I've been doing internship interviews lately and am considering the pros and cons of different opportunities. I've come to what I believe to be an interesting question.
Looking at pay, job security, promotion opportunities, and mobility outside of said industry, is it possible that a software engineer at a good tech company who does some automated trading on the side has a higher expected long term payout than a prop trader?
I understand the expectation of retail trading is negative, but let's assume this retail trader focused on stat arb and market making and is not a compulsive gambler or anything like that.
Here are some assumptions I'm making in my choice: I think the progression of pay and starting pay are better in tech than in all but the top prop companies. The skills learned in tech are more relevant in other industries. A tech background is fairly desirable in HFT and quantitative finance, more generally. Please tell me if you feel any of these assumptions are wrong.
Thanks for the info both here and in a more general sense. I've learned a lot lurking on this phorum.
Prop Trading vs. Software
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october
- Posts: 1
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
"I think the progression of pay and starting pay are better in tech than in all but the top prop companies."
I'm 32. I left finance in 2008 and worked for startups and now I'm trying to get back into finance (real finance, not back-office IT where I'll be viewed as a cost center). I disagree with you. Or, to put it more bluntly: spending 7 years in the VC-funded tech world was a giant fucking mistake that has cost me hundreds of thousands to millions in lost income.
Finance base salaries are slightly lower than in tech, but you get bonuses. In tech companies, you get startup equity that is quite often worthless. Someone at my level makes $175-200k base in tech and gets equity worth about $300k-1M, but vesting over 4 years, with a cliff (and a lot of good people get fired at 11.9 months and get no equity; there's even a term for it, which is "cliffing") and other factors that are out of your control. Or, I could be VP/ED-level and make slightly less in salary but have a lot of upside in bonus potential. (Good years are often 100-1000+ percent.) Do you want to be paid in an extremely volatile, illiquid stock that your employer and a few douchebag VCs control, or do you want a cash bonus?
The people making money in tech are not the smart people-- the talent level's higher on Wall Street than in Silicon Valley-- but douchebags who are turning connections into profit: "para-drop" executives whose VC friends put them into high positions after the first 50 people did all the work, and "serial entrepreneurs" who can raise VC even if their companies fail. (The VCs, and not the market, decide when a company ceases to exist, and unless you really piss them off, the conversation is, "We've decided to have your company 'acqui-hired' but if you behave, we'll make sure your next company gets funded.") Finance is way more meritocratic than VC-funded tech. I have a friend who's a recent immigrant, Russian Jewish, with a thick accent, smart as fuck, and he makes a shit-ton as a trader. You would *never* see someone like him get above Senior Software Engineer in Silicon Valley. The Valley is all about connections and pedigree because the actual decision makers aren't smart enough to recognize a 140+ IQ, so they fund and promote people who remind them of younger versions of themselves.
Also, in VC-funded tech, you answer ultimately to Sand Hill Road, which is comprised of people who weren't smart enough for hedge funds and failed out of Wall Street so badly that they landed in a strip mall 30 miles south of San Francisco.
"A tech background is fairly desirable in HFT and quantitative finance, more generally."
HFT and quant finance have more technical meat than 99+ percent of software jobs, and most quants have a better understanding of statistics and machine learning than most so-called "data scientists". Most "data science" jobs are bullshit.
For every machine learning expert getting paid $500k plus equity (*real* equity) to publish research papers or work on open-source projects, there are hundreds of grunts on Scrum teams (Scrum is this humiliating micromanagement nightmare that it is better if you don't know what it is) who are stuck maintaining the crumbling Rails app of a 26-year-old who's now CTO and refuses to admit that it's not the way forward.
Trust me on this. Tech's allure is that the work is sold as being more interesting than in finance. In general, it's not. The basic-research jobs where the work is more interesting than what you'd get in a quant job are so hard to get that you should write them off as a possibility unless you have a PhD from Stanford. Besides, Google X is a joke; would you really want to have Sergei Brin's trashy conquest as a co-worker?
Honestly, I think the difference between tech and finance is that tech has better marketing. Tech sells itself as "changing the world" and is situated in a place where people complain about cold when it's 57 degrees. Finance is honest about what it is and is concentrated (in the Anglosphere) in three cities (NYC, Chicago, London) reputed for terrible weather. Tech companies claim to have never laid people off (because they dress layoffs up as phony performance-based firings) while finance firms admit that they let people go sometimes. Tech dresses boring IT jobs up as something exciting, whereas financial quants will admit that 50% of their jobs are data cleaning.
You get the "tech background" by working on hard problems and busting your ass to build your skills-- something you can do in finance as easily as in technology-- and not by working on "user stories" as an open-plan grunt programmer at a tech company.
A tech background will do more for your HFT/quant ambitions than working at a gas station, but I think that a year as a quant will do more for you than a year at Google... and if you're not expecting $150k+100% at age 22 (only Putnam Fellows can get that) you can probably get a finance job if you're capable.
I'm 32. I left finance in 2008 and worked for startups and now I'm trying to get back into finance (real finance, not back-office IT where I'll be viewed as a cost center). I disagree with you. Or, to put it more bluntly: spending 7 years in the VC-funded tech world was a giant fucking mistake that has cost me hundreds of thousands to millions in lost income.
Finance base salaries are slightly lower than in tech, but you get bonuses. In tech companies, you get startup equity that is quite often worthless. Someone at my level makes $175-200k base in tech and gets equity worth about $300k-1M, but vesting over 4 years, with a cliff (and a lot of good people get fired at 11.9 months and get no equity; there's even a term for it, which is "cliffing") and other factors that are out of your control. Or, I could be VP/ED-level and make slightly less in salary but have a lot of upside in bonus potential. (Good years are often 100-1000+ percent.) Do you want to be paid in an extremely volatile, illiquid stock that your employer and a few douchebag VCs control, or do you want a cash bonus?
The people making money in tech are not the smart people-- the talent level's higher on Wall Street than in Silicon Valley-- but douchebags who are turning connections into profit: "para-drop" executives whose VC friends put them into high positions after the first 50 people did all the work, and "serial entrepreneurs" who can raise VC even if their companies fail. (The VCs, and not the market, decide when a company ceases to exist, and unless you really piss them off, the conversation is, "We've decided to have your company 'acqui-hired' but if you behave, we'll make sure your next company gets funded.") Finance is way more meritocratic than VC-funded tech. I have a friend who's a recent immigrant, Russian Jewish, with a thick accent, smart as fuck, and he makes a shit-ton as a trader. You would *never* see someone like him get above Senior Software Engineer in Silicon Valley. The Valley is all about connections and pedigree because the actual decision makers aren't smart enough to recognize a 140+ IQ, so they fund and promote people who remind them of younger versions of themselves.
Also, in VC-funded tech, you answer ultimately to Sand Hill Road, which is comprised of people who weren't smart enough for hedge funds and failed out of Wall Street so badly that they landed in a strip mall 30 miles south of San Francisco.
"A tech background is fairly desirable in HFT and quantitative finance, more generally."
HFT and quant finance have more technical meat than 99+ percent of software jobs, and most quants have a better understanding of statistics and machine learning than most so-called "data scientists". Most "data science" jobs are bullshit.
For every machine learning expert getting paid $500k plus equity (*real* equity) to publish research papers or work on open-source projects, there are hundreds of grunts on Scrum teams (Scrum is this humiliating micromanagement nightmare that it is better if you don't know what it is) who are stuck maintaining the crumbling Rails app of a 26-year-old who's now CTO and refuses to admit that it's not the way forward.
Trust me on this. Tech's allure is that the work is sold as being more interesting than in finance. In general, it's not. The basic-research jobs where the work is more interesting than what you'd get in a quant job are so hard to get that you should write them off as a possibility unless you have a PhD from Stanford. Besides, Google X is a joke; would you really want to have Sergei Brin's trashy conquest as a co-worker?
Honestly, I think the difference between tech and finance is that tech has better marketing. Tech sells itself as "changing the world" and is situated in a place where people complain about cold when it's 57 degrees. Finance is honest about what it is and is concentrated (in the Anglosphere) in three cities (NYC, Chicago, London) reputed for terrible weather. Tech companies claim to have never laid people off (because they dress layoffs up as phony performance-based firings) while finance firms admit that they let people go sometimes. Tech dresses boring IT jobs up as something exciting, whereas financial quants will admit that 50% of their jobs are data cleaning.
You get the "tech background" by working on hard problems and busting your ass to build your skills-- something you can do in finance as easily as in technology-- and not by working on "user stories" as an open-plan grunt programmer at a tech company.
A tech background will do more for your HFT/quant ambitions than working at a gas station, but I think that a year as a quant will do more for you than a year at Google... and if you're not expecting $150k+100% at age 22 (only Putnam Fellows can get that) you can probably get a finance job if you're capable.
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NeroTulip
- Posts: 0
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
@october: You sound pretty disillusioned and your tone might piss some people off, but I see your story as an interesting counterpoint to the current hype about Silicon Valley. Thanks for sharing.
Inflatable trader
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MCgeneratedname
- Posts: 0
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
I like subversive characters.
my 2c: I live in England and from time to time I have some contact with "tech people" from London.
There are a lot of "big data" / "data science" / "analytics" / everything with the word "insight" - companies out here.
Is this all bullshit? Yes.
Their way to approach a problem ranges from wrong (academically wrong) to plain naive.
Quantitative Finance is much more rigorous with an academic / scientific approach.
Thanks for entertaining me on this rainy morning with "Sergei Brin's trashy conquest".
my 2c: I live in England and from time to time I have some contact with "tech people" from London.
There are a lot of "big data" / "data science" / "analytics" / everything with the word "insight" - companies out here.
Is this all bullshit? Yes.
Their way to approach a problem ranges from wrong (academically wrong) to plain naive.
Quantitative Finance is much more rigorous with an academic / scientific approach.
Thanks for entertaining me on this rainy morning with "Sergei Brin's trashy conquest".
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aickley
- Posts: 0
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
@october
Thanks for sharing indeed.
I see a bit of "the grass is greener" bias though. Had you stayed in finance you might have become disillusioned about it as well.
Thanks for sharing indeed.
I see a bit of "the grass is greener" bias though. Had you stayed in finance you might have become disillusioned about it as well.
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mtsm
- Posts: 0
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
I think you are completely off and very naive about finance october. It's kind of ridiculous what you write actually.
It's mostly about what you want to believe or not at the end of the day.
Right now from my vantage point, I am definitely observing a strong move from finance into technology. The consequences of 2008 prove to be pretty disastrous and I don't think it is over.
It's mostly about what you want to believe or not at the end of the day.
Right now from my vantage point, I am definitely observing a strong move from finance into technology. The consequences of 2008 prove to be pretty disastrous and I don't think it is over.
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MCgeneratedname
- Posts: 0
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
> I am definitely observing a strong move from finance into technology
You have to be careful making a career move according to what other people are doing at the moment.
It's easy to get into a pork cycle and difficult to get out.
You have to be careful making a career move according to what other people are doing at the moment.
It's easy to get into a pork cycle and difficult to get out.
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mtsm
- Posts: 0
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
In general you mean?
I am just observing that I know like 10 people or so who have moved to google alone in the past 2 odd years. It's invariably the same story. All experienced people. They all looked in finance for a while and ended up finding the packages offered by technology firms to be competitive or superior.
Honestly, it's has gotten very very difficult to job hop in finance, especially with a derivatives background both sell- and buy-side. The packages just suck, provided you can even find anything at all. It's a fraction of what it used to be. And there are so many cheap people kicking around. Maybe it's very different in electronic trading, but in derivatives it's very bad.
I am just observing that I know like 10 people or so who have moved to google alone in the past 2 odd years. It's invariably the same story. All experienced people. They all looked in finance for a while and ended up finding the packages offered by technology firms to be competitive or superior.
Honestly, it's has gotten very very difficult to job hop in finance, especially with a derivatives background both sell- and buy-side. The packages just suck, provided you can even find anything at all. It's a fraction of what it used to be. And there are so many cheap people kicking around. Maybe it's very different in electronic trading, but in derivatives it's very bad.
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october
- Posts: 1
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
"I think you are completely off and very naive about finance october. It's kind of ridiculous what you write actually."
How so?
It's not that I have this belief that finance is a worker's paradise. It's obviously not. I may have made the bad life choice of leaving finance for tech startups, but I'm not a *total* idiot.
Finance has its negatives and pays very well to offset them. VC-funded tech has more negatives and pays only moderately well to offset them. This is because there are a lot of naive, idealistic programmers who refuse to work for Wall Street (but willingly ignore the fact that they answer, indirectly, to venture capitalists-- that is, people who failed out of Wall Street because they weren't smart enough for the quant funds.) The finance negatives are more superficial things-- having to show up at 8:30, wear a suit-- while the Googley "happy fun job" looks better from an immature perspective, but damages your career.
I actually know what I'm getting into and that, for just one example, I'll probably still have to deal with open-plan offices, which seem to be the norm everywhere despite the fact that they're counterproductive. I fucking hate that open-plan shit, but I have a good doctor and just take meds to push away the health problems that the open-plan environment causes.
"Right now from my vantage point, I am definitely observing a strong move from finance into technology. The consequences of 2008 prove to be pretty disastrous and I don't think it is over."
This is true, and that's a big part of why VC-funded tech is not a great place to be. The market's flooded with unqualified people, and the ones in charge (VCs and founders) don't have the talent to tell the fakes apart from the people who can actually write code and build products. "Agile" and the open-plan fetishism (think of the worst, loudest trading desk, but on a programmer's salary) are just part of a race to the bottom as hordes of unqualified, semi-desperate people throw themselves into the gears of Silicon Valley.
2004-06 was probably a good time to join a company like Google, because people were beating down the doors of finance, and you could use the Google prestige and contacts to become a founder, and even if you failed in your next two startups, you'd still get a few million in your acqui-fails. That era is over. The people beating their way into Silicon Valley are going to get hosed. Finance is the contrarian bet and it's also the better one, in my opinion.
How so?
It's not that I have this belief that finance is a worker's paradise. It's obviously not. I may have made the bad life choice of leaving finance for tech startups, but I'm not a *total* idiot.
Finance has its negatives and pays very well to offset them. VC-funded tech has more negatives and pays only moderately well to offset them. This is because there are a lot of naive, idealistic programmers who refuse to work for Wall Street (but willingly ignore the fact that they answer, indirectly, to venture capitalists-- that is, people who failed out of Wall Street because they weren't smart enough for the quant funds.) The finance negatives are more superficial things-- having to show up at 8:30, wear a suit-- while the Googley "happy fun job" looks better from an immature perspective, but damages your career.
I actually know what I'm getting into and that, for just one example, I'll probably still have to deal with open-plan offices, which seem to be the norm everywhere despite the fact that they're counterproductive. I fucking hate that open-plan shit, but I have a good doctor and just take meds to push away the health problems that the open-plan environment causes.
"Right now from my vantage point, I am definitely observing a strong move from finance into technology. The consequences of 2008 prove to be pretty disastrous and I don't think it is over."
This is true, and that's a big part of why VC-funded tech is not a great place to be. The market's flooded with unqualified people, and the ones in charge (VCs and founders) don't have the talent to tell the fakes apart from the people who can actually write code and build products. "Agile" and the open-plan fetishism (think of the worst, loudest trading desk, but on a programmer's salary) are just part of a race to the bottom as hordes of unqualified, semi-desperate people throw themselves into the gears of Silicon Valley.
2004-06 was probably a good time to join a company like Google, because people were beating down the doors of finance, and you could use the Google prestige and contacts to become a founder, and even if you failed in your next two startups, you'd still get a few million in your acqui-fails. That era is over. The people beating their way into Silicon Valley are going to get hosed. Finance is the contrarian bet and it's also the better one, in my opinion.
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october
- Posts: 1
- Joined: Thu Jan 01, 2004 12:00 am
Prop Trading vs. Software
"I am just observing that I know like 10 people or so who have moved to google alone in the past 2 odd years. It's invariably the same story. All experienced people. They all looked in finance for a while and ended up finding the packages offered by technology firms to be competitive or superior. "
I disagree, and I've known people who've tried to make that move and I know how it works. Base pay is similar. Instead of bonuses, you get "equity" that has a lot of strings attached. If it's Google, that's not so bad because you get RSUs that are practically as good as cash. If it's one of these startups, you'll probably never see a dime.
Banks pay bonuses, and for the past 7 years, those bonuses have mostly been mediocre. Tech companies pay you in a volatile, extremely illiquid asset, whose median value is zero in most cases, that is controlled by someone who can fire you.
You can get on a "high-compensation plan" (HCP) at a company like Google, which means that they earmark you for the best projects and put you on the managerial track, with the goal of getting back up to your finance numbers "on merit" (tech people actually believe in meritocracy) inside of 3 years. The thing is: most people who I know that have taken HCPs have said that they wish they had stayed in finance. High comp is better than an HCP, which is more of a promise.
"Honestly, it's has gotten very very difficult to job hop in finance"
Technology has the opposite problem. It's not hard to job hop, but it's pretty much mandatory if you want to have a career in it. It's almost impossible to find a 5-year job in technology, because companies will not invest in your career at all, which means that unless you want to end up stagnant and unemployable, you have to jump ship every year or two. I'm sick of it. I've job hopped like a bat out of hell but I'm sick of changing jobs every 12 months.
I disagree, and I've known people who've tried to make that move and I know how it works. Base pay is similar. Instead of bonuses, you get "equity" that has a lot of strings attached. If it's Google, that's not so bad because you get RSUs that are practically as good as cash. If it's one of these startups, you'll probably never see a dime.
Banks pay bonuses, and for the past 7 years, those bonuses have mostly been mediocre. Tech companies pay you in a volatile, extremely illiquid asset, whose median value is zero in most cases, that is controlled by someone who can fire you.
You can get on a "high-compensation plan" (HCP) at a company like Google, which means that they earmark you for the best projects and put you on the managerial track, with the goal of getting back up to your finance numbers "on merit" (tech people actually believe in meritocracy) inside of 3 years. The thing is: most people who I know that have taken HCPs have said that they wish they had stayed in finance. High comp is better than an HCP, which is more of a promise.
"Honestly, it's has gotten very very difficult to job hop in finance"
Technology has the opposite problem. It's not hard to job hop, but it's pretty much mandatory if you want to have a career in it. It's almost impossible to find a 5-year job in technology, because companies will not invest in your career at all, which means that unless you want to end up stagnant and unemployable, you have to jump ship every year or two. I'm sick of it. I've job hopped like a bat out of hell but I'm sick of changing jobs every 12 months.