Morning Coffee: Achieve a $200k salary aged 22, avoid banking jobs. The first bank reporting Q3 results hiked bonuses

There are three things, broadly speaking, which determine how well you’re going to get paid.  They are, the state of the overall market, the particular conditions in your specific niche, and your own personal efforts. Which matters most?  Surprisingly, it’s often the one that people talk about least.  Unless your individual performance has been extremely good, or the macro picture is absolutely appalling, the biggest driver of your compensation in any given year is whether you happen to be in the right place at the right time.

Get Morning Coffee ☕ in your inbox. Sign up here.

At the current moment, the very rightest place to be is in artificial intelligence.  It’s a technology at the sweet spot where the amount of financial capital being invested is out of all proportion to the availability of human capital.  And while the rest of the graduate hiring market founders, the Wall Street Journal says young people with AI skills can now earn higher salaries than junior bankers, even if they don't have any experience. 

Shape.ai, for example (which recently got investment from Meta), is paying $200k as a starting salary, and since 15% of its employees are under 25, it's not just paying this to a few child prodigies.  As their head of people says, “We’re eager to hire AI-native professionals, and many of those candidates are early in their careers”.  And it’s not just startups.  Salary comparison sites are finding plenty of entry level jobs at firms like Roblox with packages well into six figures of USD for machine learning engineers. 

Many of the young people going into these roles appear to be computer science majors with specific concentrations in AI programming.  But this isn't always the case. Jure Leskovec, a CS professor and startup founder says there is also “a next generation of software engineer” coming through, in the form of graduates without advanced degrees, but with the ability to learn fast and leverage the technology. History graduates, take note. 

As we noted yesterday, the labour shortage is becoming a problem for employers; if they don’t have sufficient funding to pay up for the relatively small amount of proven talent, they are forced to accept the candidates they can find and hope they learn on the job.  

So should we all be quitting banking and taking a vibe-coding boot camp? Probably not.  As Nassim Taleb said you sometimes see a glut that’s not followed by a shortage, but you almost never see a shortage that isn’t followed by a glut.  Salaries like this attract the attention of bright kids all over the world, and the university production cycle is only three years.  Before we know it, AI expertise will be as valuable as low-latency programming, cloud computing or data science – which is to say, a perfectly viable career if you’re good and hard-working, but not one that commands crazy scarcity premiums any more.  So your time is probably better spent looking for the next big thing, and wishing luck to the people who have managed to catch this wave.

Elsewhere, the big questions since the start of 2025 have been the fundamental ones; how much revenue is the investment banking industry going to make, and how will this be divided up between shareholders and employees?  Guidance from the bulge bracket has suggested that the answer to the first is somewhere between the unbridled optimism of November 2024 and the despair of April 2025. And now, with Royal Bank of Canada opening up the Q3 earnings season, we are getting guardedly optimistic news about the second.

RBC’s investment banking division achieved record revenues, up 25% on last year.  And its expenses rose by 17%, largely driven by variable compensation -ie. bonuses.  The management team there emphasised that they didn’t feel like there was much visibility for the second half of the year, but the numbers imply that they’ve set aside roughly a third of the incremental revenue to kick back to the people who made it. That’s pretty good for this point in the cycle.

But remember the three drivers of pay – market, sector and individual.  It’s likely that RBC, which is consolidating its franchise after a period of growth, is setting pay to retain key staff, in a market where departures are costly and difficult to replace.  And that’s likely to be a common picture across the industry. Although 2025 might be a good bonus year after all, it might be one in which there’s a lot more differentiation between the top, middle and bottom.

Meanwhile …

Convertible bond arbitrage is one of the classic hedge fund trades – it was how Ken Griffin got started. But it needs the right conditions to really sing – lots of equity volatility and lots of bond issuance. This year has apparently been absolutely fantastic, and a lot of funds are returning to the classics. (Bloomberg)

A somewhat technical, but interesting overview of the Separately Managed Account (SMA) product, an innovation in prime brokerage which has allowed a lot of multistrategy “pod” managers to dip a toe into launching their own funds. (Business Insider)

US M&A bankers have been laboring through Labor Day, contributing to the biggest August since 2021 for transactions. (Bloomberg)

Private credit funds really are moving into territory which used to be the exclusive domain of banks. A few years ago, if you had heard that someone was making a $40m loan to a controversial football agent, collateralised against his racehorses, you would surely have assumed it was Credit Suisse; now it’s Apollo. (FT)

“Some attrition is normal for any organization of this size” is never a good thing to find yourself saying. Although several of them had been with the company for years and might have been out of joint with the recent high profile hires, Meta Superintelligence Labs can’t be pleased to have lost eight senior AI researchers in the two months since its last reorganization.  (Business Insider)

A not-so-usual move back from VC to banking for Ofer Harduf, who has gone back to JP Morgan’s tech team after spending five years at Fifth Wall Capital. (Reuters)

London has the hottest trains, New York the hottest platforms and Beijing, Tokyo and Paris are relatively pleasant, in the battle of the horrible summer commutes. (Bloomberg)

Ozempic makes you thin, and joyless. (Bloomberg) 

Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Signal: sarahbutcher.22  Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. 

Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libellous (in which case it won’t.)