Tests Are Not the Only Stress on Wall Street

(Bloomberg Opinion) -- Wall Street is booming. Mergers and acquisitions are happening at a record pace this year. Initial public offerings are making a comeback. Volatility — the lifeblood of any good trader — is creeping back into markets. New York State Comptroller Thomas DiNapoli said in March that Wall Street’s average bonus jumped 17 percent in 2017 to $184,220, the highest since 2006. It's a good chance bonuses will be higher this year.

Walking around midtown Manhattan these days it’s hard not to spot the Wall Street types — attractive and brimming with confidence, strapping on the Panerai before heading over to lunch at Del Frisco’s Grille in Rockefeller Center for some cheesesteak eggrolls. Easy street.

So it’s understandable why the general public gets riled up by the recent news that regulators are a step closer to rolling back the Volcker Rule, which was created to make the banking system safer after the 2008 financial crisis, or news that big banks are still be fined big amounts for bad behavior. I worked in capital markets on Wall Street for nine years, and I can assure you that it is not easy. In fact, I left because it was too hard. Yes, you hear of people who “burned out,” and there is a slight stigma associated with that designation. I will admit that I burned out. I simply couldn’t work another day. I tell people that being a market maker on a trading desk was the hardest thing I ever done, and this is coming from a person who graduated from a service academy. I hope to never do it again.

There is a common misconception that a Wall Street trader has some kind of “edge” that normal people don’t. Maybe that was once true, but not anymore. Sure, there are synergies and a slight informational advantage from having a Bloomberg terminal and being jammed on the same floor with 200 other people, but they matter less these days. First, if you’re facilitating customer trades, it means that most of your trades have to be losers in order for your customers to be winners. Otherwise, your customers would consistently lose and they would stop trading with you. So most sell-side trades start out in the hole, and you have to figure out how to turn them into winners, or at least minimize the losses. This takes a psychological toll. It’s no fun losing all the time, especially when your job, house and family are on the line.

Put another way, a trader on a sell-side desk is given an impossible task: make money and keep customers happy. The two are nearly mutually exclusive. If you fail to do either of those things, your job is at risk. Your job is at risk, anyway, because you’re expensive and Wall Street firms are always looking to cut costs, and therefore are either in perpetual layoff mode or finding people willing to work for less. Plus, there are the usual worries about the competition. There is always another bank out there that is willing to commit more capital more cheaply.

So you start to get creative about ways in which you can add value that don’t involve committing lots of capital. Maybe you can write a morning note and gain a following by having something interesting to say. Maybe you can entertain clients and gain a following by the force of your personality. But at the end of the day, your customers want you for your body, not your mind. They want access to a big balance sheet, and they want it for free.

Worse than any sort of business risk are the compliance worries. Every time you hit “send” on an email you put your career at risk. There were times when I felt like if I hit the wrong button on my keyboard I could go to jail. There are so many rules that there is a good chance you will get in trouble for breaking one you never knew existed. Or, even if you know the rules, there is a good chance a regulator is going to make up a new rule, and you will get in trouble for something you thought was fine all along. In the old days, it was enough to have a strong code of ethics: don’t steal and don’t front-run trades. But stepping on the trading floor in 2018 means that there is not a small probability that your career will be ended by some compliance violation — and it might not even be your fault. You get a mark on your U-5, and you never work again.

Once you get by all that, there are the stresses involved with actually managing risk. In today’s markets, that is actually the easy part.

Wall Street is an emotionally unhealthy environment. People have different ways of coping. Some develop anxiety disorders such as persistent fear, panic attacks, or obsessive-compulsive disorder. I began to compulsively check to see whether I had locked the door when leaving the house in the morning, or whether I had shut down my computer when leaving the office. Wall Street is known for having substance abuse issues, which the outside world often misinterprets as “partying.” Not really. These sorts of coping mechanisms are a way for traders to exercise control in some small way when faced with huge amounts of randomness and unpredictability in their professional lives.

Don’t get me wrong — I enjoyed my time on Wall Street. I worked with great people, had plenty of intellectual stimulation and lots of laughs. There is no amount of money that could get me to go back. It took me a full five years after quitting to realize that the world wasn’t coming to an end. Today’s Wall Street is a place for people who are very good at dealing with stress. There is more of it than ever.

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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