How do you split $11 billion?

November 28, 2005 9:55 AM

How do you split up $11 billion? That's enough to evenly split $500,000 per Goldman Sachs employee. It's bonus season on Wall Street. Extensive interviews with current and former Goldman Sachs employees and a best guess of how all of the money gets disbursed.
posted by suprfli (44 comments total)

A hell of a thing to read right after returning from a meeting in which it was announced my company would have no bonuses this year :P
posted by Foosnark at 10:07 AM on November 28, 2005

That's enough to evenly split $500,000 per Goldman Sachs employee.

... but spliting it up evenly would really not motivate them to get out of bed in the morning, now would it?
posted by R. Mutt at 10:36 AM on November 28, 2005

Five figure bonuses? ::faints::

Is it wrong to be excited that I'm moving to the financial world this week? Yaaaay new job.
posted by ThePinkSuperhero at 10:39 AM on November 28, 2005 [1 favorite]

I'm beginning to feel again that communism Marxism might still have something going for it.

My salary is ~ 0.00013% of 11 billion, give or take an order of magnitude (for red-haze induced calculation error).
posted by PurplePorpoise at 10:45 AM on November 28, 2005

Does anyone else have a really difficult time when trying to conjure up a mental image of a dollar amount that's more than 3 or 4 figures?

I mean, if my boss said, "Hey, Jon! I'm going to give you a five hundred thousand dollar bonus!" I might vomit in my mouth a little bit.
posted by Jon-o at 10:53 AM on November 28, 2005

I'm in the wrong industry.
posted by letitrain at 10:56 AM on November 28, 2005

I would pay that much to never hear the phrase "I might vomit in my mouth a little bit." again..

Since the .5 mil is meaningless to most of us, can we instead talk about ways to abolish that phrase?
posted by HuronBob at 10:57 AM on November 28, 2005

This is why I'm studying finance.
posted by smitt at 11:14 AM on November 28, 2005

I worked for a competitor to Goldman Sachs. I'm very junior, but we get paid bonuses that are unbelievable for kids our age. A top-tier analyst in my class (undergad class of '03) will have earned $100,000 and $145,000 in the first two years on the job and if that analyst stays on for the third year (which is an optional year and the last before having to find another job or be promoted to a post-MBA position) s/he will earn $175,000 if pay stays consistent with last year's class. Those are all-in amounts, but year-end bonus makes up more than 50% of it. These analysts are almost all 22-25 yrs old - if you stay on this path you could go an entire career without earning less than $100k in any given year. You'll also work 80-90 hours a week until you're 32, give or take a year. It's fucking blood money. I know a ton of 30 year old VPs making $700,000/year and they are some of the most miserable people I know.

I quit last month.
posted by mullacc at 11:23 AM on November 28, 2005

My salary is ~ 0.00013% of 11 billion, give or take an order of magnitude (for red-haze induced calculation error). - PurplePorpoise

I'm gonna assume you're out by an order of magnitude (maybe two?). If not, you may share your $1.4 million salary with me =)
posted by raedyn at 11:26 AM on November 28, 2005

This is why I'm studying finance.

Good luck. High Finance chews up and spits out more people than the porn industry. (mullacc can testify, it seems)
posted by solipse at 11:29 AM on November 28, 2005

solipse writes "High Finance chews up and spits out more people than the porn industry. "

The problem is that cocky undergrads see that as challenge. "That mullacc was weak, but I can handle it." Whatever. The real pressure in banking doesn't come until you're a Managing Director and are held accountable for revenue. The junior level stuff is just a matter of what price you're willing to sell your youth.
posted by mullacc at 11:33 AM on November 28, 2005

That's 0.00013% (0.0000013/11 billion) not 0.00013/11 billion, raedyn.
posted by PurplePorpoise at 11:34 AM on November 28, 2005

*sigh*
posted by shoepal at 11:41 AM on November 28, 2005

Ahhhh, yes, that explains my calculation problem, PurplePorpoise :: pulls out calculator again::
posted by ThePinkSuperhero at 11:43 AM on November 28, 2005 [1 favorite]

*double sigh*

Lowly PhD student grumble grumble. But hey, I'm not too young to sell out and make millions doing doing grunt work.
posted by zpousman at 11:45 AM on November 28, 2005

heh. I should have caught that, PurplePorpoise.
posted by raedyn at 11:49 AM on November 28, 2005

I worked at a big NYC law firm this summer and asked a lot of the corporate lawyers why they hadn't gone into investment banking, which seems to pay a lot more. They gave 2 main answers 1) law was more intellectual and 2) it was a risk/reward decision. I get the impression that becoming a rich investment banker is not much less risky than going into professional sports or moving to Hollywood to become an actor/singer. And the rewards are proportionate.

And yeah, you sell your time.
posted by banishedimmortal at 11:54 AM on November 28, 2005

I worked for a few years at a securities firm in the WFC. When they hired me off of a try-and-buy, I was told that bonuses could be good, but to not expect anything. That first year, the Russian real estate market crashed, and the internet bubble was very close to bursting.

In light of all that, when my boss handed me my bonus check with his apologies, my eyes still did a cartoonish bug-out effect. I paid off my cars and put a down payment on my first house with that money.

Good times...good times.
posted by thanotopsis at 12:35 PM on November 28, 2005

banishedimmortal, I will be at a Biglaw NYC firm myself this summer and I have also asked people a similar question and received similar answers, especially the risk/reward decision. I have continually been bowled over by the compensation at such law firms, but reading this makes NY Biglaw look like an entry-level McDonald's job.
posted by Falconetti at 12:37 PM on November 28, 2005

how much of their bonuses will the millions of people who live on less than a dollar a day ... not much it's safe to guess.

you know what the bible says about the camel and the needle.
posted by specialk420 at 12:37 PM on November 28, 2005

banishedimmortal: Those 2 answers are interesting. I'm probably biased coming from the banking side but both of those answers seem silly to me. 1) What kind of law? If the option is to be banker or to practice securities/M&A law, being a banker is way more intellectually challenging - the bankers are the idea guys and the lawyers are the document-bitches. If the option is to practice other types of law, then yes, perhaps it will be more intellectually challenging but you'll probably take pay cut versus securities law. And 2) I don't see it this way - perhaps there is more risk of being laid-off in a recession as a banker than as a lawyer but the pay in the good times more than outweighs the risk of being laid-off. The real trade-off is the whole "selling your time" thing. Almost anyone with the smarts to earn a college degree can be a successful banker, it's just a matter of getting your foot in the door and persevering. Only about half the bankers I knew were actually smart - the other half were barely competent but were willing to do the shitty transactions that the smart guys didn't want to do. You can get (sorta) rich either way.
posted by mullacc at 12:45 PM on November 28, 2005

mullacc - thanks for your input and your honesty. I have a perch that watches the folks in finance, and I agree with what you have said. The dollar amounts are staggering, but people are losing entire decades off their life reaching the point of huge pay-off. Otherwise they are making a great deal of money and no time to spend it, let alone enjoy it.

Do I want that kind of money sure, but I also like a relationship, friends, downtime, and something other than a "career" to get out of bed in the morning.

It would be interesting to know the folks that don't stay with it, or as the successful would like to put - don't make it. Several acquaintances got out for various reasons, for the most part they knew they would not live to 40 if they kept up the pace.

The dollar amounts in iBanking are staggering....
posted by fluffycreature at 1:07 PM on November 28, 2005

fMullacc:

1) I agree that the lawyers are often document bitches (though I prefer the term "monkey fucking scribes"), especially on the associate level and especially in Capital Markets work (and I'm quite worried about spending my days writing prospectuses). This is why I asked this question to almost everyone I met, and I'm still not convinced by their answers. However, I have also heard it said that I-bankers, at least at the analyst/lower-tier associate level, spend their time making bullshit Powerpoint presentations, churning out cookie-cutter Excel spreadsheets that have little to no objective informational content (independent of what the bank wants them to say) or predictive value.
I think among the things that lawyers valued about law over i-banking were A) integrity - that is, being able to say "no" instead of doing whatever you thought would please your boss/client B) the intellectual problems that actually figuring out the law presents (although I agree that this may just be another form of the problems that upper level bankers also think about, and are absent from many lawyers' daily practice), and C) being able to work with intelligent, decent coworkers - in contrast to the typical i-banker. Which leads to the second point:
One of the reasons I asked lawyers why they weren't i-bankers was that I couldn't believe that all that money didn't come at a price. And part of the price is the risk. Simply put, the lawyers usually told me that i-bankers always have to look over their shoulder at their superiors/coworkers, they have no job security (even as MDs) and they work even more than NYC Biglaw lawyers. Whereas being an associate (not to mention a partner) at a BIGLAW firm is about as stable a career as you can get -- barring a major fuckup, I don't think my firm, for one, has ever laid anyone off.

That being said, I am still not convinced that I want to be a lawyer forever, and am definitely looking at exit options already, and I haven't even graduated law school yet. For the time being however, starting as a corporate lawyer suits my tolerance for risk. Plus, I like having the JD, no matter what I end up doing.

And Falconetti - if you're at a NYC Biglaw firm, you can probably make the switch eventually if you want to.
posted by banishedimmortal at 1:09 PM on November 28, 2005

Risk aversion isn't why lawyers aren't Wall Streeters. They know the money is better and they'd gladly take it if they could. From five years as a lawyer and three years on Wall Street, I'd say the reasons are thus:

(1) MATH IGNORANCE: many big firm lawyers are essentially innumerate, to say the least of scaling up to the modest, but real, expertise required to be an investment banker.

(2) BUSINESS APATHY: many big firm lawyers in their bones don't care in the least about business -- for them it's the necessary evil that finances their lifestyles. They maintain the minimum knowledge / interest level to do their jobs, but nothing like the level needed effectively to work on Wall Street. Example: I'd guess that 80% of associates in big New York firms read neither the WSJ or the FT on a daily basis.

(3) EARLY (DIS)ADVANTAGE: you get to Wall Street, more often than any other way, by setting your sights on it in college. Many lawyers were way outside the pre-Wall Street set in college, choosing instead to be in college journalism, political clubs and other kinds of liberal arts activities. They end up in law school because it's the default for their "set", and then it's too late to make it to Wall Street easily. (This is why your humble correspondent spent five years in law firms, more than any other reason.)

(4) SOCIAL SKILLS: your social skills have to be honed two or three tolerances sharper to get a Wall Street job than to get into big law firms. Plenty of lawyers made their cut but can't make the higher one.
posted by MattD at 1:21 PM on November 28, 2005

I agree with most of what's been said here. Though as an analyst working on M&A transactions, I feel like I've done a good amount of real intellectual work. But I had to seek it out. I've also done plenty of bullshit powerpoint and silly data-hunting tasks. In the end, the mix of bullshit to good work just wasn't attractive enough to keep me interested (I'm hoping the buyside is better in this sense). And as for the lawyers - I've yet to see a lawyer do anything cool. I've seen plenty of lawyers-turned-bankers do some nifty negotiating and deal structuring though.

Also, the social/political stuff is weird. I suppose I do witness it, but it doesn't seem real to me. Especially on the junior level. This is probably due to my own aloofness and my sometimes unfortunate tendency to react honestly when most other analysts/associates would bullshit. It has worked out for me though - I feel like I have a lot of support and have gotten paid in the top bracket. But I take all this as a sign that I'm in the wrong business.
posted by mullacc at 1:53 PM on November 28, 2005

MattD, I really like those observations, and I think you've definitely identified a few important reasons why some lawyers ended up doing law instead of i-banking. However, at the firm I summered at, many of the lawyers that I was talking with actually have had offers to work for (or did work for) the big I-banks (bulge bracket or whatever, I'm just getting the hang of the terms), and decided to leave on their own, which would probably eliminate reasons 1,3, and 4 - unless they foresaw that they would get fired eventually (because they didn't care enough, weren't social enough, whatever) and just left preemptively.

Personally though, I think 3 and 4 apply to me. I went to a state school and had no idea what I wanted to do. It took me about a decade to figure some things out and law school was probably my only practical shot at getting into the business big-leagues. Also, I really don't know if I have the personality traits that would make me succeed at an i-bank. But I'm always thinking about it.

MattD, if you could go back would you have skipped the JD and legal career, and gone straight to i-banking?

And here's another "New York Metro" link on the subject of salaries:
http://newyorkmetro.com/guides/salary/14497/
posted by banishedimmortal at 2:02 PM on November 28, 2005

banishedimmortal: I know you addressed your question to MattD...But, I've worked with 3 lawyers turned M&A bankers (all of whom switched at the senior associate level and are now Managing Directors/Directors) and each one answered your question with an emphatic yes.
posted by mullacc at 2:14 PM on November 28, 2005

mullacc: interesting. Although it makes sense that people who left a legal career to become successful i-bankers would naturally enjoy i-banking more than law, and thus would have wished they had been doing it all along, on the other hand it's disheartening (at least if I end up following the same path) to think that they didn't seem to think that their JD/legal experience was even worthwhile...but different people have different experiences I guess.
posted by banishedimmortal at 2:24 PM on November 28, 2005

High Finance chews up and spits out more people than the porn industry.

I'd be willing to bet that Goldman has a higher divorce rate than the porn industry too.
posted by R. Mutt at 2:27 PM on November 28, 2005

banishedimmortal: If it's any consolation, I don't entirely believe them. I thought they were a little better than some of the other non-JD bankers, which is why I asked the question in the first place. Also, I think the costs of law school (financial, mental and time) influenced their answer to a significant degree. These guys just hired another lawyer as an associate, so they obviously don't think it's worthless.
posted by mullacc at 2:38 PM on November 28, 2005

Thanks, mullacc, that's good to hear.

BTW, I had wanted to link these to my Monkey Fucking Scribe reference above:

The story

The voicemail itself.

And, no, Gupta didn't get fired for coining this classic phrase.
posted by banishedimmortal at 2:54 PM on November 28, 2005

My first "Christmas bonus" was a $10 gift certificate to Kroger. I still have it.

Unfortunately, it's also the best Christmas bonus I've ever received.

My salary is ~ 0.00013% of 11 billion

Believe it or not (if I did the math right), that was about my exact salary at my first "real" job (after I got my college degree). $7.15/hr for 40 hrs.

Money is for suckers.
posted by mrgrimm at 3:05 PM on November 28, 2005

I seemed to have been transported to bizzaro metafilter.
posted by vronsky at 4:28 PM on November 28, 2005

I wish they would talk about the bonuses given out to us non-glamorous technologists and other supporting roles (besides secretary). But I guess no one cares about us, they only care about the big superstar i-banking weenies.
posted by ch1x0r at 4:56 PM on November 28, 2005

Catching up a bit late, I'm interested to hear of a law firm thronged with finance-to-law people. That's a pretty rare bird -- the few I know all fall squarely into my category 2 (lack of zeal for the deal); they did the analyst program straight out of college were made utterly miserable by it. Law school struck them as more satisfactorily cerebral, and they're now happily ensconced as appellate litigators or tax lawyers.

In the much more populous set of law-to-finance people, it's rare to find who are certain they would have been better off having gone straight to b-school. It's usually a sign that they spent their legal career in some particularly miserable corner of M&A or securities law, rather than any certainty that the MBA would have taken them to a better position.

I myself had a much more varied and interesting tour of private practice -- although certainly not without its difficulties. Business school certainly was an option for me (the business school where I went to law school essentially gave law students carte blanche to go JD/MBA) but I've no evidence I would have been better off as a JD/MBA '99 going straight onto the Street than following the path I followed. Lots of MBAs got fired in 2001-2002, and many of them came back but not particularly strongly.
posted by MattD at 6:43 PM on November 28, 2005

I'll just stick to making $20-40 K a year, and keep my soul, even if I'm not using it for anything.
posted by Balisong at 7:15 PM on November 28, 2005

As someone a million miles from the JD/MBA world, I've really enjoyed this thread. Thanks MattD, banishedimmortal, and mullacc. Y'all rock.
posted by shoepal at 7:59 PM on November 28, 2005

And it came to pass, that the beggar died, and was carried by the angels into Abraham's bosom: the rich man also died, and was buried;
And in hell he lift up his eyes, being in torments, and seeth Abraham afar off, and Lazarus in his bosom.
And he cried and said, Father Abraham, have mercy on me, and send Lazarus, that he may dip the tip of his finger in water, and cool my tongue; for I am tormented in this flame.
But Abraham said, Son, remember that thou in thy lifetime receivedst thy good things, and likewise Lazarus evil things: but now he is comforted, and thou art tormented.

Luke 16:22-25

_________________________________________

Jesus said unto him, If thou wilt be perfect, go [and] sell that thou hast, and give to the poor, and thou shalt have treasure in heaven: and come [and] follow me.
But when the young man heard that saying, he went away sorrowful: for he had great possessions.
Then said Jesus unto his disciples, Verily I say unto you, That a rich man shall hardly enter into the kingdom of heaven.
And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.

Matthew 19:21-24

_________________________________________

But woe unto you that are rich! for ye have received your consolation.
Woe unto you that are full! for ye shall hunger. Woe unto you that laugh now! for ye shall mourn and weep.

Luke 6:24-25
posted by matteo at 9:25 PM on November 28, 2005

Bible quotations? And no bevets?

Now we've been transported to bizarro MetaFilter.
posted by raedyn at 7:31 AM on November 29, 2005

I-Banking is overhyped. Prior to my ibanking internship I was like omfg, its totally worth it. For that amount of money at my age, i'd be willing to work 28 hours a day if necessary. Ibankers are so awesome.. Cool, rich, powerful, ibanking... yeah.. i want it, you want it, we all want it...

Well after 2+ months of 100 hour weeks, its no joke. I got abt 12k for summer which was probably more than i ever earned in my entire life. Worth it?

I don't know.
No life (no time to chill with friends, i'd just go home to sleep)
Unhealthy (yeah, so they give u $25 bucks for dinner, but good food gets boring too, esp if u have to sit on your ass right after dinner, no time for exercise)
No time to even spend the money (you save tons, but whats the point of all that money if u aint got the time to enjoy it?)
No time to think about anything else (email/blackberry takes up all ur attention).

Try doing ibanking for a few months, Im pretty sure u'll realize its not as great as it sounds. Whether or not its worth it, depends on how much u value having a life (especially if your still young, and starting out).
posted by sprockett at 11:00 AM on November 29, 2005

Sullivan & Cromwell Opens Bonus Season for Associates
Sullivan & Cromwell has kicked off the year-end bonus season by informing associates they will receive additional compensation starting at $30,000 for first-years and ranging up to $50,000 for senior associates.
posted by shoepal at 3:26 PM on November 29, 2005

my heart bleeds.

oh, the good food is so boring. life is so hard.
posted by Miles Long at 12:11 AM on November 30, 2005

I love it how lawyers are so freaking self-absorbed. Do you ever stop to think about a fundamental difference between investment banking and law -- one is about wealth creation, making efficient markets, etc. and the other is about dotting i's and crossing t's.

NYC Biglaw is good, safe money -- but it's a woefully inefficient service product for what businesses pay for it. Moreover, it's rare that the lawyers really help on a deal -- it's more that you HAVE to use them due to various laws of dubious worth -- for instance, if lawyers and accountants freaking did their job -- we might not have needed Sarbanes-Oxley -- which, WOW!, gave a lot more work to the lawyers.

You also build some real skills in investment banking -- how to accurately assess a thing's worth, writing to an audience that actually cares what you write and not writing in such a complex style so as to justify your all too long post-graduate education, and, at its highest levels, investment banking is at best about eliminating inefficiencies from the market and letting deals happen that should be happen. We're all stronger for it.

You can't say the same thing about law. Listen, NYC corporate lawyers have to stop thinking their the "intellectual" titans in a world of grunty investment bankers. It's not true.

Without the banks, our economy falls. Without many lawyers, who by definition are incentivized to work longer and harder (i.e. bill more) doing the most menial tasks (that dot i and cross t thing), the economy becomes a more efficient, blissful place. That, and perhaps no one pays $2400 for a one bedroom in the East Village anymore.

I'm serious -- lawyers might be "happier" people -- but you can get into 30s doing document review or extraneous garbage related to a deal to a point so extraneous a good chunk of life goes by and you never make a mark on anything. I doubt investment bankers feel the same way into their 30s.
posted by narebuc at 2:05 PM on November 30, 2005