomed to in New York. But being in São Paulo and working in infrastructure investing instead of investment banking would give him better hours, a sunnier climate, and the chance to try something entirely different.

Unlike some of the analysts I’d met, Ricardo’s and Arjun’s experiences in finance hadn’t made them want to flee the industry altogether. Both of them had reservations, sure. They both hated the hundred-hour weeks, the endless revisions of pitch books and Excel models, and the threat of getting called back to work at a moment’s notice. But they’d survived. And now, they were advancing up the ladder to positions that would reward them with large pay packages and give them significantly more responsibility.

As I spoke to Ricardo and Arjun that winter, I began to understand why they were intent on remaining in the financial sector for the foreseeable future. And I couldn’t necessarily blame them. They were twenty-four and twenty-five years old, respectively. Both had been raised by immigrant parents who stressed the value of earning money and having stable careers. And if they stayed a few more years in finance, they would be able to guarantee themselves a generous standard of living for the rest of their lives. For those who can make it work as a career, Wall Street is still an unparalleled personal economic engine.

“By the time I’m twenty-nine or thirty, I’ll never really be worrying about money again,” a young Goldman banker once told me, by way of explaining why he was remaining in finance. “I’ll have decent control over my life, and by that point, I’ll be making decisions that have a real material impact.” (Of course, even the rich worry about money, but they do so from the comfort of their mansions.)

Money aside, a career on Wall Street does carry some benefits. One of them is that the finance world is a huge umbrella, with thousands of different jobs that involve varying functions and work environments. If you don’t like corporate finance, you can move to prime brokerage. If you hate your job in equity research, you can move to a hedge fund whose specialty suits you better. The analysts’ obsession over “hot desks” and stratification within investment banks obscures the fact that these are all high-paying jobs with lots of mobility and opportunity. Even the lowliest back-office manager at a major investment bank earns more than the leading practitioners in many other industries.

The people who do manage to move up the chain of command, of course, have it much better. They not only have the opportunity to become rich beyond belief, but they are given work that is genuinely important, that affects the fates of huge corporations and markets around the world. Their competence (or lack thereof) can have a material impact on our largest cultural, corporate, and governmental institutions, and the clients their firms serve often live or die on their advice. And as long as you’re willing to put up with the harried lifestyle, the internal politicking, and the risk of being fired or laid off, Wall Street can still catapult its high achievers into true power.

Even the most disgruntled analysts I spoke to believed that the skills they’d gained in their jobs would prove useful later on, no matter which field they ended up in.

“That’s the thing that I can’t quite reconcile in my head,” Jeremy Miller-Reed told me shortly after quitting his job at Goldman Sachs. “On one hand, to anyone who asks me, ‘Should I go work in finance?’ I’d say, ‘Fuck no.’ But, at the same time, having that business experience is hugely valuable.”

Of course, the skills an analyst picks up on Wall Street are more narrowly applicable than they appear, and a meaningful percentage of the young people who come to Wall Street for two years after college stay in related fields for the rest of their professional lives. (One headhunter I spoke to estimated that only 10 percent of young Wall Street workers ever leave to work in a completely different industry.) Although a few will make it to the CEO’s office, many more ambitious young financiers will get stuck in a middle-management role, or end up being bounced around like a pinball between firms—always landing on their feet, but never achieving the status they once dreamed of.

It saddened me to imagine Ricardo and Arjun spending their lives as the vice presidents of such-and-such obscure finance subdivisions. Both of them had outside passions that, statistically, they were extremely unlikely to ever pursue, now that they’d survived their first two years on Wall Street and decided to press on in the financial industry. And I couldn’t help but think that they’d be able to contribute more, on balance, doing things other than serving as well-paid investors and intermediaries.

But they seemed to be happy to remain in finance. And all I could do was hope that they would remain scrupulous and thoughtful as they climbed the ladder, and that a career on Wall Street would leave their basic decency intact.