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.

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.

In part that’s because the worst of the layoffs occurred in that critical first year of our careers. But of course, that also happened to the class of 2008. No, the real reason we suffered such attrition is that we had herded ourselves like deranged lemmings into the financial sector. “Forty-one percent of your class went into banking,” Morton told me. That’s an astonishing proportion, though it didn’t seem so at the time, when employment in the securities industry was near its peak and the banks were so flush that Merrill Lynch flew us to Nantucket on a private jet for a recruiting event. When the money went away, so did a lot of those jobs.

But even after securities employment recovered, Chicago M.B.A.s never again crowded into the sector with such intensity. Only about 25 percent of last year’s class went into banking, which is a little lower than is now normal. More of today’s new M.B.A.s are doing what our finance classes should have taught us to do: diversifying. So a contraction in the finance sector is terrible for that 25 percent, but it doesn’t devastate an entire class stuffed with bankers, consultants, and dot-commers. When the few get laid off, they have a lot more employed classmates to help them find new jobs.

Employers, too, may have learned their lesson. A current second-year student says consultants tell him that they learned hard lessons from what happened to my class: firms that fired all the people at the bottom of the pyramid had no one in the middle to manage projects when business improved.

But consulting employment has been roughly stable; that’s not where the unbanked have gone. Instead, many people are pursuing careers in alternative energy, or trying to start their own firms; to my surprise, many are also heading into the corporate-management rotation programs, with firms such as Dow Corning and Sears, that most of my class shunned.

Indeed, if Booth is any indication, the complaint that “the best and the brightest” are being siphoned off into consulting and finance is less true today. One of the four “distinguished alumni” honored that weekend was Pat Basu, Class of 2005, an M.D./M.B.A. who became a White House fellow in the Obama administration, where he worked on health care. Morton told me that current classes don’t talk as much as mine did about money; they talk about the things they want to make and do.

Of course, these days, there’s also less money to distract them. Financiers are still rich—in 2010, the industry accounted for 5.3 percent of New York’s private-sector jobs, but 23.5 percent of its private-sector wages. But despite all the news about their huge bonuses, they aren’t as rich or as numerous as they used to be. By the end of 2012, New York’s Office of the State Comptroller expects the post-crisis job losses on Wall Street to top 30,000. Finance-related activities used to account for about 20 percent of state tax revenues; they now account for about 13 percent.

Other data back this up. At some point in the weekend—probably after that second round of shots—someone said, “We are the 1 percent!” I pointed out that this is not literally true, since the entry point (as of 2009) for the top 1 percent is $343,927 a year. (In Washington, but not in Chicago, this is what passes for amusing cocktail chatter.)

However, those of us who left finance can take heart, because we are a lot closer to the top 1 percent than we used to be. In 2007, the entry point was $410,096. The top 1 percent’s share of national income has also dropped recently, as the finance professor Steven Kaplan pointed out when I ran into him. In fact, for all the fanfare greeting recent studies by the Congressional Budget Office on rising income inequality from 1979 to 2007, according to Kaplan’s calculations, between 2007 and 2009 the share of adjusted gross income that went to the top 1 percent dropped from 23.5 percent to 17.6 percent—the largest two-year drop since 1928–30.

A few years back, Kaplan and the economist Joshua Rauh compared the incomes of Wall Street executives, “Main Street” executives, and celebrities such as professional athletes. They found that much of the rise in income inequality between 1994 and 2004 was due to the jump in Wall Street incomes: those of investment bankers, venture capitalists, hedge-fund managers, and top securities lawyers—the incomes that so many in my class were chasing.

Income inequality usually falls during recessions: top incomes are more tightly linked to volatile capital gains and corporate profits. And because the IRS takes a long time to compile tax data, we won’t know for a while what 2010 and 2011 look like; probably, incomes rebounded at least somewhat.

On the other hand, as New York’s comptroller suggests, 2011 wasn’t so hot. While it’s too early to tell how everything will shake out, 2008 was a major discontinuity; there’s no reason to assume that previous trends in income are going to continue forever, unchecked. In the third quarter of 2011, Goldman Sachs posted a loss for just the second time since going public in 1999, prompting TheNew York Times DealBook to talk about “change unlike anything since the Great Depression,” a new era of “boring businesses” and “tempered” risk taking. “It’s hard to make much money,” said an institutional-fund manager at the reunion. “The correlations are too tight—you’re just trading the spread” between assets in different risk classes.

With even quite conservative economists agreeing that the financial sector got too large and too risky, that’s not a bad thing—not even for my classmates. A banker who parachuted into equity research years ago said frankly, “I wish I made more money.” On the other hand, he pointed out, waxing on about the shorter hours and lower stress, “the lifestyle is much, much better.”

My classmates and I might not all have 1 percent–level incomes, but almost everyone seemed to have what Occupy Wall Street says it wants: stable, interesting, well-paying jobs … and a clear future. The few people who are still in finance are the ones who really like it, and are presumably really good at it. And the rest of us are probably better off than if we’d bartered away every waking moment of our 30s.

The most remarkable thing about my business-school reunion was, in fact, how little people talked about money or jobs. They talked about family, friends, the trips they took, and the houses they were turning into homes. According to the behavioral economist Daniel Kahneman, they were talking about what is really important: “It is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you.” Now, that’s a universe worth mastering.