Do you think finance is a brain drain?
Title. Do you think too many overly smart, gifted kids are going into finance hoping to make bigger bucks? And if this brain drain exists, has it already negatively impacted society?
The way I see it, finance is more suited for a guy like me - with average IQ, can't do rocket science, can't do advanced math and physics, econ student at a weak target/ strong semi-target, picks easy classes to max out my grade, has to read a textbook a couple of times to truly understand the content, no photographic memory or whatever. That's where the peak of my intelligence can get me - filling up spreadsheets and pushing bits of paper around, and I know it and I've accepted it long ago.
When I see some genius engineering/ physics nerd go into Jane Street/ Optiver and become a quant and join the futile effort of tryna beat the market against thousands of other people tryna do the same thing - i feel like its a waste of their talent. Granted, I know people take what they can get and not everyone can get into NASA (same way how not every finance major can get into GS and you have to be flexible with your career plans). Working in a science lab researching cancer or some shit is also probs not as impactful as an outsider might think.
But I also think there's insufficient incentives for truly gifted students to go into more productive fields. Thoughts?
No. Maybe to an extent, but I know doctors who aren’t the smartest people, but through hard work and determination, they became doctors and experts in their specialty.
I firmly believe that once you have a basis of general education, hard work (and to an extent, luck) determine how successful someone will become. I probably could have gone to med school if I studied hard enough. However, I chose a different profession.
Lots of smart people working non-white collar jobs bc of a lack of willpower or motivation. One of the smartest dudes I’ve ever known decided to fry his brain with acid and shrooms. Another is working selling like mortgages or something that takes little skill
Good point and I agree with what you have said. However, the question is whether there are insufficient incentives in more productive fields (e.g., STEM) and thus top students in those fields flock into finance instead of continuing down those paths where they might become successful
Gotcha - I’d argue if society valued the potential advancements made in STEM fields due to the smartest people pursuing a career in said fields, the incentives would be there.
Comes back to the market and what’s valued - society as a whole simply doesn’t care that much, instead valuing money and profit over scientific advancements.
This is a great question. From my own personal experience I would say you are right. I was a Biochem major- I worked in a lab doing research- decided screw it finance was easier and paid more money and here I am 20 years later.
I don't think that's the case, and STEM people are now earning way too much as compared to last 2 decades. Society is skewed towards STEM now. It's the fine Arts that is suffering, and needs an awakening.
yes I've been on this particular train of thought for years. but things have shifted in the past decade, people moving towards FANG etc, which is well documented. intelligence is relative, who you think is smart and who I think is smart may be completely different.
Quite the opposite. I don't think we have enough smart people in this field and need to pull more from other fields.
I can't believe how many very senior finance professionals I've met who don't understand the basics of DCF, valuation, and accounting basics. When dumb people make bad financial decisions, it does affect all of society, just in different ways.
if so many senior pros are dumb, then why's it so hard to break in even as a target
Is an IQ test part of the entrance process? You're being asked some basic finance and accounting questions. Besides that people are just looking for fit etc. As you note, you don't have to be a rocket scientist to make it.
In fact, that's kind of the problem. At my school, all the smart kids went to study engineering, medicine, and the sciences. Brain drain to other fields. The less smart kids studied business. And, you can do just fine for a long time copying excel models and copy/pasting presentations. But at a certain point, like when you're bidding on a $500 million deal with investors' money, you really need to know your stuff. You need to know finance as good as a NASA scientist understands physics. And I've found that a lot of people don't. They may be smart but don't really know their stuff as well as they should given the massive responsibilities that they have.
cause you don't compete against senior pros, you compete against other hungry fresh grads from target schools who dedicated several of their last years to prepare for interviews and get the job. if an average applicant for an IB Analyst position was competing against an MD at the same bank, the applicant would get the job cause the MD would completely blow the technicals.
good take.
to add to this, I noticed that there are a lot of applicants who know finance/valuation/accounting well and there are not enough open positions for fresh grads, so the competition is fierce and a lot of people with good knowledge of finance/valuation don't make it to IB or even Big4 TAS and similar. but then you look at seniors in IB, TAS, executives on the client side, and vast majority of them don't know finance/valuation.
ChatGPT
Question: Do You Think Finance Is A Brain Drain?
It is not accurate to say that finance is a "brain drain" in general. Finance is a broad field that includes a wide range of activities and professions, and it can provide many opportunities for personal and professional growth. However, like any field, finance can also have its challenges and drawbacks, and it may not be the right fit for everyone.
Isiah is no longer going to contribute his own thoughts. they will solely procured from chatGPT. someone should just make a chatGPT account for WSO and comment on everything
Isaiah lost motivation after Patrick took the majority of his bananas away
I would argue as well that the genius engineering or physics nerd shouldn't feel pressure to "change the world". I specifically went into trading because of the type of personality and environment that comes along with it, the money is great as well don't get me wrong but even if NASA or curing cancer paid more I still wouldn't be attracted to that type of career.
I've competed all my life, it was video games in high school (Grandmaster starcraft, semi-pro in CSGO, etc. Like every game I would play I would end up top 5% or better) and powerlifting in university and was probably top 5% of strength for my weight + age class in certain lifts. Going into trading was like another opportunity to compete and really stand out amongst others. I'm still pretty junior but whenever I come to work I'm excited, and super motivated, and spend extra time here because I want to.
Working at NASA or curing cancer or engineering the next life-saving device is frankly not interesting to me and I'd argue most of my colleagues feel the same way even if the pay was better they'd still love what they're doing now.
It's funny you mention this because I was a computational biology major who went into biology for pharmacology and drug development specifically looking into cell growth etc. and just realized how boring it was compared to all the different stimulation I'd experienced in the markets and through competing in powerlifting or with video games. So sure, finance may be a brain drain but I'd say most of those people we're taking aren't the kind of people who would've been in that cancer-curing or NASA engineer talent pool because they wouldn't have cared enough to apply.
Grandmaster, damn bruh. It took everything I had to hit Diamond on Zerg pulling ling all ins on raging noobs.
I really love and hate your answer here.
Hate:
Begins with referring to the people who have the largest influence on meaningful advancements as nerds, and ends with you saying you would never want to become a doctor, even if it paid the most. You sound like the guy who only competes in things you are naturally good at. I am willing to bet that early on, you were above average at math, video games, and in the strength department.
Love:
I think you are right, but didnt articulate it the right way. I think most of us in finance looked at all the top jobs out there and tried to figure out where we could excel. Maybe you're excellent at mathematics and analyzing macro trends, so being a trader made the most sense for you. Personally, I realized I would make a shit engineer due to the science component, and switched to finance.
I think you call out something many of us also have in common, which is a fierce intensity and desire for competition. IB / S&T / Corp Dev/ PE, we are all fighting for a small number of spots, with promotions being few and far between. We work on lean teams with a lot of responsibility, and in high stress environments. We are willing to take relatively big risks (working jobs with low job security, fierce competition, high turnover) in order to do what most people simply wont. However, I think few of us were built to be strong engineers / SWEs / doctors. I simply dont think we have what it takes, and I dont think we could compete in those same spaces. For those of you who beg to differ, I would be curious as to why you selected finance in the first place. If it was purely about comp, do you feel good about that choice? There is no right answer, but I am genuinely curious.
Hmm +1 SB because you're very spot on here. Honestly, I was typing pretty fast haha, and just skimming the off-topic. I apologize, I didn't mean nerd in a derogatory way. In my high school and university, that phrase didn't have a negative connotation to it, it was more so a compliment towards intellectual acumen than an insult targeted at social skills, and I didn't mean for it to sound like a negative way to describe those who have a large influence on meaningful technological/scientific advancements. Agree, poor phrasing on my part.
You are also exactly correct in that I only competed in things I was naturally good at. I never really ever thought about sinking time into things I didn't have a natural propensity towards because my mindset was always If I can work my ass off and be great at something I enjoy I'd rather do that than work my ass off to be mediocre at something just because it may be looked more favorably on in society. I actually had the same recognition in that I'd be a shitty pharmacologist or researcher due to the rote memorization and the fact I was distracted by things a bit more fast-paced.
In trading something my mentor told me was I should find my strengths and really work to make them so outstanding that I am the one guy on the team people come to for that topic or concept. At the end of the day even in some of the most competitive careers, you're still working as a team and for a company so he told me don't work hard on bringing my weakness up to average otherwise you're a jack of all trades and master of none. Work on bringing your strengths up so that you're a master of something and can lean on your teammates for things you may struggle with or find difficult.
I really like that attitude because I was already the kind of person who kind of always wanted to improve upon my strengths because it's fun. If you're good at something and you recognize it it's fun you realize the additional time and effort you put into becoming better is slowly making you a leader at that skill and to have other people rely on you and give you the opportunity to help others learn. It was always tough for me to acknowledge weaknesses and even consider trying to bring them up to average because I was always of the mindset of: Why would anyone come to me for this if I'm average when they could go to X who is a master at this? Why learn from me when they could learn from the best?
I do concede though that there is a certain minimum threshold of skill you do need to have for any career but will always support the guys who tell others to work on their strengths and just bring their weaknesses up to par. I do still agree though that even if it paid significantly more re: researching or engineering I wouldn't have chosen those career paths, but do concede that you're right - I probably wouldn't have chosen it because I realized early on I wouldn't be good at it.
Lifts?
I was 90kg 157.5 kg bench and have lower back issues from a car accident when I was younger so I don’t strength train only hypertrophy for squats. This was like peak university days and I only did 2 competitions. One junior and one senior year
Yes but in a different sense: I am objectively dumber now than I was when I was in college / first graduated. In other words the job certainly drains my brain, and I'm sure others would agree. Despite what some may tell you, if your IQ is above even just 110, most corporate finance jobs probably won't be too intellectually stimulating.
once you stop exercising your brain (studying, learning new concepts, solving problems), you get dumber. I'd say 99% of jobs don't exercise your brain. even if you're a brain sergeant or NASA engineer, you're just applying the same approach over and over again and each time you use less and less brain. so everybody gets dumber shortly after graduation.
Kinda glad my dumbass isn’t a doctor
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go google what brain drain means then circle back
I don't think anyone that has dealt with Jane Street would label what they're attempting to do futile.
Yes, finance is a brain drain. I think doctors should be one of the most well paid professions, not middle class.
I think they are. top doctors make like $1M+ while working not more than 40hr.
I'm not so sure that is true. Top doctors making that are cardiothoracic or neurosurgeons and work a ton. There are plenty doing cosmetic/plastic or dermatology which can make $500k or more in NYC especially if you own your own practice. But that takes years.
I think so, for sure. Top US students get disproportionately sucked into finance and consulting, going on to spend their best years plugging away at models and PowerPoint decks in the pursuit of wealth - precisely because they are smart enough to realize where the best opportunities are from a personal pay and optionality perspective.
But, when we need engineers and scientists to build the things that are worth investing in, we instead take students from abroad who don’t know any better, and tell them if they just study enough hours and get enough degrees that they’ll get paid well in the end.
I think it really depends (generic and useless typical consulting answer, sorry). For example, I think because of the prestige and annual comp doctors (especially specialists like orthos) receive, they are less inclined to leave a very value-add field to work in finance for a higher potential upside of higher comp right out of the gate.
But then you have fields like engineering, where you do need to be brilliant, but still wont receive the same level of comp, that I think do suffer.
I dont have hard data on any of this (I am merely sharing my perspective), but an anecdotal data point or two. Had a friend who was much smarter than me, who was an engineer at a top school. He began his career working for a top prime (Lockheed, Boeing, Northrup, etc.), and was no doubt a high value add, working on classified materials. He left to go to B school and then to become a consultant, where he now advises on M&A. He could be adding way more value working on designing some of the next defense mechanisms that keep Americans and our allies safe.
As for a second data point, my GF's sister went to a target majoring in chemical engineering. I have been told this is one of the most challenging types of engineering, and this girl is objectively brilliant. However, upon graduation she ended up working in consulting as well. She works roughly ~40 hours a week making absurd money and excels at her job. While I dont blame her, I think she is bright enough to be adding much more value elsewhere.
With respect to myself, I dont think I am particularly smart or gifted. Aside from being far above average when in math from an early age, I showed all signs of mediocrity. I think I am a perfect person to work in finance. I learn at an above average rate, but I am no innovator, at least not to the extent that I would be a great physician, scientist, or engineer.
In summation, I think yes, finance / consulting does create a bit of a brain drain as many of the smartest folks chase the jobs that pay the most and have the most prestige. If you are privileged, you care a lot about prestige. If you come from humble beginnings, making enough money to live a comfortable life and help your parents retire is a pretty big driver.
I think this is a great question and am curious how others feel.
Yes but it's becoming less so since our best days are behind us (10000% in the investment world, except for maybe the top VCs...maybe). Tech is the new land of opportunity
As a guy with many extremely smart math-type friends going into quant research, honestly I'd say no. Besides quant research, there are few opportunities to use really advanced math outside of academia. And honestly, these guys aren't the type of folks who could teach a class well anyway. Extremely brilliant but not exactly the most patient. So I'd say QR isn't really a brain drain as much as a productive outlet for that kind of talent.
Now, as a software developer myself who's heading into quant, I get the argument a little more. There are a lot of more productive ways for CS folks to spend their time instead of getting that 5 microsecond algorithm down to 4 microseconds.
That said, the situation is different here in CS / computer engineering land, compared to the math world. Despite the perks and pay of mm / hf, most of the really competitive applicants in my uni still want to head out to the west coast to join a big company or float their own startup. There is a small set of folks like me who think that mm / hf is a better fit, but it's not like there's a lack of applicants for companies that actually make useful hardware / software for others. Far from it - it's still pretty darn tough to land a job somewhere like Google or Microsoft.
I think traditional big tech companies still hold a lot of appeal because of a general sense of 1) I'm not good enough to get into these crazy exclusive quant firms so why even apply, 2) I prefer a more laid-back lifestyle, 3) all my friends are in silicon valley so I'd like to go there too, and/or 4) I want to be where the innovation is occurring, which is really in big tech, not finance, i.e. I'd rather help build the latest and greatest AI frameworks than spend all day wrestling with a legacy C++ codebase.
For me personally, the reason I picked quant is because I actually really like economics and business (unlike 99% of CS majors who completely despise anything related to business, except maybe the stock market), I'm going in more on the big data side rather than the low latency side (I find the big data side to be more interesting and mentally stimulating from a software perspective), and my friends are going to be working close by in NY instead of silicon valley (since as I mentioned, I have a lot of brilliant mathy friends who are working in QR).
First, I wouldn't blame the lack of incentives. The US may be in the top 3 countries in the world regarding opportunities where you can literally be whoever and do whatever you want, compared to China, where 7 years olds are sent by the Gov into the mountains to train for 15 years and become the next Olympic gymnast. Even if opportunities aren't directly available, with all the grants/philanthropy/VC funds going around there, you can easily come up with the incentive to do something in science and you'll get funded.
Second, those with extremely high IQs or with great talents who go into finance, at the end of the day, are also humans and are predisposed to be concerned about prestige, money, and social status. Some quants out there on Wall Street may dream one day of being the next LTCM, getting a Nobel in Economics while making billions, and also being recognized and admired by Wall Street, while others may simply choose finance because they don't really aspire to become the next Nobel winner and just want a home, a wife, and a dog - a comfortable and simple life.
Emotions sometimes may be more decisive than intellect when taking decisions. Don't underestimate this flaw no matter how intelligent/genius or "rational" someone may appear.
There is a common perception that many highly talented and intelligent individuals pursue careers in finance because of the high salaries and prestige associated with the industry. This has led to a "brain drain" in other fields, such as STEM, where there may be fewer incentives for top students to pursue careers. However, it is worth noting that not everyone who enters finance is necessarily highly intelligent or gifted, and that success in the industry can also come down to factors such as hard work and determination. Additionally, the value and importance of different careers can vary depending on personal preferences and societal priorities.
As an entrepreneur, I like some of the innovation that has come out of finance that has allowed people like me to mostly bootstrap companies with much dilution. You do not appreciate the glory of American credit until you try running a company in literally any other country. I remember trying to run something in Canada...could barely secure any credit to scale. Contrasted with America, where I can get any mix or flavor of debt/equity I want within reason.
So no, I don't think it's a drain...
Yes, but no.
Incentives drive people to achieve, thus, people will seek to achieve whatever is most incentivized.
Sure, many talented individuals have pursued financial roles that provide no value to society, but without the incentives those roles provided, would they have ever developed those talents? Would the next best option have provided value to society?
I definitely think there is a brain drain to Finance. I’m consider myself a pretty smart guy but I grew up with a few friends who are beyond genius. Freshman year high school taking Linear Algebra and BC Calc type smart. Fast forward they are all engineering majors at top schools. This internship recruiting cycle they all sold out and joined me in Finance over opportunities with top research programs. Then look at people like Jim Simmons. One of the most mathematically gifted people on the planet chose to use it to make a fortune instead of something to advance society - not a knock I would have done the same thing. I live by RenTech and the brain drain at that firm alone is incredible.
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