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There is a contrarian view that the leveraged buyout craze of the 1980s was not driven by the invention of junk bonds but by the advent of powerful spreadsheet software. Investment bankers could suddenly run complex deal scenarios and receive answers in the time it took to double click a mouse.
Today, Wall Street believes flashy software can be used to quell rebellions brewing in junior analyst bullpens. New recruits want more respect for the demands on their time. Automation could theoretically give it to them. But competition for clients suggests junior bankers should expect little change to their hundred-hour weeks.
For decades, these juniors have assembled PIBs — public information books — that give senior bankers a bound copy of relevant securities filings and news articles. Software allows PIBs to be created almost instantaneously. The prevalence of tablets makes hard copies mostly unnecessary. Similarly, updating stock price charts and output tables in PowerPoint can now be done immediately, instead of manually cutting and pasting into 50-page books.
Efficiency projects are welcome. Tech has already automated investment bank work in many ways. Due diligence “data rooms” all now exist online after years of being conducted at law firm offices. FactSet, an analytics provider to dealmakers, has grown to have a $14bn market value. Start-ups like InCloud Counsel build tools to automate routine negotiations over transactions documents.
Yet as sleek as these innovations are, the average managing director has little to no conception of how they work. They may not even understand the basic workflow required to put together a client presentation. Instead of unburdening the working lives of junior bankers, automation could mean they do more.
Investment banks remain a more glamorous version of the play Glengarry Glen Ross, in which the prize for finishing in third place is termination. Top dealmakers focus on selling as much as possible to as many clients as they can. That type of incentive structure is not something that fancy software will change.
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