I have several dozen friends as well as family members/parents that are doctors or that are currently in medical school/residency. The reason or rationale for going into medicine can vary depending on who you speak with. On some level, all of them would probably say that they’re interested in medicine to help humanity or to further their curiosity for the sciences. I think going through medical school would be too tough if you didn’t have a genuine desire to help enhance the livelihood of others or to further the state of scientific research. That being said, money can also be a factor as well. I find that my friends that are in fields that are lower-paying (like pediatrics or internal medicine) or that have difficult work-life balance (like surgery) are more likely to pursue medicine purely for their passion for the field. In other cases, I’m sure my dermatology and radiology friends also love medicine, but they do cite the lucrative nature of those specialties to be a a major draw for them. Of course, they also worked really hard to get into those residencies, so there’s still a big sacrifice that people have to make.
As far as how I felt “handicapped” not having done investment banking prior to private equity, I think there have been two stages for it. The first was during the recruiting process – I didn’t think a lot of firms gave me the light of day at first because I didn’t come from an investment banking background. The ones that did give me a chance initially were either drawn to the name of the firm I worked at for equity research, or had alums from my school in senior positions. I eventually got a number of interviews from middle-market and large-cap private equity firms, but I felt like I had to work very hard to get them. It would have been a much more natural career transition for me had I come from investment banking.
In terms of how it would help to have done investment banking before private equity, I’d say that the biggest help would be on the financial modeling side. I feel pretty comfortable with my LBO modeling skills, but my M&A modeling skills are pretty rudimentary. I’m sure I’d get better if I had more reason to build M&A models (like for add-on acquisitions for example), but I haven’t worked on any of those yet. Banking analysts spend most of their time working on pitches (not that useful for PE) as well as transactional models (very useful) so I think the other pre-MBA’s that came from banking were more proficient in modeling from the start. It took me a little while to ramp up, and because of that, I felt like I didn’t get offered as many modeling opportunities at the start as I would have had I done banking. Fortunately, I think I’m all caught up to where I would have been had I done banking, but for a time I felt like I was “behind the curve.”
That being said, there are other areas where my equity research background has helped tremendously – my industry research and company analysis skills are very polished, and a number of senior transactors at my firm have given me high marks for my analytical abilities. Other pre-MBA’s that came from banking have also told me that I seem to be able to analyze companies from a strategic/operational standpoint more intuitively. According to them, they feel that equity research may have prepared my better because it requires me to always think about the attractiveness of a particular investment, and to be critically assess both the merits and risks of a particular company. From their banking experiences, they felt that they didn’t really spend as much time digging deep into the company or following it over a long period of time (typically, once a deal was finished, they wouldn’t pay attention to that company anymore). Of course, there are areas where banking analysts do have to dig deep, like when they are responsible for identifying files to put in a data room for a deal they’re trying to sell; that being said, in a lot of these cases, they still feel like they don’t have as balanced a perspective on investing, because the banker’s job is to sell a company often with little regard for how crappy it might truly be. One ex-banker at my firm described the process as glossing over the faults of a company and just trying to find different ways to “put lipstick on a pig.”
Anyway, at the end of the day, a key reason why I find private equity so enjoyable is because it really requires me to look at a company from many different dimensions – obviously the first and foremost perspective is that of the investor, but being able to analyze a company strategically and operationally are also very important. I look at it as a job where I have to put just about every business or finance skill I’ve developed to good use, and it’s cool that not everyone from our firm is from banking because I find that people from different fields bring different perspectives with them. I’m obviously grateful for my experience in equity research because it taught me a lot of skills that have come in handy, but I also recognize that there were certain skills of mine that would be more polished if I had done banking. That was really all I was trying to get at.
Hope that helps shed some additional light on my opinion concerning the merits of investment banking. It is a grueling job but I still think it’s the best way to begin your foray into finance, especially if you’re not sure what area of finance you eventually want to specialize in.