The End of Wall Street As They Knew It

http://nymag.com/news/features/wall-street-2012-2/

by cdwhite • 14 years ago

120 65 14 years ago

pg• 14 years ago

“If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”

npt4279• 14 years ago

Best quote in that article, by far. I just gave up trying to fit that in a tweet.

ThomPete4• 14 years ago

Yes but problem seem to be that a surprising relative small number of academics start companies around the globe I hear.

In Denmark it's less than 5%.of those who start companies. I wonder what number is in the US.

glimcat• 14 years ago

Starting a company is about 1% interesting stuff, with the rest going to grunt work, marketing, meetings, etc. ad nauseum.

Staying within academia is up to about 25% interesting stuff, sometimes more, with the rest going to teaching / outreach / departmental involvement / begging for grant money. If you enjoy teaching, interesting stuff can be 40 or 50 percent, sometimes more.

If anything, the IP workflow for collaborations bridging the gap out of academia needs to be improved. Take the horror show that is the US patent system and convolve that with university bureaucracy - it's not pretty.

roel_v5• 14 years ago

Don't get me started on that. Academics snub their noses at 'businesses', that's for slimy 'business people', academics don't stoop to that level. Maybe if it's called a 'spin off', and if they're guaranteed to receive a salary for a part time position for at least a few years. At the same time of course, that grant money needs to keep coming in! Those cheap alumni should donate more, with their fat paychecks, and of course the government should spend more on research! Just tax companies more, they don't do anything useful anyway!

(Yes I'm bitter, sometimes. And yes I know that there are exceptions. And things are changing - even if very slowly.)

SkyMarshal• 14 years ago

It's about time. That's what should have happened immediately after the crash several years ago, but the bailouts stopped it.

adamtmca2• 14 years ago

This is one of the benefits Iceland's prime minister claimed came from letting their banks fail -- more physicists, programmers and engineers moving from finance into technology.

roel_v5• 14 years ago

Hmm. What kind of industry does Iceland have that requires 'physicists, programmers and engineers'? With a population in the hundreds of thousands, smaller than even medium sized cities in most countries, how much opportunity is/was there for these people? It's not even big enough to sustain a serious university, let alone a real r&d environment. Using Iceland as an example for other countries is usually fallacious, because it's so unique.

jcnnghm3• 14 years ago

I'll believe it when I see it. There is an uproar because the cash portion of bonuses are being capped at "just" $125,000 a year. Presumably, that is in addition to the regular salary, and excluding stock bonuses, which now make up about 75% of bonuses. So a $500,000 a year combined cash and stock bonus will not be unheard of. That's a total compensation package of $600,000 - $700,000 a year.

YC founders probably have the highest chances of success as startup founders, given YCs connections and alumni network. What percentage of founders make over $600,000 a year in total compensation, once exits are added back in, and averaged over the years the founder works on the company? What percentage makes under $125,000 a year? What percentage of engineers that aren't founders or within the first five employees make over $300,000 a year? The money is in Silicon Valley, Google's 2011 net income was $299,874/employee [1], but the vast majority of engineers aren't going to be the ones to get it.

How many finance people are actually going to give up the higher pay, lower cost of living, shorter hours, and structure of Wall St for Silicon Valley? Have a bad year on Wall St, make a Silicon Valley engineering salary, have a bad year as a start-up founder, make nothing and go bankrupt.

[1] Goldman Sachs 2011 net income was $162,913 per employee. Average pay was $367,057. It's harder to get data on Google, but it looks like the mid-career median salary is $141,000.

mahyarm2• 14 years ago

From what I got, Wall St./NYC has a similar or higher cost of living and very insane hours even at large finance firms for at least for the first 5 years. 14 hour days are very common.

patio11• 14 years ago

I think it's time to dust off the pg essay on wealth. Wall Street pay skyrocketed because of measurement and leverage: basically, you can trace millions of dollars of revenue to the actions of a single individual with a high degree of certainty. Does that opportunity exist in Silicon Valley? Yes, it exists in spades. The engineers at issue are not as sophisticated as Wall Street employees about extracting that value or taking advantage of a very fluid employment market, but they also didn't get where they are by being stupid, and if you're not stupid and your weekly reports are routinely sounding like "Oh BTW I made us two million bucks" then people are going to start giving you whatever it is you care to get out of the relationship. There just doesn't seem to be any a priori reason to me why $120k is the correct price for competent engineering in a world where productivity directly associated with software is measurably exploding. (That gets no less true at $240k, $360k, or $1024k.)

I don't know if I'd pick early startup employees as the likely beneficiaries of this dynamic, though. Some will end up working for the next Google and end up rich as kings, but that has a poor median-case outcome for individual engineers since they don't get to "invest" working years in 100 companies in parallel. If you want measurement and leverage there's a fairly good case to be made for going to work for the current Google (or AmaBookSoftEtc) and just engineer your transfer onto the pointy bit of the spear.

Tichy3• 14 years ago

Except that with a startup you can fail. Employed in the finance industry you make money no matter what.

apaprocki3• 14 years ago

Exactly. I think Ph.D.s going to Wall St. has everything to do with risk aversion.

wtvanhest3• 14 years ago

The finance industry is up or out. So, no you are not employeed no matter what.

geebee2• 14 years ago

That's extremely true.

I remember how the banks used bailout money to pay out bonuses. There was an uproar about it, and they scaled it back, but I remember the banks arguing that if they were going to survive these turbulent times, they'd need to keep the top talent, and that meant bonuses. There was that indignant letter to the nytimes from an AIG employee (salary + bonus around 700K) who was angry that people were angry about his bonus, since he had "nothing to do" with the people who ruined the company (his analogy was that it was like blaming the plumber when the electrician burns the house down).

I worked for a startup that tanked. Lots of people put a lot of their lives into it. Options were worthless (and I knew people who had worked for 7 years or more) The startup kind of made the last payroll. We got our regular paychecks, but they failed to pay out all of the vacation time. We found new jobs, and moved on with our lives.

Nice thing about high tech culture is that the experience (even the failure) made more more employable, not less. So in that sense, you can fail in the valley.

apaprocki3• 14 years ago

A Ph.D. with a huge backlog of student loans is probably the last person I would expect to see foregoing a regular salary for a large amount of risk and uncertainty.

In my version of that quote, I think it would make more sense for really talented, smart engineers to leave school, with or without a BS, and start a company.

gte910h• 14 years ago

Pay to get a science or math PhD? Nice one!

Seriously, you can get funding to do a PhD in science or math almost trivially.

carterac• 14 years ago

This quote is actually pretty representative. I have some very close friends in finance and have heard that many people are quitting or planning on quitting to join the tech/startup sector for this very reason.

Interestingly, instead of immediately quitting some people are instead just slacking until they get fired and receive lucrative severance packages.

Of course, this is only for my finance friends with technical backgrounds. I haven't heard the same from non-technical people in finance.

mattmiller2• 14 years ago

I would love to see non-technical finance people branch out into the real economy. Where would they go? They would make excellent CPAs, but how many more CPAs do we need? The next logical jump would be to management, but a management does require some skills and usually a lot of domain knowledge.

Some would have to try their hand at the highly lucrative software industry. I think the consensus in wall street is that it would only take them a month or two and a couple software books to be leet programmers. I would love to see them try, and I wonder how well they would do.

gruseom• 14 years ago

Interestingly, instead of immediately quitting some people are instead just slacking until they get fired and receive lucrative severance packages.

If such are the habits they've cultivated in finance, they won't do very well at those tech startups they plan to join.

paulbaumgart• 14 years ago

  "And as the world becomes deleveraged, money has been pouring out.
  In October 2011 alone, hedge funds saw $9 billion go out the door."

  "Over 1,000 funds have closed in the past year and a half."

I guess that means the "VC bubble" is only going to grow over the next few years, huh?

sbierwagen• 14 years ago

This article's a complete whitewash, of course, being about as pro-Wall Street as a monocle salesman.

Notorious leftist wingnut Matt Taibbi wrote a post about it: http://www.rollingstone.com/politics/blogs/taibblog/why-wall...

Djehngo• 14 years ago

I don't think the original article was particularly pro-Wall Street. It was saying that Wall Street was changing, that it would shrink and there would be less money around.

It attributed most of this to the Dodd-Frank act _but_ it didn't say that this was entirely a bad thing, it didn't state that it would be the end of the United States.

If anything I would say the original article was vaguely anti-Wall Street, the quotes chosen for the article portray the bankers as being rich, conceited and of dubious value to society.

My reading of the rolling stone article conveyed fewer facts and a significantly greater proportion of opinion.

surrealize• 14 years ago

It's not that the NY Mag article was particularly pro-Wall Street. It's that it wasn't anti-Wall Street enough. The Wall Street types quoted in NY Mag blamed financial reform for their declining revenues, when (as Taibbi points out) it's actually the European crisis that's doing it.

Taibbi writes with a fairly angry tone, but he's got the facts to back up the bombast (and those facts are plentiful in his post).

mistermann• 14 years ago

Matt Taibbi's is the only person I've encountered who consistently writes something on this subject that resembles reality, and I consider myself to be very conservative.

The mainstream media's lack of coverage (or poor coverage at best) of this subject has been shameful.

Prediction: all of this supposed austerity on Wall Street will be very short lived.

mattmiller2• 14 years ago

I would not bet against your prediction. The political propaganda machine is on their side.

alanmeaney• 14 years ago

The deleverage of the banks caused by the new rules will not eliminate Wall Street risk taking. As the article states many of the top proprietary trading desks are already moving to Private Equity and Hedge Funds. This will only serve to hide the risk taking from the scrutiny of the public eye. Despite the recession there are billions of dollars looking for an above market return.

Through Private Equity and Hedge Funds Wall Street will find a way to meet this demand. It will simply adapt itself to the new rules, finding new ways to take new risks.

Greed will always find a way…

joejohnson• 14 years ago

Here's an interesting response to this article: http://www.rollingstone.com/politics/blogs/taibblog/why-wall...

BrentRitterbeck• 14 years ago

Just give me some interesting data to work with, and I would gladly come to work for any of these firms for $125K flat salary just to get into the place.

The End of Wall Street As They Knew It

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