<p>What makes a large chunk of top engineers take up jobs on Wall Street (sales and trading, quant, etc) rather than at start ups or companies like Google, Microsoft, etc?</p>
<p>The ability to have a ridiculous income.</p>
<p>I can understand the lure of riches but why take the engineering route to get there?</p>
<p>Money’s probably only a part of it. Such jobs may offer (or seem to offer, in the collective consciousness) more independence, responsibility, independence, or autonomy… more excitement, more room for the best to excel. Engineering’s not for everybody… Not even all incredibly smart and talented people who might mistakenly start out in and finish an engineering degree. That’s OK.</p>
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<p>Two reasons: (1) I doubt any of those folks went into engineering originally dreaming of finance. They likely made that decision later after hearing of the ludicrous salaries. (2) The quantitative skills of engineers are sought after by finance companies.</p>
<p>I think you are probably right on point 1. But engineers aren’t the only profession requiring quantitative skills and IB takes a lot of people with little or no quantitative background. Yet I still see some on these boards saying go to xxx engineering school because IBs recruit there and not at some other engineering school.</p>
<p>You have to remember that there are a wide variety of roles within an investment bank.
The jobs that engineers by and large go into are not the same positions as the positions that history majors take.
Both a history major a chemical engineer may be recruitied into sales and trading, but the history major will probably end up in something like equity sales, whereas the engineer is more likely to end up trading on a cva or rates desk. </p>
<p>Also, engineering is generally seen as a safe major. The jobs are less competitive and will give you back up options if you don’t make the cut for finance. Econ probably won’t</p>
<p>Reason number one is mentioned already.
The back office work of Finance requires highly quantitative skills.
Engineers and mathematicians are the best guys in it.</p>
<p>Reason number two is that engineers know their own fields well.
Say I’m an employer and I want to invest in biotechnology.
Who should I employ? Definitely experts from biomedical field!</p>
<p>If you’re a chemical engineer,
you have your quant skills, thats one.
Two, you know a lot about chemicals,
including fibers, nanatech, waste management, etc.</p>
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<p>Clearly the most natural end-goal for such an engineering student would be a career in venture capital. A background in both technology and in financial deal-making & negotiation (hence, working in investment banking preferably over S&T) would complement each other. Indeed, majoring in engineering followed by experience as an investment banker is arguably the optimal strategy to qualify for VC. The reverse strategy - to major in finance and then work as an engineer - is far more difficult as few finance students are qualified to work as engineers. </p>
<p>But more commonly, many people probably obtain an engineering degree for a backup career in case they are unable to obtain a finance position. </p>
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<p>Debt obligations are probably the most important reason why more engineers do not join startups. Most startups pay poorly if they even pay anything at all during their initial phase, but rather ‘pay’ people in the form of equity. Even most startups that do pay respectably may die shortly anyway. That sort of financial instability is not exactly amenable to the typical newly minted engineering graduate with thousands of dollars of student loans to pay off. Once you graduate, student loans immediately start coming due. If you join a promising startup that doesn’t (yet) pay enough to meet your loan payments, your creditors won’t care why. All they’ll care about is that you’re not making your payments. In contrast, barring a 2008-style catastrophe, a finance job assures you of being paid both highly and, more importantly, steadily. You’ll be able to shoulder whatever payback schedule your loans obligate you to meet.</p>
<p>{Note, it is precisely for this reason that we should devise a debt deferral system for new college graduates who join or launch startups. Just consider how much potential innovation we waste because talented engineering graduates are deterred from pursuing promising startup ideas just because they need to pay back their loans. Imagine if they could defer those payments until either the startup dies - whereupon the engineers will then have to take regular jobs - or has secured enough funding to pay regular salaries. For those who are concerned about how the government could fund such a deferral system in this age of constrained resources, imagine having redirected just a small percentage of the 2008 financial bailout to capitalize such a startup debt deferral student loan ‘bank’.} </p>
<p>As far as why more engineers don’t choose to work for established tech firms such as Google or Microsoft, well, speaking about the latter, most of the projects do not seem particularly thrilling. At least not to me, and I suspect not to plenty of others here. I don’t know about you, but I’m not exactly champing at the bit to build the next security update for Microsoft Windows/Office. Granted, Microsoft does have some intriguing projects such as Xbox, Windows Phone, and arguably even the Metro interface of Windows 8. But most Microsoft employees will not be assigned to those projects. Rather, they’ll be assigned to the older software projects.</p>
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<p>Actually, I believe you’re not using the term ‘back-office’ correctly. At least, not the way that financial services ‘back-office’ is usually defined, being the legal/regulatory compliance, operations, and information technology departments. Yet not only are these departments not particularly high paying, and hence couldn’t really be said to be preferentially ‘attracting’ engineering students away from engineering, they’re generally not highly quantitative either. The lone exception might be the information technology departments that support the trading algorithms for high-frequency trading firms, but you would not be working on them as a new college graduate. </p>
<p>S&T and corporate finance - the two departments that do tend to attract many new college graduates - are front office positions. Even risk management, treasury, and financial control are considered to be middle-office positions. </p>
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<p>While there is some truth to this, the difference is marginal. The fact is, for the overwhelming majority of finance jobs that new college graduates will compete for, you need to know very little math beyond basic arithmetic. </p>
<p>I think the guys at M&I said it best:</p>
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<p>[Investment</a> Banking Math: It’s Not Rocket Science | Mergers & Inquisitions](<a href=“http://www.mergersandinquisitions.com/investment-banking-math/]Investment”>Investment Banking Math: It's Not Rocket Science)</p>
<p>The vast majority of engineers I see entering finance work Technology in the technology division at banks or prop trading firms. Sakky calls this IT, but I think that most people in Technology are actually software engineers. They are well compensated (usually start at 100k is what I’ve heard) but paid much less than front office employees in the long run. The Technology divisions at banks are full of CS grads from MIT/CMU/etc. </p>
<p>Engineers can also become quants or traders, but these positions are hard to get without some interest in trading and financial markets, which most engineers do not have. I think that economics and math with some computer science is the best preparation for a career in trading.</p>
<p>al6200 writes “I think that economics and math with some computer science is the best preparation for a career in trading.”</p>
<p>Hmmm. I’ve been out of the loop from my IB contacts for a long time but as I recall the best traders didn’t need any of those skills. Traders were a specialized breed, or subset, of the sales crowd. If you are talking about creating algorithms for automatic trading then that would be a different story.</p>
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<p>It depends entirely on the product and the bank. Market making equities isn’t even remotely similar to trading on a fixed income exotics desk.</p>
<p>@sakky, the quote you posted is purely in relation to ibd. It does not apply to S&T.
Hence the inclusion of this in the same article.
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<p>Meaning finanical simulation, rish analysis, etc
those tasks that need both math and computer are middle office work
not back office work?
Are they well-paid compared to engineering work?</p>
<p>Well, some engineers can make money just as good. You just have to be in the right place at the right time.</p>
<p>And don’t forget that quant jobs are sometimes unstable or hard to come by. Just look for quant jobs at the same time you look for engineering jobs.</p>
<p>My college roommate (30 years ago) was a Chemical Engineer, and after six months working in a telecom position which he hated, moved into a major Wall Street firm as an institutional trader (trading something fairly simple, but what they do is never truly simple, even if it’s trading blue chip bonds). He eventually became a partner and retired at 39. His brother, a basic engineer (Engineering/Economics combo) also became a Managing Director with a Wall Street firm, working on the mergers and acquisitions side. He also retired at 39, and came out of retirement after a firm lost someone when the Twin Towers fell and begged him to replace him.</p>
<p>They said that Wall Street likes engineers because they can solve problems. They’re also good at math, and that understanding is crucial in any Wall Street position. They also tell me that what they do there can’t be learned anywhere but on the Street.</p>
<p>Wall Street also looks for a high level of aggessiveness; they often hire Ivy League athletes, regardless of major. I see no end of different majors winding up on Wall Street (I went to Princeton), but the common thread tends to be smarts and aggressiveness/competitiveness. both of the guys I mentioned above were athletes, as were two other of my roommates who wound up in jobs like these.</p>
<p>Some companies are even reluctant to hire Ivy League engineers because they fear that they won’t remain as engineers. They either want to move quickly into management, or wander over to Wall Street. Or that is what many industrial companies fear.</p>
<p>By the way, Wall Street is ruled by the instituional traders and sales reps on the equities/bonds side (retail is low-end, and someone who wants to invest a paltry $10-million in a single trade is low-end), and by the dealmakers on the investment banking side. People doing quants and finance and analysis – anything in the backroom – may be well-paid or very well-paid compared to anyone in the rest of the world and compared to most engineering jobs, but they are sneared at by the traders/sales reps/dealmakers, who really run the show. </p>
<p>If you want to get into some type of quant position, you may not find it rewarding for the long haul. Pay is good, but hours are brutal, and many of them strive to move into trader/sales/dealmaker positions. Those are the higher paying (sometimes 7-figure at age 28) and higher status positions.</p>
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<p>I never disagreed that an engineering background might prove to be useful in certain finance positions. </p>
<p>But those positions tend to be rare, particularly when talking about those with only bachelor’s degrees. The vast majority of Wall Street analyst positions will be either in IBD, or S&T of relatively basic products. And, as boondocks alluded to, those tend to be the highest paying positions on Wall Street.</p>
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<p>I agree. But in response to that, I have always wondered: why won’t those industrial companies then simply pay their engineers better and/or offer them more opportunities to move to management? If they did so, then they wouldn’t have to fear that those Ivy League engineers might leave.</p>
<p>As much as it pains me to say, perhaps it is Wall Street rather than regular industrial firms that has it right, by offering excellent pay and lightning-fast advancement to its most aggressive and savvy young employees. Like Boondocks said, a career in finance offers you the chance to retire before the age of 40. With the important exception of the startup world, you can’t really do that in most industrial/tech careers, regardless of your level of talent and how hard you work. You’re going to be hobbled to advance largely in lockstep with the rest of your officemates. You can be the greatest chemical engineer that Dow Chemical ever hired, and you’re still not going to make what even a Wall Street associate with only a few years of experience makes, let alone what a managing director or partner makes. </p>
<p>And that’s why, to answer the OP’s question, why many engineering students, particularly at the top schools, would rather go into finance.</p>