Weekend Wars: Finance vs. Engineering
A question we often hear posed on Wall Street Oasis is what should I major in? Or some derivation, thereof. People will tell you anything and everything from straight finance, accounting and business to seemingly irrelevant topics such as theater, music and drama.
Though the battle of liberal arts vs. business sciences will always be a popular topic, there is another quiet storm brewing which gets little attention. It is the growing disconnect between engineering majors and actual careers in engineering. Specifically, engineering majors are taking higher paying jobs on Wall Street and thereby leaving America undermanned in the high tech entrepreneurial sector.
According to long time tech exec and Duke University Prof. Vivek Wadhwa the financial industry is to blame for The Cannibalization of Entrepreneurship. Whenever someone titles an article Friends Don't Let Friends Get Into Finance,I am pretty excited to hear the thoughts of the WSO community.
For those interested in a further academic treatise on the subject, Paul Kedrosky and Dane Stangler have published an academic report on the issue.
From my vantage point, the argument makes a lot of sense. After all, it is tough to argue the assertion that engineering is far more academically rigorous than finance. Pulling over a 3.5 in any engineering discipline is an achievement I never could have hoped to achieve in school. Meanwhile, finance classes never really took a lot out of me. Though they were/are industry specific I can definitely see what appeals to recruiters in engineering grads. In all fairness, I was more concerned with female anatomy and botany of the non-credit varieties...so what do I know?
The second half of the issue is pretty murky, but again...it makes sense on quite a few levels. The slave hungry banks and money motivated mind have a natural synergy. Remember boys, pimps may need whores... but it is a two way street.I recommend that you guys look at the other side of the coin, before forming an opinion. For those with the option of choosing between a typical financial industry major and engineering, I think the choice is becoming obvious...
The game is changing and anything with a rigid quantitative background will help you break into and (likely) thrive in the financial industry. That having been said, I think young engineers would be wise to consider the entrepreneurial or traditional corporate paths. The money may not be there at the start, but possibly a lot more lies down this road. I think many bright young minds get blinded by the cash and wind up stuck in a career they really aren't cut out for or crazy about. The reality is that engineers build things, whether physical or virtual. America needs those minds at work rebuilding a nation, which (in some aspects) resembles the second or even the third world.
Naturally, I don't expect anyone to forget their own interests. Today's engineering majors will be the rock stars of the American and global economic future. I realize that it is asking a lot to give up that six-figure offer from a bank, just be cognizant that once you enter the rat race...jumping ship for your own thing will be neither easy, nor likely.
Now that you've heard my two cents, let's get yours...
Are the engineering and entrepreneurship fields being cannibalized by Wall Street? Is engineering really becoming the better major for breaking into finance? Is the traditional finance degree going the way of the dinosaurs? I figure with all the real world wars going on today, we can afford to have a discussion that is a bit less volatile and aggressive this weekend.
Take it easy boys and rev up for a great week.
Subject I think a lot of these days: I believe the short answer is yes, Wall St. is cannibalizing a lot of engineering and entrepreneurship talent, but I don't necessarily think Wall St is at fault. This are the reasons I believe:
1) Engineering often pays decently out of the gate. We start our Engineers at 55-60k with a bachelors, with a good work/life balance. But is a long, slow uphill climb after that, and to get into management is tough. I'm 30 and manage some engineers with much more experience than me, and it's an interesting experience. The career path is very regimented, and not nearly as open ended as some finance paths (just my belief - I know the engineering side far better than the finance.) I think this would turn off a lot of otherwise talented engineers to go elsewhere. 2) Cultural respect level for engineers has dropped off hard over the last 40 years. Being an Engineer no longer impresses anyone, especially women, and most engineers are labeled nerds or geeks, which sadly is an image that is often deserved. 3) Upper Management attitude towards engineers. The engineers are often the smartest, and most hard to replace people, but you wouldn't know that by the attitude upper management has towards them, likely because most upper level management haven't come from that role.
I'm obviously generalizing, and in some great tech companies especially (Google/Microsoft) this is likely not the case, but this is what I see.
I literally just left my Silicon Valley engineering job at one of the big Fortune 100 tech companies after working as an engineer for a few years out of undergrad and I fully agree with the above points. You hit a glass ceiling relatively quickly and while engineering salary wise starts off great, it doesn't experience the jumps you get in other industries such as finance. The difference in compensation between a level 1 eng and a level 3 engineer (so roughly your analyst level vs Associate position) is on avg only around ~30k whereas in finance or consulting it is much more of a leap.
I'm actually starting in management consulting in a few weeks ironically enough so I pretty much agree dead on with the article. Engineering is a good place to start and its honestly easy to jump from engineering to anything else. Consulting firms especially will snatch you up. I have a really technical background and I had interviews with every consulting firm I dropped a resume to even the ones I had mistakes in the cover letters.
Why is a 30 year old engineer on this board...
Speaking from my own experience, I don't disagree with your above premise and I think Engineers are tremendously valuable, but the schooling was absolutely brutal. I think Engineering should be offered a 5 year program for most disciplines, because often times that's what it turns into anyhow. But it's a horrific workload, the professors, while smart, are usually poor teachers, and the classes are usually devoid of women. It is no surprise me to that people opt for finance and accounting.
yeah, a lot of the professors also cannot speak English and if you ask what they said or meant, they get pissed off.
Some of the adjunct faculty also teach because they can't do, and when they hear that you worked on a bigger and more complex project in your internship than they did in their PhD thesis (i.e. their entire life) they get pissed off too.
Depends greatly on the kind of engineer, but I totally agree with Steelflight about the rigidity of the system. Plus I would imagine the amount of exit ops while great in number are extremely limited in scope. You cant for example design fasteners at one job then go and be sales manager material at a different company right away. Basicly your engineering skills have a narrow transferable skills band.
People should stick to what they are good at. If you're good at both, do what you enjoy more.
Midas great article linkage, a rare for techcrunch especially liked the quote "Its like i just smoked some of that high quality Charlie Sheen Weed and can see the future". I am with the engineers on this one or as a friend once put it, engineers build, finance guys just feed off them. Cheers
While I can agree with parts of Vivek's article, he loses credibility when he attacks Wall Street for no reason (cites his boy Kedrosky who says "economic Ebola" prompts engineers to opt for WS).
Why is it a bad thing for the economy to have a growing proportion of service-based activity? Or just finance for that matter. I hear people argue the US will go to shit because we produce nothing, but can you please logically walk me through your thinking. Is there an optimal balance of tangible products and financial products that contribute to GDP? Do people honestly believe that finance offers no societal benefit? Why is engineering such a venerated profession? Would it be more noble for these potential Wall Streeters to instead do non-profit work rather than devise complex algorithms and strategies at a HF?
Lots of questions and Vivek seems to think he has all the answers. It is not that simple.
Devising complex algorithms and HF help the average member of society how? Listen, I don't fault anyone for taking a job to better themselves and their family, and I'm not quite there with Volcker thinking the only thing of value produced in the last 20 years from the financial sector is the ATM (reduced spreads and ETFs are high up on my list), but come on, most people in the industry don't even believe the 7% of GDP spent on financial services is appropriate.
Again, I don't fault Wall St for people leaving / not choosing engineering, all the other reasons I list above are much bigger causes.
That's just one example. I don't want to argue about the merits of specific financial products. While there is a lot of bad about Wall Street, it is silly to ignore the innovation that makes a difference- directly or indirectly- in people's lives.
^What he said.
An engineering degree definitely opens doors and gives you lots of credibility with employers. Obviously there are more engineering graduates going into finance than vice versa (I don't think a finance/business major can go the other way), suggesting the former degree is a better choice if one wanted to keep their options open. An engineer who speaks finance knows how to create value and enhance it, and is an invaluable asset to any team.
I fully agree, and that is why I chose the path I did (Engineering undergraduate, then MBA.) However, extracting said value back from employer is not always as straightforward
Argonaut- while I respectfully agree professors do speak english with an accent, I highly doubt a top tier school professor cannot speak english. Mate you must understand most of these professors learn english from preschool as the countries they hail from are often colonial english.
The ability to speak English is only one facet in the ability to communicate ideas clearly. In my experience (and this is from one institution, a good state school) the Engineering professors were absolutely awful. I'd guess they were good researchers, but looking back, I think the reason the chose Academia is obvious. Most of them had terrible people skills, and could not communicate ideas at all. I doubt they would have done very well in industry, where communicating your ideas, listening for constructive feedback, and building consensus are every bit as important as the brilliant designs themself.
yeah, here's an example:
Professor: Acceleration problems are really easy, all you need to do is solve the differential equation Student: um, this is physics 1 class, Cal 1 is the pre-requisite, we are not gonna take Diff.Eqs for another 2 years.
Steelflight, I am currently considering pursuing an Industrial Engineering undergrad with an MBA as well. Are you able to message me so I could ask you how it turned out? I tried to message you but the system was not allowing me to. Thanks
The problem is not that they speak with an accent, the problem is that they get belligerent and defensive when you ask them to explain what they just said. Not all. Some are more prone to that than others.
Argonaut- while I respectfully agree professors do speak english with an accent, I highly doubt a top tier school professor cannot speak english. Mate you must understand most of these professors learn english from preschool as the countries they hail from are often colonial england.
Maybe a little late to the party considering I was graduating Middle School when this post started but I am currently a senior Mechanical Engineering major at a top-10 school nationwide and I have had many different instances in which my professor spoke god-awful English. Not fun when you are trying to learn Navier-Stokes equations.
Oh and I feel you Argonaut, I've had professors that literally did not speak English. And what was funny, or painful at the time, was they chose TA's who spoke (or tried to speak) equally bad English. These profs are brilliant and are there mainly to do research.
I follow Prof. Wadhwa on twitter, he def can speak English well. He raises a few good points in this article also.
I believe that financial sector's share of GDP will decrease by the end of this depression. He mentions in the article that last time that its share of the economy was this high was during the twenties, and after the depression hit, that no longer was the case. History doesn't repeat itself, but it does rhyme, as Mark Twain would say.
I am interested in pursuing an engineering degree that can let me transition into finance. I like how an engineering degree can make me more marketable in the job market.
If anybody has any advice for me on how to do this that would be great. What are some of the best engineering degrees for finance?
Industrial Engineering
I'd say a degree in Petroleum Engineering would set you up fairly nicely for many finance jobs. I would think a good knowledge of the technical side of the oil and gas industry would be very valuable. But then again you could make 100k straight out of school so the attraction to finance may not be as strong as it is for other engineering majors earning far less than you.
A couple comments on this issue. I attended an "Institute of Technology" and was also a member of our student investment portfolio. We had about 800k that we managed. Despite this, not one person got a BB IDB offer. We had some guys get into consulting and a few went to boutique firms. I would say this is a result of being a "non-target", as you guys put it.
So here's what I would say. 1) If you go to an engineering school, major in Industrial Engineering. Also there tends to be some cute girls in there. 2) Do not major in a non-technical field at an engineering school as I did. I majored in economics. While in the end it worked out well, no one was recruiting people with my skill set at an engineering school for anything other than consulting, which I had no use for. 3) If you can get above a 3.0 in an engineering major, do well on the GMAT, and you have a good personality, you will be able to pretty much write your ticket to most MBA programs, but you will be back-dooring it into banking, and basically pinning your hopes on a summer associate position to launch that career. That's a lot of time and money to gamble that you will get that requisite internship. 4) Just don't do engineering at all though if you don't want to be an actual engineer. Its a good way to get a shitty GPA and employers do a poor job of realizing a 2.9 Electrical engineering GPA kicks a 3.5 Finance GPA's ass any day. 5) If you must combine your need to build something with your desire to be a player in capital markets, then do real estate investment/development.
[quote=av8ter]
4) Just don't do engineering at all though if you don't want to be an actual engineer. Its a good way to get a shitty GPA and employers do a poor job of realizing a 2.9 Electrical engineering GPA kicks a 3.5 Finance GPA's ass any day.
I think that this is the key. When I was in school everyone had a lot of respect for the e-school kids. They sacrificed SO MUCH of their time to study and still got like a B- to C+ in their classes. What happens is these kids get a nice entry-level job off their background but their sub-par GPAs don't get them anywhere else(grad school, not engineering related position). These guys were incredibly intelligent but the disconnect with their professors just fucked them in the long-term.
This is exactly what happens. I could go on for days with stories, but this is spot on. I loved how I had to write the optional entry on my b-school app to explain my "low" 3.2 engineering GPA, which in reality was pretty good.
This goes back to my original point: Wall Street isn't the reason potential engineers shun the profession.. other engineers (specifically in academia) are a far biggest cause.
industrial engineering is a joke degree lol
Yea but a shit load of Industrial Engineers end up going to HBS. lol.
One of the big problems is that with Engineering or Physics or any other type of major science that the prospects for graduate school or a PhD suck. I'm majoring in physics and economics and a professor of mine did a presentation on Physics PhD and Engineering related PhD. After 45 minutes i decided to focus on Econ (still major in physics though as well). People say you sell your soul for finance, but PhD students work comparable hours, in a lab with few to no windows, horrible compensation if any, and they get their degree right before they turn 28, if your thesis goes picture perfect. Anyone who wants to do that shit is so motivated that they don;t care about compensation and societal connotations of being a nerd anyways. Hence my reasoning for going out and getting a litigation consulting internship as oppose to working for a government lab this summer.
I recommend CS...it's actually a useful major, you learn a lot, and it's recognized as being a difficult major.
I am with absinthe CS is a good bet and will give you a major heads up. If you are still keen on keeping up with a little of finance, do side course self study programs like CFA while in college. UofCOandG I assumed a degree in Petroleum engineering is pretty useless unless you want to move to houston and trade energy and that too is a long shot. Most petroleum engineers as it is make a killing in their field as the deman is still there all over the world.
Here's a piece of advice I took away from a buddy's dad who has started and sold a bunch of junior energy companies and banked 10+MM on each sale:
If you have a rock star track record in all three then there is absolutely no glass ceiling for whatever you want your end game to be.
Most engineers go into corporate careers anyway, be it from the start or 2 years down the line. Few engineers I know work in technical positions, and more often than not it's at the NASA if they do.
EDIT: What I'm saying is... it's not that finance pays too well, it's that technical jobs don't pay well. It's become so streamlined to build stuff that it can be outsourced to cheap Indian engineers. Engineering in the West from a technical standpoint is much more about research (often conducted in universities), much less about the romantic view of the stuff-building engineer.
Engineer here, and I work on the electronic trading desk of a BB.
I have more of a technology background, but our product/biz dev guys are either your typical wharton grads or engineering grads, which isn't too surprising. However, what I am seeing is that more and more of the new analysts have an engineering background. In fact, I think all of our new analysts last year were engineering majors. Of course, this is an electronic trading desk, so it makes more sense to hire eng majors there than say M&A.
On the sales side, this is less true. Most of those guys are b- schoolers, but then again they also tend to be older.
From what I see, the trend is towards engineering majors. I am sure it varies greatly by desk though.
A national defense company engineer here. Making 60K directly out of undergrad is sweet. Then a few years later you realize that you are in a multi-thousand person, incredibly bureaucratic, slow-moving organization and your raises are only 3 - 6% a year (No bonuses no matter how much you accomplish). You are in your mid to late 20s and making about 70K after you started at 60K and it infuriates you. You realize that you have the brain horsepower to go into finance and make more loot, so why wouldn't you?
I'm headed to a top 15 B-school next year so I can go into finance. I'm thrilled to be part of the engineering emigration statistics, can't wait to leave engineering behind and never look back.
Sorry to bump a dead thread guys. But I just received my raise today for this coming year and it was
Repellat itaque dolorem molestiae enim ut adipisci. Quidem optio porro vero voluptatibus et perspiciatis. Voluptatem eum laboriosam libero.
Odio inventore vel aliquid soluta quia. Eum quasi aut molestiae quis. Sit libero nam corrupti ut aut. Nulla placeat quos placeat maiores omnis quia. Rerum inventore expedita rerum iusto.
Nemo repellendus quas accusamus laborum incidunt est praesentium. Explicabo numquam quae odio ipsam impedit sit id. Exercitationem et libero aliquid itaque commodi quia consequuntur. Qui exercitationem at doloremque sunt nihil voluptatem. Sed ullam et nostrum facilis doloribus non amet quaerat.
Modi et cupiditate vel eum qui. Illum omnis in doloribus vel quo vel. Quis blanditiis accusantium tempore ullam similique quam necessitatibus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Repellendus itaque dolor sed et sed labore. Reprehenderit id deleniti occaecati omnis accusantium aspernatur. Mollitia dolores quia repudiandae veritatis dolore deleniti. Est cupiditate in qui vitae sed error. Natus nihil repudiandae aut quam. Maiores et numquam exercitationem minus. Aut accusantium itaque autem animi architecto reiciendis voluptatem.
Natus perspiciatis totam explicabo vitae. Est eaque repellendus aut dolores iste molestias. Modi eveniet corrupti ducimus explicabo libero reiciendis illo. Ut sit error distinctio est aut et sit.