Let us compare the earnings of 2 finance PhD friends from a top tier school. One joins academics and in 5 years becomes a fully tenured professor in a business school at a public university. Another joins an exotic desk in an investment bank and becomes a director in 5 years. The business school professor will be making in the range of 220-280k. Whereas a director in trading at a bulge bracket bank would be making 250k(base)+350k(bonus) = 600k in current environment. Some of it would be deferred compensation. The professor would be teaching 1 hour per day and guiding research students etc. for 1 more hour per day. Other than these 2 hours, he would spend say 3 hrs per day on his research. So, he works for a grand total of 5 hrs per day. In the months when universities have holidays, professor workload would be even lesser. The director on the other hand would be in office for a minimum of 10 hrs per day. So, on per hour basis, their salaries would be equivalent. However, university professor would get a pension and once he gets a tenure, he has a secure job. On the other hand, the director at WS bank could see his job being axed as recently happened across UBS or in recent history as most of the credit guys saw their jobs gone in 2008. Most interestingly, the expenses of the guy at WS would be much higher than the expenses of the professor. A big reason is NY or London rent and living costs are much higher compared to say if you are teaching at Santa Barbara. If professor decides to spend other 5 hrs of his job on doing consulting or writing some software that he can sell or just his own prop. trading, well he could end up making more than the trader at a bank. Current and ex-WS traders might have a hard time believing that a professor could have a better overall life as well as risk/stress adjusted a better salary + pension, since they have always been made to believe that they are the top dogs, but I have seen this happen in real life many a times.
Thank you for calling me a bottom feeder, I appreciate the vote of confidence. This is my view of the industry as somewhat successful insider. I am no Gutfreund, but I have been doing this for the last 15 years and have been running large structured/options books at a few IBs/funds. Could you refute my "points of adjustment" specifically? Anyway, the point was that Wall Street jobs as a whole do deserve what they get paid, it is not really a "life arbitrage". Granted, there aren't too many occupations were you can easily be worth a few millions by the age of 35-40, but you are paying for it in the lack of stability, lousy work environment and many other things. Someone saying "these jobs are the shizzit" is either very young and has been in the industry for just a few years or has never been in the industry proper at all. Nobody is agruing with that, an FO job (be it trading, or even structuring/sales) is a great way to make a top percentile income. Yet, as Maverick74 has rightfully pointed out, the information ratio of a wall street career is fairly low and life-style disadvantages are substantial.
im a simpleton, but the best way i can think to express what i'm reading in terms that all of the elite traders will understand: working at a bank you are long call options that you didn't have to pay for with dollars and the theta decay is your life and well-being. working at a university you are long an annuity that you already paid for with your time (getting the phd). of course this leaves out a whole slew of industries people may work in. maybe this example is bad, but feel free to correct it.
adjusted for pensions+other benefits and probability of success wall street jobs are not lucrative at all when compared to gov't jobs.
Your numbers are way off. UBS alone has for sure more than 2000 employees that earn 500k or more per year. That is 1yard in compensation out of a pool for all compensation that generally makes up 30-40% of total revenues generated. 1000 entrepreneurs that took home cash worth 1mil last year in or around SF? Please show me. For what it's worth they took home stock certificates or future hopes but cash?
Yeah sure, so it does not make a difference whether they invest large sums in recruiting the right people (such as feeding a whole industry of head hunting monkeys) because they could as well have hired you without making a performance difference.
Among small to mid tech entrepreneurs, 1000-2000 people taking home more than a million - just due to the sheer size in the tech space and the sheer number of firms, this should be true. However, you raise a good point of whether it is cash or stock?? Actually, it would be interesting to see if there is hard data on small to mid level silicon valley entrepreneurs numbers and their compensation. Anyone know of such a source?
Not sure who made your life that miserable at your banks and I have never worked much in New York but I can tell you that life as prop trader in HK and Tokyo is/was fantastic and all the perks added to the beauty of it. Maybe it was that I never had to take delayed and dirty trains, never had to be fearful to get robbed or shot on the street, never had to deal with The ridiculously high US income taxes, never paid a penny on capital gains (in HK) , enjoyed the worlds best food at reasonable prices without standing in line to get into a restaurant and without having to make reservations 3months in advance. Never had to content much with out-of-line alpha males who where obviously either on drugs or otherwise suffering from sociopathic disorders. I guess I can only say , welcome to Wallstreet. One reason I never wanted to work in NYC or London for that matter. Maybe you get the idea why there are lots of top traders who would love to trade out of HK or Singapore. Few hours flight to all the weekend paradises you ever dreamed of. Ad I am not talking about the filthy holes in Thailand or Philipines. Caveat about HK: the sometimes bad air pollution is a drag for some with family.