22 year old investment banker earns $130K

While a lot of people think its ridiculous how much investment banking analysts get paid, its actually crazy how little they get paid when you break down how much they have to endure.  Here's why:

1.  Top banks only recruit at the top ~10 schools in the country, or the top 1% of colleges essentially.  If you see them on your campus each Fall, then you are at one of those schools, if not, you are at a "non-target" school.  The competition to get an analyst job is incredibly competitive.  Most top tier banks will recruit 4-10 analysts per group.  Based on my rough calculations in an average year that makes only around 1,000 investment banking analyst jobs available each year.  In 2009 and 2010 this number will be far lower.  Each bank will get 1,000's of applications from the brightest, hardest working kids from the best schools in the world to fill those few spots.  

2.  The hours are terrible.  Have you ever worked 80-100 hours in one week?  Try doing that every week.  That's what analysts go through.  Essentially it is like working 2-3 jobs.  The typical work week Monday thru Friday is arrive at work between 8AM and 9AM and leave work between 1AM and 4AM.  Weekends - spend most of Saturday and Sunday in the office, hopefully getting off early enough to go out for drinks Saturday night before the bars close. 

3.  MBAs.  Most people who get MBAs and then do banking are careers switchers.  9 out of 10 of these people have no business working in finance.  These MBAs start as associates where they add little to no value trying to manage analysts and suck up to senior bankers by offering to do work that they will pass off to others below them.  You used to make computer chips for a living?...what qualifies you to check an analyst's work that you couldn't create yourself and don't understand?  NOTHING.  While this is the rule, there are exceptions and some associates are capable of using a computer, including Excel w/o the mouse and Power Point, but these people are few and far between.  

4.  Computer skills.  Have you ever watched an I-Banking analyst (with proper training) use a computer?  It's a beautiful thing.  Create excel models without ever touching the mouse, building graphs effortlessly and complex formulas and conditional formatting you didn't know existed all in 1/50th the time it would take a normal 22 year old kid working in an office.  Not to mention the Power Point skills, Word skills and Internet Surfing skills.  No seriously, internet surfing skills - literally I can navigate the internet 10x faster than you can.  Hit Alt +D to go the address bar, ALT+T to open a new tab then CTRL+Tab to navigate between your tabs.  Need to close out that window before your boss sees?...ALT+Tab to switch applications back to that memo or the windows button(bottom left side of keyboard w/ the windows logo on it)+D to show the desktop and minimize all the windows.  Maybe you knew all this already, but I bet you didn't and this is just the tip of the iceburg. 

5.  Managing Directors (MDs).  Managing Directors absolutely dominate the analysts at a big bank.  While some will eventually learn some of the analysts names that slave over their work every night til 2am, many will not, nor will they ever give out a "thank you" or "nice work!".  Most of these people never worked as analysts so they don't know the pain and suffering it will take to make 200 mindless formatting changes or to redo a model adding 20 extra acquisition targets.  MDs favorite sayings are things like, "The best thing about Fridays?....Only 2 more days of work until Monday"...ouch. 

A 60K salary based on a 40 hour work week comes out to roughly $30/hour (I think...mental math).  So if you double that or even multiply the hours by 2.5x, then you are really only making $10-$15 an hour before you take the bonus into account....Not a very good deal.  Add that extra 1.0-1.5x your salary as your bonus and it begins to make sense, but not before that.  So the next time someone is complaining about why the I-bankers who blew up the world economy are making too much money, think twice, these kids are worth their weight in gold and work 2x as long and hard as the average joe, so deserve to make that extra coin.  Not to mention the 22 years of overachieving and hard work it took to get to that point to begin with.