I think this ignores the fact that, in many cases, these are actually pretty enjoyable places to work.
Talented software engineers like working on difficult problems, and the reason why these companies pay so much is that they have very difficult problems that need to be solved, ones that they believe cannot be solved by a typical “average excellent” software engineer that might get hired at a FAANG.
Couple that with the fact that all the peers tend to be top-notch, hardware budgets are plentiful, and that typical weekly workloads are 55 hours or less, and it’s not a bad life. And if you decide you would rather do something more fulfilling, you can “follow your passion” in your 30s with a sizeable nest egg and much less worry about how much money you need to make.
My kid applied to only 1 job as a 2022 college graduate, a DE Shaw research lab position. She did not get it, but she told me the starting salary range which was from 112-168K. I did not believe her that anyone would pay that much for a Chemistry degree until I looked DE Shaw up.
Thanks for the information.
I think computational biology is DE Shaw’s personal passion project for the past many years, and this is outside of finance.
Best of luck to your daughter in finding what she wants.
Grad school was always her goal (1st year Biochemistry/ Molecular Biophysics grad student), but DE Shaw was the only job that was tempting enough to go into the work force. I think the job she applied to was in a Computational Biology lab.
The firms are sometimes/often competing with academia which pays a 40k PhD stipend. And they need to make the offer lucrative enough that some kids just find it intriguing. At Princeton they still manage to not get the top 7-8 kids in a math undergrad who go do a PhD, even with 600k offers.
Incidentally some of these kids are net negative NPV for a couple of years after hiring. And they know zero finance going in. They just know how to spell the word.
There is so much truth to this statement. And while being an academic is important and noble work, I just hope they have looked at just how difficult it is for even highly talented PhDs to get a tenure track position at a respected state flagship, much less the elite colleges they are graduating from.
With my kids, I provided the cautionary tale of an MIT student who was very active here on CC about 10 years ago. She then got a PhD from Harvard in 2013, and since then has been bouncing around between multiple adjunct lecturer and post doc positions since then. And this is despite publications in journals like Science and Cell. The academic winnowing process is brutal.
But I think it’s an interesting question whether these kids would have a better chance of getting hired by the quant funds with or without a PhD. In the UK a PhD adds a lot of capabilities (particularly writing and presenting skills) that you get zero exposure to in a math or physics undergrad course. It’s also a relatively quick process (3-4 years after a 3 year undergrad degree). But maybe the cost/benefit analysis is a bit different in the US, where you have a broader undergrad degree course and a much longer PhD duration.
There is a unique value being missed in hiring straight out of undergrad. My husband is a CFO in the entertainment industry and he prefers hiring brand new accountants and financial analysts because he can mold them to do things his way, as opposed to hiring someone with years of experience.
Just to be clear, when RSUs vest, they typically vest in shares of the underlying stock and the fmv of those shares of actual stock on the date of vesting is how you’re taxed. That amount of tax is your basis if you sell the shares later. If you sell them right away (not always an option for many of us due to insider trading policies and MNPI), then there shouldn’t be much of a difference.
Typically for publicly traded companies, the taxes are paid to the IRS by the issuer and that number of shares equal in fmv to the cash paid the IRS are withheld by the company, resulting in net shares delivered.
I also don’t think RSUs are called restricted stock units because they are granted in bulk, unless I’m misunderstanding what you wrote. RSUs differ from restricted stock because the latter are covered by a different section of the IRC (property), whereas the former are treated as a contract right until it vests. In both cases you’re not taxed until vesting.
The other big difference is that, unlike restricted stock, which again is real stock when issued (even before vesting), RSUs aren’t actual shares (until vesting) and thus cannot vote and don’t count as shares outstanding.
Edit: in case anyone stops reading here, I should have said that the tax basis in the net shares delivered after tax withholding is the amount you are taxed on, not the tax paid.
I’m sure your point is true in other areas, but the law firm bonuses for clerkships, especially SCOTUS, is more about competing and getting that candidate in the door and less about compensating for the government salary.
Law is still a prestige obsessed profession, and it probably always will be. The paradigm of the learned lawyer and all that crap. And, candidly, when clients with a lot at stake look for legal help, they tend to make assumptions about the reliability of legal advice based on where the advising lawyer went to school. When the board needs the big answer from Legal, they want a GC with a Harvard or Stanford (for example) JD and they want the advice backed by the imprimatur of Cravath. I’m generalizing, of course, but not by much.
So, in this world in which I’ve lived for a long time, SCOTUS clerkships are at least more burnished walnut for the office and, for the litigation practice, very valuable, applicable and practical experience. But nobody is really making up for anything. They just want that person for the reasons I’ve described and are willing to pay for the credential.
At first I thought, “That’s what I wrote,” but I see your point. Correct.
If the fmv of the shares is $36 a share on vesting, then if you sell at $40 later on, your tax basis is $36 per share, or said differently, your gain is $4 per share.
Form 1099 makes this complicated because, in my own experience and that of others (I oversee stock plan admin), the IRS mis-reads it and assumes you should have paid tax on $40 per share. I just went through this with them for the third time in my life. It’s not a big deal to explain it, but it causes them to pause on your return, and we all know what that means.
You are correct from the perspective of the law firms.
From the perspective of a talented young lawyer- knowing what the signing bonus will be (SCOTUS being the top tier, but appellate clerkships also) is what smooths the path towards government service. These are folks with loans to pay back, getting married, having kids… absent the firms “making them whole” you’d be looking at a much more diminished pool (lawyers with rich parents).
A lot of undergrads do some research. My son would have 4 semesters of independent work, including senior thesis. Clearly nowhere near a PhD. But enough to get a flavor. Firms in this space like this a bit because it shows ability to tackle open ended problems where there is no a priori idea on whether there is a solution.
We are all good.