Go to the web sites of venture capital, private equity or hedge funds, or of Goldman Sachs, and you’ll find that HYPS alums, plus a few Ivies, plus MIT and Caltech, are grossly overrepresented. (Equivalently, look at the founding teams of venture funded startups.)
Most top firms only recruit at a few schools. A kid from a non-elite UG school has very little chance of finding a job at one of these places unless they first go to grad school at, e.g., HBS, HLS, or get a PhD from a top place. (By top place I don’t mean “gee US News says Ohio State’s Aero E program is top 5!” — I mean, e.g., a math PhD from Berkeley or a PhD in computer science from MIT — the traditional top dogs in academia.)
This is just how the world works. I won’t go into detail, but it’s actually somewhat rational for elite firms to operate this way — a Harvard guy knows how the filtering works at his alma mater and at similar places so he trusts it. Plus, at the far tail of ability I would guess the top 10-20 UG schools grab almost 50 percent of the pool.
I teach at U Oregon and out of curiosity I once surveyed the students at our Honors College, which has SAT-HSGPA characteristics similar to Cornell or Berkeley. Very few of the kids knew what a venture capitalist or derivatives trader was. Very few had the kinds of life and career aspirations that are *typical* of HYPS or techer kids. At the time I took the survey almost 50 percent of the graduating class at Harvard was heading into finance. You can bet that the average senior at Harvard knows what Goldman Sachs is (and even what it means to make partner there), that McKinsey is so over (relative to careers in finance), what the difference is between a Rhodes, Marshall and Churchill scholarship, etc. etc. Very few state school kids do … Last year a physics student at Oregon won a Marshall to go to Cambridge. The administrators were happy about the PR. I had a conversation with a vice-provost about how to ensure a steady pipeline of such candidates — but there are not the resources, institutional understanding of the process, etc. (let alone pool of able kids) to turn UO into a Rhodes/Marshall/… machine like Harvard.
Now tell me that peer or network effects don’t matter. Controlling for SAT may account for much of the variance in well-established careers like medicine or even law, but for the very top jobs (which contribute disproportionately toward income inequality), kids at elite schools have huge advantages. Guess where I will send my kids (assuming they can get in)?
To see the elite / non-elite divide most starkly, look at the probability of (earned) net worth, say, $5-10M by age 40. This cuts out almost all doctors and lawyers and leaves finance, startups and entertainment (i.e., movies or television; let’s ignore sports). Even after controlling for SAT, I would guess elite grads are 3 or maybe even 10 times more likely to achieve this milestone.
Controlling for IQ doesn't account for differences in drive or life expectations or naked ambition, let alone social networks, signaling or information flow among elites.
See also Returns to elite education.
22 comments:
The buddy's name is Adam D'Angelo and was in my class at Caltech (we were also in the same house, Lloyd). He is a big algorithms guy and worked on some related tech shortly before Facebook hit the big time (i.e. Buddyzoo), and became CTO of Facebook for a while after graduation. I haven't read the book or seen the movie (nor do I plan to do either), but Adam preferred to be the quiet thinker behind the scenes, so I wouldn't be surprised if he were left out.
Thanks! Ask and ye shall receive :-)
At over 40 Steve's showing signs of growing up, but he's still got so far to go.
"Controlling for SAT may account for much of the variance"
As a matter of fact MDs have average SAT scores. In fact I can say I've never met a smart MD.
Having the SAT, ACT, CBATs etc. doesn't get you in to an elite school in the US. This is almost unique to the US.
There are a lot of ways to get rich by age 55 or so, but, like you say, by age 35 there are a lot fewer. I doubt if Sam Walton was worth the current equivalent of $10 million at age 35.
Prof. Hsu,
I thought that the great privilege of going to Caltech was to learn Science from the best of the best. From people like Kip Thorne and others of his caliber. But, apparently, the main usefulness of a Tech diploma is to go work at a Private Equity "top firm" and spend 100 hours per week doing some financial voodoo-like magic that requires no more than 4th grade arithmetic, while having to put up with 2nd rate intellects with oversized egos. Being realistic and pragmatic does not mean that one has to sell out.
"I thought that the great privilege of going to Caltech was to learn Science from the best of the best. From people like Kip Thorne and others of his caliber."
That's probably what 50-75 percent of the incoming class is thinking. Even in the old days, many of the engineering majors were thinking about starting companies (back then it was chip design). By the time graduation rolls around the 50-75 percent figure has decreased by a factor of 2, even though about half the class will go on to get a PhD. I'd like my kid to have the benefit of a Caltech education, but the option to make money if he/she desires. It's useful to know how the world works.
You might be interested in Vernon Smith's (economics Nobel and father of experimental economics) view of the Caltech education:
"Caltech was a meat grinder like I could never have imagined. I studied night, day, weekends and survived hundreds of problems, but what a joy to take freshman chemistry from Linus Pauling, hear physics lectures by J. Robert Oppenheimer on his frequent visits to Caltech, attend a visiting lecture by Bertrand Russell, and regularly see von Karman, Anderson, Zwicky, Tolman, Millikan and other legendary figures of that time, on campus.
I was majoring in physics, but switched to electrical engineering, which was in the same division (Mathematics, Physics and EE) as a senior. In this way I did not have to take the dreaded "Smyth's course," required for physics majors, but not EE, and received my BS on schedule in 1949.
... After Caltech, Harvard seemed easy, and I got virtually straight A's. ...Graduate school is an endurance test, but was not that demanding for me after having survived the undergraduate meat grinder.
... The first thing to which one has to adapt is the fact that no matter how high people might sample in the right tail of the distribution for "intelligence," ... that sample is still normally distributed in performing on the materials in the Caltech curriculum. The second thing you learn, if you were reared with my naive background, is the incredible arrogance that develops in conjunction with the acquisition of what you ultimately come to realize is a really very, very small bit of knowledge compared with our vast human ignorance. ... the difference between Harvard and Caltech: "At Harvard they believe they are the best in the world; at Caltech they know they are the best in the world."
http://infoproc.blogspot.com/2009/05/vernon-smith-at-caltech.html
D'Angelo left to start Quora, interview here: http://www.businessinsider.com/what-i-learned-from-being-cto-of-facebook-why-i-started-quora-and-this-is-why-gen-y-kicks-ass-at-entrepreneurship-2010-9
Damn Lloydies, who knew they were worth anything more than a shortcut between Ruddock and class (and perhaps depending on your age, some good acid.)
I think you missed the context. In many previous analyses it has been shown that controlling for SAT eliminates much of the lifetime earning differences between elite and state school grads. In the past, professions such as law and medicine were among the dominant paths to financial success, and a state school kid with a high SAT score had more or less the same chance of getting into those professions as an Ivy league kid. Hence the result.
These days, the spread in income / wealth isn't driven by doctors or lawyers, but rather by financiers, startup guys, etc. Most of the increase in inequality in the US over the past decades is driven by just a few zip codes -- NYC + CT, Seattle + Bay Area. Guess why that is?
http://infoproc.blogspot.com/2006/09/us-income-inequality-caused-by.html
Last I checked, the hole in the wall between the infamous alleged LSD lab and the adjoining room was still there. :)
:-)
IIRC Sabeer Bhatia (Hotmail) was also a Lloydie, but am not completely sure. I think Bill Gross (IdeaLab) is a Page boy.
When it comes to techer as Big Brain in the background of a well-known startup, I think the cut is not that high -- like the top 20-30% of techers would have the brainpower chops (co-workers and Red Herring article says "X is the smartest guy I ever met!!!" :-). Within that population it comes down to luck (knowing the other founders), willingness to leave the safe corporate job for the startup, and ability to manage a team.
On the other hand Bill Gross had many, many good ideas.
Is Harvard itself what motivates people to so effectively pursue these high end jobs, or is it just a magnet for people who would do that either way? I'm at a big state school and I'm the only one I know with a startup.
Both. Ambitious kids go to Harvard, and they become even more ambitious after interacting with their new peers. ("Remember Mark? He was a senior when we were freshmen. I hear his startup is doing really well in Palo Alto. If he can do it ...")
I was never a student at Tech. I had the enormous privilege of SURF'ing there for one Summer (although I was an undergrad in Europe at the time). I met some enormously talented people there, which was a rather humbling experience, indeed. Some of the people I met at Tech did "sell out" and are now doing consulting or finance. Some of them are quite happy with their careers. Some others are quite miserable... but peer pressure and their parents' expectations prevent them from doing what they really want to do (which pays only 60k or so). A few started companies, which is, imho, a much better use of their talents than trying to survive the daily gring at some corporate hellhole.
I am no fool. I understand how the world works. As an European, I see Americans' "fascination" with the ivy schools as the mere aspiration to join the "neo-aristocracy". England has Cambridge / Oxford. France has École Polytechnique and the like. It's not just that "a Harvard guy knows how the filtering works at his alma mater and at similar places so he trusts it", it's also that the Harvard guy is human and, thus, susceptible to diseases such as tribalism. Even Techers are susceptible to tribalism, with their endless, childish rivalry with MIT.
Kudos for planning on sending your kids to Tech. At least they will have to earn their A's ;-)
I've heard from some esteemed minds that the kids at certain universities are workaholic grind outs. Schools like Berkeley immediately come to mind. Would any of Steve Hsu's readers care to elaborate more about this fascinating theory?
I should be a bit more precise. The theory that I've heard articulated is that there are certain groups of people, perhaps concentrated within certain universities, whose real life accomplishments purportedly dwarf their actual innate intelligence. That is to say, these groups of people obtain SAT or PSAT test scores vastly in excess of what their IQs would actually predict, and therefore these individuals are best characterized as being workaholic grind outs. I presume that these same people also obtain real life accomplishments vastly in excess of their innate intelligence as well.
It's a truly fascinating theory. I'd really love it if any of Steve Hsu's readers could possibly expound upon that with a bit more detail.
> "a Harvard guy knows how the filtering works at his alma mater and at similar places so he trusts it", it's also that the Harvard guy is human and, thus, susceptible to diseases such as tribalism. <
No question this is part of it as well. But all the more reason to send the kid to the right tribe ;-)
"Even after controlling for SAT, I would guess ..."
I always miss the context, but it looks like you've missed the context of your own context.
Part of the prevailing ideology you've fallen for is the explanation of outcomes by "individual differences".
There are no individuals. There is only society.
I've pasted it below. I'd still like to hear your opinion on this matter -- esp. with your Williams perspective!
"Obviously this kind of assertion is difficult to back up with hard data or academic studies. In fact, most academics don’t know all that much about how the real world works. David Kane, one of the contributors to this blog, is an exception, and I would like to hear what his take is on all this. I bet he agrees with me as long as I add Williams College to the list of elites: HYPS —> HYPSW :-) "
Dale and Krueger is 1999 (see the link at the end of the post to Returns to Elite Education, where I discuss their results and also Hoxby's). I find the results persuasive, but it's looking backwards at the *prior* 30 years. I think something changed qualitatively with the huge growth in finance and the startup economy. See this income inequality analysis with county by county data. Most of the increase in inequality in the US over the past decades is driven by just a few zip codes -- NYC + CT, Seattle + Bay Area.
http://infoproc.blogspot.com/2006/09/us-income-inequality-caused-by.html
$(5-10)M by age 35-40 seems to be the goal of a lot of science types. They are not especially materialistic, but want financial independence and the freedom to do whatever they want (e.g., return to science or math research). I know a few people who managed to accomplish the goal and actually return to science research, but many others get caught on the treadmill and can't give up the money lifestyle. I think Charles Ferguson is an interesting case because he has gone on to do interesting things (documentary films) since cashing out his startup.
It's an entirely different category of person who has been dreaming of being super wealthy (e.g., net worth > $100M) since childhood. I imagine Buffet, Ken Griffin (Citadel), etc. fall into this category.
Mezrich's book is very thin on technical details, especially after Zuckerberg gets the first Harvard-wide system going. The main other programmer mentioned is Dustin Moskowitz from Harvard. Admittedly, I was mostly skimming after the first few chapters but I don't think I missed anything worthwhile.
More importantly do people ever have time to date or get laid at Caltech or is it all study study? :) Is there ANY partying?
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