9 ms·

The End of Wall Street As They Knew It

120 points by cdwhite 15y ago

pg 15y ago
“If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”
- npt4279 15y ago
  Best quote in that article, by far. I just gave up trying to fit that in a tweet.
- ThomPete 15y ago
  Yes but problem seem to be that a surprising relative small number of academics start companies around the globe I hear. In Denmark it's less than 5%.of those who start companies. I wonder what number is in the US.
  - glimcat 15y ago
    Starting a company is about 1% interesting stuff, with the rest going to grunt work, marketing, meetings, etc. ad nauseum. Staying within academia is up to about 25% interesting stuff, sometimes more, with the rest going to teaching / outreach / departmental involvement / begging for grant money. If you enjoy teaching, interesting stuff can be 40 or 50 percent, sometimes more. If anything, the IP workflow for collaborations bridging the gap out of academia needs to be improved. Take the horror show that is the US patent system and convolve that with university bureaucracy - it's not pretty.
  - roel_v 15y ago
    Don't get me started on that. Academics snub their noses at 'businesses', that's for slimy 'business people', academics don't stoop to that level. Maybe if it's called a 'spin off', and if they're guaranteed to receive a salary for a part time position for at least a few years. At the same time of course, that grant money needs to keep coming in! Those cheap alumni should donate more, with their fat paychecks, and of course the government should spend more on research! Just tax companies more, they don't do anything useful anyway! (Yes I'm bitter, sometimes. And yes I know that there are exceptions. And things are changing - even if very slowly.)
    - ThomPete 15y ago
      heh Yeah well I don't have any specific grief with academics, but it does strike me as ironic that those who are supposed to be the beacons also often seem to be the most risk averse. I can of course only speak for Denmark and a little for the US (having worked there), but there doesn't seem to be any correlation (nor causation) between high academic merits and entrepreneurship. Which I guess once you think hard about what entrepreneurship really is makes some sense.
- SkyMarshal 15y ago
  It's about time. That's what should have happened immediately after the crash several years ago, but the bailouts stopped it.
- adamtmca 15y ago
  This is one of the benefits Iceland's prime minister claimed came from letting their banks fail -- more physicists, programmers and engineers moving from finance into technology.
  - roel_v 15y ago
    Hmm. What kind of industry does Iceland have that requires 'physicists, programmers and engineers'? With a population in the hundreds of thousands, smaller than even medium sized cities in most countries, how much opportunity is/was there for these people? It's not even big enough to sustain a serious university, let alone a real r&d environment. Using Iceland as an example for other countries is usually fallacious, because it's so unique.
    - ThomPete 15y ago
      if you like me believe that physical borders mean less and less, then I thinks it's easy to see why the parent commenter said what he said.
      - roel_v 15y ago
        Well yes, they do mean less and less, but in the context of the quote, that's exactly what makes the argument moot. To be more concrete, Iceland didn't benefit from having bankers and quants in Reykjavik become programmers in Silicon Valley. Actually quite the contrary. His claim only makes (some) sense in a global, moral context - i.e. when one starts with the assumption that bankers don't add value, then defaulting meant getting rid of the bankers, hence a net positive. But pragmatically, from the point of what was better for Iceland, I don't get it.
        ThomPete 15y ago
        Perhaps because the change in attitude benefit because some of those people will stay home and not go to SV. In fact most people most probably wont go to SV.
        15y ago
- jcnnghm 15y ago
  I'll believe it when I see it. There is an uproar because the cash portion of bonuses are being capped at "just" $125,000 a year. Presumably, that is in addition to the regular salary, and excluding stock bonuses, which now make up about 75% of bonuses. So a $500,000 a year combined cash and stock bonus will not be unheard of. That's a total compensation package of $600,000 - $700,000 a year. YC founders probably have the highest chances of success as startup founders, given YCs connections and alumni network. What percentage of founders make over $600,000 a year in total compensation, once exits are added back in, and averaged over the years the founder works on the company? What percentage makes under $125,000 a year? What percentage of engineers that aren't founders or within the first five employees make over $300,000 a year? The money is in Silicon Valley, Google's 2011 net income was $299,874/employee [1], but the vast majority of engineers aren't going to be the ones to get it. How many finance people are actually going to give up the higher pay, lower cost of living, shorter hours, and structure of Wall St for Silicon Valley? Have a bad year on Wall St, make a Silicon Valley engineering salary, have a bad year as a start-up founder, make nothing and go bankrupt. [1] Goldman Sachs 2011 net income was $162,913 per employee. Average pay was $367,057. It's harder to get data on Google, but it looks like the mid-career median salary is $141,000.
  - mahyarm 15y ago
    From what I got, Wall St./NYC has a similar or higher cost of living and very insane hours even at large finance firms for at least for the first 5 years. 14 hour days are very common.
    - jcnnghm 15y ago
      I just looked it up, and you are correct about the cost of living. Manhattan seems to be about 38% higher than San Francisco.
      - uptown 15y ago
        Cost of living in NYC is pretty insane. Housing is consistently high. Food prices are nuts ... think > $7 for a box of cereal. For taxes, you've got Federal tax, state tax, and city tax, plus some exciting new taxes like MTA taxes for the mismanaged transit authority you're already paying your fare to use. Want to own a car? Either park on the street for free where you'll need to move your car no fewer than three times a week due to street-cleaning, or you can get a parking garage for anywhere from $300/month to $550/month depending on the type of car you're trying to park. The list goes on and on. It's an expensive place to live. The upside is that anytime you take a vacation elsewhere it feels like you're stealing because everything is so comparatively inexpensive.
- Tichy 15y ago
  Except that with a startup you can fail. Employed in the finance industry you make money no matter what.
  - apaprocki 15y ago
    Exactly. I think Ph.D.s going to Wall St. has everything to do with risk aversion.
    - dagw 15y ago
      Risk aversion is certainly one factor, but another is that Wall St. (and local equivalents) offer some genuinely interesting and hard problems to play with and are generally pretty good about letting their smart people have pretty free reign to play with those problems. I know among my mathematician friends finance has been a popular career avenue, not because of the money, but because finance was the only industry they felt genuinely respected mathematicians and was willing to hire mathematicians to work on mathematics.
  - wtvanhest 15y ago
    The finance industry is up or out. So, no you are not employeed no matter what.
    - Tichy 15y ago
      No, but if you are employed for n months, you get at least n*salary as revenue.
      - wtvanhest 15y ago
        Why would a PhD not get paid at a startup?
        Tichy 15y ago
        Just not as much as they pay in finance, I suppose.
- apaprocki 15y ago
  A Ph.D. with a huge backlog of student loans is probably the last person I would expect to see foregoing a regular salary for a large amount of risk and uncertainty. In my version of that quote, I think it would make more sense for really talented, smart engineers to leave school, with or without a BS, and start a company.
  - gte910h 15y ago
    Pay to get a science or math PhD? Nice one! Seriously, you can get funding to do a PhD in science or math almost trivially.
- carterac 15y ago
  This quote is actually pretty representative. I have some very close friends in finance and have heard that many people are quitting or planning on quitting to join the tech/startup sector for this very reason. Interestingly, instead of immediately quitting some people are instead just slacking until they get fired and receive lucrative severance packages. Of course, this is only for my finance friends with technical backgrounds. I haven't heard the same from non-technical people in finance.
  - mattmiller 15y ago
    I would love to see non-technical finance people branch out into the real economy. Where would they go? They would make excellent CPAs, but how many more CPAs do we need? The next logical jump would be to management, but a management does require some skills and usually a lot of domain knowledge. Some would have to try their hand at the highly lucrative software industry. I think the consensus in wall street is that it would only take them a month or two and a couple software books to be leet programmers. I would love to see them try, and I wonder how well they would do.
  - gruseom 15y ago
    Interestingly, instead of immediately quitting some people are instead just slacking until they get fired and receive lucrative severance packages. If such are the habits they've cultivated in finance, they won't do very well at those tech startups they plan to join.
deleted 15y ago
[deleted]
paulbaumgart 15y ago
"And as the world becomes deleveraged, money has been pouring out. In October 2011 alone, hedge funds saw $9 billion go out the door." "Over 1,000 funds have closed in the past year and a half." I guess that means the "VC bubble" is only going to grow over the next few years, huh?
sbierwagen 15y ago
This article's a complete whitewash, of course, being about as pro-Wall Street as a monocle salesman. Notorious leftist wingnut Matt Taibbi wrote a post about it: http://www.rollingstone.com/politics/blogs/taibblog/why-wall-street-should-stop-whining-20120208 http://www.rollingstone.com/politics/blogs/taibblog/why-wall...
- Djehngo 15y ago
  I don't think the original article was particularly pro-Wall Street. It was saying that Wall Street was changing, that it would shrink and there would be less money around. It attributed most of this to the Dodd-Frank act _but_ it didn't say that this was entirely a bad thing, it didn't state that it would be the end of the United States. If anything I would say the original article was vaguely anti-Wall Street, the quotes chosen for the article portray the bankers as being rich, conceited and of dubious value to society. My reading of the rolling stone article conveyed fewer facts and a significantly greater proportion of opinion.
  - surrealize 15y ago
    It's not that the NY Mag article was particularly pro-Wall Street. It's that it wasn't anti-Wall Street enough. The Wall Street types quoted in NY Mag blamed financial reform for their declining revenues, when (as Taibbi points out) it's actually the European crisis that's doing it. Taibbi writes with a fairly angry tone, but he's got the facts to back up the bombast (and those facts are plentiful in his post).
- mistermann 15y ago
  Matt Taibbi's is the only person I've encountered who consistently writes something on this subject that resembles reality, and I consider myself to be very conservative. The mainstream media's lack of coverage (or poor coverage at best) of this subject has been shameful. Prediction: all of this supposed austerity on Wall Street will be very short lived.
  - mattmiller 15y ago
alanmeaney 15y ago
The deleverage of the banks caused by the new rules will not eliminate Wall Street risk taking. As the article states many of the top proprietary trading desks are already moving to Private Equity and Hedge Funds. This will only serve to hide the risk taking from the scrutiny of the public eye. Despite the recession there are billions of dollars looking for an above market return. Through Private Equity and Hedge Funds Wall Street will find a way to meet this demand. It will simply adapt itself to the new rules, finding new ways to take new risks. Greed will always find a way…
joejohnson 15y ago
Here's an interesting response to this article: http://www.rollingstone.com/politics/blogs/taibblog/why-wall-street-should-stop-whining-20120208 http://www.rollingstone.com/politics/blogs/taibblog/why-wall...
BrentRitterbeck 15y ago
Just give me some interesting data to work with, and I would gladly come to work for any of these firms for $125K flat salary just to get into the place.

120 points by cdwhite 15y ago

pg 15y ago

“If you’re a smart Ph.D. from MIT, you’d never go to Wall Street now,” says a hedge-fund executive. “You’d go to Silicon Valley. There’s at least a prospect for a huge gain. You’d have the potential to be the next Mark Zuckerberg. It looks like he has a lot more fun.”

npt4279 15y ago
Best quote in that article, by far. I just gave up trying to fit that in a tweet.
ThomPete 15y ago
Yes but problem seem to be that a surprising relative small number of academics start companies around the globe I hear. In Denmark it's less than 5%.of those who start companies. I wonder what number is in the US.
- glimcat 15y ago
  Starting a company is about 1% interesting stuff, with the rest going to grunt work, marketing, meetings, etc. ad nauseum. Staying within academia is up to about 25% interesting stuff, sometimes more, with the rest going to teaching / outreach / departmental involvement / begging for grant money. If you enjoy teaching, interesting stuff can be 40 or 50 percent, sometimes more. If anything, the IP workflow for collaborations bridging the gap out of academia needs to be improved. Take the horror show that is the US patent system and convolve that with university bureaucracy - it's not pretty.
- roel_v 15y ago
  Don't get me started on that. Academics snub their noses at 'businesses', that's for slimy 'business people', academics don't stoop to that level. Maybe if it's called a 'spin off', and if they're guaranteed to receive a salary for a part time position for at least a few years. At the same time of course, that grant money needs to keep coming in! Those cheap alumni should donate more, with their fat paychecks, and of course the government should spend more on research! Just tax companies more, they don't do anything useful anyway! (Yes I'm bitter, sometimes. And yes I know that there are exceptions. And things are changing - even if very slowly.)
  - ThomPete 15y ago
    heh Yeah well I don't have any specific grief with academics, but it does strike me as ironic that those who are supposed to be the beacons also often seem to be the most risk averse. I can of course only speak for Denmark and a little for the US (having worked there), but there doesn't seem to be any correlation (nor causation) between high academic merits and entrepreneurship. Which I guess once you think hard about what entrepreneurship really is makes some sense.
SkyMarshal 15y ago
It's about time. That's what should have happened immediately after the crash several years ago, but the bailouts stopped it.
adamtmca 15y ago
This is one of the benefits Iceland's prime minister claimed came from letting their banks fail -- more physicists, programmers and engineers moving from finance into technology.
- roel_v 15y ago
  Hmm. What kind of industry does Iceland have that requires 'physicists, programmers and engineers'? With a population in the hundreds of thousands, smaller than even medium sized cities in most countries, how much opportunity is/was there for these people? It's not even big enough to sustain a serious university, let alone a real r&d environment. Using Iceland as an example for other countries is usually fallacious, because it's so unique.
  - ThomPete 15y ago
    if you like me believe that physical borders mean less and less, then I thinks it's easy to see why the parent commenter said what he said.
    - roel_v 15y ago
      Well yes, they do mean less and less, but in the context of the quote, that's exactly what makes the argument moot. To be more concrete, Iceland didn't benefit from having bankers and quants in Reykjavik become programmers in Silicon Valley. Actually quite the contrary. His claim only makes (some) sense in a global, moral context - i.e. when one starts with the assumption that bankers don't add value, then defaulting meant getting rid of the bankers, hence a net positive. But pragmatically, from the point of what was better for Iceland, I don't get it.
      - ThomPete 15y ago
        Perhaps because the change in attitude benefit because some of those people will stay home and not go to SV. In fact most people most probably wont go to SV.
      - 15y ago
jcnnghm 15y ago
I'll believe it when I see it. There is an uproar because the cash portion of bonuses are being capped at "just" $125,000 a year. Presumably, that is in addition to the regular salary, and excluding stock bonuses, which now make up about 75% of bonuses. So a $500,000 a year combined cash and stock bonus will not be unheard of. That's a total compensation package of $600,000 - $700,000 a year. YC founders probably have the highest chances of success as startup founders, given YCs connections and alumni network. What percentage of founders make over $600,000 a year in total compensation, once exits are added back in, and averaged over the years the founder works on the company? What percentage makes under $125,000 a year? What percentage of engineers that aren't founders or within the first five employees make over $300,000 a year? The money is in Silicon Valley, Google's 2011 net income was $299,874/employee [1], but the vast majority of engineers aren't going to be the ones to get it. How many finance people are actually going to give up the higher pay, lower cost of living, shorter hours, and structure of Wall St for Silicon Valley? Have a bad year on Wall St, make a Silicon Valley engineering salary, have a bad year as a start-up founder, make nothing and go bankrupt. [1] Goldman Sachs 2011 net income was $162,913 per employee. Average pay was $367,057. It's harder to get data on Google, but it looks like the mid-career median salary is $141,000.
- mahyarm 15y ago
  From what I got, Wall St./NYC has a similar or higher cost of living and very insane hours even at large finance firms for at least for the first 5 years. 14 hour days are very common.
  - jcnnghm 15y ago
    I just looked it up, and you are correct about the cost of living. Manhattan seems to be about 38% higher than San Francisco.
    - uptown 15y ago
      Cost of living in NYC is pretty insane. Housing is consistently high. Food prices are nuts ... think > $7 for a box of cereal. For taxes, you've got Federal tax, state tax, and city tax, plus some exciting new taxes like MTA taxes for the mismanaged transit authority you're already paying your fare to use. Want to own a car? Either park on the street for free where you'll need to move your car no fewer than three times a week due to street-cleaning, or you can get a parking garage for anywhere from $300/month to $550/month depending on the type of car you're trying to park. The list goes on and on. It's an expensive place to live. The upside is that anytime you take a vacation elsewhere it feels like you're stealing because everything is so comparatively inexpensive.
Tichy 15y ago
Except that with a startup you can fail. Employed in the finance industry you make money no matter what.
- apaprocki 15y ago
  Exactly. I think Ph.D.s going to Wall St. has everything to do with risk aversion.
  - dagw 15y ago
    Risk aversion is certainly one factor, but another is that Wall St. (and local equivalents) offer some genuinely interesting and hard problems to play with and are generally pretty good about letting their smart people have pretty free reign to play with those problems. I know among my mathematician friends finance has been a popular career avenue, not because of the money, but because finance was the only industry they felt genuinely respected mathematicians and was willing to hire mathematicians to work on mathematics.
- wtvanhest 15y ago
  The finance industry is up or out. So, no you are not employeed no matter what.
  - Tichy 15y ago
    No, but if you are employed for n months, you get at least n*salary as revenue.
    - wtvanhest 15y ago
      Why would a PhD not get paid at a startup?
      - Tichy 15y ago
        Just not as much as they pay in finance, I suppose.
apaprocki 15y ago
A Ph.D. with a huge backlog of student loans is probably the last person I would expect to see foregoing a regular salary for a large amount of risk and uncertainty. In my version of that quote, I think it would make more sense for really talented, smart engineers to leave school, with or without a BS, and start a company.
- gte910h 15y ago
  Pay to get a science or math PhD? Nice one! Seriously, you can get funding to do a PhD in science or math almost trivially.
carterac 15y ago
This quote is actually pretty representative. I have some very close friends in finance and have heard that many people are quitting or planning on quitting to join the tech/startup sector for this very reason. Interestingly, instead of immediately quitting some people are instead just slacking until they get fired and receive lucrative severance packages. Of course, this is only for my finance friends with technical backgrounds. I haven't heard the same from non-technical people in finance.
- mattmiller 15y ago
  I would love to see non-technical finance people branch out into the real economy. Where would they go? They would make excellent CPAs, but how many more CPAs do we need? The next logical jump would be to management, but a management does require some skills and usually a lot of domain knowledge. Some would have to try their hand at the highly lucrative software industry. I think the consensus in wall street is that it would only take them a month or two and a couple software books to be leet programmers. I would love to see them try, and I wonder how well they would do.
- gruseom 15y ago
  Interestingly, instead of immediately quitting some people are instead just slacking until they get fired and receive lucrative severance packages. If such are the habits they've cultivated in finance, they won't do very well at those tech startups they plan to join.

deleted 15y ago

[deleted]

paulbaumgart 15y ago

"And as the world becomes deleveraged, money has been pouring out. In October 2011 alone, hedge funds saw $9 billion go out the door." "Over 1,000 funds have closed in the past year and a half." I guess that means the "VC bubble" is only going to grow over the next few years, huh?

sbierwagen 15y ago

This article's a complete whitewash, of course, being about as pro-Wall Street as a monocle salesman. Notorious leftist wingnut Matt Taibbi wrote a post about it: http://www.rollingstone.com/politics/blogs/taibblog/why-wall-street-should-stop-whining-20120208 http://www.rollingstone.com/politics/blogs/taibblog/why-wall...

Djehngo 15y ago
I don't think the original article was particularly pro-Wall Street. It was saying that Wall Street was changing, that it would shrink and there would be less money around. It attributed most of this to the Dodd-Frank act _but_ it didn't say that this was entirely a bad thing, it didn't state that it would be the end of the United States. If anything I would say the original article was vaguely anti-Wall Street, the quotes chosen for the article portray the bankers as being rich, conceited and of dubious value to society. My reading of the rolling stone article conveyed fewer facts and a significantly greater proportion of opinion.
- surrealize 15y ago
  It's not that the NY Mag article was particularly pro-Wall Street. It's that it wasn't anti-Wall Street enough. The Wall Street types quoted in NY Mag blamed financial reform for their declining revenues, when (as Taibbi points out) it's actually the European crisis that's doing it. Taibbi writes with a fairly angry tone, but he's got the facts to back up the bombast (and those facts are plentiful in his post).
mistermann 15y ago
Matt Taibbi's is the only person I've encountered who consistently writes something on this subject that resembles reality, and I consider myself to be very conservative. The mainstream media's lack of coverage (or poor coverage at best) of this subject has been shameful. Prediction: all of this supposed austerity on Wall Street will be very short lived.
- mattmiller 15y ago

alanmeaney 15y ago

The deleverage of the banks caused by the new rules will not eliminate Wall Street risk taking. As the article states many of the top proprietary trading desks are already moving to Private Equity and Hedge Funds. This will only serve to hide the risk taking from the scrutiny of the public eye. Despite the recession there are billions of dollars looking for an above market return. Through Private Equity and Hedge Funds Wall Street will find a way to meet this demand. It will simply adapt itself to the new rules, finding new ways to take new risks. Greed will always find a way…

joejohnson 15y ago

Here's an interesting response to this article: http://www.rollingstone.com/politics/blogs/taibblog/why-wall-street-should-stop-whining-20120208 http://www.rollingstone.com/politics/blogs/taibblog/why-wall...

BrentRitterbeck 15y ago

Just give me some interesting data to work with, and I would gladly come to work for any of these firms for $125K flat salary just to get into the place.