On Investment Bankers, Second Thoughts
I was too harsh on investment bankers yesterday, as some of you pointed out, in declaring that the profession has no social value whatsoever. That was glib and unfair. It's correct, of course, that investment banking can provide access to capital that is essential for building businesses and creating jobs. And the financial tools—my 401k, for example— created by investment banking can certainly benefit individuals, as well as being of a broad economic good. On an individual level, plenty of investment bankers, hedge funders, and so on are extremely generous with their money. They give to charities, to museums, to schools, to hospitals, to many worthy causes.
That said....
I would wager that the percentage of their money which people worth over, say, $10,000,000 give away is significantly smaller than the percentage contributed by people making, say, under $100,000. Let's be real, here: While some of these folks are generous, they're not usually digging deep into their pockets.
I know a lot of investment bankers, and they all will tell you that they chose the profession for the money. (Some—not many—have an intellectual interest in it.) I have never met anyone who went into investment banking because he wanted to help other people.
So the social benefits of investment banking are entirely incidental to most of the people who practice it. As opposed to, say, doctors, teachers, social workers, members of the clergy, some lawyers, etc.
(In fairness, I must say this is increasingly true in the world of journalism; the inspiration of Woodward and Bernstein has waned, while the hope to work for
US magazine and get on VH1 now seems journalism's great motivator.)
As a result, many investment bankers are as likely to do social ill as social good—as likely, say, to shut down a business as to build one. Because personal wealth is the prime motivator.
Moreover, there's no question that the culture of wealth they have created, particularly here in New York, is shallow, tedious, and self-absorbed. It's absolutely true that New York City benefits from the taxes paid by investment banks and their employees. At the same time, this has become a less interesting, less diverse city because of the legions of twenty- and thirty-somethings who make millions and spend it on penthouse apartments, $1,000 bottles of vodka at silly clubs in the Meatpacking District, Ferrarris, and lap dances. (Investment bankers have ruined the Meatpacking District.)
I also think that the lure of these millions is having a profound and unfortunate effect upon younger people. It is the case that many professions are losing talented young people—even well-paying professions such as business and medicine—because they simply can't pay what investment banks pay.
A friend of mine, a lawyer who is in her mid-30s and makes over a million dollars a year, said to me the other day, "I can't believe I work so hard and make so little money. I don't know why I didn't just go into investment banking."
This is a woman who could probably retire now, if she had to. But hers is not an uncommon sentiment. The rich are getting richer in this country—there's plenty of evidence to show the growing inequity of wealth in the United States. And instead of trying to do something about that, more and more young people just want to hop on board the gravy train.
So it was unfair to say that finance has no social value—of course it does. But the downsides are significant.
