Thursday, January 17, 2008

Honors college survey

I was invited to address a class this morning in the Clark Honors College at U Oregon. The Honors College is like a small, select, liberal arts college within the university that requires special admission. It's one of the oldest honors colleges in the country and has (I'm told) a very good reputation. Most of its students could probably have been accepted at elite private colleges, but are getting a less expensive education here.

At the end of the class I took a survey. I was particularly interested in the level of interest in science and science careers, and the level of awareness about the kinds of elite career paths that are common for Ivy League students. As I mentioned in an earlier post, about 50% of Harvard graduates now head into finance. It was my hypothesis (confirmed by the survey results) that even top students at public universities are generally unaware of these relatively new career options, as opposed to traditional high status jobs in fields like law, science and medicine.

Studies of a previous generation of students showed, after controlling for SAT score, little difference in lifetime earnings between graduates of elite and non-elite universities. I doubt that will be true for this generation -- some essential social capital is missing from the public school experience, in particular, knowledge of the very existence of the most lucrative career options. (Of related interest: David Wessel of the WSJ comments on the finance bubble and the NYTimes on how the legal and medical professions have lost allure.)

Survey

25 participants, roughly equal numbers of seniors and juniors and a smaller number of sophomores. About 1/3 of the students were science majors. Some of the numbers below are estimates, as I had to quickly count the number of raised hands.

Number of frequent MySpace users: 3/25
Number of frequent FaceBook users: 25/25

Would you be unhappy if your annual salary never exceeds $100k per annum (in today's dollars)? only 3/25 said yes -- amazing!

Do you feel you have a good understanding of / do you think it is important to understand :

DNA and evolution 16 / 16
special relativity 3 / 7
internet technology 3 / 6
the operation of a nuclear bomb 3 / 6

Have you ever written a computer program of > 100 lines not required for a class? 0 / 25 (!!!)

Can you give a job description for the following:

management consultant 1 / 25
investment banker 5 / 25
derivatives trader 0 / 25
venture capitalist 7 / 25

Can you tell me what fraction of a normally distributed population is >4 standard deviations above the mean? 0 / 25 (a few knew it was a small fraction, but no one gave an estimate within an order of magnitude)

15 comments:

Dave Bacon said...

"3/25 said yes!"

I just knocked Eugene's vaunted hippy cred down a level. :)

steve said...

Dave -- did I write that in a confusing way? What I meant to say is only a few students out of 25 thought it was important that they someday make > $100k per year (would be unhappy if they did not).

I consider that pretty un-materialistic. I was surprised at the result!

Anonymous said...

I believe Dave was expecting 0/25.

Some time ago I heard Harvard referred to as, I forget the exact words, a large financial conglomerate which happens to be loosely affiliated with a small educational institution, it seems fitting they would follow that career path.

I wonder if it's as efficient an allocation of social capital as having ~5% of the population here in California selling real estate for a living.

Anonymous said...

I think a difference is that the top companies go to the brand name schools first to recruit, so students at those schools hear first about new opportunities.
In addition, my classmates and I were sensitive to how recent alumni were doing. Maybe top schools have tighter alumni networks, especially with recent graduates, so there's a tighter feedback loop in terms of discovering what jobs are satisfying. People are affected by what they see others around them doing. My freshman year at MIT (2003), everyone wanted to start their own software company. Later, there was a small shift towards law school. Now everyone is going into finance, including me. My perspective certainly changed when I took my first financial internship. Before that, I had worked in labs and software companies and viewed success as making 250k a year by age 25. Now I view that salary as very disappointing, and my friends who are still in school are aware of my change in perspective.

steve said...

MIT class of 2008: yes, I agree completely. At elite schools you would notice students in the cohorts ahead of you interviewing at Goldman, McKinsey, etc. and get a feel for what others are doing. Most people tend to follow the herd anyway. If, on the other hand, you are one of only a few bright students at public U, then only the longstanding tried and true paths such as law, medicine, PhD will be well understood by people around you.

I had the feeling UO kids thought $100k was a high salary. $250k would be unimaginable :-(

Bottom line: send your kids to an elite school if you can afford it.

Tom said...

My comments as a student of the HC:
Yes, $100K is a lot and $250K is unimaginable :)

I agree with the sentiment that at public schools the traditional elite careers paths are much more visible than newly created careers in finance. But I also think that at the UO students who want to make a lot of money are less attracted to the HC than to other niches, like the honors business program. I'm a member of the investment group (uoig.uoregon.edu) at Oregon as well, and it is there that you find more of the type who want to make a lot of money. There's not much overlap between the two institutions. (I plan to quit the IG next term.)

The honors college teaches a limited liberal education curriculum of social science and (less) humanities, with nearly no science and math, and no vocational education at all. So it's wrong to view it as a home (representative sample) of the brightest students at the U of O. Rather, it is home to some bright students of the social sciences, with a few science, humanities, and business students as well.

Also interesting and perhaps relevant is the 70%/30% female male ratio.

steve said...

Tom,

Thanks for your comments -- were you in the class I spoke to?

I'm pretty sure about 1/3 of the class were science majors, so it may have been less than representative of the HC as a whole. (The course is on the brain and neuroscience, taught by a neuroscientist.)

Actually, the guys (I think they were all guys) who thought it important to someday earn >$100k were visibly hesitant (slightly embarrassed) to raise their hands! :-)

dudeincanada said...

250k by age 25 is disappointing !?

Steve :
I've always wondered about the possibilities in finance for people who are a little bit smart but not elite. For esample people who graduate in math , with a 3.0ish gpa , at a respectable state school. Is there any room for them at the finance table ? Can they get those 250k/year salaries that the smart people view as below them now ? If i could make 250k at age 30 even, I'd feel quite successful. I'm not quant/PHD material though. Is there anything people like me can do in finance or do we just have to be actuaries and maybe , with a lot of luck , make $200k/year at age 40 :)

steve said...

DudeinCanada: 250k per year is a high salary for anyone. The MIT guy would have to be lucky as well as good to get there by age 25.

The actuarial track is one option -- there isn't that much difference between insurance and valuing a mortgage portfolio -- but since it's a traditional track that everyone knows about you will probably not obtain the outsized returns that cutting edge finance stuff can offer.

If you have good people skills I would suggest you get an MBA, specializing in finance. Then you can enter the career through the traditional, mainstream track. It's not a secret that the vast majority of jobs in finance require very little quantitative ability. The quant track is more visible to geeks because that is where PhD types end up.

Good luck!

FC said...

Following on dudeincanada's comment: For someone without aptitude or interest in PhD-level mathematical research, is a master's in finance or financial engineering a viable alternative to an MBA?

steve said...

FC: honestly I'm not so familiar with that track, but I suspect it is becoming the standard entry path into the field, at least on the quant side -- the days of maverick physicists just strolling in are over.

Tom said...

Steve: I was not in the class you talked to.

It's interesting that you resolve elite v. state schools using expected salary as the metric. Perhaps some at Oregon would hold that as supporting evidence for the opposite conclusion.

steve said...

Tom,

I'm not trying to promote material wealth as a measure of goodness or of achievement by alumni of an institution. After all, I spend most of my time on esoteric research for which there is little monetary compensation.

However, to understand the social forces shaping the future of our country, it is important to know whether there has been a change in wealth accumulation patterns in the last generation. The top few hedge fund managers made more last year than all the CEOs (and CFOs and Sr. VPs) of all Fortune 500 companies combined. I'd like to know if that group of super wealthy people is drawn disproportionately from, e.g., elite private schools as opposed to public schools.

Anonymous said...

http://www.washingtonpost.com/wp-dyn/content/article/2008/01/22/AR2008012202615.html

Thought this article (opinion piece)
goes with the theme of your finance discussions.

--VR

Anonymous said...

The comment by the fellow at MIT is intriguing, since it reminds me so much of one of my friends, who, in 1999, honestly believed that he would become a millionaire after 6-12 months of work at a company that sold widgets over the internet. What is also interesting is that then, as now, his statement didn't seem all that unreasonable.

Keep in mind, I'm not trying to discourage anyone from finance - If you can get $250K+ for a year of your time, straight out of college, you'd be crazy not to. I think it does say something about the sustainability of the business model, though.

To the prospective actuary, $140K/yr by age 30 is a reasonable salary if you have your fellowship. Also, many actuaries live in places like Hartford and St. Paul, where $140K/yr goes a lot farther than it does in NYC/Greenwich.

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