Tech As An Alternative to Finance
I’ve been seeing lots of grass is greener envy on WSO and thought I could offer perspective.
I was all set to join a hedge fund post graduation, but the financial crisis put the brakes on that plan: the fund pulled out of my country, I took a job in big tech to ride out the storm, and I’ve been here ever since.
I work on the business side but have many friends in engineering.
On Startups as a Founder
They are, for the most part anyways, lottery tickets.
There were dozens of search engines that debuted around the same time as Google - some with better technology - that no one has ever heard of.
Slack, the current hot “startup,” spent 4 years as a failing MMORPG before the CEO laid off 80% of his staff and pivoted to a communications app.
The company with by far the smartest founders I know (a CERN caliber theoretical physicist and a Harvard mathematician from MBB with research experience at MSFT/Google who raised money from Peter Thiel) was acqui-hired (read: failed) after 7 years of going mostly nowhere.
May 2017… I wonder how many new MarTech companies have been founded since then?
That pic is exactly what it looks like: 5000 “MarTech” companies all competing for a slice of the CMO’s budget.
On Startups as an Employee
They are, for the most part anyways, lottery tickets.
Even if the organization you join hits unicorn status (exceedingly rare) and realizes liquidity without complication (exceedingly unlikely) after 4 years (exceedingly fast), your 0.1% is only going to be worth 125k per year after 2x dilution.
Here is the top comment in the first search result for “how much equity startup reddit:”
I once had a bunch of options in a pretty hot startup. The startup hadn't IPOed yet, but if we were heading in that direction and if we ended up with a similar market cap to our nearest (virtually identical) competitor I would have been holding about $1.5m in shares.
Then the market tanked, no one could IPO or get additional funding, and the company went bust.
We ended up having a competition at a bar to see who could make the best paper hats out of our option paperwork.
I didn't win.
For a more detailed analysis of why startup life can suck for employees, particularly young employees, read this.
On Startups in General
I’m not sure who to blame for muddying the waters, but a “startup” has traditionally gone by another name: a new business. I’m not sure if you’ve heard, but most new businesses fail, especially ones that focus on fast growth at all costs.
If you’re going to give this a shot, be prepared to spend ~3-4 years earning less than your peers, with the most likely payout being nothing but experience and a story to share (and possibly a very bitter story at that).
To maximize your chance of a positive outcome, pick the best people that meet all of the hygiene requirements - good IQ, good schools, good degrees, good industry, good idea, good backers, etc. - that work well as a team.
Just like in banking, you need people who hit certain competency thresholds, but having the world’s greatest AI researcher means nothing if the team can’t deliver a real product that solves a real need… you know, the whole execution thing.
After you check all of the boxes, make your decision based on instinct.
On Roles Most Similar to Banking/Consulting
There are a ton of functions I left out of this post - customer success, renewals, quality assurance, enablement, etc. - that are really great jobs for most people, but I don’t know much about them and they offer little appeal to the typical WSO forum member (read: Type A overachiever and/or Greedy SOB)
As you would expect, you’ll see lots of burnt out/passed over MBA bankers & consultants running around the corp dev and strategy departments.
Of the well known tech companies, Uber feels the most banking/consulting like - the offices are generally more sophisticated than what you see in consumer tech, and the employees have an aristocratic vibe. It’s currently the most popular tech-haven for Goldman/Mckinsey refugees.
Uber boss Dara Khosrowshahi with Andrew Ross Sorkin
At the lower levels you’ll find them in operations roles, and at the higher levels they serve as city GM’s. The work is analytical but not overly complex (sound familiar?) and if you factor in equity the comp is similar.
You’ll find the “best” tech people in product management - PM’s own a particular product and sit at the intersection of users, business, and engineering. The required skillset is very broad, requiring technical aptitude, communication skills, analytical abilities, big picture thinking, etc. etc. so lots of engineers w/MBA’s and successful entrepreneurs in these jobs.
PM roles - particularly well known rotational programs like Google’s APM and soon Uber’s - are highly coveted, and can lead to senior management or investor positions at classy VC firms.
Being an account executive is similar to being a managing director in banking - you have revenue generating responsibilities and everything else is secondary. In the more senior roles, you’ll have a reasonable base salary (say, 150k) with a variable commission that can fluctuate wildly depending on your territory, the timing of your product, and your talent.
Sales is the riskiest - there is lots of pressure to perform, and though you could be very talented, if your timing is off and your territory sucks you might not sell anything all year, and the company can fire you for non-performance.
Of the careers discussed here, sales has the lowest intellectual requirements: the barrier to entry is effectively non-existent, ergo you’ll find plenty of underachievers and average joe’s.
I keep reading something akin to “Damn, software engineers at FAANG make so much money! I’ll just leave banking and join them!”
A few things.
Yes, some software engineers make a ton of cash. Anecdotally, I’ve heard of fresh undergrad Google recruits pulling in 300k+ total comp this year. That might be an exaggeration, but not a big one.
Graduates from a handful of AI labs are fielding multiple 7 figure offers. That is not an exaggeration.
Google apparently paid Anthony Levandowski $120mm AND offered 10% of future profits on his self-driving efforts, should he deliver.
But these numbers are for the best, the best of the best, and the best of the best of the best, respectively, not the average.
As a rule, successful software engineers look less like bankers and more like one of these guys:
(Hint: it’s not Joe Rogan)
None of the high-end software engs I know could succeed in banking - it’s just a very different personality type. There’s a certain temperament required to be an effective SWE, and it can look pretty autistic-y. That’s not to say it’s impossible, but it’s the exception not the rule...
And despite what you might tell yourself, finance is NOT. THAT. COMPLICATED.
Software engineers are not paid to write code, they are paid to solve problems, and easy problems are already solved or easily solvable.
If you want to earn the big bucks, you have to tackle new, hard problems, which increasingly means interdisciplinary stuff in the life sciences or robotics… there aren’t a lot of people with the IQ & knowledge to push the envelope here.
For people below the stratosphere, software engineering is just another job, and not necessarily a good one - because the powers that be change the technology stacks every 5 years, the skills learned are rapidly obsolete, so workers HAVE to learn continuously just to keep up; there is no professional body to protect them.
Some guys/gals make a pretty good living specializing in some God awful enterprise product like SAP or Oracle, but it can be a miserable existence - no one likes paying some consultant $400/hr to plug holes in software that cost $10mm.
Finally, it’s not clear that “software engineering” as it’s now known will even exist in 10 years. Something like 90%+ of the code at Google is machine generated today, and we’re not going to start re-replacing infinitely cheap algorithms with expensive humans.
I think that pretty much covers it.
A career in tech can make sense depending on who you are and what you want, but it’s not a panacea, and not necessarily better than a career in finance.
Hope that helps and here to answer any questions.