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22-year-old Wall Street graduate trainee: A tragic victim of artificial intelligence? At the moment, the answer is both.
Earlier this week, Navid Mahmoodzadegan – Boutique Investment Bank Moelis & Co. The next CEO of the company – speculated that AI tools can now take on many of the grunts currently being made by human number crunch and PowerPoint makers. He said AI could streamline the “size of the pyramid.”
It sounds contradictory to the enthusiastic recruitment of private equity junior bunkers. The unique habit of providing jobs starting in two years led to new employees at sell-side companies, resulting in complaints from JP Morgan boss Jamie Dimon. Apollo Global Management and General Atlantic responded by suspending this delayed poaching practice.
The knowledge industries, such as investment and trading, are essentially about human judgment. However, low-level training that cultivates these skills can be increasingly outsourced to algorithms. As Mahmoodzadegan points out, investors and the board want to see the technology used to reduce costs.
Bankers’ salary is, of course, one of the biggest spending. Moelis and its closest rivals consistently pass employees gross revenues of over 70%. The historic norm of 55% is nearly impossible to achieve today as investment banks expand into new areas such as private credit financing advice and selling previous private equity transactions.
But junior talent just happens to be relatively cheap – perhaps $200,000 a year for an analyst. It is difficult to see how assuming fewer trainees can offset the multi-million dollar guarantees given to administrators.
The pitch to investors in early career private equity is rather compelling and consists of more money and potentially more interesting work. Private equity companies are gaining thinner staff members and are less focused on PowerPoint’s rush. For them, daily operational costs such as junior pay are not that much.
The lives of junior bankers at sell-side companies can be more “intellectually stimulating” even when there are fewer staff members than they do today due to the deployment of AI. When a small number of junior workers support the most seniors, or narrowing pyramids, for those who can step into the door, there is a higher chance of getting up to the top.
Over the next few years, some current unknowns will become clear. For example, what happens to the quality of the workforce if the repetitive tasks that today’s excess juniors perform in the middle of the night, and AI actually builds characters and professional judgment? And what if the game-changing benefits of AI don’t arrive?
One thing to note is that private equity companies were more humble than Wall Street investment banks about what AI does for their business. It suggests that it’s not just about money and mental stimulation. Trainees may also have less confusion and job uncertainty by choosing to embrace the Buying Baron’s development.
sujeet.indap@ft.com
