The investment bank working week

It seems that being an intern at the London office of Bank of America Merrill Lynch can be seriously bad for your health; a very hard-working intern passed away a week before completing his internship, and there are strong suggestions that overwork may have been a significant factor in his death. Huffington Post has the sad details:

The intern, 21-year old Moritz Erhardt, was described by Bank of America spokesman John McIvor as "an outstanding student."
[...]
According to a story sent out on the financial terminal service Bloomberg, Erhardt was found dead in the East London student housing where he had been staying, Claredale House.

Now the natural inference is that "he worked super-hard as an intern" == "he was killed by overwork" but there's a large gap between the available facts and that conclusion. Still, apparently well-informed juniors on Wall Street Oasis have noted the banks making the connection:

Can confirm that HR from one of JPM / MS / GS have sent an e-mail round to line managers of IBD interns saying something along the lines of 'don't work your interns too hard for the final weeks'

Erhardt was reported as having pulled three all-nighters in a row - the amount of coffee / Red Bull / Monster energy drinks / other medications needed to keep conscious and approximately functioning for that long without sleep can't be good for you.

So why do banks work interns so hard - and why do interns play along? The latter half of that question is easiest to answer; internship is an audition for employment at the bank, with all the other interns providing constant competition, and often the most straight forward way for an intern to feel that they are competitive is in terms of the hours they've worked - an objective numeric score, in an environment where it is otherwise very hard for you to measure how well you are doing. The banks in turn are seeing how the interns hold up under stress. If they are to be hired, they will be in a stressful environment for years. To gauge their long-term stress management, ratcheting up the stress levels for the relatively short period of their internship is viewed as a reasonable proxy. Overworking interns is a win-win - at least, from one party's perspective.

We can turn to Alex's boss Rupert for the financial community's perspective on interns and new hires: "I tend to worry about employing such people of independently weathly means... One ends up questioning their commitment to the job. If they don't need the money, will they be prepared to put in the back-breaking hours necessary for a trainee?" The ability and inclination of an intern to work long hours are a signal that they are able and willing to play the game of working in a modern banking environment, doing the grunt work for their bosses. The immediate practical value of intern work to a company is usually marginal, if positive at all; the net contribution to the company is probably negative when you factor in the mentoring, reviewing and assisting time of the full time employees.

The game doesn't actually change much once you're in full employment at the back - as an analyst, then an associate, then a VP jockeying towards making the leap to Managing Director and serious remuneration. If you're working a 40 hour week at the bank then you're either employed based on your father being a major customer of the bank, or you're on your way out. A 50 hour week is the minimum acceptable, and even then your commitment to your job can be questioned. Evaluating your commitment in terms of hours "worked" is one of the easiest and most visible ways for your bosses and co-workers to provide feedback in your quarterly / annual reviews, the result of which will be vast amounts of cash and shares (if you're good), admonition followed by dismissal (if you're bad), and just enough remuneration to keep you grinding away at the coal face (for the 70%-80% of people in between).

There's a certain logic in the bank pushing this model. Bank employees aren't paid by the hour; thus, if you employ a quant at a nominal 40 hours a week and expected 50 hours a week, and persuade them to work an actual 60 hours a week with an implicit threat of firing or degraded bonus, you've increased their productivity by 20% - for free! Of course, after a few years they may get fed up with you and head off to a different bank, but except for the most senior levels of a bank everyone plans on a year-to-year basis. The bank will fire the low performers just after bonuses are announced (when they get nothing) to maximise the work from them. The top performers who get head-hunted away will quit either the day after the cash bonus clears in their bank account or the day after their outstanding share units vest. Loyalty? "If you want loyalty, buy a dog." (Michael Lewis, Liar's Poker).

At every level of management, the easiest way to show that you're an effective manager / driver of your team is to demonstrate their dedication to the firm. "My guys worked 70 hour weeks for months on end delivering system X only 2 weeks late!" There is little to no gain in making it easier to deliver system X by negotiation of features and timescales with the client teams; rather, a balls-to-the-wall death march is expected. "My guys worked 45 hour weeks to deliver a slightly lower-feature system X on time" is far less likely to gain a manager plaudits and hence a larger bonus.

In the end, the long hours culture will take a toll. Very few people can put up with a high-stress long-hours environment for years at a time. If the immediate aim (a certain level of promotion) starts to fall out of reach, the best option is either to get head-hunted away or, in a more challenging economy, to coast and provoke the firm to fire one with a payoff. The usual deal is about 1 month in salary per year worked, incentivising the burned-out lifers to quit before the young bloods want to. My personal rule of thumb, backed by Ed Yourdon's experiences in "Death March" is that your maximal short term productivity peaks at 70-80 hours a week. Beyond that, net productivity drops even after a week or two as the long hours and fatigue fog your brain. Longer-term, the 6-12 month sustainable limit (if taking vacation as it accrues) is around 60 hours per week. Interestingly, personal circumstances don't appear to matter much. Married employees have more distractions and potential stress at home, but then have a partner who can take some of the domestic load - the bank employee can return home to food on the table, clean bedsheets and an ironed shirt / business suit.

When I ask my buddies in banking why they're still there, the reasons are usually financial. Waiting for a chunk of shares to vest, trying to gain a promotion so they have better bargaining power to move firms, accumulating cash to reach an early retirement. Very few of them really enjoy what they do, and they hate the long hours - they are under no illusions as to what it does for them - but they realise it's a game between consulting adults and currently they're willing to play it. Note the lack of bitterness when Lehman Brothers went under and employees left the same day with their belongings in a cardboard box; they knew that this was always a possibility and it was factored into their planning as they worked. They don't feel as if anyone screwed them over, though not a few of them were frustrated at Dick Fuld's ineptness in the final days.

Interns, in turn, know what a banking internship involves. It's going to include long hours, a certain amount of abuse from the junior banking employees, stress, impossible tasks, and hard socialising in the few hours that are work-free. That's OK because it only runs for a limited time. But if you take it too seriously, lose perspective and feel that the only acceptable way to fail to achieve a task is to spend three straight days attempting it, you're not going to do yourself any favours. It's only a game. For the final word, I can do no better than yaob227 on wallstreetoasis:

It is "OKAY" to say fuck off when your life depends on it.