Opportunity Cost of IB

Genuinely curious and want to have an open forum for peoples thoughts / opinions:

Do you ever think about the opportunity cost of working in investment banking? Let's say you are working ~80+ hours a week for the first couple of years and 50-60+ after that. Imagine if you put all of these hours into building a business that you founded yourself, or a company that you have equity in. If you put in 80 hours a week working on building a business of your own, the possibilities are endless. You would have no ceiling on your success.

Rather, we are all just cogs in a system where we slave away making "good" money while the real people are at the top making the big dollars. Why not invest all of those hours, late nights, and hard work into something that you build for yourself, that can make you vastly more wealthy, rather than working for the guy at the top?

Comments (89)

Mar 15, 2019

How ya gonna eat while you put all your time and effort into this business?

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Mar 15, 2019

All because you spend time on business doesn't mean it will succeed. The majority of business will fail, then most will do nothing slight profit but no real growth. It's very rare to create a successful business venture from scratch without a network etc. At least after IB you will have a network you can leverage as well as the expertise of industries, clients etc.

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Funniest
Mar 15, 2019

Surely this is a troll. Let me rephrase your question - why would someone want a job that pays better than almost every other job if there's another potential job that may some time in the future pay more but probably won't? Who the fuck would want a job like that? We should all just be entrepreneurs and drive to our startups in our lambos.

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Mar 16, 2019

Not trolling. Thanks for offering your opinion.

I have merely been thinking lately about how IB analyst (and really for the rest of your career) people are slaving away working 80+ hours a week for a few hundred thousand $ while the good old boys at the top take in millions. All the while you could have been putting that sweat into something that you have real equity in.

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Most Helpful
Mar 16, 2019

Because most people that get into IB are risk averse and uptight people that arent innovative enough to come up with an idea for a startup

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Mar 17, 2019
NonTargetNetwork:

slaving away working 80+ hours a week for a few hundred thousand $

Those poor slaves, not even taking home a measly million. Oh the injustice!

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Mar 19, 2019
NonTargetNetwork:

Not trolling. Thanks for offering your opinion.

I have merely been thinking lately about how IB analyst (and really for the rest of your career) people are slaving away working 80+ hours a week for a few hundred thousand $ while the good old boys at the top take in millions. All the while you could have been putting that sweat into something that you have real equity in.

You make starting a business and generating that type of income sound easy. Those good old boys at the top started out working long hours. Your perception that hours go down to 50-60 range after a few years is entirely ignorant.

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Mar 19, 2019

You're naively assuming that just because you're a good little boy that puts in 80 hours of work on your company that it will succeed... vast majority of companies fail, not because founders aren't will to put in the effort, but because the idea is shit.

The hardest part of being an entrepreneur is identifying something you're really good at producing or a service you're really good at providing, and then being able to work hard at building out that competitive advantage. The hard work (grinding out 80 hour weeks) is relatively the easiest part of starting a business.

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Mar 20, 2019

Also, to be honest anyone right out of college probably doesn't have the skills or experience to start a company from scratch. They have no network. Sure, there are people who quit college or start successful companies, but they are certainly exceptions. I would say your point might be valid if someone does their analyst years then takes that risk (maybe MBA, PE, etc. between). Even then, chances are it will still fail.

Mar 15, 2019

Because your risk adjusted return is higher in Investment Banking than it is as an entrepreneur starting from scratch.

Being an entrepreneur will most likely lead to failure without any resources, network, skills, etc. - even if you put in 80 hours a week into it.

Being an investment banker lets you have a great income, and the risk of failure is much lower.

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Mar 16, 2019

True and valid points. I would disagree on you saying you wouldn't gain a network and skills with entrepreneurship, that simply isn't the case. But you are right I guess risk tolerance is a huge factor here.

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Mar 19, 2019

Not sure this is true anymore. IB comp has come down, state and local taxes on ordinary income have gone up, cost of living in NYC/SF/London has gone up, and job security (in IB, and it was never that great) has vanished.

Anyone who thinks a startup is low risk is a fool, but with valuations where they've been for several years, it's not actually that high risk relative to banking.

Mar 19, 2019

I get why you would say that relatively the risk isn't that high for entrepreneurs because valuations have been over-inflated, however, the percentage of winners and losers hasn't changed so I still think it's just as risky as several years ago. I do agree that the rewards behind investment banking have fallen drastically since prior to 2008.

Very few students/recent grads will start a business out of university and ever make it to a Series A. The ones that do also usually have some kind of exceptional skills/experience/talent such as 10+ years experience in painting/basketball/cooking/etc. that they can convert into value for a customer.

Mar 15, 2019

Ideally, that person should've started the entrepreneur path during their undergrad or even before.

If they were able to generate profits/traction and could see how they could expand after graduation, then it would make sense.

But most people who ends up in IB are people at target school. Generally speaking, they have loans to pay off so IB is all around a better move coming out.

Inversely, if you go to a shitty non target, you're efforts are better devoted to trying to get something started rather than going on WSO trying to break into IB

Mar 16, 2019
secrethidden:

Ideally, that person should've started the entrepreneur path during their undergrad or even before.

If they were able to generate profits/traction and could see how they could expand after graduation, then it would make sense.

But most people who ends up in IB are people at target school. Generally speaking, they have loans to pay off so IB is all around a better move coming out.

Inversely, if you go to a shitty non target, you're efforts are better devoted to trying to get something started rather than going on WSO trying to break into IB

Yes, this. People use IBD as a means to get into VC/start-up/entrepreneurial, whilst having $$ and experience.

But the ideal person would have done that in their undergrad

Mar 15, 2019

The point is to learn what you don't know (because trust me, you have no clue out of school, stop pretending you're Zuckerberg), develop skills and a network, all while making decent cash. Not to mention, your experience earned is directly correlated to hours worked. IB is a fast track to accelerate your career. If you end up liking it enough to stay in, well then kuddos to you.

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Mar 15, 2019

Suggested new topic: Risk Adjusted Opportunity Cost of IB

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Mar 15, 2019

American culture tends to over glorify commerce or business by in large (I wont call it by the bullshit word of "entrepreneur" that all of you like tossing around).

Back in the day, the only way you would become a business man was to either inherit it (be born with the business/ be from a high enough social class where your social network could give you easy access to financing etc..) or be a proved operator for years and then strike out on your own. I guess in some countries you can add being a SKILLED political operator...read skilled.

Garbage fucks like Gary Vee and the rest of the self-help bullshit crowd make it seem far more easy than it is to run an actual venture.

I'd stay working in Banking if I were you. Very few people have all the cards to be a high rolling boss.

Ty

Mar 16, 2019

Worked out well for me but it's certainly not for everyone. The stress and inability to turn off isn't really good. It gets worse in some ways too the more you scale (personal cash) because then you're responsible for employee well being and really can't afford to fuckup unless you're a total psychopath that isn't worried about fucking up and causing people to lose their jobs.

Mar 20, 2019

You're mistaking sociopath with psychopath

Mar 17, 2019

You know what? You are absolutely right in asking this.

Entrepreneurship is risky and often thankless at the beginning. For most who don't have the privilege of a financial safety net, working for months/years without the certainty of getting paid is not an option so they get jobs (and IB is one the the highest paying entry level.) But the often overlooked option is to have job income while building something on the side. No matter what anyone here tells you, you won't "learn" to be an entrepreneur in IB; it's not even close to what you'll learn actually trying to build something even if it's small or if it fails.

This is physically impossible with a 80-100 hr/wk job. So you could argue that it is actually the marginal 40 hrs/wk you need to put in working in IB that has the biggest opportunity cost.

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Mar 17, 2019

Thanks for the response. This was my thought process as well.

People are acting like you gain more "skills" in IB than you would by going out and starting a business from scratch or working at a start-up. That's simply not the case. Real business skills don't end at modeling in excel and using powerpoint.

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Mar 17, 2019

Basically this.

IMO IB is far from entrepreneurial.

The best skill is sales and knowing how to get clients.

For those who are planning to go entrepreneurial:

Big hint: Figuring what product/service to offer is the trivial part.

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Mar 17, 2019

You say it's risky but not all business are the same.

It's risky to not take the "risk" too

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Mar 19, 2019

it takes 3 things to be a successful entrepeneur
1) resources (usually money)
2) an idea for a product or service that people want to pay for or use and be willing to give way something of value (like personal info/data) in exchange
(ie...if you have an idea for a new search engine, but its not better than google, this does not qualify)
3) ability to execute on your idea with the resources available to you

if you don;t have these things, then you should take the job that either pays you the most money, or that pays you "enough" money, but gives you enough free time to develop your business idea.

you should watch Shark Tank, and ask yourself if you have a business idea that the sharks would invest in. If not, then maybe you should take the IB job.

You can always re-evaluate every couple years.

just google it...you're welcome

Mar 20, 2019

I don't think #1 matters much. There's almost always a workaround and you shouldn't let it stop you from trying at all.

Mar 20, 2019

resources not necessarily money...could be other things like free advertising/publicity, a paid for place to live, food to eat, computer, relationships, etc...
(they usually can all be replaced with money tho)

just google it...you're welcome

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Mar 20, 2019

If a business student has an idea for a technological venture but no resources, is the only option to then partner up with a software engineer for example? Then you could say that the software engineer doesn't really even need the business guy in the beginning because most entrepreneurial business can be easily learned with a couple of books.

I'm just talking how I view it from my own experience, I know first-hand how difficult it is to translate idea into tangible and have failed many times to get started because I feel like I lack the resources/technical expertise to actually build a MVP.

Mar 20, 2019

This question haunts me. I am not in IB but working my ass off to get there (CFA, networking, similar job in tech industry...), however I'm having difficulties assessing the real value of it. In my current job I make about 30% of the money of that of an equivalent position in IB, but I literally work 35h per week max. with a 7 minutes commute and a flexible/working from home schedule. On the other side, I can't live in a good school district without mortgaging my existence, I have actually capped any accelerated career growth within my sector (now is just putting years of experience) and I will retire when dementia takes over me.

Some people chase status when trying to work in IB, but I don't think that is worth that much. In my opinion, It is more about how fast you become financially independent, and without any serious data beyond public salary information, I believe that in IB you get there faster.

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Mar 20, 2019

if you only work 35 hours per week, and work in tech (assuming you know how to code)....you can easily start your own business and devote 30 hours per week on it. All you need is a "good" idea, and the will to bring it into existence.

just google it...you're welcome

Mar 20, 2019

Don't get why people have this assumption that you need a "good" idea to succeed.

Ask yourself, how many "innovative" product do you spend money on everyday?

Assuming your market is B2C and not B2B, 9/10 people would rather spend it on a starbucks coffee than a $5 SUPER AMAZING APP.

Unless your business is not planning to make profit (aka fail), then go for it.

Mar 20, 2019

As the saying goes: The more you know, the more you know you don't know. IB is for risk averse people that want a well-trodden path to success. There is of course risk and chance involved, but that's just trivial compared to entrepreneurship.

A good IB analyst program on your CV can work well as a springboard to better career opportunities. Entrepreneurship can actually hurt your future employment.

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Mar 27, 2019
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Mar 27, 2019