Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

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AndroAsc
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Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by AndroAsc »

Some kind soul did a 5-way analysis for financially optimal career path for high W-2 income jobs. This assumes top-tier (so >80th percentile).

https://docs.google.com/spreadsheets/d/ ... edit#gid=0

I found it very insightful, and wished I had this information when I was younger. Will be useful to younger members and those with kids for planning purposes.

Methodology and references are also in the other tabs.

Please DO NOT post your comments on subjective issues like "money is not everything". Keep discussion to factual numbers.
deanmoriarty
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by deanmoriarty »

The numbers for software engineers are somewhat accurate, considering you are talking about the top percentiles (I am in the field, working as a senior software engineer with those compensations).

However, in order to get those numbers you are “forced” to live in the Bay Area basically (where run-down houses are 2M+), or maybe Seattle, so that’s another point to consider, whereas a doctor is getting paid that much even in a LCOL (source: I currently live in the Bay Area).

Also, while I am enjoying milking those compensations right now, I am living very frugally and saving as much as I can because I am not at all convinced engineers will keep being paid that much in the next decade. The barrier of entry is so low and at some point the market will get saturated, there is no BAR exam or AMA association to keep the supply artificially low, and it’s just not that difficult to become a proficient programmer. An interesting article on the subject published just yesterday: https://www.jefftk.com/p/programmers-sh ... -lower-pay

I hope I will have achieved financial independence by the time it hits me, but if I had the opportunity to rewind my life or give an honest advice to a high school kid, I would seriously consider or recommend med school, it’s a much more bullet-proof way to insure a high income for many years. Tech is just too unpredictable, before 2010 nobody was consistently making those salaries.
Last edited by deanmoriarty on Mon Dec 30, 2019 12:12 am, edited 3 times in total.
ArtsWorker
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by ArtsWorker »

If the rate of alcohol abuse among lawyers is twice the national average, does this spreadsheet account for disability-adjusted life years?

https://www.alcohol.org/professions/#pr ... ohol-abuse
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AndroAsc
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by AndroAsc »

deanmoriarty wrote: Mon Dec 30, 2019 12:04 am The numbers for software engineers are somewhat accurate, considering you are talking about the top percentiles (I am in the field).

However, in order to get those numbers you are “forced” to live in the Bay Area basically (where run-down houses are 2M+), or maybe Seattle, so that’s another point to consider, whereas a doctor is getting paid that much even in a LCOL (source: I currently live in the Bay Area).

Also, while I am enjoying milking those compensations right now, I am living very frugally and saving as much as I can because I am not at all convinced engineers will keep being paid that much in the next decade, the barrier of entry is so low and at some point the market will get saturated, there is no BAR exam or AMA association to keep the supply artificially low. An interesting article on the subject published just yesterday: https://www.jefftk.com/p/programmers-sh ... -lower-pay

I hope I will have achieved financial independence by the time it hits me, but if I had the opportunity to rewind my life or give an honest advice to a high school kid, I would seriously consider or recommend med school, it’s a much more bullet-proof way to insure a high income for many years. Tech is just too unpredictable, before 2010 nobody was consistently making those salaries.
You're right about tech needing to live in HCOL area. I would say Investment Banking and Law Firms too, since the top firms are in HCOL areas. LCOL arbitrage is only possible with the doctor path and Management Consultants (since they pay the same regardless of location).
Sourc3
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Sourc3 »

deanmoriarty wrote: Mon Dec 30, 2019 12:04 am The numbers for software engineers are somewhat accurate, considering you are talking about the top percentiles (I am in the field, working as a senior software engineer with those compensations).

However, in order to get those numbers you are “forced” to live in the Bay Area basically (where run-down houses are 2M+), or maybe Seattle, so that’s another point to consider, whereas a doctor is getting paid that much even in a LCOL (source: I currently live in the Bay Area).

Also, while I am enjoying milking those compensations right now, I am living very frugally and saving as much as I can because I am not at all convinced engineers will keep being paid that much in the next decade. The barrier of entry is so low and at some point the market will get saturated, there is no BAR exam or AMA association to keep the supply artificially low, and it’s just not that difficult to become a proficient programmer. An interesting article on the subject published just yesterday: https://www.jefftk.com/p/programmers-sh ... -lower-pay

I hope I will have achieved financial independence by the time it hits me, but if I had the opportunity to rewind my life or give an honest advice to a high school kid, I would seriously consider or recommend med school, it’s a much more bullet-proof way to insure a high income for many years. Tech is just too unpredictable, before 2010 nobody was consistently making those salaries.
I have been working for FAANG for the past few years and I disagree that we will not be paid as well in the next decade. Yes, we need to keep updating our skills to stay relevant but as long as we do that, there will be plenty of opportunities.

Although there are droves of new grads every year, the software we write is also getting more and more complex and specialized. Similarly to medicine (where specialists make a lot more money) you’ll need to be specialized in one area or another to stay valuable. Experienced specialists are very hard to find.

I guess I’m a lot more optimistic than you are 😀
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by IthacaisGorges »

I have worked in 2 of these fields (software and consulting) and have friends in the others. The salary figures seem about right for the firm's noted. The real wildcards are probability and value of equity compensation. (Plus there are some very generous assumptions here and there - MBA optional in banking for instance).

The advancement and retention probability year to year in consulting and banking is far less than 100%. My experience in consulting indicated that a material number (25%+) were out after 3 years for various reasons. Many more left after another few years, I would guess only 10% stayed 10 years.

On the equity compensation side for software, just as the past decade has skewed expectations for portfolio returns so it has inflated estimates of option values.

But again, these numbers seem fair overall.

Only other obvious note is how hard a road some of these are. When I was hiring in consulting I think we interviewed maybe 1 in 8 applicants at the Ivy MBA program where I was on point. Of those, maybe 1 in 5 got an offer....
finite_difference
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by finite_difference »

Does the analysis take into account the actual hourly pay rate, and the potential negative impacts of having a stressful occupation and/or working long hours?

Because many lawyers and doctors and tech professionals need to work (very) long hours.

Whereas some jobs are closer to 40-hours per week, and may also have much less stress.

If you earn 4x as much as someone else but work 2x the hours, then you’re really only earning twice as much on an hourly basis. And if on top of that you’re twice as stressed out, then is that really worth it, taking into account your health, family, and friends? What’s the benefit to having a lot of money if you have no time to spend it?

I think the optimal career path is the one you as an individual enjoy the most and that doesn’t cause you to be overburdened with stress.
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Watty
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Watty »

AndroAsc wrote: Sun Dec 29, 2019 11:56 pm This assumes top-tier (so >80th percentile).
I am a retired software developer.

Over the years I saw way too many people get into computers just because someone told them that it was a good field to be in.

Some of them could become somewhat competent, more were mediocre, few were top performers. Unless they the had some natural ability and the right personality for computers they rarely thrived and they often hated their jobs. Many of them quickly moved on to other fields either voluntarily or involuntarily.

Avoiding low paying career paths might make sense but picking out a field just because the the pay might be high is unlikely to work out well.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by 123 »

The "sources" tab on the worksheet indicates disparate sources for each occupation group. We don't know the "n" (number) of individuals evaluated in each category. I would put more faith in a more standardized study. The study lacks an indication of parental education/income/occupation which may be a better predictor of career success since it can greatly influence what educational institutions a child may attend and the career paths followed.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by HEDGEFUNDIE »

Software salaries are tilted toward RSUs, so it’s hard to put much stock (heh, get it?) in the seemingly natural progression of comp seen in the spreadsheet.

Same with investment banking. Annual bonuses are wildly variable by year.
Last edited by HEDGEFUNDIE on Mon Dec 30, 2019 12:49 am, edited 3 times in total.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by DameTime »

Dermatologists go through 4 years of post graduate training, so the numbers for the sake of comparison are even worse. The salary floor for physicians is quite good, however the hours and delayed start make for a substantial amount of catch up. Would be interesting to see years 10-20.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by anon_investor »

finite_difference wrote: Mon Dec 30, 2019 12:31 am Does the analysis take into account the actual hourly pay rate, and the potential negative impacts of having a stressful occupation and/or working long hours?

Because many lawyers and doctors and tech professionals need to work (very) long hours.

Whereas some jobs are closer to 40-hours per week, and may also have much less stress.

If you earn 4x as much as someone else but work 2x the hours, then you’re really only earning twice as much on an hourly basis. And if on top of that you’re twice as stressed out, then is that really worth it, taking into account your health, family, and friends? What’s the benefit to having a lot of money if you have no time to spend it?

I think the optimal career path is the one you as an individual enjoy the most and that doesn’t cause you to be overburdened with stress.
+1

As a former lawyer at a big law firm, working 80-100 hours a week year round means per hour I likely was paid less then some of the other professions. 0 time for any potential side hustle. But for lawyers at least, there are non-law firm jobs (in-house attorney at a mega corp) that can still pay very well and only require 40 hours a week.

I would say some of those numbers are potentially off for the lawyer portion for the first 3 years, as the elite students will have full scholarships could intern their first and second summers at big law firms making a prorated amount of the current 1st year associate salary ($190,000/yr base). So they will do better than the projected negative numbers. Also, after graduation and before starting as a 1st year associate, most law firms give a generation bar stipend, which further reduces that negative number listed.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by HawkeyePierce »

Law, medicine and (to an extent) management consulting all require graduate education. A software engineer can start making six figures right out of undergrad. That opportunity cost shouldn’t be discounted.

Work life balance is very team-dependent but nothing like law or medicine and few roles require the kind of travel you see at the big consulting firms.

I also dispute the need to live in VHCOL areas. All the big tech companies have large campuses in Colorado. Austin is still a hot market. Atlanta is picking up. Plus, more and more companies are opening up to remote work. I have a number of friends working remotely in software from Montana or Wyoming.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by VaR »

For each of these professions, how much does raw intelligence combined with expertise matter vs softer skills and luck? Or on the other side of that coin, how much do one's shortcomings matter not?

I'd argue that all of these professions have compensation that overlaps enough with each other that the answer to the question of "which is better?" might be "which would you be better at"?

I'd be pretty interested in a more comprehensive study of the distribution of compensation in these areas and also a comparison that touches on a couple of different HCOL and LCOL areas.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by fasteddie911 »

The floor and security of medicine is what makes it attractive. Most med school grads shouldn't have trouble finding a job paying at least $200k in most parts of the country. I'm not sure what it's like for the other fields.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by ClevrChico »

If you want to make a lot of money, solve difficult problems.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Jack FFR1846 »

You can't predict the future.

Perhaps now, software engineers in the valley are cleaning up, but a ton of software tasks have been outsourced to India. Think the 737 MAX and video processors. As corporations continue to look to reduce cost to increase the bottom line, more of these jobs will be outsourced.

Someone with the makeup to be an engineer may have zero ability to be a doctor. And visa versa. A big percentage of wanna be engineers are weeded out in the first engineering class. I'm sure similar things happen in medicine, law and finance.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Dottie57 »

HEDGEFUNDIE wrote: Mon Dec 30, 2019 12:40 am Software salaries are tilted toward RSUs, so it’s hard to put much stock (heh, get it?) in the seemingly natural progression of comp seen in the spreadsheet.

Same with investment banking. Annual bonuses are wildly variable by year.
RSUs are generally seen in tech/software companies. The majority of software jobs are in other types of companies (retail, banking, healthcare etc).
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by JoMoney »

AndroAsc wrote: Sun Dec 29, 2019 11:56 pm ...
Please DO NOT post your comments on subjective issues like "money is not everything". Keep discussion to factual numbers.
That's funny. The data and "facts" are meaningless without context, and the numbers can be 'adjusted' using other factual numbers, or even just aggregating them in a different way to show whatever you want.
This entire thread is full of posts of people adding numbers or reframing it in a different context. There would be no point to a discussion without it.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by sport »

ClevrChico wrote: Mon Dec 30, 2019 8:31 am If you want to make a lot of money, solve difficult problems.
In my career as an engineer, I solved some very difficult problems. Unfortunately, I never made a lot of money.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by J45 »

I guess I share similar opinions like most of you have.

IT is getting saturated. I have several IT Eng. in my family who do different kind of work but some have been having lot of trouble finding jobs. The ones who are ready to hire, pay lower than 6 figures unless you have masters and hold a tool or two under your belt. Seasoned IT professionals have done well as they have been in the field for last 20 years or more, so they dont have any issues. New graduates are finding the market difficult. Also I feel this is a field where a good percentage have to change jobs approx. 5-6 years. It can be of various reasons e.g. Project ended, lay offs, not satisfied etc. This can be stressful but every IT person usually knows this.

Medicine is changing a lot with new robotic surgeries, Nurse Practitioners etc. NPs are entering almost every field. Nothing against NPs but someone with two years of training, now practicing as a physician is a recipe for trouble. Its just the beginning but time will tell where this goes!

Will the hospitals start hiring more NPs because they have half the salary of a physician? Specialties will have more value but Internists and Family Practice docs may be taken over by them unless you improvise (fill your practice with NPs).

I see litigation in the future because you can easily figure out from the list of medications if a patient is being treated by a physician or an NP.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Megamill »

What type(s) of undergrad degree(s) will get a kid onto the investment banking track?
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unclescrooge
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by unclescrooge »

Great analysis of the first 10 years, but it's an incomplete analysis.

The physician's timeline didn't have enough runway. It basically stops just as they are hitting their stride.

Plot this out to another 10 years and you'll see a different picture.

High burn out rate in other industries will mean those cumulative earnings figures stagnate, while the physician's earnings continues upward.

I started my career as a programmer in 1999, just in time for the dotcom bust. Unfortunately my options were underwater when vested and the few companies I worked for after that went nowhere. And then carpel tunnel took it's toll and I decided to pivot into data analytics. Still pays decent, but without the lucrative RSUs. But between 2005 and 2015, I place zero value on these RSUs because of my prior experience.

Hind sight is indeed 2020.
Last edited by unclescrooge on Mon Dec 30, 2019 10:40 am, edited 1 time in total.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by LawProf »

Lawyers can make money anywhere, and I suspect that the very top lawyers have a higher ceiling than anyone else on this list, except maybe investment bankers (I'm talking about King of Torts, own their own airplanes types). And you don't need to be the top of the academic intelligence chain to climb that mountain. There's a saying in the law: "A" students become professors, "B" students become judges, and "C" students become millionaires.

On the other hand, I couldn't imagine working at Cravath (the example given for lawyers) ten years out. That would be misery. And in NYC that $425,000 isn't really going that far for the amount of insane hours necessary to work there.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by ClevrChico »

sport wrote: Mon Dec 30, 2019 9:52 am
ClevrChico wrote: Mon Dec 30, 2019 8:31 am If you want to make a lot of money, solve difficult problems.
In my career as an engineer, I solved some very difficult problems. Unfortunately, I never made a lot of money.
YMMV, but an experienced engineer in my LCOL area makes 2X the typical family income. Most people would consider that very good.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by snailderby »

Just one comment on the numbers for lawyers (since the OP wanted to confine this discussion to the numbers): Those numbers appear to be for associates, not partners. For what that's worth.
Last edited by snailderby on Mon Dec 30, 2019 12:35 pm, edited 3 times in total.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by bgf »

Megamill wrote: Mon Dec 30, 2019 10:09 am What type(s) of undergrad degree(s) will get a kid onto the investment banking track?
at least back when i was in college, 2004-2008, it wasnt so much the degree as the school. the big ibanks only hired from a selection of schools, my undergrad business school being one of them.

might be different now.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by bgf »

snailderby wrote: Mon Dec 30, 2019 10:47 am Just one comment on the numbers for lawyers (since the OP wanted to confine this discussion to the numbers): Those numbers appear to be for associates, not partners. For what that's worth.
correct, scroll all the way to column S, and it maxes at 7th year associate. a partner making less than $500k at Cravath is laughable.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by HawkeyePierce »

J45 wrote: Mon Dec 30, 2019 10:00 am I guess I share similar opinions like most of you have.

IT is getting saturated. I have several IT Eng. in my family who do different kind of work but some have been having lot of trouble finding jobs. The ones who are ready to hire, pay lower than 6 figures unless you have masters and hold a tool or two under your belt. Seasoned IT professionals have done well as they have been in the field for last 20 years or more, so they dont have any issues. New graduates are finding the market difficult. Also I feel this is a field where a good percentage have to change jobs approx. 5-6 years. It can be of various reasons e.g. Project ended, lay offs, not satisfied etc. This can be stressful but every IT person usually knows this.

Medicine is changing a lot with new robotic surgeries, Nurse Practitioners etc. NPs are entering almost every field. Nothing against NPs but someone with two years of training, now practicing as a physician is a recipe for trouble. Its just the beginning but time will tell where this goes!

Will the hospitals start hiring more NPs because they have half the salary of a physician? Specialties will have more value but Internists and Family Practice docs may be taken over by them unless you improvise (fill your practice with NPs).

I see litigation in the future because you can easily figure out from the list of medications if a patient is being treated by a physician or an NP.
IT and software engineering are not the same field.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by coachd50 »

AndroAsc wrote: Sun Dec 29, 2019 11:56 pm
Please DO NOT post your comments on subjective issues like "money is not everything". Keep discussion to factual numbers.
Why? The idea that young people should pursue fields based on possible incomes as opposed to their individual likes, dislikes, skills, and aptitude seems silly.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by HEDGEFUNDIE »

Just wanted to point out that for all of these professions, there is a high-powered track, which takes 5-10 years to build up to.

And then, for those who choose it, there is a "work-life-balance" track to drop down to, which can still pay $200-300k per year in a sustainable job. Doctors can go into private practice and choose their own hours. Consultants and i-bankers can exit into F500 corporate finance / corporate strategy. Big law associates can become in-house counsel. Etc...

Not a bad life, if you can handle not having a life for the first bit.
Last edited by HEDGEFUNDIE on Mon Dec 30, 2019 5:52 pm, edited 3 times in total.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Ollie123 »

This seems very poorly thought-out by the person who put it together, largely for the reasons unclescrooge noted. Its too specific, almost like it was designed to give the answers someone wanted it to give. Why the first 10 years only? I don't know a single physician who went into it expecting to be wealthy by age 30. Most are just hoping to be done with training by 30. Many won't be when you factor in longer residencies/fellowships, not to mention the fact that many people will work for a couple years before going to med school. Not to mention its a HUGE caveat that these numbers are for dermatology and not medicine. Medicine is a diverse field and dermatology is an exceedingly small subfield. So trying to generalize derm numbers to medicine is like trying to generalize software engineer numbers to someone in desktop support.

Would be far more interesting to look over a lifetime earnings. We hear a lot more ageism in IT and "forced retirement" in 50's - many physicians will carry on another 20 years without incident. Does the early success (if invested) overwhelm the longer earnings? That is where it gets interesting. Showing someone who starts earning six figures fresh out of undergrad does better than a doctor who spends 8 of the next 10 years in training is: A) Not interesting; and B) Not something anyone should have needed an excel spreadsheet to tell them.

In all cases, I'm not sure point estimates are very meaningful. Variance matters a lot here. Especially since there is zero guarantee of "making it" on any of these paths. Would you rather be the corporate attorney who burned out on the corporate law path and went to do non-profit work or the med student who couldn't get into a dermatology residency so did internal medicine followed by a gastroenterology fellowship? Even if you are confident you could be > 90th percentile in any of these fields, this info seems more relevant to consider than point estimates based on some extremely specific assumptions.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Phineas J. Whoopee »

With respect to the time a career takes it isn't possible to give a financially optimal answer. I hope I haven't violated your prohibition, OP.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Afty »

I wish there were an analysis like this but for career satisfaction. Any of these jobs pay well enough, but which makes people happiest?
miamivice
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by miamivice »

I'm confused. If I can go just submit my resume and get a $450,000 a year job working at another company, why am I working where I do for a mere $166,000?

I am also confused as to why the average salary of a software engineer is $89,000, since according to the spreadsheet they make far more than that. Keep in mind that half of software engineers make less than $89,000 a year.

Finally, my understanding is that the vast majority of lawyers do not get paid very much at all (most are not employed as lawyers). Maybe that's wrong, but I don't think so.

In other words, this spreadsheet is comparing the top jobs in 5 sectors that are filled by people who are either extremely talented, lucky, or both. They aren't positions that just anybody can drop of a resume and start doing.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by ncbill »

How long does one want to work?

Plenty of retired military (O-5) at my last college reunion...with that pension & other retirement benefits they are now able to do what they want.

And that career path is a lot more achievable than anything in that spreadsheet.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by potatopancake »

I have a few points to make:
1. dermatology is a four year residency. the majority of docs do not become dermatologists. the base salary for this profession, following residency, is 200k. Many specialists making 400k+.
2. Consider the floor and ceiling of other fields. Law will make a good salary in certain firms after school. A couple of my friends who started in these big firms have either switched into roles that pay less or went to complete judicial clerkships. I don't know if any of my friends will become partners at these firms 10+ years out.
3. IB is definitely the most lucrative option. Partners make seven figures reliably. There is less training time (no schooling, residency).
4. Cost of living is inversely proportional in medicine and directly proportional in IB and law. Rural docs make 1.5-3x salary of big city academic docs. The same cannot be said for other fields tied to expensive cities (ie, NYC).
5. All of these professions require high drive personalities. The difference for physicians and software engineers is a more stable mid-, late-career. After residency and after entering administrative/leadership roles, the hours will be easier for both of these fields. My surgeon uncle worked 40 hours a week after joining private practice. As I understand, partners in IB and law still work grueling hours throughout their career. Please correct me if I am wrong. Many people in law lateral or go in-house for better work-life balance. IB may transition to private equity and other more family friendly career paths.

Sorry I didn't offer much data. All of these careers are going to leave you with enough money to live and retire comfortably.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by HEDGEFUNDIE »

miamivice wrote: Mon Dec 30, 2019 4:15 pm I'm confused. If I can go just submit my resume and get a $450,000 a year job working at another company, why am I working where I do for a mere $166,000?

I am also confused as to why the average salary of a software engineer is $89,000, since according to the spreadsheet they make far more than that. Keep in mind that half of software engineers make less than $89,000 a year.

Finally, my understanding is that the vast majority of lawyers do not get paid very much at all (most are not employed as lawyers). Maybe that's wrong, but I don't think so.

In other words, this spreadsheet is comparing the top jobs in 5 sectors that are filled by people who are either extremely talented, lucky, or both. They aren't positions that just anybody can drop of a resume and start doing.
I think the charitable way to interpret the spreadsheet is, if you are talented enough to get into a degree program that opens up one of these paths, should you take it? Is the ROI there?

The majority of people who go to top computer science, medical, law, MBA programs can get these types of jobs. After you get into the program it’s less about luck and differentiated hard work and more about desire and interest.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by TheMadEph »

As everyone has pointed out, this analysis is flawed for various reasons so i wouldn't suggest using this to help anyone with a decision. I definitely would say that it is not insightful - and primarily because of the short time frame.

-Dermatology is one of the hardest residencies (and not 3y)
-doctor track needs to reflect 20 years total to get a good comparison, and it is not because they make the money later in the careers, it is because the COMPARISON against other fields is more stark then. IB is a triangle, consulting is a triangle, SDE is sometimes a triangle, partnership at big law firms are triangles (e.g. tournament rewards where only the successful IB make the huge money). Doctors are not - doctors ALL generally get good salaries in their chosen field (with some divergence obviously). Averages are not useful here, compared to medians with Standard deviations/distributions
-Consultants doesn't make sense - people don't stay consultants for long periods of time usually - although they do become directors sometimes they often go in to big corporations etc. That is where the big money is made - not with billable hours at McKinsey.
-Working at big banks in IB or other similar fields is also very hit or miss, yes people make some huge amounts of money - but they also will get fired and or have bonuses cut dramatically from one year to the next. timing of income is crucial oftentimes. (as is deferred compensation). Many partners in law firms could easily jump to banks but they dont - one reason is that they keep getting cash on a quarterly distribution. Worse for taxes but better for feeling secure.
-Similar issues with SDE - equity compensation is huge piece, and timing of when you join a company and when you leave is much more important than everything else in terms of your total compensation over 10 years.

The ultimate point is that this chart would only be useful to show to someone who has a decision to make if it were accompanied by detailed conversations with someone in each of those fields and a solid understanding of distributions of outcomes and understanding of the role luck plays. If you want to avoid needing lots of luck, then nothing beats being a doctor. If you are super skilled and are ready to the roll the dice, nothing beats being a SDE (or starting your own company), if you are super skilled and also have a great personality, IB is probably your best bet; if you are super skilled but a late bloomer, probably a good bet would be to go to law school (but consultants are a good way to burn some time figuring it out too, and more lucrative earlier).

My background (since people will think this is relevant). From legal field, work in big tech, married to doctor, with tons of friends in IB and in Consultancies.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by AlphaLess »

deanmoriarty wrote: Mon Dec 30, 2019 12:04 am The numbers for software engineers are somewhat accurate, considering you are talking about the top percentiles (I am in the field, working as a senior software engineer with those compensations).

However, in order to get those numbers you are “forced” to live in the Bay Area basically (where run-down houses are 2M+), or maybe Seattle, so that’s another point to consider, whereas a doctor is getting paid that much even in a LCOL (source: I currently live in the Bay Area).

Also, while I am enjoying milking those compensations right now, I am living very frugally and saving as much as I can because I am not at all convinced engineers will keep being paid that much in the next decade. The barrier of entry is so low and at some point the market will get saturated, there is no BAR exam or AMA association to keep the supply artificially low, and it’s just not that difficult to become a proficient programmer. An interesting article on the subject published just yesterday: https://www.jefftk.com/p/programmers-sh ... -lower-pay

I hope I will have achieved financial independence by the time it hits me, but if I had the opportunity to rewind my life or give an honest advice to a high school kid, I would seriously consider or recommend med school, it’s a much more bullet-proof way to insure a high income for many years. Tech is just too unpredictable, before 2010 nobody was consistently making those salaries.
That article is complete B/S.

For example:
- doctors don't get paid nearly as well in OTHER countries,
- doctors might get paid WAY less in the future, depending on where the health care policy goes,
- IB is big on attrition. Even those who make to Director or MD have short careers. It is not so much about skill, but longevity and tenacity, which are NOT high quality skills,
- someone above mentioned triangle. I am assuming they refer to pyramid schemes. IB, Law are all pyramid schemes,
- good programmers (programmer X) could get paid EVEN better in the future.

I think the key to being well paid lies in two things:
- pick a good profession (e.g., don't go into retail or low-paid sales like dealerships),
- become REALLY good at it.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by boglebill »

Preface - always reach for the stars!

This does a great job of painting a skewed and largely inaccurate picture. It's like saying NFL players should make $25+ million per year.

Reading between the lines, the author states it's geared towards HCOL areas. I believe each employer is elite status.

I have over 20 years experience in the tech and consulting space. My salary doesn't have a year-over-year history of 20k/20%+ increases.

This is a fun calculator to play with:
https://www.nerdwallet.com/cost-of-living-calculator
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Horton »

10 years?! This convinces me of nothing. I want to see an analysis projected out over the employee's entire career and through retirement for a set of 50,000 stochastic scenarios :twisted:
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Nowizard »

All things being equal, the choice of a higher paying career is wise. The part to avoid is choosing a job over a career. Positive place to start is with an analysis of these specific options to determine interest. There are other financially viable options than these examples. Only quibble is where to start with decision making.

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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by JoMoney »

A "financially" better career path is to be the founder of Microsoft or Facebook.
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by Small Law Survivor »

Makes no sense at all to limit this to a ten year projection.

And, the number of lawyers working at Cravath (or comparable firms) after ten years is infinitesimal. Why do people go to law school when the average salary is relatively small? The lottery effect ....
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by AndroAsc »

I agree that a 20-30 year analysis may be better, but if you look at the methodology section, the author mentioned that after 10 years, public data points are harder to come by and the variance is larger.

Also, in 10 years:
- The management consultant path assumes the person reaches Principal, the level before Partner (highest level in this field)
- The IB path assumes the person reaches Director, the level before Managing Director (highest level in this field)
- The SWE path assumes the person reaches Staff, which is 2 levels before Principal (using Google scale, which is almost the highest level in this field, the next being Distinguished Engineer / Fellow but there's only a handful of those).

Not that familiar with Law or Medicine paths.

In 3 out of 5 cases, the person has reached N-1 level, where N is likely to be the highest level in their career lifetime.

As much as I hate to say this, the drag of Medicine in early earnings is really a negative. Additional analysis that factors in interest rate of student loans (which the author did not include), will probably make it only worse. It's possible that the Medicine path will eventually catch up in terms of net worth, but having more money earlier in time provides better security.

The other criticism that attrition rate and WLB variation between paths is also valid, and that was also raised in other online forums where I first found this spreadsheet. Management consultants have 50% attrition rate (approx) between levels, and IB from comments here also seems to have a similar practice. SWEs have lower attrition rate, but that's probably balanced by the fact that by Year 10 in this projection, they are already hitting the glass ceiling of $500k/yr (Staff level positions are top 10% in the company).
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Re: Financially Optimal Career Path: Investment Banker vs Management Consultant vs Software Engineer vs Doctor vs Lawyer

Post by KyleAAA »

deanmoriarty wrote: Mon Dec 30, 2019 12:04 am The numbers for software engineers are somewhat accurate, considering you are talking about the top percentiles (I am in the field, working as a senior software engineer with those compensations).
Eh, they seem to be assuming you hit staff/principal in 7 years. Based on my experience at Big N, this is extraordinarily unlikely for an 80th percentile engineer. Even many 98th percentile engineers wouldn't hit staff/principal within 10 years. Less than 10% or so of technical staff are at staff/principal and above at any given time, and most engineers will never progress beyond the senior band regardless of how much experience they have. Of course, senior engineers could still hit $500k with stock appreciation if they move between companies every 3-4 years. But these numbers don't seem consistent with 80th percentile talent.
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