Diverting talent out of Finance will revive Britain(business.timesonline.co.uk)
business.timesonline.co.uk
Diverting talent out of Finance will revive Britain
http://business.timesonline.co.uk/tol/business/economics/article5439295.ece
25 comments
Some of the recruiters I've talked to from larger and smaller firms that never see the "I-bank crowd" are now getting swamped with top applications.
They'd be bonkers to hire any of them, they'll all jump ship at the first sign of the economy recovering.
Until more traditional companies allow for greater meritocracy and faster advancement they won't be able to hold the top talent.
Agreed. Here in the UK one of the remnants of the old class system is that managers will never pay a worker more than themselves. Its never been a problem in the City as the place was just awash with cash (and the traders and their managers were of the same "class" anyway, and they all made much more than the programmers). But in other companies, someone on the "graduate management fast track" will feel a sense of entitlement (comes from being institutionalized) and will bitterly resent anyone with technical skill, whether that's someone who operates a compiler or a lathe. I'm fortunate to have mainly worked for enlightened employers (the CEO of my current company was formerly the CTO) but I know that's not the case in most of the IT world.
They'd be bonkers to hire any of them, they'll all jump ship at the first sign of the economy recovering.
Until more traditional companies allow for greater meritocracy and faster advancement they won't be able to hold the top talent.
Agreed. Here in the UK one of the remnants of the old class system is that managers will never pay a worker more than themselves. Its never been a problem in the City as the place was just awash with cash (and the traders and their managers were of the same "class" anyway, and they all made much more than the programmers). But in other companies, someone on the "graduate management fast track" will feel a sense of entitlement (comes from being institutionalized) and will bitterly resent anyone with technical skill, whether that's someone who operates a compiler or a lathe. I'm fortunate to have mainly worked for enlightened employers (the CEO of my current company was formerly the CTO) but I know that's not the case in most of the IT world.
Well, finance may be dead but we still have two more talent graveyards to deal with: law and healthcare. These two fields offer generous paychecks without offering anything valuable to the society.
Yes, not all smart kids want to be doctors, dealing with blood, death and nearly ten years of school isn't easy. It's not doctors who I meant by "healthcare" - we're wasting a giant percentage of premium brain tissue on lawyers and medical equipment and drug sales force. There is a big, hairy and disgusting reason why a short stay at the hospital will cost you $50K in the US: the food chain of various middlemen that feed off your illness is huge.
"I want my kid to be a doctor or a lawyer" problem needs to be dealt with. A nation of lawyers and doctors isn't competitive.
Yes, not all smart kids want to be doctors, dealing with blood, death and nearly ten years of school isn't easy. It's not doctors who I meant by "healthcare" - we're wasting a giant percentage of premium brain tissue on lawyers and medical equipment and drug sales force. There is a big, hairy and disgusting reason why a short stay at the hospital will cost you $50K in the US: the food chain of various middlemen that feed off your illness is huge.
"I want my kid to be a doctor or a lawyer" problem needs to be dealt with. A nation of lawyers and doctors isn't competitive.
I'm getting tired of populist vilification of finance. We went through a bubble and too many resources were devoted to finance lately, just as too many resources were devoted to technology in the bubble of the late 90s. However, finance is not a "talent graveyard". It is "useless" only as your circulatory system is "useless" to the "real work" of your body's organs. Allocating resources to all available investments in society is valuable, which is what finance does. It creates value even if that value is less visible than the product of the coal mines that your grandpa used to work in.
I tend to look at it as an economic lubricant. It makes things run smoother, and as complexity increases things would break down if it wasn't there, but at the end of the day it is there to enable the parts of society that produce valuable things and ideas.
I agree that it is useful and its existence is desirable, but the problem is that it is often overshadowing the parts of society that it is supposed to be supporting. Because of this, it is drawing a disproportionate number of smart people who might otherwise be having a greater impact elsewhere.
I agree that it is useful and its existence is desirable, but the problem is that it is often overshadowing the parts of society that it is supposed to be supporting. Because of this, it is drawing a disproportionate number of smart people who might otherwise be having a greater impact elsewhere.
I agree, but with a caveat:
The problem of "talent" migrating to lucrative fields is universal, but is not really a problem at all. I'm going to be graduating from college soon, and I've seen many of my peers look at Wall Street, law, and even medicine (I'm an engineer).
The people who do so, invariably, are hardly people I would consider top-talent. The people who take up code jobs at banks in the hope of one day becoming traders invariably can't code their way out of a wet paper bag. The people who are only after the money tend to also be the most incompetent. We're not losing that much when they all flock to the flavor-of-the-decade industry.
The hackers who really care about their work continue to work in their respective interests, rain or shine, and they're the ones who are advancing their fields in leaps and bounds. As long as we do not dis-incentivize these people (e.g. pay them a non-living wage) we're doing pretty ok.
I had a job offer from one of the major British banks for code, and I asked them how much real programming I could look forward to. My contact was honest and told me most of it would be front-end C# hackery, and I turned them down. I don't care if you pay me $200K a year, I'm going to hate my life if I hack C# GUI day in and day out.
The problem of "talent" migrating to lucrative fields is universal, but is not really a problem at all. I'm going to be graduating from college soon, and I've seen many of my peers look at Wall Street, law, and even medicine (I'm an engineer).
The people who do so, invariably, are hardly people I would consider top-talent. The people who take up code jobs at banks in the hope of one day becoming traders invariably can't code their way out of a wet paper bag. The people who are only after the money tend to also be the most incompetent. We're not losing that much when they all flock to the flavor-of-the-decade industry.
The hackers who really care about their work continue to work in their respective interests, rain or shine, and they're the ones who are advancing their fields in leaps and bounds. As long as we do not dis-incentivize these people (e.g. pay them a non-living wage) we're doing pretty ok.
I had a job offer from one of the major British banks for code, and I asked them how much real programming I could look forward to. My contact was honest and told me most of it would be front-end C# hackery, and I turned them down. I don't care if you pay me $200K a year, I'm going to hate my life if I hack C# GUI day in and day out.
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Some might dispute the idea that finance is dead.
Although lawyers, with their TPS reports and infinite memos, drive me absolutely nuts; they are necessary. While they don't create wealth, they allow others to do so.
I agree major reforms are needed, but they certainly provide some value.
I agree major reforms are needed, but they certainly provide some value.
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You need enough medical people to take care of people who are sick, enough lawyers to keep the legal system running efficiently, and enough financial people to make good decisions about the allocation of capital. You also need a few managers, to mention the most prominent elite profession. Most of these professions, however, are overloaded and have people in them who don't belong.
Having one profession attain the status of an elite caste leads to a lot of problems, including a sharp reduction of quality within that profession. People go into that profession with the wrong motivations, and a lot of the people who enter this elite profession don't have the necessary talent, but get put there as political favors (e.g. top-tier managers). Much of why managers have such a negative reputation is that most people in management really have no talent for it, but ended up there because executive positions pay well while expecting very little at minimum, and they were able to get these jobs.
Much of why finance and law suck up so much talent, though, has to do with risk-aversion. A person only has one life, and an assured upper-middle-class lifestyle is more appealing than a 1/5 chance of becoming very wealthy and a 4/5 of faceplanting and having to enter a traditional track at 30. There's more expectancy in starting a company than in going to law school, but expectancy is meaningless, given human mortality.
If I had the ultimate power, here's the program I would found in order to take at least the long-term risk out of startups and encourage bright young people to form companies: career mentoring, 3-5 hours per week, from a VC. The "trainee"/protege works for, and eventually may found, startups. He operates "on the market"-- the program wouldn't guarantee any funding or line up particular jobs, though it might provide assistance and advice-- and is therefore fully responsible for his own job search and funding. After 12-14 years working in startups (some successful, some failed) he gets a job in VC, if he wants it (he might be doing something more interesting).
This removes the long-term career risk from founding startups and makes "serial entrepreneur" a viable career rather than a pipe dream. While one might argue that the guaranteed exit would lead to people being less hungry, most young hackers would much rather found successful companies than end up in business in any context, even as VCs.
Having one profession attain the status of an elite caste leads to a lot of problems, including a sharp reduction of quality within that profession. People go into that profession with the wrong motivations, and a lot of the people who enter this elite profession don't have the necessary talent, but get put there as political favors (e.g. top-tier managers). Much of why managers have such a negative reputation is that most people in management really have no talent for it, but ended up there because executive positions pay well while expecting very little at minimum, and they were able to get these jobs.
Much of why finance and law suck up so much talent, though, has to do with risk-aversion. A person only has one life, and an assured upper-middle-class lifestyle is more appealing than a 1/5 chance of becoming very wealthy and a 4/5 of faceplanting and having to enter a traditional track at 30. There's more expectancy in starting a company than in going to law school, but expectancy is meaningless, given human mortality.
If I had the ultimate power, here's the program I would found in order to take at least the long-term risk out of startups and encourage bright young people to form companies: career mentoring, 3-5 hours per week, from a VC. The "trainee"/protege works for, and eventually may found, startups. He operates "on the market"-- the program wouldn't guarantee any funding or line up particular jobs, though it might provide assistance and advice-- and is therefore fully responsible for his own job search and funding. After 12-14 years working in startups (some successful, some failed) he gets a job in VC, if he wants it (he might be doing something more interesting).
This removes the long-term career risk from founding startups and makes "serial entrepreneur" a viable career rather than a pipe dream. While one might argue that the guaranteed exit would lead to people being less hungry, most young hackers would much rather found successful companies than end up in business in any context, even as VCs.
For American readers: the City = Wall Street, not London.
"... When I visited Japan last month to study its successful high-speed rail system, its transport minister told me that Japan’s first railways were built by Edmund Morell, a British engineer, in the 1870s. This is the time for Britain to seek to regain its world-class engineering skill base and to lead in new industrial sectors such as low carbon technology. This will happen only if pioneering companies recruit top talent now. ..."
Good idea, but will regrettably not happen because after the grads are trained
- where is the industry into which they can be recruited?
- what market is willing to pay for these products now & in the near future?
- where are the English entrepreneurs?
The UK made a deliberate decision to specialise in finance at the same time winding back engineering. A shame really because English engineering is first rate.
Good idea, but will regrettably not happen because after the grads are trained
- where is the industry into which they can be recruited?
- what market is willing to pay for these products now & in the near future?
- where are the English entrepreneurs?
The UK made a deliberate decision to specialise in finance at the same time winding back engineering. A shame really because English engineering is first rate.
I'm a Mech Eng graduate and it's too late for my generation. Once we were all eager beavers, we couldn't wait to get out into the real world and engineer some stuff. Most of us went into IT or banking because there were so few jobs for engineering graduates in our field. Now, hell, I've all the database skills you could want, but I barely know one end of a gas turbine from the other. Getting the UK back to an engineering powerhouse will not be quick or easy to do.
Good points, but please refrain from using British and English interchangeably.
"... please refrain from using British and English interchangeably ..."
Why out of curiosity?
Why out of curiosity?
As a British engineer who is not English it can be seen as offensive.
Here's a nifty diagram to illustrate: http://upload.wikimedia.org/wikipedia/en/thumb/9/96/British_...
Here's a nifty diagram to illustrate: http://upload.wikimedia.org/wikipedia/en/thumb/9/96/British_...
"... As a British engineer who is not English it can be seen as offensive ..."
Hey thanks danw for distinction.
Hey thanks danw for distinction.
Absolutely: yes! As said in the NY Times piece, Time to reboot America...
>To top it off, we’ve fallen into a trend of diverting and rewarding the best of our collective I.Q. to people doing financial engineering rather than real engineering. These rocket scientists and engineers were designing complex financial instruments to make money out of money — rather than designing cars, phones, computers, teaching tools, Internet programs and medical equipment that could improve the lives and productivity of millions.
>To top it off, we’ve fallen into a trend of diverting and rewarding the best of our collective I.Q. to people doing financial engineering rather than real engineering. These rocket scientists and engineers were designing complex financial instruments to make money out of money — rather than designing cars, phones, computers, teaching tools, Internet programs and medical equipment that could improve the lives and productivity of millions.
No it won't, because the UK govt spends vast sums on high-priced "management consultants" and that's where these people will go. Think about it, if you're an investment banker, what else can you do? It's not like you can become an engineer or a doctor or a teacher overnight. You'll take the shortest path to the money. That's what these people do, why they went into banking in the first place!
>Think about it, if you're an investment banker, what else can you do?
You can read a balance sheet, research an industry, make a presentation to sell something expensive, and work 80 hours a week at something no matter how tedious.
There's got to be some demand for those skills.
You can read a balance sheet, research an industry, make a presentation to sell something expensive, and work 80 hours a week at something no matter how tedious.
There's got to be some demand for those skills.
What does "research an industry" mean, tho'? It doesn't mean anything about how to do stuff in that industry. It means knowing that if the price of oil goes up, sell your airline stock. It's an open secret in finance that when an analyst says "buy" he means "hold" and when he said "hold" he means "sell SELL SELL". I'm not clear where the value-add is there.
Tell you who the major players are and how they differ. Estimate a value function for the equity of firms in that industry. Find out how large the market is, how it has changed over time, and how it differs across countries. Research the regulations that effect the industry and give a concise explanation of which rules are normally constraining and which rules can be worked around. Find out what companies have been bought or sold in the sector, who has been doing the buying, and who has the balance sheet to do more deals in the near future.
Sounds like someone who'd be ideally suited... to working in an investment bank!
Yeah, maybe. Might be useful in internal management and strategy divisions of large firms, too. It would probably be good to have an ex-investment banker somewhere in the high level management of your firm.
The majority of our class majors in finance, and 30% of the recent graduating class ended up at I-banks and 20% at consulting firms (http://www.commerce.virginia.edu/career_services/Destination...). With that said Lehman Brothers was the sixth top employer and I doubt those recent graduates still have jobs.
People are still applying to I-banks, but now every person is now applying to one of the top consulting firms as well (McKinsey, Bain, BCG, Monitor, etc.). Offers were being rescinded to a lot of my friends in the class of 2009 (I'm 2010) and Goldman Sachs just cut it's salary 45% (http://www.bloomberg.com/apps/news?pid=20601087&sid=aQjV...). For many it's been a rather depressing year. Our new business school is flooded with 50 inch plasmas and stock tickers all over the place so the class of 2009 literally saw many of their companies collapse in real time. I found it very exciting from an academic perspective however.
A lot more people are looking at corporate jobs as well with GE, G.Mills, Rolls-Royce, P&G, Fortune 500 etc. and the accounting firms such as Deloit and Ernst and Young being overrun with applications. Some of the recruiters I've talked to from larger and smaller firms that never see the "I-bank crowd" are now getting swamped with top applications.
I think it's important to remember that complex instruments that properly evaluate risk and allow for huge influxes of money into companies that make, "cars, phones, computers, teaching tools, Internet programs and medical equipment that could improve the lives and productivity of millions." is rather important. When that stream is turned off it's more than the financial industry that suffers, it's the lifeblood of our economy. Although you may be able to bootstrap an internet startup it's not as easy to bootstrap a revolutionary new technology or new cancer drug.
The reason people go after jobs at I-banks and consulting is the top salaries and more importantly the chance for fast advancement based on pure meritocracy (in theory) that most traditional corporations lack. Us B-students are a bit of a sucker for prestige as well. Until more traditional companies allow for greater meritocracy and faster advancement they won't be able to hold the top talent. The top talent is more than willing to work hard and produce results, they can't help it. Many of them have a sort of irrational drive for success even in the face of the philosophical absurdity of the concept of "success". They want to be rewarded for it. The problem isn't so much finance, it's that other companies didn't create programs to attract top talent and finance did.
With that said as I write this I'm working on my cover letters for consulting summer internships. The vast business experience and name attached to a consulting firm is still worth the investment, even if it's only for two years or a way to kick start a career (or become a career, depending on if you like it I guess).
Ultimately, however I plan to continue my entrepreneurship which I've been doing since a kid (three past internet startups; and two I'm involved in right now). Then again at 21, who knows what I will be thinking in two...five...ten years.
I must say it does help starting out with some nice savings in the bank from these ventures, and knowing that if things get worse I'm confident I can always find ways to scrap things together to pay the rent.