A Few Questions for Twofish-Quant.

[mark55]

Hello,

I also have a few questions about a career in finance. My background is I did a PhD in high energy particle physics, with a lot of c++ experience. Since then I have spent 5 years as a postdoc working on one of the LHC experiments (again a lot of C++ and in recent years python, work a lot in teams of international people, self motivated at learning new skills when required etc etc). I know I do not want to try to become a lecturer (and anyway its I can see colleagues 5-10 years ahead of me in their careers unable to get such positions already, so doubt I have much chance - and that is part of the reason I don't want to focus my career plan on that) and I don't think I can spend the rest of my life doing postdocs (if they gave me a permanent position doing what I do now I would probably stay...but let's face it academia does not work like that). So if I can get paid to do something else interesting with better long term career prospects I am all for it.

Basically my dilemma is with the LHC starting up I would like to (and almost certainly can) stay working on it to analyse the data for several years - just because they will pay me decent money to do something fun. BUT is there any sort of age cutoff for moving into a career in finance? i.e. does doing too many years in academia post phd harm your chances of moving into finance (or other careers) positions using similar skill sets? In essence will I do myself long term career damage by staying 3 or 4 years more (I am 31 now, and 5 years after my phd)?

Thanks,

Mark

 

[kylem]

This thread was an interesting read.

 

[twofish-quant]

Basically my dilemma is with the LHC starting up I would like to (and almost certainly can) stay working on it to analyse the data for several years - just because they will pay me decent money to do something fun. BUT is there any sort of age cutoff for moving into a career in finance?

As long as you are learning new things (and there are always new things to learn), you don't need to worry too much about this. One thing that you should try to do is to stay on the cutting edge of whatever it is that you are doing.

In essence will I do myself long term career damage by staying 3 or 4 years more (I am 31 now, and 5 years after my phd)?

I got into Wall Street when I was 37, so you'll still be younger than me when I switched. I remember a group of people looking over the resume of someone that was interested in a finance related position at age 63.

 

[ferm]

I got into Wall Street when I was 37, so you'll still be younger than me when I switched. I remember a group of people looking over the resume of someone that was interested in a finance related position at age 63.

I had the same idea as mark55, I understood going after too many post-docs harmed the potential to find good jobs. Did you get into Wall Street directly from academia or you worked in industry before? My (possibily wrong) idea was that employers do not like to hire people who have been too many years in academia...

 

[twofish-quant]

I had the same idea as mark55, I understood going after too many post-docs harmed the potential to find good jobs

This is a problem in academia. As long as you have usable skills, it's not really a problem in industry.

Did you get into Wall Street directly from academia or you worked in industry before?

Ph.D. -> commercial programming -> Wall Street

The big reason that I ended up on Wall Street is that the glass ceiling there is a lot higher. In most non-financial programming, you reach a point in which to advance any more you have to stop doing geek-work and start giving powerpoints for the rest of your life. There is that sort of glass ceiling in finance, but it's a lot, lot higher.

My (possibily wrong) idea was that employers do not like to hire people who have been too many years in academia...

Some will. Some won't. The good news is that in industry there are enough jobs, so that even if most employers toss your resume in the trash the second they see it, there still is going to be someone that will hire you, and all you need is one person to hire you.

In the case of finance, this tends not to be a problem since the work that you did in graduate school and as a post-doc is relevant experience.

 

[kylem]

Would an MSEE from a top engineering school in something like Artificial Intelligence, Stochastic Control, Adaptive Control, or Signal Processing get a person a job on Wall Street (a quant or something similar)?

Or a MS in Computer Science in AI/Machine Learning?

 

[twofish-quant]

Would an MSEE from a top engineering school in something like Artificial Intelligence, Stochastic Control, Adaptive Control, or Signal Processing get a person a job on Wall Street (a quant or something similar)?

Depends on the amount of application programming you've done. A few things about Wall Street jobs

One thing about Wall Street is that lots of interesting things are going on, but the movies and television make it seem like everyone in finance is a millionaire whereas most people aren't. If you look at any movie on Wall Street, the more interesting thing is to look in the background of any trading floor, you see lots and lots of computers. And lots of computers mean a lot of computer babysitters.

 

[ferm]

In the case of finance, this tends not to be a problem since the work that you did in graduate school and as a post-doc is relevant experience.

I guess not all post-doc experience will be relevant, am I right? E.g. if you are in a field without heavy statistics or programming needs (which is my case btw), I guess it will be more difficult. At least if you are younger you might go for an internship or get a M.Sc. to overcome this, but I understand this gets more difficult as you get old (and you need more money, and you don't have savings)...

Also, I understood that in industry employers look for young people they can train or for older people with experience. This is what I see here in Spain, but that might be because here, once you hire someone, it is very expensive to get rid of him in case he doesn't work well. I might well have a distorted view of industry, however...

 

[twofish-quant]

I guess not all post-doc experience will be relevant, am I right? E.g. if you are in a field without heavy statistics or programming needs (which is my case btw), I guess it will be more difficult.

It's more difficult. However, you can try to make it relevant.

At least if you are younger you might go for an internship or get a M.Sc. to overcome this, but I understand this gets more difficult as you get old (and you need more money, and you don't have savings)...

Once you have a post-doc, another masters degree in a technical subject is likely to be a waste of time and money. If you need to learn statistics and programming, go onto to Amazon, buy a dozen books, and teach yourself statistics and/or programming, and then look for excuses to use them in your work.

 

[xiaoguiren]

Ummmm...

I think I've got a similar problem. I was very interest in computational physics when I was still an undergraduate, but my current job does not related with it at all. I tried to learn more programming skill and solve some realistic problem in my spare time. But now I find I'm really confused. I don't know what kind of work is really useful , and what I should do next, and why should I do this. Then I think it's boring , meaningless and finally give up. It doesn't mean I am not interest in CP any more, but I don't know what can I benefit from it.

My major is physics , and I've made me familiar with some basic knowledge in programming, numerical mathematics and simulation, maybe not that professional but enough for some simple applications.

What should I do or learn next? Maybe you can give me some advices.
Thanks very much!

 

[dynamicJester]

Damnit Twofish-Quant, I nodded in agreement so much to your statements that if this thread was any longer, my head might have came off. It is sad how profit driven those who run these institutions are at the expense of learning. I also agree online universities will change the landscape for higher education.

As for buying degrees - check this article on a professor removed for not giving her students a passing grade automatically. While the notion of grading itself may be a questionable idea for those driven to learn for learnings sake the idea of buying a degree is made most clear here: http://www.insidehighered.com/news/2010/04/15/lsu .

You see, the students must not earn but instead instantly deserves their degree, after all they paid for it. A view point that I can be sympathetic about considering fees despite how contemptible the sense of entitlement the students have is. I suspect one of the students' family has a lot of pull or nothing would have happened.

 

[oreliphan]

Hi TwoFish,

I just wanted to hear an opinion on someone working in the industry of what is going on with Goldman Sachs right now. I'm being vague intentionally, so please share as much as you like on your thoughts.

Other people working in the industry, please feel free to chime in!

 

[twofish-quant]

I just wanted to hear an opinion on someone working in the industry of what is going on with Goldman Sachs right now.

There is really nothing much to say. Unemployment still at about 9%, and Goldman-Sachs happens to be the designated scape-goat. Personally, I think it's a vast improvement over a year ago. A year ago people were in a "kill the bankers" mood. Right now, it's now just "punch the bankers in the nose." Three to five years from, there will be another bubble, and banking will be cool again, until that bubble pops, and we will be right back at the start of the business cycle.

Personally, I think it's a good sign that the economy is improving. A year ago, we were all in the lifeboats, and when people are struggling for dear life to prevent economic disaster, people were nice to each other. Now we've made it out of the lifeboats onto the island, it's time for the a lot of the "bottled anger" to come out. It's an interesting media event, but I really do question how much people will remember this even a month from now.

I do think it's a little weird. People are mad at GS for basically not becoming an economic basket case and for making money doing the crash. It's almost as if people would have preferred GS to have gone totally bankrupt. I mean, no one is mad at Lehman right now. The other thing that I think is sort of weird is that everyone is mad at GS now, but no one is mad at GM or AIG, and it may be because they got stomped on a few months ago.

I don't think that too many people are looking at the GS sideshow, because that's something of a media circus. The big thing that people are trying to figure out is what happens next week with the UK elections. That's going to have a much, much larger impact on anything than anything that is going on in the US right now.

There are also some weird popular misperceptions of Wall Street. The thing that most people don't quite realize about Goldman-Sachs is that it is a 30,000 person high tech company. You get the impression that Wall Street is run by a few uber-rich bankers, whereas if you randomly pick a person out of an investment bank, there is a very good chance that you'll find a computer geek.

If you hear the CEO and senior managers from GM, Microsoft, or Boeing, most people realize that most people that work for those companies aren't CEO's or senior managers, whereas people seem to take CEO's and senior managers of investment banks as somehow representative. I think it's a bit odd, personally.

 

[OmCheeto]

I do think it's a little weird. People are mad at GS for basically not becoming an economic basket case and for making money doing the crash. It's almost as if people would have preferred GS to have gone totally bankrupt.

People outside of Wall Street think it's weird, but probably for a different reason.

http://www.dailyfinance.com/story/i...match-secs-fraud-suit-against-bank/19446616/" 4/20/2010
You may recall that back in the good old days, American International Group (AIG) paid Goldman Sachs (GS) $12.9 billion of taxpayer money in a 100-cents-on-the-dollar settlement of credit default swaps that AIG had written.

That's fine. We can afford to bail out GS via AIG. Probably saved the world economy from collapse.

http://www.businessinsurance.com/article/20100425/ISSUE01/304259958" 4/26/2010
Goldman Sachs Group Inc. has insurance in place to protect directors and executives should they become embroiled in the controversy over the investment bank's subprime mortgage-related deals, but whether that coverage will be called into play remains unclear.

New York-based Goldman purchases only Side A directors and officers liability coverage, with American International Group Inc. leading a “massive tower” of limits, arranged by Aon Corp., market sources said.

Not a problem. Everyone buys insurance. Fire insurance, car insurance. GS bought liability insurance for it's executives. This would protect them in case, um, they might be accused of having done something wrong. Which coincidentally;

http://www.reuters.com/article/idUSTRE63J13E20100420" 4/20/2010
U.S. insurer AIG (AIG.N) is considering pursuing investment bank Goldman Sachs (GS.N) over losses incurred on $6.0 billion of insurance deals on mortgage-backed securities, the Financial Times said.

is what AIG, the company we bailed out, who graciously paid out 100% on the dollar to GS, is considering doing.

I don't think that too many people are looking at the GS sideshow, because that's something of a media circus.

Astro prepared us for the sideshow https://www.physicsforums.com/showthread.php?t=365339".

I think it's a bit odd, personally.

And so do we. But, as I said, probably for different reasons.

Jan 22, 2010

And their bonuses. Jeez Louise...

$23,000,000,000.00 for 30,000 employees.

Let's see, we loaned them $10,000,000,000.00, which they paid back with interest, thank you very much. Then we basically gave them $13,000,000,000.00 through an AIG kind of fix it thingy. Then we gave them a low interest loan of $52,000,000,000.00. (http://www.dailyfinance.com/story/g...or-charity-23-billion-for-banker-bo/19193897")

Hmmm... I've invested $1,300.00 in the stock market since December 08 at $100 per month and am ahead by about 25%. Hmmmm... If I'd had $75,000,000,000.00 instead of $1,300.00, I'd be ahead by, um, $19,000,000,000.00.

Pretty damn close. And I don't know nothin about the stock market. I'm going to have to be much more proactive the next time they're giving handouts. I could really put a big fat jabba the hut sized bonus to good use.

Some might say "sour grapes".
If it weren't the US taxpayers money, I'd agree.
But it is, or at least was.

 

[OmCheeto]

And will you guys PLEASE stop telling Wall Street about upcoming technologies...

I've only $100 a month to invest, and just yesterday my "top secret" stock jumped nearly 20%.



We poor investors are very interested in an L-shaped recovery curve.

btw, do you have any opinions on how to https://www.physicsforums.com/showthread.php?t=280796"?

Fuzzyfelt's husband had the best advice I'd seen.

 

[twofish-quant]

That's fine. We can afford to bail out GS via AIG. Probably saved the world economy from collapse.

You actually can't. If you are interested in why it won't work, I'll explain, but I don't know if you are or not.

One the reasons I got interested in finance is that there is a part of me that likes to ask "so how does this work?" I drop a baseball, it falls. Totally weird. I give a piece of green paper to someone and they hand me a baseball. Also, really, really weird.

The problem with being curious about things is that you find that most people aren't too curious. In order to get those green slips of paper that I use to buy the baseball, I go up to a machine, put in a card, and green pieces of paper fall out. That's really, really, really weird if you think about it, but most people don't.

I can't stand not knowing what is going on behind that machine. Just like I don't quite understand how gravity works, I don't quite understand how ATM's work, but I know more than I did a decade ago (or at least I think I do). Also just like gravity, if you keep asking questions about money, you'll eventually end up with a question that no one knows the answers to.

I've found that most people really aren't that curious, and they view things like finance and gravity as "magic" which is is fine until the day that the magic stops. When people didn't understand why it rained or how it rained they performed lots of rituals in the hopes that by beating drums, you can make it rain, and what I find curious is that we are more or less at that stage in banking.

Not a problem. Everyone buys insurance. Fire insurance, car insurance.

So how does insurance work?

Some might say "sour grapes". If it weren't the US taxpayers money, I'd agree. But it is, or at least was.

What I think happens is that most people go to the ATM get green slips of paper, and they assume that more or less you have these rooms of green pieces of paper that are being moved around. Now people might think that these pieces of paper or rooms are electronic, but ultimately, the idea is that you have electronic pieces of paper being moved from electronic rooms. There is a room that is marked "my money" and a room that is marked "someone else's money" and the economy works my moving money from room to room.

Except that's not what happens.

 

[twofish-quant]

I've only $100 a month to invest, and just yesterday my "top secret" stock jumped nearly 20%.

Find a no-load nice mutual fund and set up automatic payments.

If you are buying individual stocks with $100/month, then the only person that is going to make any money is the broker. If you are looking for "hot stocks" then you aren't really investing, you are gambling. It's fine to do that, but just realize that this is what is going on. If you *really* are intent on buying stocks, you actually will do better by just closing your eyes and throwing a dart at a newspaper, than thinking about it.

btw, do you have any opinions on how to https://www.physicsforums.com/showthread.php?t=280796"?

Not really. The thing is that the current state of the economy is dependent on decisions that were made about a year ago. Things are going as well as can be expected. About a year ago, I was at a talk in which some economists gave some numbers as far as "how quickly can we produce jobs", the answer was pretty depressing, and what is going on now is pretty close to the projections.

It's really not a complicated calculation. You figure out the amount of credit available in the economy, then you figure out how much credit gets taken out of the system to cover bad loans that are not yet recognized. This gives you the amount of credit that is left to produce new jobs, and this gives you the estimated change in employment, and the projections are more or less what is going on right now. You then stare at the equations to see if there is something you can change. The big variable is the amount of government spending, but those are subject to both political and economic limits. One other big limitation is time. If you have a decade or even three years, you can make some pretty fundamental changes to the economy. If you have only a year or an hour, you can't.

Moving this back to "why do banks hire physics Ph.D.'s?" Physics Ph.D.'s are used to dealing the multi-scale system. One of the basic questions you ask when you analysis a physical system is "what are the time scales involved?" For stellar evolution, nuclear timescales are about a billion years, thermal timescales are about a thousand, and pressure time scales are in seconds or minutes. The same sort of thinking is useful in economic systems. It takes Congress about a year or two to pass a law, making a regulation takes a few months, economic panics take place on the order of hours, and high frequency trading takes place on the order of seconds.

I'm more interested right now in avoiding things that people are going to regret twenty years from now.

Part of the problem with "fixing the economy" is that the economy isn't your standard engineering problem, where is there is single answer. You come up with plan A, but it turns out that people hate plan A, and you can't get people to agree with it. So you come up with plan B, which runs into the same problem. About the time you come up with Plan Q, you might have something that people don't hate, and you it's plan Z1 that finally gets passed.

So the problem with coming up with "a plan to fix the economy" is that you have to be flexible because if you aren't, you aren't going to be able to get anything useful done, since if you have this magic plan to fix the economy, you'll just get frustrated that no one listens to you.

So rather than by starting by stating what the plan is, you start by listening to people to figure out what the political constraints are, and then coming up with the best that you can do given the constraints.

There are people that come do this sort of thing for a living (i.e. listen to people and come up with things that can be done). They are called politicians, and for the big general questions, they are better at coming up with workable solutions than I am. I talk too much and I'm extremely argumentative, and if you want someone to come up with something that really works, you need someone that's a much better listener than I am.

Trying to keep this close to physics and careers... One thing that I am better at, is if you give me a set of rules, then I am not that bad at figuring out what the consequences of those rules are, so rather than being a politician, the area that I'm most useful at is if you give me a piece of legislation, and ask me a specific question on what the consequence of a part of that legislation is.

Writing legislation is a lot like computer programming or physics theory, and it's something that I find relaxing. So the type of question, I'm better at answering is not "how do we fix the economy?" but rather "if we change this definition in subsection D, paragraph 2, line 3 from bank holding companies to financial holding companies, what happens?" Most people don't have the patience to learn a set of obscure rules and definitions, learn a totally new language, and then sit down for several days patiently working through the consequences of changing this rule. Physics Ph.D.'s tend to like this sort of thing.

 

[twofish-quant]

Keeping this focused on careers...

One other thing, people have an incorrect view of how much people at Goldman-Sachs or any other investment bank really make. What happens in an IB is that the compensation distributions are really, really skewed with a relatively few people at the top making tons and tons of money, and most people making decent but not totally outrageous salaries. GS is a 30,000 person company, and I think the number is that only about 500 people or so make >$1 million year. The problem is that if you look at say GM or Boeing, you've heard of people there that don't make $1 million/year. Other than me, how many people on Wall Street have you encountered that *don't* make $1 million/year?

One thing that seems weird to me is that many more people are upset at the bank bailouts than the automobile company bailouts, even though many, many more people are employed by banks than by auto companies. I think this is partly because people realize that not everyone at GM makes ten million year, whereas people don't quite realize that there are people at GS that aren't millionaires.

It's also a problem because finance jobs tend to be focused in a very few cities. Most people personally know of a lawyer or doctor or computer programmer, but unless you live in a major financial center, most people personally don't know any investment bankers. This matters because if you see a doctor or lawyer in the movie or in the news, you realize that this is just a movie, but a rather large have no contact with investment banking except in the movies.

This matters for careers, because jobs on Wall Street while they pay decent salaries, aren't so high as to make you want to drop everything for a job there. The money is decent, but what I really like about finance is that you get to do "physics like" things.

There is much less of a glass ceiling. While there are people that work for Boeing or GM or any other large company that have physics degrees that make mega-bucks, they generally don't have physics backgrounds, and once you reach a certain point, you can't advance without giving up being a geek. In finance, there is a glass ceiling for physics geeks, but it's much, much higher.

The big decision that you have to make if you want a physics job in finance in the US is a curious one, and that's whether you like New York City.

 

[SbF5]

What other kinds of PhDs are common where you work?

 

[TheDoorsOfMe]

I know this is a bit off topic, but I was wondering Two-Fish Quant if there are any good texts you would recommend on reading to get a better idea of the financial world? By this I mean teaching you the different types of basic technicals you might look at. Also the basic strategies of dealing with different types of markets. I also would like a book that would well inform me on all the debt crisis going on and what it means. Not just one that glosses over it for the general public. Basically I want to get up to date on the financial world and not just from CNBC's and CNN money's perspective. But a more academic perspective so I can look at it myself.

 

[kylem]

Quick question:

Is an Applied Math PhD better than a Physics Phd, or the other way around?

(or do they have pretty similar opportunities on Wall St?)

 

[twofish-quant]

I know this is a bit off topic, but I was wondering Two-Fish Quant if there are any good texts you would recommend on reading to get a better idea of the financial world?

I'd start by going into the bargain bin of the local college bookstore and finding some intro business/finance/marketing/economics textbooks. Finance is different from physics in that in physics there is one set of basic knowledge that is standard. In physics there are three theories that explain 100 things, whereas in finance there are 100 things that explain three things. So if you pick up a few random texts, that's a good way of getting started, provided that you look at those texts in the same way you'd read wikipedia articles.

www.ssrn.com and wikipedia are also pretty good places. Wikipedia has pretty good coverage over legal and mathematical aspects of finance. Random law review books are also useful. Economic history texts are also useful.

Sorry if this sounds a little vague, but finance is one of those things were you are better off *not* reading the same textbooks as everyone else, because the textbooks might be wrong.

By this I mean teaching you the different types of basic technicals you might look at.

Professional investors look at "technicals" the same way professional astronomers look at astrology. No one I know takes technicals seriously. The google terms for what professional investors is "modern portfolio theory."

There is another style of investing which professionals do, which Warren Buffett is the king of, and that involves looking into companies in huge depth and picking out the good ones. For this sort of investing your main expertise shouldn't be finance. If you are analyzing trucking companies, then you need to go out and learn everything you can about the trucking industry, talk to truckers etc. etc.

Also the basic strategies of dealing with different types of markets.

The trouble is that for a small investor, you don't need a book to deal with markets. What you need to know can be written in one page. Scott Adams, the writer of Dilbert, did it.

http://www.early-retirement.org/forums/f27/dilbert-scott-adams-guide-to-personal-finance-15177.html

I also would like a book that would well inform me on all the debt crisis going on and what it means.

No one knows what it means. A lot of people are just guessing. The books that I've found useful are those that don't try explaining "what it all means" and just focuses on telling the story about what happened with interviews with people that were there. Gillian Tett and Aaron Ross Sorkin are two writers I think did that well.

http://phillipswagel.com/ has a link to a really good "this is what I was thinking when everything fell apart" paper.

The other thing is that there is a ton of stuff on the web. All of the major lobbying associations have websites, so you really should visit them to see what "group X thinks the problem is."

 

[twofish-quant]

What other kinds of PhDs are common where you work?

Math, statistics, computer science, engineering. Anything technical.

Curiously the department that I work in doesn't have anyone with finance or economics Ph.D.'s. Also the split of the department that I work in is 50% masters + work experience and 50% Ph.D.'s

 

[twofish-quant]

Is an Applied Math PhD better than a Physics Phd, or the other way around?

No one care much what you got your Ph.D. in. The care if you have computer and numerical modelling skills.

 

[kylem]

That's about what I figured, thanks. :)

 

[NINHARDCOREFAN]

I have a question. I have a undergrad degree with double major in Math and Computer Science and a Masters degree in Computer Science. If I get into financial industry, will my salary have a very low ceiling because I don't have a PhD?