The Graduates

Busted banking careers, crashed consultants, and shrunken incomes: the author attends her 10-year business-school reunion for lessons on how M.B.A.s can survive a recession.
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While the chants of the protesters and the thrumming of the drum circle echoed through New York’s financial district, I spent a pleasant October weekend in Chicago drinking with the people who used to occupy Wall Street.

It was my 10-year reunion at the University of Chicago Booth School of Business. Obviously I wanted to see if people had gotten fatter, balder, and wrinklier. (Surprisingly, not really.) But I also wanted to know what had become of us, and our careers.

Ten years ago, we graduated into a country where the Twin Towers were still standing, Webvan was a going concern, and the unemployment rate was 4.5 percent. Many of us headed to New York or other cities to become what Tom Wolfe, in The Bonfire of the Vanities, called “the Masters of the Universe”—the financiers who can earn lottery-size sums on a single deal. Others went to Silicon Valley start-ups, or became the consultants who worked with them. I couldn’t find anyone at the reunion who admitted to trading dodgy residential mortgage-backed securities, but we participated in all the other madness of two decades of financial froth—and got smashed in two crashes.

We weren’t the people who inflated the bubbles; we were the ones hired, and then fired, by those people. We were the ones who happened to be standing next to the guy who was pushing the buttons when everything went to hell.

The good news is that most of my classmates seem to have landed somewhere safe, warm, and in the workforce, which should reassure recent graduates wondering if their life is over. Less happily, that somewhere isn’t really where many expected to end up; reality has taken us down a peg or nine.

On the last night of the reunion, I found myself talking to an old friend whom I had vainly tried, when we were both students, to talk out of pursuing investment banking, on the grounds that it required 100-hour workweeks doing nothing very interesting. His rebuttal back then was simple, and irrefutable.

“I want to retire when I’m 45. I can’t do that if I go back to consulting.”

A year and a half later, after the dot-com crash had dried up all that lucrative IPO and M&A business, he was laid off, along with most of his associate class. That’s when he … went back to consulting. He’s now in corporate strategy at a major health-care firm. As we lingered over drinks, I asked him whether he wished he’d gotten to stay in finance.

“I’d regret it if our classmates were starting to retire,” he admitted. “But that was not our fate. That was the fate of people 10 years before us.”

Later that night, after more shots had been ordered, another classmate was even pithier.

“We thought we were going to be the masters of the universe. Now the masters of the universe are all in D.C.”

I have a theory about what happened to us, and our nation: when too much money is piled together in one place, it starts to decay, and as it does, it emits some sort of unidentified chemical that short-circuits the parts of your brain controlling common sense. When my class matriculated in 1999, ads for a firm called Discover Brokerage featured a tow-truck driver whose passenger notices in the cab a picture of the home—an island—that the driver has purchased with his fabulous online-trading profits. The passenger looks taken aback while the driver muses, “Technically, it’s a country.”

What’s even more amazing than the fact that this ad was ever made is that this sort of triple-distilled balderdash could intoxicate a large group of very smart people at one of the nation’s top finance schools.

Oh, don’t get me wrong: none of us was simpleminded enough to take those ads literally. Oh, ho-ho, no, not us! No, we made only the most erudite and sophisticated sorts of mistakes, like gang-rushing banking internships, and telling ourselves we were “consumption smoothing” as we used student loans to finance vacations. Believe it or not, many of us talked frequently about the echoes of 1929—but we still didn’t necessarily act on that insight, as the markets cratered in the early 2000s.

For my summer 2000 internship at Merrill Lynch, I chose the technology-banking group despite having watched the March 2000 NASDAQ crash from the lobby of Merrill’s auditorium, where we were supposed to be undergoing orientation. Ignoring the helpless, angry flapping of the HR staff, a bunch of us spent the afternoon telling nervous jokes and watching the eerie flicker that billions of dollars give off when they evaporate on live TV.

Predictably, the technology-banking group had almost no work. Also, I was not a good fit with Merrill’s very conservative, very competitive culture. I felt as if I’d decided to intern with a mathematically gifted baboon tribe, and I’m sure they were just as puzzled by me. Unsurprisingly, I didn’t get a full-time offer. Having learned my lesson, I very sensibly turned around and took a full-time job upon graduation at … a technology-strategy consultancy. I got laid off even before the bankers.

And they were laid off in droves, along with the consultants and aspiring dot-com employees; during my first year or two in New York, my recollection is that at least half my classmates there lost their jobs. Ten years later, only a few of the people I spoke with were still where they’d started out.

How could we have failed to notice the danger? You know how: It’s the same reason your cousin bought that 16-room McMansion on an option ARM. Everyone else had been doing it for years, with seemingly stellar results. Why wouldn’t we follow in such successful footsteps?

We paid for our naïveté, though. A surprising number of my classmates acknowledge that if it hadn’t been for the 2001 recession (or the even bigger one in 2008), their careers would probably look very different. Multiple studies indicate the same thing: when you graduate really matters. Graduate into a bull market and you’re more likely to get a job, and to get a job that pays well. Graduate into a bear market and you’ll end up with less choice and a lower salary. Moreover, these differences persist: one study of Stanford M.B.A.s shows that even 20 years later, the average salary of a class that graduated into a bear market was still lower than those of classes that had graduated into an equity boom, when high-paying finance jobs tend to be more plentiful. Unemployment can affect your earnings anytime, but according to another study of undergraduates, the earlier it happens, the worse it is, with the most-serious impact on people who suffered an “employment shock” during that critical first year, when skills are gained and résumés burnished.

Exactly how big was the shock we experienced? At the time, it felt like “the worst thing in the world,” to quote a classmate. But however bad the shock was for us, I assumed the current group must be suffering something even worse. After all, the dot-com crash was theatrical, but economically mild; GDP dropped by less than half a percentage point, and unemployment reached 6.3 percent. By contrast, between the second quarter of 2008 and the second quarter of 2009, GDP dropped by 5 percent; by late 2009, more than 10 percent of the labor force was out of work.

On the Monday after the reunion, I tested my hypothesis on Julie Morton, the associate dean for career services and corporate relations at Booth. To my surprise, she disagreed. It wasn’t just our adolescent imaginations: my class and the one after it were hit harder than any of the others before or since.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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