Why Banking in 2018?

I'm guessing you're a freshman

I will answer these questions one at a time...

What entices people to "just go into banking" and not actually find a more specific field people are interested in?

There are lots of ways to be involved in "fields" beyond being a principle. Do you have to be a physician to run a company that manages hospitals? No, but you are still very much involved in the healthcare field. Banking, allows you to build a fundamental skill set that you can apply to any field that you are interested in.

For those saying they hope to use this to go into PE or VC in the future, why not gain an actual skill in school and work your way through a good tech firm or consulting, which actually builds some of the skills you need to problem solve and build companies as a leader?

Do you think bankers don't solve problems? Do you think bankers aren't providing advice to CEO's who are building companies? They are doing both of those things on a much broader level than someone involved with one "tech firm." Consulting and Banking are very similar in this sense however, banking is transaction oriented while consulting is project oriented.

Also, you get paid more working at a google or a facebook, etc. as a technical worker than as an analyst at any bank no matter how competitive. You also work much less hours and get many more perks.

This is correct at the junior level. However, as you advance at a google or a facebook your compensation plateaus. Bankers, at senior levels, have a theoretically unlimited cap to their salary as it is a function of how much business they generate. You're also right about the hours but I will say there is something to be said for having to work 100+ hour weeks and still generating clean work product. It shows fortitude and resilience that your precious fucking coders have not had to demonstrate on a consistent basis. That is valuable.

P.S.: Hedge funds nowadays do want more Quants and CS guys. The Hedge Fund industry is incredibly saturated and there is a proliferation of mediocrity. As the industry contracts and only the strongest funds are left, what do you think is going to happen to all those fancy "quants and cs guys" that got hired during the expansion period?

I personally think finance is interesting. But also, I want to get my MBA after 3-5 years and IB then Private Equity or Corporate Development seems like a low risk way, that matches my current qualifications, to make a good money, learn valuable skills and get into a good MBA program

Assuming you're not deliberately trolling people, I'll attempt an answer.

Banking and consulting are popular career destinations for a lot of Type-A personalities because they offer greater optionality than just about any other entry-level position. You can't predict how the world turns any better than anyone else, but you probably feel technology is going to be ever-present and ever-changing, so acquiring a CS degree at a top school (unless it's Yale, in which case, the CS department is something of a joke) and working in tech feels like a safe move to you. I suspect you also enjoy coding, so the thought of getting paid well straight out of school to do something you'd probably do anyway appeals to you greatly. I get that. That makes sense.

Let's talk about the short term. What if you didn't enjoy coding? What would you do after graduating? Would you want to work in marketing, HR, communications or some other function at Google? Would you want to do business development? Maybe you'd care about policy. Would you take a low-paid role as a Congressional staffer to gain some legislative experience? Or would you try your hand at graduate school so you could get some research published and become a policy wonk?

As an engineer, you care how things work. You care why things work. And you aim to understand them. But if the things that stir your mind to action aren't technical in nature, but strategic, economic, regulatory, financial or social in nature, you're going to get little to no satisfaction from an entry-level technical role. That said, the preponderance of entry-level positions are menial by nature. I'm sure that a HYP CS grad contributes more on average to their firms (assuming they are in a coding position) than analysts at Lazard or McKinsey, but analysts at top banks and consultancies know they are 'paying their dues' for some purpose. That purpose isn't clear to most when they start in the business. But you only really get one or two times in your life to be trained by someone. In the case of investment bankers and strategy consultants, they're being trained to run companies or invest in them. You only really get a chance to be trained in that broad skill set coming out of undergrad or coming out of business school, and I assure you, it's better to bite the bullet at 22 than at 28.

Further, while the payout from building a business from scratch may be higher than investing in one, advising it, or running a company someone else founded, that payout is also far, far less likely. It's significantly easier to invest in companies than to build them. And it's significantly easier to manage an established business than to create one. While you can make the argument that a lot of leaders in tech today came up through the ranks, a huge percentage had to found the companies they lead to get the chance to do the work I cared about at age 22. And the career path at larger tech companies is getting drawn out considerably. It's not like the guys who are 40 today are leaving or retiring tomorrow. There are only so many C-suite level positions and the space is going to grow increasingly crowded. A lot of those positions, by the way (CFO, CHRO, Chief Strategy Officer, General Counsel, Chief Marketing Officer, Chief Development Officer, Head of Sales, etc.) are rarely filled by technologists. They're tech-savvy, but not coders, so I think there is a greater career risk of being pigeonholed as an engineer who doesn't understand the 'business side' of the company.

Two years at the beginning of your career spent at Goldman Sachs or Bain alleviates that concern for the rest of your life. I've known people who did two years at Goldman 20 years ago who still bring it up like it was last week. It gives you a lot of credibility when discussing a range of corporate issues. I know a lot of people at FAANG companies who don't know much about the way the company works, how it's viewed by the market, or really why executive decisions are made. That's a problem for getting promoted, because at some point, you are no longer going to get to code every day. At some point, you have to hire and manage a team. At some point, you have to understand the budgeting process for funding your team. You need to be able to create reasonably accurate projections on your team's growth. And you need to sell your vision for your team internally to the people who control the purse strings.

These are the skills you learn in banking and consulting. I left banking at one of the banks I mentioned to move into consulting because I appreciated the concept of optionality. While the pay might be slightly lower initially, the medium- and long-run compensation and career implications more than make up for it. Private equity might consolidate at some point, but GPs will always make great money. Investment banking and strategy consulting are already changing a lot from when I started, but MDs are still making bank (though not as much as they once did).

Maybe you can do that through tech as well, but there's greater risk. If you want to make millions, PE is still the surest way to do so. Otherwise, you need to get enough RSUs from your company (and hope the company does REALLY well) to get you there. Your salary is never going to do that. And while $200k is a lot of money to most people, I promise you that it's less than you'd imagine, especially in San Francisco or New York.

I'm not trying to talk you out of pursuing a career in tech. But all businesses are essentially technology businesses at some level anymore. Goldman employs more technologists by far than they do bankers. You can work in tech anywhere. But only at a 'tech company' will you ever have a shot at being anything besides CIO, CISO, CTO or some variant of that. I think that's likely to change in the next 10 years, but it hasn't yet.

If you can't see the benefits of the skills you would acquire in high finance or consulting, don't pursue those fields. At the same time, though, if you can't see why others might want that for themselves, then you wouldn't make a good strategist anyway.

1.No one thinks going into banking is going to make them rich and happy. What they do know which you apparently don't, is that it is a great stepping stone if you want to do anything else whether that's law school, MBA, corp dev, corp strat, or even working for a FAANG (Sundar Pichai).

2. Finance and tech require two completely different set of skills. History students at top universities can't program but Investment Banks are more than happy to take them. They are two completly different paths that aren't related at all. Comparing the prospects of consulting vs IB is more relevant.

3.Pay in IB continually goes up where Directors are making $700K a year, how many 35 year old programmers make $700K a year? My guess is not a lot.

4.Don't get me wrong, tech is a great career field but if you can't program and aren't interested in tech, investment banking/consulting is still by far the best way to start off a career if you want to be successful in life.

joedaddy179:

P.S.: Some of the smartest people I know are going into banking...

Unless you're at Yale...

I've not heard of any startups or tech firms in that compensation range. On the flip side, though some large, undergrad-hiring, well-known quant funds can hit the lower end of that range (Citadel notably hitting the higher end -- I know a graduate from school who ended up there with that sort of package), you must keep in mind how difficult it is to land a job in HF, specifically quant. I think your folly here is assuming that most CS majors realistically have a chance at working at Two Sigma, D.E. Shaw, and other funds of their ilk. The reality couldn't be any more different.

Though lots of HFs have formal programs, most hire extremely sporadically. Jobs are far more plentiful in IB, so naturally people gravitate towards them. Of course, they're also a fantastic springboard into other areas of finance, an MBA, or a Fortune 500. Some may still apply to HFs, but the major ones that recruit across a broad spectrum of universities are pretty brutal, and a lot of more niche shops (lesser known, but just as spectacular) will only hire from one or two specific schools, looking for only a handful of positions to fill.