Why the Best Investors Took the Pay Cut

Every day, folks send me the same message.

"I have two offers. One pays more. Which should I take?"

I get it. You want the mansions. The megayacht. The private jet. And maybe, if you care about it, the power and influence. The kind that lets you say whatever the hell you want, like Bill Ackman, Alex Karp, or Palmer Luckey.

I'm no hypocrite. Money is why we want to work in investing. But early in your investing career, don't put money first. The big money comes in the later years. And to earn it, you have to become useful first.

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Entrepreneurship Changed My View Toward $

Let me tell you how I figured this out.

I began my career as a white-collar cog, collecting a W-2 check every two weeks and never once asking why I deserved it.

Then I was a junior in Wall Street research and an analyst with phantom equity at a start-up hedge fund. Steady pay twice a month, but now I expected a year-end bonus tied to my performance and how the firm did. So I started giving a sh*t about how useful I was to my employer.

Then I started my own business in 2022. For the first two years, I made basically $0. The entire year. Twice.

Today, if I choose to, I can work three hours a week and still make six figures. My input (how much I work) and my output (how useful I am to my customers) have de-coupled, in both a good and a bad way. And I have the leverage of the internet and AI to make something once and distribute it to as many of you as I can at once.

That journey taught me how capitalism really works: you create value first, then you figure out a model to capture (some of) the value you created. It sounds management consulting, but it IS how the world works.

I've spent years collecting advice from some of the successful investors. On this question, they almost all agree: don't let the paycheck decide.

Being Useful

In a hedge fund, being useful means only one thing: can you bring moneymaking stock ideas?

Hedge funds don't produce deliverables. Their only job, a very hard one, is to grow the money clients gave them.

The 200-page deep dive, the financial model, the 50 customer and supplier calls are all just process. If that work didn’t boil down to a decision that makes money, it's not useful.

Investment firms will always pay for someone who can be an autonomously useful stock picker. That's what an experienced Senior Analyst or Portfolio Manager is. At that level, your pay is (somewhat) tied to the dollar profit you generate for the firm, as incentives should be. And as the firm grows client assets managed, your upside has no ceiling.

But nobody starts there. You learn to be useful from people who've done it.

Stanley Druckenmiller puts it most bluntly:

"If you're early on in your career and they give you a choice between a great mentor or higher pay, take the mentor every time. It's not even close. And a lot of kids are just too short-sighted in terms of going for the short-term money instead of preparing themselves for the longer term." - Stanley Druckenmiller; Founder, Duquesne Capital; Lead PM, Quantum Fund (source: He delivered the remark on January 18, 2015, during an address at the Lost Tree Club in North Palm Beach, Florida.)

Here's why the best investors believe this, and how they made the same call early in their own careers.

They Took the Pay Cut

Michael Karsch picked the right firm over the bigger check:

"Most analysts are too money-focused early-on. At Chieftain, I knew I would be giving up plenty of money compared with some of my friends who went to other places. But that job was worth an enormous amount to me." — Michael Karsch, Founder, Karsch Capital Management; Managing Director, Soros Fund Management

Richard Chilton didn't pick the highest payer either. He went on to found Chilton Investment Company, whose former investment team includes two of Lone Pine Capital's co-CIOs, Kelly Granat (the incoming co-CIO of Gavin Baker's Atreides Management) and David Craver.

"When I joined Wall Street, you know, it paid okay, but it wasn't the highest payer ... I didn't go into the hedge fund business to make money... point is you gotta love what you do to be able to make money anyways." — Richard Chilton, Founder, Chilton Investment Company (source: OneWire interview)

Nadim Rizk turned down investment banking early on. He took an investing job that paid less than half as much:

"My first job there paid me a little less than half of what the investment banking job paid, so my first lesson is don't go for the job just because it pays you the most money. Go for the job that you really are very passionate about." — Nadim Rizk, CEO & CIO, PineStone Asset Management

See the pattern? None of them regret the money they left on the table. They talk about what the job gave them instead.

Why the Mentor Wins

In your first few years on the buy-side, you're selling your time. And your time isn't worth much, because you aren't influencing portfolio decisions directly. In return, you get paid in two currencies: money and education.

The education is worth more. The key to becoming productive is pattern recognition, and you pick it up through osmosis from the seniors. So the person teaching you matters more than anything.

You'd be surprised how many people fight over an extra $20,000 a year and end up with a firm or a boss who can't make them a productive stock picker. In a profession that judges you only on output, that's a terrible trade.

Bill Ackman keeps it simple:

"I wouldn't worry very much about how much money you make. I'd worry much less about compensation than I would about what you can learn."

Mohnish Pabrai thinks chasing money or prestige is a mistake:

"In terms of career, take the job you would take if you weren't getting paid. As Buffett says, go work for someone you like, admire, and trust. Those are the jobs you want. Don't take the job with the most prestigious firm or offering the most money. Those are both very stupid things." — Mohnish Pabrai, Founder, Pabrai Investment Funds

Benjamin Beneche of Tourbillon Investment Partnership says a small pay bump is never worth downgrading the people around you:

"Never sacrifice an easy win, a slightly higher starting salary or anything like that for the quality of the people you are around. It might be worth it at a stage in one's life, but certainly early on it's not. Always pick the people and the context over any near term gain, particularly one related to a bit more money." — Benjamin Beneche, Founder, Tourbillon Investment Partnership

Daniel Fields of Polen Capital sums up the payoff:

"Prioritize principles over money and join people that you respect and can learn from... If you do that well, the money will come, and you'll be able to feel good about not just what you've accomplished, but what you're contributing to others." — Daniel Fields, Director of Research and PM, International Growth, Polen Capital

Careers also move in jumps, not raises. The big gains come in sudden leaps, like making Senior Analyst or PM, and you need to be in the right seat, ready, when they show up.

The famed short-seller Jim Chanos puts it well:

"When fortune smiles your way as it does in any business career a number of times, take advantage of it. That's when people grow, that is when you see quantum leaps and step functions in career moves." — Jim Chanos, Kynikos Associates

The right mentor is what gets you ready.

Don't Let Others Pick Your Path

A lot of the pull toward the highest offer isn't really about money. It's the peer pressure.

Howard Marks warns against letting either one decide for you:

"I believe you shouldn't let society determine what your way is, and you shouldn't let money determine what your way is. If the proposition of investment management is interesting to someone, then they should do it, because they'll have a great deal of fun." — Howard Marks, Co-founder, Oaktree Capital Management

Preston Athey of T. Rowe Price has watched what happens to candidates who chase the glamorous, high-paying seat:

"Do not accept the first job that comes along that seems to have the highest paycheck. Do not automatically assume that some glamorous job that requires 80 hours a week will be all worth it three years later. I've seen too many examples of people who get into those jobs and frankly regret it ... Two or three years later, they move onto something else and maybe they've gotten some good experience, but it's really made them cynical." — Preston Athey, Portfolio Manager, Small Cap Value Fund, T. Rowe Price

Money-Chasers Get Outworked

In investing, the person who loves the work beats the person who's there for the paycheck. Passion turns into obsession with your craft, and obsession produces better output. Always.

Stan Druckenmiller gets real here:

"First of all if they're going in it for the money they should go elsewhere. Yeah there's too many people in the business like me that just love the game and the passion... and they're not going to be [able] to out work the people that are passionate in the game and it's not a fun game if you're losing." — Stanley Druckenmiller; Founder, Duquesne Capital; Lead PM, Quantum Fund (source: Nicolai Tangen Interview)

Scott Miller agrees:

"If you're just investing to make money, the guy who loves investing and is thinking about his portfolio while he's in the shower and while he's walking the dog is probably going to kick your ass. Only do it if it absorbs and compels you." — Scott Miller, Founder, Greenhaven Road Capital

Alex Sacerdote of Whale Rock Capital, a leading tech hedge fund based in Boston, concurs.

"You have to be in the business for the right reasons. It's really important to be very curious and have a passion for investing because there are so many people out there competing with you. It's really important to love what you are doing." — Alex Sacerdote, Founder, Whale Rock Capital Management

Jane Siebels, who worked for John Templeton early in her career, adds that passion makes you think differently. And in investing, thinking like everyone else doesn't pay.

"The money is not worth it. You need to be passionate. You need to love what you do. Usually, if you really get in touch with yourself and follow your passion, you will be different than anybody else because there's only one of you." — Jane Siebels, CEO, Siebels Asset Management Research

C.T. Fitzpatrick of Vulcan Value Partners points to a simple mechanism: repetition.

"[Malcolm Gladwell's book Outliers] discusses the principle that if you do something you enjoy doing, you're going to do more of it, and the repetition makes you better." — C.T. Fitzpatrick, Founder & CIO, Vulcan Value Partners

Passion also keeps you in the game. Investing is hard in a way pay can't fix. You'll be wrong, often, sometimes in public. Without passion, you'll burn out before you ever reach the big-pay phase of your career.

Just ask Scott Ostfeld, managing partner of activist firm JANA Partners, and Alex Magaro, Co-President of Meritage Group:

"The truth is investing can be very frustrating, difficult, unpredictable, and grueling. So you should only pursue the career if you have the passion, if you're intellectually curious, and if you're committed to it, because at every turn, you can be very quickly humbled. That's the nature of the business." — Scott Ostfeld, Managing Partner & PM, JANA Partners

"If you don't really enjoy the day to day of investing, it's going to wear you out and make you miserable. Even if you're able to retrain yourself to be purely motivated by money, that motivation will in fact wear off and sooner than you think and then you will hate it. You will be vastly happier in a field that naturally lights up your brain." — Alex Magaro, Co-President, Meritage Group (Simons family office of the Renaissance Technologies fortune)

The Pay You're Chasing May Not Last

The 2 (management fee) and 20 (performance fee) days of hedge funds are long gone. The job is much less financially lucrative for juniors.

Howard Marks breaks the sad news about the industry:

"The main reason you shouldn't do it is to make a lot of money, because number one, money isn't everything. Number two, I predict the investment management business is not going to remain as remunerative for everyone as it has been in the last 35 years." — Howard Marks, Co-founder, Oaktree Capital Management

William Strong, founder of multiple investment firms who began his career at Ruane Cunniff LP, the manager of the Sequoia Fund, sees the same thing:

"I think there are too many people going into the investment business because of outsized compensation which I don't believe can last." — William Strong, Founder, Mason Hill Advisors, Equinox Partners LP

Kevin Fogarty points to one big reason: the rise of passive investing.

"This fundamental analysis world is under a massive amount of pressure from passive, and so, anyone that really wants to go into this world of security analysis or fundamental investing has to have a huge amount of passion for it." — Kevin Fogarty, Chief Investment Officer, Value Creators Capital

If you're chasing pay, you're betting on a pay structure that a lot of insiders doubt will survive.

You might say: maybe I will just chase the AI profession. Sure, but again you will be competing with those obsessive about AI. The competitive dynamics is the same in every profession.

Money-Focus Can Get You Rejected at the Door

Being money-focused doesn't just cost you learning. It can cost you the offer itself.

William von Mueffling of Cantillon Capital will just reject your candidacy.

"Don't ask about compensation - prove yourself first. Asking about compensation is an immediate disqualifier." — William von Mueffling, Founder, Cantillon Capital Management

It can also cost you the relationships that build a career. Michael Karsch has seen it happen in performance reviews:

"A lot of young analysts have no idea how to behave in a performance review, and they often focus on a very small amount of money rather than seeing the big picture. This tends to alienate people who would otherwise become their mentor." — Michael Karsch, Founder, Karsch Capital Management; Managing Director, Soros Fund Management

Nickel-and-dime for a small raise, and you might push away the very person who would have made you rich later.

What Should Motivate You Instead

If not money, then what?

Mason Hawkins, famed value investor and manager of the Longleaf Funds, gives three reasons:

"You want to pursue it for the intellectual challenge, for the reward of being correct about your investment decisions, and for the opportunity to help others. Those would be the three primary reasons I would council you to pursue a career in investing. If you start out just doing it because you want to make a lot of money, I doubt that you'll be as successful." — Mason Hawkins, Founder, Southeastern Asset Management

Rolf Heitmeyer, who began his investing career at deep-value firm Donald Smith & Co., offers a simple test:

"If your idea of a good time is reading a 10-K and learning about a new business, that's a good sign. If you're doing it only because you want to make a lot of money, you probably won't be very good at it." — Rolf Heitmeyer, PM, Blackrock Income & Value Equities Group

The Other Side

Not everyone agrees. It's worth hearing them out.

Roger Fan takes the opposite view:

"Advice for students: it's very important to get your foot in the door no matter what, but not only that, to take the highest paying position that you can. Don't work for free if you don't have to, don't take a pay cut. The money matters." — Roger Fan, Founder & CIO, RF Capital Management

Beeneet Kothari, another Soros-lineage investor who worked at Stan Druckenmiller's Duquesne and Zach Schreiber's PointState, offers a middle path. He graduated with debt and couldn't afford to be picky. He offered a very pragmatic perspective:

" I think as much as I've always thought about that in terms of managing a fund, it's also relevant in managing a career, which is you can't just, unless you're born to money, be an artist and say, I'm going to do this thing, and I don't care if no one likes it. You got to pay rent and support a family and so on. I think it's important not to forget that you are walking two axes. It's orientation and execution and sometimes you might have to prioritize one over the other, but generally you’ve got to walk both of these two lines over the long term.

I graduated college with debt and not having a job was not an option ... I would prioritize execution, which means getting a job, staying in the game, and then as those opportunities come up, as your luxuries come up, you can kind of tilt the balance a little bit." — Beeneet Kothari, Founder, Tekne Capital Management

And John Huber questions whether you need to find your passion first at all:

"Don't worry too much about getting the perfect job or pursuing your passion, but instead focus on self-improvement. If you become great at whatever you're doing, you're going to really enjoy it." — John Huber, Founder, Saber Capital Management

Notice that Huber still isn't saying "chase money." He's saying chase growth. Which leads back to the same place: pick the job where you'll become useful, the fastest.

How to Choose

I'm pragmatic. Buy-side seats are hard to get. And most of them come with some "hair," because the person in the seat before left for something they thought was better for their career.

Know your non-negotiables. I can share one of mine: I don't work for assholes. You'd be surprised how many people are fine with working for a screamer for a year or two, just for the optionality a brand name on the resume can open up. To me, life is too short for that.

Beyond that, pick the firm where:

• The PM has a repeatable process for making money in the market.
• You believe you can add value in that style of investing.
• You can learn how the firm actually makes money.

Let me nerd out on stock valuation for a second. Most of a business's value sits outside your 3-5 year forecast period, captured in the terminal value.

You, as labor, work the same way: most of your earning power in this profession sits in the out years, not in your first 1-3 years. So stop quibbling over a small % of your lifetime earnings power.

The basic laws of the free market will keep working: the most useful people will create and capture most of the value in this industry. If you are a good stock picker, I guarantee you'll make the big bucks you dream about in investment management.

That works in any profession, by the way.

Pabrai suggests starting with the people, not the job posting:

"Find a shop that is run by people you admire and have principles you believe in, and try to convince them to bring you on board without focusing on compensation." — Mohnish Pabrai, Founder, Pabrai Investment Funds

Which job would you take if you weren't getting paid? That's usually the right one.

What do you think?

Thanks for reading. I'll talk to you next time.

Source: Columbia Student Investment Management Association Graham & Doddsville newsletter, unless specified otherwise