Friday, May 26, 2006
...but you gotta be lucky!
If I mislead you by saying hard work will lead to success (in my last post), I apologise. You need a bit of luck as well.
In The Making of an Investment Banker: Macroeconomic Shocks, Career Choice and Lifetime Income, Paul Oyer concludes:
In The Making of an Investment Banker: Macroeconomic Shocks, Career Choice and Lifetime Income, Paul Oyer concludes:
First, random factors play a large role in determining the industries and incomes of members of this high-skill group (graduating Stanford MBA class).Some other interesting bits from the paper:
Second, there is a deep pool of potential investment bankers in any given Stanford MBA class. During the time these people are in school, factors beyond their control sort them into or out of banking upon graduation.
...bull markets cause GSB (Graduate School of Business) graduates to be less likely to become entrepreneurs or consultants.Oyer quotes a few of other papers:
...investment bankers earn a substantial premium relative to other GSB alumni. The premium varies from about 60% for a new MBA on Wall Street relative to one in management consulting to over 300% for an investment banker fifteen years after leaving Stanford relative to an average alumnus with the same amount of experience in any other industry.
...a new MBA that goes to Wall Street can expect between $2 million and $6 million in discounted additional lifetime income (using $1996) relative to what he would earn if he took a job elsewhere.
This premium can be interpreted in various ways, but may simply reflect the disutility associated with working in investment banking relative to other fields. (i.e. bankers are paid more because their jobs suck :->)
...graduating in a recession lowers wages early in employees’ careers, though it does not have a noticeable effect on employment... wage differences fade over the first ten years or so after graduation as those who graduated in recessions move from small, low-paying firms to larger firms...and
... workers who accept low-paying jobs are stuck with low wages for at least several years... Those who switch jobs undo some of the ill effects of starting a job at the “wrong” time, but not all.
Together, the papers lead to the conclusion that luck early in one’s career has important long-term effectsSo what can you do besides praying for bul market in your graduation year? Oyer says "short the stock market upon entering school".
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