You're #2, so why try harder?
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People and MarketsCraig CobenNew Issues

You're #2, so why try harder?

July 31, 2021, Tokyo, Japan: FINN-ISH LINE: Olympic Women's 800 metres final, Finland's SARA KUIVISTO, 29, (bib number 1894) on way to breaking national record again after breaking in her last heat to make the semi-finals at the 2020 Tokyo Summer Olympics

You've come a long way, baby. But is the extra tier worth the extra tears?

My advice to you is…. REJOICE!

Adjusting for time or accountability, the return from working at a tier two bank is probably higher than a tier one bank.

You don’t know how good you have it. You should pity, not envy, your peers at the leading banks.

I understand what you’re thinking. You believe that your best effort is never going to be good enough. You’re demoralised because you know that due to brand name and/or credentials, you’re not going to unseat one of the leaders.

You think it’s an unfair contest, like carrying a baseball bat to a gunfight.

And you’re right! Let’s be clear: (almost) no client will give you the chance to prove yourself. And herein lies one of the worst kept secrets about corporate and private equity clients: they may be creative in other ways, but they are very (lower case c) conservative about which banks they choose to lead their deals. And in a way it’s rational, even if you think you can do a better job than the likes of Goldman Sachs or Morgan Stanely.

First, it’s unlikely you will execute better than a leading franchise bank. Not because they’re so good, or you’re so weak, but rather because a lot of transaction execution has become commoditised. For example, when it comes to distribution, the big banks all speak to the same fund managers who by and large don’t care which bank is leading a deal.

Sisyphus: it's all about having a positive mindset, says Camus

Second, the individual decision makers are loath to expose themselves to criticism if for whatever reason the deal doesn’t work out well. “Nobody gets fired for buying IBM,” was a longstanding mantra for corporate IT departments. You can substitute “hiring JP Morgan” for “buying IBM,” and it’s the same idea.

You sound like a modern day Sisyphus, condemned to push the heavy boulder up a hill, only for it to roll down to the bottom. You probably wonder what the point is of putting in so much time and effort when the pitch outcome is a preordained failure.

But this is exactly why you should rejoice. “One must imagine Sisyphus happy.” wrote Albert Camus in his landmark 1942 essay The Myth of Sisyphus. The French existentialist probably wasn’t thinking about investment bankers, but his words should resonate with you.

You’re being paid to do a job, and if that job is to roll a boulder up a hill only for it to roll back down, then so be it. Your bosses expect you to keep trying. The best thing you can do is to embrace the seeming absurdity — believe me, there will be more absurd things going on at your workplace than that.

You should feel relieved. If you work at a leading franchise, you’re expected to win every pitch. The pressure is enormous, and any mandate awarded away leads to a forensic internal review of what went wrong. Those blamestorming sessions are no fun.

Losing: just act devastated

But you don’t have that burden. Everyone knows you’re going to lose. You just have to deliver a serviceable pitch and not embarrass the bank. You can act theatrically as if you’re devastated about losing, but the reality is there’s much less accountability. And since your bank will have a junior role in the syndicate, you don’t have to do much work later on, other than sending in a few email updates with your opinions.

Of course, your bank is going to earn much less, but your compensation as a capital markets director in a tier two bank will not be all that different from your equivalents at the top banks. We all know of capital markets bankers who make a good living as a perennial lead-right on the prospectus cover. Less pressure, less stress, fewer holiday interruptions, and at worst slightly less pay. Sounds pretty good.

There are a couple of other advantages to working for a second division bank. First, you savour every victory that much more. It means so much to win a deal, precisely because it is so rare. You will remember and cherish the wins in a way that wouldn’t happen at a top tier firm. Second, you may have a better client experience. When there’s a lot at stake, seniors tend to muscle in on the situation. At a more threadbare operation you may have greater scope to step up and deal with problems or clients in a more unfettered way. Besides, your seniors are probably not as good as those of the top US banks (yes, it’s a generalisation, and exceptions abound, and so don’t get offended please), meaning they will need more of your assistance.

But OK, let’s say that the good life at a second tier bank is not good enough for a high flyer like you. You want to be an actor, and not a voyeur, in the capital markets. You want your name on the big deals.

The order book lines in the sand

I’ll make two suggestions. First, you say that your bank has a very strong presence in the Middle East. A lot of clients value access to capital from the Gulf, and it may be worthwhile emphasising your privileged position in the region and ability to generate interest from investors there.

Second, you must be realistic that your bank will likely have to buy business, particularly in the form of an outsized or unusually favourable balance sheet commitment. Spend time with your internal partners, including your senior management and the risk gatekeepers, to convince them to strategically support certain clients so you can win a senior role on a transaction.

But you’re still likely to be pounding sand, to be honest. I would embrace your situation, rather than complain about it.


Welcome to GlobalCapital's new agony aunt column, called New Issues.

Each week, capital markets veteran and now GC columnist, Craig Coben, will bring his decades of experience at the highest levels of the industry to bear on your professional problems.

Passed over for promotion? Toxic client? Stuck in a dead end job, or been out of the market for so long you'd bite someone's hand off for one?

If you have a dilemma you would like Craig to tackle, please write in complete confidentiality to agony@globalcapital.com


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