I think when they say "average salary" or "average income", it's the median, not the mean. Even though if you are taking a small enough group (which Wall Street workers are, just 160k of them in the NYC), mean matters as well for understanding the skew of the distribution. It's an interesting thought. I guess "income information ratio" would have to be income minus the benchmark divided by the standard deviation from the benchmark. The benchmark would be an average income for people of similar educational and professional achievement.
+1 I used to always think this is true, glad to see another long term member independently arrive at the same conclusion.
Of course working in wall street is very lucrative. Excellent pay, excellent benefits, and last but not least, the discretionary bonus. Even for back office, the pay is above average if you work for a top shop and there's always the carrot of transitioning to the front office (not at all easy but possible). But I will tell you one thing. Every penny is earned. The amount of work and responsibility is tremendous and most normal people would crack under the pressure. The bullshit family excuse is #1 case for not making it. If there's a fire to be put out that can cost the company serious money, you reschedule, you get paid enough for it to cover the penalties and you'll get it all back and more EOY. If you can't let down your family, you don't belong here. Just don't complain about us making X times your salar OK? For the first years, you get money but you don't have time to spend it. Job hoppers usually get lost by the 1.5-2 year mark, and grind away their entire career hopping firm to firm with nothing to show for it, but they live OK, upper middle class in the suburbs. Only after paying dues, sticking with the firm, and generating consistent income for your company will you get both time and the income to spend without worry. Now if you work for a second tier firm, all bets are off, but I'm sure the hours are easier. Basically, if you are front office at a top firm and you do everything you are expected to do you will double your money every year, at least that has been my experience.
I used to have the same attitude and was probably a tad bit more aggressive than you are about promoting my firm and WS top tier banks in general. I used to believe deep down from my heart that aggressive cut throat culture at WS is great. Not any more though! I think with time, a person gains more perspective about life and their priorities change. Now, I prefer to stay in a suburb, away from typical ego-trips at WS. Now, I am of the view that being a top-tier univ professor is a much better job (in a holistic sense of quality of life etc.) than being an MD in exotics trading at a BB shop. One experience that really changed my view about FO positions in top tier firms is when I started to compare lifestyle and money that people afford and make in silicon valley - especially the tech entrepreneurs. Most of the traders or top salesmen in JP,MS,GS etc. make way less than successful tech entrepreneurs and have much poor overall quality of life than these tech entrepreneur guys. Comparison with silicon valley tech entrepreneurs was the key that showed me that FO career on WS is really not the top kind of career as it is advertised like in business schools.
Sure I agree the big money is made in owning a company. But it has huge risks as well, particularly these tech startups you talk about: read survivorship bias. Also with all the cash you accumulate in the biz, nothing is stopping you from starting your own company or investing in one. But there are also many guys who work make serious money and keep working there. Best option from a risk/reward perspective. You know how many celebs go broke? They invest in bad business ventures.
How ironic is that? Most of those who believe the numbers in the link that OP provided are wrong appear to be the bottom feeders of the system, so bottom that even the snake oil sales men selling books and trading courses look like high income generators in comparison. Funny how the numbers "must of course" be discounted for the higher cost of education, longer work hours so in order to come to the final conclusion that a Wall Street trader must of course not be any better off than the postal office worker or teacher next door. What a bollocks. The truth is, there are people with different intellects, educational levels, network connections, passions, and drive as well as attitudes and willingness to work hard. To make it to a trading role at a tier 1 or 2 investment bank in NYC (or anywhere else for that matter) requires a certain aptitude, intelligence, education, and street smartness. Most people do not even meet those basic criteria, including most on this website. The opposite does not hold true: Not everyone who does not work in banking/trading automatically disqualifies for a banking job. Others of equally high intelligence or intellect happily pass up a career in finance because they feel a different calling, passion, drive. But what I find funny is that most on this board justify their miserable day trader life (mostly unprofitable or very close to breaking even) categorize themselves as belonging to the last group above, as those who happily pass up a chance as bank trader. Well, the truth is that most would not even qualify for a job interview alone. The truth is that other jobs and industries are equally prestigious in their own rights, a job as investment bank or hedge fund trader is one of the most competitive jobs. Not just to get in, not just to be qualified as a candidate to deserve grooming and mentorship, but as someone who ultimately proves to be highly profitable over a long period of time. Those individuals generally do not care about the commute, do not care about the work hours, do not care how their personal lives suffer, they are so passionate about their chosen path and careers that it is all that matters to them. Why can't many of those who discount the hard work, intelligence, and educational efforts that goes into the ground work of attaining a career as professional bank or hedge fund trader not accept reality: That they themselves could not make it and that there are others who made it. Why do those same individuals do not belittle astronauts and start architects? Because they benefit human kind while the trader's only goal is profit maximization for his own pockets? The irony lies in the fact that those who generally could not make it, who got fired, who did not stand up to the competition have the biggest ax to grind. Why can't we simply accept the fact that the guys who got in there are way more intelligent, hard working, with more will power, more educated than the average guy on the street, the average guy on this board. Yes there are some assholes sitting on some of those chairs, but so do assholes sit on many other chairs on corporate boards and in other jobs in every other industry. And fact is, hardly any other job has such a favorable risk/reward (given you are given the opportunity) as a bank/hedge fund trader. Period.
what hog wash about your IT/entrepreneurs comparison. While you are right about different salaries, could you rest for a moment and count the number of people in Silicon Valley who nowadays pull down more salary than the average FO trader? You should not include those who got rich quick during the tech gold rush otherwise you should probably also include those guys who sold the tulips to idiots a few hundred years ago. The number of guys pulling down very decent salaries as bank traders are a multiple of the few guys who still pull down 500k+ salaries in technology. And I would argue it is comparatively much harder to get into the seat of such technology job than becoming a bank trader.
I am not comparing technologists at banks with bank traders. I am comparing bank traders with people who started IT firms. Some people on this thread were specifically comparing with top tier BB - I count JP, MS, GS, DB in top 4. Others like SG, HSBC, Nomura, CS, UBS are big but not Bulge bracket. Even if you include 3-4 more banks, say we are talking about top 8 sell side banks. Between NY, Tokyo, HK and London, say you have trader teams of 15 people at each location in each specialty - so 15 in IR, 15 in FX, 15 in credit, 15 in equity. So, 60 traders times 5 locations = 300 traders per bank. Say 8 banks, we are talking about 2400 traders. Compare with guys who started IT firms. I hope you agree that there are at least 2400 guy who started and run mid-size IT firms. Each of them would be making more than a million per year whereas on average all these traders won't be making a million per year.
Your right bro, those bank traders killed it in 2008 and the hedge funds really slaughtered the S&P the last 3 years. Ohhhhh wait... Banks/ hedgies are just as bad as most individual traders the 90% number still applies for the most part.
Finance attracts very smart people. A lot of people with PhDs in hard sciences go for degrees like MFE just so that they can enter the hallowed portals of banks. A lot of people are like this but a lot of people ultimately develop a great amount of balance in their lives. Having balance in life does not mean that they are any less passionate.