Wall Street v. Big Tech Compensation: Who Earns More?
In this episode of "The Blind Ambition with Jack Kelly" podcast, Jack Kelly and Rick Chen break down Goldman Sachs' latest planned layoffs of 1,300 to 1,800 people as part of its annual performance review process. We react to the mega investment bank's plans to "cull" its workforce and why so many Wall Street firms and banks have annual layoffs.
Jack reflects on how the situation is exacerbated by the stigma associated with being labeled a so-called "low performer" and how it typically impacts someone's job prospects in the future.
Rick compares the pay packages common on Wall Street and the finance industry with what you might earn at Nvidia, Meta or a startup in the tech industry. He also explains how stock options and restricted stock unit grants work and whether people really earn $500,000 or more in tech. Jack contrasts the tech industry's stock-based compensation with Wall Street's cash bonuses and explains which might be the better bet for your career.
Rick Chen (0:04): Hey everybody, and welcome to this special episode of "The Blind Ambition with Jack Kelly." It's your friend Rick from Blind, and today, I've asked Jack to come on the show and click down this headline. He's covered in Forbes, Goldman Sachs having another round of layoffs. It's going to be about 3% to 4% of the bank's bull headcount, which ends up being around 1,300 to 1,800 jobs. And the kicker here, which is why I want Jack to break it down for us, is it's connected to the annual review process, and the bank, the executives have come out saying, hey, these folks that are getting cut, we're doing it because of performance reasons. It's not a typical reorg layoff. It is performance-focused. Now, did I get that right, Jack?
Jack Kelly (1:03): Yeah, you know, so, this is what I think is so unfair. It's not just Goldman today. We're talking about Goldman Sachs, really well-regarded, one of the top-tier investment banks there is. And what happens on Wall Street? It's kind of cold-blooded. Every year, sometimes a couple of times a year, it's culling the herd.
So what happens? They'll take, supposedly, the low performers, you know, the people who feel are not up to snuff, and just let them go. And it's harsh, it's cold, it's brutal. And not only that, it's not just the layoff.
The challenge is this. So let's say Rick and I are Goldman Sachs, and we're let go. The press is showing that they're letting go low performers, non-performers, words to that effect. So if we're going to now go and interview at Morgan Stanley or interview at Deutsche Bank or a hedge fund or a private equity shop, the companies aren't stupid. They're going to say, hmm, why did Jack and Rick get chosen to leave the company while there's 40,000 people at the company ready? Why did they leave? Why were they asked to leave? Is there a problem? Is there an issue? So now, only do you not do you lose your job, but now, you have this stigma attached. Hey, you're a non-performer. You're a low performer. You're not up to snuff. You know, there's something wrong. You didn't do something right. So now that follows you. So imagine going to an interview, and the interviewer at a Morgan Stanley, they're going to, you know, human nature, they're going to be curious, hmm, are we taking a leftover from somebody? Is this a bad person? Is this someone who did something really bad? Did they do insider trading? Did they do something questionable? And now that sticks with you.
So, Rick, I don't think it's like that in the tech sector, but it's a really cold way, in my opinion, really cold way of doing it. Now, if they didn't put on the importer of low performer and words to that effect, okay, once you say that, it plants that seed for other people to look at you in that way. It just seems like a double tap of negativity, losing a job, having this like, prejudice against you, because maybe it was your fault something happened. So it's like, not only do I not want you, I'm going to screw you so that you can't get a job anywhere else.
Rick Chen (3:38): It's the scarlet letter that's going to stick on your resume.
Jack Kelly (3:42): Oh, my, that's a great way to see it. Scarlet, like, hey, beware of this person with the scarlet letter. This is a problem. Watch out for this person.
And then, you know what? Think about this. This is what's also so crazy. This is what drives me nuts. If you have 1,000 people getting laid off, they make it sound like it's nothing. Oh, it's only 1,300 people. Only 1,300 people. Where the hell are the managers?
If there is 1,000 people that are not performing up to a certain level whose fault is that, wouldn't you have to point to the managers and say, wait a minute? Are you doing your job? Are you training them? Are you coaching them? Are you mentoring them? Are you re-skilling them? Are you doing everything you can to bring them up? Maybe it's not the worker's fault, and this is another reason why it's so frustrating for people because it could be the managers who suck. Like, why do we absolve them of everything? If they were good managers, presumably, they would see that their people aren't really doing well, so they'll do everything in power to bring them up so they don't have to be called, right? I mean, we ignore that part.
Rick Chen (4:43): I wonder. And so this is my, my days when I wanted to be a lawyer, young Rick time, yeah. But a lot of these big law firms, they have these so-called up-or-out policies where, you know, after five, seven years, if you're not a partner at the law firm, you're let go. Is that the case at some of these Wall Street banks, Goldman, Morgan Stanley, what have you? Do they have a similar practice in terms of, hey, you know, if you've been at the firm for this couple of years, and you're not on that partner track, or you're not an executive yet, is that how they're kicking these butts of the managers? Is it in another roundabout way, or does that culture not exist? Or does it exist in a different way on Wall Street?
Jack Kelly (5:31): That's a really good question. What happens is this, with Wall Street, it's similar to the way you're describing, but a little different. Let's say you're an investment banker. You're doing deals. You do mergers and acquisitions. You know, you're doing underwriting for IPOs, what have you, and you're the hot shot. You're doing great. But then all of a sudden, if some years go by, maybe you lose some clients. The economy is different. Maybe not so great. So now let's say Rick and I were like hot shot young investment bankers, but due to the economy, due to other events, due to our age, maybe things are changing, and now it's kind of what you're saying about the law firm. They may tap us on the shoulder and say, hey guys, you know, you had a great run, but we're looking at the numbers, and we're paying you, you know, a million a year, and you're not really generating that much. So sorry.
So, it's a little similar, like it's your expiration date. Alright, you were really good. You really helped us. You made a lot of money, but you're not making us money anymore. So see ya. Take care.
Rick Chen (6:35): It just strikes me of this culture of what have you done for me lately? Right? There's this recency bias in terms of like, hey, are you producing right now here in this last year? Or whatever that cycle might look like?
It strikes me because in tech, I find that there's not this same culture. You know, you could be a senior software engineer, and that could be your terminal level, and no one would bat an eyelash, like, hey, Rick, why aren't you a staff software engineer? Why aren't you a director? Weren't you a CTO? You know, if you're just killing it at coding shipping all the time, that's fine. Or, you know, if you are laid off by Google, I'm sure Microsoft would love to have you, right? I'm sure Apple would love to have you. There's hundreds, thousands of startups that would dream of picking you up, right? So they could say, hey, we have a former Google engineer now at our startup.
Again, this is why I wanted to chat with you about it. It just strikes me. So, what happens to these thousands of people, and I imagine these banks, Goldman, everyone else does this every single year. Do you just have to leave the industry entirely? Does it sink you that bad? Do you have to go down a tear? Because it just seems so especially brutal when Goldman does it so many people want to work at Goldman. What if you finally make it, and you're just part of this herd that gets culled this year? Are you just screwed all out of the whole finance industry because Goldman has put this brand on you?
Jack Kelly (8:09): You know, the positive side to working in finance is that, unlike FAANG, where you may have half a dozen or plus top tech companies, everyone wants to work for finance, it is really large.
I think a lot of people don't realize how big that industry is. You have everything from wealth management to money management to hedge funds to private equity to trading. You have fintech. So there's so many different ways you can move your career. So let's say you have that scarlet letter. You can move to different areas. You may have the background experience to pivot into mergers and acquisitions. You can maybe pivot into private equity. Hey, all right, it didn't work at Goldman because you were doing this, but you really do have the knowledge, the background, the credentials, you could go somewhere else.
So tell me, if I'm wrong, it just seems to me there's so many more outlets for people to go within the financial sectors because even with finance, you have insurance, you have so many different practices that you can move into that you can make a nice living and do well where I think with tech, it really, and again, tell me if I'm wrong about this, all the attention really is for FAANG. That's like the Mecca. And if you're not there, you're nowhere. It is similar to Wall Street, where you want to be in the top echelon, whether JP Morgan, Bank of America, KKR, which is a big private equity firm, and so forth. But even if you can't do that, there's so many other, you know, mid-tier, what have you.
Now you might take an ego hit. So if you go from Goldman and you go to maybe a second-tier investment bank, you might say, but at least you have a job, you know, you're still in the game right where I think within tech, it's hard because you're fighting over just a limited five, six companies, at least what I see, I'm on Blind all the time. So you're fighting everybody else, brushing up on their Leetcode and doing whatever you can to make sure that you get into. Where, with finance and Wall Street, I think it's more open, and it's also across the whole U.S. and international. So like, you could actually work in different countries, in different cities and different states. So I think you have more mobility.
It sounded harsh when we started talking about what do you do next? If, let's say, you're laid off from Goldman or another bank, there are lots of other opportunities for good, smart people out there.
Rick Chen (10:21): I appreciate sharing that other part of the coin because in tech, my understanding, having been in this industry for so long, is everyone wants to go to these five, six companies because those simply are the companies that pay the best tech. It seems analogous to finance in the sense that there are many different specialties, different industries, certainly, many different company sizes that you can work at. But God, like the pay difference from this top tier to the second tier, where, God forbid, tiers below, is just so significant that you really feel it on the way down. You really feel it on the way out, where you might have to change your entire lifestyle. Maybe that's not the case is what I'm getting from what you're saying Jack. In finance, where maybe there's just more off-ramps and that off-ramp is less steep. It doesn't kick you in the butt on the way out as much as it might do in tech.
Jack Kelly (11:19): But, let me ask you, with tech, if you're in FAANG, it sounds like there's like a big drop off, if you go down tiers, like, how much money? Let's say, for typical, let's say, someone working for Amazon or Apple. I see the what they're what people are saying; I'm on Blind, that they're making $500K, $600K, $700K, $800,000. Is that accurate, or are they hyping it? Or what's the real deal that goes on?
Rick Chen (11:48): I'm glad you asked because part of it is a bit of a hype, right, where you're pumping it up, and that's largely because, if you look at the stock market, most of the gains in the biggest 500 companies, the S&P 500, it's pretty much the seven companies, right? The so-called Magnificent Seven, and they're primarily tech companies. There's the Amazons, the Nvidias, the Metas. So that's why those end up being the seven or 10 companies that everyone in tech wants to work at because stock-based compensation is such a big part of compensation packages.
When you're looking at your TC, your total compensation, for a lot of folks, their initial grant in their offer letter might be something to the effect of base salary is going to be $200K, and you are going to get a stock package worth $500K split up over four years. So your first year, technically on paper, your compensation is actually $200K plus the $125,000, but what ends up happening is, as your stock gets released to you, as it vests over time, the stock value, the share price, actually trades up because, you know, they're innovating. They're coming up with all these new technologies and products and services where the company is becoming more valuable. So that $125,000 stock grant that you get every year ends up being worth $200K, $300K, $400, $500K. And so your total compensation ends up being $600K, $700K every single year, when on paper, you know, it was just supposed to be that $125K, and that big drop in terms of that high level to, you know, a startup is especially extreme, because it's all about the liquidity, right?
If you work at Meta, you get that stock, you can sell it immediately as its vest, because you can go to Fidelity, you can go to E-Trade, you can go to, you know, Merrill Lynch, Robinhood, and buy Meta right now, today. Everyone knows exactly what the share price is going to be. There's a market where you know you're going to be able to sell it, but if you work at these startups, even these huge companies about to go public, that liquid market doesn't exist, right? So you have basically lottery tickets where you can't necessarily sell your shares. If you do try to sell your shares, you're not necessarily sure what you can get for them. There's all these marketplaces, and we've had them on the show, but that market is opaque. People might not necessarily want to buy it, or you might have to wait four, five, seven, 10 years even for that liquidity event to happen, whether it's a secondary sale of shares or that eventual IPO or an acquisition. So you could be sitting on a lot of paper cash.
You know that recruiter, that offer letter will say at a startup, hey, you're going to get 100,000 shares, and you're like, great, but you can't sell it, or you have to sell it at a discount. So that's that big drop. It really comes down to that stock-based compensation.
I've been on the other side where, on paper, my stock compensation was supposed to be $100K, and the company actually does poorly. The shares trade down, and so you're actually seeing a pay cut. It's not something that anyone at the company likes, but I've been there too.
Jack Kelly (15:20): So, let me just understand. If you're in the right company and it's doing well, and your stock appreciates, that $125K, and the base will be like almost chump change, compared to what you're going to get on the appreciation of your stock, right? So is that? So is it almost like you guys are gambling on the tech side, where you're gambling that you find that right company? And maybe that's why everyone goes to FAANG because they feel like the stock's always going to go up. And if it always goes up, and you have a lot of that stock, you're going to be freaking rich. Is that the game? Is that how it works?
Rick Chen (15:56): I mean, it's less of a game in the sense that, you know, Meta, Amazon, the volatility is not quite there. It's not a meme stock. The variation isn't going to be that crazy, right?
These typical offer letters at these large companies, when they're describing your compensation, most base salaries are going to be the same if you're going to be a senior professional on the business side or a software engineer. It might be something like $200K to $250K, and that band is pretty tight. It's really the stock compensation that's different, right?
So, there's certain roles, like engineering, tech side, they might earn more stock than someone that is, you know, on the HR side or on the marketing side. You'll get something in your offer letter that says, you know, $400,000 but vests over four years. And so you do a little bit of math, and you end up saying, oh, that's $100,000 a year. So they'll give you $100,000 worth of stock, whatever that might be, and it's usually be based on a certain date after you join or a certain point of time in the year, where they'll take a snapshot of what is our stock trading on on that day, and then give you that many shares. And you just got to hope, oh, well, I got 50 shares. Oh, lucky for me, our stock actually went up. And so my $100K of stock is now worth $120K or $200K or whatever.
Jack Kelly (17:29): Rick, what I find so interesting and funny is that if you asked any person at random about tech versus finance or Wall Street, they would say, oh, the Wall Streeters are the gamblers. They're the ones taking the risk. But the more I'm hearing you talk about it, it's different.
Let's say you're at a Barclays, Deutsche Bank, you know, good firms. Let's say Goldman and Morgan Stanley, or JP Morgan, or the PE shop; you'll get a really nice base, and then you get a large bonus. So most of the money on Wall Street and finance; it's the bonus time. They get little stock, for the most part, maybe some big executives get some stock, but it's really the bonus. So you're working the whole year hoping you'll get your bonus.
In fact, a lot of a lot of people who work on Wall Street, their salary is just to pay the bills and all that. But then they wait for the end of the year where you get that big bonus, and then you're like, yeah, the gamble is that you could have a bad year, but you're crushing it all along, like, think about what's going on now in the market, everything is going up, up, up, up. All of a sudden, Nvidia is going down, the stocks are going down. So you could have this great year, and then all of a sudden, not so great. And now your bonus could be what they call a donut or zero or a bagel.
Immediately, literally, you could have been crushing it almost all year, and then in like November, early December, things go bad, and like, oh, sorry, Jack, sorry, Rick, you got a bagel. You got, like, a zero on your bonus or very little bonus. So that's gambling. You're hoping you're going to hold your job and then get a good bonus on your side. With tech, you have got to hope that the company you're with, your equity is good, and nothing goes wrong with your company because then you can say, oh my God, all right, my base is all right. But now, whatever is going wrong with my company? RSU, restricted stock unit RSU, so you have RSUs, but like, if your company all of a sudden something goes wrong, then you're skunk too, right? You did all that hard work, and maybe you don't have much to show for it. So I guess both sides, you are gambling. How is it going to play out?
Rick Chen (19:37): Well, the PR person in me was saying, no, it's not a gamble because it's to align incentives. We're in the same company together. We all want the company to do well. We're getting shares of the company because we're literally part owners of the company, and so that's to reward you for the hard work. It's almost like a profit sharing.
Where it seems like, on Wall Street, you're getting cold, hard cash, right, for your bonus. And in tech, that cash bonus is less frequent. Some companies do have it in addition to the stock and your base salary, but it's primarily stock, right?
So, there's almost two kind of gambles. If you're working at a startup, you're getting stock options instead of restricted stock units, for the most part. A stock option, you actually have to buy them with your own money at a certain strike price, at a certain price, and you're hoping that one the price that I'm allowed to buy those shares at is low enough, or lower than what the eventual value might be in an IPO, or whatever. Then second, that the company eventually hits that milestone where someone wants to buy the stock, or the stock becomes liquid, because, you know, I've been at companies where I buy my stock for my stock options, and I'm just sitting on the stock. I don't really have a good way to sell it; the value might even go down because, you know, in 2020, 2021, a lot of tech was flying high. These companies were raising at these crazy evaluations, and so, on paper, the stock went up. But now we're in 2024, that might not be the case. There's no liquid market, so you're kind of making this guess. But what if I had joined in 2021 and got these stock options that were priced really, really high, and now I have to wait and hope that the company will eventually get to those same levels or grow into that valuation for my stock options to be worth or something?
Alternatively, if you work at, you know, a not-so-cool public company, the stock goes down. And so I was promised $100K a year, but now it's, you know, the stock gets halved. And now I actually have $50k in stock. It's like, great. I got a pay cut.
Jack Kelly (22:01): Oh, this opens up a door. Let me just kind of think this through out loud because I'm on the Blind platform. And, you know, I would encourage anybody who is going to watch this to check it out because it's interesting to learn what goes on behind the scenes in different industries, in different sectors.
So, what I see, is this within the finance area, here's a kind of a drawback, or maybe a little pitfall. Let's say you were a stockbroker, wealth manager, money manager, what have you? The incentive is that you need to sell more. You'd have to do certain things. But by doing so, we see on a regular basis, like, my God, here's what happened, this terrible thing, because you get big bonuses based upon your productivity. It's human nature. You're going to push the envelope. Let's say you're a stockbroker. Insurance rates are going up, mortgage rates are going up, everything, food is going up. You're like, oh, I need some extra money. Maybe I'm going to tell Rick this stock you bought. Let's get you out of this stock and put you in this stock. So now the broker will get some more commission money because they're churning your account a little bit because they got to come up. And that's just one little example of it on the finance Wall Street side. I don't know if the same thing happens in tech because tech seems to me kind of like you can't fudge the number to goose up your total package.
Rick Chen (23:26): Yeah, I'm trying to figure out if there's an analog in tech, right? Obviously, we have tech sales where you can structure a deal in a way that gives that sales rep more commission upfront or something like that. But you know, if you're a marketing professional or a PR guy like me, I get that stock no matter what the cause and effect in my day-to-day work is less clear, right? Obviously, an engineer your work, the code that you're producing, ends up being the product that we can sell. Great. The PR gets that publicity and hopefully drives more sales, more qualified leads by marketing, but there's less of an impact in terms of how I can kind of goose up my own numbers because it's at a company level. Yeah, you have to massively coordinate, and obviously, that's what the company wants, right?
Like everyone wants you all to put in this crazy work hour so that everyone's shares can be valuable. You almost had this collective action problem where you really have to get everyone to not rest and vest, to like, work really hard rather than kind of more immediate.
Thanks for breaking down the state of Wall Street for us, Jack, and what these kind of annual performance-related layoffs look like, and what it actually means for those people that are affected, and how that affects their compensation packages.
Jack Kelly (24:51): It's unfortunate we have to talk about the culling and the low performers. But you know, this is what it is.
The value that you and I add is by giving. Some color and context to what's going on. Sometimes, you just have to have this calm, nuanced conversation where you can really delve into, hey, what is going on so people who are trying to navigate their careers may say, you know what, listen to Jack and Rick. I think the tech area is really good, maybe. So how can I kind of cross over and vice versa? So I think it opens up ideas, but particularly when it's a tough white-collar market for finding jobs, I think that's the value that we offer, in part, is to show, hey, here are different things you could take a look at that maybe you didn't even know existed.
And if you've lost your job and are looking for a new one, hey, maybe you could go into finance. Go into Wall Street. So, we'll keep doing these kinds of shows so that we could help people navigate their careers, grow their careers, make more money and build a future for themselves.
