Finance can ruin your career (hot take)
investment banking = offering commodity, rent-seeking services for exorbitant fees by marketing pieces of paper
private equity = acquiring pieces of paper and selling them for more than you paid for them
none of this adds a great deal of value to the world. sure the returns are real, though driven primarily by inefficiency in private markets and financial engineering, but real and noble value creation is achieved by forming and/or growing a business
moreso than any other career, you are very long one firm and career path as a PE investment professional in particular. you become a "deal guy". a highly compensated position in the long term, but ultimately not a role that has a ton of value outside an investment context. sure you can go do corp dev/M&A somewhere if you flame out but your skillset isn't that tangible/transferable outside of a few other paths. so you better be damn sure you can be a deal guy for a loong time, otherwise you may be ahead of your peers now, but you can easily fall behind later
oh and by the way, unless you're at a super established mega fund, your firm could blow up with a couple mistimed bets. or founders could get selfish and greedy with carry economics (which already doesn't actually cashflow for years and years most of the time). just lateral to another firm you say? well sure, but that means giving up all your unvested (and potentially also vested) carry. and if you are lucky enough to be at a mega fund, good luck navigating the internal politics and overcrowding at every level deftly and getting to the partner level, which is more difficult each year
i guess said differently, you have a TON of optionality in first few years of a "high finance" career path, but it diminishes meaningfully after years ~3-5. just something to think about
i don't have a question. that's it. that's the post.
what's the alternative?
corporate = pushing around paper to justify your job at a business that's been on autopilot for 15-100+ years
startup = pushing around paper to please VCs enough to give you more free cash at a stupid valuation whilst hiring an army of stackoverflow searchers and glorified door to door salesmen
yeah i don't disagree
point is just pe/ib/etc gives you higher salary near-term but at cost of less flexible/transferable skillset and lower optionality longterm
don't underestimate selection bias
in retrospect i'd rather have started in business, crushed it for ten years, been a seniorish exec somewhere pulling mid to high six figures. risk/lifestyle adjusted optimization bliss
ten years onto the IB/PE track and you're still grinding through IC memos and dialing into conf calls saturday mornings. ooh the carry, the prestige, you sure are the "apex predator" of high finance. enjoy it while it lasts :)
Hahahaha, senior exec in ten years starting in corporate land. Good one dude. You'd be lucky to be a senior manager in that time frame, director tops. Even if you "crush it".
I am very much a supporter of open discussion and opposing opinions. However, as a (sub)forum dedicated to private equity, I am very concerned regarding the number of posts lately trashing the PE industry or its future based on what I believe to be inaccurate premises. My apologies if this comes across as a rant, but defending one's industry can be exhausting. So here I go....
Private Equity does not pigeonhole you nearly to the same degree as nearly any other professional path out there. In fact, I believe it is one of the best possible careers to build a broad skillset and knowledgebase to ensure flexibility throughout one's career.
If you go the corporate route, you are often "locked in" to your particular industry after a handful of years. 15 years of experience in insurance? Goodluck transferring those skills. Same with Aerospace & Defense, Oil & Gas, Infrastructure, Financial Services... you name it. It is not uncommon for people to get "trapped" in their industry unless they are willing to take a few steps back in their career to transfer.
The same holds true for functional areas. If you've been a salesman for 15 years, you're not going to be qualified to do finance, strategy, M&A, coding, design, human resources, or any other role within the organization. Pretty much every role within a corporation is "silo'd" and results in building expertise that is not transferable to other departments. This is even true outside of corporations. Lawyers know very little outside of law. Practicing doctors often struggle with business concepts. Professional athletes don't develop a diverse skillset during their careers.
By contrast, PE professionals have such broad exposure to the corporate world that we can survive in a diverse set of environments. I've personally done many aspects of HR both within PE and at portfolio companies: Soliciting candidates, Interviewing, Hiring, Onboarding, Training, Performance Reviews, Setting Bonuses, and Firing .. at all levels of the organization. I have overseen the FP&A process, working with CFOs to set budgets and performance objectives. I've negotiated legal documents, from consulting services to employment agreements to loan notes to purchase agreements. I've done project management, overseeing cross functional teams both inside and outside my organization on everything from M&A to integration. My point? The private equity job description is SO diverse that you are doing the exact opposite of pigeonholing yourself into a single career path.
I feel very confident that, if I wanted, I could secure a job in: Human Resources Finance / Accounting Sales Teaching Consulting (!) Startup Industry Research Government Corporate Development
What's your long term goal? Build or buy? I find this quite surprising. Private Equity's business model is to buy businesses, grow them, and then sell them for more than it paid for them. You state that this does not add a great deal of value to the world versus forming and/or growing a business. However, your plan is basically to do exactly what a private equity firm does. You're planning on buying a business and then growing it (and the day will eventually come where you need to exit). I'm drawing what I think is a logical conclusion here ... it seems to me that you're differentiating between the two because: 1) You're growing the business as the Owner/CEO, as opposed to PE which does so as the Owner/Board of Directors. 2) You plan on owning the business for a long time. It feels like you're drawing the line at "adding value" by serving as the CEO rather than on the Board. However, what's stopping one of the employees of a manufacturing company from saying: "The CEO doesn't actually add value to society, I'm the one making the product, he just talks on the phone all day negotiating contracts and takes all the profits?" No offense, but your title says you're a second year associate so I'm going to assume you don't know much about how carry economics work. (I don't actually feel this way because one doesn't need direct experience to have in-depth knowledge of something, but I wanted to put it into context for you). I made a number of pretty direct comments about the way carry works in this recent thread here: https://www.wallstreetoasis.com/forums/data-average-private-equity-comp… (i) Correct, carry vests over time. All that means is that there is a cost to leaving. Twice I have voluntarily left PE firms and forfeited unvested carry. The vested portion still pays out, and the vested portion is just as valuable whether or not you're employed at the company. Remember also that the carry grants are so large that even a year of vesting is incredibly valuable. You absolutely do not need to stick it out five or more years to make a lot of money. (ii) What is your basis for concluding that you forfeit vested carry if you leave the firm? The entire concept of vesting is that it is NOT forfeited except in very specific, often extreme cases. Usually you have to be terminated for cause (such as fraud) or some other extreme. I say this based on direct access to the fund formation documents at my employers. (iii) Correct, they don't cash flow for 5-10 years. This hasn't changed my lifestyle at all. My actual cash compensation (base + bonus) has always been significantly higher than every single one of my non-finance friends, including those in tech or corporate roles. Waiting 5-10 years for my first carry payment was a non-issue ... by the time it hit I had no debt and plenty of cash in the bank. I sure would have loved to have made all the money up front, but this is not a meaningful deterrent. (iv) Once you start receiving distributions, they far outweigh your capital contributions. A common structure is that the PE firm puts up 2% of the fund size in the form of a GP capital commitment. Your capital commitment is probably pro-rata to your carry allocation, which is a worst case scenario. In a $100M fund that returns a 2.0x gross and you have a 5% allocation: Capital Commitment = $100 * 2% * 5% = $100k. Your carry payout is $100M * 20% * 5% = $1M ... plus you'll get your $100k investment back at a 2.0x or $200k. That means for a $100k capital commitment, you can expect to get $1.2M back (less taxes at capital gains). Conclusion: As soon as the carry starts paying out, you don't need to worry about reinvesting a substantial portion of your distributions. I'm confused about how you're measuring flexibility here. In your original post, you spoke to getting pigeonholed as a "deal guy" with limited applicability outside of an investment context. Here you seem to speak to the fact that changing firms is really expensive. Either way, I think this is a terrible way to look at flexibility. My interpretation is that you're saying: "You make so much money, that there is no possible way you'll make as much money elsewhere, and if you want to change firms within the industry, you'll also forfeit a lot of money, therefore you're stuck." To me, I don't think the relative payscale should matter when determining how "flexible" a career path is. If someone had two jobs opportunities with identical exit ops and one paid $500k while the other paid $250k, any logical person would take the $500k one even if it meant a paycut down the road. So while I agree that money will be forfeited if you do choose to exit, I don't think this is a negative to the industry. While PE can have some brutal hours, the majority of PE firms are rather reasonable. I have a couple friend at $1+ billion funds that leave work between 6-7 every night as VPs / Principals. Associates don't stay past 9-10, take vacations, and have some weekend work but hardly crushing. This forum likes to discuss the extremes (such as the Apollo thread), but I do not believe it is representative of the average.Meanwhile, I have a friend who worked at Burger King and was stuck at work every night until around midnight (corporate, not the 24/7 drive thru). Another friend of mine grinds until 10pm every night for $70k/year at a corporate back office gig. Tons of friends became Big 4 accountants who didn't see the light of day for months at a time for a fraction of my pay. A few went the startup route and were wildly successful, where others lost all of their spare cash working 15 hour days and weekends trying to get their businesses going for years before they failed. This concept that every other career path outside of finance is an easy gig is completely made up.
I'm going to stop here as this has definitely turned into a rant and I've typed enough. Happy to engage in a friendly debate with those who disagree.