As for any bubble, in order to manage to make a buck, you need to get in early. Thatâ€™s what people who started working in finance in the late 70â€™s did. Ten years after the US delinked the USD from Gold, the FED could now have fun playing around with the money supply while supplying free dollars to the banks avec en plus, a government guarantee.
Naturally, the number of students choosing finance as a career increased exponentially since that time. After all, the industry seemed to have no downside risks and a limitless upside potential. Adding to that, with all the movies portraying the high profile lifestyle of investment bankers on Wall Street, you didnâ€™t need much more to impress a bunch of 17 years old. At that time, finding a job in finance was easy and the pay was way up there.
Fast forward to today and we realize that the situation is pretty much the opposite. Since the beginning of the financial crisis five years ago, close to 200,000 jobs in finance have been lost worldwide . But thatâ€™s not it. Recently, during an interview for Bloomberg Television, Meredith Whitney, who is a favorite guest for the financial mainstream media, said that Wall Street had to lose another 50,000 jobs; if it was only that . New reports are talking about an additional 100,000 job cuts in banking for the coming three years . In sum, we have a front row seat to witness the bursting of the financial sector bubble.
You can only imagine how the hundreds of thousands of recent finance graduates must feel. Probably not, so let me give you a glimpse on their current reality. JP Morganâ€™s CEO, Jamie Dimon, mentioned during an interview that in response to a job posting on his companyâ€™s website, they received over 100,000 resumes. Facing this huge number of applicants, they decided to filter the demands using a GPA hurdle of 3.7/4.0, which left close to 4,000 eligible candidates for the job. Obviously, there was no way they could go through all of them, so they simply asked one of their analysts if he knew someone. If that doesnâ€™t give you second thoughts about choosing finance as your potential career, you might want to re-think that.
Another sign that indicates the continuous downsizing of that sector is the important amount of information you can found about it. See, usually, when a sector is initially expanding, the barriers of entry to work are somewhat minimal and the salaries are usually good. And often times, you wonâ€™t find much information about that sector (let one even hearing about it until itâ€™s too late). In the case of finance, you can find literally any information you want. You donâ€™t even have to go to college anymore to study finance. By simply browsing the topics and learn everything by yourself, you can be as competent & competitive as any finance graduate on the planet.
Donâ€™t take my word for it. Recently, Mr. Black Swan himself, Nassim Taleb, urged young people to â€˜â€™stay out of the investment industryâ€™â€™ . According to the paper he published, the market is pretty much rigged and the only way you can be successful is by share luck . Even the King of Bonds himself, Bill Gross, founder of PIMCO, recently said that the â€˜â€™cult of equity is deadâ€™â€™ .
So how are finance students dealing with this? The answer is that finding a job right out of undergrad has become as competitive (if not more) as entering Med school. Students are doing the equivalent of the Twelve Labours of Hercules:
Labour # 1: Study harder than ever to maintain a perfect GPA.
Labour # 2: Spend hours every week trying to find the contact information of industry people.
Labour # 3: Make dozens of cold calls and send hundreds of e-mails to industry people every week.
Labour # 4: Constantly learn new things about your field to get an edge over your competitors.
Labour # 5: Spend some hours every week to hit the gym to stay in shape.
Labour # 6: Network, network, network. Go to events organized by firms youâ€™re interested in. Join your school clubs, take leadership positions and make friends.
Labour # 7: Spend hours preparing for interviews.
Labour # 8: Learn a foreign language. Finance will expand in Emerging Markets where speaking the local language is a strong asset.
Labour # 9: Learn some programming. In this day and age, you have no excuse not to know how at a minimum, build your own website. It is also a way to differentiate yourself from your typical finance candidate.
Labour # 10: Donâ€™t get distracted by ladies (and vice versa) â€“ Yes, it is a labour for kids in their 20â€™s.
Labour # 11: Be ready to see your efforts to get interviews and internships fail, over and over and over again. In the current industry condition, donâ€™t be surprised if +90% of your requests fall on deaf ears.
Labour # 12: Be mentally prepared. Even if you complete your bachelor with a 4.0 GPA, with 2-3 internships under your belt, be prepared not to receive any offer at all. This situation can persist for months after graduation.
From my view point, if youâ€™re going to go through all these hurdles for a potentially big zero in return, you might as well put those efforts into entering Med school. Also, bear in mind that regulations and taxes will only increase in finance. As a result, employing you will become more expensive and therefore, youâ€™ll have a harder time finding someone willing to hire you.
- Joe Coscarelli (2011), New York Magazine, online: http://nymag.com/daily/intel/2011/11/wall-st-layoffs-driving-young-people-to-drink.html
- Meredith Whitney (2012), Bloomberg, online: http://www.bloomberg.com/video/whitney-says-banks-will-cut-50-000-more-jobs-1ubf8ffHSMmBKWcYuukqAw.html
- Reuters (2011), Reuters, online: http://www.reuters.com/article/2011/11/16/us-banks-jobs-fb-idUSTRE7AF1T620111116
- Steven Russolillo (2012), WallStreet Journal, online: http://blogs.wsj.com/marketbeat/2012/08/15/nassim-taleb-stay-out-of-the-investment-industry/
- Nassim Taleb (2012), NYU-Poly, online: http://www.fooledbyrandomness.com/spurioustail.pdf
- Steven Russolillo (2012), WallStreet Journal, online: http://blogs.wsj.com/marketbeat/2012/07/31/bill-gross-were-witnessing-the-death-of-equities/