All New Wilmott Jobs Board                     (r)

The myth of the risk free job

Apparently quant finance is dead, and we are all going to have to get real jobs, perhaps in manufacturing or dentistry, working at minimum wage whilst the global economy crashes around us.

Some will starve.

OK, it is at this point that I have to point out that actually I'm not as young and good looking as many people seem to think.

This is not my first recession, or even 2nd or 3rd. One reson for the slightly hysterical tone on some media and various online discussions is that we have had one of the longest ever runs of economic growth. This has combined with quant work expanding as a proportion of overall banking, and so the idea of perpetual exponential growth has become an assumption when we all ought to know better given what we do for a living.

The issue is not "how bad is it ?", but "how do I make better decisions about my future" ?

As I say in the Guide, you can expect several major, non-discretionary changes in your career whatever choices you make.

Do you think retail is a better place to be ? Really ?

How about manufacturing ? That's truly a bad place to be. Many highly qualified engineers at their peak don't reach the pay that many quants get at entry level. And you will be treated like shit, and at the first chance they will outsource your job to Vietnam.

Media ? I've done a stint there. Was fun. Appallingly badly paid, but fun. Job security there is really very poor, indeed a rather large % of journalists, editors, cameramen, etc are "freelance" because firms don't even pretend there is job security.

Energy ? Lots of risks, there. It's a classical boom & bust industry, with the added bonus that the local government may put you in prison. Pay can be OK, but most of the decently paid stuff is highly specialist and "project based", ie when they finish the pipeline, there is no job for you at all.

Law ? Lawyers are not immune from ups and downs in the economy, though like accountants some of them work in areas that are counter-cyclic. Contrary to what you may have read, big firms can and do make partners redundant.

Accountancy ? In some ways, this is the field most like quant work. Indeed those whose maths are less strong, and who have a higher tolerance for boredom do indeed take this path and it can work out well. Accountancy has good grace of degradation, ie if it goes wrong, you can transfer your skills to another line of work or employer. But the accountancy firms are known to be very bloody minded about firing when the cash flow dries up. Alsothey are intensely political, on a scale I do not observe in any othrtr line of work. (The story about me having to use the "black people's entrance" at PWC is true, and yes the elevator did smell that bad).

Defence ? Aside from the risks of being anywhere near fighting, defence contractors are pathetically dependant upon random acts of foreigners and political pork barrels. Even in a time of greater spending, the mix changes depending on the kind of fights your government expects to have. Many skills here are portable, but again many are not. You need to pick carefully, and the reality is that you may not be given much choice in what you work on.

In house software development ? Not a bad career, but you have three big risk factors. The success of that firm, the growth in the kind of business that you come to learn, and the technologies you use. If one of those 3 go down, it can get very cold, very quickly. All s/w development jobs are gambles. I've been lucky with C/C++, but I was also a founder member of the VB User group, a skill that has declined from attracting a serious premium above other development tools, to being "legacy" in a few short years. That's a common pattern, indeed VB held out longer than many other things like PowerBuilder, OS/2, Sybase, Clipper, REXX and other buzzwords you may not even recognise. Java is not immune to this, and currently looks like having a scarily bad over-supply relative to demand before long. It can be great to be an expert in just in time stock control for retail, but as I say above retail ain't happy right now, and is well known to be highly cyclic, and what else exactly do you think those skills allow you to do if that area goes down ?

As I have said before, and no doubt will say again until you listen is that the only thing that will get you through your career without the changes hurting you too badly is to currently keep your skills up to date. Discipline yourself to look up from the screen often enoguh that you can spot good new directions, or the comind collapse of your current one. Make sure some of your skills are portable. Every so often update your CV, even if you aren't looking for a job, because :

a) you may be looking sooner than you think, and

b) it helps you visualise how marketable you are.

Risk and Return in Quantiative Careers

I was recently asked over in Wilmott.com about how to achieve both stability and a decent income.

No given job is stable, and that applies from the head of Merrill Lynch to the person who who cleans his floor.

To misquote Woody Allen, "dying doesn't scare me, it's staying dead, that gives me the shits".

Static stability is not only unattainable, it is often unpleasant in the long term, since you may feel trapped and/or stale. The single biggest clump I know of such people is Britain's witless semi-monopoly Telco, British Telecom. It pays these jokers more than they are worth, so they can't get proper jobs since it would hurt financially.

Imagine a truly huge firm staffed 100% by people with no interest other than keeping their jobs, it's not pretty. Those unfortunate enough to fly British Airways will see the same thing, where their naked contempt for customers who fly with them is caused by their own frustration. Every BT/BA employee I have encountered has struck me as in borderline clinical depression. Not always dumb, but always wasted.

Whay you need is dynamic stability. The ability to get another job when this one dies.

This not only will improve your risk adjusted return, but will actually make you happier. I rarely say "X will make you happier", because my job as a headhunter is to find out what you want, and try to get it. It's not my place to tell you what to like.

But in this case I observe that optionality has profound value in your morale, even if you don't really want to leave. A good analogy is that you you pick up a very attractive person of a compatible sex and go back to their room. As you are getting undressed, you hear the door being locked. Your utility may droop noticeably at this point.

One way you can extract utility from the pestering calls of headhunters is to ask them about what variants on your skills would make you more marketable. This is a tragically noisy signal, but is usually honest since HHs want people they can sell. You should not panic the first time you hear "there's not so much call for pricing Nigerian options in Delphi these days", but if the signal repeats, time to think about diversification.

In the Guide, I make a big thing of using your financial maths skills to manage your career. There is an inherent trade off between risk and return. Specialisation helps you get a better return, but when that niche goes bad, it can hurt. I know this from personal experience, indeed one major reason I feel qualified to offer career advice is that I can help people avoid making the mistakes I have made. Some are so bad, I don't put them on this forum so I can use them in after dinner speeches, and my forthcoming novel.

However, risk is not a monotonic function of specialisation, at any point in time for a given person there is an optimum. This is because someone who is generally average across a broad front risks coming 2nd in lots of interviews, but first in none. You need a few sexy specialist skills to get any given decent job.

Networking is also useful, but at more levels than one might at first think.

Yes, some people have good good jobs through the people they know, but more critically you can model how the market for your skills is evolving. You can identify "low hanging fruit", skills you don't have that are congruent with those you already have.

It's often necessary to incur debt to buy into this line of work, and that's usually rational. I counsel you however to keep your debts down, because it reduces the set of options you can choose between.

It was a huge jump for me to become a headhunter, and I could take that risk because I had no debt at all. That's bigger than is rational for most people most of the timed, but recall your Real option theory when looking at the effect of debt you incur.

There are also "insurance skills". These are things people will at least pay you something if it all goes tits up. These are of course the equivalent of low risk/low return assets in your personal portfolio. Excel/VBA is one of these, but you should ensure you have a couple. There is always work somewhere for an Excel jockey, and it may be your way back into banking if you fall out.