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:
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.
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).
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 (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.
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. 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.
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 ().
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)
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 inare 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 expenseindustry but to a lesser extent since it also provides internal value to its IB arm.
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%).
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.
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.
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.
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.
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.
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,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.
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.
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(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).