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  • Matt Ting

Should You Go into Finance?

There are generally two kinds of people who end up in finance:

  1. People who are passionate about finance, and

  2. People who understand that a career in finance has many benefits and are willing to put in the energy and time to break in.

Of course, these are not mutually exclusive groups, as most people who genuinely like finance also recognize the immense benefits it comes with.


But I have found that most of my peers in finance eventually embody one of these two attitudes.


There are people who read finance forums and 10-Ks in their spare time and then there are people who wistfully daydream about the moment they can exit to a portfolio company.

Like most naïve college students, I thought I was staunchly in group #1, but it turns out that I was a fraudulent pretender belonging to group #2 all along.


If you already know you're passionate about finance, you should check out our Valuation and Finance Starter Kit in order to improve your technical skills.


Of my investment banking analyst class, maybe a quarter of people left to non-finance paths within 5 years. Many of these people knew at the outset that finance wasn’t for them, but still decided to pursue investment banking in order to get better exit opportunities down the road.


Investment Banking Career Paths

If you’re trying to decide about whether the grind of investment banking or private equity is worth it for you, a good place to start might be to ask yourself the following questions.



Step 1: Think about how much you genuinely like finance


What do you do with your non-career energy?


The most enlightening thing to think about what you focus on outside of your career. A key insight for me is that my peers who are excelling in finance devote lots of their energy to finance in their free time.


During university, some people continued to immerse themselves in finance even after recruiting was over or when the grades didn't matter. The most passionate finance people were looking at stocks in high school and were watching CNBC at breakfast.


It’s relatively easy to have a surface level interest in finance, but the people that really succeed in finance are those who are true students of the craft. Think about what a large common denominator of people are drawn to finance memes or the cultish jokes from r/wallstreetbets or r/cryptocurrency. It’s extremely easy to like the idea of finance or the more gambling-oriented euphoria that comes with investing. But then think about how many people are truly willing to do the diligence and self-study to learn about the underlying mechanics of corporate finance. Consider how r/wallstreetbets is over ~60x bigger than r/securityanalysis, which is probably the largest serious subreddit for finance.


Security Analysis Reddit Stats July 2021

Some questions that might help you understand your true interest in finance:

  • Do you listen to investing or finance podcasts?

  • Do you read finance textbooks or finance primers for leisure?

  • What kind of electives did you take in university?

  • When did you first become interested in finance?

  • How actively do you manage your personal account?

  • Are you constantly looking for new or novel investing opportunities?


How excited do you get when you talk about finance?


It is extremely obvious who likes finance and who is a Pretender when you’re at a group dinner or party. If you’re having dinner with true blooded hedge fund or private equity people, they will invariably talk about their favorite businesses, stocks, or investment opportunities after maybe five minutes of pleasantries. They’ll begin frothing at the mouth as they gush over the free cash flow profile of a company while the Pretenders will awkwardly look at each other.


So, when you talk about finance and your career, what aspects do you talk about? If you talk about the investing, the businesses, the deal making, the nuances of industry, then you might really like finance!


If you talk more about bonuses, the gossip of people moving around, and which private equity firms empirically have the best business school placement, then you might just be a Pretender.



Step 2: Think about how much energy you are willing to put into your career


Which long-term goals are most interesting to you?


This is much more philosophical in nature, but it can be instructive to think about what kind of career and life you want.


Almost everyone can devote the first few years of their working lives to investment banking, but sharp trade-offs start to appear in your late 20’s. Do you want to have a family around society’s median age to do so (27 to 31 for women)? Do you want to do long-term travel before you have kids?


Finance is a pretty grindy job through your 20’s, which will likely force you to sacrifice some other lifestyle options. Many careers in finance have a culture of weekend work, which may make it harder for you to go on trips or travel internationally. The demands of the job are often so high that you can’t overcome it with pure intelligence. Lots of people are smart or cunning enough to waltz into investment banking, but very few people are competent enough to excel at a tough buyside role without trying.


On the other hand, the potential salary in finance starts to multiply in your late 20’s, so if you leave finance too early, then you’re depriving yourself of key wealth generating opportunities (e.g., carry or co-invest). If your goal is to earn lots of money, then it generally makes sense to keep working hard in finance.


  • Do you have any extremely ambitious wealth goals? E.g., being a hundred millionaire or owning a sports team?

  • Do you want to own multiple properties?

  • Do you want to earn enough so you can self-fund a startup or other ventures?

  • Do you want to retire relatively early?

  • Do you want to get married and have children?

  • Do you want to be able to do long-term travel trips?


US Income Brackets per Statista


If you earn more than $150k, which is what virtually everyone in a corporate finance role like investment banking or private equity earns, you will be in the top 20% of U.S. earners. If you have a specific wealth goal, staying in finance might be the easiest way to achieve that outcome. If you want to retire extremely early, your best chance might be to grind it out in finance until your early 30’s and then quit.



Step 3: Network and reach out to people until you find mentors with the same values as you


You should recognize that if you go into finance, virtually every career choice and situation that you could face has been mulled upon. You aren’t the first person to hate investment banking after a few weeks. You aren’t the first person to switch to a hedge fund and wonder if you’d be happier in venture capital. All of these outcomes have happened and it becomes your job to find people who have been in those situations.


Harvard psychologist Dan Gilbert, who is a renowned author on the topic of happiness, suggests that we need to find people who resemble us in order to make the best life decisions.


“… one way to make predictions about our own emotional futures is to find someone who is having the experience we are contemplating and ask them how they feel. Instead of remembering our past experience in order to simulate our future experience, perhaps we should simply ask other people to introspect on their inner states. Perhaps we should give up on remembering and imagining entirely and use other people as surrogates for our future selves.” (Daniel Gilbert in Stumbling on Happiness)


To me, this is why networking is so important, particularly with people who are 5-10 years older than you. You want to find people who were in similar career forks as you that also have a similar life perspective to you. It generally helps if they’re much older so they’re more detached from the career question at hand.


In my opinion, people who are your age or only a few years older likely won’t have the maturity or honesty to transparently give you an assessment of their career choices. If you happen to be in a similar social circle, they will still likely be steeped in cognitive dissonance and give you a biased or unhelpful answer.


Similarly, your goal should be to talk to 1-2 new people per week until you’re relatively confident that you’ve found someone with your ideal career path. You should try to find someone who has a similar outlook on life and that has financial and family goals that make sense to you.


Note that if you want to do something very radical (like start your own small business, go to medical school, or pursue art), you’ll likely have to search much harder in order to find the right mentor. I had to search very long until I met people who helped sort out my career choices.


Conclusion


As much as I disliked aspects of my work in finance, I would still do investment banking and private equity if I had to. I learned that I was not passionate about finance, but I think the immediate career benefits are still large enough that it is worth doing for many people. It gave me the opportunity to go to business school, exit to tech, and save enough money to pursue my own interests.


It still took a tremendous amount of work and I devoted much of my life in university to breaking into finance, but collectively it looks like it was a worthwhile decision.