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Why don't more engineers/scientists go into finance

  1. May 28, 2012 #1
    Anyone attending or graduated from an Ivy League or similar caliber school has probably seen tons of undergrads going to work at firms like Morgan Stanley, Blackstone, JP Morgan, Goldman Sachs, etc. These places pay first year analysts about $100K after bonus, second years about $150K, and third years (if they stay on) over $200k. After a decade or so you're easily pulling in high six figures (500k+) salaries that most engineers could only dream of. The numbers are even more ridiculous if you go into private equity or hedge funds. And this is after the whole financial crisis.

    I'm sure the average STEM major is much smarter than the average investment banker or trader, so why do people still try to break into the lower paying engineering jobs when they could easily be making six figures on Wall st (AVERAGE compensation/employee at goldman is around $400k, at Google it's just over $100k...and Goldman isn't even close to being among the highest paying finance institutions.)

    Which I guess also begs the question of why do engineering jobs pay so little compared to high finance?
     
    Last edited: May 28, 2012
  2. jcsd
  3. May 28, 2012 #2
    Some people don't see the need of making a high six-figure salary when they could be doing something they like to do. Some people from a STEM background do end up in finance.
     
  4. May 28, 2012 #3
    I don't know what the situation is like in the US, but I did my undergrad in mathematics at Oxford in the uk, and I know that the mathematicians and physical scientists were heavily targeted by Goldman etc. I'd go as far as saying that I suspect that the average investment banker probably is the equivalent of a STEM major, at least the British ones.

    Also, though many of the high flyers from my course negotiated high starting salaries for themselves (noting that this was 2006/7), they were expected to work for it. It's not like people go into investment banks on big salaries and do a 9-5, judging by my acquaintances they were expected to work 10-14 hour days, and come in frequently on the weekend.

    As for why they get paid so much, well, I guess when so much money is flying around it's hardly surprising when a lot of it ends up in people's pockets.
     
  5. May 28, 2012 #4
    It is true that the salaries are high. It is also true that most of the people doing this are those that are from ivy league schools. The problem is most people aren't from ivy league schools.

    Another problem is that a lot of people study STEM majors to become scientists. They stick with these majors which are arguably the hardest majors because they enjoy it. I would like to think that I am no stalker but I do admit that I have been following Twofish-quant's posts more often than I probably should be. From his general posts, I gather that he would be willing to dump the high paying finance job without ever looking back if a tenure position in physics opened up for him.

    Now finance pays high because like what I said above and from what you can see, most of the people that work there did not study finance. A lot never even thought they would end up in finance. To keep these people in their jobs, banks need to pay high salaries to keep them interested.


    That is not to say... I am not interested of course. :wink:
     
  6. May 28, 2012 #5
    Because it's soulless?
     
  7. May 28, 2012 #6
    And boring.

    (I've done it too. I worked for a hedge fund for two years. Yes, the pay is great, but damn, please pass the sharp stick...)
     
  8. May 28, 2012 #7
    1) Because you have to move to NYC

    2) Once you take into account all of the differences, the salaries aren't that great. NYC has 45% marginal tax rates, and everything is extremely expensive (especially rent). Once you take those into account, the compensation is only someone better than high end engineering, and if you hate NYC, then you are better off taking an engineering job.

    3) "Reflexivity". Salaries are high because no one wants the job. Once everyone wants the jobs, salaries go down.

    4) Average salaries are misleading. If you are a science geek, you'll go into technology. The technical people make less money than the deal makers.

    1) They don't.
    2) Any difference is because of the fact that people that manage the money, get the money.
     
  9. May 28, 2012 #8
    For physics Ph.D.'s, this isn't an issue. Because finance is a second choice for physics Ph.D.'s, the schools that physics Ph.D.s on Wall Street come from tend to be the large public state schools, although MIT is high represented. It's odd that you'll see the place crawlling with MBA from Harvard, Princeton, and Columbia, but hardly any science Ph.D.'s from those places.

    And some people go into finance because that's the closest thing out there to science. If you work as a technical geek at a bank, you will be doing technical work. Conversely google and Microsoft also hire MBA's.

    Sure, but one reason I got into finance was that it's very, very mathematical. Also there is less of a glass ceiling in finance than in other fields.

    Also, the money is good, but I'm trying to make a ton of money so that I can retire early and get back to astrophysics.

    And one thing that you learn is that 80% of what's in a finance textbook is either wrong or irrelevant. One reason that finance oddly needs more physics researchers than physics is that the laws of physics do not change over time. The laws of finance do (and sometimes literally).
     
  10. May 28, 2012 #9
    Maybe. Or it could be that you end up with too many finance people and the economy collapses before you get your jackpot. On the other hand maybe it doesn't matter. If the world economy collapses (again), I'll at least be at the center of action.

    A lot also depends on where you are and what you do. I've *never* been bored. I've been angry, frustrated, depressed, ecstatic, terrified, and every combination of the above, but
    I've never been bored.
     
  11. May 29, 2012 #10
    What makes you so sure?

    It's arrogance to think like that. For me engineering is quite easy comparing to let's say medicine.

    Because money is not everything and purpose of higher education isn't to make more money. Well you really don't need colleage degree to make money.

    More or less if you study engineering you want to do engineering. If you want to do finance, you study finance.

    I don't agree that finance is boring. There are many people that see finance as their primary goal. Finance is a field close to money so it's obvious that it's rich field that pays well. Main purpose of finance field is to use your knowledge to hack economy and make money because of that (and I can't understand why do you think that this knowledge is easier to obtain that knwoledge about car building or paricle physics. After all you have much more engineers/particle physicists than rich people in this world) If you can't make money with finance it's fail. It's like you can't build a car with engineering.
     
  12. May 29, 2012 #11
    It appears to me most people are using the term "finance" as a substitute for some imaginary investment bank job. There are lots of other jobs in finance. Most of them suck.

    I've met plenty of underwriters who work in finance and make 2/3 of what the median EE makes. Most people in finance don't make that much money. That's the reason most engineers don't go into finance.
     
  13. May 30, 2012 #12
    One other factor is that finance is non-unionized, rather secretive, and often concentrated in a few cities.

    If you talk about General Motors, then you see people that work for GM that aren't high level executives, so that you realize that most people that work for GM are not executives. If you talk about a major bank, the only people you see talking are executives, which gives the misleading impression that *only* executives work there.

    Also a lot of the connection between finance and physics has to do with the fact that banks hire theoretical physicists, but the numbers are tiny. A mega-bank has maybe 200,000 employees of which about maybe a few hundred jobs at most have anything to do with theoretical physics. However given that the US graduates about 1000 physics Ph.D.'s each year, those jobs turn out to be really important.
     
  14. May 30, 2012 #13
    Because I see the focal point of our economy trying to figure out how to buy X at price Y and resale it at Z without adding any value into the equations as a bad thing.

    I therefore don't really have a desire to participate. I also enjoy what I do and don't want to live in NYC.
     
  15. May 30, 2012 #14

    npc

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    Yes it is soulless, but it is not that boring, especially at the moment with all that is going on in the world. But there are different types of not boring, it is not boring in the sense that it is a fairly dynamic field which can have fundamental changes in thinking every couple of years. More then enough to keep people busy.

    But being not borning is not the same as saying it is interesting, fulfilling work
     
  16. May 30, 2012 #15

    npc

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    Don't believe it's a case of no one wants the job, think it is quite the opposite (even from looking at the interst in quant work on these forums), there are plenty of people who want the job, all attracted by the salaries, but these are not always the people you want to hire.
     
  17. May 30, 2012 #16

    npc

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    I'd be very careful with this statement, investment banking and trading attracts some very intelligent people. Also, there are major banks that will not allow traders near any deals until they can fully explain their trades in mathematical terms including valuations on the deals. also, there would be a reasonable number of quants who get fed up with the work and head into trading, not because the job is more interesting, but because the rewards are even better then quant work.
     
  18. May 30, 2012 #17
    What do you mean by soulless and why do you think that?
     
  19. May 30, 2012 #18
    Isn’t it obvious?

    When you sit in a cubicle and pursue useless patents your company uses to clear the field of startups and maintain market control, it’s soulful.

    When you sit in a cubicle and ensure that enough capital is set aside to pay an insured’s life insurance benefit to their family, it’s soulless.

    The first produces a valuable benefit for society. The second is just pushing money around and has no value at all.
     
  20. May 30, 2012 #19

    That's what I thought :D

    5/5 for this post <3
     
  21. May 30, 2012 #20
    One problem is that if people that care about "fundamental value" don't go into finance, then you have a bad selection effect in which major decisions about the world economy are made by people that don't care about the implications of those decisions, which will cause the system to come crashing down.

    One thing that I like about my job was that I played a small role in "saving the world from total economic collapse" in 2007-8, and I get a good feeling in doing my job well, because you just need to turn on the news to see the bad things that can happen when the job gets done badly.
     
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