For one reason or another we receive a large amount of email regarding Doctorate degrees. The title of the post is direct, a bit mean and for better or worse absolutely correct. If you have a PHD and want to work on Wall Street, no one cares. Now that you’re paying attention we’ll go ahead and break down every division in finance and why you will never need a PHD in Wall Street. Unless this dinosaur industry changes entirely, you’ll never need anything beyond an undergraduate degree, at most an MBA to work on Wall Street because Wall Street is a relationship business.
Investment Banking: In short terms investment banking is a real estate agent for companies. If you want to buy a house you hire a real estate agent and if you want to buy a company you hire bankers. That is plain and simple. Now why would you ever need a PHD for this? You don’t. In fact if you have a PHD it will be harder for you to ever enter investment banking since you have spent 4 years acquiring a skill set that is not useful for investment banking. If you must get an MBA, which we suggest you avoid, that is the maximum education level you will need.
Again the reason is simple an MBA is a networking opportunity. Your job as an investment banker is to build relationships and help fund them (capital raises) or sell them (M&A). An MBA would give you an opportunity to build out this network and shows some dedication to building bonds. Your PHD study in XYZ does not generate money for any investment bank.
Sales and Trading: Here again a PHD does not matter and shows a fundamental misunderstanding of the work that is done on Wall Street. In a Sales role you are calling hundreds of clients, you are in charge of managing soft touch relationships on a very large scale. You’re assigned a sector (space) or region (say Texas) to cover and you’re now responsible for helping the firm maintain relationships in these regions to generate trading volume.
Again here, having a PHD will make it harder for you to get an interview because your skills do not generate money for the investment bank.
Hedge Funds: Long Short Equity? Merger Arbitration? Macro fund? None of these jobs require or have a need for a PHD. On paper they will see a person who is overly qualified from an educational stand point. What does this mean? Now they are now concerned that you have a boxed view of the world. For the most part they are likely correct as you’re trained in the scientific method and have a structured thought process that they likely do not need.
Here again, how does your PHD help the hedge fund make money? It doesn’t.
Equity Research: Here you’re doing niche work covering specific sectors, Industrials, Technology, Medical, Financials etc. Perhaps here the value of a PHD would shine in terms of product differentiation? Unfortunately not. Research is essentially the marketing arm for an investment bank and is a liason between the buyside and C-level executives. There is no need for a PHD for this type of analysis and relationship building.
If you do not believe that Equity Research does not require a PHD then simply look up the financial analysts on TV. You will see again that the maximum education level is an MBA. Your PHD does not help you develop relationships with C level executives and again does not help you generate money for the firm.
(** Small caveat is for the Medical division, here there may be some use for specific PHD’s but the point is that is not by any means necessary to move up on Wall Street and you’ll likely get very few extra points for having a PHD since again the job is a sales role)
Corporate Development: Here you’re working for the M&A division within a large company, lets call it Fortune 500 for simplicity. Your job is to find strategic acquisitions, as an example look at small $10-100M companies that a company such as Google could acquire. While you need to understand what products and services each niche company offers your job does not entail product testing. In that case, the product will be run by the R&D team not the finance team.
In this case what would be of most value? You guessed it, again the most valuable and easily transferable skill would be financial modeling which could be done in investment banking, equity research, hedge funds, private equity and otherwise. Your PHD does not help the firm make money and you would likely be better suited for the R&D team.
Private Equity: We have used an example, a fixer upper house, to explain the private equity model. Your job is to find companies that can be acquired with debt and subsequently be sold for a profit ~3-5 years down the road. A strong candidate for private equity would have a solid foundation in financial modeling, reading sales memorandums, creating debt structures and of course building relationships. This is exactly why an ex-banker is the best fit for the role, they spend their time building relationships and building financial models.
If you have a PHD, again this does not help the Private Equity fund make money.
Mutual Funds/Fund of Funds: This is the last major pillar within finance, as noted by our networking map and again a PHD is not necessary. Here you’re taking (most likely) long-term views of an entire company and are calculating the associated risks to build out major portfolios. Perhaps you’re more focused on running the consumer portfolio, or you are in charge of dividend only stocks, at the end of the day your job does not entail creating a product/service (products/services from a business perspective, not a financial services perspective).
Your PHD does not help any mutual fund make money.
Final Caveats and Thoughts: Notice we have italicized the main point of the article several times, finance and Wall Street is about generating revenue and subsequent profits. If your PHD is not going to help the firm make money they will have no use for your niche skills. With this in mind there is only one space where a PHD would be necessary – working as a high level quant. The rest of Wall Street, again 99% of the industry, would need at minimum a bachelors degree and at maximum an MBA.
Finally, if you do not believe any information within this post you can prove this thesis out by yourself 1) sign up for a premium linked in account and find all the Managing Directors in finance across Investment Banking, Private Equity, Equity Research and Sales and Trading, 2) search out Portfolio Managers in Hedge Funds and Mutual Funds, 3) search out Corporate Development Heads. Across the board you will see the same theme, the vast majority will have high level undergraduate degrees or MBAs from top tier schools.
To end this post, always ask the following questions before you decide to pursue a higher education or any degree. “Will a company value my acquired skill set? Will my degree help me generate long-term profits for the firm?” If the answer is a no, don’t be surprised if you don’t receive any interviews.
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For the long-term readers you’ll notice we get annoyed by all the PHD questions. The reason is as follows: 1) we have covered this topic numerous times on twitter, 2) our myths about Wall Street post explained that complex math is not needed, the most complex formula will be a DCF, CAGR, WACC or CAPM which is a dead giveaway that a PHD is not needed 3) Wall Street is a sales job, 4) the biggest reason – if you believe a PHD will make you more attractive to an employer on the Street you have not done your research and do not know what your job will entail (this topic has been covered numerous times on the blog).
Outstanding blog. Another good post.
Do you have any practical advice on surviving with less sleep?
I sleep 8 hours a night – I get the impression you’re making it, on average, on 5 hours or less. How?
Was it something you worked on, or have you always been someone who needs less sleep than most?
Do you think it’s affected your muscle gains at the gym?
Any feedback will be much appreciated.
How old are you?
We recommend working hard through your mid twenties. After that you can scale the hours back and try to sleep on a consistent basis, 7-8 hours a day. Your body can take a lot of punishment in your 20s so 6 hours of sleep can be enough. Better to take advantage of your youth by working hard and building the right foundation. Too many people focus on partying and by the time they are in their mid-twenties they are too far behind in the career game.
Generally yes you will make trade offs less weight gain, health will take a step backward in your younger years but you can recover quickly.
Health should be valued more than money as we’ve stated in the past, but take advantage of your high energy levels to set yourself up for the next 25+ years. Once you’re in a legitimate career for 10+ years the hours come down to a reasonable level.
Thanks for your reply.
I’m 23.
I run my own business, earning six-figures yearly. Being in this relatively comfortable position has definitely made me more relaxed about sleep. (At 18, when I was in college and launching my business from scratch, I’d sleep 6 hours per night or less.)
Six-figure profits are nice, but I’m trying for seven-figures and beyond… An extra 2 hours each day would help.
I’ll experiment with sleeping for 6 hours over the next 30 nights.
Thanks for your advice, man.
Check out getting a scrip for Modafinil. If you’re not into supplements WSP’s advice is as close as you’re gonna get.
Another dead on post. I remember the Associate class at my bank and we had some PHD’s apply… None of them received interviews as they had no finance experience.
Business 101 “We want to drive profits”. Having a PHD is not going to be helpful for the firm. If you want to be a professor or work in a specific field be certain it is the correct degree.
The correct way to abbreviate doctor of philosophy degree is Ph.D or PhD.
PHD is reserved for “Pimping Hoes Degree.”
An exception might be Economists/Chief Economists at banks and quant funds?
What’s up with this blogs continued bashing of education? Lots of other posts are good, but not attending school because “you don’t need it to do anything” reeks of someone who may be successful, but whose friends are just becoming board certified orthopedic surgeons (around age 30-35) and feels a little insecure about it. It just doesn’t fit in with the theme of this blog (personal development as someone on wall street). On any other topic (women, money, etc. etc.), you’d say try and reach your maximum potential. But I’m certainly biased, because I do have a Ph.D.
Look up the richest people in the world. Practically none of them have PHDs.
We are destroying the myth that PHDs are needed for Wall Street.
The only exception is some medical related stock analysts such as bio tech. Rest of it is a complete waste.
uhh…hft?
PhD, no one cares?
Yeah…
http://jobs.efinancialcareers.com/job-4000000001206854.htm
We already covered this. If you’re looking to become a quant then yes it is of use.
Investment Banking, Equity Research, Sales and Trading, Corporate Development, Asset Management and Mutual Funds make up the vast majority of Wall Street professions. Your link unsurprisingly linked to a quant role.
So yes the more common degree is still going to be Bachelors/MBA/CFA.
There is a misconception out there that the majority of Wall Street roles require high levels of math IQ and this is simply false. The majority of roles on the Street are sales/interpersonal skilled professions.
I had to post this as your title was very assertive.
Point taken.
Love your blog.
Yes we intended to be assertive as we received many emails regarding math PHD degrees. The truth again, is that 95%+ of Wall Street jobs have no use for such degree.
Indeed.
I know this may not be the place but I have a simple question. If you’re looking to be a high level quant is a Pure Math PhD the way to go? Or is a Mathematical Science or Mathmatical Finance Degree more useful?
Find the people who work in the space that you want. Emulate and follow their path. We do not know what *exactly* you want to do.
Go on linked-in, find the guys you want to become, look at their background and emulate.
Wash rinse repeat.
Saw this too late (Currently 1 year PhD candidate at T10 school).
Looking into investment banking.
What should I do to keep my candidacy competitive (ie summer internships in top banks)?
Also how much is my PhD hurting my chances? Your blog seems to suggest it merely has nil effect.
Advice much appreciated!
As noted here… Unless it’s in finance it is 100% irrelevant.
YouMre going to have to network like mad and maybe even downgrade to a masters.
If you’re going for say petroleum engineering… Downgrade to a masters… Try to get into oil and gas.
This article is extremely popular but unfortunately the reality is a PHD isn’t going to help you at all if you want to be a banker.
Network + learn how to sell yourself. Not much else we can say to help. Please read our faq section on networking.
To add, since my last post I talked with the biz school where I’m doing my PhD and they did not paint a kind picture, either. They said if you’re dead set on working on the Street or even going in I-banking then getting a PhD is one of the worst things you can do (unless it’s economics, math, stats, or finance, but even then that’s a tough sell), since all the time and energy you’re focusing on research is time you’re not spending learning the trade and getting experience. Alternatively, if you want to stay the course with your PhD you need to accept the fact that the odds are stacked tremendously against you and you’re better off working as a consultant. They also added that you’d be better served applying to an MBA program and abandoning your PhD, but if you went into your doctorate straight from a BS or MS then you likely won’t get into a T50 b school, since you won’t have any real work experience.
Their point, “This article is extremely popular but unfortunately the reality is a PHD isn’t going to help you at all if you want to be a banker.” is 110% true. It’s competitive enough as it is that no company is going to bother with the risk of taking a chance on someone who has parts of a finance background but lacks the actual degree. They’ve already got literally thousands of applications from top programs who have the degree and experience required for the job and then some. Plus they’re typically younger, can be held onto for longer, and generally more gung-ho and eager to bust their arses to make an impression.
Again, a LOT of STEM PhD students are being advised to consider finance jobs after they graduate because the academic and research job markets are absolute garbage. Less than 1% of PhD students can find tenure track positions within 10 yeas of graduating, so academia is not the guarantee it was even 10 years ago. I’m working on my genetics PhD and the finance career path is being pushed down my throat pretty tenaciously because of all the stats and programming I’m taking and using. Remember, Wall Street = finance but finance != WS. If I DO want to go that route I’d be looking at incredibly specialized companies and jobs, but holding my breath.
tl;dr – A PhD puts you at a strong disadvantage but if you really, REALLY want a PhD then accept that you’re greatly hindering your chances. (although if you want a PhD just to have a PhD then you’re in it for the wrong reasons in the first place)
Hi. I was wondering which jobs pay more, quant jobs that require Ph.Ds or Front office roles. Also, Jeff Simon’s hedge fund, among the larger hedge funds today, hires only Ph.Ds. So is a Ph.D really such a bad idea. I’m about to graduate with a Mathematics major and am pondering applying for Mathematical Finance and Math Ph.D programs.
We only answer questions in Q&As for subscribers. This change was made last year.
I am a PhD with a lot of management consulting experience and little finance experience. One thing that I can tell you for sure is that your blog is true only because the consulting and finance industries in the U.S. were built and are run by MBAs who are not willing to let anyone else enter the market. Fortunately, this is changing in the consulting industry with MBB hiring massive numbers of PhDs because they have realized PhDs can learn the entire academic content of an MBA program in literally three weeks. And then they can do anything that you throw at them because a PhD teaches you fast learning more than anything else.
In my experience of working with MBAs, PhDs scare the shit out of them by how faster they are in learning everything, even learning corporate culture and client interaction. Another reason is that MBAs are very aware of the fact that people with the intellectual horse power of top 10 engineering PhD programs are capable of learning the entire content of an MBA program in less than a month. That is why there is so much resistance to letting PhD enter finance and consulting. Because it will make MBA programs go out of business and MBAs useless.
Mark my words: MBA programs will be extinct in 15 years. As consulting and tech companies are beginning to realize, it is a lot easier to teach PhDs to be business professionals than the other way around. They have lower expectations and are cheaper than MBAs too.
Again, most of the content of your article is true because people like you are either scared of top PhDs from Caltech, MIT and similar programs or you have never worked with them closely and think all of them are like those in big bang theory.
Agree! Degrees are becoming more worthless by the day!