How to get over having a low beta career
I am an incoming analyst at a EB and have started to think about what I might do after my 2 year analyst stint.
With that, I feel like the compensation in banking and ‘high’-finance has really fucked my perception of money and opportunity cost. From a financial perspective, no opportunities outside of high-finance seem rationale.
Examples:
- Graduate School (losing 2 years of income + tuition) is a 500k or so immediate swing, just to make likely the same or less money
- Taking a job outside of high finance is an immediate 6-figure swing, plus the growing difference of what your salary could’ve been if you stayed in high-finance over the years
- starting a company almost always has a minimal expected value since most fail
- etc.
Although grateful to off rip be in the 90th or so percentile for household income in America by myself, I do wonder how starting your career off with such a enormous opportunity cost plays out down the line when it comes time to take risks that could lead to substantially more wealth.
Obvious counter argument is there are other factors/reasons to make these decisions than purely financial.
Idk where the question in this is, any thoughts? How does starting your career off NOT in a position where you ‘have nothing to lose’ play out? How much of your lifestyle would you be willing to sacrifice at all?
Persoective from 20 years later. It only gets more this way when you become more senior. I have turned down two partner roles at great PE firms, both of which were super interesting (not that my current role isn’t very interesting) because of the 75% drop in cash comp, even though there was a lot of theoretical upside 10 year down the road.
Nature of life. I’ve reconciled myself to it. I have decided to add some beta to my life by making some interesting start up bets during the upcoming downturn. Also to make a conscious decision to work with some earlier stage companies as a banker and structure fee arrangements in a way that gives real equity upside.
Great reply. Would be curious to learn about the early stage companies but understand remaining anonymous. How are those two PE firms you turned down doing nowadays?
Thanks for posting. One question I have: It seems like vast majority of IB analysts want to jump ship to PE. I have always been interested in being a career banker so was curious if you are happy with your decision to remain in IB, and any other thoughts about this you have (i.e. the pros and cons of each) now that you have perspective from 20 years later.
Every high payed Career, you have to work a lot look at doctors and surgeons, lawyers etc so stop it with your tech bullshit
Lol wtf he didn’t even mention tech…
That’s mostly true at the junior levels. At the senior levels the hours tend to get better and the pay is very high. My wife and I are PE and HF and while we love our work so tend to work a fair bit (or at least think about work a lot) we have many weeks at 50ish hours. I’d say even the “bad” weeks are less than 65. So the hourly pay is a lot.
In regards to PE, isn’t working at a Mf/UMM the same as banking in terms of hours even if you become a senior
In banking specifically, an MD told me that he usually never sees his kids because he's working all day.
Are you at a LMM/MM? Seems like MF/UMM MDs would still work like hell.
All W2 careers are commoditized these days (law medicine finance comp sci). Have to be creative and start your own thing if you want upside.
Why are they commoditized?
One way to get over “low beta” is to get fired during a recession and struggle to find a job for a while. Better yet, consult for awhile as a 1099 contractor and fight for the value you bring to your client. You will find that without the group-protection of a traditionally high paying cohort and thus market comparables for your fees, you have to “survive the jungle” or die.
You realize that life is not always a straight path. You realize being busy (and wanted) is better financially and psychologically. You might also be forced into entrepreneurship because that’s the best path yet unknown outcome, the alternative being working a job you don’t like just for a paycheck (but in a bad economy that might not even be an option).
I have lots of friends who have stable jobs and very little career turbulence, but can’t wait to retire. There are two ways of looking at that - low beta life: 1) stable and comfortable or 2) not maximizing.
I think the MD who posted above found a way to bridge for upside with minimum downside (money only at risk, but not time, reputation, contingent liabilities and/or personal recourse). That said, in an up-or-out industry (get promoted or be kicked to the curb), there are so many variables to making partner. That path is not for most of us.
I’m a family man, so Maximizing is going to Universal Studios and riding every ride there and staying until closing, which right before closing the lines to the rides are all short. That’s when you ride Transformers, Jurassic Park, and Harry Potter. You live for that period where there are no lines. Whatever that means, career wise. You can interpret for yourself.
Congrats on the EB role
Aditya Mittal started off at Credit Suisse and now he's CEO of biggest steel manufacturing company in the world
That sucks for him because steel is a terrible business
Minor detail left out here is that his dad founded the company
You're getting too caught up in the details and not seeing the forest for the trees. The point is that the world is your oyster following a stint in IB
Coincidentally, the name of the company is ArcerlorMITTAL. As if his dad had founded the company…
Like fr tho, this dude was made head of M&A of the company three years out of college. He’s the definition of nepotism
"Aditya Mittal (born 22 January 1976) is the CEO of ArcelorMittal12 which was founded by his father Lakshmi Mittal, who was ranked 21st in the 2012 Forbes list of billionaires.3"
If you are born the son of a billionaire, you too can become a billionaire!!
Very interesting post and I am finding myself in a similar dilemma. I have done a few internships in PE and banking. Now incoming analyst at GS/MS. I don't think that banking is very fun. The hours and culture obviously sucks. I found PE to be more interesting as you get more responsibility and think more on your own. However, the work is still pretty similar to banking at the junior levels.
I feel that going into any other profession would be a bad choice as I've worked extremely hard to get here. The salary is amazing and it's one of the most prestigious firms on earth. Walking away now would be throwing away all my hard work and objectively there is no way I could justify it. However, I know deep down that no one outside of finance has any idea about the prestige and I don't have any expensive habits so I could live a great life on a much lower salary. Yet, I will stay in banking for my analyst stint merely because I can always go into another industry later on, but getting back into IB/PE if I started out in another industry would be extremely difficult.
Who cares if you’re “throwing away” your years in PE? It’s about being happy and fulfilled. If you’re not feeling that way working in PE I’d argue that you wasted your time in banking just to get to PE. Life is too short to do something for 70+ hours a week if you’re not happy about it.
IB is on a higher beta side. your bonus is a big component of your comp and it heavily depends on market. moreover, you can get fired in downmarket. so, I don't know what low beta you're talking about. the higher beta is only HF probably. maybe you don't know what beta is? analysts should have grilled you more during interviews.
Yeah honestly I have the same issues. I value life + experiences + happiness above all so my time vs. money utility curve is prob way flatter than the avg. financial professional. But stepping down to a 9-5 job that makes peanuts compared to what I do now doesn't seem correct either. Working that extra 20 hours literally 5-10xs my comp - doesn't seem right to trade down.
FWIW the way I've self rationalized is that financial independence = the ultimate lifestyle as I can live my life without someone telling me what to do so I'm just trying to sprint to my retirement number. I know FIRE is gimmicky asf but we in this profession have the ability to get to retirement levels of wealth in a way that 99% can't do without living like a monk... so why not do it?
Basically all my career choices have been focused on this (e.g. HF to get paid upfront vs. PE which locks you in for LT) and once I hit my number I'm out
The mileage on this may vary as I am also a risk taker and I've been lucky enough to have a blue-chip background so my margin of safety is better than most. Ultimately you just have to make your own decision so please don't use aggregate rando forum posters as guidance for what you should do, just intake our stories / frameworks and see what resonates with you
looking for a higher beta option? look up on the upper right/center of the screen and click on the "HF" tab.
come over to the dark side..
Or, amuse yourself by just browsing through our collective regrets at choosing a high beta career
I want to, but you guys don't want me
What made you want to join a HF rather than PE
More applications of data all over the place
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