I have personally spent a tremendous amount of time speaking to Ph.D candidates in Big Data disciplines about this trade-off. Clearly, it is a deeply personal decision that will plumb the depths of who you are, what you care about and what your risk profile looks like.
Most of the time I’m speaking with “elite” stats/cs/machine learning gurus who have offers from Teza, Citadel, Two Sigma and/or Rentech as well as Google, Facebook and 2-3 top start-ups. The hedge fund quant jobs are $400-$600k with total comp of up to $1mm, and the others are, well, substantially less. To be specific, I am usually helping a super-cool portfolio company working on bleeding-edge data problems involving complex analysis leveraging sophisticated algorithms, where the scientist in question would have a meaningful impact on the development of the company’s IP and get points of ownership and real leadership development opportunities in the process. The trade-off between current cash and intellectual richness couldn’t be more stark.
Quant hedge funds are cool, don’t get me wrong. But the nature of the work a top quant does at a hedge fund in no way compares to the academic richness and impact they’d experience at a bleeding-edge start-up. Even if a start-up is extremely successful, the likelihood of the risk-adjusted payoff approaching the hedge fund job is remote. If your family has acute money problems that can be solved by a big paycheck, then do what you need to do and take the hedge fund quant job. But if you have the luxury of taking the long view, then consider all aspects of your utility function.
Fact of the matter is that top quants are perpetually in demand at leading hedge funds. It is an opportunity that simply will not go away. However, the start-up that strikes you at your core, is keeping you up and night, has a group of people whom you are excited to work with and where your unique skills can have a direct and powerful impact on its success doesn’t come along very often. It is far less a commodity opportunity than the big paycheck at a leading quant hedge fund. Also, the networks you’ll make by being a leading data expert at a start-up will be extremely valuable and stay with your regardless of your future career path. The world of start-ups is far more collegial than quant hedge funds, where everything is a “state secret” and people operate in virtual isolation, legally and otherwise. Conversely, at my fund’s Big Data conference we had a group of top data experts get together, share war stories, techniques and strategies for addressing their unique data problems. This simply doesn’t happen in hedge fund land. Secrecy and suspicion rule, and for good reason. They view the pie as fixed, with each group going after the largest share. Sharing with others simply dilutes one’s impact - and one’s compensation.
So what should you do? It depends on your own unique circumstance. But if you can afford to take the long view, I’d almost always recommend giving the start-up a shot. Because the insurance policy of a quant hedge fund job will always be there. Wait until you’re sufficiently cynical and burned out to take such a role. The cash will make you feel better, but the lack of dynamism associated with a “change the world” start-up may not.
