A Few Questions for Twofish-Quant.

[Goldbeetle]

Also MIT and Harvard are for-profit institutions. MIT has $10 billion and Harvard has $35 billion. The business model of MIT and Harvard is to get smart people admitted, make their alumni rich and powerful, and they collect the cash each year when some freshman calls you up for donations. You *can* buy your way into either MIT or Harvard, but it requires more money than anyone reading this will ever see. (I'd say $5 million or so in cash will do it).

One reason elite universities will let people buy their way in is because much of the reason middle class families want their kids to go to Harvard/MIT is that your kids get the meet the kids of people that can drop $5 million to get their kids in.

One thing about wealth it's just like knowledge. Now that I work on Wall Street, I feel a lot poorer than I did before I came up here. I'm making more money, but I'm exposed to people that make even more money.

I agree! Plus, I know of at least two books discussing this and the buying your way into big-name universities. I hope I can retrieve the titles and post them.

 

[twofish-quant]

I agree! Plus, I know of at least two books discussing this and the buying your way into big-name universities. I hope I can retrieve the titles and post them.

It even happens at a smaller level. The more money that you have, the more you can hire tutors, buy consultants, and generally figure out the rules. As with most things there is a lot of social process involved so you just can't show up with a suitcase of money and buy an admissions, but if you have money, you can figure out what the rules are.

Also the fact that you can buy your way into the big universities, makes it even more attractive for people in the middle class. If you are middle class in the United States, chances are, you don't have any close friends that make $50 million a year, so the fact that your son or daughter is going to a school where they likely will set up some close friendships or even marriages with the son or daughter or someone that makes $50 million/year makes sending your kid to Harvard more attractive.

I should point out that this really does concern people that went to big name universities, and part of the reason I post about my experiences is to help level the playing field a bit, and that's also why I'm interested in trying to expand educational opportunities in general.

The big name universities exist in large part so that the power elite can remain in power, but that's not necessarily a bad thing, because the power elite realizes that if you make things too exclusive, then you'll set yourself up for a revolution in which all of the people that can think are trying to pull you down, and all of the people that are on the inside are just idiots. So you end up with this odd system in which if you have a relative that went to the school or truly large amounts of money, you get in, but most of the places go to people that *don't* have connections, so they get sucked into the system.

 

[twofish-quant]

Something that may surprise people is that I'm a big fan of Karl Marx, Antonio Gramsci, C. Wright Mills, and Noam Chomsky, and I think that Karl Marx more or less accurately described the nature of capitalism which is exploitation of the working class by the power elite.

So why am I being a Wall Street corporate drone rather than going out on the streets fomenting revolution. Well, if I lived in 1920, I would have likely done that. The trouble is that I live in 2010, and what happens is that after you have the revolution, you end up with a new power elite that can behave as badly as the old power elite. For that matter look at the power relationships in academia.

I see the the solution to the problem is to generate so much wealth, that the working class *can be* ruthlessly exploited and still live a decent life.

 

[NINHARDCOREFAN]

I double-majored in Computer Science and Applied Math as an undergrad and have a Masters in Computer Science. Is it worth for me to pursue a quant because I won't be trying for a PHD in the future? I mean I will hit celing in salary wise very quckly right if I have just Masters.

 

[ferm]

Dear twofish-quant,

"How many hours per week do you work?"

50-60

I remember that in a previous post (in the "physics phd to quant" thread) you wrote

I don't know of any Ph.D.'s that work killer hours.

I would have said 60 hours per week are quite close to killer hours, but I see my scale might be wrong... I assume you don't have many more days off than the average job (say about 30 days per year) and you work on weekends, am I right?

I could understand working some years this amount of time, but I think it has to be difficult, for example, to raise a family in this situation. Assuming you get some sleep, of course :).

Would you say this is temporary, i.e. in a few years you will probably be working a more relaxed schedule, or not?

Thank you!

 

[kote]

50-60 hours is an average workload to have at a large corporation regardless of background, at least if you want to have a remote chance of ever being promoted. At the typical large corporation you can expect to start with 10 days of vacation per year in the US.

I have friends on Wall Street doing mergers and acquisitions who work twice as many hours. A lot of engineer friends are going to graduate school part time on top of 60 hours of work per week.

You don't have to do any of that, but you may have to find a smaller company or accept that you probably won't go much further in your career if you choose to work only 40 hours per week. There are exceptions of course, but in general I wouldn't count on having 40 hour weeks with 30 days of vacation in the US.

 

[ferm]

I have friends on Wall Street doing mergers and acquisitions who work twice as many hours. A lot of engineer friends are going to graduate school part time on top of 60 hours of work per week.

This sounds completely insane to me. Working that many hours a week means you devote 100% of your time to work and don't even have enough sleep. For sure these people's health has to resent...

Does that change much in London, for example? There I met 2 physics PhDs that had been working in finance only for some months and they didn't complain about working so long hours (I didn't ask how long they worked anyway).

 

[Locrian]

This sounds completely insane to me. Working that many hours a week means you devote 100% of your time to work and don't even have enough sleep. For sure these people's health has to resent...

On another forum I frequent we get a rare but reliable stream of investment bankers who pass through. Many of them claim to work 100-120 hours a week, and know lots of others that do. The lifestyle, as they describe it, simply involves no family time and little sleep. You work constantly, except when you play. You might also sleep a little. The way they see it, the probability that they'll stay on Wall Street for more than a decade is near zero anyways (off to a consulting house with you!), so they give it 200% for as long as they can hang around.

It's difficult for me to tell what proportion of investment bankers and lawyers live that life - here on physicsforums, all the quants who I've seen post (sample n = 2) have much more reasonable hours (50-60). If I run into any of those posts I'll link them here, ans they're a fun read, regardless of how representative they are.

 

[twofish-quant]

You don't have to do any of that, but you may have to find a smaller company or accept that you probably won't go much further in your career if you choose to work only 40 hours per week.

Also my experience is that some small startups also will have you work insane hours. The thing about some small companies is that they take on the aspects of cults. The other thing is that 60 hours/week is a *lot* less time at work than graduate school

 

[away22]

Entry level people in investment banking do work 70-100 hours a week on a consistent basis, but this is really only for the first 2-3 years. After that, many folks move off to private equity, hedge funds, consulting, etc... where the hours (and pay) are much better. Also, the more senior people in banking don't work that many hours, although they may have a few weeks (eg when they have a deal coming up) where they do put in those kinds of hours.

But most physics PhD's and quants don't go into investment banking, so you guys don't have to worry about those types of ridiculous hours. If you're in trading, portfolio management, analytics, or the other typical quant roles, you're probably looking at 50-65 hours a week, as someone mentioned above. You really can't expect any less if you're serious about making it in the industry. Some of the back-office positions may demand less hours, but of course your future opportunities, and more importantly your pay, is severely limited as well.

 

[twofish-quant]

This sounds completely insane to me. Working that many hours a week means you devote 100% of your time to work and don't even have enough sleep. For sure these people's health has to resent...

People that work in mergers and accquistions do work totally insane hours, but a lot of that is episodic. It ramps up toward the end of the deal. I don't know of anyone in technology or front office that works anywhere near as long hours as people in M&A. If the markets are closed then there isn't that much for a trader to do.

There I met 2 physics PhDs that had been working in finance only for some months and they didn't complain about working so long hours (I didn't ask how long they worked anyway).

Physics Ph.D.'s in investment banks just don't work totally insane hours. It's roughly about 50-60 hours/week with four weeks of vacation. People in Europe have somewhat more vacation. People in Asia work somewhat longer hours.

 

[twofish-quant]

On another forum I frequent we get a rare but reliable stream of investment bankers who pass through.

One thing that one has to be careful here is job titles. On Wall Street, the term "investment banker" is a specific job title, and that belongs to a small fraction of the people that work in an investment bank. If you have a physics Ph.D. then for the purposes of this discussion you probably won't be an "investment banker" and that's a good thing. The starting salary/bonus for a physics Ph.D. is roughly that of an MBA entry-level analyst, but MBA entry-level analysts work 100-120 hours/week and the competition that MBA's have for IB jobs is killer, whereas there isn't nearly that much competition for Ph.D. jobs.

It's difficult for me to tell what proportion of investment bankers and lawyers live that life - here on physicsforums, all the quants who I've seen post (sample n = 2) have much more reasonable hours (50-60). If I run into any of those posts I'll link them here, ans they're a fun read, regardless of how representative they are.

Different parts of the bank have *very* different cultures, and I know there are people that work crazy hours because whenever I leave (around 7:00 p.m.) there is a line of food delivery people in the lobby.

 

[twofish-quant]

If you're in trading, portfolio management, analytics, or the other typical quant roles, you're probably looking at 50-65 hours a week, as someone mentioned above. You really can't expect any less if you're serious about making it in the industry. Some of the back-office positions may demand less hours, but of course your future opportunities, and more importantly your pay, is severely limited as well.

I don't get the sense that back office positions work substantially less. Also, if you work in the back office, you have a much, much smaller chance of getting a multimillion dollar salary, but at the same time the salaries are decent if you look at them in comparison to other industries. The other thing is that there is this giant restructuring of the financial industry, and my guess is that some positions that traditionally were considered back-water positions (risk) will turn out to be very important.

The other thing is that how those 50-65 hours/week are distributed is important. The group that I'm in is pretty flexible about how the hours are distributed so people routinely leave early for family reasons, and then you find them logged in from home late at night to make up the difference. What's also interesting is the sociology around how long you work. The odd thing is that no one punches a time clock, and no one really monitors your work time, but somehow people get some pressure to keep working.

 

[brushman]

Could you describe a typical day at work for a "quant"?

How's opportunity for advancement?

Do you actually get to use lots of math/programming/general problem solving, or is it just lots of buisy work?

 

[mal4mac]

I see the the solution to the problem is to generate so much wealth, that the working class *can be* ruthlessly exploited and still live a decent life.

What makes you think that will work! It certainly hasn't so far...

 

[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.