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Matt Levine

Investment Banking Is Cheap If You’re Rich

Also tax expertise, ESG restructuring, index funds and comparable companies.

Investment banking is a business of building long-term relationships. Your job, as an investment banker, is to become close to the people who possess giant piles of money, in the hopes that one day they will do giant deals with their giant piles of money and give you some of it. If you are at the weekly meeting of an investment-banking group and everyone is going around the room talking about what they did last week, and someone says “I did a billion-dollar merger and earned an $8 million fee for the bank,” and you say “I played Settlers of Catan with Mark Zuckerberg,” you win, because the expected value of proximity to a giant pile of money is so much higher than the value of an actual fee from a normal-sized pile of money.

One result of this is that banks are always happy to give freebies to the possessors of giant piles of money. “We’ll do this work for Facebook at no charge because the opportunity there is so vast and we want them to owe us one.”