I used to work for CSFB (now Credit Suisse) in London's Canary Wharf. It's the most I've earned in my entire career.
Unless you've worked for an investment bank you have no idea how much money they have. It's like a giant gulf-of-mexico-style money gusher that doesn't quit.
How do they make it? CSFB flies on the bleeding edge of what's legal and always have. I was there when Frank Quattrone was involved in the IPO of VA Linux. The share allocation resulted in the US vs Quattrone lawsuit. Imagine you facilitate an IPO and you get to hand out shares at $80 a piece to your buddies on and the first day it pops up to $300/share and you can sell - right then.
http://bit.ly/cBMdqb
In investment banks there is what's known as the Chinese Wall. It separates investment banking from the brokerage divisions to prevent conflicts of interest. Imagine you have a bunch of guys buying and selling stock for the bank's account and another group of guys recommending to customers which stock to buy and sell. They're all in the same building, using the same elevators, the same mens rooms and the same lunch hall. Quick entrepreneurial quiz: Anyone see a business model there?
They take their licks though. I was there when the LTCM fund collapsed and they lost $600M. Also when the Russian economy collapsed and they lost another $600M. Layoffs? Nah - business as usual.
If you're a developer or ops guy and get tired of startups, I strongly recommend going to work for an investment bank. It's very very hard to get your first job - you're going to have to network your ass off or have a seriously hot resume - probably both. But once you're in, provided you're good at what you do, it's very easy to move between banks and promote yourself into better jobs in other banks or divisions.
So what the fk am I doing running a startup? Good question. I ask myself that sometimes. When you look at the opportunity cost from the "I could be in an investment bank" perspective it is scary. I don't have some magic answer or a bunch of bullet points. I guess what draws me to it is the fact that I own my own business. It's also completely honest. Your success is your own and so is your failure. Working in banking feels like cheating. Perhaps it is. But it pays cash and lots of it.
I've contracted exclusively for investment banks in London for the past 6 years (with the exception of a brief stint at the FSA). The reason I stick with it is the exact reason you specify: the money, or more accurately for me, what the money allows me to do. The majority of the developers I work with have painted themselves into a corner with the money they've made working at banks such that they have no other option but to keep working at banks to maintain the lifestyle they've come to take for granted. The money allowed them to buy large houses, nice cars and good things but it also means they'll have to face a significant downturn in lifestyle if they ever want to move to a different sector not to mind starting a startup.
From the outset I was always conscious of not falling into the same subtle but dangerous trap. I'm not sure why, probably because I never felt 100% comfortable in a corporate environment and knew a some level that I didn't want to be trapped by it. The upshot is that we don't live a lavish lifestyle such that when the income is throttled down the adjustment isn't as severe. We don't own our house, we rent (we're actually quite nomadic so this decision is only partly financially related), no fancy car, we don't tend to spend money on fine dining and entertainment or a lot of the trappings that people often face.
This has allowed me to make choices that were right for me like taking a full 3 months off on the birth of our first child and only going back to work (for an IB I contracted with previously) for 3 days per week for the subsequent 9 months. This really allowed us the time as a family to adjust to our new circumstances. It also allowed me to experiment with a few projects that had been on my mind for a while - nothing significant just the first dip of my toes into the world of startups. Since then we've had another child - again I was able to spend a lot of time with him. I've also been able to try out a few more projects which, although not successful, have allowed me to further experiment and find my feet conceiving and building products. As a result I'm now on the brink throwing myself full time into my own bootstrapped startup which is about to open to beta.
So yes, while I agree that the money to be made from working in investment banks is great, I'd warn against getting too sucked in with the cash if you ever want to keep the door ajar for other things. Well done for making the jump into the startup world, it's a brave move I hope to join you soon. Don't pine for working at a bank, if you value creativity and and the opportunity to strike out on your own (which you clearly do), you've made the right choice whatever the outcome.
So you could work for an investment bank, make a lot of money, use as little of it as possible and save the rest, then after a few years, quit and use the savings to fund a start-up? Sounds like a plan to me...
This is basically what every investment banker does. Virtually every investment banker has "their number", the amount of money they need to quit investment banking and go do whatever it is they want to do with the rest of their life. Very few of them ever actually meet it - or rather, they'll meet their initial "number" early in their 30s, but by then their number will have grown by a few million more, as they realize that sticking with the job for just another year or two will give them another half a million more or some insane amount. It gets to be a treadmill - every time you're about to quit, there's another carrot dangled right in front of you, and it takes a lot of willpower to say "No, I'm done" and leave.
The head of BizDev at the financial software startup I used to work at was one of the lucky ones who got out (and he told me the above observation). You occasionally see other ex-financiers in the startup world, eg. Jeff Bezos or Joshua Schacter, but in general you don't see very many ex-investment-bankers. Most of them seem to still be working on Wall St.
BTW, this applies to other professions as well. An engineer frequently will see "just one more technical challenge that needs solving before I can get to the good, world-changing stuff." (I'm dealing with that now - I keep getting distracted from the ideas I really want to do by the various low-hanging fruit.) An experienced teacher will think "Just one more year with the kids, then I'll retire." Startups are nice in that they have clearly delineated endgames; most salaried professions are not like that.
Yep. That's what I'm doing. With the full support of my bank as well (they know I'm working on my start-up in my spare time, they've arranged to pay me in a fashion that's tax efficient allowing me to invest my money in my startup pre-tax, etc.).
There are plenty of people doing it, at any start-up event I go to (in London) I run into current and former banking peeps.
It's worth pointing out that this is really only a viable career option if you are a straight, white, anglo-saxon male ready to work long hours, drink hard, and put up with a machismo-dominated culture. The financial sector and investment banking in particular, even in their tech departments, have the kind of corporate culture that sends me running.
Having worked at Goldman Sachs in FIG investment banking, and having very close friends at virtually every bulge bracket as well as 8 of the 10 largest Private Equity firms, I can attest that this is completely false. If there is one industry that bleeds meritocracy (outside of entrepreneurship, which I think is a clear first), it is finance. You are definitely right about the long hours - you must be intelligent and be willing to work extremely hard, and you must also be willing to put up with a great deal of tedium and grunt work at almost all levels. However, the one thing that you don't have to be is white. Minorities are vastly overrepresented, and while I have not done a hard calculation if you take Asians and Indians as a percentage of total front office workers, I would not be surprised if it were near 30%. Include Jews and it's even higher. I currently work at McKinsey & Co in the Corporate Finance practice in New York, and the office as a whole (of 500 front office consultants) is probably 40% Asian or Indian.
That said, there are many downsides to finance as well and there are many reasons I am forgoing a $400k+ paycheck in PE to move back to SF to start a company where I am paid $0 and will have to live off of a ramen diet. The fact that I am not straight, white, and anglo-saxon however does not play a factor at all (and in fact there are running jokes at many banks and top tier consultancies that the above description puts you in the minority).
Agreed. I'm British Asian and work on the the trading floor of a mid-tier bank in London, race is completely a non-issue. Diversity is huge both on the business and tech side.
On the IBD side (M&A/CF) there's probably less diversity, but again it's not a huge issue. In IBD the division is more down to class than to race.
The trading floor is still male dominated though, although there are a fair number of female quants in the industry.
I disagree somewhat although I am a contractor not a permanent employee seeking promotion so that might be the reason for the difference. I am straight and white but otherwise I don't fit what you describe. I arrive at 08:00 and leave at 16:30 sharp unless exceptional circumstances arise. I make it clear from the first day that I'm not there to socialise and I won't routinely work outside my contracted hours. My theory is I have the length of my first contract (usually 3 to 6 months) to prove that I'm worth sticking with in spite of not being the proverbial round peg. So far it's worked and I've always been extended multiple times at each institution. They eventually stop offering you out to get drunk if you're politely constant with your rejection - I do get a bit of a ribbing and feel pressure in this respect but it doesn't impact me.
Currently my team is made up of 2x French men, 1x Nigerian man, 1x Indian Man and me (Irish man) the team leader is an English man so there certainly could and should be better female representation but that was also the case (but to a lesser extent) when I used to work in the telecoms sector.
There is a lot of arrogance and machismo on display but it's less prevalent in the back office - certainly more than what I experienced in other sectors. It is hard to stomach though.
So by "better female representation" you mean "less than 100% male". And the team is 50% white, and 100% straight (I assume you'd have mentioned otherwise). And you admit they pressure you to drink with them. So it sounds like you agree with almost everything I said about the makeup of the workforce at these places.
This is completely not true anymore and I don't think it has been for 30 years. Just like that WSJ article from a few months back said, WASPs are a dying breed, if not totally dead already. The CEOs of Lehman Brothers, Goldman Sachs, Deutsche Bank, JPMorgan Chase, Bear Stearns and Barclays are/were all Jewish. As is Charles Schwab, he president of the World Bank, the Chairman of the Federal Reserve, the president of the European Central Bank, and so on and so forth. Anecdotally, I don't know any WASPs in Finance at all. British Indian, Russian, Chinese/Korean american, tons of jewish people, white guys who aren't WASPs... the hours and culture might be ridiculous, but it ain't WASP culture anymore, if it ever was.
They take their licks though. I was there when the LTCM fund collapsed and they lost $600M. Also when the Russian economy collapsed and they lost another $600M. Layoffs? Nah - business as usual.
The finance industry doesn't need as many layoffs as other industries because they solved the stick wage problem.
It's easy to raise wages when times are good, but it's hard to drop wages when times are bad, because it results in the whole office getting demoralized and productivity dropping. So companies will resort to laying people off entirely when revenues drop, because the morale hit from cutting people off entirely is less than the morale hit from dropping everyone's salary.
Finance presumably solves this by paying out the majority of compensation in bonuses, which are explicitly tied to the firm's performance. If the company does well, you do well, if the company does poorly, you knew ahead of time that you'd be taking a haircut, so it doesn't feel as much like a broken promise as when wages are cut.
They're not completely immune from layoffs though - when a firm goes under entirely, most of the employee base is let go by the acquirer. And financial firms tend to blow up completely more than other types of firms, because they operate with more leverage. That's why luxury businesses in NYC took a big hit this financial crisis.
This is exactly right. Relative to 2007, my friend's 2008 income fell 40%. In 2009 it was 50% higher than 2007. Layoffs are less likely when wages are flexible.
I don't think if I could live with myself if I worked at an investment bank. Most of what they do provides no benefit to humanity, in fact on the whole they're probably parasitic. Shuffling money around senselessly while taking a cut might be extremely profitable if you do enough of it, but it's just a drain on modern capitalism.
Many of the people I know that work in the vast world of "other people's money" feel exactly the same way, FWIW - on many occasions I've had discussions with them about the fact that all the only value they ever create is to shave the odd basis point off a spread here or there, and they have no illusions that it matters one bit.
But it's an assload of easy money, and once you're in, it's trivially easy to stay in (it's like gambling for a living, where you get a cut of whatever you win, except that you don't actually have to win consistently to continue to buy in because there's always another fool willing to trust you with his money), so it's very easy to end up deciding that there's not enough rational incentive for you to do anything else.
More than anything, I weep for the brain drain that Wall Street inflicts on the rest of the world. Far too many of the smartest people I've ever known were sucked in, people who could otherwise be creating real value doing jobs without which, the financial industry couldn't even exist. IMO, this is the great danger of having a society where the money shufflers are outpaid by 10:1 compared to people of similar ability in other jobs, that too much of our real talent will be wasted on an industry that is practically by definition (as a zero-sum plus fees industry) incapable of creating much more value than it currently supplies.
The smartest people I know care much more about tickling their brains than about earning insane amounts of money. They are happy with their middling six figure salaries doing quantum computing research and the like.
Shuffling money around is also useful for making public what would otherwise be private information. Greece can profess to the world how solvent they are, but the swap market tells a different story.
I said "most of what they do" rather than "all of what they do" because some of it coincidentally helps others. The ratio of parasitic behavior to useful is unfortunately growing, and hasn't stopped just because it caused an economic meltdown.
I wonder how you square this with your past, as I understand, as an online poker pro?
As a former professional poker player myself, it never would occur to me to denigrate the work of financiers or suggest that what they were doing was immoral. I was able to morally justify my occupation to myself.. and, as such, it is orders of magnitude easier to justify theirs.
That's pretty much it. Any penny I won at gambling did nothing to harm the broader economy. It might harm some other guy who gambled it, but he knew what he was buying into.
My problem with Goldman and their peers isn't that they won money gambling from other people. It's that in so doing they knowingly destabilized the global economy. The actions of investment bankers have harmed every American, most of whom couldn't even spell CDO let alone know why the existence of so many of them led to Joe Average getting laid off.
I'm not some sort of moral crusader by any means. I really did mean I had less against crack dealers (in fact I think drugs should be legalized, but that's another topic entirely) because the person buying crack knows what they're getting. I don't think everyone can or should be saving lives, they just shouldn't be harming people who aren't knowing and willing parties to the transaction. If my playing poker could have caused economic collapse (in fact the opposite happened, poker became a huge industry that provided lots of well-paying jobs) there would have been an issue.
Like many people, Goldman went long on housing. This did harm the economy. But I take issue with your use of the word "knowingly" - why would Goldman knowingly lose billions of dollars?
Also, many of the people being laid off (e.g., construction workers, realtors) are also complicit in harming the economy.
I'm not being intentionally obtuse, but I still don't understand your specific objecton(s). As I read it, I think it comes down to "a difference in degree is a difference in kind."
I would argue that you can't really know that your winnings never caused a lay-off, for example. Perhaps you beat Frank, the owner of an RV dealership in Eau Claire, so badly that he had to let one of his salesmen go to keep his company alive.
You can raise all sorts of objections at this point about the personal responsibility of Frank. He shouldn't be gambling with money he can't afford to lose! He should understand all of the rules before he sits down! He should have a firmer grasp of the probabilities! He shouldn't be playing with his heart instead of his head!
And those are all objections that market participants can (I believe in good conscience) make about their activities. So, I'm not sure exactly where your objection lies.
Is finance too important to be left to the market? (Let's ignore, for now, the moral hazard of current government interventions... unless that's your objection.) If not, should the markets be limited to qualified investors who have demonstrated some level of knowledge? Should market participants be required to diversify their holdings? Perhaps only a certain percentage of one's net worth can be in play?
So are taxes for building bridges to nowhere etc.
A penny in tax is one penny that cannot be allocated for something else (which is far more likely to be productive).
The money supply was inflated because of the easy money policies of Greenspan and co. Attributing that solely to bankers oversimplifies things.
And let's remember that Fannie Mae and Freddie Mac, two of the groups that originally lobbied for 'increasing homeownership' and thus accelerated the real-estate bubble, are still roaming around scot-free.
For a long time, I used to think along those lines, too. But then I seriously asked myself in what way I'm actually contributing to humanity - and I find it's not so much. And I'm working in research. But in the end, what I do is so marginal that it only really differs from what investment bankers contribute if you look at it through a strong microscope.
My company employs 14 people and counting. It's created most of those jobs in a recession. It buys goods and services that total up to a lot of money which then employ other people.
The games provide enjoyment to thousands of customers. Don't get me wrong, I'm not curing cancer, but yes it does benefit humanity.
Starting salary for typical IT roles (dev, etc) are about £35-45k p.a. in London depending on how well you negotiate. That's straight out of uni. It goes up rapidly as you go up the ladder. Within a couple of years, if you do well, you should be up to £65k or so, and probably start getting a bonus on top of it too (probably about £10-20k or so in IT). It's not that unusual for the salary to go up by about £10k per year if you do very well, which isn't necessarily that hard, because there are a lot of blasé, bored people who don't have any energy anymore (the environment saps it out of you).
If you're on the business side rather than IT, the equation changes dramatically upwards. I have a friend who's 5 years into a front office, commodities sales job, starting from the lowest possible rank, and who's now earning £150k per year plus bonus. She started on £30k because she really wanted the job - so her salary has gone up 500% in 5 years. That's not counting the bonus either.
That's not fuck-you money. Few people earn that even at banks. But it is a very comfortable salary.
It's cheap to get that salary, too. All you have to give up is your dreams. My friend who earns £150k hates her job, and used to tell me that every time I saw her.
> It's cheap to get that salary, too. All you have to give up is your dreams.
Don't forget the effect of compound interest: they want your soul as well, and you burn out more every year for as long as you stay.
In my early career, a headhunter came after me to interview with his London bank client. I did a few quick sums at that point, and it's not nearly as attractive a package as it looks.
I'm in Cambridge, UK, so we have quite a few guys around here who get approached by the big London banks or who choose to interview there; a few of my friends did. Without exception, the ones who took the jobs get up early, commute down on overcrowded trains, work long hours during the day itself, and then commute home on overcrowded trains. By the time they've done that, they are so tired that they often don't want to do much on weekday evenings any more. The only thing that might improve the situation is moving to London, but that pushes your cost of living way up.
I don't earn as much money on my decent IT contracts as your £150k+bonus friend, and I've been working a bit longer. On the other hand, by the time you figure out an hourly rate including things like commuting time, I bet I'm not that far off. By the time you factor in the costs of commuting or getting London accommodation, I'm even closer. Oh, and I still have a life Monday-Friday.
I can understand people who go straight into that kind of environment for a couple of years after university, when you're young enough to take it and you're basically making an investment of 2-3 years of having no life in exchange for more comfort for the rest of your life. But I can't understand why anyone would want to stay there for much longer, even with all the financial reward: money is only worth anything if you have time to enjoy spending it.
Nah, cost of living isn't that high (as ig1 says). I've been living in London for the last 7 years, much of it on a rather limited salary. You can live very comfortably near central London (zone 1-2) in a nice area on £35k. You won't save much money, but once your salary goes up, of course, you will be able to (depending on how you adjust your lifestyle, of course).
As for hourly rate, that can be computed easily. My friend works about 12 hours a day, 5 days a week (no weekends, since her work is linked to the markets being opened). She gets 4 weeks of holiday a year, and there's about a week's worth of bank holidays. So that's 47 weeks * 60 hours = 2820 hours a year, on the upper end (assuming no sick days or other unplanned absences).
That works just above £53 an hour.
You could drive that down by counting her (30 minute or so) commute in, but you won't make much difference. The fact is, she earns very good money no matter which way you cut it. And that's not even counting the (very significant) bonus.
I'll grant you that living in Cambridge and working in London is daft, but that's why they have, ya'know, houses and stuff in London. So you can move there rather than spend hours on the train every day.
It depends very much on which bank you're working for. American/Asian banks tend to be much more hard pushing in terms of hours of facetime you have to put in, but at many of the European banks 40 hour weeks are fairly average even for Front Office devs.
Cost of living wise london isn't that expensive once you take into account cost of commuting. I'm paying £1300/month for a large two bedroom flat within walking distance of the city.
I'd expect the bonus to be higher, 10k bonus is what I'd expect a new grad to get a year out of uni. Although bonus varies a lot by bank, how close you are to the money, and if you get paid out of an "IT pool" or out of the "desk pool".
For base I think your figures are pretty accurate, although bases tend to max out at around £100k (in pure developer roles; developer management can go higher). A lot of senior devs become contractors, with day rates typically being in the £550-£750 range.
I've taken the contractor route and I'm perfectly happy with it. Although I fall within the range you specify I've seen higher for some specialised front office roles in certain technologies. This past week I've seen live positions in the range of £800 - £900.
You make around S$200k/yr within 4 years if you're in banking IT in Singapore. This is not even counting the bonuses they usually get. OTOH if you work work for a startup here, you get around S$80-90k/yr max. And if you're a non-IT person at a bank, the figures are just astronomical.
Almost half of the people I met in university are now working for banks, and you'll find them either preparing for CFA exams over the weekend or thinking about their MBA applications for next year. These include people with PhDs in Physics and who worked on cutting-edge stuff like quantum cryptography.
Before you start that bank job you should also think about whether what you're doing is moral and right. Whether by doing that job you're contributing to making the world a better place.
That's a good point, startups don't usually make the world a better place, but at least they generally don't seem to actively try to make it worse. And even if a startup were bad, it's very unlikely to be powerful enough to do damage on the scale a big financial institution could.
Broad strokes: Startups directly create new value, which by definition makes the world a better place, at least for someone. In contrast, the finance industry adds value indirectly by optimizing capital allocation. At best, finance increases efficiency, but it's very hard to measure whether it's helping or just exploiting the complex rules to skim off the top. In contrast, startups without a value proposition fail.
Only consumer product startups create new value, at least in the sense I think you are describing.
A B2B startup, much like finance, will only increase efficiency. If I build HRWeb (replace your human resources dept with the internets), all it does is makes a bunch of other companies more efficient.
A business is two things: an organization that sells something, and a collective of employees.
As you say, some B2B startups sell efficiency to the organization.
But there is also good money in selling products to the employee collective, even if they decrease efficiency of the organization.
For example, you can sell employees a product that gives them job security by making them appear more valuable. You could sell them a tool that will help them get rival employees fired.
Both of these would come at a cost of efficiency, but would be excellent B2B products. In the end, it's the employees who sign the purchase orders, not the organization.
I have a sneaking suspicion that these make up a much larger portion of B2B products than most people would think.
Also consider that you didn't create the system and are just a part of it, if you don't take the job someone else will. Depends what stage of your life your at, the money could be a primary concern or a secondary one with flexibility, personal interest and creating something valuable higher.
> you didn't create the system and are just a part of it, if you don't take the job someone else will.
Exactly why I moonlight as a crack dealer, with the odd stint pimping adolescents I meet at the bus terminal. Sorry for the lame attempt at the witty reply... I guess the point is that not doing something doesn't mean it won't happen, but it does mean you won't do it, and that matters to some people.
I know you're joking, but I don't see the moral concern about investment banking. You may not be making the world a better place (although that is very debatable), but you're not making it worse, either.
That's like saying men are bad because men are responsible for most wars.
You can't ignore the benefits created by investment banks. Without them we wouldn't have had the financial meltdown; but neither would we have had the rapid growth of the last century which has largely been fuelled by financial markets enabling huge amounts of investment. Without the investment banking sector you would have no IPOs, no financed takeovers, no VCs, even bank lending to small business would be close to non-existent. If you want to see the impact of financing, have a look at places which have introduced microfinance in recent decades. It has a transformational impact.
Of course they're not all bad. This isn't a movie, nobody is truly evil.
But the problem is the industry has fundamentally changed as it's been deregulated from the useful industry of yore that you mention (helping to efficiently allocate capital and provide liquidity, entirely separated from retail banking) into highly leveraged gambling institutions with a small arm that still provides some of those old services.
The guys inside the big investment banks who do the things you're talking about are more or less insignificant to the results of the big banks. The traders look at them the way a programmer at Google probably looks at the cooks in the cafeteria. All of the money is on the bond floor, and that's where the damage has been (and will in the future be) done.
I've worked in most major asset classes (equities, interest rate swaps, government bonds, credit derivatives, fx) and they all have significant real world uses.
In a couple of those classes, for example FX, the volume of speculation trading exceeds the volume of "real" trading, but again that's not without it's benefit. FX spreads have dropped dramatically and liquidity is near instant and it's much harder for an individual company or country to deliberately interfere with the market price of a currency.
Prop trading which is essentially the gambling part of most banks generally tends to be a relative small part of most banks. When it comes to trading most banks make their money from market making rather than any kind of prop trading. Bank share holders generally don't like prop trading due to the high risks involved.
In terms of risk there are obviously cases where bankers are taking excessive risk (because there's a high personal upside and low personal downside risk) and that's one of the factors that contributes to the failure of some banks. But it's not as if the activities the banks undertake are fundamentally wrong, rather that the rewards for the bank aren't matched by the risks.
In terms of morality there's very limited number of banking activities you could point to and say "that's morally wrong". You could for example reasonably argue that a salesperson at a bank selling A* rated CMO's to a pension firm is morally in the wrong if they suspect that the default rate on the underlying mortgages are higher than the triple A* would suggest, but on the other hand it's not as if he's selling it door-to-door to pensioners, he's selling it to a professional banker representing the pension fund whose job it is to do the due diligence on the product he's buying. A certain amount of responsibility for the purchase falls on the buyer of the product. As the old saying goes "It takes two to tango".
They didn't. They hedged the long positions with credit default swaps, assumed that they couldn't lose (which was true if the counterparty could afford to pay the swaps) and thus didn't declare them on their balance sheets as they were viewed to be without risk.
What ended up happening is the counterparties (most notably AIG) had taken on far more in credit default swaps than they could pay out, meaning there was lots of risk hiding off balance sheet. This is why Uncle Sam had to bail out AIG. (The Fed could have bailed out all of the people AIG owed instead, but that would have been far more work for no clear gain.)
I thought they didn't so much take long positions as ended up with being long as a result of everyone stopping buying them. Were they buying from other IBs or was it just a case that they couldn't sell some of the toxic packages they'd created?
That's true for Goldman - they tend to have a very short term focus. It was not true of many of the other banks. This is why Goldman did so well (relatively speaking) in the crash.
I don't think that's true anymore. The amount of money controlled by the gamblers, and the amount of leverage they use, has gotten to the point where it threatens the fundamentals of our economy. It melted it 2 years ago and nothing substantial has changed since.
Unless you've worked for an investment bank you have no idea how much money they have. It's like a giant gulf-of-mexico-style money gusher that doesn't quit.
How do they make it? CSFB flies on the bleeding edge of what's legal and always have. I was there when Frank Quattrone was involved in the IPO of VA Linux. The share allocation resulted in the US vs Quattrone lawsuit. Imagine you facilitate an IPO and you get to hand out shares at $80 a piece to your buddies on and the first day it pops up to $300/share and you can sell - right then. http://bit.ly/cBMdqb
I was also there when James Archer, Jeffrey Archer's son was found guilty of manipulating the swedish stock exchange and banned for life. http://news.bbc.co.uk/2/hi/business/1459638.stm
In investment banks there is what's known as the Chinese Wall. It separates investment banking from the brokerage divisions to prevent conflicts of interest. Imagine you have a bunch of guys buying and selling stock for the bank's account and another group of guys recommending to customers which stock to buy and sell. They're all in the same building, using the same elevators, the same mens rooms and the same lunch hall. Quick entrepreneurial quiz: Anyone see a business model there?
They take their licks though. I was there when the LTCM fund collapsed and they lost $600M. Also when the Russian economy collapsed and they lost another $600M. Layoffs? Nah - business as usual.
If you're a developer or ops guy and get tired of startups, I strongly recommend going to work for an investment bank. It's very very hard to get your first job - you're going to have to network your ass off or have a seriously hot resume - probably both. But once you're in, provided you're good at what you do, it's very easy to move between banks and promote yourself into better jobs in other banks or divisions.
So what the fk am I doing running a startup? Good question. I ask myself that sometimes. When you look at the opportunity cost from the "I could be in an investment bank" perspective it is scary. I don't have some magic answer or a bunch of bullet points. I guess what draws me to it is the fact that I own my own business. It's also completely honest. Your success is your own and so is your failure. Working in banking feels like cheating. Perhaps it is. But it pays cash and lots of it.