February 7, 2014
By Michael Gibson
With due respect to Nietzsche, who said otherwise, the way does exist and Ivy League grads have found it. Or at least that’s what you would think talking to them about “the path.” Not a path, but the path.
“Oh, you know the path,” a Princeton student recently told me at a recruiting event, “you go to an Ivy League school. Then you either become an investment banker or a management consultant. After two-three years, you apply to law school or b-school. And if you fall off the path for even one year, you can’t get back on.”
The best universities in the world are turning many graduates into krill for too-big-to-fail corporate leviathans. Since they’re well-paid krill, no one complains, but when more than a third of a graduating class disappears each year into the gaping maw of financial services, it begs the question whether Ivy League schools are teaching critical thinking after all.
Universities reveal little data about the employment and career tracks of recent grads. (Incidentally, consider that the FDA requires labels on all food packages for purchase.) But according to the New York Times, in 2010 close to 36 percent of Princeton graduates with full-time jobs went into finance, down from a pre-financial crisis high of 46 percent in 2006, but still more than one-third of an entire class. If you add management consulting to the count, it’s more than 60 percent. Likewise, graduates from Harvard are more likely to enter finance and consulting than all other career paths.
For any given Ivy grad, getting a job in professional services makes good practical sense. The money is good, the action exciting, the high status intoxicating. It’s a career with optionality: you tell yourself you’ll pick up some skills while waiting for the right time to breakaway for something you truly love.
But Andrew Yang, the founder of Venture for America, sounds an alarm in his new book, Smart People Should Build Things. Sure, bankers and consultants provide valuable services. They do things like help large firms raise money, facilitate mergers and acquisitions, and introduce process innovations, spreading best management practices to new regions. But, Yang points out, all of this activity depends on a vibrant ecosystem of other companies coming into being, creating value, and thriving. If a majority out of the Ivy League is marching down the professional services path every year, then logic dictates they’re not creating new companies or helping young ones thrive.
Yang compares the pull of the professional path to the resource curse or “Dutch disease” that keeps some developing countries poor. In those nations, the wealth created by one abundant resource such as oil will tend to kill off all the other productive parts of the economy.
“In the United States,” Yang writes, “companies with fewer than 500 employees account for almost two-thirds of net new jobs and generate thirteen times more new patents per employee than do large firms. If the US economy had generated as many startups each year for 2009-2012 as it had in 2007, the country would have produced almost 2.5 million new jobs by 2013.”
Alas, thanks to the pod of too-big-to-fail whales, those startups never came to be. To make matters worse, all those talented graduates are now devoted to supporting and defending large incumbent firms, who by nature are reluctant to pursue radical innovations that might disrupt their current cash cow business models.
Universities love to shepherd talent to large corporations. There is a Goldman Sachs Room in Columbia University’s career services office. To access job fairs at Ivy League schools, firms must pay thousands to get exhibit spaces. That leaves many small startups hungry for talent locked out.
Yang founded Venture for America to help solve this problem. It’s a two year program for aspiring entrepreneurs infused with a learning-by-doing philosophy. By placing talented graduates in startups in Detroit, Las Vegas, and New Orleans, Yang hopes the program can help give a jolt of life to the struggling economies in these cities . Along the way, instead of marching down the path, grads will actually pick up the skills they need to build a great company.
We need more programs like Venture for America. The opportunity lost to the path is starting to add up. Unemployment and underemployment in the US hold steady; the consensus among economists predicts slow growth rates for the rest of the decade. It doesn’t have to be this way. It’s as simple as Yang says: smart people should build things. If we expect each generation to be better off than the previous, we need more young firms bringing new products and services to the market. But unless the Ivy League stops running human resources for Goldman Sachs and McKinsey, the prospects are dim.
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