Friday, March 13, 2009

The Best and Brightest

NYTimes writer Judith Warner objects to the characterization of Wall Street titans as the "best and brightest" :-) Of course, one interpretation is perfectly consistent with David Halberstam's original usage to describe JFK's team of whiz kids and their role in the tragic Vietnam war.

As usual the mainstream press gets it completely wrong and bemoans the reallocation of talent from law and medicine into finance, when in fact the real societal loss is from science, engineering, technology startups, etc.

Over the course of the past week or so, while I was interviewing child psychiatrists about the exciting new field of developmental neuroscience, the phrase “the best and the brightest” came up twice.

As in “I hope the brightest and the best kids will be doing this” — instead of going to work on Wall Street.

The first time I heard it, I didn’t say anything. I was laboring too intensely to keep up with phrases like “single nucleotide polymorphism.” But the second time, I was able to pause in note taking long enough to grouse, “I never had the impression that the best and brightest people went to Wall Street.”

“Maybe not in your day,” came the reply. “But in recent years they have.”

Let’s leave aside for a moment the concept that I could be old enough to have a “day” dating back to sometime in prehistory. And return to that phrase “the best and the brightest,” which got a great deal of airing last month when the Obama administration made the shocking decision to place limits on the compensation packages of executives whose banks received federal bailout funds.

A nice triple usage by columnist Susan Lee, in a piece on the proposed $500,000 compensation cap for top management, was typical: “This produced outraged shrieks from Wall Street that any pay cut would cause the best and brightest to head for the exits,” she wrote. “… But the big flaw here is that the best and brightest have nowhere to go … unless the best and the brightest want jobs as home-care attendants or third-grade teachers, there’s no place to jump.” ...

Two comments on the article (there are already over a hundred):

March 13, 2009
1:23 am

When I hear the term “best and brightest” associated with Wall Street, I don’t immediately think of the executives or the traders, but the mathematicians they employed. From what I’ve heard, over the past few years, there has been a significant drain of technical talent away from places like Silicon Valley and Boston, and to very well compensated careers creating new financial instruments.

I couldn’t care less where Gordon Gekko ends up, it’s the people who work for him that matter.

— Mike Douglas

31. March 13, 2009
1:29 am

Kudos for this piece. Having attended two colleges commonly thought as incubators of some of the “best and brightest” and graduating fairly recently (2005), I can attest that there was very little stigma attached to going to Wall Street. Even at Caltech, a powerhouse for future Nobel Prize winners in the sciences, more and more graduates were heading into finance — sometimes as “quants” and sometimes simply as traders and analysts. There was no sense of shame about wanting, purely and simply, to make piles of money.

It seems to me that something has gone awry in the system when even the “best and brightest” in the sciences and engineering — fields where job opportunities have not disappeared, where there purports to be high demand for innovation and intelligence — feel that there’s more reward on Wall Street than can be found in any labs. Finance hasn’t just siphoned away would-be doctors or lawyers; it’s siphoned off from would-be alternative-energy entrepreneurs, from innovators in many necessary fields.

Why? From the people I know who went into finance instead of science, most were drawn to the culture — the culture of supposedly being “the best and the brightest.” There’s tremendous ego involved in being smart enough to succeed at a place like Caltech (I wasn’t; I transferred), as well as tremendous ego destruction in realizing that the sciences are populated by some phenomenally brilliant people who are, on an IQ scale, truly and unquestionably “the best and the brightest.” Most of us can never compete with that, even those who spent their childhoods and teenage years being the smartest people in the room.

But send those scientists and engineers onto Wall Street and suddenly those egos are getting stroked! Suddenly they’re not nerds — they’ve got money to throw around, they feel more glamorous than their engineer friends, they get told that they’re the “best and the brightest” (even though they should know better), and, most importantly of all, they get to feel like the smartest person in the room again. It may sound like armchair psychology, but I’ve talked to a lot of people who have this attitude.

What’s the solution? Maybe we can make the sciences sexy again, as glamorous as they were during the space race — Obama seems to be on track, constantly referencing the centrality of science to his policy. There’d be a lot fewer MIT and Caltech alums on Wall Street if it were seen as a meeting ground of second-rate intellects.

— maria


Ian Smith said...

"The pretty good and the pretty smart" in the US.

In countries like China and Japan "the best and the brightest".

My SAT, ACT, and all of my CBAT scores were higher than the median at Cal-Tech, but I wasn't even called for an interview.

In countries where raw test performance determines what school you go to "the best and the brightest" really do have the opportunity to go into whatever is most lucrative.


Unknown said...

Yes, but. It seems that the financial crisis was caused not by the quantification of financial data but by the influence of those leaders who were unable to make sense of it. Many financial leaders graduated with non-mathematical econ degrees, and were simply aggressive and charismatic individuals who wanted to "lead" (on the marketing and dealmaking side) without putting in the intellectual work to understand the underlying mathematics.

My view is that the demonization of the quants (and not these charismatic leaders) reflects a basic misunderstanding of how all this played out, and that what we need is not less financial math but more, and expectation of better understanding of this math from financial decision-makers.

rp said...

Interesting topic that brings together a lot of different issues relevant to those of us who made the science to academia switch. Personally I think the conventional story line of ‘the best and the brightest being siphoned off by money’ misses a, maybe even the, critical issue.

1) At the undergrad level it’s certainly true many students at the best schools are being siphoned off into the ‘business world’ but this isn’t a new phenomenon – the New Yorker published an article about this years ago focusing on how many Ivy League stars were going to work for McKinsey an related firms. Over the last decade the cohort going to ‘finance and consulting’ may have switched a bit towards finance, but consulting has still been drawing many. And a crucial point – the salaries on the finance side are generally 2X better, but candidates with offers from both just as often take the consulting position as the finance position. In my opinion most of these students ARE NOT driven by money above some basic level.

2) At the PhD level (which is where we really start talking about quants) the dynamic is very different. These are people looking at a very tough job market in their existing fields (Steve has posted about the academic job market) and trying to decide what to do. For most there is an inherent ‘fear’ of the cut-throat business world vs. the comfort of academia and many do not make the jump enthusiastically.

Across but of these pools, if there is any ‘siphoning off’ of talent it’s happening in the first stage (out of undergrad), and it’s not driven by money, or at least not primarily. I disagree with the nytimes comment about stigma – there is still stigma attached to working at a hedge fund, and it helps push people who also have opportunities to work in consulting in that direction in spite of the higher hedge fund salaries. But these students generally are not looking beyond the ‘elite business world’ (meaning the Goldman Sachs and McKinseys and the many other large and small companies of this type, and the occasional Microsoft) at all. Why? This is a critical point missing from the discussion I think, and where a real solution may exist. You’re a successful senior at Harvard majoring in X, having not really thought hard until now about what job you’ll do when you graduate. What opportunities do you see before you? A gazillion ‘elite business world’ companies knocking on your doorstep (ie career fairs) to test your analytic mettle and, if you pass, give you a job with other talented people and a route to rapid advancement if you do well. If you don’t go that route? Expect to struggle finding (a) a job related directly to your major which can work for engineers and computer science types but usually not for physicists or many other majors, for instance, or (b) doing a general job search across firms not well equipped to hire very bright but inexperienced people into attractive jobs with high growth potential unless a match of training and company need happens fortuitously.

The ‘elite business world’ is winning these people because they show up and have interviewing and training systems to give these students attractive opportunities in spite of their complete inexperience and lack of (in most cases) of relevant training. The rest of the world, by and large, doesn’t. If an eco-conscious ‘green energy’ company showed up on campus with below average salary offers but a willingness to take inexperienced, bright students with no particular expertise immediately relevant to their business, they would be SWAMPED with eager applications. There is a real hunger to do good in the world among these students that I think trumps desires for money.

It may be that finance and consulting are unique in being able to put young, bright people to work quickly, and the current state of affairs has arisen because of this unique quality. Maybe most other industries need experienced but not necessarily brilliant people, and hiring a few Harvard grads and given them real challenges just isn’t worth the effort. I hope this isn’t the case. If it isn’t, though, then the real problem is to figure out how to more directly connect the opportunities in these fields to the students who would take them if they saw a straightforward way to do so. You can always count on the most enterprising or connected of these students to find their way to a tech startup, perhaps, but most don’t have the life experience to do so – and it is on the companies to find a way to tap this resource.

I’ve always thought a great business plan would be to take a few million, go to career fairs at the top schools in the fall, hire some really bright undergrads, and then figure out some challenging problem to tackle. In a year you’d have a real business even if you had no idea where to start at the beginning.

Sorry for the long comment.

CW said...


I think you nailed it. The new grads who aren't totally committed to science and engineering, and are quite possibly somewhat insecure about whether they can hack it, are sitting ducks for assiduous recruiters from financial services and consulting. Plus, those industries have been honing their pitch for at least a couple of decades now.

In addition, I recall reading on this blog or elsewhere that Wall Street has for a long time shown a particular liking for athletes from good (but not necessarily elite) schools. They're looking for a certain aggressiveness and drive, and it makes sense somehow that such people, once in executive positions, would develop aggressive and effective recruiting strategies to build teams.

And finally, as someone in one's twenties, with student loan debt and the usual worries about finding a first job, how do you tell friends and family that you turned down or mostly ignored big name recruiters offering $50K+ (at least) to start? This takes a kind of self-possession and independence that not that many people have at that age.

Horatio said...

Is it really a societal loss if someone chooses finance over engineering?

Ian Smith said...

There is and has been an easy solution. It was proposed by Buffet.

100% tax on capital gains of less than one year.

Ian Smith said...

100% tax on capital gains of less than one year is a start.

For commodities: brokers approve trading for producers and direct consumers of commodity.

For options/CDSs: broker software indicates whether there is the appropriate position in the underlying or not.

Restrictions may be relaxed for a small number of designated market-makers (exchange members).

David said...

Spitzer became governor largely thanks to his many hyper-publicized cases against Wall Street titans like Dick Grasso and Hank Greenberg- cases that he pursued by going after everything and everyone connected with his targets, no matter how personal, by leaking constantly to the press and by making his own nasty, off-hand public comments.

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