年轻人到底应该去买方，还是去卖方？Buy Side or Sell Side: Where Should Young People Start?

"A thousand times more important than ability is your underlying operating system."

Post #14

One clarification up front: the buy side and sell side I'm discussing here exclude quant trading.

Sell side —

Big Four: PwC, EY, KPMG, Deloitte.

Consulting: MBB, Roland Berger, Accenture.

Investment banks — IBD: sells corporate-finance services (IPOs, M&A, follow-on offerings, and the like). Sales & Trading: sells liquidity (market-making, dark pools, etc.). Research: sells industry research, financials, information. Vendors: sell terminals and data.

Buy side: top of the food chain. Buys every service.

My take first: from my own shallow experience, observation, and understanding, I would not encourage new grads, newcomers, or anyone whose career lacks a solid hard-skill foundation to start straight on the buy side — primary or secondary, and the primary side especially. When we judge a person's value, we mostly look at their ability, their irreplaceability, and the social resources they command. And you can't talk about the present while ignoring prospects and the future. What follows is my own modest view; discussion welcome:

• The buy-side arms of VCs and big banks (e.g., direct-investment desks, secondary prop desks) rarely if ever hire new grads, and rarely take internal transfers straight from the sell side. All else equal, the sell side offers plenty of openings — primary-market IBD and secondary-market ER hire new grads every year.
• Most buy-side seats are far less liquid: no vacancy, no way out.
• Most buy-side shops can't offer systematic in-house training — there's little time to teach you or bring you along. Banking and consulting, by contrast, are called the "Whampoa Military Academies." Every year they allocate enough resources to give new grads comprehensive, systematic training across the board; your hard skills come out solid, and you don't fall behind on professional knowledge or network either. At a genuinely big sell-side shop, they can build in you a rigorous work ethic and good work habits, and lay a very systematic foundation for your professional knowledge. When your resources and abilities are limited, this is the steadiest path.
• Colleagues tend to tell you only the "what," not the "why."
• The experience gap is too wide: your formidable colleagues have mostly already done one or two different careers, and many are the "elite among the elite," while you're fresh out of the gate. The "pointers" they give you are so leapfrogging that, if you're not careful, they blow right past your ceiling and you can't digest them.
• Buy-side workload is no lighter than the sell side — don't kid yourself.
• The sell side gives you a full grasp of regulation. Once you've marinated in investment-banking thinking in this industry long enough, it pays off handsomely.
• What the buy side mostly gives you is the platform's endorsement. The moment you lose that platform, discovering you've "achieved nothing" is agony. The sell side, by contrast, lets you advance or retreat: advance by taking a run at a good buy-side seat, retreat by staying on the sell side and keeping at it. One more thing: there has never been a job that pays a lot, asks little, and sits close to home; the trust-fund kids work harder than you'd think. Don't pine for the easy life. Whatever tempers you — whatever keeps you busy and worn out — will, at some point in the future, repay you double in ways you can't imagine.

If you bring your own resources — if you're a VIP — then sure, go straight to the buy side. The people you meet, the projects, the vantage and platform, the resources you get plugged into are on a completely different level from the sell side. The buy side carries a natural sense of intellectual superiority. Secondary-market people understand far too little, far too slowly. The work is extraordinarily rich, and you get to meet the very best people. There's no better way to learn how the very best founders read an industry, set strategy, pace execution, and lead a team. And finally, your curiosity gets richly fed.

On the sell side — whether at a Big Four firm or a bank — the core is compliance: helping companies prepare all kinds of documents, fielding the assorted messy questions the listing review committee throws out, all so the company can clear its hearing. In that setup, if you have great acuity, judgment, vision, industry-research chops, and so on, you'll get almost no chance to use them when everything revolves around the IPO. What you're there to do is apply your composite knowledge of finance, accounting, and law to help the company prepare its materials, make the required fixes, and get through its hearing and list smoothly.

If you don't bring your own resources, or your resources are limited, starting at a big sell-side shop is the better bet. The buy side prizes resources even more than the sell side — you could say on the buy side, resources are king. A junior on the buy side who has resources will have plenty of channels to plug into. The buy side has many ways to play the game, and the resource channels it can reach are extremely varied. On the buy side, professional skill matters too, but not as heavily as on the sell side. On the sell side resources matter as well, but their reach is limited — the core of "resource coverage" really comes down to whether, in the end, they hand you the business.

A few tips:

1. In finance, for your first three years don't compare pay. For your first three years don't compare pay. For your first three years don't compare pay. Said three times because it matters.

2. Going deep in one industry matters enormously. Finance is a broad and narrow profession at once: broad, in that it demands very wide, expansive professional literacy; narrow, in that you ultimately have to focus — primary or secondary, capital-markets business or equity business, either way.

3. Advice from a mentor: for someone with a solid base and decent ability, getting fluent at the mechanics of the job takes about three to six months. Use the fastest possible time to think clearly about the value you'll create over the next year, then spend 50% of your time working hard to make it real. Leave yourself the other 50% to think about everything else.

One last line to close: the thing you can do tirelessly, again and again, is exactly where your gift lies.