Consulting vs. Trading vs. Entrepreneurship: Got Lifestyle?
This article was guest-written by Zeke Lee, a Stanford graduate, former management consultant, and former derivatives trader on Wall Street. He founded the GMATPill.com, a video-based GMAT prep course for ambitious MBA candidates that was recently featured in Bloomberg Businessweek.
So you’ve reached your last year of university – or maybe you’re in your late 20s or beyond and still haven’t figured it out – and you’re in “What do I do with my life?” mode.
The obvious solution is “Whatever makes a lot of money and positions me to make even more in the future.”
But it’s tricky to answer that one, because there are quite a few fields where you can do that.
I’ve worked in 3 that you may have considered if you’ve been reading this site: trading, management consulting, and entrepreneurship.
You can do really well in any of those, but the one that suits you best depends on your personality and the kind of lifestyle you want.
So today, we’re going to delve into the lifestyles offered by these different professions and learn how everything from the location to the hours to your co-workers, stress level, and pay differs.
And yes, there will be at least one models and bottles reference by the end.
Location / Travel
With a job in management consulting, you never know where you’ll be staffed. You could be based in your home office for a good amount of time; or you might get stuck in Nebraska, Dubai, or go mining for gold in Saskatchewan.
That’s not necessarily a bad thing when you’re 22 and just out of school, but traveling every week is the last thing you want to do once you’re older and have a family.
You also spend a lot of time in consulting thinking about travel arrangements, when you need to arrive at the airport, and how your travel affects the number of hours you’re billing to the client each week.
That can be annoying if you’re not into travel, but then you could also be enterprising and AirBnB’ing your vacant apartment when you’re out of town to earn extra cash – which comes in handy when you compare consulting pay to the others on this list.
In trading, by contrast, you always know where home is and you never find yourself using Google Maps on your smartphone to figure out how to get back to your hotel at night (though you might be too hung over after a big night out to find your office successfully).
The only downside is that trading is focused on a few big hubs – New York, Chicago, London, Hong Kong, and a few others – so you’ll probably have to live in one of those cities. Whereas you do get more flexibility with consulting, since plenty of consulting firms have offices in dozens of cities.
With entrepreneurship, it’s so dependent on what type of business you’re starting that it’s hard to say much about where you’ll be living and how often you’ll be there.
My experience is with online businesses, which are great in some ways because you can work from anywhere, go to any city you want, and meet people anywhere.
Of course, if you decide to start some type of high-end consulting or service-based business instead, then it will turn into management consulting and you’ll be flying all over wining and dining clients in different places.
Location / Travel Winner(s): Trading is the most stable / predictable option, but starting your own business could be even better if you pick the right type of business.
The good news is that none of these 3 fields necessarily involves the same 80-hour+ workweeks that you see with investment banking hours – but there are other factors to consider.
Consulting calendars are usually based on projects, so your hours and schedule will fluctuate greatly depending on what stage of the project you’re at. Weekend work happens sometimes, but you’re not necessarily expected to be in the office unless you’re working on a project that gets incredibly busy at the last minute.
The hours worked per week are about the same (~60 on average) for both consulting and trading, but with trading you have a more fixed schedule because you work when the markets are open.
So if you’re trading US stocks, you work from 9:30 AM to 4 PM New York time, and might have 1-2 hours of pre-market and post-market work to do, giving you a 7:30 AM – 6:00 PM workday most of the time.
The biggest advantage is that trading hours are more predictable since they don’t vary much from day to day, so it’s easier to have a life and do at least a few things outside of work.
Just be careful not to take a trading job on the west coast if you still want to have a life: you’ll be waking up 3 hours earlier than you would on the east coast, and also going to sleep 3 hours earlier and most likely missing out on parties and events that happen on weekdays.
Just as location was unpredictable with your own business, so too are the hours.
These days a lot of people fantasize about traveling the world and living the 4-hour workweek lifestyle, but the truth is much different: especially in the early stages, your business becomes your lifestyle.
It’s totally different from consulting or trading where you can separate work and your own life – if something comes up, you have to take care of it even if it’s 3 AM and you’re about to go to Bali to go surfing in a few hours. After all, if you don’t take care of every aspect of the business, you’ll be the one suffering the financial consequences in the end.
Hours tend to be longest at venture-backed startups, where you need to sink or swim quickly and start showing exponential growth; you can potentially get better hours with a small business or anything that doesn’t need to scale very quickly.
I say “potentially” there because your hours will be intense as long as you’re actively running the business, and especially when it’s in the early stages.
At GMATPill, we get questions from students all over the world and so everyone involved needs to be ready to respond no matter what time zone. That’s one reason why some students have said it’s more helpful than Kaplan or ManhattanGMAT, but on the flip-side, you can see how even with an online business you might have long and unpredictable hours.
Hours Winner(s): For the average person, trading wins in terms of hours worked and predictability.
The amount of co-worker interaction you get and how you act around your co-workers is even more different than the first two criteria above.
Consulting is generally the most team-friendly environment, because you always work on projects with other consultants and are often in the same room as the rest of your team.
You’re talking to other people every day, and the people who are in consulting tend to come from more diverse backgrounds and have better “people skills” than those in (some) areas of finance.
The culture at consulting firms also tends to be more employee-friendly and tolerant of mistakes than what you see in trading, where it’s 100% results-driven and you as an individual are valued according to your P&L.
While each trading desk is a team, there’s much less back-and-forth interaction and collaboration between team members than there is in consulting.
You spend most of your time staring at all 8+ of your monitors, processing information, and figuring out how market developments impact your portfolio. Your boss and more senior traders occasionally check in with you, but it’s more solitary than what you do in consulting, especially on the prop trading side.
At a large bank, you do interact with the salespeople and junior traders and field calls from them during the day, but it’s not like consulting where you’re all in the same room sitting around a table working together.
Co-worker interaction is arguably the worst when you start your own business – if it’s online, you start developing “online” business relationships and you spend more time writing emails and talking on the phone rather than meeting in-person.
And even if it’s a traditional business with an offline presence, you don’t have true peer co-worker interaction unless you start it with a business partner or two – and even if there are other people in your office, the dynamic is much different when you’re the boss rather than the employee.
On the other hand, you also don’t have to deal with office drama and politics, which is appealing to many people.
The best option to get around this issue is to create your own community and start networking with other business owners – there are lots of Meetup and Facebook groups for this purpose in most major cities.
Co-Worker Interaction Winner(s): Consulting wins in the average case, with the most teamwork and the most co-worker collaboration.
Dress to Impress?
In general, fashion matters the most for consulting because you’re around clients constantly and need to wear decent clothes to be taken seriously.
Since you’re never in your apartment and can save on furniture, take that extra cash and spend it on decent clothes and shoes: you may think it’s all about merit, but just as with anything else, appearance and first impressions are huge. If you don’t dress well, they’ll assume that you’re not as polished or articulate and may not send you on as many client engagements.
In trading, by contrast, fashion makes much less of a difference because you don’t meet clients in-person, and in prop trading you don’t even have clients.
You can’t show up to work wearing jeans, but normal business attire is fine and spending extra on clothes won’t give you a huge benefit (this, of course, is much different on the sales side).
With entrepreneurship, once again it comes down to the type of business you’re starting: if it’s online and you never see people, fashion is irrelevant and you can work in your bathrobe.
If it’s client-based, fashion becomes much more important and spending extra on clothes can have a huge ROI ($100 per hour vs. $1,000+ per hour).
Even if you’re working online or you’ve founded a tech startup, it still pays to have at least 1 good suit and decent clothes on-hand, because you never know when you’ll find yourself at a networking event or presenting to a large group – and appearance matters.
Dress to Impress Winner(s): If you like fashion and buying good clothes, consulting wins. If you’re not into it and really want to work in your bathrobe, entrepreneurship (assuming an online business) wins.
All of these professions can be stressful, but the types of stress you encounter are much different.
With consulting, the stress is mostly about what the client wants and getting random requests that further complicate or lengthen the project.
Then there’s the stress of travel and having to plan your work life around that.
You do get some pressure from your superiors and other co-workers, but overall it’s not like investment banking where people can be cutthroat and where relationships with higher-ups are tense.
With trading, by contrast, you don’t have clients in the same way so it’s more about market-related stress and not screwing up personally.
Imagine looking at your Facebook and Twitter news feeds all day, and then multiply that by 10x and you get an idea of what it’s like to be a trader: there’s tons of constantly changing information to sort through, some of which is useful and some of which is useless.
It’s a constant flow of information, and if you miss one small detail or step away briefly you might lose tens of millions of dollars (or more if you have fat fingers).
At a large bank, you might be forgiven for mistakes in the early stages, but prop trading firms and hedge funds are less forgiving and won’t hesitate to boot you if you’ve lost a lot of money.
With entrepreneurship, especially in the early stages, the stress is related to where your pay is coming from: it’s not like consulting or trading where you get a guaranteed base salary.
You never know what sales will be like the next day, week, or month, and if something goes wrong you start playing mind games and second-guessing yourself, wondering if it was just a temporary hiccup or something more serious.
Then you have the stress of managing employees, making payroll, working with partners, figuring out what product to build next, worrying about what happens when Google/Facebook/Apple enters your market, and so on.
Stress Winner(s): Assuming you want the least amount of stress, consulting wins. If you’re a masochist and want as much stress as possible, entrepreneurship wins.
Budgets, Models, Bottles
Ah, now the fun begins.
You get paid significantly less in management consulting than in trading; the gap may not be huge in your first year or two, but it increases more and more over time.
If you make the sales & trading vs investment banking comparison, a trader might start out in the low 6-figures and reach the 7-figure range in between 5 and 10 years, and sometimes earlier than that, assuming good performance.
Even the most senior Partners at the top consulting firms won’t come close to that; the compensation progression is much slower, and many Partners and Principals won’t even hit the $1 million USD mark.
The average case in both industries is probably not too different at the entry through mid-levels, but the ceiling is far higher in trading because there’s no limit to the amount of money you can make from investing.
Entrepreneurship is similar to trading in that respect: look at Fortune’s list of the richest people in the world, and most billionaires have started their own businesses and/or are investors of some kind.
In fact, the ceiling is even higher with entrepreneurship because you could create a company worth tens or even hundreds of billions of dollars – no trader could reach that level because it’s so hard to raise sufficient capital.
But the average case is much trickier to establish; the oft-cited statistic that 80% of all businesses fail within 5 years isn’t quite correct because it’s based on whether a business still “exists” according to tax returns – so if you sell your business or voluntarily move onto something different, that counts as “failure.”
Even figuring out your own income is trickier with your own company, because you also have expenses: it’s not like trading or consulting where it’s just your base salary and a year-end bonus.
Plenty of retail stores and restaurants have revenue in the millions, but have very low margins because of their high cost of goods sold and operating expenses – so the owner doesn’t take home nearly that much.
It’s safe to say, though, that if your business lasts for any length of time you won’t be starving – and remember, 31% of “The 1%” consists of “executives and managers in other industries,” many of whom own businesses.
Budgets, Models, Bottles Winner(s): For the ceiling case, entrepreneurship. For the average case, trading.
So, What to Do with Your Life?
You may now be tempted to say, “Aha! I’ll just see which career won in the most categories above and pick that one!”
One small problem, though: it’s a 3-way tie. They each won or tied in 3 categories, so there’s no clear winner.
And that’s the point of this exercise – we like to debate “lifestyle” a lot, but it’s not the best way to pick a career unless you have strict requirements that absolutely must be met.
Lifestyle only matters in the context of what’s important to you: if you want a predictable schedule and location, you’re a trader; if you like to travel and work in teams, you’re a consultant; and if you have a burning problem you need to solve and hate working for others, you’re an entrepreneur.
So think through these lifestyle differences, but always keep in mind what matters most to you.
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