Why would banks hire physicsts?

Lavabug

Sort of echoing the oil companies thread here. It gets mentioned a lot that physics graduates have a good shot at working at a bank. What would make a physics graduate attractive to a bank? Is it purely the quantitative science/math background? Are programming skills seen as the main selling point?

twofish-quant

For physics Ph.D.'s a lot of the math that people use to run the world financial system happens to be the same as the stuff that people end up using in graduate school. Even where the math is different, physics geeks tend to learn new math very, very quickly.

The other thing is that physics Ph.D.'s have a tendency to try to figure stuff out even when the textbook is either missing or wrong. For a lot of the more interesting problems in finance, there is no textbook, and people are making stuff up as they go along.

It depends on the type of job.

rydel

twofish, would you say bank would more prefer to hire a Math PhD or Physics PhD? On that note, do you think it's easier for a Mathematician to learn Physics or for a Physicist to learn Math?

alan2

They like applied mathematicians, physicists, and engineers. Financial problems bear a striking resemblance to physical problems. The Black-Scholes equation is diffusion, etc. You can't teach this stuff to business majors.

twofish-quant

Both. Physicists and mathematicians approach things from different points of view, and you need both perspectives. There are also lots of CS, EE, and statistics Ph.d.'s

twofish-quant

Actually you can. The trouble is that most business majors don't enjoy doing math.

It's not hard to teach Black-Scholes to business and finance majors. The time in which you need a physics geek is that when it turns out that Black-Scholes is *wrong* (and Black-Scholes has been wrong since 1987) and the business and finance people need some idea what formulas to put into their spreadsheets.

Another common situation is when you have a trader with a ton of experience in a market so that he knows in his gut how the market works. The trouble is that you can't put "gut feeling" into a spreadsheet, so at that point the physics people try to craft formulas that match people's gut feelings about how the markets work.

One problem with the universe as far as jobs for physicists go is that the laws of physics don't change very much. You figure out the theory of everything, and you are done. The laws of finance change every few months. (Sometimes literally. Someone passes a new law like the Volcker rule, and people need to adjust their equations.)

There are probably twenty times as many MBA as physics Ph.D.'s in a bank. However, there are are a 100 times more MBA's graduated each year.

alan2

Either your experience has been very different than mine or we are talking about different things. My experience has been that the average undergrad business major has had, at most, a year of what is usually called "Business Calculus". MBA programs do not normally include mathematics. With the exception of very few, I would not expect a business major to be able to create an accurate model and then solve it. You can certainly teach them what the BS equation means and how to use it but they generally do not have the mathematical background necessary to go beyond that. That's why the financial industry snaps up people with those skills from other fields.

twofish-quant

Maybe it is. Wall Street firms require people that are highly mathematically literate. On the other hand, most business majors don't end up on Wall Street. Also, I went to school at MIT, where the business and economics departments are *heavily* numerical.

If they want a job as a Wall Street trader, I'd expect them to be very, very good with numbers. Any competent traders is going to have a very strong gut feeling for numbers, and can do very complicated calculations in their head under extreme stress. Most business majors don't end up on Wall Street, and I don't think that most business majors even end up working in finance.

The "financial industry" is too general. Also most jobs in finance *don't* require particularly good math skills, but those that do, tend to pay extremely well.

alan2

We probably were talking about different things, I agree with everything that you said. I was thinking of the "average business major" vs. the "average" something else. I would think that the business major with the required analytical skill set would be just as valuable as the math or physics major. I wonder what percentage of business majors have that skill set.

Mépris

Are there other ways to show that one can "do very complicated calculations in their head under extreme stress" than a technical B.S degree? Why do investment banks hire people with humanities/social science degrees from the top 20 colleges/universities, then?

Obviously, with the amount of jobs in that industry, there's probably more people outside of the top 20 than in, in which case, I suppose that these guys have "math-heavy" finance degrees or maths/science ones?

I've spend some time reading through Mergers & Inquisitions and a lot of the information (??) that I've read about hiring reminds me a lot of applying to the top 20 universities. Maybe that's why graduates of those specific schools end up there...

twofish-quant

In fact, most traders don't have technical BS degrees. Also trading is not something that you can learn in school. What happens when you get hired is that you start as a trading assistant, and then work up.

What a trader does is to look at a large number of LCD screens (eight). To you or me they just look like thousands of numbers, but to a trader, they form a matter, and they can quickly make decisions.

Same reason that you go to a department store to buy a television set rather than go to someone at the side of the road. If you go to any big name university, then you'll have a nice set of salesman and trained staff to help you with your staffing needs.

But it doesn't matter. Yes there are smart people that don't go to Harvard. But if you hire someone from Harvard you can be reasonably sure that he isn't stupid and that if you put some training into him, it isn't a total waste. One reason that technical degrees tend to be less "brand name" centered, is that it's pretty easy to figure out someone's technical skills in an interview. It's harder to figure out cultural and personality skills.

In addition, if you've gone to the same department store for the last fifty years, you'll need a reason to switch.

The other thing is that describing the system doesn't mean liking it. One thing that I really hated in high school was how a small group of "cool kids" ran the entire place, and part of the reason I've tended toward technical things is to get away from that.

Mépris

Great. If someone with an Art History degree gets hired, then so can someone with a Physics degree. So, why do physics undergraduates don't shoot for those jobs instead of complaining about a "lack of jobs" and moping about "being lost". Humanities majors do stuff outside of class and I think science majors should do likewise. Instead of learning real analysis in the library all day, maybe cut down the studying by 2 hours and do something else. What's the big difference between a 4.0 GPA and a 3.6, as far as getting a job goes?

But does a Harvard degree make getting an interview alone easier or is the part of "getting the job" also taken care of, at least, partially? Another thing I've noted is that headhunters, in general, do *not* have Ivy League degrees. I've looked at 3 websites and yeah, that's a limited data set, but if the guys who recruit for the "top firms" don't have fancy degrees themselves (I've seen a mix of state schools and liberal arts colleges who are just outside of the top 20), who's to say they'll even consider liking an Ivy League grad before meeting them?

Recently, you made a post about Marxism, power and money and I think that this applies here as well, except that there's usually less money involved. Is not how things work in general, be it at one's work place or school? It's quite easy to see a few "stock characters" in most situations, like the "jock" types (Harvey Specter in Suits or Gordon Gekko) or the "insecure and will do as I'm told" types, for example.

chiro

One thing thats important is to see something from an employers perspective.

An employer wants the best person for the job and part of that means that if someone is trained specifically in some ways for a job and the employer can be choosy about who they pick, then they will pick the one that has specific experience.

But even this is not always true. Another facet to consider is what is involved in the job and if the particular job wants someone with the attitude to 'learn what they need to when they need to' vs 'we want a specialist in specific blah bla'.

But if I had to say one thing about getting a job, its basically to be flexible and not to constrain yourself by your bachelors degree.

The thing is that a lot of skills are transferrable in different ways and it helps to be aware of what is transferrable and how to sell that point to someone else.

Also realize that combing pure mathematics with something else can be good economically in the way that people design data mining algorithms or software tools or the like: again this comes down to how flexible someone is and how flexible their focus is.

In short, the more people that are directly affected by what you do, the better your chances at not only getting a job, but getting one with higher pay: it's not a universal rule and I don't want to generalize jobs here but the truth is that if more people know and understand what you do and how that 'benefits' them directly, then chances are you'll be more sought after than the person that doesn't have those attributes.

Also the fact that 'benefit' is really really subjective doesn't make matters any easier than they otherwise could be.

twofish-quant

Well if you want an honest answer......

There is a philosophy that physics is the most important science in the universe, and that anything that deviates from that is a "step down into the gutter." When you are in a public discussion, people tend to not say exactly what they feel because it looks arrogant, but when you start making decisions, then these sorts of deep beliefs start coming out.

Not much, but unless graduate admissions requirements have changed since the time I applied, then it *will* hurt your ability to get into the graduate school of your choice. It certainly hurt mine. If a large amount of your identity is based on getting into the right graduate schools, then that can be extremely traumatic (and it was for me).

It makes getting an interview a lot easier since companies will do on campus recruiting at Harvard. Also, you tap into a lot of information networks that aren't easily available elsewhere.

For example, if you submit your resume to a major bank, and you don't include citizenship or work visa information, then that resume is dead, and no one will ever tell you why. If you have information networks, you'll know to always include work visa/citizenship information on a resume and never include a picture.

Yes, but that makes them even more likely to take Harvard people. If you have someone that actually went to Harvard or MIT, you know the good and bad bits of the place, and so you aren't going to be in total awe of the place. If you haven't been there, then all you have is a brand name, and sometimes that matters.

Also just a bit about the hiring process at most companies. If you have a friend that you think is a good hire, then you forward the resume to the HR person responsible. At that point, you are hands off. You let someone that is unconnected to you do the technical evaluation. However, just *getting* your resume into the HR system is a challenge.

One thing that you must remember is that companies are not after the best candidate. They don't care about getting the best people. They *are* most concerned about "avoiding the worst." If you got a resume from some with a big name university, then you can be very confident that they aren't totally incompetent. If you have someone that isn't, then you are taking a larger risk. Maybe it's not a huge risk, but why take one at all.

Also the big name universities, make things easy for companies. If you go to the Harvard Business School and say "I'm a big company, and I want to hire corporate bureaucrats." then you'll have an entire staff there working with you to set up interviews, go through candidate resumes, etc. etc. It's like going to a department store.

The other thing is that Wall Street in NYC has got this weird clash of cultures that's reflective of the city itself. Historically, it's this weird mix of upper class East Coast WASP types with people that just got off the boat and did "low class" money lender stuff in street corners and boiler rooms. So there are parts of Wall Street with *extreme* dislike for school ties. You had white shoe firms with prep school types, and then people from Brooklyn working in boiler rooms that are going to scream at you with a string of F-words if you bring up your school connections.

Finally, if you want to see what things look like inside a bank. Check out the movie "Margin Call." I didn't see the events in the movie happen, but I can imagine people behaving in the way that they did in the movie if something like that happened. That's in contrast to Wall Street: Money Never Sleeps which as far as I can tell is just junk.

mal4mac

There are philosophers who hold that physics is an unimportant pursuit - something that "goes on in the gutter". So if you are feeling upset about being kicked out of physics then it might be worth exploring these philosophies. Epicurus is my favourite - study him properly and you might never get upset about anything - even about having to work in a bank :)


Did you get over the trauma? If so, how?

In the UK they are more concerned with avoiding non-public school types. Comprehensive school oiks frighten their rich clients. Even Oxbridge will not be sufficient - you need to be "public school". I recommend hiding the nature of your school - i.e., don't call it "St. James Comprehensive" on the CV - just call it "St James" and act like a public school type in the interview... not easy (they have strange ways), but it might work...

Mépris

Always do. I don't like having to clean things up (in my head or elsewhere) because I wasn't able to "take it in for what it is" there and then, if that makes any sense.

Yes and I can see how many persons studying or wanting to study physics feel that way about it. I (used to?) feel the same way about it too. The interesting thing, though, is that I've never read any pop science book in my life. At least, as far as I can remember and have, and continue, to be discouraged by anyone who asks what I'm doing, to study physics. So, how did I get that "philosophy" in my head? :D

And what kind of information can one find there? How are these "information networks" set up? Do they have a "I want to work in finance" club and everybody who makes the cut into their fancy association gets a free booklet, along with a free newsletter every week? (haha)

This seems important but why? Work-visa information, I can guess, is because there'd be a lot of paperwork to do, money and time to spend, if any applicant is not legally allowed to work, yes?

So, does part of the screening process for employing headhunters involve the school they went to?

I can only see that mattering if their clients are specifically looking for people with "brand name degrees".

A few good internships + reference letters (from where one interned) would not compensate (or even outweigh) that, then?

In Suits, the firm hires exclusively from Harvard Law School. The interviews were set up in a fancy hotel and all the interviewees sat next to each other in front of a secretary's office. Now, I know it's a just a TV show but what happened next was the guy doing the hiring was exasperated because of the sheer amount of suck-ups, idiots and other people he didn't want to work with kept showing up. He basically told his secretary to just give him a word the minute an interviewer even "sounds a little like him" and what happened was that the secretary did the screening herself. And that was at the pre-interview stage.

Do interviews in finance work like that? Sort of like playing an arcade video game, gradually clearing out the level until you get to the boss fight? That is, you have the interviewer asking a stock set of questions and if you can't make it past "area/level 3", there's no way in hell you're gonna get a shot at taking out the boss?

Cool.
Looks interesting. Thanks.

Mépris

I don't know about you guys but one part where I went wrong, throughout most of high school (and that was up until a few months ago), was that I thought that the only thing I had going for me was my smarts. That was "wrong" because it's so easy for everything to go wrong, the minute that there is only *one* thing that can make you happy with yourself.

With regards to schools, I've had my fair share of disappointment - once, just because the school was not accepting applications for my year and that had quite an impact on the rest of my secondary schooling and the other part is right now, with uni - and one thing that really eased the feeling is that I've talked to people who went to these schools numerous times. What I found was that none of them were necessarily smarter than I am, I didn't like their "culture" at all (but I also hated the one at my school, which in some ways, was trying to mimic theirs) and they were not necessarily the kind of people I'd have liked to grow up with. Ultimately, there'd be a few things I'd have benefited from but there's also a lot of crap I wouldn't have put up with.

There's also another important thing, at least for me. Academics should only be *a* and not *the* part of my life. Maybe that's the kind of thing mummy would have said to me had I scored an own goal (and I have!) because I have little coordination and as such, run like a monkey on dope, when on the pitch, but I find that I might have given too much importance to some things that deserved it. And it wasn't not entirely my fault to begin with but I won't get into the "history" - something twofish got me thinking about when he mentioned the reasons of his getting a PhD - of that now.

Another thing, check this out. Don't get me wrong, I'm not completely dismissing the top schools. I'm just saying some of us might have placed too much value on them for the wrong reasons.

If I've got this right, "comprehensive schools" are state schools that take in everyone as long as there are enough seats and "public schools" are state schools who are relatively more selective but not to the extent of "grammar schools"?