Why does it seem finance is a dying industry?

So many people talking about automation, bonuses going down, layoffs, analyst classes decreasing in size, etc on this forum. Some of the jobs represented on this forum being declared as dead. There's articles online that say sales and trading, ER, a lot of AM are dead-end jobs that are about to be replaced. Saw a post of someone working at a top AM firm and he said he couldn't even consider doing this as a career because of how bad revenues were getting. Then there's things like PWM which 50% say is dying and the other 50% say is fine. And at the end, I've seen people saying that the remaining roles in finance like IB, Corporate finance, consulting, PE is going to be downsized because automation can do most of the work it seems like finance can't catch a break and nothing seems to be currently going well.

There's a Mergers and Inquisitions article that pretty much says screw finance, it's over, go work at Google. Can't link it but it's called: "Is Finance Still a Good Long-Term Career?"

Comments (19)

Nov 13, 2018

Late stage capitalism. Everything is a dying industry as "work" becomes increasingly superfluous.

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Nov 13, 2018

But you never hear people say "tech is dying" or "the legal field is dying" or "medicine is dying" or "engineering is dying" so I dont think it's because of late stage capitlism, more so because the financial world is starting to adopt a lot of new tech to revitalize the industry.

It's really only certain parts of finance that are "dying" as well. IB, PE, Corporate Development, and RE arent anywhere close to "dying" and neither are roles that require a lot of education like quants.

Nov 13, 2018

Tech may not be dying as an industry, but try competing against outsourcing/H1Bs as a programmer or software developer as an American.

The legal field is dying. The employment outcomes for law students who graduate outside of the top 10 law schools are abysmal.

Medicine is one of the only fields not dying as it will be a long time before people are comfortable being diagnosed by a robot or operated on by one. The demand for healthcare is built in to the human condition. Everyone gets sick and requires medical care at some point. Most people will never need the services of a lawyer, accountant, wealth manager, etc. however.

Engineering is being outsourced/H1B'd just like tech. Employers post jobs requiring 10 years experience paying 120k and then claim "they can't find any Americans to fill the position."

At the rate we're going, some form of "socialism" such as UBI is going to become mandatory as expecting everyone who needs to earn a living to become a quant or cardiac surgeon or investment banker is ludicrous.

Capitalism, in it's constant drive towards increased efficiency, is self-defeating. That's not to say I don't like it, or it's a "bad" system, or it's unfair, etc. Honestly, I don't see it as a political issue. We are simply transitioning into a new era that will render most forms of "work" unnecessary. It may take 50+ years to reach the "upper echelons" of the economic ladder such as IB, but something will have to be done much sooner than that to accommodate the people at the lower end that it's already starting to marginalize.

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Nov 19, 2018

You never hear anyone say "tech is dying" because technology is pervasive in society. Same with medicine and engineering. For example, social media is booming but the personal computer is dying.

Finance as a whole is not dying because it'll be around for as long as people exchange goods and services.

To your point, maybe there are some areas of finance that are declining. The question is which part of finance is growing and how do you get there.

Nov 19, 2018
dsch:

Late stage capitalism.

Log out of reddit, brah

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Nov 13, 2018

There's a valid argument to be made in the public markets. How can public market active management as a whole sustain itself when 90% of the funds can't beat their benchmarks? That's an inherent fundamental headwind that only gets worse as technology and regulation increases transparency on how much some funds suck.

Private markets still have long-term viability because automation can only do so much. You can't automate good relationships and proprietary deal flow very easily which are the primary drivers of superior private market returns.

Also, people overestimate automation like they do with AI, machine learning, and outsourcing. My banker friends have PowerPoint automation software and outsource a lot of stupid bitch work now to people in India and they LOVE it. Sure this means your IBD team needs 1-2 less analysts but the flip side is that there's less time spent on near value-less labor.

The key here is this: don't compete in saturated markets where variables of differentiation are becoming limited or commoditized. The more linear, systematic, and formulaic your job/skills are, the more likely robots will take it over.

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Nov 18, 2018

can you give examples of saturated markets where variables of differentiation are becoming limited or commoditized and vice versa? thanks!

Nov 18, 2018

Well there's 3 environments I can point to that support the theme:

Natural food space: If you go to a natural foods conference, you'll know what I'm talking about. The barriers of finding guidance and starting a new food product company is lower than ever and this has led to a mass inflow of new entrants into categories like bone juice and chips. Yes, branding as a differentiation point becomes more important in this environment but even that value starts slipping in categories where the benefits touted are all the same.

Cannabis: This is moreso a function of where the state of the industry is but despite cannabis's wide variety of strains and different combination of compounds, the wave of legalization in the US is flooding the product in states like Washington and Oregon. The US cannabis consumer at this point doesn't care about branding or specific product tailoring so they look for maximum THC % which has caused major commoditization in producer-heavy markets. This will change in the near future though when cannabis consumer tastes evolve.

Breakdancing: Yeah, kind of left field area to analyze competition right? One thing that drives me crazy about the bboy scene is that 6 year olds nowadays are performing the hardest moves that 30 year olds took over a decade to perfect. This is largely a function of the fact that the dance is still relatively young and best-practices in training and learning certain moves are now starting to be passed down to kids so they save time on experimenting. This, however, has caused a commoditization in acrobatic moves at competitions and more "soft" skills like presence, storytelling, and energy have been emphasized more.

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Nov 13, 2018

Automation won't take over in a snap. It's very much a long long drawn out process to replace people.

Finance will still be a comfy career in your lifetime and I think it's a much slower burning candle than people think. Despite passive funds outperforming most active funds in the last decade - the HF industry is as big as ever in AUM. A few trillion AUM dollars won't flow out of the industry overnight. Not saying I'm bullish about the industry's long-term prospects but if you're on the buyside it's comfortable.

Aside from that I'm a believer in the paradox of skill so I'm skeptical of people thinking they can beat the market in this day and age.

Nov 13, 2018

Oh and if anyone talks about coding as the future... Watch out for India. Back in ER we outsourced tons of coding and VBA work for pennies on the dollar

Nov 18, 2018

As long as you have human senior executives youll need finance goobers to explain shit to them in a way they can understand so they can make decisions and justify their $10m / year salaries. Its also going to be hard to automate ass kissing in as authentic a way as many of my compatriots practice it.

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Nov 21, 2018
Big4please:

so they can make decisions and justify their $10m / year salaries.

Have you ever met someone getting $10m/yr in an F500 company?

I had a meeting with someone who was the #2 person in a large public company and managed to get 30min on his schedule. His disclosed income on Forbes at the company was $8-10m/yr.

The only slot of time I could get with him was during his lunch hour 3 months from the book request date.

This dude just knew things. He saw things. Visionary. The meeting was amazing. The sheer amount of value he was adding to the company was not $10 million per year. It was much more. Significantly more.

Look at the C suite F50 guy versus a PM at a hedge fund. The hedge fund guy is cranking out value too, but in a different way. Those F500 guys/girls have every second of their time booked and have brutal oversight from a variety of people around them.

In my opinion, the $10 million at a F500 company is a salary that a person definitely worked up to over their whole career for this point and the salary is an efficient number derived not only from internal compensation balance and equity (fairness) measures, but typically is also approved or managed by someone on the board of directors, who represents shareholder value. So the $10 million number is a pretty fair value. Especially if you consider how much of that number is stock options which are worth zero if the company abruptly fails or gets sliced in value (it happens).

So, considered all these things, I'd rather not make $10 million in public companies. It all seems like too much work. Too much oversight. Too many meetings to go to and boxes to check. Is the $10 million worth it to pay these execs? Sure. They are basically professional athletes in the business realm. They are stars, excel at what they do and can lead hundreds of thousands of people in a new direction to capture billions of dollars of value for shareholders in the market. Pay them whatever they deserve. Get the best guy for shareholder value. That's what the board is thinking.

$10 million? Could be a steal in some cases. Look at what Lou Gerstner did to IBM when it almost failed in the early 90s. How much was that worth? How much did they pay him?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Nov 21, 2018
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