MBA - Money? Odds against IB, and Others

Graduate School Business School - MBA
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<p>If you are talking sheer cash, I did a bit of research. And the nature of this work can be more rewarding than IBD, and others.</p>

<p>Anesthesiologists make a whopping starting salary of around 300k a year, and that definitely trumps Private Equity or Venture Capitalist incomes (usually 150-170k; and that's after experience). Is there proof on the contrary that the latter jobs can top this salary? Surely Hedge funds and PE can have the capacity to make one million but this is in extreme cases, and unbelievable luck. Is this generally true?</p>

<p>Of course, "money" should be the least of concerns when entering medicine, and it takes a huge amount of commitment and dedication and sincerity to work this job, but if you also want to discuss money, well I thought we can bring it up.</p>

<p>Sorry if I'm mistaken, but realistically, and generally, Anesthesiologists usually have the edge over these industries when we are discussing "income," no?</p>

<p>Am I mistaken and does PE, IBD or HF make even more, though under extreme circumstances, ergo not a typical salary?</p>

<p>Here's the link claiming so, and dang, they made it to #1! Well no wonder they are the top job in America, they are monitoring lives. They even surpassed Physicians it said!</p>

<p><a href="http://money.cnn.com/galleries/2009/moneymag/0910/gallery.bestjobs_highestpaid.moneymag/%5B/url%5D"&gt;http://money.cnn.com/galleries/2009/moneymag/0910/gallery.bestjobs_highestpaid.moneymag/&lt;/a&gt;&lt;/p>

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<p>Please consider, though, the significant number of years of education and residency that it takes to become an anesthesiologist. I would guess that someone going into private equity straight out of college, taking two years to get an MBA, and then going back into private equity would often make more money all in than an anesthesiologist after a similar number of years out of college. Don’t forget, too, that an anesthesiologist may have a significant amount of student loan debt from 4 years of medical school that he or she likely did not pay off while making very little money as a resident.</p>

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<p>True, but function-wise, as far as I know, they don’t even perform surgeries, and have to be very skilled and sincere in providing anesthesia. I wanted to know though if VC or PE can top their salaries, and if so, if it is only in rare circumstances and big luck.</p>

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<p>Don’t forget that the path to being an anesthesiologist is extremely competitive and selective. In addition, there is some luck involved, whether one gets matched to a residency or not. Not all medical students who wants to be anesthesiologists gets to be one.</p>

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<p>Probably not in salary, but that’s the wrong comparison to make, for all finance jobs, as most of the compensation in VC/PE is made from the bonuses, and especially, off the equity itself. What you therefore need to be looking at is total compensation. </p>

<p>Consider the following quote from Businessweek regarding private equity compensation packages circa early 2007:</p>

<p>As always, MBAs chase the money. And nowhere are the pay packages more regal than in the land of private equity. First-year compensation of $300,000 for top-tier talent at a Wall Street investment bank doesn’t seem too shabby–until you consider that thoroughbred MBAs joining the largest private equity shops command base salaries and bonuses as high as $450,000. Add to that, of course, the real payoff: the equity. “More equity is flowing downtream to these new hires,” says Brian Korb, a partner at New York executive search firm Glocap Search, co-publisher of the 2007 Private Equity Compensation Report. “Especially for the all-stars. It’s just like in sports.”</p>

<p>[What</a> B-Schoolers Lust For Now](<a href=“http://www.businessweek.com/magazine/content/07_04/b4018058.htm]What”>http://www.businessweek.com/magazine/content/07_04/b4018058.htm)</p>

<p>Furthermore, keep in mind that that’s just starting compensation. Finance industry compensation is well-established to grow quickly with experience and with high potential ceilings. As a case in point, in 2009, Goldman Sachs was on track to pay over $700k in total compensation per employee, including secretaries, IT staff, and workers in the mail room. Now, obviously that doesn’t mean that each secretary at Goldman Sachs made $700k; they surely made far less. But that means that the investment bankers, especially the most experienced ones, made far more. Private equity generally pays even higher than investment banking does, so you can imagine what the principals of Goldman Sachs Private Equity were paid. </p>

<p>Now, to be fair, equity & bonuses are stochastic, depending not just on your individual talent but also on the state of the economy. You might receive zero bonus, and indeed, I suspect that many VC/PE employees did receive near-zero bonuses in 2008 and the equity proved worthless. Yet, as reported in the recent news, the finance industry has reverted to paying record bonuses.</p>

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<p>I thought only HF managers make that much, but so do GS employees? That’s a huge stretch, workers in the mail room? And virtually no work involved? But this is a relatively rare instance, and not frequent I assume with typical PE or IBD positions, right?</p>

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<p>Guys, lottery winners are by far the highest earning career paths. Don’t you know?</p>

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<p>Uh, did you read the rest of the paragraph? </p>

<p>Allow me to reprint it:</p>

<p>*Now, obviously that doesn’t mean that each secretary at Goldman Sachs made $700k; they surely made far less. But that means that the investment bankers, especially the most experienced ones, made far more. Private equity generally pays even higher than investment banking does, so you can imagine what the principals of Goldman Sachs Private Equity were paid. *</p>

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<p>^Thanks for that, missed a few parts, yes. Regarding PE, is it true that they typically don’t recruit at top MBA schools? Do PE firms favor students from non-MBA programs? I’m not sure what their desires are, as some say they do recruit MBAs, others say they couldn’t care less. So what’s the rule of thumb to get in (or begin to get in) to PE?</p>

<p>I did an essay once for Barbarians At The Gate in my Alternative Dispute Resolution class, and enjoyed the idea of the whole LBO (Levereaged Buy-Out). PE seems interesting in this regard which is why I was wondering what their prerequisites are before even entering a certain firm, vis-a-vis IBd where they just hire MBAs at top tiers immediately.</p>

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<p>That all depends on what you mean by ‘recruit’. If you mean ‘recruit’ in the sense that PE firms will actively seek new employees through standardized hiring channels such as on-campus interviews, then it is true that PE firms don’t actively recruit MBA’s or anybody else for that matter. Most of the hiring is done through networking - if you can’t garner an introduction brokered by the right people, then you won’t be able to broach a meeting. </p>

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<p>There may be some truth to the notion that PE firms don’t really care about what specific degree you have as long as you were able to successfully leverage your network to instigate a meeting and if you have the desired knowledge and experience (as explained below). </p>

<p>However, I suspect that it is rather unlikely that you would be able to have such a network without an MBA. Access to a strong network and commensurate practice with socializing and networking is, after all, arguably the most important feature that an MBA degree provides. I suspect that that’s a key reason why PE firms seem to be so abundantly staffed with MBA’s as opposed to other degrees. </p>

<p>In other words, if you can build a network with extensive reach into the PE community without an MBA, then maybe you can dispense with the MBA. But I wouldn’t hold my breath, for most people can’t do that. </p>

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<p>Most PE hires have former IB or MC experience. It’s quite rare for a PE firm to hire undergrads directly out of school (as opposed to undergrads who first work in IB or MC and then jump to PE), and rare even to hire MBA’s without such prior experience. </p>

<p>But there are some who don’t care, and perhaps you can network your way towards finding them. I would simply say that the odds are low.</p>

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<p>The average Vice-President at Goldman Sachs or Morgan Stanley makes more than $300,000 per year. If you enter one of these firms as an analyst after college and decide that you wish to make Investment Banking your lifelong profession, then you can become a VP in 6-7 years (roughly 28 years old). This is a tough path, but it is by no means impossible. In fact, so many people WANT to leave banking after just a few years (due to the insane amount of hours as well as the availability of more lucrative exit opportunities), that the competition for promotions isn’t even as bad as most people would imagine.</p>

<p>VPs at most other Bulge Bracket banks (BAML, JPM, CS, UBS) make a comparable amount, and there certainly is no shortage of VPs or individuals of even higher rank at these banks (Executive Directors, Managing Directors, etc.), who, as a function of said rank, make even (much) more.</p>

<p>If you are a Pre-MBA Associate at a large Private Equity fund such as TPG, KKR, or Blackstone, you can make more than $300,000 in your 3rd and 4th year out of college. This is less common, but by no means rare. More importantly, individuals who work in these places are hardly there purely due to luck. The selectivity criteria is quite stringent. You generally have to have attended Harvard, Princeton, Stanford, Wharton, MIT, etc., as an undergraduate, worked at either GS / MS in one of their top groups for 2 years, and been one of the top analysts in your group. </p>

<p>There is FAR more money to be made in Finance, and at a far earlier age. Most individuals who go the traditional HYPS > GS / MS > TPG / KKR / Carlyle > HBS / Stanford / Wharton track can finance their own business school education without taking out loans (if they were prudent with the money they earned in those 4 years out of college), whereas for some doctors, it could take 5-10 years to break even on their Medical School debt. </p>

<p>The only situation in which I believe Medicine could be preferable to Finance if considered purely from a FINANCIAL point of view, is if you are a student at a school below Top 20 (this is a bit arbitrary I know, but bear with me). If you attend such a school, it might be quite difficult to break into finance, especially at the top firms. Consequently, it will be difficult later on to break into a top business school. If you find yourself in such a situation, Medicine will probably offer the potential for greater financial success.</p>

<p>One of the main differences between Finance and Medicine is that Finance is OBSESSED with prestige whereas Medicine is less so. An MBA from Harvard means infinitely more than an MBA from University of Phoenix when it comes to how much employers are willing to pay you. On the other hand, you can go to some unknown medical school, completely demolish your board exams and place into a very desirable and lucrative medical specialization despite your less than pedigreed background. Thus, you’d be making a pretty decent income despite not having attended Harvard College or UCSF Medical School. However, getting an MBA from an unknown school, or working in Finance for some unknown firm, generally will be MUCH LESS financially rewarding than working for the very top firms or graduating from the very top schools. It will most likely also be less financially rewarding than working as a Medical Doctor.</p>

<p>That being said, though Finance is a much more lucrative route (granted that you are on a particular track with a strong blue-chip background) than medicine, I would still argue that Medicine is a much more noble profession. Consequently (as I step on my soapbox) anyone who pursues it should be fueled by a passion for helping others rather than a mere desire for personal wealth. Ask yourself if that’s why you want to be a doctor. If you are not passionate about helping people / saving lives, etc., and simply want to be a doctor for the money, at least don’t try lie to yourself by imagining you’ll make more money than the Finance guys at top firms. Because you won’t.</p>

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<p>Actually, I suspect the (total) compensation is significantly higher than that. A first-year (post-MBA) associate makes more than $200k, including bonus.</p>