Finance FOMO
I'm guessing that there is more than one deck out there which attributes the proliferation of fintech startups, in large part, to a chronic undervaluing and subsequent underinvestment in technology across most of the industry. It doesn't seem surprising then that by all accounts, working as a software engineer in most part of finance is, not the best.
There are however a handful of engineering-focused hedge funds which are on the opposite end of the spectrum, and which are perhaps some of the best places to work as a software engineer, in any industry.
These firms are consistently at the top of my alternate-reality-did-I-make-poor-life-choices-fomo list. Yep, this is another self-help post. Sorry.
So, what's so great about them?
$$$
Money, obviously, is a factor. These companies have way higher earnings per employee than most companies, so they can pay huge comp packages to high performers - and they do.
There aren't a lot of these companies (relatively speaking), and they're mostly fairly new (say last 10-20 years), so there just aren't a lot of people who have say 10+ years experience working at one of them. If you are one of those lucky few, you'll be able to negotiate a hefty bump by jumping ship. I've got to think that at least part of that cost is going to be written off by the company as a way to make sure they're keeping up with the competition. It's the only industry where I personally know (second-hand) of multiple people ending up in serious legal trouble for not guarding the company secrets closely enough. So, information sharing is squarely off the table. There is no way though that they aren't going to benefit from some implicit insight through osmosis after you join - you're not going to forget 10 years of habits and practises, even after 2 years of gardening leave.
So, yea. If you're good, you work hard, and you get a bit lucky, you can earn a fuckton of money. Way more than you'd get from investing the same time effort into a career in big tech. I know this to be true, I've got receipts. The only thing I know of that can compete in dollar amounts is being early in a successful startup - glhf.
They also just pay you cash. None of this equity nonsense. And as a bonus, you often get to invest in the fund. That perhaps doesn't sound like a bonus, but these funds return well above pretty much anything else you can invest in that has a sane enough risk profile for the bulk of your savings. And yep, they're not open to the public. You have to be solidly in the "high net worth individual" category before you can play at that table. Unless you work at the company.
Ok, so, you can get rich. That's not unique, and for many, not a strong motivator.
Mission
This one is weird, because I think many would make an argument that a hedge fund itself has no "purpose". I think that is likely true within society as a whole (if you can tell me what value a hedge fund creates for anyone who is not invested in the fund, I would love to know, and before you say it, I'm not sure "providing liquidity" is a good enough answer).
It does however, have a very clear mission: to turn a big pile of money into a bigger pile of money, forever.
This is way simpler and more straightforward than basically any other business could ever hope to be. There are no customers. There are no shareholders. There might be outside investors, but even if there are, they're only expectation is that you'll turn their pile of money into a bigger pile of money, forever.
It just doesn't ever get that simple in a "normal" business, you know, one involving creating value and selling stuff customers.
I wrote words here about how a clear and well-defined mission, which is understood by everyone contributing to it, is the best glue to keep a group of people moving in the same direction together. Well, guess what, this is that.
It's so simple and objective that there is just no scope for misunderstanding. Everyone should be able to agree pretty easily on whether a task has purpose within the company - does it make the pile of money bigger? Excellent! Do it!
I'm oversimplifying of course - it's always hard to just the return on an investment in infra, some people will be focused on their own personal career missions, etc. Still, as a starting point, it's way better than anything you'll find elsewhere.
That simplicity is pretty damn appealing. In my alternate fantasy land, it leads to a work culture almost completely devoid of internal politics, and a comp structure that is about as pure and fair as it can be, with what you get being proportional to how much bigger you make the fund's money pile.
Is that actually what it's like? Maybe? Sometimes? It seems like it must at least be a fair bit better than big tech.
Real Coding!
It's no secret that the tech is rarely the secret sauce these days. With the exception of the recent LLM party, I'd argue the last world-changing startup to be truly based on a technical innovation was Google.
You can build most of a SaaS startup now by stitching together other SaaS offerings. And do to the stitching, you can lean on a ton of open source frameworks, cloud offerings, etc. Engineering has straight up got easier. This makes sense. Making cars used to be harder, then they invented machines to make parts of cars, etc.
I think the line here is really whether the technology is the product, or simply a means of the product existing.
You could argue that Uber's product is it's technology, but I'd argue the product is taxi rides, and the technology is just the way they sell them to you.
Google's product was it's technology. Sure, they had an interface, but what it was surfacing (and I'm talking back in 1998 here) was basically just pages ordered by PageRank. It was that algorithm which set Google apart from competitors and led to it's success.
At these funds, the product is.. a machine that makes money? That they don't let anyone else see or touch or use? I think that's about right? Anyway, the point is, the money comes out of this machine that the software engineers spend their days building. Bugs lead to less money. Optimising some maths using AVX512 instructions leads to more money. Reversing Intel's hardware designs and optimising for specific cache paths leads to even more money. As long as you paid your colo fees to make sure you've got the shortest possible cable linking you to the exchange. And a dedicated line-of-sight microwave link for literally the shortest possible path to the country you're trading in.
So yea, lots of cool engineering stuff. And it really matters. It's one of the very few places you can get away with doing this kind of work, and one of ever fewer places where you can literally put a dollar amount on some crazy micro-optimisation.
This is unique, and this is a draw for many, myself included.
So, yes?
You can show up every day to a nice office, put your headphones on and crank through endless challenging technical work. You won't be distracted by internal politics or other nonsense, and you'll get paid a hefty chunk of cash every year.
That's why this is an alternate-reality-did-I-make-poor-life-choices-fomo trigger.
Going to do my best now to persuade myself I made the right choice not going to one of these funds 10 years ago (assuming I could have passed the interviews, which is definitely not a given).
Mission & Money
I do care about working at a company that creates value for society, so that's a bit of a sticking point. That said, many would argue that the fix here is just to embrace the EA mentality - earn as much as I can, and give most of it away.
I don't find that a terribly satisfying solution here. If I'm going to work my ass off to earn a ton of cash, it feels weird to just throw that over the fence and hope somebody uses that capital efficiently. I know, there are ratings for NGOs that discuss this - and yes, you absolutely can pick which fence to through your money over, but you're still throwing it over a fence. I guess I'm just being selfish, but I want to be able to draw a line directly from what work I did to the value it created for society.
I suspect the way that this would work out, for me at least, is I'd tell myself I was going to give money away, but be reluctant to do so without feeling confident it was going to be used efficiently (I worked hard for this after all!). I'd tell myself I was just waiting for the right opportunity to give, and I'd end up not giving. At least not nearly as much as I could.
We're motivated by exerting control over an ever-expanding scope right? Giving money is literally reducing the control you can exert. It's not motivating.
Ok so what if I just embrace getting rich as a goal? I could just plan to fatFIRE and spend retirement creating value for people with no need worry about making money.
Well, and this is definitely just me being obsessive, but if the goal is just to make money, I would find it really hard to not think things like "oh I should have just bought a bit more BTC back in 2014", or "I wish I'd been better friends with that guy that moved firms last year".
Even if your employer has a perfect comp system, and your contributions are accurately and fairly compensated, that still feels to me like an inaccurate way to decide how to spend your time overall - and consequently, I don't find it to be a good motivator.
Let's say you spent 2020 working 12 hour days to implement some new treading strategy. It made the fund a ton of cash, and you got a fair slice of it. The time you were working on this you spent sleeping or relaxing/socialising.
Now let's say you spent 2020 sacking of work and going into business for yourself in crypto-land. I'd venture you'd have come out way better off financially.
Yes, crypto was rare in this respect - people don't create whole new parallel financial systems very often, but I think the point remains valid.
If the thing motivating me was increasing my bank balance, I'd find it very hard to constrain myself to one particular sandbox, no matter how profitable it was. That's partly just FOMO, partly my short attention span and appetite for change and risk, but I think that remaining at least curious about what other opportunities are out there is justified and sensible. If you find nothing then it'll make you more motivated to do well at work. If you find something then you should go do it. To not look is to not measure the opportunity cost, so then how can you tell yourself you're optimising for money?
I think in my particular case, if I embraced the above strategy, I'd end up spending all my time exploring outside the sandbox and end up doing a mediocre job at work.
Anyway. Back to this: I could just plan to fatFIRE and spend retirement creating value for people with no need worry about making money
I was speaking about early retirement with a friend a few years ago, as he made a great point.
What would you do if you were retired, and what is stopping you from doing it now?
More specifically - and he didn't use these words, but the point was clear: whatever I wanted to do was likely to be something that created value (otherwise why bother), and so I'd likely be able to capture some of that value - and that might be enough to live off, or more.
Here I wrote that value captured can be a proxy for value created, and yea, if I'm going to go save the world in retirement by creating a ton of value, capturing some of that is actually probably the best way to ensure I'm actually doing a good job - and not just wasting capital like the possibly-inefficient NGOs I spurned earlier.
So, if the goal is to earn money so that I can fatFIRE and go save the world, but I'm going to make money from saving the world anyway, then.. just go do that now? Don't waste time faffing about at a hedge fund first?
..and if the goal is to earn money just because, then I am probably too easily distracted to do this well at a hedge fund?
I like solving problems with code
I said hedge funds are appealing because they involve lots of challenging technical work, and that appealed to me.
That is true, and it does. It appeals to me. I like the sharp edges and fiddly challenges that you don't usually get to justify working on.
But, I also said I'm a wrangler at heart. The reality of actually solving coding problems for years on end, with no outcome or impact other than seeing a number go up, just, feels tough.
Worse (for me!), with the clear mission and small number of employees, there is just much less wrangling to be done.
And the problems that I could solve using code are basically just one problem, which is "how to make more money." In some companies that's a problem reserved for the quants, and if I'm honest with myself, even in a firm where the roles are more fluid, I don't have the instinctive grasp of maths needed to excel there.
So for me, this one is just a bit of a siren song unfortunately.
So, no?
Alright I think I've persuaded myself that it's not the life for me. Which is good because it's kinda too late already.
Confirmation-bias litmus test time
If the comp for the total period was the same: would I rather work at a startup or a hedge fund?
Startup, hands down.
Over a 10 year period, how much extra would I have to earn at the hedge fund to go there instead of the startup?
Mmmm, enough to fatFIRE and feel truly secure in throwing away my earning potential. And I'd probably want enough to have seed capital for some retirement projects. So, I'd want, $20m at least (to have 10 leftover after tax). Not impossible.
What if I could choose between the hedge fund, with a guaranteed $20m bonus after 10 years of service, or spend 10 years working in startups which may or may not succeed.. which do I pick? Hm. Definitely made it harder for myself.
Luckily that's not the kind of offer that exists IRL. How about -
Hedge fund, with a potential total comp of $20m over 10 years of service, or spend 10 years working startups which may or may not succeed.
Tough. It would be really hard to turn down that (potential!) money. I do think that at the end of that 10 years though, I'd feel much happier and more fulfilled if I picked the startups. And who knows, maybe one of them gets a fat exit and makes $20m look like peanuts. Hm. Maybe I am all about the money after all?