Advice to the young

In the FT, Lucy Kellaway criticizes Joseph Mauro’s advice to his juniors at Goldman Sachs who are thinking of leaving to join start-ups or go back-packing: “put your head down and keep running”, he says. I think he’s right and she’s wrong – though not quite for the reasons Mr Mauro gives. If I were he, I’d suggest the following:

 - Working at Goldmans is CV gold. You might think the work is mind-numbing. But outsiders don’t know this. Having Goldmans on your CV looks much better than having whoarethey.com.  And five or ten years at Goldmans looks better on your CV than having it for a few months, which suggests that you couldn’t hack it. Signals matter.

 - Start-ups aren’t an easy option. You’ll have to work long hours there too, and perhaps in no more supportive an environment, so don’t move in the hope of getting a better work-life balance. And there’s no guarantee of success: Goldmans is too big to fail, but start-ups aren’t. Many of them fail – and worse still – do so at the same time. That means you could be out of work in a few months’ time and competing against other talented people for scarce jobs with a wonkier CV than you’ve got now.

 - In this context, staying at Goldmans is like holding a real option. In many cases – and especially in the case of uncertainty – you should hold onto your real options.

 - The payoffs to working at Goldmans are long-term. If you live frugally and avoid taking on liabilities such as a wife and children – and if you’re working 80-hour weeks it’s hard to do otherwise – you should be able to retire in your late 30s. Or failing that, at least be able to find low-paid but satisfying work where you needn’t to worry about salary or career advancement. I know someone who did this.  Ms Kellaway might be right that “if you are in your 20s there are no obvious benefits of playing a long game”. But just because benefits aren’t obvious does not mean they don’t exist. They do, and they are considerable.

Now, I appreciate that nothing is more certain to be ignored than advice to the young from old farts. But in a sense, I’m not offering advice. Instead, I’m pointing to a fact about today’s capitalism – that it offers a raw deal even to the most talented or hard-working or luckiest young people. They cannot have a decent income (decent enough to buy a house anyway), job satisfaction and a work-life balance. They must choose. One good choice some of them can make is to regard capitalism as a burglar regards a house: grab as much as you can while you can, and then leg it.

Comments

[rogerh]

I am sure you are right, once in the door at Goldman's then you have to stick it for 2 years minimum or you look a loser. Then comes the choice - do I stick it for another 8. Very very few startup opportunities would justify jumping ship. But I suspect American and UK experience might be a bit different. A UK Goldman's employee would do well to buy property and make money two ways, indeed I suspect most would make more (on average) from a job+property than any average startup - hence the UK is not a good place for young entrepreneurs. But America seems different, from a distance at least it looks as if the startup/property risk balance might be better biased toward the startup.

Anyway, after the first two years comes the next move - or not. A succession of two or three year slots seems OK, but a bad choice needs to be dumped quickly - 3 months max, messages matter.

[Adam]

All of your points presuppose a highly controversial premise: that one ought to give greater weight to the needs/wants/desires they will have as a 40+ year old self, rather than their needs/wants/desires as a 20-39 year old.

Working 80+ hours a week for 5-10 years doing mind numbing work (that some might argue as at best worthless and at worst damaging to society) incurs a huge opportunity cost.

Also, your points gloss over the importance of reference points and loss aversion. Once you're used to a high income at Goldman Sachs, it becomes very difficult to take a pay cut to go part-time or change to more rewarding work.

A better analogy would be a bank robber taking a 20-year jail sentence for the team in return for a large share of the spoils when he gets out.

[theOnlySanePersonOnPlanetEarth]

"Working 80+ hours a week for 5-10 years....................A better analogy would be a bank robber taking a 20-year jail sentence"

An even better analogy would be a bank robber doing a 5 to 10 year jail sentence. Except in this prison you get champagne on tap, good restaurants, leggy blonds, all the latest mod cons, a nice car etc etc.

[Matt Moore]

One very smart contemporary at Oxford was agonising over which charity to work for. I told him, nicely, that if he wanted to do good, instead of look good, he should join Goldman and donate 80% of his take home to the charity instead, thereby hiring 8 of the role he would have done.

He didn't take my advice.

[Kaleberg]

From what I gather working at an outfit like Goldman consists of massive busy work, mainly aimed at massaging the egos of higher ups in the corporation who basically rely on old boy network connections to rake in billions for the firm. It's not as if they do anything productive. You are expected to put in your two years, though sometimes conditions get so bad that the relatively high salary and ridiculous hours lead to people quitting before then anyway. It is hazing for a very high level fraternity, so sticking it out for ten or more years might make sense if one has no desire whatever for a life and great desire for money. Even then, the money isn't always what one expects.

I have a relative in the business, so I have some modern calibration on this. It isn't as easy to buy your 20s and 30s back on the open market as one thinks.

[Jon]

I would agree with Adam and add a further point. The assumption of the piece is that the past will be a good predictor of the future. That is possible but its probability is decreasing. In twenty years it is quite possible that banking will be automated and you will have spent 20 years learning skills that are no longer valued. It is also worth noting that the status of bankers is limited to business and those in the city. If you want to be respected by the broader populace, it's best to do something less tarnished. Lastly, if secular stagnation and technological unemployment lead to trouble ahead, it will be bankers who will have their assets stripped first. Gambling on a 20 year pay off is a big gamble at this point in time.

[chris]

@ Jon - lots of jobs are vulnerable to automation in the future - and perhaps finance is less vulnerable than it should be:
http://www.investorschronicle.co.uk/2014/06/25/comment/chris-dillow/the-robots-aren-t-coming-qEVDKD7nTI26ErvyyWBN9I/article.html
Working in finance has the advantage that it'll give you high earnings and hence a cushion against unemployment in a way that other jobs won't.
Sure, it has low status. But personally, I don't give a damn what people think of me, and I suspect most bankers don't either - they certainly shouldn't.

[gastro george]

@Matt Moore - nice anecdote. But the problem for him personally would be that Goldman will have taken away his soul, as well as his 20s and 30s.

@chris - "But personally, I don't give a damn what people think of me, and I suspect most bankers don't either ..."

Which might be part of the problem?

[Adam]

@Matt Moore. If every intelligent and motivated individual followed your advice and went to work for an investment bank then, eventually, there wouldn't be any organisations left in existence able to make good use of the new influx of donations.

You're also discounting the fact that a lot of people choose to work in the voluntary, mutual and social enterprise sector because they believe in a different economic system to the one we have.

[Ben]

We must choose *because* people work at Goldman Sachs et al, because they soak up our disposable income via high land costs by lending unlimited fiat.

[Ben]

It's amazing really, nearly every post (and the blog) states that they do nothing at best and at worst have a -ve effect, and that the pay is high.

So let's assume the best case: harmless but pointless. They get paid a vast amount and can retire in their 30s with 60 years of leisure.

Where does that come from? From the labour of others. Any disputes here??

So if it comes from the labour of others how? Economic rent, mainly via land costs.

[gastro george]

Not that I'm any kind of expert on Goldman, but here are a couple of possible examples:

1. Devising fiendishly complex company organisation to evade taxation. The company pays, but it comes out of artificial profit at the expense of governments.

2. Handling a merger or takeover. It's a closed market so they can charge what they like, and really it's part of the control fraud executed by the senior managements of companies that lines their pockets as well. It comes out of the bottom line of companies, so at the expense of the shareholders.

[Jonathan]

Thinking of children as a liability is, in my opinion, erroneous. One's own children are an asset, and part of one's wealth.

Conversely, seeing a wife as a liability, rather than a mutual insurance partner, is a particular and perhaps unsophisticated way of looking at one's well-being and security.

There is a damned sight more to wealth than the number on the bank statement.