Compensation Growth in Finance vs. Technology
Compensation is always being something highly emphasized about financial services industry and probably one of its main attractions but I never realized that the pay in tech and IT was so comparable and better on the entry level.
So I think some of the younger readers here shouldn't be too tunnel visioned about finance like I was in a way and really explore other options because compensation wise they might be just as good.
Comparing Wages Between Finance and Technology
A frequent discussion on Wall Street Oasis revolves around the difference between careers in tech and finance and which path offers better wages and better work life balances.
Starting wages between the two fields are largely comparable. Tech may actually edge out starting position wages on Wall Street considering that tech firms often offer stock-based compensation bonuses. However, our users point out that often times wage growth will be substantially larger for those that continue in careers on Wall Street.
Our users highlight that programmers and developers typically start out and top out between $150 - $300 K for wages.
However, in finance roles, particularly on the buyside, workers will likely surpass these levels once you are in the industry for a while.
Read more about Wall Street compensation with the Wall Street Oasis Investment Banking Industry report which offers details about salary and bonus figures all across the experience spectrum. Check out the 2018 Investment Banking Industry Report here.
You can find out more about the talent war between Silicon Valley and Wall Street in the video below.
Read More About Tech vs. Wall Street on WSO
- Silicon Valley vs. Wall Street: Working at Google vs. Goldman Sachs
- VC Analyst vs. Growth Equity vs. Consulting vs. IB
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The problem is that in tech, the compensation won't grow as high as in finance. Your friends will probably cosistantly get 150k-ish salaries for the rest of their lives, maybe a few will reach 200k. In finance, you'll have a larger percentage that reach higher levels of compensation. The kicker is the lifestyle/perks. If that is taken into consideration then tech is definitely a contender for finance, depending on how much you value lifestyle.
This is probably the consensus.
What lime said is by and large true. I know a couple of developers (well, technically they're developers/pseudo-managers) in their late 20's/early 30's making in the $300,000-ish range, but compensation isn't likely to grow significantly past that particular juncture. It's hard to add significantly more value than that unless you get involved in the more "Product Management" type roles.
The main point, though, is that they're absolutely okay with that. The people who work at these companies eat/sleep/breathe programming and software engineering. They wouldn't want to do anything else. Hell, the guys I mentioned in my introductory paragraph hate their part-time role as "management" and would much rather spend all their time in the trenches, developing solutions to the problems they and their clients are facing.
That's why I would caution anyone against pursuing Tech (or any other career path) simply for the dollars. Plus, by the time this generation of coders has reached maturity, who's to say The Tech Boom 2.0 will still be booming quite so hard? We've seen how quickly things can change in Finance, at least as far as compensation is concerned. Chasing the money -- without significant emphasis as to what you true passion is -- is a great way to end up a day late and a dollar short.
Also, assuming you're after that illusive $1,000,000+ pay day, then finance is still probably where you want to be.
Flake's acceptance :')
yes but finance has more of this thing called presteej.
Not so much. There's more prestige in working with Google than working with Goldman Sachs.
This is true. Was recently talking to some 'higher up' at a BB and he did note that there was a very very very slight change in applicants. For a lot people Google really does fit with their personality and they love coming into work.
i sed presteej not prestige.
Haha
GS only pushes money into their pockets. they push cocks up their clients' asses.
people srsly need to stop obsessing about starting salary, its irrelevant.
comp 5-10 years down the line is what starts to matter
Thank you.
Comp 5-10 years down the line will probably be whats most important (you're more likely to have kids and stuff) but when choosing a degree/career most people tend to look to starting salary because: 1. 5 years is pretty far down the line for a 21 year old. 2. They will probably have student loans to payback.
Stop obsessing over salary period. Being a trader / ibd analyst is completely different than from what a lot of my friends do at msft / fb / goog / etc. Sure the entry level salary is on par. But there's a big difference between being a non quant finance worker and being a software developer. Culture and day to day work. If you're thinking about career attractiveness solely based on compensation, I would say you're just doing it wrong period.
ifts like comparing models n bottles to playing ultimate frisbie in the office... or apples to oranges
The biggest difference is that it actually takes brains and talent to land a job in Silicon Valley vs. connections and a lambskin from the right school to land a job on Wall Street. Your average banker wouldn't last five minutes at Google, but a Google engineer could easily run an HFT desk at Goldman.
My thoughts exactly.
Very well said
I agree with your general sentiment, but you're seriously underestimating the amount of tech savvy in HFT/quant finance.
Different jobs take different skills. I dont disagree that the average silicon valley 27 year old blows away the average wall street 27 year old in terms of IQ, but I disagree with your statement that the silicon valley dude could just drop onto a trading desk and be good at trading, making markets, or running the desk. You said HFT specifically and I have never worked in that particular discpline of trading but I have worked with quite a few quants whose actual brain power dwarfed mine and I wouldnt trust them to do anything that required any qualitative judgement which includes running any type of trading desk. I am sure there are many exceptions I am just saying that just because someone is smarter doesnt mean they would be better at every job...
Second this. It's not even a fair comparison. Being a great trader / investor requires a high degree of social savvy and qualitative judgment about some pretty sophisticated trends, events and business models. No doubt these people could not do what the geeks in Silicon Valley do, but it goes both ways. In general, the really good investors I've met are far smarter than anyone else I've ever come across -- but it's smarter in a more wholistic way, like "yeah, this is how shit actually works in real life, and here's how we can profit from that." You need to have both incredible breadth and depth to be a really skilled generalist investor across asset classes.
Silver!!for you sir
Touche, sir. This is nowhere near correct. Over the past 3 years, I have presented dozens of talented people from Google, Amazon, Facebook, nVidia, MS, etc, to clients in the HFT space, with very little success. These are not run of the mill candidates either. Many of them were "top performers" in their respective companies; some being lauded with founder's awards, etc. Google is a huge company. HFT desks around the globe to not add up to 20% of the people there.
Contact me for further information. www.wwfirs.com OR bhughes (at) wwfirs dot com
Touche, sir. This is nowhere near correct. Over the past 3 years, I have presented dozens of talented people from Google, Amazon, Facebook, nVidia, MS, etc, to clients in the HFT space, with very little success. These are not run of the mill candidates either. Many of them were "top performers" in their respective companies; some being lauded with founder's awards, etc. Google is a huge company. HFT desks around the globe to not add up to 20% of the people there.
Contact me for further information. www.wwfirs.com OR bhughes (at) wwfirs dot com
You may have been a broker in the 90's or something, but I don't think you have any clue what trading floors are like nowadays.
The average trader in instittutional broker dealerage is about as smart as the average college graduate. VIX traders? MBS traders? Maybe corporate bonds and more complex stuff? Ok, add another 20 IQ points.
Move over to developers in algo trading and you start to see more brainpower. But you don't find that brilliant creative spark that can take some new idea out of nowhere like you see in a lot of kids at google.
Most of the people that I knew who went to Google for software engineering roles were much smarter than all of that. If you worked on the business side at Google, I'm not sure that's what Eddie was referring to.
I agree, but I still think that going to work at Goldman is still a tangible choice if that is what you want for your life.
In addition to all this wonderful information, I know plenty of programmers in their upper 20s lower 30s that sometimes pull 90-100 hours/week to meet deadlines for projects. Sound familiar? I think it's a matter of doing what you love. The computer science guys are probably on some computer science forum right now talking about how they'd do anything to get into an Nvidia architecture design program or work at Activision/Blizzard.
Same thing that we see people do here, just a different industry. And someone hit the nail in the head above regarding compensation. You start out with a lot and get to, roughly, the 300k point and it slows down tremendously. Most people, including myself, wouldn't mind a compensation package of that magnitude, but finance will by and far always be the area with more upside in compensation throughout your career.
Actually, I think the tails in tech are much fatter. The top 0.05% of programmers go on to make billions- generally enjoying an extra 0 over their wealthy counterparts in finance. The problem is that the top 1% does not go on to make tens of millions like in finance.
This, but I was too lazy to write it.
The average comp, excluding the 0.05%, is higher more or less across the board in finance as well.
But the bottom line is that if you enjoy tech, do tech, and if you enjoy finance, do that instead. If you hate what you do, you are not going to be the top anything.
And if you're a high roller in finance, you might have a chance to participate in some fat tail tech investments. Just don't be like my boss who passed up a chance to cut a check to Google pre-IPO. He is not a tech investor but met "the Google guys" at an event and they asked for money -- he fumbled the ball badly on that one: "Hasn't search already been done?" OOPS.
1 in 2000 programmers make billions? Lol no.
People getting hired into Google now will never get rich there, even if they max out their equity-based comp and GOOG stock beats the market. They'll have to leave to start their own thing. It's all about equity.
The minute someone said the word "prestige" I blanked out of this discussion. Assuming you're self-secure, Interest in your work and the mullah is what matters.
Besides, the most prestigious thing is actually never the best option long term (at least in terms of $$)- usually its the 3rd or 4th. Although I admit it's hard predicting the 1st and 2nd.
Eddie B nailed it. I was a comp sci major in undergrad and can tell you that if you are a rockstar in the financial world, you're a pretty smart person with decent interpersonal skills and good connections. If you're a rockstar in engineering/computer science, you're usually an effing genius. You might be as socially functional as Rainman, but if you can stand out in intellect among the other tech geeks, these companies know you're worth the investment because there aren't many people that can do the things you can do. To give you an idea, Sergey Brin was my classmate's math TA for Calc 2. The man was nailing double integrals in his head. If you're one of these rockstar geeks and can communicate effectively, you're worth every penny of that starting salary.
There are obviously a few brilliant people in finance, as well, but they are usually well rounded and do not possess the same freakish genius that the best of the sciences can offer. Nothing wrong with that. At the end of the day, do what makes you happy. If you're good at what you do, you'll get paid...so long as you're not good at non profit work.
^^^ Given that 1% of the country is actually trained in software engineering, this works out to about 1 in 200,000 people for the entire country, leaving room for 600 people on the Forbes 1000. Given that about 60% of major IPOs these days are from the tech sector, I believe my number is fairly accurate.
You'll never get rich at Google, but you'll get rich at the startup you go onto afterwards. The same principal works in banking.
4 years in banking -> PE -> $$
4 years at Google/MSFT/IBM/Facebook -> Startup -> $$$
You switched from "programmer" to "trained in software engineering", different sets. Even so I think your numbers are still optimistic.
Expectation at a PE firm is way higher than at a startup. Even if you have a successful startup, billions are very rarely in the cards. Also, most startups go to zero, zeroing out equity and also one's invested capital.
I agree with you re: fatter tails though; a startup is much riskier (more leptokurtic) than finance.
Java is free, Eclipse is free, MySQL is free, PHP is free; even the servers are free until you have enough operating profits to easily pay for them. The analogous stuff that costs hedge funds tens of thousands is all open source to developers these days.
I talked to a MD, head of S&T for one of the Big5 in Canada, who was also an engineer pre-MBA. He said that any job where you receive salaries is never gonna make you rich. Another founder of a major graphic card company here said that, someone who earns 100,000 and works 10 hours/week is probably richer than someone who earns 1,000,000 and work 100 hours/week.
Long story short, engineer or banker, you are never truly rich unless you OWN the money machine, regardless of its size.
Hence the allure of PE/VC/HF. (At the higher levels) You are an owner, not merely an employee.
Leptokurtic? Seriously??? :D
Most people here, rightly or wrongly, assume they are in the 0.01%, so that really doesn't matter to them.Lets put it this way, your friends who are making 95K + and got offers from these great Tech companies are also really really smart. They are most likely really passionate about technology and have spent tireless amount of hours intelligently designing code. The depth and complexity of what top undergrad CS students undertake is beyond many other majors and you can't develop an acumen in it unless you are truly passionate about it. These kids are problem solvers, and you must realize that the range of salaries for CS students is quite broad. It can range from 55K to 100K, even at relatively good schools.
Why? Because the top coders are a dime a dozen, and years of experience may not be able to provide you with that problem-solving intellect. Since they are a scarce commodity, top companies are willing to pay that much for a top fresh grad (top 1 percentile of all CS undergrads in the nation... so as you can guess they come in different forms... it could mean top 80 percentile at MIT/Harvard/Caltech... to top 10 percentile at UT Austin/Purdue... to top student of Kansas State U).
Breadth based intelligence is often different from depth based intelligence. Breadth based would be a sorta well rounded individual, and depth based is the Asperger's type person. I think there are more breadth based people in the world than depth based, hence the value to society of both are debatable. Breadth based folk are worth their money in Finance (IB, S&T, PE, etc.) and depth based excel in the Tech sector.
Bottomline, do not become a programmer unless you know who you are!
At the bank I work for, we've found that it's more like top 5% at Rutgers= top 15% at MIT. We don't really need to go lower on the value chain than that. We've also found a strong correlation between grades in algorithms and problem-solving ability. Of course, we're also looking for clean coding and skill in software engineering- the ability to develop one solid architecture once and for all that will survive the Jenga-like game of changing markets. So we usually follow up with a project of some sort.
The rare commodity is a programmer with strong business sense.
As an engineer who went from Silicon Valley to Wall Street, all I can say is best decision of my life so far.
Also, engineers aren't as smart as you guys seem to think. There is no way I (or any of my classmates) could run a HFT desk.
I doubt engineers that go to the street and work IB are more/less smart than the normal hires. The only difference might be initial numeracy advantage.
I'd say the math/physics people seem smarter when you initially talk to them (probably because they are more passionate about their fields of study), but after taking classes with people from various math/science/engineering majors I realized they are pretty much all the same.
Google engineers are in their own class.
Why is everyone arguing? Both are great career paths. I still feel like adding my 2 cents though. Simply put, you make more money in high finance in the long run, but you provide more value to society as an engineer or software developer and the intrinsic nature of your job is more exciting... unless you're a code monkey, but even that's probably better than building models day in and day out. Mind you, models don't bother me. Speaking of models, whoever made that "models and bottles" comment either made a bad joke or is oblivious to the actual lifestyle of an investment banker.
Anyway, I'm glad I'm double-majoring in computer science and finance lols
how do you delete double posts?
@Bondarb Yeah, I was making the point about HFT specifically. Qualitative trading is a whole other ballgame.
For a finance community, I think WSO has a tendency to hype up the glory of software engineering a tad too much. Many of the smartest engineers I know -- had they chosen finance -- would simply be very smart finance people. Similarly, many of the smartest finance people I know -- had they chosen engineering -- would be very smart engineers.
Am I going to argue that the intelligence ceiling required of a Google developer is lower than that required to work in IBD (in terms of actually doing the work -- getting the job could feasibly be a different story)? Of course not; I don't think that anyone would make that claim. That said, what if we compare some high end software engineering jobs to being a hedge fund portfolio manager -- a job that most of the entry-level investment banking monkeys will never even touch, having gone corporate or PE years ago? Or either of those jobs to Pure Mathematics Research? There, I think the comparison starts to make a little more sense. (Although the type of intelligence required is probably quite different in each case).
Anyway, my main point is: Do the thing that your want to be doing, or else you're going to wish you'd done a different thing. There's plenty of exceedingly smart people in Software Engineering . There's also plenty of exceedingly smart people in Psychology Research, Medicine, and, yes, even Finance*.
*Amazingly, there's still been no documented sighting of an exceedingly smart person working in government.
Also: Edmundo, assuming you read my post, I know you mentioned having a subscription to lynda.com. Would you say it's been worth it? I want to bite the bullet so that I can have a good resource for learning Ruby on Rails, but I'm not sure which service (or individual course) I should go with.
Very astute observation, atomic, +1 for you sir.