Here is an excerpt:

"When the music of financial-services contraction stops, there will be a lot of investment bankers without seats. Merrill Lynch alone recently said it would lay off another 2,900 people, on top of the 1,100 jobs already eliminated this year. The total number of eliminated banking jobs is likely to dwarf the 90,000 over the two years following the Internet bust of 2000.

For many of these bankers, getting fired could be the best thing that ever happened to them.
Rainer Maria Rilke, in "Letters to a Young Poet," offers some words of wisdom that the newly jobless would do well to consider: "This most of all: ask yourself in the stillest hour of your night: must I write?" Rilke warned of the hardships of his chosen craft, arguing that if the poet could even imagine living without writing, he would be better off doing so.

This kind of profound introspection is rarely undertaken by those young professionals who march off to investment banking careers based more on what is expected of them than on any deep commitment to the field. They should take a moment to ask themselves: Must I bank?

Such introspection, even if it comes late in life, can lead to greater fulfillment than scrambling for the next best investment banking job that might still be available. I wrote in my last book that the opportunity to really pause and face a world where the next step has not been preordained can be a profoundly cathartic learning experience. Judging from the emails I received after the last bust, many may have benefited from doing just that."

The Prince agrees with everything that Knee argues in this article.  Anyone considering a career in banking should read this article. It also offers a framework for how those who have been laid off should think about their situation.  It may actually end up being the best thing that ever happened to them, even if it feels like the end of the world right now.

"I have studied the vault guides, read IBankingFAQ, read Mergers and Inquisitions, read the WetFeet guides, read your posts, done practice interviews, perfected my resume, taken all the finance courses my school offers and read books about the firms I am interviewing with.  Yet, I still have this sinking feeling that I am not fully prepared for my analyst/summer analyst interviews.  Do you have anymore suggestion or parting words of advice?"

My first word of advice would be to relax.  If you have done those things you are way ahead of most of your competition.  That is not to say that you should blow off your peers but it is to say that you are probably more prepared than you think.

However, here are a few additional maxims that The Prince has applied and seen others apply successfully in interviews.

Overall Advice:
1) Be Humble. Don’t feel like you have to rattle off everything from Vault to get the job. Give your thoughts and then turn the question back towards the interviewer for his or her thoughts.

2) Don’t come off as naive. Show them that you have a realistic perception of how difficult the hours & lifestyle will be. Acknowledge that you can’t understand or prepare for it. Many bankers will describe this as having the right attitude for this kind of work.

3) Let the interviewer do the talking.  Everyone loves to talk about themselves.  Bankers and S&T people love to hear themselves talk.

4) Prompt the interviewer with insightful questions.

5) Use the names of the interviewers when you are talking to them.

Two Additional Strategies:
1) Take every opportunity to emphasize market/financial news aptitude. Sit down with someone from your school who was an investment banking summer last year and ask them for tons of market information. For example, talk about the private equity industry’s problems, the mortgage crisis, municipal bonds trading crazy versus Treasurys etc. However, demonstrating market awareness should take the form of a few sentences about a trade you like or an opinion you have followed by a question to the interviewer about their opinion of what you said.  Get the interviewers thoughts on the subject

2) Get to know the interviewer and establish a connection by asking questions about their life outside of work. Why they came to work there?  What they do after work?  Play on common interests, hobbies, sports, etc. W hy did they come to x bank?  What do they dislike most about their job?  The Prince’s best interviews were all about making a connection with the interviewer and convincing him or her that he or she wanted to work with me. In these interviews we did not cover one technical or job related question. Let the interviewer do most of talking answering your questions and they will love you for it.  Everyone, especially bankers, loves to hear themselves talk.

Go out, buy a copy of Dale Carnegie’s How to Win Friends and Influence People and study it.  The Prince hates self-help books as much as the next person but this one is worth it.  No book will prepare you more for your job in finance.   At the end of the day most people in finance are salesman and relationships are the most important asset they have.

Many of the applicants, at least the competitive ones, will pour over resources like the Vault Guides, Wall Street Oasis, Mergers and Inquisitions, and maybe even this site in search of an edge in the process.  The Prince has blogged before that the odds are not good in the regular recruiting process when it comes to bulge bracket banks and especially when it comes to the top groups within these banks.  If the deck is stacked against even someone from a target (i.e. Harvard, Princeton, Stanford, Yale, etc.), then for a non-target (i.e. state schools, liberal arts colleges, Indian country, educated and raised by wolves etc.) the odds appear downright disheartening.  Nevertheless, some non-target applicants will make it through this grueling process and secure offers with the right combination of connections, interviewing skills, finance knowledge, academic record, and character traits.  The target versus non-target distinction may not be fair and no one disputes that applicants from both groups will be able to do the work.  Like an old coworker said to me once during my summer analyst job: "I can’t believe I get paid this much to just add, divide, subtract, and multiply in a model then put that into a pitchbook."  I even have one really quantitative friend with a double major in math and financial economics who was told in a banking interview that he was too bright for the work, would get bored, and would be better off going into sales and trading or a hedge fund.  Please check out the Prince’s two older posts about getting interviews and then killing them if you want to explore this further.

Now that we have set the scene, The Prince wants to offer some gross speculation on what this year’s recruiting season was like.  This is mainly based on anecdotes, the fortune or lack thereof of friends, and insight from some friends that are currently bankers.  Typically, the regular recruiting process for full-time analysts starts in late August and wraps up before Christmas.  It consists of interview drops, followed by on-campus interviews, and then ’superday’ interviews at the firms for target schools’ students.  For non-targets, it looks more like a resume passed to HR by a contact, a phone interview, and then maybe a ’superday’ if the applicant is exceptionally impressive or has a great connection.  Summer analyst recruiting starts in the middle of January and runs till about the middle of March normally at the bulge-bracket banks.  Some banks will take some people off cycle for full-time or summer analyst jobs but this is fairly rare.  The Prince has known one person who left Google after only 3 months on the job after graduation and was taken off cycle to start at a bulge bracket as a 1st year analyst.

By all accounts this was a brutal recruiting season.  Full-time offer rates to summer analysts were down sharply.  In some regional offices I heard of groups giving offers to 1 in 4 summer analysts.  Many summer analysts who did get offers jumped on them and didn’t wait to try their luck for better offers in the regular process.  So there were fewer slots left for the full-time process.  The number of full-time analysts hired was also down across the street.  The Prince has friends at targets that had summer analyst jobs at top banks but didn’t get full-time offers after the summer, and then didn’t get any full-time offers in the regular process.  By all accounts it was a bloodbath this year in recruiting. The Prince and a few of his friends were fortunate enough to get summer analyst jobs and full-time offers at places they wanted to work.  Others were not so lucky and many are still looking.  This was not the case last year when banks were hiring at higher rates not seen in years.

Yet, why was it so brutal?  The response seems obvious—if banks figure out bonuses by placing 50% of their weight on the past year of performance and the other 50% on the outlook for future performance, they probably do the same thing with analyst recruiting.  The forward calendar looks weak.  The LBO game is shut down and certain fixed income products may never come back.  This also looks to be a sleepy year for M&A.  So things look bad and banks are cutting back on their analyst classes.  Does this really make sense?  Well, it is possible to argue that this is a dumb reason to cut back on analysts that are the cheapest form of professional labor employed by a bank.  For example, take a bulge bracket bank with 100 investment banking and 100 capital market summer analysts.  If the total cost of training, paying, relocating, and hiring each of these 200 summer analysts is $18,000, which is probably high, the total cost of this program for a summer is $3.6mn. 

That seems like a small expense to get to do a three month job interview of the most qualified candidate your bank can convince to come.  It looks even cheaper when you consider that many no name managing directors get bonuses is excess of that every year.  Albeit these managing directors do normally bring in business and don’t just crunch numbers but you get the Prince’s point.  Also, do we really believe that all those summer analysts don’t ad any value to the firm in excess of their $3.6mn cost.  My summer experiences had me doing the same work but slower than my full-time analyst peers. 

If everyone else is cutting back, should an opportunist bank increase hiring of summer analysts to get stellar candidates that in past years it would not have had a shot at? This seems like a great time for HR and the leaders of banks to think strategically about how to improve the quality of their talent at the analyst level.  Now for full-time analysts, cutting back may be more prudent because the costs per analyst are higher.  Yet, analysts are still the cheapest labor a bank has, and getting top quality talent in at the ground floor will improve the firm if the talent stays.  It may also help the firm if the top talent does leave after 2 years to head into PE or HFs, since these former analysts will rise into positions of power on the buy-side with, if their experience is good, a preference for their old firm.  Certainly no one gains friends by firing their incoming analyst class but a bank also sacrifices potential future high quality talented friends by cutting back on full-time and summer analyst positions.  Maybe The Prince is full of it and less work for a bank on the forward calendar must translate into fewer analysts getting hired.  Yet, that seems like a pretty short term outlook, and banks that act strategically now to hire more analysts may reap long-term benefits by getting more quality talent than they could expect to attain in previous years.

In addition to being easy-to-read, Knee’s book, with its candid insider’s accounts, is hilarious at times.  The intimate glimpse into the life of a mid-level and later a senior banker is unique among books of its kind.  Knee had a ringside seat during the boom and bust decade and into the 21st century, so his take on the tech bubble’s collapse is especially interesting.  Knee’s account of an industry in free fall captures an era of fabulous deal-making and the catastrophe that followed when the bubble burst.  However, the book is about more than just the tech bubble—its insights can help us through these turbulent times.  It can also give some comfort to those bankers who are slogging along now with the credit (or LBO cycle) at bottom or nearing a bottom.

The warning embodied in Knees book can be summed up by the decline he witnessed (which probably started even before he came on the scene).  Knee entered an industry that was typified by the motto "first-class business in a first-class way" (Morgan Stanley’s motto) and saw it transformed in a mere decade to a free-for-all typified by the acronym IBG, YBG ("I’ll be gone, you’ll be gone").  Mercenary-like bankers signed off on weak deals, knowing they would leave them in the rear-view mirror. Once, investment bankers prospered largely on their success in serving the client, preserving the firm, and protecting the public interest.  Now, however, this is no longer the case, and only a handful of bankers still work in the trusted advisor role.  While this state of affairs is unfortunate, it appears to be irreversible.

Now, in the "financial supermarket" era, bankers feel that their worth is tied exclusively to how much revenue they generated for the firm.  Today, most young executives feel no loyalty to their firms or to their clients; Knee chronicles this unprecedented but understandable level of cynicism and distrust of investment banks.

The Accidental Investment Banker is filled with power players, back stabbers, celebrity bankers, and incredibly rich individuals.  It provides a vivid account of investment banking and where the industry has been plus some predictions of where it is going.  The book is both cautionary and hopeful for the future of the industry.   Brimming with insight into what investment bankers actually do, and told with humor and unflinching honesty, The Accidental Investment Banker offers a fascinating glimpse behind the scenes of Wall Street.  At least, that is the Prince’s take.  The Prince enjoyed reading the book, and hopefully this review encourages you to read this book if you have not already.

Here is a short bio of Knee:

Jonathan A. Knee is now a partner at a boutique investment banking firm. He is also Adjunct Professor of Finance and Economics and Director of the Media Program at the Columbia Graduate School of Business. His writing has appeared in the Wall Street Journal, New York Times, Washington Post, Los Angeles Times , and elsewhere.

Here are some reviews from other people:

"Not since Michael Lewis’s ‘Liar’s Poker’ has there been as good, as accessible or as pithy a look at the world of investment banking…. Unlike Lewis, who was a flash in the Wall Street pan, Knee has spent more than a decade working his way up the ladder, and he has a pleasant and self-effacing way of weaving his own experiences at Goldman Sachs and Morgan Stanley with the history of those firms. Knee has great fun cutting some of Wall Street’s biggest egos down to size while exposing how little there really is to all that high-priced financial wizardry. He’s written a wonderful primer for anyone who has wondered how Wall Street really works, and a wonderful reminder for those who already know how far professional standards have fallen."–Steve Pearlstein, Washington Post

"This insider’s chronicle brims with humor and insight as it depicts a civilized world driven mad by money."–Fast Company

"A thumping ride across deep waters, Knee evokes the precarious, risky thrills courted by businesspeople great and small. Smart, clever and unfailingly articulate…. Knee maintains a reporter’s sense of detachment, observing how the decade in question turned into an economic house of mirrors as money-guzzling dotcoms bloomed and withered, playing havoc with long-established rules and mores, nurturing an era of incompetence and brawling, veiled in the traditional pseudo-gentility of a privileged profession…. Funny and knowing, this business memoir debut should appeal to a wide swath of business veterans."–Publishers Weekly

"A refugee from the investment-banking implosion that accompanied the various other bubble bursts of the late ’90s, Knee argues that his profession has sold out its legacy of independence and solid judgment, much to its own shame–and to the clear and present danger of those affected by its decisions (which is to say everyone)."–Atlantic Monthly

"Return with us now to those thrilling days of yesteryear, when giants like Mary Meeker moved millions with a single appearance on CNBC. Knee, a partner at boutique investment bank Evercore Partners whos also logged time at Goldman Sachs and Morgan Stanley, here provides a candid and irreverent insiders account of an industry in free fall during the boom-and-bust decade and into the 21st century. Knee takes aim at a range of Street figures, from Joseph Perella to new Treasury Secretary Henry Paulson. But theres also a bit of self-stroking, as the author celebrates the virtues of boutique firmslike his own."–BusinessWeek

"The best account I’ve read of how the Internet boom and bust was experienced inside the investment banking department of a big Wall Street firm."–Michael Lewis, Bloomberg.com

"The fashion world has ‘The Devil Wears Prada’. Hollywood has ‘You’ll Never Eat Lunch in This Town Again’. Now Wall Street is getting…The Accidental Investment Banker …. A rare, ringside seat inside the madcap and often egomaniacal world of Wall Street’s Masters of the Universe…. For would-be bankers, the book is an excellent primer on what it’s really like; for current bankers it will be a guilty pleasure."–Andrew Ross Sorkin, New York Times

"Entertainingly indiscreet…. Knee’s talent for wicked pen portraits is put to good use because he worked in the vicinity of some the most colorful and intriguing investment bankers of the 1990s."–John Gapper, Financial Times

"Articulate and funny…. One of the street’s top media bankers, Knee has written what is at once an homage to old school investment banking and an insider’s reflection on how the boom era reshaped his industry…. A very good picture of work life on Wall Street through the turn of the century."–MarketWatch.com

"For anyone who remembers the crazy boom times, and the even crazier bust, Jonathan A. Knee’s ‘The Accidental Investment Banker’ is a must…. Reveals a world that rivals ‘24′ in intrigue and drama."–Fortune

Getting the Interview and Creating Advocates: "Press Some Flesh and Get on the Phone"

The Prince and my friends have always tried to network extensively throughout our summer analyst jobs with our co-workers and employees in different groups.  There is nothing like the head of desk walking up to you after you have become friends and telling you that if there is anything you need in the future or you want to work for them next summer to just pick up the phone.   An unsolicited plug by your superior to the head of a group you would like to work for is invaluable.  Your boss setting up a lunch, dinner, or golf outing with the head of the group you would like to work for will put you way above the other applicants.  This isn’t to say that recommendations alone are going to get you a job.  They are going to give you an advantage and they are going to help you get an interview.  Considering, that the majority of people will not even get a first round interview, creating your own luck through networking is a must.  Some institutions won’t give you a first round if you don’t have a contact that knows you inside the firm.  Apply to as many banks as you want to work at.  Many times, just like college admissions or dating (according to some of my friends), banking job hunting is a contact sport.  You have to play the odds. If you apply to ten places you may get three interviews.  In the process I describe below put extra work into your top three employers.

For those of you that have never had a finance related job and are therefore unable to build a network of supporters inside a given firm, all is not lost.  The Prince is constantly asked by younger college students about where to begin.  All too often, students ask this question way to late, i.e. once the recruiting season has begun.  At least a year before you plan to start applying through the regular process for full-time or summer analyst jobs you need to start laying the groundwork.  Now I’m not talking about just reading the Vault Guide or the reading list I put forward, The Prince is talking about pressing some flesh and getting on the phone.  Start by sitting down and making a list of everyone you know in the financial industry.  Prioritize them by how close they are to the bank or team you want to work for.  Consider your relationship with them and what you know of their personality.  Try to pick a half dozen family friends, school friends, alumni, etc. that work in the industry and you believe would serve as your advocate in the application process.  They don’t need to be from the firm you want to work for or even necessarily working in the same area of business you are interested in.  For example, if you want to work in banking an introduction from a family friend in sales and trading, prime brokerage, and possibly even private wealth will still get you credibility.  Speak with professors that still keep in touch with their students that went into finance.  A professor picking up the phone to a past student to recommend you has worked wonders for some of my friends.  Talk to your school’s investment club and maybe talk to a development officer at your school to get up-to-date ideas on alums in the industry who would be willing to help students break into the industry.  If you have no one you can think of off the top of your head ask your parents if they have any friends that they could setup lunches with.  If that is also fruitless just pick up the phone and call recruiting at a hand full of banks where you will be applying.  Get the numbers, emails, etc. of a few junior analysts in the groups you want to work in.  Then setup phone calls or if possible coffee meetings to pick their brains and put a personality behind your application.  The junior people are going to read the applications and grant interviews so just chatting with them will give you an advantage.  You are never going to make an impression meeting analysts at an information session at your school.  Picking up the phone and getting it done will make you stand out.  In fact, skip the information sessions since they really don’t add any value to your search if you already know the basics of where you are applying.  Yet, we want to go beyond just meeting the analysts.

Once you have your contact list of possible advocates start setting up meetings.  Differ to whomever you are trying to contact on times and venue, etc.  You are a college student and everything is negotiable.  If the head of a group at Goldman wants to meet you in New York and not just do a phone conversation get on the next plane or train to NYC to do that meeting.  Every meeting or phone conversation you do should lead to another handful of contacts and recommendations.  Genuinely seek the advice of everyone you meet.  Be realistic with them and convey to them your attitude about working in the industry.  Search for information about the culture of where they work and get as much information about personal interests and hobbies of your contact as possible.  if you can get info about the interests of the people your contacts recommend that is also great information.  Don’t ask them bullshit questions that get answered at any information session.  Avoid asking them things they probably don’t know or would feel uncomfortable talking about.  Get your contacts talking about themselves, their accomplishments, and their experiences, good or bad.  Some of these initial contacts may become your future coworkers and some may advocate for you in the application process.  Getting someone within the firm to "sponsor" you is fantastic.  Even if your initial contacts don’t advocate for you the people they lead you to may.  From one contact in a bank you could easily speak with nearly 20 people in the bank by asking questions at the end of your meetings like, "Who should I talk to next, or who would you say I need to meet?"  I have seen people turn 3 meetings into 30 and multiple offers using this method.  Sometimes these informal meetings turn into job interviews or lead to interviews outside of the regular process.  If that happens, you know you have followed The Prince’s advice well.  At the end of the day financial services are sales jobs and anyone who wants to work in this business has to be able to sell themselves.  The book The Prince, and many of his superiors, regularly read to work on sales and influencing people is Dale Carnegie’s How to Win Friends and Influence People.  Read it, study it, and apply it and these meetings The Prince has discussed above will be golden.  So at this point if you are lucky, you will already be engaged in interviews setup by the contacts you gleaned in the above process and have powerful advocates all over Wall Street.  The worse position you could find yourself in after this plan is knowing a lot more about the career you want to work in and being more than a number to those who will read your application.  Either way it is worth it.  I have rarely met anyone who applied through the regular process without meeting anyone at his or her target firm prior to interviews and got a job.  It just doesn’t happen that often.  It is just too competitive and your competition is really qualified (and probably pressing flesh using a system similar to what The Prince details above). 

Interviewing : No About What You Know, More About Connecting and  "Getting It"

To begin, it is inexcusable to miss or stumble on any vaguely technical or lay-up question during an interview.  These include questions like "Why this firm?", "Why investment banking?", "How do you calculate WACC?", "What are the ways to value a company?", "What do investment bankers do?", etc. etc.   Do your homework and game these questions out in advance.  At the very least, know everything in the Vault and WetFeet guides cold.  These easy questions are the simplest way to separate out those who have done their homework from those that don’t have a chance.  Go to your friends who have been through the process to do mock interviews and seek advice.  If you do 15 mock interviews with seniors at your school that have jobs or with alums in the industry you are going to kill the real interviews.  Don’t lie or exaggerate anything on your resume.  Always be conservative with this rule.  If your school has a business school on campus go to the career counselors there or ask a friend in business school to give you the resume guides they use.  There is a very specific style of resume used to apply for banking jobs by MBA students and if you use it at the undergrad level it will set you apart.  Little things business school resume tips like starting every line with an action verb or conservative formatting will go a long ways.  Remember, you only have about 15-30 seconds to be evaluated based on your resume.  Plant things in your resume that are going to make people interviewing you want to ask questions.  If you won a contest for hunting mushrooms back in Russia, put that on your resumes.  Teasers that peak people’s interests always work wonders.

Setting aside the basics of interviewing and resume preparation there are a few subtle techniques that will give you a leg up.  First, never forget someone’s name and use their name in conversation.  Speak to them on a first name basis during your interview if they introduce themselves that way.  Second, the best interviews are those where none of the easy questions get asked.  When your interviewers don’t bother to ask you technical questions or the standard questions you know that they are truly sizing you up for a job in their group.  The Prince’s best interviewers were about growing up in Europe, fly fishing, skiing, college basketball, etc., not about describing for me the significance of an equity beta.  If you interview is purely technical then you have failed to connect with the interviewer and don’t expect an invite to the next round.  The people who are interviewing you know that you can do the work.  They want to see if you are someone that can work with.  Do they like you as a person?  Could they see you hanging out with them at a bar?  Would they want to be stuck at the office with you on a Saturday night? 

If you connect with your interviewer and don’t get a single technical or throwaway question then you have done your job.  Ask lots of questions during the interview.  Frame the interview and direct it where you want it to go.  Take control, the interviewer won’t care so long as you let the interviewer do most of the talking.  People love to hear themselves talk and they love to talk about themselves.  Ask as many questions about your interviewer and his or her experiences as possible.  Have good questions ready for your interviewer.  If you are interviewing in sponsors ask the interviewer relevant questions about private equity industry dynamics.  Mention buyouts that that group worked on or congratulate them on a buyout they just did the advising or financing on.  Demonstrate your awareness of what is going on in their niche without sounding like you know to much.  Name drop excessively, especially the names of any advocates you think you have from your networking within the firm.

Finally, you have to convey to them that you "get it".  This is the toughest thing to teach and the toughest thing to describe.  You have to show them that you are not naive but you are also not arrogant (i.e. think you know more than you do, i.e act or talk like the Prince writes).  You have to have a realistic and positive attitude about the job.  A good way for someone to see if you get it is to ask a question like this, "Why on earth would you want to do this job? I mean last night I slept under my desk, my buddy over there slept on the conference table, and my girlfriend isn’t taking my calls because I stood her up three nights last week.  How are you going to deal with the unpredictable lifestyle and are you aware of how terrible it is?  You’re young, you could do so many other things, why go through this hell?"  The correct answer to that steam of questions is not, "Yeah, Yeah, Yeah, investment banking, I know all that and I’m ready," because you’re not ready and you really have no idea what it is actually like.  You better have a damn good answer to this question and it better be realistic.  It better demonstrate your understanding of the less glamorous side of banking because that is the side of the job you will experience most often.  Just admit that you won’t really know if banking is for you until you have experienced it.  This is especially good to say when you are applying for a summer because it shows that you are willing to walk away if it isn’t for you after working a summer.  Displaying a subtle industry knowledge and sense of humility will make the interviewer think you get it. 

The Prince wants to close this rather long post with a story that focuses on this very nebulous idea of some interviewees "getting it" when other don’t.  Getting it is about not coming off as arrogant, naive, or uncreative.  It is conveying a very real and mature understanding of your position within the power structure of the firm and the industry.  To the story I was promising.  One summer The Prince was playing golf with his boss and a senior MD at Goldman Sachs.  This MD was the head of a business at Goldman and had been there his entire career.  He was very well respected and a great golfer.  After the round, The Prince was asked by the MD about a good friend of The Prince, who had applied to work in the MD’s group.  The Prince’s friend had worked at a different bank than the MD’s that summer but in the same group as the MD.  The Prince gave a glowing review of his friend and genuinely believed everything he said to the MD.  The Prince covered his friend’s sports exploits, interests, affinity for good bullshit, wonderful girlfriend, strong character, stellar academic qualifications, and his great personality.  The Prince also expressed the opinion that his friend would fit in really well with the MDs group.  The MD looked at The Prince and said, "All that stuff is great but does ——- ‘get it’, you know."  I looked at him somewhat perplexed, so he continued, "I don’t want to hire someone to work for me who is just checking off another box.  Someone who is just trying to go into sales and trading at Goldman because that’s just what one does after Phillips Andover, to Princeton, to high honors in biochemistry.  I want someone who really ‘gets it’ and understands what we do and their place in that.  Someone who wants to be in this industry for the right reasons and wants it badly.  I am talking about seriously motivated and ambitious individuals."  Then he finally said, "Does you friend ‘get it’"  I looked at him and said "—- gets it."  My friend got the job but ultimately turned it down for another firm, a move which I will never understand (come on its Goldman Sachs, reputation, prestige, and perceptions are everything) but ultimately lead to him being happy.  The Prince apologizes for how over dramatic the story above is now that it is in print but I think it illustrates how seriously many people take this quality they are looking for in interviewees. This particular MD certainly isn’t the only person in finance I have run into who is searching for people who ‘get it’ for their team.    

To all those who read this entire thing, bravo to you.  Finally, To all of you eager college students dying to crack into finance to make your fortune the Prince has two words for you.  Happy hunting.

Keep it Humble,

The Prince

Previous Post in the Series: "So You Want to Be An Investment Banker"

Next Post in the Series: "Getting the Offer: Life as a Summer Analyst"

Sorry about the infrequency of posting last week.  My girlfriend’s birthday and school related commitments kept me away from the computer.

Some books and resources The Prince recommends for interviews.

Mergers and Inquisitions - This is the most complete and correct investment banking career advice blog I have found.

Previous Reading List from "So You Want to Be An Investment Banker"

How to Win Friends and Influence People by Dale Carnegie

The Fast Track: The Insider’s Guide to Winning Jobs in Management Consulting, Investment Banking, & Securities Trading by Mariam Naficy

Vault Guide to Finance Interviews

Vault Guide to Top 50 Banking Employers

Vault Career Guide to Investment Banking

Vault Employer Profiles

WelFeet Investment Banking Interview Guides

Financial Times - "Banker Pay is Deeply Flawed" By Raghuram Rajan  - January 8, 2008

Financial Times - "Regulators Should Intervene in Bankers Pay" By Martin Wolf - January 15, 2008

Wall Street Journal - "Deal Fees Under Fire Amid Mortgage Crisis" - By Liam Pleven and Susanne Craig - January 18, 2008 -  Page 1

Needless to say, many financial blogs have attacked the media’s arguments.  The Prince’s favorite piece responding to the argument that banker pay should be re-incentivized or regulated by the government (the suggestion for government regulation is simply absurd but it has been put in print) comes from the Epicurean Dealmaker.  His response to financial journalists banging the populist drum against banker pay is hysterical and right on point.

The Epicurean DealMaker - "The Pressure Room" - January 17, 2008 - One of his best pieces of work.  He is such a great writer.

The ED’s posts leading responding to The FT up to "The Pressure Room" post:

"Eat the Bankers" - January 9, 2008

"Armageddon Rag" - January 15, 2008

"Armageddon Outta Here" - January 16, 2008

Some responses to the ED by FT Alphaville to add some flames to the fire.

FT Alphaville "The Banker’s Pay Bust Up" - January 17, 2008

FT Alphaville "Some of My Best Friends are Bankers" - January 18, 2008

FT Alphaville "The Last Word on Banker’s Pay (Allegedly)" - January 18, 2008

Two disclaimers before we begin.  First, the Prince must admit that he does have soft spot in his heart for the Epicurean Dealmaker.  Second, there really isn’t anything The Prince could add that would be as good as what the ED just wrote this last week but The Prince is going to try anyway. 

First of all, the financial media needs to learn the difference between investment bankers and the structured products employees who created the instruments that caused this crisis.  The financial media’s ignorance of the basic organization, power structure, and roles of investment banks is truly astounding.  The financial media is essentially complaining about declines in the secondary market for MBS and CDO issuance.  At the end of the day you cannot blame the bankers for the performance of these issues in the secondary market.  Investors bought these securities and when they declined in value everyone got hurt, even the banks that originated the paper.  Investors took the risk, should of performed their own due diligence, and the issuers did nothing illegal when they marketed these securities.  The institutions that bought this paper are big boys and they should take the losses as a result of their normal risk-taking.  To think that the government should regulate banker pay is sheer lunacy.  The financial sector attracts the best and the brightest because it offers merit based awards that dwarf other industries.  I don’t think the government or investors want less qualified people operating in the capital markets or as corporate finance bankers.  If he government regulates pay individuals that would have went into banking will look elsewhere.

Finally, the financial media’s ability to absolutely ignore opportunity cost and the alternatives of many bankers is truly astounding.  They should know better.  When bonus pools rose this year many journalists cried foul.  What they neglected to understand is that outside of mortgages most business units had banner years. M&A and sponsor activity was at a record pace for most of the year.  Banks by raising bonuses are simply responding to market realities which dictate that their best employees are no more than a phone-call away from a new job in private equity, hedge funds, or other banks if they are unsatisfied.  The lucrative alternatives for bankers for investment banks to pay high bonuses to compete to keep talent.  Financial journalists missing this part of the story really show that they have only a rudimentary understanding of basic labor market dynamics.

First, some basics.  The main investment banking full-time analyst recruiting season in the fall each year with summer analyst recruiting beginning in mid-January.  The offer rate to summer analysts varies by bank with Goldman Sachs being the lowest since they have two different start dates in the summer.  Usually, the offer rate is over 50% to summer analysts at most banks.  Goldman also goes out of its way to host receptions for summer analysts at other banks in hopes of getting them to interview on an accelerated track for Goldman.  This year the offer rate was much lower since most banks cut the number of full-time slots they had on offer since the forward calendar looked ominous for investment bank performance (i.e. credit meltdown, LBOs slowing, and M&A slowdown).  Typical rule of thumb is that for each 20-30 interview slots roughly 1,000 resumes are reviewed at GS, MS, and JPM.  All initial screening is done by summer analysts.  Sometimes summer analysts from the target schools will review resumes from their school but more often than not the analyst looking at your resume will not be from your school.  Since analysts have tons of work don’t expect anything more than a 30 second glance from the analysts or the HR recruiter.  So resume perfection is essential.

Typical summer analyst pay last year was a pro-rated sum based on a salary of $55,000-65,000 per year plus a $2,000 taxable relocation bonus.  Total all in amount would look something like $16,000 for a summer before taxes.  Don’t expect to bank much of this money since rent will be a killer and working all the times means you have to pay more for services since you can’t get them done during the day (i.e. cleaning, dry-cleaning, shopping, meals, etc.).  You really should not do the summer analyst job or the full-time analyst job for the short-term money.  The real money comes 6 to 10 years down the line, right now you are paying your dues.  Do as Goldman does, “Be Long-Term Greedy,” and do the analyst job with hopes of more money in the future.  Just taking your hazing now because everyone goes through it.  After taxes you are not going to be making enough money as an analyst in the metropolitan cities where banks operate to really live large.  Especially, considering that bonuses are taxed at about 50% unless you put them into deferred plans, 401-ks, ESOPs, or IRAs which I strongly recommend.

Now the odds are not good for anyone applying for a full-time analyst job on the normal schedule in the fall.  The odds are even worse for those who do not have previous summer jobs that have a financial bent.  Most full-time positions at a given bank are going to go summer analysts from that bank or from other banks.  The ability to find senior alumni at your desired target to advocate for you will make a difference if you play your cards right.  The top groups at a given bank will probably not have many jobs on offer for the regular process once summer analysts have accepted their offers.  Don’t expect to apply in the regular pool and get an offer to GS M&A or CS Sponsors.  It isn’t going to happen.  If you have no previous experience and you are going to investment banking it is truly a contact sport and don’t expect to get your first choice.  Be very careful about picking a group where you like the people because that will make your life so much better.

There are some alternatives to the regular pool during your senior year and the Prince would highly recommend them.  The best route to getting an interview or an offer is to get summer internships as early as possible in your sophomore and freshman summers.  They don’t have to be in the investment banking division they should be in a division which has contact with the IBD or the capital markets groups.  Think operations or primebrokerage.  You can then use your contacts from these positions to get interviews at the end of the summer and secure more prestigious summer jobs each year.  Furthermore, you should focus on building strong connections to the decision makers in the businesses you want to work in later down the line.  For example, The Prince spent mornings shadowing credit derivative sales when he worked in primebrokerage.  This led to some long 5AM to midnight days but at the end the head of the desk offered him a job for next summer as an analyst.  My job last summer came about because my boss talked to an old friend of his in Investment Banking that was an alumni of my school and highly recommended me.  The alumni interviewed me and then had me interview with everyone in the group before making me an offer before the end of my primebrokerage summer job.  So I had an offer in hand before summer analyst recruiting even started 4 months later.  I was so thankful that I didn’t have to go through the summer analyst interview process since many of my friends were getting killed by interview for 3 weeks in January and February.  Some of them didn’t even get offers after all that hard work trying to secure a summer job.

Here are some great resources for more information on what to do to get interviews.  The Prince doesn’t agree with everything on these sites but by and large they offer good advice.

• Mergers and Inquisitions - Good general advice on resumes and what to expect once you are hired from a current analyst.
• Investment Banking Resumes - Mainly focused on crafting successful I-Bank resumes
• IBankingFAQ - Pretty comprehensive site about winning jobs in banking and what it is like working as an analyst.
• Wall Street Oasis - I really like this site and typically the forum posts give lots of useful information.  This is a good place to get answers to most of your questions but many times the forums devolve into debates about which banks are the best.
• Vault - Some of the guides can be helpful and the company specific guides are usually pretty good.  Often I have found the guides to not be accurate or outdated.  The message boards on vault are okay but don’t spend too much time using them because their is a lot of false information posted.
• WetFeet - Basically the same as Vault, however, I like their investment banking interview book better than Vault’s guide. 

For Vault and WetFeet your career center should have a portal which allows students to download guides from these companies for free.

Here are some links to the career sites of major banks.

• Bank of America
• Citi
• Credit Suisse
• Deutsche Bank
• Goldman Sachs
• JP Morgan
• Lehman Brothers
• Merrill Lynch
• Morgan Stanley
• UBS

Here is a great reading list from GS that I read selectively before interviews.  If you are a freshman or sophomore reading this stuff will make you look good in interviews and help your general banking knowledge.  If you really want to “get it” you have to read these.  The Prince’s favorites are in red.

Written by Current or Former Goldman Sachs Employees

• The Five Great Myths about China and the World by Jonathan Anderson and Fred Hu; PPP Company Limited; 2003
• Exploring General Equilibrium by Fischer Black; MIT Press; 1995
• Business Cycles and Equilibrium by Fischer Black; Blackwell Publishers; 1991
• Managing Currency Risk by Fischer Black; Association for Investment Management & Research; 1989
• Old Girls’ Network: Inside Advice for Women Building Businesses in a Man’s World by Connie Duckworth; Coming in July, 2003
• Goldman Sachs: The Culture of Success by Lisa Endlich; Knopf; 1999
• Beginning the Journey: China, the United States, and the WTO by Robert Hormats; Council on Foreign Relations Press; 2001
• Global Aging and Financial Markets: Hard Landings Ahead? by Robert Hormats; Center for Strategic and International Studies; 2002
• The Boundaryless Organization: Breaking the Chains of Organization Structure by Steve Kerr; Jossey-Bass; 1998
• The GE Work-Out : How to Implement GE’s Revolutionary Method for Busting Bureaucracy & Attacking Organizational Problems – Fast by Steve Kerr; McGraw-Hill Trade; 2002
• The Practice of Risk Management by Bob Litterman; Euromoney Publications PLC, 1998
• Foundations for Financial Economics by Bob Litzenberger and Chi-fu Hwang
  Prentice Hall; 1998
• Markets, Mobs, and Mayhem: A Modern Look at the Madness of Crowds by Robert Menschel John Wiley & Sons; 2002
• Adam Smith and the Origins of American Enterprise by Roy C. Smith
  St. Martin’s Press; 2002
• The Wealth Creators: The Rise of Today’s New Rich and Super-Rich by Roy C. Smith; St. Martin’s Press; 2001
• The Global Bankers by Roy C. Smith; BeardBooks, Incorporated; 2000
• High Finance in the Euro-Zone : Competing in the New European Capital Market by Roy C. Smith; Pearson Education; 2000
• The Money Wars: The Rise and Fall of the Great Buyout Boom of the 1980s by Roy C. Smith; BeardBooks, Incorporated; 2000
• Cases and Readings in Markets, Ethics, and Law by Roy C. Smith; Simon & Schuster Custom Publishing; 1996
• Street Smarts: Linking Professional Conduct with Shareholder Value in the Securities Industry by Roy C. Smith; Harvard Business School Publishing, 1997
• Global Banking by Roy C. Smith, Oxford University Press; 1995
• Comeback: The Restoration of American Banking Power in the New World Economy by Roy C. Smith; Harvard Business School Publishing; 1993
• Securities Markets in the 1980s: The New Regime, 1979-1984 by Barrie A. Wigmore; Oxford University Press; 1997
• Crash and Its Aftermath: A History of Securities Markets in the United States, 1929-1933 (Contributions in Economics and Economic History, No 58) by Barrie A. Wigmore; Greenwood Publishing Group; 1986

Industry Background and Flavor

General

• Understanding Wall Street by Jeffrey Little & Lucien Rhodes
• The Money Masters by John Train (for later.. methods of master investors, W buffet, Templeton, Price etc)
• The New Money Masters by John Train
• Money Masters of Our Time by John Train
• The Visual Investor: How to Spot Market Trends by John J. Murphy
• The Essays of Warren Buffett: Lessons for Corporate America by Warren Buffett
• Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffet the World’s Most Famous Investor by Mary Buffett and David Clark
• The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor by Robert G. Hagstrom Jr.
• The Alchemy of Finance: Reading the Mind of the Market by George Soros
• Bill Gross on Investing by William H. Gross
• Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein
• Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay
• Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta
• The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow
• The House of Nomura: The Inside Story of the Legendary Japanese Financial Dynasty by Albert Alletzhauser
• The New Crowd: The Changing of the Jewish Guard on Wall Street by Judith Ramsey Ehrlick & Barry J. Rehfeld
• One Up On Wall Street: How to Use What You Already Know to Make Money in the Market by Peter Lynch
• Beating the Street by Peter Lynch
• Our Crowd: The Great Jewish Families of New York by Stephen Birmingham
• Reminiscences of a Stock Operator by Edwin Lefevre
• Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider
• Soros on Soros: Staying Ahead of the Curve by George Soros, Bryon Wien & Krisztina Koenen
• Guerrilla Investing: Winning Strategies for Beating the Wall Street Professional by Peter Siris
• The Battle for Investment Survival by Gerald Loeb
• Money & Power: The History of Business by Howard B. Means
• The Great Game: The Emergence of Wall Street as a World Power 1653 – 2000 by John Steele Gordon
• Toward Rational Exuberance: The Evolution of the Modern Stock Market by B. Mark Smith
• 100 Years of Wall Street by Charles R. Geisst, Richard A. Grasso
• A Random Walk Down Wall Street, Seventh Edition by Burton Gordon Malkiel
• Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher
• The Go-Go Years: The Drama and Crashing Finales of Wall Street’s Bullish 60’s by John Brooks
• Against the Gods: The Remarkable Story of Risk by Peter Bernstein
• Extraordinary Popular Delusions and the Madness of Crowds and Confusion by Charles MacKay, Martin Fridson, Joseph de la Vega
• Manias, Panics and Crashes: A History of Financial Crises by Charles Kindleberger
• Capital Ideas by Peter Bernstein
• The Big Board by Robert Sobel
• The Chastening by Paul Blustein
• From Here to Economy: A Short Cut to Economic Literacy by Todd G. Buchholz
• After the Trade is Made by David Weiss
• The Crisis of Global Capitalism: Open Society Endangered by George Soros
• Martin Zweig’s Winning on Wall Street by Martin Zweig
• The Money Game by Adam Smith
• The Fed: The Inside Story of How the World’s Most Powerful Financial Institution Drives the Markets by Martin Mayer
• Maestro: Greenspan’s Fed and the American Boom by Bob Woodward
• The Quotations of Chairman Greenspan: Words from the Man Who Can Shake the World by Larry Kahaner\
• Barbarians at the Gate by Bryan Burroughs and John Helyar
• Liar’s Poker by Michael Lewis
• The Predator’s Ball by Connie Bruck
• When Genius Failed by Roger Lowenthal
• F.I.A.S.C.O. - The Inside Story of a Wall Street Trader by Frank Portnoy
• Den Of Thieves by James B. Stuart
• Monkey Business: Swinging Through the Wall Street Jungle by John Rolfe and Peter Troob
• Next by Michael Lewis
• The New New Thing by Michael Lewis

Broad Industry History

• Investment Banking: A Tale of Three Cities by Samuel L. Hayes III and Philip M. Hubbard
• A History of Corporate Finance by Jonathan Barron Baskin and Paul J. Miranti, Jr.
• Global Banking by Roy C. Smith and Ingo Walter
• Wall Street Women by Anne B. Fisher
• In the Black: A History of African Americans on Wall Street by Gregory S. Ball
• The Last Partnerships: Inside the Great Wall Street Money Dynasties by Charles R. Giesst
• The City of London, vols 1-4 by David Kynaston
• The Rise and Fall of the Merchant Banks by Erik Banks
• The London Stock Exchange: A History by Ranald Michie
• The Death of Gentlemanly Capitalism: The Rise and Fall of London’s Investment Banks by Philip Augar

Analytical and Reference

General

• Barron’s Dictionary of Finance and Investment Terms by John Downes & Jordan Elliot Goodman
• The Intelligent Investor by Benjamin Graham
• International Economics: Theory and Policy by Paul R. Krugman
• Wall Street Journal Guide to Understanding Money and Investing by Kenneth M. Morris
• The Irwin Guide to Using the Wall Street Journal by Michael B. Lehman
• The Financial Times Guide to Using the Financial Pages by Romesh Vaitilingam
• The Atlas of Economic Indicators: A Visual Guide to Market Forces and the Federal Reserve by W. Stansbury Carnes, Stephen D. Slifer
• Wall Street Words: An Essential A to Z Guide for Today’s Investor by David Logan Scott

Fixed Income, Credit, Commodities & Equities

• Bond Book: Everything Investors Need to Know About Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More by Annette Thau
• The Bundesbank by David Marsh
• Controlling and Managing Interest Rate Risk by Anthony G. Cornyn and Robert A. Klein
• The Handbook of Fixed Income Securities by Edited by Frank J. Fabozzi
• The Money Market by Marcia Stigum
• Money Market Bond Calculations by Marcia Stigum
• Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment by David F. Swensen

Options/Derivatives

• How to Trade Options by Jon Najarian
• Options as a Strategic Investment by Lawrence McMillan
• Options: Essential Concepts and Trading Strategies by The Options Institute
• Options for the Stock Investor: How Any Investor Can Use Options to Enhance & Protect
• Their Return by James B. Bittman
• Trading Index Options by James B. Bittman
• All About Options: The Easy Way to Get Started by Thomas A. McCafferty
• How the Options Market Works by Joseph A. Walker
• Mastering Derivative Markets: A Step-by-Step Guide to the Products, Application & Risks by Francesca Taylor
• McMillan on Options by Lawrence G. McMillan
• The New Financial Instruments by Julian Walmsley
• Options, Futures and Other Derivatives by John C. Hull

Written About, By or For Money Managers and Traders

• Investment Analysis and Portfolio Management by Reilly Brown
• Market Wizards: Interviews with Top Traders by Jack D. Schwager
• The New Market Wizards: Conversations with America’s Top Traders by Jack D. Schwager
• Stock Market Wizards: Interviews with America’s Top Stock Traders by Jack D. Schwager
• Trader Vic: Methods of a Wall Street Master by Victor Sperandeo
• Trader Vic II: Principles of Professional Speculation by Victor Sperandeo
• Exceptional Trading: The Mind Game by Ruth Barrons Roosevelt
• Trading to Win: The Psychology of Mastering the Markets by Avi Kier
• The Disciplined Trader: Developing Winning Attitudes by Mark Douglas
• Stan Weinstein’s Secrets for Profiting in Bull and Bear Markets by Stan Weinstein
• Trading in the Zone: Master the Market with Confidence, Discipline & A Winning Attitude by Mark Douglas and Thom Hartle
• Trading in the Zone: Maximizing Performance with Focus and Discipline by Ari Kiev
• Trading with Crowd Psychology by Carl Gyllenram
• Pit Bull: Lessons from Wall Street’s Champion Traders by Martin S. Schwartz et al
• The Master Swing Trader: Tools and Techniques to Profit from Outstanding Short-Term Trading Opportunities by Alan S. Farley
• How to Trade in Stocks by Jesse Livermore
• The Market Maker’s Edge: Day Trading Tactics a Wall Street Insider by Josh Lukeman
• The Super Traders: Secrets & Successes of Wall Street’s Best & Brightest by Alan Rubenfeld
• A Zebra in Lion Country by Ralph Wanger with Everett Mattlin
• Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy
• Hit and Run Trading: The Short-Term Stock Traders’ Bible by Jeff Cooper
• Hit and Run Trading II: Capturing Explosive Short-Term Moves in Stocks by Jeff Cooper
• Street Smarts: High Probability Short Term Trading Strategies by Laurence A. Connors and Linda Bradford Raschke
• The 5 Day Momentum Method by Jeff Cooper
• The Real Holy Grail: Money Management by Eddie Kwong
• Trading Connors VIX Reversals by Laurence A. Connors and Gregory Che

The only book missing from the list is Jonathan Knee’s Accidental Investment Banker which the Prince highly recommends.  For those applying to Morgan Stanley, the excellent new book from Patricia Beard entitled Blue Blood and Mutiny: The Fight for the Soul of Morgan Stanley which is a must read.

There will be more articles coming in this series.

• So You Have an Investment Banking Interview
• Which Group Should I Choose and Why?
• How Do I Get the Offer as a Summer Analyst?

"Governments could fall, wars could start, storms could wreak damage, its up to people like Anita to study the risk, THE PRESSURE IS ON."

Hilarious.