Note: This post was first published in November 2019 and updated in February 2021
Every year, without exception, I see the exact same situation playing out at work.
Bright, motivated, and hard-working guys and girls begin their careers as investment banking analysts.
Almost immediately, the most ambitious and foresightful of the bunch start doing the rounds with the more senior members of the team, myself included.
In pre-Covid days, this meant getting lunches together, going out for coffees, and having other informal conversations.
(Suffice it to say that this generation made a far more seamless switch to Zoom than everyone else)
The key topic of such conversations? Soliciting advice on how to become a top-ranked analyst.
And who can blame them? After all, for the majority of their life, they followed a very simple formula for success:
Get top grades in school >> Get into a top university >> Get top grades at university >> Get a high-paying job. Boom!
Therefore, it’s not at all surprising that they would be looking to apply the same formula to extend their success in the workplace – and, by corollary, life.
Get a top ranking at work >> Get a great bonus >> Have a great life!
Unfortunately, the moment you graduate from university, the goalposts shift.
The magic formula that worked well for so long breaks down before your hat lands on the ground at the (virtual) graduation ceremony.
Being #1 is no longer the most important factor in determining your success.
Do you know what is? Simply staying in the game.
Burn Bright Or Burn Long?
Let’s go back to my junior colleagues for a minute.
Becoming a top-ranked junior banker certainly has its advantages.
On average, first-year investment banking analysts get a year-end bonus of c.£32k.
The top performers can get paid significantly more, sometimes clearing bonuses of £40k or more.
And yes, that 25% increase in pay will come out of the bonus “bucket” of below-average analysts. Like many things in life, bonuses are a zero-sum game.
There is, however, a price to pay for the outsize compensation.
The top-ranked analysts typically work longer and harder than anyone else. They get staffed on the most challenging deals and pitches.
As a result, they typically work with more senior bankers. And guess what?
Those senior bankers tend to be much more demanding.
80-hour weeks can be the norm and it’s not unusual to clock 100+ hours for weeks on end.
And despite the portrayals in the media, you don’t spend any time doing this:
(Un)fortunately, this ain’t your life as a banker
No matter how young, energetic and motivated you are, sustaining that kind of lifestyle is nearly impossible.
Some form of burnout is commonplace and almost inevitable.
As a result, the top analysts usually depart the bank in a few years.
A select few will get hired away by private equity.
Others will leave for a corporate or pursue an MBA. And some will just take a career break and do nothing for a year while they ponder their next move.
In other words, they drop out of the game. And in doing so, forgo the financial rewards of just sticking it out.
Yes, a top-ranked analyst will have collected about £88k in bonuses by the time he burns out and leaves banking in two years.
His middle-ranked colleague would only get about £70k or so over the same time period.
Yet she would also get more sleep, more exercise and more social contact with her family and friends.
In other words, she would likely be happier.
The result? She probably stays put for another year or two. And in those two years, she will clear another £145k by making it to the associate ranks.
That leaves her far ahead of the high-flyer who knocked it out of the park – but only lasted two years.
Simply because she conserved her energy – and stayed in the game.
The 90% Rule
2021 was the first year in a long time when I didn’t dread January.
In pre-pandemic days, January meant that my gym suddenly filled up with more people than I’ve ever seen there before.
That 6:30 am HIIT class would be fully booked seven days in advance.
The line for the treadmills will be going out the door. And good luck trying to do some bench presses.
The gym would be full of people working out six days a week for two hours straight.
Yet magically, about four weeks later, the crowds would thin out, leaving me to enjoy my workouts again.
Because thankfully, 90% of people quit the gym within three months of joining.
Let’s face it – if the last time you got some exercise was in the playground, you are not going to look like these guys anytime soon.
Not going to happen
Not even if you go to the gym for three hours a day, seven days a week. You simply won’t get there.
But you know who will?
The people who start small. The ones who start off by going twice a week for 30 minutes – and not necessarily in January.
A few months later, that twice-weekly, simple workout has become an entrenched habit. At that point in time, they add a class or two – and drop the Saturday night burger and chips.
When you bump into them in September, they’ve lost 15 pounds of fat and bench press their bodyweight ten times.
Unlike the quitters back in January, they never burned out.
They stayed in the game.
And they are just getting started.
Defying The Odds In Order To Lose
Let me give you another example.
It is a hard fact supported by historical data that losing money investing in the stock market over long periods of time is nearly impossible.
Here’s what happens if you stay in the market for 20 years:
And have a look at how the worst-case outcomes change the longer you stay in the market:
And yet, year after year, millions of people defy the odds and walk away with painful losses. Their returns, instead of looking like the ones above, look like this instead:
Yes, it’s that bad
The reasons are simple. They try to time the market. They pile in at the top. Then they run for the hills at the bottom.
In other words, they don’t stay in the game.
It doesn’t matter whether it’s writing, playing an instrument, learning a language, cooking – or (gasp!) reaching financial independence.
The reality is that it is nearly impossible NOT to achieve your goals – provided you let your efforts compound.
Compounding requires time. And time implies staying in the game.
In one of my favourite books, Morgan Housel writes about Warren Buffett’s investing success:
As I write this, Buffett’s net woth is $84.5 billion. Of that, $84.2 billion was accumulated after his 50th birthday.
His skill is investing, but his secret is time.
None of the 2,000 books picking apart Buffett’s success are titled “This Guy Has Been Investing Consistently for Three-Quarters of a Century”
So I will leave you with the same message I give to my junior colleagues when they angle for a top ranking:
Many will start fast. Few will finish strong.
Choose who you want to be.