Just out of interest, knowing these people personally: what are the kinds of tradeoffs involved in these jobs that pay so extraordinarily well so early in one's career?
Is it a case of spending your 20s 8am-10pm in the office, no weekends, no vacation, etc?
Or, if not, then what's the path into a job like this? Are they simply 0.00001% level brilliant people, lucky, well connected?
I knew people like that. First of all, the first few years are a grinding machine and it pays shit (relatively speaking). You spend literally all your waking hours at the bank, w-e included and even when you have some time off, the bank restrict what type of activities you are allowed to do. Every year, the bank unceremoniously fired the bulk of your team. Anything is fair game to get the upper hand. There is no such thing as a friend. Even if you are in a team, there is no such thing as team work or team mate.
If you survive 4 years, then you get into the really well paid positions with 300K bonus a year being common. I have seen 2 scenario unfold: either the 4 previous completely ruin your value system, so you are either a complete asshole or addicted to a life of excess that keeps you in the system. A few will get promoted to hire levels yet and enter a weird world of mostly networking.
In rare circumstances, generally the one lucky to have a good and sane social circle before going into the grinder, you retire at 30 with several millions in your bank account.
At my bank, and we had a particularly bad group but it was successful (and this is mid level not a top tier), 2 kids out of 30 finished the two year "program". No one ever tells you the employment contract is for 2 years out of undergrad, and maybe you get "invited" for a third year, and maybe you get "promoted" from analyst to associate to compete with all the post MBAs who want to beat you out.
And honestly the wash out was a mix of things: quit, got fired, suffered too much took a random job, suffered too much held out and got an amazing job....etc.
I believe the ratio is better at other banks and also better in current times.
I had drinks with my old boss a few months ago and I warned him he would kill a kid one of these days. His answer was "oh culture is fixed, we give one Saturday off a month now. Morale is much better".
Granted this is a tiny skewed example. But your message is spot on.
I think this is an extreme view that isn’t entirely represented. I’ve had friends that worked pretty much 7am-7pm tying to get to that huge bonus, yes, but the majority of the team didn’t get fired. They did, however mostly all transition to other roles that are not as well known for lavish bonuses, but they do do very well. There are many support roles, client dealing roles, project management type roles, that are less ruthless than a front office buy side role. And less well compensated too, I’m sure. But that is where the majority end up at these banks.
You're talking about banking. I think the context of the original question is actually the buy side, because that's the comment you're replying to.
I have not seen any of the typical sell side grind common to investment banking among hedge funds. New grads hired to reputable hedge funds typically work comparable hours to their friends who work at Google/Facebook. They might earn 20 - 100% more though.
The story varies enormously by kind of institution and by specialism.
Being an associate in mergers and acquisitions at an investment bank is famously gruelling - long hours, terrible work culture - and as far as i can tell pretty menial, low-skill stuff most of the time.
Being a quant at a hedge fund can be pretty fun.
My general impression is:
1. Smaller companies are better, on all axes, than bigger ones
2. Trader/associate/etc > developer in all of hours, stress, and pay
3. Front office > back office in all of hours, stress, and pay
Important note: the person you're responding to is talking about the buy side. It's not uncommon to find a work life balance resembling tech in the buy side. For example, it's a popular meme that Citadel has a horrible work life balance. But I know two devs there who earn in excess of $500k each year and only work about 45 - 50 hour weeks.
I also know another new grad recently hired at Hudson River Trading, and another new grad recently hired at Jump Trading. Both are earning over $400k per year, but they work 45 hour weeks. And since RenTech has been mentioned in this thread: the people I know there have wonderful work life balance.
I have found that most popular conceptions of bad work life balance in finance apply to banking and sell side, not to the buy side. Working as a developer at a bank usually sucks, both financially and culturally, in my experience. Not always, but commonly. Working at a hedge fund can be very nice both financially and culturally.
What backgrounds do the new grades that work at Hudson River Trading, Jump Trading and so on have? BS, MS, PhDs? What schools are they coming from, etc? What fields did they study?
Usually top ~20 schools with a bachelors in math or CS. Sometimes Masters or PhD, but those end up working directly in research. The new grads I know aren't actually quants.
Cool. That's adjacent to what i do, but i have more experience and make less money!
As an aside, i love that the names for things vary so much across the industry. Where i am, "research development" means things like building historical market data archives that other people can use to backtest algorithms etc.
It's not a meme about citidael I've never heard anyone praise them. They churn and burn. Plus what are they even doing? Turning a dollar into a dollar five. That's really making people's lives better.
It may seem counterintuitive, but turning a dollar into a dollar five actually makes people’s lives better. Many of citadel’s investors are teacher, firemen pension funds. Even beyond that, Citadel gets paid for essentially contributing to liquidity in financial markets. And, liquid and well functioning financial markets are critical to a well functioning society.
I have a brother-in-law who had a job like this. He started right out of university and worked his way up to a VP position with his company before retiring last year at 40. He’s married and has four kids, huge house, boat, they go on extravagant vacations, etc.
One of his teen daughters said, when asked how she felt about her dad retiring and being home all the time, that it was ok because he is “nice” now. She went on to explain how her primary memory of him over her youth is that he was always “mad”.
That sounds awful... having that much cash is nice, but it cost him seeing his children grow up and having a good relationship with them right now.
When you're fresh out of grad school I can imagine the thought process of grinding it out for a couple of years to get to the higher pay brackets. But when there's a wife and kids involved... not so much.
Well, it could be worse. You could be mad/anxious all the time and not making the big bucks. The people that are mentioned here, making the big bucks with plush material lives are not the majority. Just like during the 80s and 90s, most sell-side traders were not making millions.
The trick is generally to find yourself in a situation where you take home 300k because you made 3000k for your firm.
I'm not being facetious. With anything trading-related, a big part of having the ability to make three million dollars more-or-less "on your own" is to have tens of millions of dollars to sling around, plus a good idea of the manner in which to sling it. So a firm will give their people a couple million in buying power and then tell them to go make an X% return. Those that can do so are compensated.
The downside, as I have it, is that the "work-life balance" is, as you mentioned, non-existent and also immensely stressful. Plus, having that kind of money in your 20's can be a problem all on its own.
Depends where you are talking about M&A (company mergers, IPOs etc) is notorious for the long hours that they make associates work, mainly to knock up powerpoints and excel cashflow models.
Trading/Sales is normally 6.30am start to 5pm-ish in the evening, which possibly drinks/client entertaining some nights after that. You probably have to spend a few years as desk gopher - coffees, doing the trade reporting admin no-one else wants to do etc. I don't think trading or sales typically work weekends. I think some may trade out of hours as well, but I think (in large IBs in the UK) that they are in the minority.
I work with a bunch of HFT firms and my impression is as follows:
>what are the kinds of tradeoffs involved in these jobs that pay so extraordinarily well so early in one's career?
>Is it a case of spending your 20s 8am-10pm in the office, no weekends, no vacation, etc?
You'll be in the office for the bulk of the trading day. You will need to be available/online though not necessarily "working" around open and close (possibly from home, many employers are flexible about butt-in-seat hours). Early mornings are rare. Late evenings will be commonplace if your employer does not have their end of day routine down.
If the team you work with is on their game this business is basically a money tree and predictably with that comes a very good work life balance. I have no idea how much vacation these people take but things get very, very quite around basically every holiday so I don't think they're lacking.
>Or, if not, then what's the path into a job like this? Are they simply 0.00001% level brilliant people, lucky, well connected?
Some combination of all of the above and being in the right place at the right time. These are smart people who understand finance, understand tech and understand the implementation. The algorithmic arms race isn't all that fast but the competition is stiff enough that you need to have all your T's crossed and you I's dotted to make money. Have you ever considered buying a microwave link because the fastest fiber money can buy is too slow. That's the level to which everything is built. People roll their own implementations of protocols because the off the shelf ones aren't optimized for what they want to do. Some of these firms reverse engineer the topology of the exchange's computer systems (by sending various orders and carefully analyzing the responses) in order to gain a competitive edge. This stuff can get crazy.
A lot of these firms need to stay under a specific headcount for legal/compliance reasons and when you need to cram that level of competency in all those skills into very few people they obviously wind up being exceptional (in the literal sense) people and they are compensated accordingly (because supply and demand).
It's even better than it sounds. During those two weeks, they're prohibited from conducting their job by law. They would get in trouble for responding to a normal work email. Very few highly compensated people get vacation like that.
>Or, if not, then what's the path into a job like this? Are they simply 0.00001% level brilliant people, lucky, well connected?
A lot of it is about jumping through hoops but also I think a lot of people who "overachieve" just started young.
I knew people who knew they wanted to be lawyers from age 12 and were finding ways to do work experience from that age.
Similarly, I know many people who were coding from <small age>. (Maybe on the BBC micro, or learning BASIC or learning Java for Minecraft, take your pick).
I have also known people managing personal investment portfolios, and pianists sinking 50 hours per week practising when they were 8 years old.
My personal favorite (because it concerns people close to me) are two people who have instinctively honed the skill to sell and have been selling in some shape or form since they could essentially talk.
When it comes to these "prestigious" type jobs, I think a lot of the people who did well and got the jobs had been prepped a long time in advance. Quite a lot of it is worldview/personality grooming that happens from the high school you go to and your parents but less about direct connections because there are very few grad-level people who get blatant nepotistic hand-me-outs at the big companies you've heard of. Though coaching and interview prep probably does probably abound.
That's not to say it's too late in life to try learn something new, but inevitably life takes over (relationships, and kids).
Having to outperform all your similarly greedy (due to self selection) peers not only in business outcome but also in the social arena sounds like an inevitable burden when so much is at stake. This would be 24/7 hell for people who don't naturally fall into the appropriate behavior patterns even if working hours where somehow enforced to a lazy 20h week consisting almost entirely of breaks.
I have 5 friends in that bucket. And none of them had the "right connection".
Some are immigrants, some are minorities, some were dirt poor and came from nothing.
But all of them had some of the highest drive and grit and sometimes intelligence out of my friend group. These guys would have done well in absolutely any industry.
8 to 10pm x 7 days a week would be an absolutely pleasure. It's hard to convey how hours longer than that weigh on you with multiple back to back subsequent years of "service".
But finance isn't special. 27 year old top attorneys make 300k. And suffer similar pain.
Even in consulting like BCG comp is not as high but you get weekends off. But you're still elbow to elbow with ambitious people.
But heres the rub. I did the math once. My calculation showed there were 4,000 private equity professions in the US. Maybe that's changed. That's an absurdly small number. How many bariatric surgeons are there? Like when you compare these very small knifes edge type quantities, sure, you see excess.
So finance used to be 7% of GDP, up from 4%, so for a period you had the ratio of people to GDP skewed so smart people rushed to normalize it. And it normalized. Now you see the equilibrium hit. But that doesn't mean sometimes the equilibrium is high. There's no 28 year old making 500k in silicon valley? Or spending 20k decorating their office?
Like it's just a matter of perspective.
Sorry for the rant. But the connection thing drives me crazy. I'm sure the silicon valley guy has really hard to obtain skills and didnt network at a bar into his top engineering job.
Edit: didn't mean for this to be combative. I've long believed humans are sort of fungible. You take a partner at an accounting firm and throw him in a consulting firm (and somehow roll back time) that same person will sort of get to the same spot. I believe when you're 14 or 16 or 18 or 20 and you sort of pick what you want to do you are so impressionable that it ends up being partly passion and partially luck.
Getting advice on which fields to study, which schools to apply to, what friends to make who also know which schools to apply to, and which companies to apply to all count as “right connection”. And of course, getting an interview because your friend’s parent knows someone at a firm looking for someone.
I know I like to hire based on personal recommendation of people I trust, it removed a lot of risk for me in dealing with random people. Hence “right connections”.
That's an extremely watered down definition of "right connection." My brother is at JPM/MS/GS. We're immigrants, we grew up outside of New York entirely outside of the finance orbit, we went to public K-12, etc. He got into an Ivy-league school because he's a nerd who always turned in his homework early since age 6 and prepped hard for the SAT. I was the one who gave him advice on "which fields to study" and "which companies to apply to"--based on nothing more than doing some research on internet forums. (He was originally planning to go into a PhD program in STEM, something we had exposure to from our upbringing.) The interviewing process didn't require "know[ing] someone at a firm." The companies came on campus and interviewed the STEM nerds with the highest GPAs. The process isn't easy, but it's highly structured, and meritocratic for some definition of meritocratic.[1]
[1] I think its more accurate to say that the field requires lack of significant adversity more so than "connections." The median family income at Harvard is $168,000, the 80th percentile. These kids aren't working all summer to help their parents make ends meet. At the same time, their neighbors are engineers, doctors, government employees, etc., not hedge fund managers.
Exactly this. I have family (through marriage) who grew up in the New York / New Jersey area and went to nice public schools. Many people they went to high school with ended up in finance on the buy-side. They knew the path from high school onwards: Get into an Ivy League for college, major in CS, EE, or Math (but with no intention of working in those areas) get recruited by a top 3 bulge bracket (MS, JP, GS) in either M&A or LevFin, put in your two years, network with the people a year or two ahead of you in college who then went onto private equity or hedge funds, get an interview there, make bank.
Actually, you're spot on and maybe my comment is wrong.
Recruiting has these crazy dance steps. Unless you know in October of your sophomore year what the door knock is on this special process it can be hard to get in. But you can get in later. Its just much much harder.
I've been trying to figure out for a few years what that's called. It's not wealth, because knowing to apply is some sort of social/human capital, and its intergenerational. But I wonder like in the area where I volunteer...how much of the difference in outcome is related to just not knowing how the process works?
It is a type of wealth. There are different kinds of wealth. Having a good, supportive family is a type of wealth. Being born in a country with plentiful drinking water and other natural resources is a type of wealth. Being able to sell your services is a type of wealth. Having a network of contacts in many places around the world is a type of wealth. Learning how to do something is also a type of wealth.
Some wealth you’re born with, or you come by from circumstance (many times relating to who you’re born to). Some wealth you can work on obtaining yourself.
> Getting advice on which fields to study, which schools to apply to, what friends to make who also know which schools to apply to, and which companies to apply to all count as “right connection”.
Or you can "just" get into a top 5-10 MBA. Still hard, but at least you're an adult at that point
It's actually really hard to go from sell-side to buy-side, post-MBA. I went to a top-5 business school in the US and everyone recruiting for banking wanted to eventually move to the buy-side. I think out of a group of ~100, <5 might have made it into a decent buy-side job. Top private equity funds put their best analysts through business school and then just hire them back. Breaking in at a post-MBA level is really hard. You really have to know "the path" early in college and get into a top bulge bracket right after college graduation, put in your two years of 100 hour weeks, and then get on recruiters' radars for PE and HF.
That was just my school, 5 years out of graduation. That might change in another 5 years as bankers get to MD levels, and then have a client and relationship roster that they bring to the buy-side. There are also people who switched to Tier 3 or Tier 4 buyside firms, but then don't make the kind of money you make at a top PE or HF.
Also, I did not go to Harvard, which typically sends more people to the buy-side then the other top-tier programs (but is somewhat self-selection, because HBS tends to accept a lot of pre-MBA buy-side people from top firms)
Is it a case of spending your 20s 8am-10pm in the office, no weekends, no vacation, etc?
Or, if not, then what's the path into a job like this? Are they simply 0.00001% level brilliant people, lucky, well connected?