Fancy a Career in Investment Banking?

If you do, I obviously recommend you to churn through Michael Lewis' 'Liar's Poker' (which I have just finished) and Tom Wolfe's 'Bonfire of the Vanities'. But once you have dealt with these two gems, what to read next? Clearly, the industry of investment banking has, along side private equity and hedge funds, been under much scrutiny from several angles in the past years. This is not least because of the monumental sums of money which pour through the likes of Morgan Stanley and Goldman Sachs every year but also because of the ever more detailed instruments deployed to leverage, hedge and split risk. On the one hand we could see this as the epiphany of modern day's efficient and enduring capitalism or on the other hand as hollow wizadry which is only going to make the crash even greater when it eventually comes to drag investors into the abyss. I am not going to be normative on this account today, primarily because I don't think it is that easy to answer. Yet, I am going to point towards the recent edition of the Economist which features a survey on investment banking. Much can of course be said (and indeed is) on the Economist but one of the reasons that I remain a loyal subscriber is because of the surveys and this time around I am not let down. Consequently,  I think the survey fields a very impressive description and account of a dynamic and diverse industry. Of course, leverage, CDOs, CLOs etc are discussed as potential makers of havoc which again is not entirely unmerited I think. Yet, I have read the entire survey and I do feel a lot more enlightened than before so here is my strong recommendation to go have a look. The following is a blurb from the first article which is free; the rest remain walled for non-subscribers but can be bought as PDF I think.

(...) it is clear that three powerful forces are at work, all of them overlapping and mutually reinforcing, and all fundamental to the gushing liquidity the world is currently enjoying.

The first is the alchemist's trick of turning debt (mostly leaden) into derivatives (mostly liquid); the second is the emergence of a new class of leveraged client (hedge funds and private equity); and the third is seeking out new capital markets, and clients, around the world. Moreover, in all these pursuits the firms are now using not just their clients' money but, to differing degrees, their own too.

The only disclaimer I need to make of course is that I am for all intent and purposes and outsider to the industry. I am sure that those of you who are more familiar with the industry will be able to put the survey in a different light. But as an economist who is obviously interested in capital markets I found the surver very readable, especially given the amount of literature which exists already.