by Brian DeChesare Comments (159)

It’s Not Rocket Science: Why You Should Stop Learning Partial Differential Equations If You Want to Break Into Investment Banking

It's Not Rocket Science: Why You Should Stop Learning Partial Differential Equations If You Want to Break Into Investment Banking

“Hi, I was wondering which class I should take to break into investment banking: Advanced Partial Differential Equations or Quantum Field Theory. Do you think it will ruin my future if I only learn up through Multivariable Calculus?”

No, I don’t make this stuff up: I get emails like this all the time.

Sometimes they’re from undergraduates, sometimes they’re from MBA students, and sometimes they’re from the occasional MD or PhD candidate.

But my answer is always the same:

It doesn’t matter.

You don’t do “real” math in investment banking, so stop worrying about it and spend your time more wisely.

Got Obsession?

So why is there such an obsession with learning advanced math / winning the Nobel Prize before you start working as an investment banking analyst or associate?

You’re Good at Math

If you’re interested in finance to begin with, there’s a good chance that you’re already good at math and have taken a lot of math classes. You’ve either:

  1. Been interested in finance for a long time and have taken a lot of finance/math classes; or
  2. You were an engineer or science-type who got bored of that and wanted to move into business.

Yes, there are bankers with liberal arts backgrounds as well but bankers in categories #1 and #2 outnumber them.

We Like to Blame Other People

It’s the same reason we believe so strongly in the myth of the “career path.”

If you can get into finance simply by calling hundreds of people and being very aggressive with networking, failure to break in would reflect poorly on you.

But if you couldn’t break in because you didn’t have that class on quantum physics, then you have the perfect alibi.

We Like to Stay In Our Comfort Zone

Getting out there, talking to people, and meeting them in-person is uncomfortable. It’s way easier just to sit at home watching TV…

…or to sit at home completing your math homework.

Going through dozens of advanced math classes also gives us the illusion of progress without actually requiring us to make any progress. It’s part of the 80% you should be eliminating.

The Truth About Math

There are 3 points you need to know about math in investment banking:

  1. You don’t use it that much.
  2. The math you do use is very simple. As in, arithmetic.
  3. Therefore, you don’t have to be a math genius – but you do have to be good with numbers.

Say What?

You don’t use math that much because you don’t do that much modeling work, even in “technical” groups like M&A.

Think “administrative work,” emailing people and updating lists of information.

And when you do use math, 90% of the time you’re working with existing templates or simple models rather than creating everything from scratch.

Yes, it’s cool to be able to say you can create a hyper-advanced LBO model from a blank spreadsheet, but in the real world no one has time for that – so you use templates.

But What About Modeling?!!

Even when you are working with financial models, none of the math is complex.

There’s addition, subtraction, multiplication, and division… and occasionally built-in Excel functions like IRR, Mean, and Median.

You never use calculus or differential equations or even geometry / trigonometry. Just arithmetic and sometimes algebra.

Think about all the basic formulas in accounting: Revenue – Expenses = Profit. Revenue – Cost of Goods Sold = Gross Profit… and so on.

Notice how there are no integrals anywhere in those equations.

So Why Do You Still Need to Be Good With Numbers?

If the math is so simple, why do you need to be good with numbers at all?

Although the individual mathematical operations are simple, you can end up working with huge spreadsheets where a lot of calculations are linked together.

1 + 1 = 2 is simple, but now let’s say you have 100 similar calculations, and the input of each one is linked to the output of another calculation.

That’s exactly what you run into in investment banking, and it gets tricky to trace everything – especially when it’s someone else’s model.

Exceptions & Other Fields

In other fields of finance the math can get more advanced.

The main example is trading, where some funds may use advanced algorithms and higher-level math to make trading decisions – so, if you’re making the sales & trading vs investment banking decision, and you’re leaning toward trading, advanced math classes might be helpful.

For hedge funds, it depends on what strategy the fund uses: long-term fundamental investing has less math than algorithmic trading.

Also in trading, mental math (17 * 35) is more important because you need to make quick decisions.

Outside of those, the math in other industries like private wealth management is as simple as it is banking.

So What Should You Do About It?

Stop taking advanced math classes – especially if they hurt your GPA.

Bankers look at the overall difficulty of your major but they don’t go in and analyze every single class – a 3.8 GPA with easier classes is much better than a 3.3 GPA with “tough” classes.

Plus, taking such advanced classes takes away from time you could be spending on internships, school-year internships, networking, and activities.

When reading your resume, bankers pay attention to the school you attended, your internships, and your GPA – not individual classes.

Beyond Undergraduate

Despite rumors to the contrary, sometimes you have to do work to get through business school.

At this level, taking “more advanced” classes is an even worse use of time because:

  1. At the MBA-level networking is even more important.
  2. Hardly any “math-intensive” finance positions hire directly from business schools – you don’t need an MBA to be a top trader. You just need to make a lot of money.

So if you’re at this stage and you’re serious about breaking into investment banking, forget about advanced statistics / financial math classes and do the bare minimum.

Summer School?

I also get a lot of questions on whether “finance summer school” or taking classes during the summer instead of an internship is worth it, and the answer is always “No, unless you have no better options.”

Bankers don’t like taking risks, and they always prefer to hire someone with investment banking internship experience over a newbie.

What About Your PhD / MD?

Bankers tend to look down on advanced degree holders.

They want people who can burn the midnight oil and who are aggressive enough to find ways to make or save money – and they don’t think that advanced degree holders fall into this category.

Getting these degrees is far more difficult than anything you do in banking, but most bankers don’t like to acknowledge this.

So if you’re already deep into one of these programs, cut your losses and get out early or take the path of least resistance if you’re too far in to drop out now.

Improve Your Communication Skills

If you really want to improve your skills before you start working, forget about math and focus on your writing and speaking skills.

There are tons of analysts who are good at math, but few can describe what they did and how it helped their bank make money in plain English.

And if you want to move up, you need to interact with senior bankers a lot – so getting to the point without rambling or stuttering is essential.

And If You Really Want to Improve Your Math Skills…

If you’re still set on improving your skills, forget about classes and have a friend in the industry send you a complex model with many different tabs.

Then, try to “reverse engineer” it and figure out what the key drivers are and how they affect the output.

Creating a model yourself is relatively easy because you control everything – the real challenge is looking at someone else’s model and figuring out how it works in the first place and how to modify it.

So spend some time playing around with complex models and get used to the process of tracing individual formulas and outputs.

And please, no more partial differential equations.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. I doubt your very successful in investing if you don’t believe in math. Its pretty much the only thing based on facts in the entire universe!

    1. Did you read what was stated in the article? Yes, you obviously need some mathematical ability to make investment decisions, but:

      a) Fundamental analysis is fairly simple – arithmetic, algebra, and basic statistics. You don’t need to know PDEs to analyze a company’s financial statements. In quant roles this changes, and topics like linear algebra and calculus become more important, but this article was specifically about investment banking.

      b) Investment bankers do not “invest” – they are agents, like real estate agents, that earn fees for completed transactions. They need to know how to market and sell and build relationships, but advanced math is unnecessary because it’s a relationship-based sales role.

  2. Avatar
    mansi chauhan

    I am in my final year of economics honours from University of Delhi and am not able to decide how to start my career in investment banking. Masters in finance or MBA are the options I am puzzled about. Or is there any other better way like working full time before pursuing masters, joining some other institution to enhance my skillset etc.

  3. hi I have done my engineering and looking to get into the field of investment banking, but I have no knowledge about if. so from where should I start.

  4. My professor said that asset management is highly mathematical. Is this true?

    1. Avatar
      M&I - Nicole

      It depends on the role. Not necessarily if you’re in say sales. If you’re in an investment role then yes.

  5. Hi I studied marketing in high school so now I want to study investment banking but I never did accounting and I only did mathematical literacy which is not so difficult do I have a good chance at pursuing this degree?

    1. Avatar
      M&I - Nicole

      Yes, I don’t think accounting requires advanced mathematical skills.

  6. Hi,
    I have two Associates degrees. Communication Studies, Business, and was 4 classes shy of becoming a Paralegal. If, I decide to take calc 1 and calc 2, and graduate with a comm degree from a UC (target school), do I have a good shot at investment banking?

    1. Avatar
      M&I - Nicole

      I think work experience matters most, but the classes you mentioned can be somewhat useful.

  7. Hello,

    Great article! I have been doing research for some time now and your article has the most comprehensive answer that I could find and help me decide to not worry about math – although I’m considering taking linear algebra post graduation if time allows.

    However, I would like to ask for advice since I’m here. I am mid way through my junior year pursuing a degree in finance from a local state school. I have a background in retail management and I want to break into the finance industry as an analyst. I expect my gpa will be in the neighborhood of 3.5 – 3.6. My concern is that I am a full time employee (salary manager) and can not afford to quit my job to take on an internship. I have no idea how my retail management experience is going to help me or hinder me once I complete my undergrad degree. Do you have any advice or suggestions? Thank you for your time!

    1. Avatar
      M&I - Nicole

      Perhaps you can look at research/buy-side roles that specialises in the retail industry. You can then use your retail experience as a stepping stone. Best to gain some sort of finance experience in school or at work too.

      1. I will look into those options. Thank you and have a good day!

  8. What are the chances of getting hired for an analyst position with no internship experience but an MBA degree? At this point, do you have any leverage over an undergraduate with an internship experience?

    1. Avatar
      M&I - Nicole

      It is hard to say because it depends on various factors (1) Are you from a target school (your MBA)? (2) How do you present yourself? (3) What are your valuation skills/experience? etc So I’d say it’s a 50/50 chance depending on the above. And yes, having internship experience at a bulge bracket is always best, though you’re technically an Associate post-MBA so I am not sure if you’ll be competing with an undergraduate.

  9. What would you recommend to improve my communications skills? I feel that’s a point I really need to improve

  10. Hi, this is really for the “Traders and Brokers” article. However when I attempt to make a comment there I get a message saying “Invalid request signature”; I’m posting my query here instead.

    So basically if I understood the article correctly, lets say you’re finding it hard to break into trading (in a big firm). One could plausibly work for a broker such as CQG/FXCM or a vendor like Reuters/Bloomberg and still break into the industry via the ONE of following routes:

    – MSc in a target uni (I suggested this because unless you have work experience, doing a MSc RIGHT AFTER a BSc is worthless, at least in London)*

    – Network while in those brokerage/vendor firms, as you need to understand trading dynamics to service the traders

    – MBA to re-brand yourself*

    *Includes networking.

    Basically it should be plausible to transition from broker/vendor to trader?

    1. Avatar
      M&I - Nicole

      Yes, these are common paths.

  11. Avatar
    Math Inquiry

    Does Calc 1 or 2 serve any purpose in banking? Why do undergraduate schools mandate those courses?

    1. Avatar
      M&I - Nicole

      Not really. Perhaps because they want you to be a bit more well-rounded?

      1. I am taken aback by this point of view that advanced math is unnecessary for a successful banking career. I, myself, and pretty much everyone else at my bank, even those in non-technical roles, value the math-inclined strategists very much– in fact, some would credit our firm’s vey success on having hired the world’s best mathematicians over the years.
        First, a rigorous grounding in math is the single most useful liberal arts skill set you can have in ANY industry, let alone the number-rich field of banking. That’s because math teaches you a structure for how to THINK about ANY problem through the invaluable tools of definition, abstraction, logical interrogation, and proof.
        Second, risk management is of paramount concern to every financial institution, whether it be a bank or insurance company or investment manger. Risk is one of the most complex mathematical notions ever conceived, and any conversation about it that is not grounded on probability and its dynamic processes (whose solutions, by the way, ARE partial differential equations) would not keep the attention of any serious professional for very long.
        Bottom line is: math is hugely useful– no matter what level of study you’re at or aiming for– and regardless of where your career path is going to tack you. The only caveat I would make is: you will be in school for only so long, and every math course you take is basically one less computer science course you can take — which is an even more important skillset in today’s business world than pure or applied math (but itself is built off of rigorous mathematical structure).

        1. Avatar
          M&I - Nicole

          Thanks for your input.

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