How much do hedge fund traders earn?

Hedge fund trading may be the highest paying job in the world, so to learn more, we spoke with a former manager at one of the world’s leading hedge funds. They gave us the following information, which allowed us to make a rough estimate of the typical earnings of hedge fund traders.

We also ran this document past several other people in the industry and asked them to point out mistakes.

We found that junior traders typically earn $300k – $3m per year, and it’s possible to reach these roles in 4 – 8 years. Senior portfolio managers can easily earn over $10m per year, though average earnings are probably lower. Read on for the details.

How do hedge funds make money and how is it shared among the employees?

Hedge funds trade in financial markets on behalf of clients in exchange for annual fees, and a cut of the profits. They’re similar to mutual funds but face fewer restrictions on what they can invest in, and can only be used by accredited investors.

The revenue of a hedge fund comes from the fees on the assets it manages. The typical fund charges a fee of 2% of assets under management per year, plus a performance fee. The performance fee is typically 20% of any returns it makes for the clients over and above the 2% base fee. So, if a fund makes 10% returns in a year,

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5 reasons not to go into education

First published June 2015. Updated February 2017.

When we first speak to people interested in doing good with their careers, they often say they want to get involved in education in the US or the UK. This could mean donating to a school, doing education policy work, or becoming a teacher.

However, we haven’t prioritised careers in education at 80,000 Hours. We don’t dispute that education is a highly important problem – a more educated population could enable us to solve many other global challenges, as well as yield major economic benefits. The problem is that it doesn’t seem to be very easy to solve or neglected (important elements of our problem framework). So, it looks harder to have a large impact in education compared to many other areas. In the rest of this post, we’ll give five reasons why.

The following isn’t the result of in-depth research; it’s just meant to explain why we’ve deprioritised education so far. Our views could easily change. Note that in this post we’re not discussing education in the developing world.

1. It’s harder to help people in the US or UK

Everyone in the US or UK is rich by global standards: the poorest 5% of Americans are richer than the richest 5% of Indians (and that’s adjusted for the difference in purchasing power, see an explanation and the full data).

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80,000 Hours annual review Dec 2016

Summary

2016 was an excellent year for 80,000 Hours. Here are some highlights – full details follow.

Metrics

  • In our last review in May 2015, we set the goal of 50 significant plan changes per month by October 2016. That month, we actually recorded over 200.
  • To make it harder to grow by adding lots of small plan changes, in October 2015 we started “impact rating” the plan changes, and tracking the impact-weighted total. 31 Dec 2015, we set the target of tripling the monthly rate of impact-adjusted plan changes over the year, which we achieved in November 2016. We now track about 150 impact-adjusted significant plan changes (IASPC) per month.

Impact and cost-effectiveness

  • Our costs in 2016 were £250,000, up 13% on 2015. Considering that our staff could have earned to give instead, the total opportunity cost is perhaps £350,000 – £500,000.
  • Since our last review, the ratio of costs to IASPC fell almost 3-fold.
  • In 2016, we caused 115 people to take the Giving What We Can (GWWC) 10% pledge. GWWC estimates this is worth about £5 million in donations to their recommended charities (counterfactually-adjusted, time-discounted, dropout adjusted). So this alone plausibly justifies our costs, although our aim is to solve talent gaps rather than funding gaps.
  • In addition, the plan changes since our last review now include three people who each intend to donate over $100m over their lifetimes,

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Has 80,000 Hours justified its costs?

We set up 80,000 Hours because we thought it could become one of the most effective charities in the world. The idea was to achieve a multiplier – with a small amount of our time, we could enable thousands of others to spend their careers on whatever is most effective, and achieve thousands of times as much as we could individually.

In this post, we examine whether 80,000 Hours has generated enough impact to justify its costs over our history, and make some rough estimates of our multiplier.

Because it’s hard to estimate what would have happened if 80,000 Hours had never existed, all of these estimates are very uncertain, and can be debated. However, there are multiple ways we’ve plausibly justified our costs to date. In this document, we sketch out some of these pathways. We’re not aiming to be fully rigorous. Rather, consider the examples as a group. If only a few turn out to be genuine cases of impact, we’ll have justified our costs many times over.

Is this the wrong question?

80,000 Hours is a startup. Asking whether we’ve justified our costs to date is like asking whether Google was profitable in 2000. The aim of 80,000 Hours is to grow, and have a far larger impact years in the future.

Most of the value of donations to 80,000 Hours comes from the chance that these donations enable us to grow 10-times or 100-times.

That said,

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80,000 Hours has a funding gap

Over the past three years, we’ve grown almost 36-fold, more than tripling each year. This is measured in terms of our key metric – the number of impact-adjusted significant plan changes each month. At the same time, our budget has only increased 27% per year.

Given this success, we think it’s time to take 80,000 Hours to the next level of funding.

Over the next few weeks, we’ll be preparing our full annual review and fundraising documents, but here’s a preview.

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Overall, the 2017 target is to triple, measured in terms of impact-adjusted significant plan changes per month (which will mean over 3,000 over the year). We’ll do this by continuing to improve the advice, and starting to scale up marketing, with the aim of becoming the default source of career advice for talented, socially-motivated graduates.

Concretely, here’s some priorities we could pursue:

  • Dramatically improve the career reviews and problem profiles, so we have in-depth profiles of all the best options. This will help our existing users make better changes, and bring in more traffic.
  • Upgrading – develop mentors and specialist content for the most high-potential users, such as those who want to work on AI risk, policy, EA orgs and so on. We now have a large base of engaged users (1300+ through the workshop, 80,000+ on newsletter), so there’s a lot of follow-up we could do to get more valuable plan changes from them.

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Update on 80,000 Hours May 2015 – June 2016

This is a quick update on our progress over the last year. Our next in-depth annual review, in which we’ll vet everything in more depth, will be in January 2017.

Our impact across the year

Here’s our key metrics for the top of our funnel. Ultimately we care about significant plan changes, which we report right below.

Unique visitors to site
New newsletter subscribers

Our newsletter now has a total of over 50,000 subscribers, which we think makes it the largest in the effective altruism community (most others have about 10,000). Our total traffic also just overtook GiveWell, which we think is the next largest by traffic (we had 880,000 users over the 12 months ending June, compared to 860,000 when calculated the same way.)

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Is deep work the most underappreciated skill for career success? An interview with Cal Newport.

Deep-WorkIn the land of the blind, the one-eyed man is king – or so the saying goes. In his new book, Deep Work, Cal Newport argues that when it comes to deep concentration, we have become the land of the blind.

He believes that the ability to do focused work is essential for career success, but becoming increasingly rare. And the fewer people are capable of deep work, the more of an edge you should be able to get by being the exception.

We think Cal is one of the most interesting thinkers working on the issue of career strategy, so recommend you check it out. We interviewed Cal to learn more.

Quick summary of the book

Cal defines “deep work” as “the ability to focus without distraction on a cognitively demanding task”.

In his previous book, So Good They Can’t Ignore You, Cal argues it’s better to focus on gaining career capital rather than “following your passion” (we agree). Part one of Deep Work takes off where his previous book ends – he argues that deep work is essential to gaining valuable career capital. In short:

  • Deep work is increasingly valuable in the modern economy because it’s what allows you to master new intellectual skills and produce creative breakthroughs. People able to do both of these can take work that’s unlikely to be automated and reach the top of their fields,

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Which skills make you most employable?

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Summary

We correlated 35 key transferable skills with salaries, then rated them on how easy they are to learn, and combined them into 11 categories.

Based on this analysis, the five skills to learn that will most boost your employability are:

  1. Learning how to learn and personal productivity
  2. Persuasion and negotiation
  3. Science
  4. Communication
  5. Analysis and problem solving

This analysis is still preliminary, so we wouldn’t put too much weight on it.

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Interview: trying to change the resources industry from the inside

Benjamin Todd interviewed Michael Dello-Iacovo about his attempts to do good as a geophysicist inside the Australian mining industry.

What does the job involve?

I’m a geophysicist working for a resources company in Australia. The resources industry is broad, and includes exploration, mining and oil and gas production. Roles in the resources industry include geologists, environmental scientists, engineers (of almost all types), information technology, and a host of others. All of these potentially involve some intermittent field work. I’ll focus on geophysics and geology, as these are the roles I’m most familiar with. Note that this summary is focussed on private oil & gas and mining companies, not government or research organisations. While the roles may be similar in these organisations, the culture, salary and other perks are likely not.

As a resources geophysicist, my work ranges from data processing (which is actually more enjoyable and challenging than it sounds), interpreting and developing geological models and spending time in the field, where my role becomes more one of contractor management, environmental/safety auditing and data quality management. Being in a technical role, I don’t have a lot of meetings (perhaps 2-3 formal meetings per week), and a lot of time is spent behind a computer screen.

Why did you take this job?

I first decided to enter the resources industry part-way through my university science degree because I had a long-time love of rocks and minerals, I liked physics,

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Help build our career guide as a freelance web engineer

We’d like to hire a freelance web engineer to work 2-3 days per week developing our career guide for the next six months.

The role will be similar to the product engineer position we advertised in the fall, except freelance and for six months.

In the next few months, you’d work on: (i) adding features to the career quiz and testing them (ii) restructuring the site around a new package of intro materials (iii) testing ways to boost our key conversions. You’d also play the role of lead developer, and act as the point person for any technical issues in the team.

The ideal candidate would have one year web development experience, and an eye for design. The site is built in WordPress, though we use angular JS for the front-end of the quiz.

Apply now

For more info, contact direct.ben at 80000hours.org.

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What the literature says about the earnings of entrepreneurs

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It depends what kind of business you’re running.

This piece is part of our series on high impact entrepreneurship. Sign up to our newsletter and we’ll email you with the rest of the series.

Summary

  • Until recently, academics lumped ‘entrepreneurs’ together with all the ‘self-employed’. A new paper, however, split the self-employed into those who owned incorporated businesses and those who don’t. (Though note that the incorporated self-employed are still very different from startup founders.)
  • Self-employed people who own incorporated businesses earn about 50% more than people with regular jobs.
  • Most of this is due to them being more educated and working harder. However, even if you correct for these factors, it seems like shifting into owning an incorporated business boosts income by about 18%.
  • The unincorporated self-employed (mostly running things like hairdressers, restaurants, corner shops etc.) earn less than salaried workers on average.
  • Once you try to compare like-for-like workers, you find that when people switch into unincorporated self-employment, 50% earn less than they would as a salaried worker (but gain more freedom), and 30% earn more. The overall average is about the same.

Introduction

It’s widely believed that entrepreneurs earn more than salaried workers. However, until recently the research did not seem to back this up. In fact, the findings of several studies in 1989 presented a puzzle: entrepreneurs appeared to earn less than their salaried counterparts.

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The value of coordination

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This post is intended for people who are already familiar with our key content. If you’re new, read the basics first.

In assessing your positive impact on the world, you need to look at the additional good you do after taking into account what would have happened if you hadn’t acted. But how can you evaluate this?

One way is the “single player approach” – consider what would happen if you act and what would happen if you don’t act, holding everyone else constant, and then look at the difference between the two scenarios.

This approach worked pretty well in the early days of effective altruism, but it starts to break down once you’re part of a community of thousands of people who will change their behaviour depending on what you do.

When you’re part of a community, the counterfactuals become more complex, and doing the most good becomes much more of a coordination problem – it’s a multiplayer rather than a single player game.

In this post, I’ll list five situations where this insight can help us to become even more effective, and I’ll suggest new rules of thumb that I think might be the best guide in a multiplayer world. This is a complex topic, so the answers I give are still tentative. I’m keen to see many more people in the community start thinking about these issues,

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Is now the time to do something about AI?

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The Open Philanthropy Project recently released a review of research on when human level artificial intelligence will be achieved. The main conclusion of the report was we’re really uncertain. But the author (Luke Muehlhauser, an expert in the area) also gave his 70% confidence interval: 10-120 years.

That’s a lot of uncertainty.

And that’s really worrying. This confidence interval suggests the author puts significant probability on human-level artificial intelligence (HLAI) occurring within 20 years. A survey of the top 100 most cited AI scientists also gave a 10% chance that HLAI is created within ten years (this was the median estimate; the mean was a 10% probability in the next 20 years).

This is like being told there’s a 10% chance aliens will arrive on the earth within the next 20 years.

Making sure this transition goes well could be the most important priority for the human race in the next century. (To read more, see Nick Bostrom’s book, Superintelligence, and this popular introduction by Wait But Why).

We issued a note about AI risk just over a year ago when Bostrom’s book was released. Since then, the field has heated up dramatically.

In January 2014, Google bought Deepmind for $400m. This triggered a wave of investment into companies focused on building human-level AI. A new AI company seems to arrive every week.

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Podcast with Ben West, who expects to donate tens of millions for charity through tech entrepreneurship

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I recently interviewed Ben West (second to left), the founder of Health eFilings. After reading 80,000 Hours’ website, Ben entered tech entrepreneurship – from software engineering – in order to ‘earn to give’. Amazingly, Ben pledged to donate any money he made above the minimum wage. His company helps American physicians file paperwork with the US government, and collect ‘performance based pay’, much more easily. Several other 80,000 Hours alumni have ended up working in his company. You can read a summary of the key points from the interview below.

Summary of the interview

  • Ben West was influenced by Peter Singer’s work when he was young to start donating his income. Four years ago he was a software engineer donating to New Harvest, a meat substitute organisation.
  • He spent almost a decade at a large healthcare IT company, which helped to prepare him for what he’s doing now. He doesn’t think he could have successfully started this company without having experience in the health IT sector first.
  • He learned about 80,000 Hours through a link on the blog Overcoming Bias. Reading our work on entrepreneurship made him willing to consider starting his own business despite the fact that he’s risk averse by nature. He then spoke with some other well-informed people, including Carl Shulman (who volunteered for 80,000 Hours in the early days), who gave him more information about what the path involved.

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What’s the easiest way anyone can have a big social impact?

Many people want a career that contributes to the world, that helps others live happier lives. To do this, some become teachers, some work in the nonprofit sector, and others work in many other sectors. Sometimes this involves significant personal sacrifice – at the very least, “socially good” jobs usually have lower earnings.

Let’s suppose you want to minimise sacrifice and maximise social impact. What should you choose then? What would be good is a career option that’s:

  1. Open to most of our audience (college grads in developed countries).
  2. Involves little or no sacrifice.
  3. Has as large a social impact as possible, with high confidence.

I think a path like this exists, as I’ll argue in the rest of this post. I call it the easy baseline:

  1. Take whichever job you’d find most personally fulfilling.
  2. Give 10% of your income to the world’s poorest people.

As of 2008, you can give your income to the world’s poorest people through GiveDirectly, a charity that provides one-off cash transfers to the poorest people in Kenya via mobile app. Every $1 you give results in $0.90 in the hands of one of the world’s poorest people. This intervention could soak up billions of dollars in the coming years, so could be pursued by many people.

If you want to have a social impact with your career, giving 10% is the easiest thing you can do, and I think almost everyone reading this should do it. You can take a public pledge to do so in just a few minutes.

Below I’ll explain in more detail why doing so is such an attractive option.

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Help finish off our winter fundraising round

Our winter fundraising round is in progress.

We’ve already raised £172,000, and are looking to raise £48,000 more.

If we make this target, then we’ll be able to cover:

  • All our costs for 2016 (mostly salaries for 4.3 full-time staff).
  • Plus hire a full-time coach.
  • And then have 12 months’ reserves remaining to start of our next fundraising round.

In the last year, we grew our newsletter five-fold to over 23,000, and increased web traffic three-fold to 60,000 unique visits per month. We accomplished this with only a small increase in costs.

During 2016, we’ll focus on converting more of this interest into plan changes by improving the online guide, such as by adding a series of intro videos and more career reviews. Our target is to increase the rate of significant plan changes five-fold.

If you’ve benefitted from our advice and would like to help us expand, please make a donation.

If you have any questions, just drop me an email at ben@80000hours.org.

You can find much more detail about our plans and progress in the evaluations section of our site, as well as fortnightly updates here.

Donate here

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Working at effective altruist organisations: good or bad for career capital?

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Working in effective altruism directly is a good way to build career capital in some respects, and a bad way in others. How about on balance?

Many people in our community are interested in working at “effective altruist” (EA) organisations, which I define as organisations whose leaders aim to do the most good on the basis of evidence and reason, and explicity identify as part of the effective altruism movement (see a list).

These jobs are often seen as higher-impact and more fulfilling than alternatives, but there’s a common worry: they’ll provide worse career capital, putting you in a worse position in the long-term.

I argued here that career capital might not be a strong enough consideration to outweigh the additional impact.

In this post, I’ll explore whether the career capital you get from working at EA orgs really is worse than the alternatives. I’ll outline arguments give for and against, arguing the career capital is better than is often assumed.

Arguments against working in effective altruist organisations for career capital
Less prestige

The jobs are less prestigious – few people have heard of organisations like GiveWell or the Center for Effective Altruism – and so these jobs don’t provide as impressive general-purpose credentials as working at a brand name employer like Google or McKinsey.

Less concrete career progression

The jobs don’t come with an obvious career path.

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Why you should focus more on talent gaps, not funding gaps

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Many members of the effective altruism community see making a difference primarily in terms of moving money to fill funding gaps rather than moving talent to fill talent gaps. This seems to me to be one of the community’s more serious mistakes, which causes us to:

  • Put too much weight on earning to give and fundraising.
  • Put too little weight on gaining expertise and developing the skills needed for direct work.
  • Overlook pressing causes that aren’t funding constrained.

In the rest of the post, I’ll:

  1. Outline what I mean by talent gaps.
  2. Suggest why the community might be biased towards focusing on funding gaps.
  3. Argue there are whole cause areas we’ve completely overlooked due to this focus.
  4. Argue that many of the causes the community does support are also more talent constrained than funding constrained.
  5. Argue that the importance of talent constraints compared to funding constraints is likely to increase over the next 2-5 years.
  6. Argue further that this imbalance is likely to persist in the long-term.
  7. Consider some of the arguments against focusing on talent gaps.
  8. Give ideas for what the community should do differently in order to focus more on talent gaps. In particular, I’ll outline who should earn to give and who shouldn’t, and list the greatest talent needs within the community.

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Take the growth approach to evaluating startup non-profits, not the marginal approach

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In its first 2 years, Google made no revenue. Did this indicate it was a bad idea to invest or work there?

We spent the summer in Y Combinator, and one of the main things we learned about is how Y Combinator identifies the best startups. What we learned made me worry that many in the effective altruism community are taking the wrong approach to evaluating startup non-profits.

In summary, I’ll argue:

  1. There’s two broad approaches to assessing projects – the marginal cost-effectiveness approach and the growth approach.
  2. The community today often wrongly applies the marginal approach to fast growing startups.
  3. This means we’re supporting the wrong projects and not investing enough in growth.

At the end I’ll give some guidelines on how to use the growth approach to evaluate non-profits.

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