The Efficient Career Hypothesis: Almost All Jobs Are Priced In

From various conversations with my peers and insights on this site, I've developed a belief that almost every single career path is "priced in" where the upsides are essentially neutralized with downsides (except for entrepreneurial roles where you aren't working for someone else). Because every employer is tasked with making a profit (or breaking even), they will only compensate you enough for you to stay, all else equal.

This means that in a neutral world where you have no passions for a field, you'd be completely indifferent for which career to choose since there is a strong trade off between compensation and work satisfaction/balance.

We often talk about the lucrative career paths of lawyers, doctors, and bankers yet we don't account for their own distinct trade offs that reduce their overall attraction/value. Obviously, different people will value elements of the job to different degrees but let's assume you are an average person who likes to earn the highest pay for the most flexibility over your schedule. Allow me to explain the trade offs for many of the most sought-after careers:

Doctors

Arguably the hardest career path to start due to the ridiculous competition for med school and heavy costs needed to finance schooling. This career may be the most rewarding on a personal/humanity level but it's far from the most lucrative or best for work life balance. Assuming you crush your MCAT and get a 3.8+ GPA in bio, your success is far from coming into fruition since you will be taking on hundreds of thousands of dollars in loans and will not see a solid paycheck until 30.

As we finance people know, the time value of money is not kind to those who forego a DECADE of cash flows. You not only will miss out on investing for a decade but you'll find that many doctors are still paying back their student debt up into their early 40s. Also after you finally manage to pay off your loans, your comp isn't anything that's life-changing for the most part. Your IB MDs and Big Law Partners (who have spent a similar amount of career grind overall) will handsomely out-earn you for your entire life. This is an entirely different story however if you don't have to pay for med school.

Lawyers

Other than finance, law is hands down the most oversaturated profession. Way too many people are chasing way too few spots. Getting into a top law school (which is a MUST to get well comped) as a non-diversity is becoming more and more of a challenge. Then, once you get through a reputable law school, the true disappointment begins. Lawyers have been reported to be the most unhappiest of people because of the mind-numbing work they are required to do in return for less-than-sexy pay.

As a corporate lawyer, you will be reading hundreds of pages each day every day. This work is even less desirable than IB and guess what? Just like a doctor, you took out hundreds of thousands of dollars to break into the industry, which you will be paying back at least until your mid 30s). For the remainder of your career, you will be chasing the partner level (which has a 1% success rate of happening).

Investment Banking

Clearly offers the highest pay coming out of undergrad and is highly competitive. Must be the dream job right? Wrong. 95% leave in 2 years despite the sky-high salaries. You will be worked to the bone 80 hours each week which will deteriorate both your mental and physical health (as you can witness on this forum as well as the Goldman survey). Not to mention, the work you do is completely uninteresting at the junior level (PowerPoint and excel updating) as it is only slightly more meaningful than big law work.

Don't care about the lack of balance and want to go AN2MD for the sake of high comp? Good luck dealing with the revenue quotas to bring in new deals at the senior level. Your main goal becomes selling and you are competing with the most cutthroat people in the industry who are all trying to out do each other. Also you're WLB will still be poor since you'll be constantly on-call 24/7 to report to your clients. This adds a different kind of stress that you experience in addition to long hours and your job security is also weak.

Private Equity

They call it "Banking 2.0" for a reason. The junior level is literally the same with minimal improvements to WLB. Not only is it more competitive than IB, the career path is also less guaranteed. Jeff Hooke study shows that 75% of PE firms don't actually add value for their risk profile and liquidity premiums. Nobody talks about this but majority of PE Associates exit in 2 years just like they did with their IB stint (many go to CD or leave the industry). And if you decide to sacrifice your personal life to climb the latter which so few can land (since partners and founders will stay forever), you role will be more of a salesperson than an investor.

PE is far less intellectual and cerebral than it is made out to be. Instead of using your acumen to craft investment ideas, the majority of your purpose will be to compete for capital raises and win bids at auctions. After all, there are only so many private companies with stable cash flows to take on an LBO. That said, the more senior you get the more you will have to sell (sounds like IB right?). At that point, why not just be in IB where you don't have to assume the risk of losing your job if your investment blows up? Comp is similar.

Hedge Funds

You live and die by your annual performance.

Offers the highest comp ceiling outside of being an entrepreneur but your job stability is questionable. Long-term risks of shrinking wallets for many HFs due to underperformance are not going away. Important to choose the right fund or you risk blowing up. If you're in a public fund, expect long hours and the constant stress of knowing where you stand exactly. Work can be much more cerebral than it's PE counterparts however.

Sales & Trading

Better work life balance than other sell-side roles but also less direct exit opps. Main problem with S&T is two fold: (1) it's very hard to know if you'll perform well and like the job before you start; (2) the longer you stay the harder it is to leave the industry since your skill set is very niche. Also, just like HFs, you either perform well or you don't (and you will find out soon). Additionally, post 2008 now, most of S&T that still exists is just trade execution (rather than prop trading).

You will just be fulfilling orders for institutional clients and not be responsible for making investing decisions. This industry is under severe pressure from automation as many know so any equities, commodities, or FX desks could disappear. The less liquid the asset safer you are. Comp is still high but not so much when you adjust for the riskiness of the role and limited ability to exit (worse than HFs)

Equity Research

Moderate work life balance with moderate exit opps. Job is known to be the most intellectually stimulating finance role and offers solid comp (at a small discount to IB). Out of all the career paths, it has the potential to be the least "priced in". Only problem is that jobs in ER are few and far between (industry is very tiny and low turnover). Also your experience is highly contingent upon the sector you are in.

Do you like energy? What about industrials? Who is your MD? Are they a workaholic? How long until they leave so you can get more coverage/exposure? Sell-side ER requires good sales skills at the senior level as well but less pressure than IB since you aren't exactly forced to pull in deals (ER is rewarded based on votes from buyside clitents). ER industry also experiences headwinds of declining expense fees with HF industry but to a lesser extent since it also provides internal value to its IB arm.

Asset Management

Very similar dynamic to ER, except pay can vary a lot depending on firm and role. The work is known to be cerebral and interesting just like ER but there is no clear-cut pay since positions vary widely (e.g. fundamental analyst vs etf sales). PMs at MFs can earn comparable pay to ER MDs but obtaining this role is challenging because of low turnover. Additionally, AM faces pressure with more capital flowing to passive investing. Fee compression will lead to lower compensation and fewer seats.

Wealth Management/Private Banking

Relatively low comp at junior levels compared to other finance roles. Less competitive to break in than the other sell-side roles (IB, ST, ER) and offers exceptional WLB. However, it is essentially a sales job where you need to cold call clients to get their money. Many are not cut out for this or find this work meaningful and it requires an exceptional personality. Can be highly lucrative if you build a good client book overtime but you need to be older (no high net worth individual is going to trust a kid with their money). Also, having a solid client book with IB-level comp is the same odds as making partner as a top PE firm (< 1%).

Corporate Development/Strategy

The ultimate destination for the majority of IB analysts and PE associates after they realize no amount of money in the world could make them give up their personal life and balance. Some believe it offers great pay for hours worked while others believe the pay is too low (after all you probably just came from IB, PE, or ER so you're probably taking a healthy discount in comp). However, many agree that the work is still not very meaningful (slightly better than IB and PE).

Essentially you are doing internal M&A or consulting work for a firm but many have stated that Management does not give you insightful roles. Instead they will hire the sell side to conduct the transaction logistics and give you some low-intelligence tasks for finalizing the deal. Most of your work tends to gravitate around accommodating for Management's strategies rather than being the one to provide Management with strategies. Also, there is a lot of office politics in corporate roles where career progression can be murky and unfair at times.

Consulting

Pay is at a notable discount to banking with slightly fewer exit opps (less finance more corporate). Although working hours are usually capped at 60-70 per week, the major downside is the requirement to travel 4 days a week. This offers just as poor WLB for many compared with IB at the end of the day, except you get less pay in consulting. Travel is a polarizing topic so this trade off is contingent upon your preference but the consensus will say that it gets very old after a few months having to constantly fly out each week.

This is the main reason most leave the gig in a few years to chase corporate roles with more balance. Hard to start a family or maintain relationships when you're never home. The more senior you become in consulting the more of a sales role it becomes. Chances of making partner are more difficult than making MD at IB but less so than PE or Big Law if you decided to stay the route as well.

Venture Capital

Perhaps the most entrepreneurial role without being an entrepreneur. Offers better WLB than IB, ER, PE, and HFs but pay is also at a discount, especially at the junior level. The turnover is probably the lowest in any industry because of the attractive type of work you do so advancing to the senior level is extremely difficult. There is an element of sales for the work since you will be competing for access to capital and financing startups. Kind of like you see in shark tank when the sharks compete with each other to be the one to invest in the startup. However, breaking into VC requires a lot of luck.

The biggest firms hire Ivy's with various background experience. Product management or previous entrepreneurship experience strongly preferred over IB/PE. Almost impossible to break in right from undergrad and career path varies by firm. Also might have to move to SF long-term for VC.

Corporate Banking

Aka investment banking lite. Decent pay with less exits but better WLB. Work has a strong element of sales and it is not as cerebral as senior level IB, AM, ST, or ER. The work is also very credit-focused and it becomes a niche background the longer you stay; hence the reduced amount of exit opportunities if you decide you don't like it. It does offer good job stability as long as you meet your sales targets since the industry is less competitive than IB.

Accounting

Very standard job with lower competition to enter compared with other fields listed. Experiences the best WLB but also the lowest pay. Many will argue you are paid too low for the time you work (keep in mind, you need to study for the CPA and take an extra year of college classes most times). Many also cite that the work is very dry and repetitive. There is career structure for Big 4 firms but the pay will continue to be very low to other fields the entire time until you reach partner (which is just as hard as making partner in PE or Big Law). Many will exit accounting to pursue corporate roles for similar pay to their Big 4 roles in hopes of hitting a home run and becoming a CFO which is more difficult than making partner in all of the roles combined.

Engineers

Overall will likely offer the most preferred WLB for pay for majority of people. But the pay will be far lower than lawyer, doctor, banking, hedge funds, equity research etc. since you will be considered an expense at most companies (outside of big tech). Engineering pay can be most similar with corporate banking (perhaps at a slight discount) The undergrad experience for engineering is typical considered to be more challenging than finance/business and the material can be less interesting in general.

Even at Google, SWE complain about being too myopic on a certain project where their whole responsibility is managing the "Find and Replace" function on Google Docs. Therefore, most of the engineering jobs will be very boring to you if you are not interested in the specifics of engineering (whether that be mechanical, coding, oil, etc.). Software engineering appears to offer the best comp for hours worked but many look past the fact that majority exit too soon before realizing the big pay day in stock comp.

------------------------- If you are a FAAMG software engineer (which is less than 1% of the workforce in this field), you can make the argument that this is a clear inefficiency. However, it still doesn't explain why 90% of SWE leave their FAAMG jobs after 3 years. If this was as beloved as Wall Street people make it seem out to be, surely you wouldn't have such high turnover. I've heard that this comes down to the fact that you are not really making good use of your talents at these firms. Since they have you working on such granular tasks, you never get to work on creative projects that you've been developing to get the job in the first place. Therefore you can argue that many would see this role as uninteresting just like IB. Sure the pay per hour is better but it must be difficult to clip your wings for so long on the job when you possess a highly valuable skill set that isn't being used.

Actuary

Probably the least popular path out of all of the ones listed because of the prominent barriers to enter/lack of direct interest. You don't have to take out any loans for additional schooling but you must pass 10 exams before coming a true actuary which takes you likely a decade. The exams have been known to be extremity difficult and the work is very math-heavy but comp and lifestyle are like enhanced engineering. You would still make more money in finance or law than being an actuary and you'd likely need half the IQ to make it work.

Conclusion 

I hope this post encourages you to realize that the grass is NEVER truly greener in any field. There is a near-direct trade off for happiness (lifestyle + quality of work) and compensation. I understand that some of you could provide some inefficiencies where people are making a killing only working 35 hours a week but these stories are the extremely rare exception to the rule; so uncommon that you'd be better off making the assumption that this will never happen to you when you're thinking of your career - thus pretending that the job market is efficient.

However, the good news about all of this is that you can generate your own alpha (and break this efficiency theory) by choosing a field you have the most interest in. Finding your passion may be difficult early on but it will become the ONLY differentiating factor that makes your job better than someone else's. If you can value how much more you like the work in S&T compared to Corporate Banking for example, then you can definitely make the best career choice for yourself that encapsulates all factors (Comp, Balance, Interest).

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Comments (97)

Most Helpful
  • Intern in PE - LBOs
Oct 24, 2021 - 12:57pm

Note: the OP edited his original post... see my response below for context

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So jobs have trade offs... whats the "thesis" here? Or is your thesis just the definition of labor market?

The way I see it, your argument is contradictory - you mention the time value of money on the supply side of labor but what about demand? Companies are willing to pay more for talent (with in demand skills) that they can get earlier. Sure in the long term salaries will level out but as long as there is a shortage of a certain skill, people who have that skill will be generating "alpha" by definition since they are being overcompensated for their input (example: software engineering).

Your assumptions don't make sense either. Whats the point of dismissing factors like personal interest when at an individual level these factors are almost always more important than minute differences in compensation? Not to mention you use factors like career trajectory as a trade off when ambition is very much a personal interest. Not everyone is interested in endlessly climbing the corporate ladder.

I am really struggling to see the point of this post. Its really just sounds like you projecting your own career goals on a series of generalizations that don't add up to anything substantive (unless you are saying all this to argue that labor markets are perfectly efficient, which is pretty obviously not true).

Oct 24, 2021 - 1:14pm

Just a philosophical thought on how nobody is going to pay you more than they have to.

If there was demand for a job that exceeded supply, that would soon be corrected as everyone would flock to it for the incentives (whether that's balance or pay)

But this isn't really focused on supply and demand as much as it is with the quality of work and balance you get from the most popular undergrad jobs. This is especially true for out of college than it is when you're at a senior level since post-grad jobs are the most efficient.

My goal for this was to provide more color to each job and show that you can't get the upside without experiencing the downsides of the job. That's why you should just go for your interests and the rest will follow. I'm also assuming you enjoy less hours and want the best pay but no job is going to give you both if it's efficient

  • Intern in PE - LBOs
Oct 24, 2021 - 3:48pm

To provide context for anyone who didnt read the original post before OP edited it, the wording is completely different now so some of what I said may not make sense. OP started the original by saying he "developed a thesis" about career choices and his thesis was literally pretty much just that jobs have pros and cons and only very briefly mentioned the "follow your passion" message at the very end.

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This would be true if people "signed up" for whatever job they want after graduating, but skills take time to learn so as a result you will always have an imbalance between jobs in demand vs talent available. For entry level jobs, this delay is the 2-4 years students spend investing time and effort developing skills. For higher level roles it will be much longer and is the reason why we still have a shortage of software engineers even though the entry level market is oversaturated. This is one of many inefficiencies in the labor market that goes against your original thesis.

I do understand your general point though. I dont see why you chose to frame it like some kind of revelation but I agree that way too many people in finance are driven by the wrong goals.

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Oct 26, 2021 - 11:55am

In terms of finance jobs, the demand far exceeds the supply. This is also true for the most sought-after jobs outside of college like the OP mentioned. Thousands are competing for each role when you think about it (that's why med schools and investment banks boast acceptance rates of 1-5%). Therefore, the employer is at a massive advantage in terms of employment structure. After many trials and tribulations, they know exactly how much to pay to keep their talent to stay (and exactly how hard they can work them). 

Great example during this past year was the rise in pay for IB analysts. The banks realized they needed to increase base by 15% to retain talent from leaving. This wasn't due to an analyst knowing they are worth more than the pay, it was due to an industry-wide trend where hundreds of analysts were leaving midway through their programs due to the inhumane working conditions. Therefore, the banks knew their current pay was inefficient (too little for hours worked) but even now it's too early to tell if this is still out of equilibrium (i.e., they may need to raise pay higher). But we can all agree that sooner or later, the employers will find the correct pinpoint where these analysts will stay (for at least the duration of their program).

As for SWE, I feel that this inefficiency will likely disappear sooner or later. The more people know about the benefits over other careers, the more they will target it. Yes, interests may play a role in choosing your job but many consider their career based on stability and pay (they'll force themselves to become interested/passionate about it). When more people are gunning for tech, it will give the employers more power. Tech has also benefited from equity comp in the past but it will be interesting if their valuations continue to experience the same growth as before (after all they are some of the largest firms in the world with valuations north of trillions of dollars)

  • Associate 1 in IB - Gen
Oct 26, 2021 - 12:28pm

Intern in PE - LBOs | Anonymous

To provide context for anyone who didnt read the original post before OP edited it, the wording is completely different now so some of what I said may not make sense. OP started the original by saying he "developed a thesis" about career choices and his thesis was literally pretty much just that jobs have pros and cons and only very briefly mentioned the "follow your passion" message at the very end.

-

This would be true if people "signed up" for whatever job they want after graduating, but skills take time to learn so as a result you will always have an imbalance between jobs in demand vs talent available. For entry level jobs, this delay is the 2-4 years students spend investing time and effort developing skills. For higher level roles it will be much longer and is the reason why we still have a shortage of software engineers even though the entry level market is oversaturated. This is one of many inefficiencies in the labor market that goes against your original thesis.

I do understand your general point though. I dont see why you chose to frame it like some kind of revelation but I agree that way too many people in finance are driven by the wrong goals.

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Says the pre-IB sophomore year "intern in PE"

Oct 24, 2021 - 2:02pm

If you want to be a top 10%/5%/1% earner there is no free lunch. Is that surprising? Choose the one that offers the best combination of interest and matches your skill level, and set standards for what you want WLB to look like. 

Oct 24, 2021 - 2:35pm

Anomalies in every industry. I know a surgeon whose been making $1.5+ million annually for at least 10 years. Came from a humble background and from what I understand nearly went to med school free (w/ scholarships).

You'd imagine his kids would follow him into medicine but they went into finance. He loves his job but knew it wasn't worth it for his kids unless they loved the concept of medicine.

Btw OP, really enjoyed reading this post. It was well thought out.

Oct 24, 2021 - 2:43pm

Yeah to echo the above comment, this analysis completely ignores the company-side demand for skills and talent, which is a gapping hole in what you are arguing here.

I think software engineering is the best job to illustrate why this matters. There's a post every other week on this forum about how software engineering or data science is a better career than banking or consulting - you don't see those kinds of posts about banking and consulting on tech forums. Why? Because SWE at elite firms is ~broadly speaking~ a sweeter deal in terms of hours and pay. Sure the work is 'myopic' as you point out, but you think an overworked 1st year analyst putting in 80+ hour weeks wouldn't take similar pay and less than half the hours at Google because of 'myopic' work? The fact that everyone has some aspect of their career that they complain about does not at all mean that these trade offs are in equilibrium

SWE hasn't seen a decrease in pay or WLB quality even as worker demand for those jobs increases because the talent and technical skill required is high enough that the supply for those roles is effectively constrained. Having hard to replicate skills increases your ability to get a 'better deal' career-wise.

Don't like SWE as an example? By your argument, being a janitor would be in equal in regards to trade offs with white collar professions

The idea that all careers are in some sort of equilibrium in respect to trade offs is pretty silly

Oct 24, 2021 - 2:56pm

This concept wasn't supposed to be tested at janitorial levels. Just thinking about the top prospects out of college.

You are right that many bring up SWE on this forum but are neglecting to mention that most well-formed arguments about SWE make the case that the grass isn't greener in SWE.

First, there is a HUGE difference between FAAMG software engineering and the rest. This is materially different than most other careers like IB or CO where MM and boutique firms still offer similar comp to the largest firms.

If you're not at FAAMG, you will be treated the same as a back office role at an IB. Comp will be low and WLB will be high.In regards to the FAANG SWE, you can make the argument that this is a clear inefficiency. However, it still doesn't explain why 90% of SWE leave their FAAMG jobs after 3 years. If this was as beloved as Wall Street people make it seem out to be, surely you wouldn't have such high turnover. I've heard that this comes down to the fact that you are not really making good use of your talents at these firms. Since they have you working on such granular tasks, you never get to work on creative projects that you've been developing to get the job in the first place. Therefore you can argue that many would see this role as uninteresting just like IB. Sure the pay per hour is better but it must be difficult to clip your wings for so long on the job when you possess a highly valuable skill set that isn't being used.

Oct 24, 2021 - 3:23pm

Huh? FAANG not making good use of your talent? You're comparing this to moving logos around on a slide, or changing growth from 2% to 3%. There are pros and cons of not working in FAANG. Many choose not to work in FAANG because of a combination of WLB, learning the start-up side of the business and real upside from stock options if the company takes off. Why is turnover so high in tech? Multiple reasons - desire to actually add value to companies / start-ups that can use you earlier in their company lifecycle and for stock option value. Options vest evenly over ~5 years. If 1 company out of 100 will 100x, then you increase your expect pay off by getting 40% vesting in 5 different companies over 10 years rather than 100% vesting in 2 companies over 10 years. Wall Street is still better for the risk-averse, wannabe upper middle / lower upper class (you have 2 years in banking and 3 decent years in a MM+ PE firm, you can hopefully maintain a job earning 500k+  for a while), but tech likely wins from a WLB, job satisfaction (culture), upside, changing projects, etc. dynamic

Oct 25, 2021 - 1:55pm

The main reason why SWEs change jobs every few years is because it's a lot easier to accelerate your total compensation by hopping every 2 years. Promotions follow the Peter principle, meaning you are almost always leveled lower than your actual talent level.

  • Analyst 1 in PE - LBOs
Oct 26, 2021 - 3:13am

Totally agree. Not sure why this post (the original post) is getting so much praise - pretty bad take.

Oct 24, 2021 - 3:24pm

It has always been this way. High risk high return is the same as more money shittier life. The only way to get a "free lunch" is if you are in the NBA, or Anthony Bourdain (but you must be granted a god given talent)

Oct 29, 2021 - 1:19pm

NBA or any pro sports is not a free lunch at all. Insane amounts of competition, literally all the players think about is bouncing around that orange 'sport ball,' training everyday, micromanaging every nutrient they eat. and they've been doing so practically since childbirth. Think about the competition, everyone and their mother has access to pickup basketball. Only the top 0.0001 will actually make it. You also have to be freakishly proportioned 7ft tall and suffer through paparazzi and the like. Plus your career will end once you turn about 32 and the rest of your life will just be reminiscing and trying to make the money last. I would not take that shit if that life was offered to me. 

  • Associate 3 in HF - EquityHedge
Oct 24, 2021 - 3:43pm

Why is there so much turnover at FANG SWEs if the job is so good? Because they are getting poached to a different FANG after 1-2 years with substantial pay bumps. I didn't see your post address that possibility. Turnover doesn't always equal bad for the employee.

Oct 24, 2021 - 3:58pm

Analysis of your law comments, from a former corporate lawyer: 

Lawyers. Other than finance, law is hands down the most oversaturated profession.

- yes, the ABA is not the AMA. They do nothing to help you  

Way too many people are chasing way too few spots. Getting into a top law school (which is a MUST to get well comped) as a non-diversity is becoming more and more of a challenge.
- this is not exactly true. Far fewer Ivy League undergraduates apply to law school because they understand the gist of what you posted. STEM BS's do not apply like they did pre-08, when IP law was exploding. Law professors, when off the record, will uniformly state the quality of student has declined since the 90s across critical reasoning, writing, and professionalism. You can get barely above a 3.0 and cram a good LSAT score and go to a lower T13 pretty easily.

Then, once you get through a reputable law school, the true disappointment begins. Lawyers have been reported to be the most unhappiest of people because of the mind-numbing work they are required to do in return for less-than-sexy pay.
- yes, they beat dentists when it comes to alcoholism and depression  

As a corporate lawyer, you will be reading hundreds of pages each day every day. This work is even less desirable than IB and guess what? Just like a doctor, you took out hundreds of thousands of dollars to break into the industry, which you will be paying back at least until your mid 30s).
- this is true for most. I went to a regional law school for free and went to a firm tons of T13 alums strive to join. The debt causes mental illness, stress that induces physical illness, and keeps lawyers from exiting the profession when they desperately want to. 

For the remainder of your career, you will be chasing the partner level (which has a 1% success rate of happening).

- this is true. Keep in mind that "partner" includes nonequity partner, basically a glorified super senior associate. And equity partners get bitched out by clients all the way up until retirement. Doesn't matter if some 28 year old buy side associate is talking to the steering committee 60 year old lawyer. That is the imbalance. 

Oct 24, 2021 - 4:04pm

In a libertarian, purely capitalistic society your argument would be correct. However, government interference in the markets provides plenty of inefficiency. There are people at government bureaus making good money for 10 hours of work a week. Its possible to be an employee at a big bank lost in the slow-moving bureaucracy of compliance and HR rules making it a pain to fire you. There are diversity and other concerns, connections, etc. We are FAR from an efficient labor market. Hell as the current macroeconomic state shows, there are people sitting at home eating donuts and gaming while collecting fat unemployment checks, not motivated to rejoin the labor force.

Oct 24, 2021 - 4:16pm

I agree with your points. These are all definitely true and it's a shame that the government is becoming a crutch for so many Americans (thanks to the libs) but this post was geared towards realizing the efficiencies of the most competitive jobs after college.

Because thousands of people want each of these jobs, there should be less inefficiencies than say working for the government.

  • Associate 1 in CorpDev
Oct 24, 2021 - 4:55pm

How much adderall did you take? A lot of garbage takes. How do you know the in and outs of all these career paths outside of IB and financial services? There are so many things that are off that I don't even know where to start. 

Oct 24, 2021 - 4:56pm

How much adderall did you take? A lot of garbage takes. How do you know the in and outs of all these career paths outside of IB and financial services? There are so many things that are off that I don't even know where to start. 

He got law medicine and engineering spot on. So please start on what he got wrong with his "garbage takes"

Oct 24, 2021 - 4:56pm

I've spent hours and hours networking with people in different fields and doing research on each field. Comes from my own passion to find the best career path (why wouldn't you want to?). Obviously these are general takes on each field but they are the most popular and reoccurring aspects. The information is not hidden on any of the jobs either, you just need to actively look - and it should make sense that there's no free lunch. Doesn't mean any career is bad, just need to be the best fit for your interests which is a simple concept.

Oct 24, 2021 - 6:34pm

Biden's Puppet Master

From various conversations with my peers and insights on this site, I've developed a belief that almost every single career path is "priced in" where the upsides are essentially neutralized with downsides (except for entrepreneurial roles where you aren't working for someone else). Because every employer is tasked with making a profit (or breaking even), they will only compensate you enough for you to stay, all else equal.

This means that in a neutral world where you have no passions for a field, you'd be completely indifferent for which career to choose since there is a strong trade off between compensation and work satisfaction/balance.

Neutral would also have to imply risk (wlb) neutrality, otherwise individuals would still look for fields at their targeted level of risk.

Oct 24, 2021 - 8:19pm

Some of your cons make no sense and apply to any job in any field. 

Ex from S&T:

"You don't know if you'll enjoy the work before you start." 

Like no shit, obviously. Doctors, lawyers, and teachers have that problem too. 

  • Associate 1 in IB - Gen
Oct 24, 2021 - 8:23pm

Sorry, should've clarified that S&T experiences the highest attrition rate from SA to FT. One of my finance orgs has graduated over 300 people who went to S&T over the years and they have experienced higher attrition rates than most other roles like IB/WM/ER/AM because it can be the most esoteric.

Oct 24, 2021 - 8:31pm

I see everyone arguing withan example or sentence they don't like but not the general idea of your post. I completely agree with you that basically supply and demand will always determine the overall compensation/wlb/satisfaction package **at an equal level of skill**. 

I've been thinking about this for some time and the only way to increase your overal utility is to either increase your skill level or to profit from your your personal preferences. (And the rarer these preferences the highest the benefit)

One person commented that it assumes that the market is efficient when in reality there is rent-seeking from some groups and intervention from governments, but I don't think it's breaking anything. For example, college professors are one of the luckiest workers in the world because they get to work on fulfilling(to them at least) research, they have good wlb and they have a good salary. This would break such a model that there is no free lunch, right? Except that's not the case, because out of the thousands that try to become college professors, only a tiny fraction of them manage to land the role. (that also reminds me of IB) 

  • Associate 1 in IB - Gen
Oct 24, 2021 - 8:41pm

You make a good point mentioning college professors. That job truly is a hack for the reasons you mentioned. I guess a lot of them have to spend mad bread on getting their Phd too in most cases which will decrease the true comp they get for the first 5 years or so; but still offers one of the highest pay per hour worked with extremely low stress environment

Oct 24, 2021 - 9:29pm

Thanks for the write-up, made me feel a lot better. Been having a tough time with recruiting and it's nice to see the struggle seems to be shared across the board, with all of us just trying to vie for that top 1% spot in our respective field.

  • Intern in PropTrad
Oct 24, 2021 - 10:01pm

"Investment Banking. Clearly offers the highest pay coming out of undergrad"

Prop traders in shambles rn

Funniest
Oct 24, 2021 - 10:19pm

OP you made every job sound like absolute garbage.

"Navy Seals, great prestige but you might get your leg blown off"

"Senator, fantastic prestige and job security but you will have all your skeletons uncovered"

lmao, after reading this post of yours I think the only job that's actually decent is being a Crypto god or onlyfans sloot

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Oct 24, 2021 - 11:07pm

I think it serves as a good testament to show that it's important to consider the downsides equally with the upsides. Psychology studies show that humans feel more pain for a loss than they do pleasure for a gain of the same magnitude. This seems to get overlooked when recruiters are boasting about their role to you.

See way too many people in undergrad obsess over the positives of the job without considering the trade offs. Prime examples "Going into IB for the high comp and exit opps despite comprehending how insane a 80-100 hour work week actually is" or "going into law for the prestige and high pay without understanding the actual work you'll be doing"

This is probably due to confirmation bias since whatever career you pick you're more likely to only consider the upside and undermine the downside of the job. Being able to honestly accept the downsides before getting into the job is a great exercise to practice, as it will likely lead to greater satisfaction when you pick the job you reason with most.

Oct 24, 2021 - 10:49pm

Only jobs that aren't garbage are the ones where you're doing what you love. This all comes down to your innate interests.

Reason why Tom Brady still in the league. Not for money or prestige, just the joy of the game.

Hope you guys can all find this same energy in your own careers. -OP

Oct 25, 2021 - 1:19am

Nfl super star qb:  terrible job security and you have a 50 50 chance of debilitating CTE that agents you permanently 

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Oct 25, 2021 - 10:27am

It's no secret that in tech (think FAANG and similar), companies will pay a huge premium to keep talent in the company, even if they don't have much (or anything) to do. It's simply better than letting them go to competitors, or that they start their own companies / startups. 

But then again, the environment in tech is very different from the other professional sectors, because the ability to scale is massive - Groupon, WhatsApp, etc. are good examples of just that. 

Oct 25, 2021 - 1:13pm

For the sake of my post I tried to keep it shorter but I'd imagine majority of RE would fall somewhere between Corp Dev and Asset Management for trade offs. From what I've seen, the WLB in RE is 40-60 hours for most gigs and the comp is similar to CD/AM since you're essentially doing the same roles except for real estate instead of finance. REPE being the biggest exception where top firms will be same story as traditional PE and LMM firms being a lot better for balance.

I honestly do not have as much knowledge of RE (especially CRE brokers - assuming it's like WM/CF) so I'd honestly appreciate your own perspective of the trade off with RE jobs and correct me if I'm wrong

Oct 25, 2021 - 1:31pm

I'm only an intern at one of the larger brokerages JLL/CBRE/C&W (middle market) but I can chime in on the WLB of our senior guys. So the comp for the Senior associates is anywhere from 175k to 250k all in (60-80hrs) while the MDs are bringing in 500k to 1MM all in (about 70hrs) on some teams. It depends on how much business your team brings in, but the Real Estate Market has been extremely hot recently and many are calling the RE game to be the new IB. I have friends in REPE who average about 100 hours a week with about 250k-300k all-in comp. It's just as much of a grind as IB in my opinion. The entry-level barrier depends on the person where as long as you have a decent gpa and a great personality you'll be able to find a job in CRE

Oct 25, 2021 - 2:27pm

yes, plus you just simply don't have the time to make calls if you want that WLB everybody talks about. instead of making 1-200 cold calls a day, I may reach out to 20-40 people per week but in a more targeted way.

other time is spent managing relationships via meetings, calls, lunches, etc., you get to make your own schedule essentially. no set start and stop time, no vacation allowance, just produce and do your compliance training and you get left alone.

Oct 25, 2021 - 2:18pm

Great post. One other issue with SWE is many people get aged out after 40 or so, unless they get into management. The leetcode interviews exist to discourage people from leaving beyond a certain age. Most people don't live it up and save aggressively so they can semi-retire before that happens.

Professor is actually another career that is far less attractive than it used to be. Many academics work very long hours and are under pressure to bring grants, be on committees and keep students happy. They are like salesmen who bring in grants while their phd students do the work, but without the upside of a sales job. Many traditional academic fields don't really have big new discoveries happening anymore, and everyone just does incremental work. Tenure has also been revoked in the past, especially at small schools where students stop coming, and is probably less secure than a government job.

I also find that the people in "good" jobs often got into their careers in a pre-linkedin/social media era when there was less labor market transparency and harder for the world to learn about those jobs. The same path won't be available to people starting now.

  • Associate 1 in IB - Gen
Oct 25, 2021 - 2:44pm

Solid point about the social media. This shit could be a TED talk in itself lol

  • Intern in IB-M&A
Oct 25, 2021 - 9:57pm

Damn bro it would be so nice to be a famous musician and not have to deal with this bs

Oct 28, 2021 - 5:32am

Just want to give a shout out to Infra / Energy PE.

Hours are better than IB / traditional PE / law etc, i.e., 60 to 70 on average vs 80 to 100. There is a slight discount on total comp, but not too much since appropriately skilled talent is quite scarce in Infra.

This is the subjective part… the work is typically more interesting / challenging since there is a heavier focus on complex financial structures, bespoke modelling, and contractual structuring opposed to making pitchbooks or running repetitive LBO models. No two deals look the same.

Maybe not a true inefficiency due to the slight discount on comp, but it feels like it to me.

Oct 28, 2021 - 5:37am

Also I would argue that Software Sales is an inefficiency too. I've seen folks with very average educational backgrounds raking in high six figure salaries just a few years out of Uni whilst working no more than 40-50 hours a week.

Only apparent catch is that you need to have a real talent for the job, which is easier said than done!

  • Consultant in Consulting
Oct 28, 2021 - 1:54pm

I'd make one correction for consulting. Few firms generally do (less so now post-COVID) the Mon-Thur travel model, meaning that WLB is actually much better than you make it out to be. You can typically count to work 50-60h (and before anyone calls out LEK, yes they are an exception) and get paid a similar or higher base to banking (although overall compensation will be a good 30-40% lower). At most, you'll have day trips or 1-night stays for kick off meetings and final presentations. On top of that, I'd argue that the skills you learn are more varied and you have a larger choice of exit opportunities than comparable professional services like Law, Finance or Accounting. This isn't to say that consulting doesn't have downsides, but I think that it isn't as priced in as people think. Most people who dislike it leave after 12 months, and those who do like it typically stay for 3-5 years. Overall I think there are net positives to consulting. It does depend on the firm, but it is an industry with a good balance of things.

  • Analyst 1 in IB - Gen
Oct 29, 2021 - 8:50am

Is consultant base pay still higher than IB now that AN1 average base salaries are between $100k-$120k? The people I know in consulting are making 90k base and 20k bonus vs people I know in banking making 100k+ base and up to 100k+ bonus, but I will defer to your expertise.

  • Consultant in Consulting
Oct 29, 2021 - 9:34am

With recent IB base increases, I think they are close but IB has a bit of an edge. Does not apply to all firms and historically hasn't been this way, but to my point it is and has always been the same or comparable. Bonus is where the main difference is. 

Oct 28, 2021 - 6:10pm

success in every industry comes down to being able to sell

I don't get the mental gymnastics around it (in general, not this thread in particular)

“Doesn't really mean shit plebby boi. LMK when you're pulling thiccboi cheques.“ — @m_1
Oct 29, 2021 - 3:57am

The central claim behind EMH is that prices reflect all available information. Labor markets can take a really long time to price in new information, and are thus often obviously mispriced.

For example, every year the BLS publishes that there is a shortage of software development talent, citing faster job growth than the amount of university graduates. Employers respond by raising wages, and sure enough, software development is consistently one of the top fields ranked by wage growth. This means there must now be disproportionate compensation for the effort of acquiring a software development skillset, the same skill set that would have fetched a lower wage prior to this growth. So how does the market resolve itself and price this in? Well, people on the margin who would normally go into other fields choose software development instead, because they are now getting a higher wage for an equally difficult to acquire skillset; this happens until the shortage is closed and employers normalize wages. Changing the composition of the workforce like this (changing what college students choose to study, where people move to work, what society socially accepts, etc.) can take decades to accomplish, and until that fully happens, everyone in the field enjoys disproportionate compensation.  

So which careers are "priced in"? Ones where there has been little new information to price.

When should you care about whether the career you are choosing is fairly priced? When you are one of the people on the margin, whose decision will ultimately help push markets towards efficiency. 

  • Partner in PE - LBOs
Oct 29, 2021 - 8:31am

I don't think that all jobs are "priced in".

Look around your own social network and people you know, there must be a handful of people you know of people who make a lot of money, not doing a lot of work, and then there's a lot of people who don't make a lot of money, doing a lot of work.

Even within investment banking groups, there are groups with better WLB (e.g. coverage vs product).

A lot of this is cyclical as well.

Oct 29, 2021 - 12:12pm

Many people like this exist, like the C-level management in any big, mature corporation. However, that person has already arbitraged out that opportunity in some sense (including all the people in line to take that job when he/she leaves), and someone entering the workforce today has a much lower chance of success getting the same role. They may be better off trying something different.

It's something that many successful entrepreneurs have said, like Jim Simons. They were never good at beating everyone in a competition, and sometimes struggled to get hired anywhere themselves, but picked the right competition to enter that others were not seeing at the time.

Oct 30, 2021 - 12:34pm

Amazing. A folk named David Ricardo (those of you who studied economics must have heard of the fella) wrote about this more than 200 years ago. This post is everything but original. I'm sure the OP felt as if he/she had discovered warm water, but no... Ignorance is bliss my friends.

  • Associate 1 in IB - Gen
Oct 30, 2021 - 3:18pm

Well original or not, post was a good way to specifically address the trade offs for the high paying jobs out of school.

Too many people on this site get lost in the sauce of IB herd mentality. Good refresher

  • Analyst 2 in IB - Cov
Oct 30, 2021 - 4:24pm

Interesting write up and there are trade offs, but unfortunately I don't think it's very accurate for high finance. The job market is not very liquid (w/ exception of maybe ibanking) and is opaque. There is asymmetric information and powerful club effects (Ivy League alumni, GS/MS alumni, etc). Putting it together, I would argue the market is pretty inefficient. There are "golden" seats, but they're extremely difficult to come by and are often not marketed publicly (read: inefficient). Sure, investment banking is atrocious and Apollo is banking 2.0, but those are very public jobs and large programs. 

There are roles in finance where the pay to work ratio is very skewed. Think some HFs (Baupost, Sachem Head, etc) and LO AMs (Cap Group, Fidelity, etc). Only issue is a lot of these places have next to zero turnover, small investment headcount, and landing a role is near impossible. 
There is a lot of luck involved in investing, including finding a job. 

  • Associate 1 in IB - Gen
Oct 30, 2021 - 7:01pm

Hedge funds and asset management shops are not the best career path if you're starting out nowadays.

Hard for most investors to understand many of these firms' value propositions when indexes outperform 99% of them overtime.

That said, obviously there will always be a need for some form of active management (or else prices would be greatly inefficient) but it's tough to bet your career on that equilibrium. For instance, Jack Bogle of Vanguard said markets could be efficient even if 90% of investments were passive. This would be very scary for anyone who's pursuing AM/HF.

Maybe I'm too bearish on the industry but it seems like the career stability in public markets is lower than many think.

  • Analyst 2 in IB - Cov
Oct 31, 2021 - 3:26pm

Buyside is a mature to declining industry in general imo, so might as well just focus on factors that you can control. Also, people often forget that there are both equity AND debt markets. Debt market is larger in terms of assets and there is a very strong argument for active management (most outperform). A lot of institutions have no choice but to invest in fixed income securities and don't have internal capabilities. 
 

FWIW, I don't think alpha is the sole measure of performance for active managers any more. ESG is becoming increasingly important to institutions, and active managers can add a lot of value here (fundamental research, engagement, etc). 

Oct 30, 2021 - 11:43pm

Assuming this post holds true in terms of trade offs for each finance career, the BEST job you could pick would be the one that offers you the highest pay for the best work life balance (given that you have no particular interest into one aspect of finance over another).

You can think of this thought process as being synonymous with asset managers investing on the "efficient frontier" (practicing modern portfolio theory and making decisions based off risk/return [pay/hours] dynamics instead of alpha [interest]).All this technical jargon aside, after reading this I feel that Corporate Development, Corporate Banking, or Venture Capital is the best career you can pick (regardless of interests) when it comes to traditional finance roles (not considering consulting, lawyer, doctor, accountant, engineer) Here's why:

IB: unfavorable because of the poor life balance. You work so much you can't even spend the high income you earn and will challenge your physical and mental health. Although it is arguably a stable job until the senior level, IB is not the best pay per hour in the industry. Also wanted to bring up that majority of IPOs and M&A deals do not add value to the clients. Even though you might be working on billion dollar deals, odds are you are subtracting value from the clients in the long-term. Bunch of studies on this.

Like Aswath Damodaran said, bankers are nothing more than plastic surgeons that try and change the life cycle of an aging business. Even though banking is very stable, most sane people will realize the work they're doing quite literally contributes nothing of great importance to these companies (maybe once in a blue moon a firm's shareholders will benefit from a merger or IPO)

PE: like OP said, PE is virtually banking 2.0 with more long-term risk. No clear career progression and things can go south real quick with one poor investment. Work life balance is still one of the worst in the industry so pay per hour is nothing crazy. It would only be worth the grind if you were the founder; otherwise everyone else is working under you for a fraction of the bread.

AM/ER/HF: definitely has better comp than hours worked but there's a huge unfortunate caveat that has arised in the past decade. Shift to passive investing is very real and will only disrupt the active industry more. When 99% (yes 99%) of actively managed firms underperform their indices over the long-term, the lack of value add becomes clear. Unlike IB/PE, AM/HFs are far less relationship based and as institutions wisen up, they will quickly drop their funding for these strategies. Obviously, there will always be a need for active investing to some extent (or else prices would be greatly inefficient) but I'd HIGHLY advise not making a career bet on this. Right now only 5% of passive ETFs are responsible for trading. Vanguard has provided research that markets will still be efficient even if passive ETFs account for 90% of trading volume. That said, we have a long way to go until there ever would be a passive bubble. Guaranteed we are going to see massive job cuts in the active space moving forward. Therefore, even though HF/AM delivers the best pay per hour, when you consider the HUGE industry risks, it becomes significantly less attractive as a career.

PWM: very difficult to gain traction. 95% burnout in 2 years. Essentially a zero sum game where you are stealing clients from some other advisor. Whoever has the better network and relationships wins. Even though it has a high ceiling for comp, it has one of the lowest as well. Therefore all else equal, despite the chill work life balance, you're pay per hour on average will be low.

S&T: also faces long-term industry headwinds for active investing. Also most won't succeed just in PWM for various reasons.

Corp Dev: although you might still report to someone, your pay per hour is solid. Yes you get a discount in comp but your work life balance allows you to enjoy your life. You can spend time with loved ones and have the money to travel/go on vacations. Job is much more stable than everything above as well. Great viability long-term for this role.

Corp Banking: Vert fair trade off for work life balance and pay (even better with new base bumps). Similar pay to Corporate Development and same job stability. You do need to sell but it's often sweet heart deals in order to keep the companies engaged with your bank so you can hit them with an fat IB fee when they eventually need a deal.

VC: also has a great trade off. Caveat is that it's super hard to advance to senior level so far less viability than Corp Dev and Corp Banking.

Nov 6, 2021 - 1:35pm

In my honest opinion, it comes down to...

  1. Choosing your priorities.
  2. Choosing what you're willing to sacrifice.

For example, nobody should go into sciences & engineering for the money. I would extend this to STEM in general. You go into these fields because you are a nerd that is passionate about tech, engineering, you name it. Or as a doctor, because you genuinely want to be a doctor. If you're aiming for power & money, go for investment banking, law & accounting (to some extent, well paid specialists), or even sales in various industries where you can build a portfolio of high paying clients. All this will trump the salary of being a engineer/tech in some firm. Yes medical professionals are well paid, but it's not a good criteria for these careers because being a medical professional requires above all empathy and dedication to patients that will destroy one's motivation if these factors aren't there.

There is no perfect or even near perfect profession/career. There is only one that is perfect FOR YOU. 

Even fields like Finance are not for everyone. They're fields where you sacrifice a lot to make a significant amount of money. Many people actually aren't willing to sacrifice that much in their work, and would prefer more 9-5 type of jobs, or something they're actually passionate about.

Finally I would disagree with the idea of finding your passion which goes in line with the two points above. The main reason is that finding your passion isn't good enough very often, and often not linked to clear professional/career projects. For example you might love art, but that doesn't mean you actually want to be an artist. I think that lifestyle and work environment, and basically figuring out where you actually would be willing to work, is more important than hypothetical ideas about one's passion. Many people just get stuck on this idea of finding their passion. A better question would be: Do you actually want to be a banker/doctor/etc?  Find out about the actual work and figure out if that's what you want to be doing. Maybe being a policeman or software developer is better for you. 

Nov 6, 2021 - 2:49pm

I work in healthcare, a ton of medical professionals out there who are incredibly disinterested in patient care after they burn out (usually happens to every doctor at some point, my sister burnt out 10 years in and just works part time now). Burnt out doctors are a nasty bunch to deal with as a patient and as a coworker. Well paying job but I'd argue it attracts a lot of people who factored in money/stability while choosing a profession. Heck my own PCP admits to have fallen in that group. He does a good job but wished he never went into medicine and would have gone into finance/law like the rest of his siblings.

I agree passion is overrated to chose a profession to an extent.

  • Intern in IB - Cov
Nov 14, 2021 - 8:29pm

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