Wall Street Talent Drain
Its hard to believe with the possibility of a six figure salary out of undergrad that people would willingly pass up finance roles, but it appears that's happening.
With tremendous growth in start-ups and tech hubs like silicon valley new grads seem lured by the innovative prospects.
The issue, executives say, is not pay, but how much scope there is to innovate and build businesses, which is why more bankers and traders are leaving the big Wall Street firms for Silicon Valley, joining private investment partnerships like hedge funds and private equity funds, or going into energy and other industries.
Obviously giants like Facebook and Google pay handsomely as well, but is it realistic to think that wall street will actually have an issue finding talent in the future? Does this mean banks will need to start widening their search at semi and non targets?
Maybe some day this will be the case, but we are no where near that day. Still have tons of bright kids at target schools who can't land jobs at these banks
One quick look at my school's OCR interview schedules and you'll see that this is not the case at all. It's become a common (albeit douchey) gag at my business school that you don't want to work with kids who aren't recruiting specifically for banking on group projects with assigned groups...
Top jobs pay well across the board. The issue is kids from OSU or say UNC aren't getting the awesome Google/Facebook/Twitter jobs that this article is talking about. Not every job at Facebook is working with Zuck and pissing excellence. So you need to compare those to Wall Street.
Being a banker is much better, pay wise, than being a general corporate finance guy at Facebook. And this is the job most people who are trying to get into banking would otherwise get.
Is a six figure salary in NYC right out of college supposed to be impressive? Especially when you're expected to work 80 hours per week? You'd have to be making about $350,000 per year just to match the hourly rate of a newly hired engineer in a city like Austin.
I'm going to reference your original post. It is completely illogical and idiotic to compare annual salary in geography A to hourly salary in geography B.
Who the hell cares what their hourly wage is? You don't flip burgers at McDonalds.
The average Goldman employee was paid $399K in 2012. It would take you 6150 hours at your $65 hourly rate to make the same amount. Hope you like working 17 hours day 365. Giving you the benefit of cost of living adjustment, you can take the weekend off and work 17 hours a day on weekdays only.
I always love the hourly comparison as if this was a union shop and you could work infinite hours at whatever salary. Engineers make good money, but not as good as bankers or most people in FO finance and even if there is a close parity, they diverge fairly quickly. Finance also has very lucrative exit opportunities.
But why does this even matter? I would literally bash my face into a wall if I had to study engineering in school and be an engineer. Not what I want to do. You could pay triple what they pay and I wouldn't do it. I am sure some people will disagree. You do what you like or what fits you.
Point being that a "six figure salary" isn't necessarily something that should draw talent.
That would only be a valid argument if the engineer could work more hours to get their salary above what a banker makes.
All that matters is the number on your 1040. Hourly wage doesn't mean shit if you can't work as many hours as you want.
I am also not defending bankers or whatever. I could care less. But this argument about hourly wage is usually brought up by people who have a lower all in salary. It also ignores career trajectory and how much you can make doing something else.
If you want to be an engineer, go be an engineer. No need to justify the lower base salary or whatever. People make decisions based on hours worked vs. pay they want all the time. Same with where you want to work.
If we're dealing with sane human beings with real career goals and ambitions, then the fact that you can make the same IB salary in Houston in energy banking shouldn't change anything here. But in the world where we're merely measuring people's life satisfaction based on their purchasing power per hour worked, Houston IB would be your fantasyland. Cheaper than Austin with even higher pay!
Those collecting unemployment make $Infinity/hour. Best job on the planet?
Doesn't matter the hourly like TNA has said.
Engineer gets paid X Banker gets paid Y
If Y > X than the banker makes more money and that is that. Potential has no value, and that is what you are evaluating when you say oh well if they worked the same hours they would make more money.
It is also amazing that people can honestly believe that a six figure salary is not very good out of undergrad. It is great by ANY standard other than your personal standard apparently. There are people who graduated with communications degrees but awesome W/E, GPA, ECs etc. and they get paid 32k out of undergrad in NYC. 100K is great out of college, doesn't matter what your location is, and it doens't matter if there is .5% of undergrads that do better, 100K is still great.
Data Sufficiency? hahahaha
http://www.asme.org/kb/news---articles/articles/early-career-engineers/…
Not to beat a dead horse:
"The median income of full-time salaried respondents increased regularly from $55,000 for those with less than one year of experience to $127,800 for those with 25 years of experience or more."
Not sure why this is a recurring argument when you have bankers making $65-$70K base with sign on and end of year bonus right out of school. Also, look at that 25 years experience number. Many (most) 1st year analysts are pulling in $100-125K all in. Associates are making that base.
Do what you love or like, but at least be confident in your decision. You don't need $100K a year to be happy so don't make this about money or hourly wage.
Making $100K a year puts you near the top earners in the USA. If you have no debt and don't like in NYC, you are pulling in like what, ~$6K after tax and nice 401(k) contributions. If you can't enjoy yourself on that amount after taxes I don't know what to tell you.
And this is only a start for finance. Real easy if you stay in the game to make a lot more.
Exactly.
Yeah, with bonus IB analysts in NYC will be pulling in north of $100k but you are annualizing a number that includes bonus, forgetting that most of these kids graduate with debt and are still a year out from their bonus. Most start out at $70k, meaning after federal, state, city and social security taxes they are left with around 2,300 a paycheck, not terrible but certainly not $6k...
Not surprised. Younger sibling goes to an top 3 LAC and has a profile that would be attractive to S&T or IBD but turned down offers to take a product manager position with a tech giant. All in Comp, perks, lifestyle, people you work with comes out to be better. Only something like Jane Street, GETCO, or optiver would maybe turn his head.
Some people just do what they love. Some people enjoy working at a startup etc and therefore go for it. I think there are bright people everywhere - it's in the eye of the beholder ;)
First of all, comparing salaries (total or hourly) is bullshit. Utility is what it's all about. And that should include free time, career opportunities, fun at work etc. Seriously, who maximizes salary instead of utility? Apart from that, the overall salary structure on Wall Street will change when Basel III is fully implemented. Banks are simply not that profitable anymore, once the higher capital requirements kick in. Having 2% core equity ratio or 10% is a huge difference. Also many business activities will be stopped as they are just too highly regulated to be attractive.
So I agree with OP, more and more talent is drawn towards the alternative investment side which is still less regulated (HF, PE, VC) or to consulting or even completely different industries. And this is not just a temporary situtation which we had so many times before (dotcom, Asian crisis and countless other times), as these were temporary market downswings. Once the economy picked up again, i-banking was booming again. Now it is different, Basel III is permanent! As long as the regulation remains as it is, banking is simply less attractive. Two things can happen now, either banks focus on just the most profitable businesses and pay more or less the same salaries, or they continue all businesses and pay less salary
There is not tremendous growth in startups and tech hubs.
Dude, I hope you aren't an engineer or in finance because this is a relatively simple concept to grasp. Also, like I said before, people in finance working in Houston, Chicago, Milwaukee, Cleveland, where ever, will make all in comp more than engineering. This ignores career trajectory, future potential earnings, etc.
So apples to apples, a banker in Houston makes more than an engineer in Houston. Yes, engineers probably work less total hours, but you are not an hourly employee. You do not have the opportunity to bill for every hour past 40. This is the key concept.
If a banker works 100 hours a week and makes $100K a year and an Engineer works 50 hours a week and makes $50K, guess what. The banker makes twice. You can tell people all you want how in some fictional world you make more per hour, but you still have less dollars at the end of the day.
Opportunity cost is not tangible. It is not backed by the full faith of the US government. It doesn't pay for dinner, drinks or a rolex.
Do what you like and be happy with it. Stop this silly and irrational argument trying to convert a salary into a fictional per hour. Honestly, talking about per hour wages rather insults me. I didn't get a masters to compare myself on a McDonald's pay scale. Maybe you did, but I give a shit about all in comp and bonus, not some per hour bullshit.
But that point aside, we're not comparing the 98th percentile Houston banker to the 30th percentile Houston engineer. The OP was asking why it might be hard for a top bank (presumably in NYC since he was talking about 6 figure starting salaries out of undergrad) to attract talent. My answer, which amazingly escapes you still, is that a well-paid starting banker making $120k in NYC is making less than your average engineer in most other regions in real terms. Yes, I used an hourly comparison because it's relevant to a young man's decision-making, but that hourly comparison requires the NYC entry level banker to make nearly $400,000 to achieve parity! Even if you want to pretend like the extra workload doesn't factor, the NYC banker still has to make over $150,000 in his first year to reach parity with the average engineer elsewhere. How common is it for a first year analyst in NYC to pull in $150,000? I'm sure it happens, but we're talking about the top earners. And if you want to be realistic, you then have to compare that to top engineers earning over $100k in lower cost areas.
Now you might not care about working twice as much for less pay in real terms than other people. But it's definitely a factor that would drive many people (not you, obviously) into other regions or maybe even other industries.
And do you seriously not understand the concept of an opportunity cost? That additional 40 hours per week of work could be used in consulting (yes, engineers can consult on the side for anywhere from $50-$150/hour depending on the industry), networking, developing personal relationships, obtaining graduate degrees, or whatever else contributes to one's long-term success. All of those things do have tangible value to the individual, even if the term "opportunity cost" is itself just conceptual.
Yes... they do. Starting IB analysts in Dallas and Houston make the same amount as their counterparts in NYC (~$120-$135k). I don't see what's so hard to grasp about this.
Again, you're acting like you have no choice about the location of your office in IB. There are certainly hundreds of analysts in Houston & Charlotte, and if you're one of the few that actually prefers these locations, you'd have no trouble switching your NY offer for a lower-cost area.
I create valuations for conceptual opportunity costs all the time. Usually it translates to $0 real value.
This discussion is sort of strange to me. Even forgetting about hourly wages vs. salaries, there's a much bigger distinction between what YOU would likely make as an engineer or a financial professional. It's not like you can just easily switch between these jobs. Imagine me saying, "ok, I've spent 15 years on Wall Street and that's enough, I'm going to be an engineer in Silicon Valley now.". Guess how much money I would make as an engineer?
$0
I agree, though. It comes down to lifestyle and career choices. If you like finance, you may not excel in engineering and vice versa. My original response, which didn't seem controversial to me, was in response to the OP's wonderment that it would be difficult to fill 6 figure positions in NYC. I think it's straightforward. Low 6 figures in NYC doesn't go nearly as far as $65k in places like Texas. And when you factor in the additional time commitment, the deal becomes even worse. To me it would be bizarre if firms could easily fill those positions with top talent.
I'm not saying it's stupid to work in finance in NYC. But it is stupid to say that young people don't consider anything beyond their nominal income...
If they care so greatly about purchasing power, they have plenty of opportunity to move to a cheaper geography in IB. This is only further evidence that recent college grads care very little about the cost of living differences.
And furthermore, you're ignoring the career trajectory than a BB IB analyst has set up for him/her. Entry-level compensation in IB is a far cry from what you can be earning in just 2 years.
Dude, if you think bankers in Houston are making less than $65K base you are nuts.
Furthermore, it is you who do not understand opportunity cost. Opportunity cost implies that you are foregoing X for Y. Since you are not foregoing additional income by working more in banking vs. Engineering since you cannot simply work more in engineering to get your compensation to banker levels, it is an irrelevant topic.
The only opportunity cost bankers are foregoing is whatever prevailing hourly rate that you could get in addition to your 50-60 hour a week engineering job. So maybe you work 55 hours in engineering, make $60K and then get a part time job making $12 dollars per hour or something.
How you cannot grasp that you are a salaried employee. Just because you make a cute little division equation doesn't mean your employer is going to pay you more money for an additional hour of work. And guess what, just because you generally work 50 hours a week for your $60K doesn't mean your boss cannot make you work say 80 hours a week. Since you are a salaried worker you will get nothing more.
And this is only for the 1st year or two. All in comp diverges very quickly and this is why people go into banking.
Additionally, bankers in Houston are working in general less hours than in NYC, for a slight dip in comp. People want to work in NYC because of deal flow, networking and future opportunities, not necessarily because the comp is higher.
End of the day x > y and that is all that matters.
As I noted, you are forgoing plenty of things by working additional hours. These can be monetary (consulting opportunities...engineers can make closer to $60-$80/hour consulting on the side than $12) or they can be non-monetary. Opportunity costs do not assume income substitutes. These can be completely non-monetary like missing your favorite TV show. These may not be easily measured in dollar terms, but they have real value. I would have hoped that a fancy Wall Street Baron would have known this. But apparently not,
And yes, I believe that the starting salary of the average IB analyst in Dallas is less than $65k (just look at any salary survey). Yes, a number of them make more. A number make less. And yes, they may make more than that their second year (just like an engineer would). And yes, you're sort of right that salaries diverge over time (for those few in IB who don't get burned out within the first five years). However, you're neglecting the fact that many engineers don't stay in the engineering role their entire lives. Tim Cook, for example, started as an engineer. Now he's an executive manager (a common path for engineers).
Your personal affront to my original "hourly" comment has become absurd. I get it. You think that by making more in nominal terms than someone else makes in real terms makes you a big shot. And you therefore think it's not sensible that people would make career decisions based on broader criteria. The only problem is that reality proves you wrong.
I know several dozen bankers in Houston and Dallas, at not a single one makes less than $65k. You seem to be under the impression that you have to take a substantial pay cut to work in Texas in IB - you don't. In fact, at the boutique shops in Houston, I know many people that make a great deal more than their IB counterparts in NY. Your salary surveys are either including a number of positions that are not IB under that umbrella, or they are just wrong.
C'mon, really? And some bankers go on to be John Paulson or David Einhorn, this is a completely irrelevant aside. The point is that the average entrant into IB makes more than the average entrant into engineer. Both in entry-level pay and especially in lifetime income. It's silly to argue otherwise, and at the end of the day, it still has no relevance to the question "should I do engineering?"
You're obsessed with these cost of living adjustments that have nothing to do with how lucrative the career is. Engineers in San Francisco make roughly the same amount as those in Austin, and bankers in Houston and Dallas make roughly the same amount as those in New York. Location is not relevant to this discussion.
I honestly still don't know why people keep saying six figures out of college. I know people at Jefferies, MS, Barclays and multiple MM banks. None of these guys are clearing six figures even with bonus. They are all making $60k - $90k, which is still very good out of undergrad, but stop saying every first year analyst pulls in a $100k. This myth needs to die and its reasons like this why every college grad has it engraved in their mind that six figure salaries are so common out of undergrad. Then they start applying for jobs and realize they were way off and slip into depression.
There is absolutely no reason to have this discussion when your pay at entry level is so absolutely negligible in finance. Upside potential is far and away the only thing that should matter, as no 21 year old kid [spare me your dumbass exception comments] actually needs $100K and what you should be comparing is what the two professions actually make when the time comes that they actually do need the money... i.e. when they settle down, have kids, or establish long-term roots in one location/job (for those who don't want a family). By the time you get yourself acclimated to the real world, the finance professional will have a paycheck that brutally rapes most salaried engineers or whatever career path you want to bring up. The opportunity to make a ton of money based on more than just a fixed number is what makes the finance gig such an attractive position. I don't think engineers have a leg to stand on in this argument though they have a million others where they can win that aren't compensation-based. And don't forget you stop becoming an engineer and start becoming an entrepreneur once you found a lucrative startup, so that argument is a waste of time too.
But it is worth noting that many engineers do not function in engineering roles their entire lives because their technical skills become stale. Eric Schmidt, Tim Cook, and even John Thain all started in engineering and transitioned into management. I think they all turned out okay...
I don't really care about this thread, but by that logic, do you consider starting your own fund being an entrepreneur as well? Doesn't negate your point, just curious.
I've always thought about that, and it could go either way, but personally, no I don't think so. Your primary function is still to do exactly what you were doing at a lower level so there's really no change in business description. You're still a portfolio manager. Your portfolio just happens to fall under a new legal entity. Now I'm not sure exactly what Mark Zuckerberg does on a daily basis but my guess is he isn't coding and building up additional functionality for the site. I'm sure he's focused only on high level decision making about strategy and what new products his business can roll out. He's transferred from being a computer engineer to being a businessman now. It would be like calling Steve Jobs a programmer, I suppose. I don't think it makes much sense to do that, he's really a businessman. And I don't know many people who would call Warren Buffet an entrepreneur because he owns his own business. He's an investor who happens to use a legal entity as the only way to viably continue doing what he wants.
This thread is hilarious. The short answer is: "top talent" chases outsized returns. Bankers don't work for the $100K salary. Bankers work for the big bonus, the massive check that comes once a year, not every 2 weeks.
It's the same rationale for going into the tech / startup roles. The outsized returns are banks are now more limited, and the outsized returns at startups have increased, e.g. getting equity and acquired. So talent now goes after that opportunity.
I only have one comment on the hourly wage comparison. From now on, whenever I go out to eat, I'm going to spend at least 4 hours eating to reduce my cost per hour for the meal. I expect to reduce my eating out expenses significantly.
You have a reading comprehension issue. I said you make more absolutely in banking, not on any per hour basis which isn't relevant since engineers and bankers are salaried. Furthermore, we are discussing entry level salaries. If you think some fresh engineering graduate is going to make $60 bucks a hour consulting (because fresh grads have an in depth knowledge of anything) you are nuts. You also cannot cherry pick the higher potential per hour salary. I could easily retort that bankers could work in a consulting role for corpdev of smaller firms and make $100 an hour. Fantasy land.
Wait, so now were are in Dallas? I thought it was Austin. Or Houston? Why is everything in goddamn Texas also? Plenty of bankers working in Houston or Dallas making $60-65K base, not even factoring in bonus. And they also aren't working the insane hours you use as the basis of your argument for NYC bankers.
Also, not you start back peddling. Just because you value watching TV doesn't mean I do. That is why we are not talking about stuff like this, we are talking about absolute dollars. You value something else so you forgo a higher salary for additional time off. Fine. Your choice. Then stop with this silly per hour calculation which in reality is only to assuage you own negative feelings.
I don't care what engineers make, nor do I think they care what I make. All I know is that when I was choosing a major and a career I chose something that pays. Why? Cause I am motivated by money. I don't give a shit about watching TV, sitting on the couch, playing pick up basketball. I care about USD. As do many people. So I don't want to earn absolute less, but "per hour more". I want to earn absolute more. X > Y.
I reiterate my statement from previous threads. This site has a dick measuring problem. Do what you like to do and what provides you with the most utility, whatever it might be. And be happy with that. Fin.
You keep saying "bankers" or "plenty of bankers" but you're not talking about medians or averages. Of course some straight out of college bankers make over $65k. And my original comment, which apparently got your little pink panties all up in a wad, was directed to the OP's apparent bewilderment that IB firms might have problems attracting talent with starting 6 figure salaries (again presumably in NYC because starting analysts in Dallas, Houston, Austin, or other moderately priced locations simply don't make that much straight out of college). Of course they're going to have a problem when those same people can use their talents elsewhere. What top talent would opt to work in NYC for a bunch of dicks that treat them like shit when they can get a job at Google as a portfolio manager?
You should consider moving to Japan. I hear you can pretty easily pull down 500,000 yen per year. More is better.
You critique me for talking about making $65K base as pretty standard and then you throw out your one, personal experience as your defense? Ok. How about YOU use average or most likely. The $65K base has been discussed repeatedly on this site. You generally make $60-65K base outside of NYC, where you would be making $70K base or slightly more. Bonus is bonus wherever you work. Since it is largely dependent on deal flow and group performance, a secondary city might take a hit.
And since you want to use your consulting salary, I will happily talk about my handful of friends. working at MM shops, right out of school, in a secondary city, making $60-65K per year, with $5-10K sign on and bonus bringing their all in comp to $90-$110, 1st year.
Additionally, was your "juicy" $65.00 per hour consulting salary plus benefits or without benefits? Plenty of independent contractors make big per hour wages without and benefits, bonus, etc. Lets compare apples to apples. Salaried engineer at a real firm with a normal, banker, MM or BB, whatever. Might be close 1st year, but as mentioned above, diverge very fast.
Finally, could you come up with any shittier of a retort than you little 500K yen quip? We are talking about absolute dollars, DOLLARS, the currency of the United States. X > Y.
Oh and nice comment about the panties. What is the matter? Can't engage in a debate without getting all frustrated and trying to make a mean comment. Hahahah. Try putting together an intelligent thesis and presenting it. The drivel you are trying to pass off as an argument right now isn't working.
The OP is clearly talking about first year analysts at MM / boutique / BB investment banks, all of whom make far more than $65k in Dallas or Houston. We are talking averages here. The average first year analyst at any of these banks is making $90k+. At the top boutiques and BB banks (which is what most people on this website think of when they say IB), that number is easily $110k+.
I think the bigger problem is the non-existant recruiting and the ever shrinking analyst class sizes. Couple that with uncertainty regarding the future of the industry, and you have a great case for a talent drain.
$60-65K base salary. Not counting sign on, bonus, etc. And people are saying $90-$110K all in, Y1. How much of an end of year bonus do engineers get Y1?
But I'm still skeptical that the typical banker earns close to $100k in a market like Dallas first year out. Just look at Dallas income reported on this site. Most report total income (sign on, bonus, salary) around $70.
No one is working at a reasonably known MM / Boutique / BB shop (see my list) making $70k all-in.
IB pays sign-on bonuses too (see my above post).
Dude, really man. Why do you have such an inferiority complex?
I think we, as a site, should really examine why the fuck engineers have so much sand in their vagina. Like I don't go on engineering sites and shit on them. I don't care what they make. Why on earth are we being invaded by a bunch of pocket protector wearing assholes shitting on us.
Listen bro, go engineer chemicals or whatever the fuck else you do. Go make multiples of what people in NYC finance make on a per hour basis. Go roll around in the pool of mechanical pencil dominance that you have in the back of your Austin McMansion. Whatever gets you off. I wouldn't want to study engineering or be an engineer if you are going to fucking Sophie Choice my entire family.
1st year analysts in banking make more, probably by a $10K delta, than 1st year engineering students. Then salaries diverge quickly. That is why people go into banking.
Turns out you guys are using selection bias. You're basing "average" incomes on top tier candidates. Yes, the average electrical engineer starting at Texus Instruments may make about $100k+options. But that's not the "average" engineer in the marketplace.
Keep the insults coming. The first bastion of a person woefully losing an argument is to get personal.
Your opportunity cost isn't the same as mine. I don't care about watching TV or free time. I want more money, absolutely. You also fail to realize that bankers in low cost Houston still make more than engineers. You also do not understand why people want to work in NYC. It isn't because of the comp, it is because of the opportunity for future finance roles.
Be secure in your position. No one here is judging you less for being an engineer. We simply don't care. Stop this silly and arbitrary fantasy argument about per hour and cost of living when no one is paid per hour and bankers in Houston are making more Y1. Forget Y1, they are making substantially more Y3 and on ward. Why people go into finance to begin with.
This is ridiculous. There are hundreds of IB analysts in Houston, and I'm taking the MM firms (no BBs or elite boutiques). These are not "top tier candidates", these are the people who get IB jobs.
No one on this site is going to claim that a first year working at RJ / BMO / etc. in Houston are "top tier candidates".
I think it's fairly safe to assume that the OP was not referring to the talent drain from Bob's Investment Bankin' Services in Houston. He/she is talking about how top talent might be seeking jobs other than IB in the current market. Safe to assume that this "top talent" would at least be considering a MM IB shop in Houston.
that would be nice.
This blinky dude is a toll, has to be. This is Blumie or some shit. I simply cannot believe someone is saying that bankers in Dallas, working NYC hours, are making $70K all in. No one would do it.
And not every engineer makes $65K. He is talking about MM firms and BB firms. Also, if you are at a lower tiered bank you are probably making $55-60K base with a $15-20K bonus. While working like 50-60 hours a week, maybe less during slow times.
So shitty IB still > shitty engineering. And even if engineering > banking at Y1 or Y2, it isn't at Y3 - onward.
But that doesn't matter. People do what maximized utility. If that means more free time then you sacrifice some salary. It that means you like money you sacrifice free time.
I understand that you're a banker who identifies yourself with money, but this personal affront to the possibility that someone else could make more than you is a bit silly...
Yawn. I am not in banking. And I could careless what other people make. What offends me is the simplicity of your argument.
I love how well known MM firms become top tier in your mind. Or many they are names that people on here would know about.
I am so fucking glad I didn't study engineering. The level of inferiority complex show to me on this city is all I need to know I made the right decision.
To whoever says engineers don't make much money. I highly suggest you visit Houston here. If your only goal is money, engineering will help you get there. Petroleum engineers here make $120k+ starting, these are young kids out of college. They were pretty much hired there junior year, thats how much they are in demand. One of my buddy's roommates is working for a major E&P company. He told me that if you start right out of undergrad working in the industry, expect to be pulling in around $400k+. Keep in mind these guys work 40 - 50 hours a week. Now here is what I will say about IBD, the upside is CLEARLY higher. There is no question about it, but while there is huge upside, there is a pretty big misconception as well. Everyone believes that a 1st year analyst will be worth $25MM+ by the time they are 30, this is not even close to reality. I have IBD friends who are associates, pulling in some pretty good money in NYC, but if you factor in taxes and living expenses, these engineers come out on top...FOR THE TIME BEING.
Just keep one thing in mind, banking has more upside, but engineers are doing pretty damn good themselves. Also don't just believe that everyone in IBD will pull in millions. I remember there was a thread on WSO about the statistics of this guy's analyst class at a BB and where they ended up. I think the people actually staying in IBD/PE wasn't as high as I thought it would be.
I personally find engineering as boring as hell. However, I know most people here just want to make money, and believe me, there are plenty of high paying jobs out there. If you have the drive and intellect to make it on Wall Street, I am sure you can do well in engineering school and lock in a very good paying job.
There are IB analysts in Houston pulling in $135k+ too. Associates in Houston are pulling $225k+ at 25.
No one is claiming that engineers "don't make much money", they are claiming that IB analysts make more. That shouldn't come as a surprise, nor does it need to be such a chip on the shoulder of an engineer, who is working reasonable hours making a very nice income. The point is that if you compare apples-to-apples career trajectories for IB analysts and engineers, the former are on a steeper salary curve than the latter.
Give up NS. This guy has serious issues. When he can't win an argument he goes right to the personal insults. I thank god he is an engineer because that type of childish attitude wouldn't go far in a social environment.
Stay in Texas dude. No need to come up North.
Hahah. What a troll. You are the only one insecure in this conversation. Everyone is simply attacking your logic, or lack thereof. No one is debating that engineering is a good paying job. You simply are comical when you make an hour comparison and then start comparing Austin to NYC.
1) Yes, I do love money. It is what motivates me. X > Y
2) How is the fact that I gain utility from money relevant. You gain utility from free time. Individual choice.
3) The argument is and always has been how you try and defend a lower salary in engineering by saying it is higher per hour. You also assert, incorrectly, that you have to work in NYC to make 6 figures in finance. Which you don't.
Is this inkybinky guy still talking?
Look, you're on a website that is labeled WallStreetOasis. You don't see TNA, or any of us for that matter, going on I'mabrokeEngineer.com and ranting there.
Go play with an erector set or something.
Don't have a horse in this race but did somewhere along the lines it get established that 1st year analysts in banking are getting 70K salary and 70K bonus? Is it 2006 again or what? Given the climate, my estimation would be that these first year kids are probably seeing all-in comp somewhere in the 110K range and should be happy receiving that...? 70K + 40K is nothing to be ashamed of... especially with the 10K sign on... so no need to exaggerate if that's the case. The numbers I've been hearing are not this high (though still are higher than any non-finance gigs right out of college that I can think of for the most part).
BH - Most people are asserting that 1st year IB analysts are pulling in $90-100K all in comp. Engineers are making anywhere from $65K-100K, depending on focus, location, company, etc. From there things diverge.
I thought this was pretty common knowledge and nothing to really argue about. You make really good money in engineering and have a nice work/life balance. Not sure why there needs to be a comparison between that an banking.
The entire argument was how silly comparing things to per hour when they are not hourly wages. It also makes no sense to compare Austin with NYC.
90-100K seems right to me in these conditions right now. And definitely the same thing for engineers, they can make that money at the top end firms a la Google, etc. Agree that's all well and good, but the question I'd ask everyone is this:
You're given a choice to receive a call option on an Ivy League student starting a full time job at a strong bulge bracket bank this June that entitles you to 10% of their earnings for the rest of their life. On the other hand, you can receive an identical call option on a student with identical credentials that will be starting a full time job at a respected Silicon Valley firm such as Google. Which call option do you think is more valuable, from an expected value perspective? What do you think the market would price these at if everyone was able to buy in?
My feelings are that the probabilities of all the various compensations these two students would receive over their lifetimes would make the BB employee's NPV much higher than the engineer's.
There's an argument to be made that the engineer is more likely to hit the jackpot by founding some tech company or something, but at that point, like I said before, they leave the realm of engineering and are now entrepreneurs, so anything tied to that no longer counts. If this is purely a finance vs engineering discussion, then that should be the way it's defined. If it's just a "what is the potential of the same kid going either way," I think it's all about the individual themselves. But there is no comparison in terms of earnings potential between the two on average, at the median, etc. Finance is the highest EV occupation I can imagine if the only thing you're valuing is compensation.
Maybe I'm right and maybe I'm wrong, so I'll never know for sure, but it seems to me if I had started out in a very sleepy industrial company, I would have been in the very upper echelons of the industry because of the lower competition. Large profits di attract a lot of competition. But, I'm not going to try and find out anytime soon because I like this industry and have a comparative advantage because of all the time I've spent in it.
Also, I think you should include entrepreneurs in either category. Generally you start as an engineer or an analyst which builds the foundation for the paths you can take.
I kind of feel bad for replying in this thread because it has some possibility of being a good conversation, but went massively off track somewhere along the way.
Thanks BH. Hopefully this ends the discussion. Which was silly to begin with because anything over $100K a year is a pretty damn good lifestyle. No need to measure dicks, I just thought the per hour argument to be ridiculous.
Pretty sure the guy you dudes are arguing with was a troll.
I was an engineering undergrad. Straight out of school, engineers are looking at 55-100K all in. Average is probably 65K. I ended up going into consulting. Straight out of undergrad, 65-85K all in. Average is probably 70K.
Want to know why I went consulting (besides that engineering work and people suck)? The 100K engineering jobs are just as hard to get as top consulting jobs, except in 5 years, the engineer will be making 130K if he's lucky, while the consultant will likely be making 150K. Give it another 5 years, and it'll be 160K vs. 300K. There's obviously extreme outliers on both sides, but that's the general gist of it. Substitute banking for consulting and it isn't even close. People obviously go into finance for the divergent growth of salaries as careers progress. It's probably safe to ignore that dude - please don't judge the rest of us engineers because he's got some sort of autism going on!
Idk where the $90-100k figures are from but analysts at the BB I interned at this past summer were pulling closer to $130k all in. Regardless, it's always people from the STEM field that come on here to knock banker earnings on a per hour basis just because they make less as a whole. Same story, different thread.
this is one of the most ridiculous arguments i've read on here. first, the profile of a petroleum engineer in texas and an IB analyst in new york are completely different - not many people are choosing directly between these two roles. second, inky i don't know where you are getting your salary estimates. on average, an IB analyst will make more than an engineer in any location. i'm going to be starting at a MM firm in IBD not in new york and my base/signing will be between $70 and 80K and i definitely expect after YE bonus to be a decent bit over 100K. in the same area i would say the average engineer is pulling 60-70 all in first year out of school. everyone realizes that engineers work less, so it's just a personal choice - do you mind working the extra hours for the extra $$? i don't understand why you are arguing about this
Guys, don't you know I made $480,000 a year by doing someone's algebra final? Yeah, $480,000 a year. It's like this:
I got $50 to do this final, and it only took like 25 minutes. That is $120 per hour. Working 80 hours a week for 50 weeks at that rate brings me to $480,000. I make more than any banker straight out of undergrad. Plus, I am an entrepreneur. Ballin'.
I am not sure why this devolved into a repetitive and senseless argument about relative wages. I think the initial question posed is an interesting one. For starters, I've always viewed the talent drain as being in the other direction. So many of our brightest and most ambitious kids get sucked into finance. In another generation, maybe they would have been medical researchers, industry leaders, or scientists. I especially think this is true when it comes to the hedge fund world. So many people that I meet in the industry are incredibly sharp, yet here we are playing a nearly zero sum game against each other. I love what I do, and don't think I could do anything else as well as this job, but I don't think this is the case for everyone. It would be great if more people were to get disillusioned, leave the industry, and free up alpha for me to harvest. Also, this may be part of the reason why there have been no major innovations for a long time. People talk about tablets or cloud computing as being highly innovative, but I don't think this is the case. They are transformative from an architectural standpoint, but are mostly just reconfigurations and incremental improvements on existing technologies. I subscribe to the Peter Thiel thesis of innovation having materially slowed down over the last few decades. Correlation doesn't prove causation, but it is certainly an intuitively seductive thought that the finance brain drain contributed to this.
I really think people overestimate the creativity of engineering/science and this is coming from an engineer/scientist, who comes from a family that is entirely comprised of engineers in hardware/software at F500 companies (Intel/Microsoft/IBM/Oracle, etc)
For most people doing actual technical work, it's pretty repetitive. You have a few high level guys who set the technical direction of a project and the rest just execute. Yeah it'd be great to be the one invented the iphone, but it's supported by a bunch of engineers who would do the same shit as they would at ibm or intel designing the hardware. You get better at execution by a lot of experience and pattern recognition. My dad and a few of my family members are at the top of their technical ladder, but they always say don't romanticize the work, after 20 years, it's just a job after awhile. This is their response to my younger family members who are like "yeah I want to work on something that excites me, the next cool app blah blah blah bullshit"
Also, with regards to pay, most people will start at 65-75k with a BS. Avg guy makes ~100k. Top pay for technical track is around 150-250 and this is usually at least 15 years in with good leadership, obviously good technical ability and patents. For reference, IBM's top technical distinction is Fellow. There are only 50 in the entire company of 400k people (maybe 100k engineers). But an engagement manager/project leader makes as much as they do. You're comparing one level after a fresh MBA, to the top 0.05% in technical staff.
Even if you start your own company, you have to work your ass off for low pay. Maybe you get bought out for 100 million and you have 10% stake, so after taxes 6 mil? A person probably steadily working finance, earning high pay from day 1 and invests, will get that money by retirement.
It's almost exact same in pharma, but worse b/c you make 25k/year for 5 years in grad school. Fresh PhD (5 years + 2 years post doc is typical) gets paid ~100k starting out. Associate director/director (technical manager) usually gets 150-250k (typically 10-15 years industry exp). However, buy outs are worse if you do start up in pharma/biotech. You usually get paid small amount up front (scientists typically don't get anything here, they actually just lose their jobs), then only get it big once drug gets approved (8 years is fast).
Sure, some guys might start higher, like at apple, google or exxon, but after 10-15 years, it pretty much evens out.
Highly entertaining thread fellas. Needless to say, the argument has been rife with compensation inflation and misunderstanding of the opponents' industry.
At the tail of both fields upside is enormous. A young engineer getting bought out or handsomely retained by a tech giant is quite a few ticks from the mean (also, whoever referenced 400K for a salaried 1st year Petroleum Engineer at a supermajor has to be joking). More typical for engineers is to sign up with some Fortune 500 company way down the list and be content that their salary is already multiples of the national median and they live in a low cost-of-living area. But in the section between the tail and the meat of the curve, there is definitely good money and lifestyle to be had; think just-out-of-school engineer at Facebook, Apple, Exxon - likely 100+ on a reasonable schedule.
This thread has cited what have to be exaggerated numbers for 1st year analyst comp, but I won't offer a revision. Suffice it to say, the absolute dollar amount is on average higher than their engineering peers. It's also more than likely correct that the trajectory is also, on average, steeper at a financial institution. I'm perceiving the upside outlier event here would be making a transition to the buyside or a trading position, somewhere where the bulk of compensation becomes directly performance linked (carry, as I understand it, not bucket-style bonus). Obvious downside is spending the prime years of your life working 18 hour days in a cubicle.
Obviously there's no right answer to this debate - ultimate happiness is not largely dependent on your all in comp during your first few years out of school. If you get to the end and still think it is, you're probably not happy.
Something tells me the Street will be just fine. Even magnas from Notre Dame and UCLA can learn MS Office.
I agree very strongly with this. I was going to point out earlier: there are far more engineers than there are IB analysts. At the end of the day, you're picking out the top-end of finance grads who are actually able to obtain an IB position to the entire engineering profession. Not a fair comparison, which is why I was surprised by Inky's argument. However, even at the top echelon of engineers, there's a still a considerable delta in the expected income curve.
Not sure why people keep saying that first year analyst comp is exaggerated in this thread. If anything, it's low-balling what most incoming IB analysts are making at anything but the smallest boutiques.
Agree, but just barely!
Its a matter of perspective. Someone talking down on IBD on a Wall Street forum doesn't make any sense. I bet if someone from this board went to JDOasis and said bankers make more than lawyers, all the responses would be negative. Here is the summary:
Banking is a great gig if you want to make GOOD money and have minimal free time.
Engineering is a great gig you want to make DECENT money and have more free time.
I can only speak for myself, but I'm more attracted to working for a startup (within finance; I don't have an engineering background) because I'm more likely to be handed a job where my decisions can truly impact an organization (both positive or negative based on what I decide and how it plays out). Having spoken with many of friends who work at large F500s, etc., the possibility of actually making a decision that changes the organization is pretty slim in my opinion.
Lots of corporations are stuck in their old ways of doing things and it's only when things start to go bad that they really start assessing other alternatives from what I've seen. Working for a big company is something I'll probably do once I'm older (for example in my early 30s) and have a family to take care of, but while I'm in my 20s, I'd prefer to take some risks and work with some brilliant people who are passionate about whatever company they're trying to get going. The fact that I could also get some equity and get a nice chunk of change if the company goes public is pretty cool as well. Hell, even if I worked for a large company, I'd want to do so more in a manager-entrepreneur hybrid type of role where I'm managing an unproven business unit and trying to grow it. So for example, if a F500 company is looking to expand in an emerging market, I'd like to be head of the group that tries to grow it and establish a presence there.
I've read 0 comments so these may have been made, or may be completely irrelevant... idc: 1.) There will be ZERO, and i repeat ZERO... effect at banks if they have to start recruiting outside of "targets". I'm not sure where the notion that A) "targets" contain the only people capable of "banking", and B) that "banking" is difficult came from... but it's absolutely fucking retarded, lol. 2.) Prestige is nothing but a word that you attach to something to get people to do dumb shit for social acceptance. If you could somehow implant in the sheeple's minds that being a garbage man was "prestigious", you'd have every god damn nerd coming out of the Ivy's hanging on the back of a truck within months. Hold on to the "prestige" and wherever the salaries go, you'll still have people busting down the door. 3.) As far as the "upside" argument. Sure people at the top of finance make more than other professions, but consider the odds. Finances career progression looks like a triangle with concave sides. The higher you go, the thinner it gets at a progressively faster rate. Sure you may be making millions at the top, but personally I'd rather make a few 100k at the top if the career progression looks more like a trapezoid. Perhaps other ppl are starting to realize this.
You do realize that a trapezoid is just the bottom half of a triangle?
You've clearly missed my point good sir
Lol at the pyramid comment. You do sometime in banking, go do some time in PE and go into F500 strat or treasury as a VP or above. Banking is a massive feeder to top business schools and other highly desired careers.
And being at the middle of finance career pays multiples of what being at the middle of other careers do.
Perfect response.
The "path to greatness" that you're eluding to isn't as easy as it sounds. Since BlackHat loves to talk in E(V), the probability of being able to climb each step of the ladder successfully (Top IB -> PE -> M7 B-school -> back to buy-side/strategy) is extremely low. Thus, reaching the middle of a finance career (VP level) is in itself a very difficult to accomplish (in the tails of the distribution).
My school is a big target for banks and technology firms. From what I've seen, many students have taken a engineering job at Dropbox/Facebook/start-up over CS or GS (only including the ones that landed both offers). Obviously the inverse is just as common, but the argument of banking/finance giving you the ultimate career trajectory as BlackHat has stated is far too simplistic. We're basically assuming this person will always be at the top of his class and that oceans will part in his path to greatness where in actuality, bthe chance of a first year Analyst making it to the MD level at a top PE firm or the PM level at top hedge fund is just as low as working at a start-up and getting acquired.[/b]
And comparing absolute salary of engineering and banking doesn't make sense. Sure, the starting dollar amounts in banking is greater than that of engineering, but life isn't measured by dollars and cents. Every success has an element of loss embedded in it. If ANT values the mighty USD more than anything else (time with family, friends, hobbies), then banking probably is the best career for him. But for what engineers lack in money, they make-up in time; time developing relationships, time pursuing interests, or just time fucking around and chasing girls. So at the end of the day, you need to answer for yourself whether or not that extra $30-40k per year is worth your time, because there is nothing worse looking back on your life and finding out you lived it following someone else's dogma.
Full disclosure: I'll be working in banking
You don't have to be top or go to a BB to make more in absolute terms. You can go to a MM firm, do credit, capital markets, whatever. If you stay with the finance industry the pay difference between this career and others diverges very quickly. And if you value time you can go to a smaller shop, smaller city, whatever.
Furthermore, not everyone gets those awesome google engineering jobs. We are talking average banker vs average engineer. Being some highly recruited Facebook engineer from cal is an anomaly.
This entire argument is pointless and stupid. Do whatever you want to do, who fucking cares. Just hilarious how whenever someone states the pay difference between engineers and bankers the butt hurt crew emerges from the wood work.
There is no "average" banker. To even break into the industry you'd have to be far above average at a top 20 school, atleast. I don't see Harris Williams recruiting kids from UC Irvine or Riverside. So I wouldn't say a Facebook engineer is a anomaly compared to a "average" banker. At those levels, there isn't much of a divergence between the two.
Even at those levels, I would argue it still diverges quickly.
How many first year Analysts make it to MD at their bank? Very few. Where as even fewer make it to MD or PM at a PE firms or Hedge fund. Sure there is an argument that you can graduate from San Jose State and go ahead and work at a regional boutique, but lets be honest, no one's making millions doing ESOPs for your local restaurant chain.
I agree that by starting out at a (top) bank, you have an "option" to make it to the highest echelons of finance and have an exponential career trajectory in terms of dollars, but you can't deny each step of the way is a giant competitive hurdle. An event, that if played out over a thousand times, may only yield less than 50 successes where that option expires in-the-money (Taleb...)
I'd say those chances are similar for the engineers that start at (top) technology firms which leave to go on and work at a start-up that will eventually become acquired or makes it big. Basically an equally small chance.
Look, it's definitely true that very few analysts make it to MD at their bank or an equivalent role at a PE firm or HF. However, it's ludicrous to say that the chances are roughly equivalent to an engineer building a start-up that "makes it big".
More importantly, as TNA pointed out earlier, you don't have to make it to MD / PM / P to make multiples of standard engineering pay. The point is that the salary progression for an IB analyst is generally much faster, regardless of what track he or she takes going forward. But that doesn't really matter re: this discussion.
As northsider said, it's worth noting that finance is not "partner/MD or bust" - even if you exit finance after 2 years, you have still accelerated your career progression.
A good amount of attrition is by choice - how many analysts actually want to stay in banking? You can get promoted up to VP in large part through endurance.
You see a fair number of bankers exit to corp dev/strategy roles - from there, you have career stability on par with an engineer. There are also have funds of funds, family offices, and pensions/endowments. All offer compensation above what the average engineer will make, and good stability.
So, high finance might look like a steep pyramid. But the attrition is largely by choice, and you can exit to a "trapezoid" profession if you fail. It's not as risky as the hierarchy would imply.
I am not bashing engineering at all - certain niches (hello, petroleum) are awesome. If I had to recommend a career to a smart high school student, it would likely be engineering (or dentistry, for that matter). This is only because getting that first banking job is so hard. It is why this website exists. Even if you do everything right, it is far from a sure thing. But if you are comparing two job offers on the basis of compensation, banking will beat engineering almost every time.
But if you are really good at math/programming and only care about money, forget engineering and banking. Get into a PhD program, then go work as a quant at bank or hedge fund. These guys are clearing 500k easily, are hard to replace, and have decent lifestyles.
Working as a early employee at a start-up is VERY DIFFERENT than starting your own company. Its ludicrous to say that the chances are equivalent to founding Facebook. It's not ludicrous when you compare it to a coder that joined Facebook in 2008 from Yahoo and is now sitting on $12 million dollars of stock options.
High finance is only a risky profession if you're after the exponential pay increase. Coming from the West Coast, I know that Stanford and Berkeley sends around 50 students into banking each year (BB or top MM). If we assume that 25 kids will come from Berkeley (a generous assumption), and that half of those (13) come from Haas, the typical Haas student only has less than a 5% chance of making it to a top bank. It should also be noted that the self-selected individuals that choose to even apply for Haas only have a 20% chance of being admitted.
But where it gets interesting is when you compare the lucky and privileged 1% of business students that ends up at a top bank with the lucky and privileged 1% of CS students that work at a top technology firm.
The Analysts that want to move up to Associates or to a buy-side firm will once again be facing terrible odds to increase their pay.
The coders that worked at Google or Facebook will get invitations to join start-ups (often times top VC backed start-ups), without even a formal interview.
You have to think of these events from a expected value perspective.
This isn't right. Most analysts at BBs should be able to land buyside jobs - they might not get a megafund, but buyside placement is not difficult. And failing that, direct promotions are not difficult to get either. Unless you are a terrible analyst, the bank would rather promote you than grab somebody fresh out of bschool who has spent the past 3 years doing marketing.
The people who go F500/Consulting/Bschool after 2 years in banking aren't leaving because they are forced out - it's largely by choice. 80-100 hours weeks take a toll.
The whole promotion mechanism is different in banking than engineering. The challenge is not in the difficulty of the work. You might meet an engineer who is some sort of coding savant...but that doesn't really happen in banking. Associates are working 80+ hours per week, and a lot just can't take it after a certain point. That contingent comprises most of the "out" in the "up or out" structure.
Moving up the ladder on the buyside, and making the VP-MD jump on the sellside, are more difficult...but you still face far from terrible odds. Those partner/MD level promotions depend on your ability to start generating revenue.
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