Best Possible Position vs Best At What You Do

I’ve been thinking about my career in the long run. I’m in a position where I may be able to pursue some very high quality positions in the industry, but there’s a good chance that I will only be mediocre/not the best in that position.

Meanwhile, I could pursue a less competitive, difficult career path where I can likely be one of the better employees and rise through the ranks quickly.

I am sure many of you thought about this at one point or another. Would it be better to pursue a career where potential pay would be highest but good chance I do not reach the upper echelon (such as HF) or pursue something more relaxed and less pay (something like FoF) where I could potentially dominate?

Although I do not want to get into specifics and focus on philosophy, what are your thoughts about this regarding potential compensation, lifestyle?

 

I'll jump in – spent the last 3.5yrs in IB (GS/MS/JPM) in a top group and have been trying to recruit out over the last few weeks. I've grappled with this question and my thought process is that most of the roles where I could stand out from my peers are often easier roles to break into where the talent pool is a lot more diluted. For that reason I think a lot of the roles which are less competitive are roles I could probably fall back on later if I end up really unhappy with my current spot. Most of the higher quality, "upper echelon" roles are opportunities I know I'll probably only get one shot to break into and pursue (esp while I'm still younger and inexperience isn't held against me), and that those roles will be much harder (if not impossible) to break into on. 

I also think personal life can factor greatly into this. I spent most of my IB years single and during that time it was so easy to focus on myself and grind it out. Towards the end I ended up getting into a relationship and that's when I started to realize that the extra hours spent trying to produce the highest quality work product and differentiate myself from others would take away from a meaningful relationship. It's still a factor in my next job decision but luckily my partner also works in the industry and is understanding of the fact that some of these "upper echelon" roles only come once in a blue moon and that maybe now is the time to still grind for a few years in exchange for better opportunities with more flexibility later on.

At the end of the day, you don't know how good you'll be until you try it so counting yourself out now is the wrong mindset IMO

 

I went from a very good team at a very prestigious bank to a well regarded but small PE fund (latest fund raise  

Doing a few years of banking so that you can be ultra rich for the rest of your life is fine, but personally I’d recommend that you try and get off the wagon by your mid/late twenties. That way you’re still young enough to party your ass off (especially important when your friends start having bachelor parties) but you’re also rich enough to do all the cool stuff you wanted. Just think is that extra $50-100k a year really worth sacrificing all your relationships and personal life for? Especially when you’re in the top 1% anyway.

 

A few years in banking wouldn't make you ultra rich by any means but you'd definitely be well to do by most standards if you managed your money correctly. I think the value prop of staying into your early thirties is that you can exit by then with potential of being ultra rich – but to your point that definitely comes at a lifestyle cost 

 

I actually don't think "standing out" versus a diluted peer set in a certain position will likely result in the best optimization for what career path to choose. Think I've written this elsewhere in other forums but the real focus should be on trying to plot on an X-axis/Y-axis the highest maximum point for what you enjoy doing the most (day-to-day responsibilities, culture, intellectual stimulation of one's work on one axis) and what you are the most talented at/can become the most talented at (on the other axis). Talent/skill is typically not a relative thing at senior levels - at least in hedge funds/public markets performance being as volatile as it is it tends to just be a function of how you can maximize talent on an absolute basis, not a relative one. Obviously the Citadel's of the world probably have some internal measure to compare PM's and such for example, but generally speaking talent is a raw absolute trait and in my view is useless to compare.

Think of it this way... the 4th line guys still have a spot on the team and do tremendously well. They still can vie for Stanley Cups and be part of winning formulas on teams. The 5th best PM at Citadel is still a REALLY strong PM. You get my point. Doing FoF as a symptom of wanting to stand out or dominate would be like deliberately playing in the minor leagues but winning the Les Cunningham every year (my NHL/AHL fans will know what that means).

 
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I used to think this way as well. But, now that I'm much older, I'll say this....You should not sell yourself short. But the more important point that I wanted to make is that it's not necessarily easier to rise to the top and stand out in a "less competitive" career path. The reason is that, as you become more senior, it's the intangibles that determine how successful you will be.

Let's say that you take the less competitive job in the less competitive industry. If you are up for promotion and the firm can only pick 1 out of 2 people, who is to say that Johnny from State School is not better liked by seniors / better at selling himself / better at navigating office politics /  better at the job? Then there is the stuff that is really out of your control. Maybe the firm is looking to promote someone who falls outside of your profile (e.g., gender, race). Maybe it just so happens that when you are up for promotion, the firm is not looking to promoting anyone.

When I look at all of my successful friends (e.g., Partners at MFPE, SM HF founders, MDs in banking), I would say that the most important determinants of success in their careers comes down to intangibles, luck, and timing. There is no guarantee that these factors will be more favorable to you vs. someone who, up to this point, has a less impressive resume than you. (In fact, when I look at back on my analyst class in banking, for example, it was the lone non-target kid who everyone initially looked down on who wound up being the most successful because he had a chip on his shoulder and something to prove. Btw, he is now worth >$500mm. Not a typo.).   

 

I think this makes a lot of sense and I agree. I would not shy away from ultra competitive paths bc “tougher to succeed” or target perceived easier ones bc of “less competition.”

Instead I would look at aptitude and interest and filter on that assuming not a dying industry. So for example if you are interested in something perceived as less prestigious, let’s say wealth management relationship management (not to pick on), and you have gotten objective advice you are good at that then I wouldn’t shy away from it even if you are a top target grad- many can become very successful this way. Similarly if you are a top target/banker but don’t have the mindset of a stock picker or enjoy it I wouldn’t “force” trying to recruit for a single manager fund. 
 

There are many examples of unconventional candidates succeeding at seemingly conventional roles such as say long/short PM and there are lots of highly pedigreed candidates that succeed at very niche asset classes that they are well suited and passionate about

 

I agree with you but also find this topic interesting. I remember reading posts on here about this topic before an a bunch of RE professionals in LCOL markets were saying how it was easier for them to be successful compared to grinding it out in NYC. They mentioned how there was a ton of random RE developers across the country who are worth 8 figures, probably more banking MDs

 

very good topic. I thought about it a lot cause I had/have a chance to move to IB/PE/HF.

in my opinion, it is better to choose the 2nd option, because career is a marathon and not a sprint and the bigger money comes in the later stage in career anyway.

an illustrative example with numbers:

1. let's say I move to IB, stick around for 5 years, and get fired due to underperformance due to burnout and dissatisfaction with life and due to IB having enough high quality candidates, so there are no problems to replace me. I'll have to start from lower position, so I'll make 250k+300k+400k+500k+600k gross in these 5 years. then it will be difficult to bounce back after getting fired. there are plenty of people who got laid off during the last 12 month from great banks who are struggling to get any job, even sub 100k, cause companies think that if you got laid off, it's a clear indicator that you're an under-performer, so they're not interested. so let's say you'll get a corporate finance gig and make 150k/year after.

2. or I can stay where I know I can easily perform well and chill. in the next 5 years I'll make 200k+220k+240k+270k+300k gross. then let's say it's 350k/year after.

let's say I invest my money in SP500 and expected return and thus discount rate is 10%. terminal growth rate is 2%. let's ignore taxes. NPV1 = $2.65M. NPV2 = $3.63M.

 

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