JPMorgan executive Mary Erdoes made waves recently in insisting that 72-hour workweeks were necessary in Wall Street, insisting the time was necessary to learn the craft of investment banking in sufficient time. Without those long hours, she argued, it would take 5 years of “normal” 8-hour days to get to a level of mastery needed to thrive in banking.
There is a lot in this argument to take apart, and it has become a hot topic both on and off Wall Street. One of the first responses on Wall Street was an odd cynical relief; with public statements about the need to maintain work-life balance and private pressure to work more and more, young analysts have whispered their discontent at the perceived hypocrisy. In an extreme case, Goldman Sachs took to making their “inhuman” conditions public, publishing a study of how hard they work and how hard their jobs are in the most junior analyst way possible: an 11-slide PowerPoint presentation.
To be fair, the GS workers cited 98 hours per week of work on average, so much more than Erdoes’s ideal, but in both cases there’s an acknowledgement that long hours are needed when starting out in investment banking.
Whether that’s true or not is up for debate, and there’s no end of people making that debate right now. But what is the argument for these incredibly long hours–especially since most other arms of finance, including much higher paid work in hedge funds and private equity firms, involve much shorter weeks?
Erdoes’s argument stems from Malcolm Gladwell’s repeating of a study by Florida State University psychologist Anders Ericsson (one should note the irony–JPMorgan has a reputation of not hiring many analysts from schools like FSU). Ericsson’s theory is stated in his paper quite simply: “To reach a level where one can win international competitions, it is estimated that over 10,000 hours of DP have been generated for several domains.” That became the hook for Gladwell’s book Outliers, and has since permeated popular culture as a truism if not a fact.
For Erdoes, that 10,000 hours appears fungible and easily divisible, so that one can simply have two and a half years of 72-hour weeks to get to that 10,000 hours, resulting in as much mastery as 5 years of 40-hour weeks. However, Erdoes does not take into account Ericsson’s self-imposed limitations to the power of these 10,000 hours. In the same study, he says: “Several studies and reviews report a consistent relationship between the amount and quality of solitary activities meeting the criteria of DP and performance in a wide range of domains of expertise.” In other words, amount doesn’t just matter, but the quality of the time spent in gaining expertise. And neither Erdoes nor Ericsson has spent much time analyzing the diminishing returns of overtime in the life of a young analyst.
This is not the only criticism lobbied at the idea. Erdoes affirms the Ericsson study’s veracity, although a more recent study by psychologist Brooke Macnamara showed “deliberate practice is important, but not as important as has been argued,” reiterating further psychological research that mastery comes from more than sheer time involved. In fact, it has been nearly a decade since the flaws in this theory have been made publicly available. But the compelling meme of a round number and the repeatability of the 10,000 hour rule has meant, nearly a decade later, it is still driving senior executive decisions–even if they hinder workers’ quality of life, performance, and corporate revenues. There is also the growing trend of young bright minds seeking work elsewhere–a trend that’s been a worry for investment banks for years.
But without considering the merits of the 10,000 hour rule or Erdoes’s application of it, what can we say about the life of a junior analyst and what skills are earned during these long hours?
There are three main skills a junior analyst will develop during her time at an investment bank: Excel, PowerPoint, and, increasingly, Python. These skills will be used to analyze data and present analyses to associates, who then will use it with clients. In addition to these software skills are other applications such as PowerBI, R, Stata, Bloomberg, and other platforms used for the collection, analysis, and presentation of data.
There are other skills many analysts will develop, softer skills such as learning due diligence methodologies, interacting with clients, learning more about financial concepts such as capital structure, TVM, and so forth, and gaining insight into the decision-making process in banking operations. Note that not all will develop these skills, however. Good bosses will act as mentors to build up the next generation of talent, while bad bosses will simply use junior analysts to get rudimentary tasks done quickly, resulting in several waves of revisions to minor details of PowerPoint presentations and the like. The long hours are largely spent being on call and ready to spring into action to make those revisions, with “down time” spent building up skills so that those revisions can be done faster and with greater ease. A bragging point among junior analysts is being able to use Excel without a mouse, for example.
Does it take 10,000 hours to develop these skills to the level of a master? Perhaps–but many of these skills become unimportant in the future. The ability to quickly change chart formats in PowerPoint is very useful for a junior analyst, but is worthless for associates. Even Excel skills matter less and less when one gets to mid-executive level.
For budding analysts, arguing with the expectations on the job won’t bear fruit, but budding analysts should be aware of what exactly is expected of them before they take the job and be prepared to look out for whether their working environment is generally interested in fostering mastery and making the analyst a better person–or whether the manager just wants someone to change colors on PowerPoint files at 2 a.m. on a Saturday.