Calculating Compounding Interest by Hand: In Favor of Germany’s Dual Education Model

~1800 words. 8 minute read.

It wasn’t always fun. In fact, most of the time it was torture, comparable to my friend’s experience of sitting through a history lecture at Passau University titled ‘Book culture in England from the 4th to the 20th century’: Every second could be greeted with a hearty handshake, a bit of small talk, then a fond farewell, before welcoming the next second (a detailed account of his suffering can be enjoyed in German audio here).

Luckily, the benefits proved to be worth it. Life-changing even, as I now know, both professionally and personally. And ‘well, it’s funny now’ as they say, so let me share an anecdote or two.

Germany’s dual education system works like this: Companies from all different industries hire young, ambitious, (in my case good-looking), yet mostly direction-less boys and girls fresh out of high school with a commitment to teach them a trade in collaboration with a trade or vocational school. An apprentice spends 50% in the firm (practice), and 50% in school (theory).

Beautiful Munich

Deutsche Bank in Munich hired me into their trainee program in the year 2000. The school part was easy. Really just a continuation of what I was already used to from high school, albeit with fascinating classes in which we learned how to compute compounding interest by hand. (There’s an exciting twist to this later).

The stories from that time I tell to this day revolve around the characters I met there. The folks who were supposed to train me so I could interact with clients, analyze a balance sheet, understand regulatory compliance, etc. were so full of idiosyncrasies, and had so little time, training, and motivation to do so that at least once day I looked at myself in the bathroom mirror, wondering what exactly was happening right now. For two years.

There was my station at the Internal Service Center, where bank slips that were illegible to our ATMs were manually processed. I was sitting next to Frau Werner, a chain-smoking lady in her 50’s, who took six smoke breaks an hour. After each break she would bring in with her a wafting cloud of cigarette smoke, sit down, turn to me, run her tongue over her teeth behind her lips and tell me what had just occurred to her when she was outside. Six of these breaks an hour meant that she sometimes continued stories on break 5 that had started after break 2. The hardest part of my assignment was to stitch her narrative together.

During my time in the branch, I met a cast of characters that is deserving of a sitcom. There was Frau Schmidtke, who talked about me, and to me (and hopefully other trainees) in third person only, clearly within my earshot. ‘Let him carry in the water jugs. He’s just surfing the internet anyways!’. I had to pass an exam administered by the Bavarian Chamber of Commerce at the end of these two years in order to earn my designation as a certified banker. My time under Frau Schmidtke’s tutelage contributed nothing to my passing grade.

Herr Adler, my assigned trainer during my corporate banking station, was an impressive example of how theory and practice can be polar opposites. One of our classes in vocational school was called ‘Serving Clients’ or something similar. It was basic sales training. Active listening, re-assuring the client or prospect of our fiduciary duties, showcasing track record, etc. I had the best intentions to be the courteous client servant that the Deutsche Bank name implied. But then I sat next to Herr Adler for 3 months and success in banking seemed to come from behaviors altogether unexpected. The moment I learned to wait for was when he was answering a client call. Within minutes, Herr Adler’s head was swelling and assumed the intense red of a ripe tomato. Frequently he interrupted the client on the other end and when he himself inevitably got interrupted, he slammed down the phone, Rob Gronkowski–style.
I was 19 years old, thinking that I had entered the world of high finance, eager to learn from these titans of industry. What was I going to do sitting two feet away from Herr Adler after a tirade of such proportions? I pretended like it was the most mundane thing in the world, let out a deep sigh, slowly shook my head in deep sympathy with Herr Adler over the hardship he had to endure working with nitwits, like this client.

Herr Gross, in international transactions and foreign currency was hard of hearing. He spoke incredibly loudly and while he showed little interest in teaching me anything, he frequently reported me to central trainee command when I left a few minutes early to catch a train. As a 19-year old apprentice, you know one thing, which is that you don’t know anything. In that sense, you are the wisest person in the place, but you also have to ask a lot of questions, many of which could be considered ‘dumb’, given your lack of banking knowledge. Now, when you had to ask Herr Gross a ‘dumb’ question, you had to do it at such volume that the entire branch could be reassured that the trainee is a total idiot. It’s a wonder that Herr Gross ever noticed me slipping out early.

The prized experience amongst us trainees was to be brought along for an actual, in-person advice conversation with a client. Gathering all my courage, I would begin many days by popping my head into Frau Reo’s office, asking if I could maybe attend a client meeting of hers, should she have one later. I only did this on days when I knew that Frau Reo had in-person client meetings scheduled to reduce wiggle room for her response. She nodded energetically and sprayed her breakfast across the desk, yelling: ‘But of course, Herr Insam. My trainees are everything to me!’. Not 15 minutes later, from across the room, I saw her lead a client into her office and shut the door.

Okay, here’s two good ones:

Herr Bauer was a traveling advisor. He would only come into the branch when he needed a place to meet with clients. Herr Bauer was a Bavarian original. He loved spaghetti carbonara, something you could’ve guessed by looking at him. Whenever he got himself an order of spaghetti carbonara from the Italian restaurant around the corner, he got me one too. He took me into client meetings all the time. He had a completely different attitude towards his job than the rest of the crew. He was always smiling and happy, whether things worked out or not. We went out for beers after work.
One time, during a client meeting he had invited me to (clients never had an issue with this), the computer system went down. Herr Bauer took out pen and paper, and effortlessly calculated compounding interest for the client’s savings account by hand. For a brief second, the whole apprenticeship made sense.

And lastly, there was Herr Schwab, the boss of all the trainees in the southeast region of Germany. One way to escape the parallel universe of trainee life was to propose ‘projects’ – ideas for one or two-week initiatives the trainee could undertake under their own leadership and direction. Typically, trainees undertook sales-related projects. They set up a booth at the entrance to their branch, for example, and promoted life insurance products, or mutual fund investments. Now, if you’ve read ‘Uncertainty beaten by Desire’, you know that I had the privilege to go to high school at the German School Thessaloniki, Greece. Many Greek students attend the German School in hopes to enter higher education at a German university afterwards. My proposed project was to go to Thessaloniki and give students at my alma mater a first-hand account of what the dual education system has to offer, especially as an alternative to college.

Deutsche Bank loved my submission. Herr Schwab and I set off to Thessaloniki together. Within hours of landing at Thessaloniki airport we had found a taverna, were feasting on feta cheese, lamb chops, tzatziki, pork from a spit, stuffed wine leaves, and bottle after bottle of retsina. By 9 pm, we were on a first-name basis. My friendship with Peter made my time at Deutsche Bank significantly better, mostly because I had someone who I could openly share my daily experiences with. Years after I had left the bank, I told him the stories I wrote about here. I had him in stitches.

Here then are the tangible benefits I took away from my apprenticeship:

1.     I earned my banking certification from the Bavarian Chamber of Commerce. Not a small feat in Germany, albeit unimportant to the rest of the world.

2.     I made my first ever paycheck(s). You get paid during this program. Right out of High School that is a pretty cool experience. I also learned how to budget, because while I thought I was rich, I was also living in Munich. Within 2 months, my account was overdrawn by a grand.

3.     When applying to universities, certain schools in Germany give you preferential treatment if you have completed a dual education apprenticeship. I had the grades to be admitted anyways, but the 2-year program with Deutsche Bank made me a shoo-in to the highly sought-after economics and culture program at Passau University.

It really is the intangibles that I benefitted from so tremendously. I am convinced that there are a lot of young men and women who aimlessly start college, which can an expensive waste of time while they’re trying to figure out what to do with their lives.

1.     The strictness and rigidness of having an employer compared to the flexibility and required self-discipline of college was right for me at age 19. Someone gave me feedback all the time, and Germans don’t bubble-wrap it like Americans do. If I was late, someone (or many people) made sure I knew that was unacceptable. As a co-apprentice of mine once said: “A good day at the office is when you didn’t get yelled at.”

2.     I was living by myself for the first time and that came with a lot of learning (read: a lot of messing up): Grocery shopping, cooking, cleaning, budgeting, figuring out a new city… again, the structure of the trainee program made it easier to compartmentalize the home stuff and the work stuff. By the time I went to college, running my tiny one-person-household was happening on auto-pilot, which made the transition into self-directed studying a lot easier.

3.     Meeting all these people in the bank and having the experience of being on the lowest rung of the ladder was character-building. My experience as an apprentice helped prepare me for situations like these and I handled them much better later in life, when it arguably counted more towards my career.
There is a German saying: “Lehrjahre sind keine Herrenjahre.” It roughly means that life is not easy at the bottom, that years spent as an apprentice are lean and difficult. It was my mom’s answer to any complaints I had. She was right.

4.     During those two years, I had plenty of time to consider what I wanted to study in college and which colleges were of interest to me. Once I picked Passau University and the economics and culture program, I was much more certain of my decision than many of my fellow students who enrolled in the program right out of High School. I was also a ‘better’ student (better at studying) than many of them, because I attended class, even the early morning lectures. I had a sense of what was waiting for us in the professional world and could give my studies direction as a result.

You can tell, the common denominator of all these is maturity. As tumultuous as my feelings were at times during my two years as an apprentice, it was the closest thing in my life to going through a school of hard knocks. Everyone knows how valuable that is.

At the end of my apprenticeship, Deutsche Bank offered me a full-time job in their corporate investment banking division. I took the job and after three months I left to start college in Passau. Full-time work could wait a little longer.

The river Inn flowing through Passau.