Finance as a career option - Revision history

Jsinick at 18:15, 26 March 2014

2014-03-26T18:15:54Z

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	Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.		Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.

	A version of this page was posted as a [lesswrong.com/lw/jna/finance_as_a_career_option/ LessWrong post] by Jonah Sinick. The comments there are also worth reading.		A version of this page was posted as a [http://www.lesswrong.com/lw/jna/finance_as_a_career_option/ LessWrong post] by Jonah Sinick. The comments there are also worth reading.

			If you're interested in learning more, be sure to check out the external links at the bottom of the page.

	==Types of finance jobs==		==Types of finance jobs==
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	{{further\|[[social value of finance]]}}		{{further\|[[social value of finance]]}}

	== ~~See also~~ ==		== External Links ==

	* [http://www.careers-in-finance.com/ Careers in finance].		* [http://www.careers-in-finance.com/ Careers in finance].
			* [http://www.investopedia.com/university/financial-careers/ Investopedia pages on financial careers]
			* [http://www.wallstreetoasis.com/frequently-asked-questions Wallstreet Oasis Frequently Asked Questions]
	* [http://80000hours.org/blog?category=12 80,000 Hours blog posts on finance].		* [http://80000hours.org/blog?category=12 80,000 Hours blog posts on finance].

Vipul at 01:37, 25 March 2014

2014-03-25T01:37:59Z

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	Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.		Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.

			A version of this page was posted as a [lesswrong.com/lw/jna/finance_as_a_career_option/ LessWrong post] by Jonah Sinick. The comments there are also worth reading.

			==Types of finance jobs==

	Finance has a number of sectors. Careers in Finance [http://careers-in-finance.com/ breaks finance down] into Commercial Banking, Corporate Finance, Financial Planning, Hedge Funds, Insurance, Investment Banking, Money Management, Private Equity and Real Estate. The nature of jobs in finance varies considerably from sector to sector.		Finance has a number of sectors. Careers in Finance [http://careers-in-finance.com/ breaks finance down] into Commercial Banking, Corporate Finance, Financial Planning, Hedge Funds, Insurance, Investment Banking, Money Management, Private Equity and Real Estate. The nature of jobs in finance varies considerably from sector to sector.

Vipul: /* Social value */

2014-03-03T06:32:35Z

Social value

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 == Social value ==
-Actors in finance produce both social value and social disvalue, and it seems difficult to make a general statement about whether the typical worker at an investment bank (for example) does more good or harm. The situation probably varies from sector to sector of finance. We give some relevant considerations below.
+{{further|[[social value of finance]]}}
 == See also ==

Jsinick at 20:10, 15 February 2014

2014-02-15T20:10:22Z

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	Finance has a number of sectors. Careers in Finance [http://careers-in-finance.com/ breaks finance down] into Commercial Banking, Corporate Finance, Financial Planning, Hedge Funds, Insurance, Investment Banking, Money Management, Private Equity and Real Estate. The nature of jobs in finance varies considerably from sector to sector.		Finance has a number of sectors. Careers in Finance [http://careers-in-finance.com/ breaks finance down] into Commercial Banking, Corporate Finance, Financial Planning, Hedge Funds, Insurance, Investment Banking, Money Management, Private Equity and Real Estate. The nature of jobs in finance varies considerably from sector to sector.

	Our remarks below concern jobs in higher paying jobs in finance, such as jobs in investment banking, private equity and at hedge funds.		Our remarks below concern jobs in higher paying jobs in finance, such as jobs in investment banking, private equity and at hedge funds. ''It may be very difficult to get these jobs.'' See for example [http://lesswrong.com/lw/jna/finance_as_a_career_option/ajb4 this comment.]

	=== Compensation ===		== Compensation ==

	Salaries in investment banking, private equity and hedge funds can be very high:		Salaries in investment banking, private equity and hedge funds can be very high:
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	The high income is moderated by marginal taxes being high at that level, as well as the high cost of living in New York city (where most finance firms are).		The high income is moderated by marginal taxes being high at that level, as well as the high cost of living in New York city (where most finance firms are).

	=== Work-life balance ===		== Work-life balance ==

	The high pay in investment banking should be viewed in the context of the grueling hours on the job. [http://www.ibankingfaq.com/category/banking-lifestyle/ According] to IBankingFAQ,		The high pay in investment banking should be viewed in the context of the grueling hours on the job. [http://www.ibankingfaq.com/category/banking-lifestyle/ According] to IBankingFAQ,
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	This is in consonance with what we've heard from two other acquaintances who have worked at a hedge funds and proprietary trading firms.		This is in consonance with what we've heard from two other acquaintances who have worked at a hedge funds and proprietary trading firms.

	=== Job security ===		== Job security ==

	Job security in the more lucrative sectors of finance may be poor. Carl Shulman [http://80000hours.org/blog/24-5-ways-to-be-misled-by-salary-rankings wrote]:		Job security in the more lucrative sectors of finance may be poor. Carl Shulman [http://80000hours.org/blog/24-5-ways-to-be-misled-by-salary-rankings wrote]:
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	''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''		''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''

	=== Culture ===		The ''degree'' to which job security is poor is a major factor in determining how promising finance is as a career for a given person. We have not been able to find good information on this.

			== Culture ==

	Some people have characterized finance as having a very abrasive culture. Others have disputed this characterization. The culture of finance firms probably varies substantially from sector to sector and firm to firm.		Some people have characterized finance as having a very abrasive culture. Others have disputed this characterization. The culture of finance firms probably varies substantially from sector to sector and firm to firm.

	* [http://en.wikipedia.org/wiki/Liar's_Poker Liar's Poker] by Michael Lewis gives "an unflattering portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices." The book reports on the situation in the 1980's, and may be out of date.		* [http://en.wikipedia.org/wiki/Liar's_Poker Liar's Poker] by Michael Lewis gives "an unflattering portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices." The book reports on the situation in the 1980's, and may be out of date.
	* Former DE Shaw employee Cathy O'Neil gives an unflattering characterization of the culture at DE Shaw [http://mathbabe.org/2011/06/24/working-with-larry-summers-part-2/ at her blog].		* Former DE Shaw employee Cathy O'Neil gives an unflattering characterization of the culture at DE Shaw [http://mathbabe.org/2011/06/24/working-with-larry-summers-part-2/ at her blog]. This characterization has been [http://lesswrong.com/lw/jna/finance_as_a_career_option/aj4k disputed].
	* Trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] "As a rule, traders are highly switched-on, pleasant to talk to, and are great people to learn from. I do not think trading is the optimal career path if you’re trying to meet highly altruistic people, but the Gordon Gekko stereotype is pretty far from the truth."		* Trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] "As a rule, traders are highly switched-on, pleasant to talk to, and are great people to learn from. I do not think trading is the optimal career path if you’re trying to meet highly altruistic people, but the Gordon Gekko stereotype is pretty far from the truth."

	=== Social value ===		== Social value ==

	Actors in finance produce both social value and social disvalue, and it seems difficult to make a general statement about whether the typical worker at an investment bank (for example) does more good or harm. The situation probably varies from sector to sector of finance. We give some relevant considerations below.		Actors in finance produce both social value and social disvalue, and it seems difficult to make a general statement about whether the typical worker at an investment bank (for example) does more good or harm. The situation probably varies from sector to sector of finance. We give some relevant considerations below.

	==== The correlation between income and social value ====		=== The correlation between income and social value ===

	[[Social value of work: income as a proxy \|In general]], there's a correlation between income and social value contributed. The fact that the earnings of people who work in finance are high raises the possibility that workers in finance contribute high social value.		[[Social value of work: income as a proxy \|In general]], there's a correlation between income and social value contributed. The fact that the earnings of people who work in finance are high raises the possibility that workers in finance contribute high social value.
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	People and organizations sometimes have a temporary need for money to accomplish their goals, and people and organizations are sometimes willing to lend money for a fee. Actors in finance who enable these transactions benefit both the borrower and the lender, and are paid accordingly. Similarly, actors in finance who lend money themselves benefit the borrowers and are paid accordingly. The proportion of activity in finance that fits this basic model is unclear. Many of the transactions in finance are many steps removed from the basic activity of enabling borrowers and lenders to connect. Some of these transactions indirectly enable borrowers and lenders to connect, and others don't. It can be very difficult to tell which are which from the outside.		People and organizations sometimes have a temporary need for money to accomplish their goals, and people and organizations are sometimes willing to lend money for a fee. Actors in finance who enable these transactions benefit both the borrower and the lender, and are paid accordingly. Similarly, actors in finance who lend money themselves benefit the borrowers and are paid accordingly. The proportion of activity in finance that fits this basic model is unclear. Many of the transactions in finance are many steps removed from the basic activity of enabling borrowers and lenders to connect. Some of these transactions indirectly enable borrowers and lenders to connect, and others don't. It can be very difficult to tell which are which from the outside.

	==== Unproductively increasing the efficiency of the market ====		=== Unproductively increasing the efficiency of the market ===

	If a company is looking for an investor and nobody is willing to invest, this is bad for the company. If the company is deserving of an investment, you spot this, and nobody is willing to invest, then you can benefit the company and make a profit by investing.		If a company is looking for an investor and nobody is willing to invest, this is bad for the company. If the company is deserving of an investment, you spot this, and nobody is willing to invest, then you can benefit the company and make a profit by investing.
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	Some activity in finance takes this form. High frequency trading is a candidate for a sector of finance that makes money through buying and selling stocks a little bit faster than others, without contributing much social value. The transactions that high frequency trading firms make occur on a time scale of a fraction of a second, and it's unclear that enabling people to buy or sell a stock a fraction of a second faster helps them to an appreciable degree, even after taking into account the number of people involved.		Some activity in finance takes this form. High frequency trading is a candidate for a sector of finance that makes money through buying and selling stocks a little bit faster than others, without contributing much social value. The transactions that high frequency trading firms make occur on a time scale of a fraction of a second, and it's unclear that enabling people to buy or sell a stock a fraction of a second faster helps them to an appreciable degree, even after taking into account the number of people involved.

	==== Pushing off tail risk onto the government ====		=== Pushing off tail risk onto the government ===

	Some firms in finance are [http://en.wikipedia.org/wiki/Too_big_to_fail "too big to fail"] in the sense that if they were to go bankrupt, the whole economy would suffer enormously, because of their interconnectedness. When they're in danger of bankruptcy, the government will often lend or give them money to keep them afloat. Because the firms are aware that they'll likely be supported by the government in the event that they make bad investments, they'll sometimes make very risky investments, that have high upside to them if they pan out well, with the expectation that if they pan out poorly, the government will cover their losses. Such actors effectively make their money at the expense of the taxpayers, thereby contributing negative social value.		Some firms in finance are [http://en.wikipedia.org/wiki/Too_big_to_fail "too big to fail"] in the sense that if they were to go bankrupt, the whole economy would suffer enormously, because of their interconnectedness. When they're in danger of bankruptcy, the government will often lend or give them money to keep them afloat. Because the firms are aware that they'll likely be supported by the government in the event that they make bad investments, they'll sometimes make very risky investments, that have high upside to them if they pan out well, with the expectation that if they pan out poorly, the government will cover their losses. Such actors effectively make their money at the expense of the taxpayers, thereby contributing negative social value.
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	Not all actors in finance behave in this way.		Not all actors in finance behave in this way.

	==== Causing financial crises ====		=== Causing financial crises ===

	As above, sometimes "too big to fail" firms will take risks that they're not able to handle, with the expectation that the government will cover their losses. If they're in danger of bankruptcy and the government ''doesn't'' cover their losses, this can precipitate a financial crisis. In particular, the collapse of [http://en.wikipedia.org/wiki/Lehman_Brothers Lehman Brothers] is thought to have played a major role in the 2008 financial crisis. In this way, actors in finance may be able to cause damage far out of proportion with their earnings.		As above, sometimes "too big to fail" firms will take risks that they're not able to handle, with the expectation that the government will cover their losses. If they're in danger of bankruptcy and the government ''doesn't'' cover their losses, this can precipitate a financial crisis. In particular, the collapse of [http://en.wikipedia.org/wiki/Lehman_Brothers Lehman Brothers] is thought to have played a major role in the 2008 financial crisis. In this way, actors in finance may be able to cause damage far out of proportion with their earnings.
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	[http://business.time.com/2012/08/08/high-frequency-trading-wall-streets-doomsday-machine/ Some people] have raised the possibility that high-frequency trading could cause a financial crisis on account of increasing the stock market's volatility, but others have disputed it, or even claimed that high-frequency trading reduces the stock market's volatility.		[http://business.time.com/2012/08/08/high-frequency-trading-wall-streets-doomsday-machine/ Some people] have raised the possibility that high-frequency trading could cause a financial crisis on account of increasing the stock market's volatility, but others have disputed it, or even claimed that high-frequency trading reduces the stock market's volatility.

	==== Earning to give ====		=== Earning to give ===

	Because the earnings are high in finance, finance has been highlighted as a promising career track for people who want to [http://en.wikipedia.org/wiki/Earning_to_give earn to give] large amounts of money to charities. 80,000 Hours Executive Director Ben Todd has [http://80000hours.org/blog/239-show-me-the-harm argued] that the harm one might do in finance is small relative to the good that one can do by donating 50+% of one's income to highly effective charities.		Because the earnings are high in finance, finance has been highlighted as a promising career track for people who want to [http://en.wikipedia.org/wiki/Earning_to_give earn to give] large amounts of money to charities. 80,000 Hours Executive Director Ben Todd has [http://80000hours.org/blog/239-show-me-the-harm argued] that the harm one might do in finance is small relative to the good that one can do by donating 50+% of one's income to highly effective charities.

			== See also ==

			* [http://www.careers-in-finance.com/ Careers in finance].
			* [http://80000hours.org/blog?category=12 80,000 Hours blog posts on finance].

Jsinick: /* Compensation */

2014-02-15T20:03:42Z

Compensation

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	* Stock market trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] that "If you’re good at [being a trader], you can make millions 5 years down the line."		* Stock market trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] that "If you’re good at [being a trader], you can make millions 5 years down the line."
	* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.		* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.

			The high income is moderated by marginal taxes being high at that level, as well as the high cost of living in New York city (where most finance firms are).

	=== Work-life balance ===		=== Work-life balance ===

Vipul at 17:45, 13 February 2014

2014-02-13T17:45:04Z

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			{{Career option\|finance}}

	Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.		Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.

Jsinick at 19:50, 9 February 2014

2014-02-09T19:50:54Z

Jsinick at 19:41, 9 February 2014

2014-02-09T19:41:23Z

← Older revision		Revision as of 19:41, 9 February 2014
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			Finance is a popular career option amongst graduates from elite universities: with [http://economix.blogs.nytimes.com/2011/12/21/out-of-harvard-and-into-finance/?_php=true&_type=blogs&_r=0 about 20%] of Harvard, Princeton and Yale graduates getting jobs in the field. Economist and New York Times columnist Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-finance-law-and-consulting.html suggested] that people with high intelligence have a significant edge in the field.

	Finance is a ~~popular career option amongst graduates from elite universities: with~~ [http://~~economix.blogs.nytimes~~.com/~~2011/12/21/out-of-harvard-and-into-~~finance~~/?_php=true&_type=blogs&_r=0 about 20%~~] ~~of Harvard~~, ~~Princeton~~ and ~~Yale graduates getting~~ jobs in ~~the field~~. ~~Tyler Cowen has [http://marginalrevolution.com/marginalrevolution/2012/01/a-simple-theory-of-why-so-many-smart-young-people-go-into-~~finance~~-law-~~and~~-consulting.html suggested] that people with high intelligence have a significant edge in the field~~.		Finance has a number of sectors. Careers in Finance [http://careers-in-finance.com/ breaks finance down] into Commercial Banking, Corporate Finance, Financial Planning, Hedge Funds, Insurance, Investment Banking, Money Management, Private Equity and Real Estate. The nature of jobs in finance varies considerably from sector to sector.

			Our remarks below concern jobs in higher paying jobs in finance, such as jobs in investment banking, private equity and at hedge funds.

	=== Compensation ===		=== Compensation ===
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	* Careers in finance [http://www.careers-in-finance.com/ibsal.htm reports] that somebody with ~5 years of experience at an investment bank typically makes ~$450K/year.		* Careers in finance [http://www.careers-in-finance.com/ibsal.htm reports] that somebody with ~5 years of experience at an investment bank typically makes ~$450K/year.
	* In 2006, Richard Rusczyk at ~~Art of Problem Solving~~ [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=83897] ~~wrote~~ "While it's not expected that you'll make a million dollars in year 5, neither is it impossible. If you're not making at least middle six-digits by year 6-8 as a quant in a hedge fund, then something has gone very wrong for you."		* In 2006, Richard Rusczyk (formerly an employee at hedge fund DE Shaw) [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=83897 wrote] "While it's not expected that you'll make a million dollars in year 5, neither is it impossible. If you're not making at least middle six-digits by year 6-8 as a quant in a hedge fund, then something has gone very wrong for you."
	* Joe Mela		* Stock market trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] that if you're a trader, "If you’re good at it, you can make millions 5 years down the line."
	* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.		* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.

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	The quotations are referring to the hours of work in entry level positions. We have not been able to find substantive information on number of hours that more senior employees work per week – our impression is that the number is smaller, but not dramatically so.		The quotations are referring to the hours of work in entry level positions. We have not been able to find substantive information on number of hours that more senior employees work per week – our impression is that the number is smaller, but not dramatically so.

	The number of hours per week that hedge ~~fund employees work~~ appear to be smaller. In 2006, Richard Rusczyk at ~~Art of Problem Solving~~ [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=90486 wrote] "I would say the average work week at places like Shaw or Jane Street is closer to 55 hours, maybe lower (unless things have changed dramatically)." This is in consonance with what we've heard from ~~another acquaintance~~ who ~~works~~ at a hedge ~~fund~~.		The number of hours per week that employees at hedge funds and proprietary trading firms appear to be smaller. In 2006, Richard Rusczyk (formerly an employee at hedge fund DE Shaw) [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=90486 wrote]

			''I would say the average work week at places like Shaw or Jane Street is closer to 55 hours, maybe lower (unless things have changed dramatically).''

			This is in consonance with what we've heard from two other acquaintances who have worked at a hedge funds and proprietary trading firms.

	=== Job security ===		=== Job security ===
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	''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''		''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''

			=== Culture ===

			Some people have characterized finance as having a very abrasive culture. Others have disputed this characterization. The culture of finance firms probably varies substantially from sector to sector and firm to firm.

			* [http://en.wikipedia.org/wiki/Liar's_Poker Liar's Poker] by Michael Lewis gives "an unflattering portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices." The book reports on the situation in the 1980's, and may be out of date.
			* Former DE Shaw employee Cathy O'Neil gives an unflattering characterization of the culture at DE Shaw [http://mathbabe.org/2011/06/24/working-with-larry-summers-part-2/ at her blog].
			* Trader Joe Mela wrote "As a rule, traders are highly switched-on, pleasant to talk to, and are great people to learn from. I do not think trading is the optimal career path if you’re trying to meet highly altruistic people, but the Gordon Gekko stereotype is pretty far from the truth."

	=== Social value ===		=== Social value ===
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	==== Earning to give ====		==== Earning to give ====

	Because the earnings are high in finance, finance has been highlighted as a promising career track for people who ~~are looking~~ to ~~contribute social value by donating~~ large amounts of money to ~~charity~~.		Because the earnings are high in finance, finance has been highlighted as a promising career track for people who want to [http://en.wikipedia.org/wiki/Earning_to_give earn to give] large amounts of money to charities. 80,000 Hours Executive Director Ben Todd has [http://80000hours.org/blog/239-show-me-the-harm argued] that the harm one might do in finance is small relative to the good that one can do by donating 50+% of one's income to highly effective charities.

Jsinick at 04:05, 9 February 2014

2014-02-09T04:05:35Z

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	* Careers in finance [http://www.careers-in-finance.com/ibsal.htm reports] that somebody with ~5 years of experience at an investment bank typically makes ~$450K/year.		* Careers in finance [http://www.careers-in-finance.com/ibsal.htm reports] that somebody with ~5 years of experience at an investment bank typically makes ~$450K/year.
	* In 2006, Richard Rusczyk at Art of Problem Solving [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=83897] wrote "While it's not expected that you'll make a million dollars in year 5, neither is it impossible. If you're not making at least middle six-digits by year 6-8 as a quant in a hedge fund, then something has gone very wrong for you."		* In 2006, Richard Rusczyk at Art of Problem Solving [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=83897] wrote "While it's not expected that you'll make a million dollars in year 5, neither is it impossible. If you're not making at least middle six-digits by year 6-8 as a quant in a hedge fund, then something has gone very wrong for you."
			* Joe Mela
	* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.		* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.

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	[http://business.time.com/2012/08/08/high-frequency-trading-wall-streets-doomsday-machine/ Some people] have raised the possibility that high-frequency trading could cause a financial crisis on account of increasing the stock market's volatility, but others have disputed it, or even claimed that high-frequency trading reduces the stock market's volatility.		[http://business.time.com/2012/08/08/high-frequency-trading-wall-streets-doomsday-machine/ Some people] have raised the possibility that high-frequency trading could cause a financial crisis on account of increasing the stock market's volatility, but others have disputed it, or even claimed that high-frequency trading reduces the stock market's volatility.

	==== ~~Causing financial crises~~ ====		==== Earning to give ====

	As above, sometimes "too big to fail" firms will take risks that they're not able to handle with the expectation that the government will cover their losses. If they're in danger of bankruptcy and the government ''doesn't'' cover their losses, this can precipitate a financial crisis. In particular, the collapse of [http://en.wikipedia.org/wiki/Lehman_Brothers Lehman Brothers] is thought to have played a major role in the 2008 financial crisis. In this way, actors in finance may be able to cause damage far out of proportion with their earnings.

	~~As above~~, ~~not all actors in~~ finance ~~behave in this way~~.		Because the earnings are high in finance, finance has been highlighted as a promising career track for people who are looking to contribute social value by donating large amounts of money to charity.

Jsinick at 03:58, 9 February 2014

2014-02-09T03:58:19Z

← Older revision		Revision as of 03:58, 9 February 2014
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	The high pay in investment banking should be viewed in the context of the grueling hours on the job. [http://www.ibankingfaq.com/category/banking-lifestyle/ According] to IBankingFAQ,		The high pay in investment banking should be viewed in the context of the grueling hours on the job. [http://www.ibankingfaq.com/category/banking-lifestyle/ According] to IBankingFAQ,

	"Analysts can routinely expect to work 90-100 hours per week or even more. A typical work day during the week might be 10:00 am until 2:00 am. Analysts will also typically work both days on the weekend. During a particularly busy time [...] it is not uncommon for Analysts to work all night..."		''Analysts can routinely expect to work 90-100 hours per week or even more. A typical work day during the week might be 10:00 am until 2:00 am. Analysts will also typically work both days on the weekend. During a particularly busy time [...] it is not uncommon for Analysts to work all night...''

	[http://www.quora.com/Investment-Banking/What-is-it-like-to-be-a-first-year-analyst-at-an-investment-bank According] to a highly upvoted Quora response		[http://www.quora.com/Investment-Banking/What-is-it-like-to-be-a-first-year-analyst-at-an-investment-bank According] to a highly upvoted Quora response

	"Your physical health will almost certainly suffer. The extent to which it suffers depends on how careful you are with your diet, whether you make time to exercise, how much sleep you get, and how well or poorly you deal with stress. Most people have at least partial burnouts."		''Your physical health will almost certainly suffer. The extent to which it suffers depends on how careful you are with your diet, whether you make time to exercise, how much sleep you get, and how well or poorly you deal with stress. Most people have at least partial burnouts.''

	The quotations are referring to the hours of work in entry level positions. We have not been able to find substantive information on number of hours that more senior employees work per week – our impression is that the number is smaller, but not dramatically so.		The quotations are referring to the hours of work in entry level positions. We have not been able to find substantive information on number of hours that more senior employees work per week – our impression is that the number is smaller, but not dramatically so.

	The number of hours per week that hedge fund employees work ~~seems~~ to be smaller. In 2006, Richard Rusczyk at Art of Problem Solving [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=90486 wrote] "I would say the average work week at places like Shaw or Jane Street is closer to 55 hours, maybe lower (unless things have changed dramatically)." This is in consonance with what we've heard from another acquaintance who works at a hedge fund.		The number of hours per week that hedge fund employees work appear to be smaller. In 2006, Richard Rusczyk at Art of Problem Solving [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=90486 wrote] "I would say the average work week at places like Shaw or Jane Street is closer to 55 hours, maybe lower (unless things have changed dramatically)." This is in consonance with what we've heard from another acquaintance who works at a hedge fund.

	=== Job security ===		=== Job security ===
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	Job security in the more lucrative sectors of finance may be poor. Carl Shulman [http://80000hours.org/blog/24-5-ways-to-be-misled-by-salary-rankings wrote]		Job security in the more lucrative sectors of finance may be poor. Carl Shulman [http://80000hours.org/blog/24-5-ways-to-be-misled-by-salary-rankings wrote]

	"While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter."		''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''

	=== Social value ===		=== Social value ===

← Older revision		Revision as of 19:50, 9 February 2014
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	Salaries in investment banking, private equity and hedge funds can be very high:		Salaries in investment banking, private equity and hedge funds can be very high:

	* Careers in ~~finance~~ [http://www.careers-in-finance.com/ibsal.htm reports] that somebody with ~5 years of experience at an investment bank typically makes ~$450K/year.		* Careers in Finance [http://www.careers-in-finance.com/ibsal.htm reports] that somebody with ~5 years of experience at an investment bank typically makes ~$450K/year.
	* In 2006, Richard Rusczyk (formerly an employee at hedge fund DE Shaw) [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=83897 wrote] "While it's not expected that you'll make a million dollars in year 5, neither is it impossible. If you're not making at least middle six-digits by year 6-8 as a quant in a hedge fund, then something has gone very wrong for you."		* In 2006, Richard Rusczyk (formerly an employee at hedge fund DE Shaw) [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=83897 wrote] "While it's not expected that you'll make a million dollars in year 5, neither is it impossible. If you're not making at least middle six-digits by year 6-8 as a quant in a hedge fund, then something has gone very wrong for you."
	* Stock market trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] that ~~if you're a trader,~~ "If you’re good at it, you can make millions 5 years down the line."		* Stock market trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] that "If you’re good at [being a trader], you can make millions 5 years down the line."
	* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.		* Some of the most wealthy people in the world, such as [http://en.wikipedia.org/wiki/George_Soros George Soros] (net worth $23 billion) and [http://en.wikipedia.org/wiki/James_Harris_Simons James Simons] (net worth 11.7 billion) made their money in these fields.

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	''Analysts can routinely expect to work 90-100 hours per week or even more. A typical work day during the week might be 10:00 am until 2:00 am. Analysts will also typically work both days on the weekend. During a particularly busy time [...] it is not uncommon for Analysts to work all night...''		''Analysts can routinely expect to work 90-100 hours per week or even more. A typical work day during the week might be 10:00 am until 2:00 am. Analysts will also typically work both days on the weekend. During a particularly busy time [...] it is not uncommon for Analysts to work all night...''

	[http://www.quora.com/Investment-Banking/What-is-it-like-to-be-a-first-year-analyst-at-an-investment-bank According] to a highly upvoted Quora response		[http://www.quora.com/Investment-Banking/What-is-it-like-to-be-a-first-year-analyst-at-an-investment-bank According] to a highly upvoted Quora response:

	''Your physical health will almost certainly suffer. The extent to which it suffers depends on how careful you are with your diet, whether you make time to exercise, how much sleep you get, and how well or poorly you deal with stress. Most people have at least partial burnouts.''		''Your physical health will almost certainly suffer. The extent to which it suffers depends on how careful you are with your diet, whether you make time to exercise, how much sleep you get, and how well or poorly you deal with stress. Most people have at least partial burnouts.''

	The quotations are referring to the hours of work in entry level positions. We have not been able to find substantive information on number of hours that more senior employees work per week ~~– our~~ impression is that the number is smaller, but not dramatically so.		The quotations are referring to the hours of work in entry level positions. We have not been able to find substantive information on number of hours that more senior employees work per week. Our impression is that the number is smaller, but not dramatically so.

	The number of hours per week that employees at hedge funds and proprietary trading firms appear to be smaller. In 2006, Richard Rusczyk (formerly an employee at hedge fund DE Shaw) [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=90486 wrote]		The number of hours per week that employees at hedge funds and proprietary trading firms appear to be smaller. In 2006, Richard Rusczyk (formerly an employee at hedge fund DE Shaw) [http://www.artofproblemsolving.com/Forum/viewtopic.php?f=338&t=90486 wrote]:

	''I would say the average work week at places like Shaw or Jane Street is closer to 55 hours, maybe lower (unless things have changed dramatically).''		''I would say the average work week at places like Shaw or Jane Street is closer to 55 hours, maybe lower (unless things have changed dramatically).''
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	=== Job security ===		=== Job security ===

	Job security in the more lucrative sectors of finance may be poor. Carl Shulman [http://80000hours.org/blog/24-5-ways-to-be-misled-by-salary-rankings wrote]		Job security in the more lucrative sectors of finance may be poor. Carl Shulman [http://80000hours.org/blog/24-5-ways-to-be-misled-by-salary-rankings wrote]:

	''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''		''While a physician will usually remain a physician throughout her career, lucrative jobs in investment banking and management consulting often come with “up or out” career paths. Either one is promoted “up,” with incomes growing exponentially, as one can see in these links for banks and consultancies, or one is fired “out” and must seek work at a lesser firm or leave the industry. Since most employees will not be around for very long, one must take into account one’s “exit options” in deciding whether to enter.''
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	* [http://en.wikipedia.org/wiki/Liar's_Poker Liar's Poker] by Michael Lewis gives "an unflattering portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices." The book reports on the situation in the 1980's, and may be out of date.		* [http://en.wikipedia.org/wiki/Liar's_Poker Liar's Poker] by Michael Lewis gives "an unflattering portrayal of Wall Street traders and salesmen, their personalities, their beliefs, and their work practices." The book reports on the situation in the 1980's, and may be out of date.
	* Former DE Shaw employee Cathy O'Neil gives an unflattering characterization of the culture at DE Shaw [http://mathbabe.org/2011/06/24/working-with-larry-summers-part-2/ at her blog].		* Former DE Shaw employee Cathy O'Neil gives an unflattering characterization of the culture at DE Shaw [http://mathbabe.org/2011/06/24/working-with-larry-summers-part-2/ at her blog].
	* Trader Joe Mela wrote "As a rule, traders are highly switched-on, pleasant to talk to, and are great people to learn from. I do not think trading is the optimal career path if you’re trying to meet highly altruistic people, but the Gordon Gekko stereotype is pretty far from the truth."		* Trader Joe Mela [http://80000hours.org/blog/265-why-consider-becoming-a-trader wrote] "As a rule, traders are highly switched-on, pleasant to talk to, and are great people to learn from. I do not think trading is the optimal career path if you’re trying to meet highly altruistic people, but the Gordon Gekko stereotype is pretty far from the truth."

	=== Social value ===		=== Social value ===

	Actors in finance produce both social value and social disvalue, and it seems ~~very~~ difficult to make a general statement about whether the typical worker at an investment bank (for example) does more good or ~~more~~ harm. We give some relevant considerations below.		Actors in finance produce both social value and social disvalue, and it seems difficult to make a general statement about whether the typical worker at an investment bank (for example) does more good or harm. The situation probably varies from sector to sector of finance. We give some relevant considerations below.

	==== The correlation between income and social value ====		==== The correlation between income and social value ====
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	But suppose there are actors who are willing to invest in the company, and you invest in the company a tiny bit faster than the other actors. The company doesn't benefit much from this, because it would have gotten an investment anyway. The other people who would have invested are harmed by this, because they can't make a profit. So the social value that you contribute is much smaller than it would have been if nobody had been willing to invest within the same rough timeframe.		But suppose there are actors who are willing to invest in the company, and you invest in the company a tiny bit faster than the other actors. The company doesn't benefit much from this, because it would have gotten an investment anyway. The other people who would have invested are harmed by this, because they can't make a profit. So the social value that you contribute is much smaller than it would have been if nobody had been willing to invest within the same rough timeframe.

	Some activity in finance takes this form. High frequency trading is a candidate for a sector of finance that makes money through buying and selling stocks a little bit faster than others, without contributing much social value. The transactions that high frequency trading firms make occur on a time scale of a fraction of a second, and it's unclear that enabling people to buy or sell a stock a fraction of a second faster helps them to an appreciable degree, even if the number of people ~~who benefit is very large~~.		Some activity in finance takes this form. High frequency trading is a candidate for a sector of finance that makes money through buying and selling stocks a little bit faster than others, without contributing much social value. The transactions that high frequency trading firms make occur on a time scale of a fraction of a second, and it's unclear that enabling people to buy or sell a stock a fraction of a second faster helps them to an appreciable degree, even after taking into account the number of people involved.

	==== Pushing off tail risk onto the government ====		==== Pushing off tail risk onto the government ====
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	==== Causing financial crises ====		==== Causing financial crises ====

	As above, sometimes "too big to fail" firms will take risks that they're not able to handle with the expectation that the government will cover their losses. If they're in danger of bankruptcy and the government ''doesn't'' cover their losses, this can precipitate a financial crisis. In particular, the collapse of [http://en.wikipedia.org/wiki/Lehman_Brothers Lehman Brothers] is thought to have played a major role in the 2008 financial crisis. In this way, actors in finance may be able to cause damage far out of proportion with their earnings.		As above, sometimes "too big to fail" firms will take risks that they're not able to handle, with the expectation that the government will cover their losses. If they're in danger of bankruptcy and the government ''doesn't'' cover their losses, this can precipitate a financial crisis. In particular, the collapse of [http://en.wikipedia.org/wiki/Lehman_Brothers Lehman Brothers] is thought to have played a major role in the 2008 financial crisis. In this way, actors in finance may be able to cause damage far out of proportion with their earnings.

	As above, not all actors in finance behave in this way.		As above, not all actors in finance behave in this way.