WILLIAM MARGRABE GROUP, INC., CONSULTING, PRESENTS
Jobs! Jobs! Jobs! Last revised: March 02, 2002
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To be, or not to be, a 'dopey manager' (5/28/00)
Dear Dr Risk – I am a 27 y.o living in Sydney Australia.
My desire is to work in derivatives, preferably structuring rather sales or marketing.
My problem is whether I should enroll in an MBA. My first degree was in a non-math major (law). From my basic knowledge about derivatives,and jobs associated with them, it appears that a PG Diploma or an MSc in Applied mathematics or even perhaps another undergrad degree in a mathematical science (I would get at least 1.5 yrs credit for my LLB degree) would be more relevant.
However MBA mania has caught on and the perception is that if you want to work in investment banking them an MBA is an absolute prerequisite. The problem is that the 'applied finance' major MBA programs offered over here are not quantitative enough (no stochastic calculus here); they seem to cater for a 'dopey manager' type of applicant.
Is this a problem? Am I correct in that to work in structuring/design/ pricing, you had better have a solid quant or math background?
Cheers – Brian
Dear Brian – Did you ever read about those engineering competitions, where you have to figure out how to protect an egg from a three-story fall, using materials that cost less than one dollar. That’s the sort of thing that a derivatives structurer does, much of the time – except that he might be protecting a financial nest egg from a thirty-percent drop in the stock market and he doesn’t care so much about the cost, as long as the client can’t figure it out. The rest of the time, the structurer is trying to figure out how to get around a tax law, an accounting regulation, a provision of a contract, etc.
Structurers that Dr. Risk knows tend to have high IQs and strong quantitative backgrounds. They’re problem solvers. An engineering, physics, or applied math background is ordinary.
A legal background is less common. However, it could be valuable, because one of the main factors driving the derivatives market is getting around annoying rules, regulations, and laws. That should be right down a lawyer’s street.
Maybe, the ideal structurer would be an engineer with a law degree. A CPA wouldn’t hurt, so he would know his way around the accounting rules.
Dr. Risk assumes that your IQ is high – you asked Dr. Risk! – but you say that your quantitative background is weak. An MBA won’t fix that – at least not a standard American MBA, from an accredited program.
An MBA advances a business career by proving that its proud possessor did two things:
The value of each of those things depends on the institution.
The Value of Admission into an MBA Program
Dr. Risk observed, when he taught at Wharton, that admission into some MBA programs, such as Wharton’s, is a badge of great honor. No, it's better than that, a valuable certification. The competition for admission is stiff, and a top business school skims the cream. Those students who win admission to Wharton could spend four semesters drinking beer and playing darts – which is close to what some of them do (others prefer sex or bridge) – and come out and make a contribution to most firms, based on sheer brains, energy, and personality. That’s a large part of the explanation for the starting salaries of Wharton MBAs – but not all of it.
Getting into some other MBA programs is not such a badge of honor, and job offers and starting salaries reflect that. While teaching at a different “top 20” business school, Dr. Risk took his wife to brunch at a local restaurant at the end of one summer. You can imagine Dr. Risk’s amazement, when he recognized that the gracious hostess was the recently graduated former president of the graduate business students association.
The Value of an MBA's Knowledge
Receiving an MBA means that the student has achieved college freshman proficiency in some basic skills (e.g., math, economics, operations research), and a basic understanding of various types of management (e.g., human resource, marketing, financial, and production management). Anything else is gravy, and sometimes there's a lot of it, and sometimes there isn't much. The MBA program covers much material at a freshman level, because some college degrees don’t require that level of proficiency in subjects that are important for business. I have taught MBA students with bachelors, masters, and Ph.D. degrees, but no more college math than they got from the MBA basic math course. One of Dr. Risk’s colleagues at one of the better MBA programs once said, “Those MBAs are like a Texas river – a mile wide and an inch deep.” I think this set of facts is what led to your “dopey manager” comment. I believe that “shallow, but broad manager” would be more accurate – in the vast majority of cases.
Some MBA programs require more than the basics. MIT has a reputation for rigor. When Dr. Risk taught at Wharton, each graduate had to complete an “Advanced Study Project” worth three semester hours. Dr. Risk supervised a large number of these projects. The value of the ASP varied from student to student. Some of the projects were, frankly, awesome. I remember in particular a project that went into great detail, producing architectural drawings, legal documents, etc., that would make possible a limited partnership offering for a real estate development in Georgetown, D.C. Dr. Risk doesn’t recall any ASPs that were awful. (Of course, that was partly under Dr. Risk's control, since he had to sign off.) According to legend, Michael Milken’s Wharton ASP turned into the junk bond business that won him billions of dollars in compensation and at least half a billion in fines.
At other institutions the attitude toward scholarship was more casual, particularly among the students. Once, during the Falkland’s War, Dr. Risk received a homework assignment on the back of a memo, something about Pentagon sales of Lockheed P-3C Orion aircraft to Argentina. It didn't seem right, because Dr. Risk didn't have a need to know this. Dr. Risk deduced that the pupil (definitely, not a "student") discovered on his way from the Pentagon to night class that he hadn’t done his homework and didn’t have any blank paper. Fortunately, he had a pen. So he worked out his week’s assignment on the back of that memo in the fifteen minutes he had before class. Dr. Risk wonders if Argentina lost the General Belgrano – to the British nuclear submarine, HMS Conqueror – and the war because it lacked the Orion's antisubmarine warfare capability. At least the memo wasn’t stamped, “Top Secret”.
So if you want to structure derivatives deals, Dr. Risk doesn’t think that the MBA will help much. Nor does he think that a year or two of math is going to prepare you to compete directly with engineers, physicists, or applied mathematicians on their home turf.
It seems to Dr. Risk that your best chance is to beef up your quantitative skills and sell yourself as a sort of problem-solving Renaissance man – legal scholar cum mathematician.
Of course, if you’re as smart as Dr. Risk assumes, you’ll take all this advice with a grain of salt, because Dr. Risk knows precious little about you and local conditions in the Australian market for structurers. – Dr. Risk
P.S. Dr. Risk’s not sure that structuring derivatives deals is a suitable lifetime job for you. After you’ve done it for a while, what’s next? Will a “dopey manager” degree give you the kind of broad exposure you need for that? You be the judge. If you think it would help for the next step, do you want to wait to get it?
Dear Dr Risk – Thank you for your most
When inquiring about a job, don't do this ... (4/28/00)
Dear Dr. Margrable – I am writing to you asking whether your group has any job openings currently or in the near future.
I graduated from the University of Geniuses and Nobel Prize Winners with a PhD in Astrophysics in 1992 and have been a post-docs here since then. My research field is the theoretical nuclear astrophysics. In my spare time I have been siting in some of financial mathematics classes since 1991.
If you have any job openings, please let me know and I will send my resume to you. Thanks. Sincerely – Cheng-Rolf Chakraswami
Dear Dr. Cheng-Rolf Chakraswami – We always have openings for people who can help us MAKE MONEY. We are ordinarily less interested in theoretical nuclear astrophysics. However, if you could explain superstring theory to us and show how it could imply an accelerating expansion of the universe, we might be able to bring you in for an interview. However, it probably wouldn't lead to a job. The same goes for every other firm worth working for. With some more preparation you might be able to make money for us, but you need to develop that theme to improve your job prospects in the world of business.
I invite you to do a little research into what The William Margrabe Group, Inc. does. Look over our web site. See if we have any activity or interest in something you’d like to do professionally. (Hint: We specialize in specialize in modeling for risk management and financial engineering.) Then, get specific about how your talent and experience could help us MAKE MONEY! – Dr. Risk
P.S. 1. You did one thing exactly right. You
went directly to the person who can hire. Try to bypass the human resources
department. They are constantly battling to be more than clerks.
Do a "Flip" to Find a Job
"Flip" a website: On Hotbot.com or another search engine, do something like a boolean search for "apple.com" & resume, and you might find the internal employment bulletin board. (Jerry Useem, "For Sale Online: You", Fortune, 7/5/99, pp. 67 ff.)
Prepare your resume for the Internet. Besides the usual, ...
Getting a job on Wall Street in case you didn't know, ...
"Dear Annie: I will graduate in June from the MBA program at a good but not Ivy League university. I'd really like to get into investment banking at one of the top Wall Street firms, but I fear my degree isn't prestigious enough. Is it worth my while to apply anyway and see what happens, or should I set my signs lower? Ivy Envy
"Dear Envy: So many people have asked me this question lately that I decided to do an informal survey of recruiters at the top investment banks (Salomon Brothers, Morgan Stanley, Credit Suisse, First Boston, and Goldman Sachs among them). These folks confirmed your suspicion: It does matter a lot where you went to school. Competition for entry-level investment-banking jobs is so intense that even with stellar work experience plus an MBA from a top school such as Harvard or Wharton, you chances of getting in the door would be roughly one in 12 which means, of course, for what it's worth that most Ivy League applicants don't make the cut either."
Source: Anne Fisher, "Ask Annie," Fortune, 5/10/99. Annie's advice is also available at http://cgi.pathfinder.com/fortune/careers/annie/.
Annie's response was no surprise to Dr. Risk, who has worked at Salomon Brothers and Morgan Stanley, and has friends at the other firms she mentions. What Dr. Risk has seen and heard is consistent with what she said. In order to get an interview, you need something positive that helps you stand out. In order to get an entry level job, it has to be clear that you can make a contribution, immediately. Potential isn't enough to get one of these coveted positions.
If you see either an ad for either (1) a person who may qualify for a position you have open or (2) a position that interests you, please express your interest to us, via email, and we will either provide a direct E-mail address or forward your message to the party that placed the ad. In your message, please include the relevant Ad Number in the "Subject" (e.g., J980201 or P980201).
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Interviews for jobs in finance, and particularly in derivatives, often involve "brain teasers". Intelligence, mental quickness, and problem-solving ability are important characteristics of successful traders, structurers, and quants. A quick solution to a tricky brain teaser is a nice supplement to a quantitative degree from a top institution. To hone your skills, you might want to try some of the "Derivative Games" at http://www.margrabe.com/games.html.
Top Ten Online Job Sites, according to Fortune, 7/5/99.
One final hint from Mark Granovetter (Getting a Job: A Study of Contacts and Careers. Chicago: University of Chicago, 1995): "In a study of executive, professional and technical workers ... in 1974 ... 10 percent were found through ads, 9 percent through agencies and 74 percent informally." (Susan J. Wells, "Many Jobs on Web, but Not All of Them," NYT, 3/12/98.)
If you're a recruiter who would like to contribute hints in this spot to job seekers on how to present themselves most effectively, please let Dr. Risk know.
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