GlobeCampus.caGreg Kuchik
In the mid-eighties, a loud sucking sound started emanating from Lower Manhattan, as the country's most promising young people were drawn into finance careers-and away from other, more worthy pursuits. Now, thanks to the financial crisis, that has suddenly changed. One of the best things to emerge from the meltdown is that students are finally free of the irresistible pull of Wall Street and its promise of riches and glamour.
The brain drain into finance stemmed from a combination of factors-the huge amounts of money to be made, the glorification of bankers and hedge fund moguls in the media and in the culture at large, and the simple need for graduates to make enough money to pay off their college debt. People who might have gone into science, engineering, teaching, non-corporate law and the non-profit sector instead joined the ranks of the investment banks, private equity firms and hedge funds.
Over the past couple of decades, the number of students pursuing liberal arts and science degrees decreased dramatically in favour of more mercenary interests. "Business is now by far the most popular undergraduate major, with twice as many bachelor's degrees awarded in this area than in any other field of study," the president of Harvard, Drew Gilpin Faust, lamented in The New York Times.
The assumption on college campuses was that if you had any potential or ambition in life, you'd be joining Goldman Sachs or J.P. Morgan after graduation. Salaries in other professions just couldn't compete. Until recently, finance wasn't a common career path for grads with math and science degrees. But beginning in the nineties, they became highly desirable to finance firms. In 2004, Wall Street was, for the first time, the largest recruiter of graduates from MIT.
There is a cost to this. Every time an ambitious young thing decides to harness his or her brain cells to design Wall Street's next black-box trading model, there is one less person searching for solutions to global warming or starting a company focused on health care innovation. Most of the great leaps forward in finance only benefit small groups of people who are already rich, rather than creating jobs and wealth for the many. And that's when things go well. After what the economy has just been through, one could argue that a good number of Wall Street's "innovations" are downright harmful (collateralized debt obligations come to mind). "We want scientists and engineers solving problems that help real people, not inventing wacky securities that might blow up the world, which is what they did instead over the last decade," says Paul Kedrosky, a venture capitalist and the editor of the business blog Infectious Greed.
The meltdown described by Kedrosky has reduced the allure of finance. Investment bankers, it's true, are already proclaiming a return to profits and bonuses-much of it generated by trading and banking fees. But in the public eye, the titans of Wall Street have gone from being heroes of the free market to social pariahs. The term "hedge fund manager" has become a signifier of greed, synonymous with 30,000-square-foot mega mansions. Anyone launching a new finance venture today would do almost anything to avoid using the H-word.
The big banks, meanwhile, face their worst public relations disaster in decades. A widely read Rolling Stone article by Matt Taibbi described Goldman Sachs, previously the pride of American capitalism, as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." The image has stuck: Reports of Goldman's compensation plans have sparked outrage, while blogs are tracking the high-ticket purchases of Goldman employees as they spend their bonus money. Goldman CEO Lloyd Blankfein's charm offensive and high-profile charitable donations on behalf of the firm have done little to repair the company's tarnished reputation. This is not the stuff that role models are made of.
After a wave of layoffs and the vaporization of Bear Stearns and Lehman Brothers, Wall Street has also revealed itself to be just as insecure a place to make a career as any other. Some firms that are hiring are doing so on a smaller scale, and some are asking students to defer their start dates. The job market overall is bleak. Wall Street's hiring of science and engineering students is dropping, but programs such as Teach for America, which sends new graduates to work for two years in troubled public schools, have reported an increase in applicants.
"The whole process is winding down right now," says Kedrosky. "In terms of freeing up existing talent, and taking up a smaller slice of new talent, the right things are happening." We can only hope that it continues.