Gaslighting People Into Working 100 Hours a Week

From a Chosun Ilbo article titled “After a 35-year-old bank employee dies from overwork after 100-hour weeks… Major U.S. bank moves to cap workweeks at 80 hours”:

Entry-level analysts at Wall Street investment banks are not really “bank clerks”; they’re closer to junior staff. In the U.S., there is a big pay gap between people working at investment banks and those at retail banks. The “bank clerks” you might see at a Shinhan Bank branch in Korea would be called tellers or relationship managers. Branch staff can apply with only a high school diploma, and they’re usually paid by the hour on relatively low wages. Korean bank employees, by contrast, tend to have higher levels of education and higher pay.

To understand what analysts at Wall Street investment banks (IBs) actually do, you first need to know where investment banks make their money. Their main revenue source is fees from advisory and financing work.

Advisory means, for example, underwriting when a company goes public, or providing advice when one company acquires or merges with another. Fees are typically set by applying a certain percentage to the size of the underwriting or advisory deal. Suppose an investment bank is hired to underwrite the IPO of a software company called A on Nasdaq. The bank might take 1% of the equity capital raised as its fee. If Company A lists at a $100 billion valuation and raises $10 billion, 1% of that $10 billion—$100 million, or about 133 billion won—would be booked as fee revenue.

Financing usually refers to acquisition financing. For instance, when Elon Musk acquired Twitter, he raised funds using an LBO (leveraged buyout) structure. The interest rates and repayment terms vary widely by company and deal, but this is generally a highly profitable line of business. It’s often bundled together with advisory services.

Managing directors (MDs), who meet with potential clients, use pitch decks called “teasers” to summarize valuation results for the client company (for example, “You can list at a valuation of XX”) along with other relevant information. If a potential client shows interest, the MD will take them to lunch, play golf, and build rapport, then try to win the mandate when the time is right. That’s why investment bank MDs are called “rainmakers”—they’re the ones who bring in the money.

Because the content and expertise that go into these teasers are so important, MDs usually tell the VPs (vice presidents), associates, and analysts under them to prepare teasers that include specific information. The most junior analysts mainly do financial modeling. Financial modeling covers a very wide range of work, so it’s hard to define precisely, but it generally means valuing a company using discounted cash flow (DCF) models. They have to make reasonable projections about future growth rates, profit margins, and so on, in addition to working with historical data. The logic and evidence behind the valuation have to be extremely robust, so this work is very time-consuming.

The problem is that you might create 100 teasers and contact 100 potential clients, and still barely win a single deal. Most potential clients don’t need an IPO, M&A, or financing right away, and even if they do, they’ll weigh many conditions before making a choice.

In the end, you can think of investment bank analysts as people who gather data and grind away in Excel. They’re basically shuttles who produce whatever materials the MD asks for. Even when there’s no live deal, they have to stay on standby at the office because no one knows when a deal will kick off or how it will unfold. And when something does come up, they often have to pull all-nighters to meet the MD’s deadlines (and pass reviews by associates and VPs). Adding more people doesn’t speed up financial modeling or deck-building in a linear way, so there are limits to how much you can reduce working hours by hiring more staff. That’s why, even when U.S. investment banks introduce policies like an 80-hour weekly cap or a ban on Sunday work, people still end up working more than 80 hours a week.

Recently I’ve been seeing posts here and there from startup founders, VCs, and corporate executives claiming that “If Korean employees worked 80–100 hours a week like Wall Street analysts, productivity would rise and innovation would happen.” I wanted to respond by saying that 99% of what Wall Street analysts do is Excel grunt work that never turns into an actual deal. There may be some very niche fields where longer hours lead to non-linear gains in productivity and innovation, but finance is not an industry that produces tangible goods or brings about social innovation. Using it as an analogy seems quite off the mark.

Most of the widely cited papers on the topic report that as weekly working hours increase, productivity tends to fall. That’s hardly surprising: humans can only maintain full concentration for a limited amount of time. Critics counter that these studies mostly use samples of factory line workers and others doing simple, repetitive tasks, and argue that in knowledge work—engineering, software, law, and so on—productivity can rise as weekly hours increase. They claim that companies like Elon Musk’s SpaceX could never have existed if weekly working hours had been strictly capped.

Depending on the person, someone might be able to stay highly focused despite chronic lack of sleep and exercise and finally crack a problem that has resisted solution for a long time. Or they might be so exhausted that they can’t come up with any new ideas. It may sound obvious, but productivity is in the eye of the beholder. You might think that modern economists have, over the past few decades, established a perfect methodology for measuring productivity, but economists are often wrong, and a perfect methodology is closer to a mirage than reality.

Take this example: two accountants, both knowledge workers. One handles audits for 100 companies a year, while the one at the next desk handles 50. Who is more productive? Anyone with common sense would ask about the average revenue or operating profit of the companies each accountant audits. Someone a bit more detail-oriented would ask whether those companies are in manufacturing, where cost, inventory, and asset management are critical, or in services, where they are not. My point is that productivity is a metric invented by humans, and it cannot be measured perfectly.

I’m not arguing that working or studying hard and putting in a lot of hours is meaningless. When a person devotes effort and time to something, their skill and expertise increase in proportion. But the claim some people make—that you have to get up at 5 a.m. or work 80 hours a week to succeed—is closer to gaslighting than to anything grounded in scientific evidence.

As an aside, I personally think finance is the field best suited to people who are “well-educated fools who mistake themselves for being smart,” and that this is actually beneficial for society. I’ll leave the implications of that thought to the post linked below.