Why don't more engineers/scientists go into finance

[astonmartin]

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?

 

[Mmm_Pasta]

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.

 

[dcpo]

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.

 

[DeadOriginal]

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.

 

[sponsoredwalk]

Because it's soulless?

 

[TMFKAN64]

Because it's soulless?

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...)

 

[twofish-quant]

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.)

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.

Which I guess also begs the question of why do engineering jobs pay so little compared to high finance?

1) They don't.
2) Any difference is because of the fact that people that manage the money, get the money.

 

[twofish-quant]

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.

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.

Another problem is that a lot of people study STEM majors to become scientists.

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.

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.

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.

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.

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).

 

[twofish-quant]

After a decade or so you're easily pulling in high six figures (500k+) salaries that most engineers could only dream of.

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.

 

[Rika]

I'm sure the average STEM major is much smarter than the average investment banker or trader

What makes you so sure?

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

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.)

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.

Which I guess also begs the question of why do engineering jobs pay so little compared to high 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.

 

[Locrian]

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.

 

[twofish-quant]

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.

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.

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.

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.

 

[Floid]

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.

 

[npc]

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...)

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

 

[npc]

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

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.

 

[npc]

I'm sure the average STEM major is much smarter than the average investment banker or trader,

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.

 

[Rika]

What do you mean by soulless and why do you think that?

 

[Locrian]

What do you mean by soulless and why do you think that?

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.

 

[Rika]

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.

That's what I thought :D

5/5 for this post <3

 

[twofish-quant]

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.

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.

 

[npc]

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.

I mean it in the sense that most people will do science/eng out of a love for the subject matter and fulfilment in finding things out, I don't believe most people will get that from finance having come from science, if you did then you should go and study finance not science in the first place.

YOu seem to view it as a question of morality or right/wrongs of a particular job, no matter what job you give an example of, you will find an example of right and wrong use of that job.

 

[Arjani]

I don't know of anyone who went into physics to have a career in finance.

 

[twofish-quant]

I mean it in the sense that most people will do science/eng out of a love for the subject matter and fulfilment in finding things out, I don't believe most people will get that from finance having come from science

Some do. :-) :-)

You seem to view it as a question of morality or right/wrongs of a particular job, no matter what job you give an example of, you will find an example of right and wrong use of that job.

I don't think that people in finance are more or less amoral than people in other fields. I do think that finance has a bigger impact on the world so that any amorality in finance has a much larger impact than those in other fields.

 

[npc]

I don't know of anyone who went into physics to have a career in finance.

I don't know anyone who had that intent either, but still a hell of a lot of ex-physics people in finance, and this will continue to be so long as there are no other real physics jobs out there.

 

[npc]

Some do. :-) :-)

There's always one! :-)

I don't think that people in finance are more or less amoral than people in other fields. I do think that finance has a bigger impact on the world so that any amorality in finance has a much larger impact than those in other fields.

Don't think it's necessarily the people who are amoral, but the results of their work can be (whether those results are intended or not). I do agree that the impact of actions in finance can have huge repercussions around the world.

 

[mal4mac]

I don't think that people in finance are more or less amoral than people in other fields.

I disagree. Can you point to a Bernie Madoff of physics? There are many finance people in prison for fiddling the accounts. Are there any physicists in prison for fiddling physical laws?

 

[Nano-Passion]

Because to some of us, life doesn't revolve around money. One's priority might be to quench his curiosity and do research, as it is for me. Personally, I wouldn't be able to stand working solely for money as my life would feel very superficial. Money is a material (or not so material in fact) item, there is no point in basing your life around it. I think it makes us economic slaves. Which brings me back to the point that I do what quenches my curiosity, that way, I feel that I beat the social and economic system that oppresses everyone.

 

[Mute]

I disagree. Can you point to a Bernie Madoff of physics? There are many finance people in prison for fiddling the accounts. Are there any physicists in prison for fiddling physical laws?

Schön scandal, Bogdanov Affair, Emil Rupp?

Sure, maybe they didn't end up in prison, but fabricating results to intentionally mislead people, resulting in a plethora of people wasting time and money trying to reproduce the results, isn't exactly a moral high ground.

Because to some of us, life doesn't revolve around money. One's priority might be to quench his curiosity and do research, as it is for me. Personally, I wouldn't be able to stand working solely for money as my life would feel very superficial. Money is a material (or not so material in fact) item, there is no point in basing your life around it. I think it makes us economic slaves. Which brings me back to the point that I do what quenches my curiosity, that way, I feel that I beat the social and economic system that oppresses everyone.

On the other hand, many people (even here) think that prioritizing the quest to quench one's curiosity results in one becoming an academic slave, trapped in a different kind of system which oppresses people. (Granted, if you beat the odds and become a prof, you're the one that gets to do the oppressing, but you're still liable to be a slave to funding agencies). So, as some people figure, if they can do work that earns them lots of money and is still somehow interesting, maybe it's not so bad being an 'economic slave'. (And still others try to get the best (and worst) of both worlds by going to national research labs or R&D in companies).

 

[Nano-Passion]

On the other hand, many people (even here) think that prioritizing the quest to quench one's curiosity results in one becoming an academic slave, trapped in a different kind of system which oppresses people. (Granted, if you beat the odds and become a prof, you're the one that gets to do the oppressing, but you're still liable to be a slave to funding agencies). So, as some people figure, if they can do work that earns them lots of money and is still somehow interesting, maybe it's not so bad being an 'economic slave'. (And still others try to get the best (and worst) of both worlds by going to national research labs or R&D in companies).

It's a risk worth taking. And whatever it may be, I much rather make a living with an intellectually stimulating or challenging job (hopefully research) than the run-of-the mill 9-5 job.

Reflecting on what others may be interested in, what matters most is that you don't work solely for money, but make it your mission to do what your passionate about. But if you don't have a passion towards anything, then you will have to be oppressed by the financial system.

On second thought, we are all more or less under the whim of the work-force. What matters though, is whether your job feels like a hobby or a struggle.

I choose a job that is a hobby. That way, I feel that I beat the system--and I get paid to have fun (to an extent of course).

 

[phylotree]

If I have a choice to make, I would always want to be a manager. So don't ask me if I want to be one or what I want to be. But when I have no alternative, whatever earns me a good living, then I suppose to accept it albeit unenthusiastically; since I will look out for another better job while still clinging the current one. Finance or not Finance, that is not necessarily a destiny, only a choice's result that will be changed sooner or later.

 

[twofish-quant]

I disagree. Can you point to a Bernie Madoff of physics? There are many finance people in prison for fiddling the accounts. Are there any physicists in prison for fiddling physical laws?

Mute mentioned them. There's also Victor Ninov

Now you can argue that fiddling with paper results causes a lot less social damage than fiddling with peoples accounts, and I agree.

Also, the really big damage is usually done by people that are doing things legally. It's in fact very difficult to do something illegal in finance because you have a dozen lawyers tracking everything you do.

The other things is that you can do things without malice, but still screw up the world.

 

[gravenewworld]

Just what we need, more of our brightest minds being turned into white collar criminals that continue to drive this economy into the ground. Soulless indeed.

 

[Mute]

It's a risk worth taking. And whatever it may be, I much rather make a living with an intellectually stimulating or challenging job (hopefully research) than the run-of-the mill 9-5 job.

Reflecting on what others may be interested in, what matters most is that you don't work solely for money, but make it your mission to do what your passionate about. But if you don't have a passion towards anything, then you will have to be oppressed by the financial system.

On second thought, we are all more or less under the whim of the work-force. What matters though, is whether your job feels like a hobby or a struggle.

I choose a job that is a hobby. That way, I feel that I beat the system--and I get paid to have fun (to an extent of course).

If you have a choice, that is. Not everyone is willing to keep postdoc-hopping (or adjuncting) in order to keep doing research while trying to get that coveted faculty job. There are options in industry, but those are harder to come across for theorists, so what does a theorist do if they want to keep doing research? Ironically, financial institutions are perhaps one of the few kinds of places where somewhat theoretical physics-like research gets done outside of academia. I am seriously considering finance jobs for the very reason that my research deals a lot with random, noisy, non-equilibrium systems, and a finance job might just be the kind of place I could keep doing the kind of research I like doing.

Furthermore, although I also don't want a "run of the mill" 9-to-5 job, an intellectually stimulating 9-to-5 job is looking pretty attractive these days. It's nice to be able to leave work at work, even if it is fun work. Otherwise, when it's not going well, your hobby feels less like a hobby and more like a job.

Just what we need, more of our brightest minds being turned into white collar criminals that continue to drive this economy into the ground. Soulless indeed.

What about the bright minds trying to understand risk and rare events better so that the economy doesn't crash into the ground?

 

[Cbray]

Guys! Let's all do science and engineering because we love it, then after years of hard study and fun we can take a crap on its face and sell our souls for plastic! OMG THAT SOUNDS BRILLIANTTTTTTTTTT!

 

[ParticleGrl]

Guys! Let's all do science and engineering because we love it, then after years of hard study and fun we can take a crap on its face and sell our souls for plastic! OMG THAT SOUNDS BRILLIANTTTTTTTTTT!

Here is the deal- for lots of people I know who got phds in physics, after their phd they discovered that there aren't many jobs for scientists. After months and months and months of looking for science or engineering work we started branching out in our job search and found out that finance, insurance, programming, consulting actually WANT us.

The only downside is that we have to deal with the mindset that comes from doing a phd. Taking the job that wants you isn't selling out- its going with the flow of life. Of course, having people like you say that its 'selling our souls for plastic' just compounds the problem. Basically, before you call something selling out, you should take a peak at the actual people making the decision.