Stopping The 'Brain Drain' Of The U.S. Economy
Yale University student Marina Keegan received an email last May from Bridgewater Associates, one of the world's largest hedge funds, offering her $100 if she said why she didn't apply for a summer internship.
Keegan, an English major, decided to take Bridgewater up on its offer.
"It was only sort of once I was inside the room when I realized ... maybe I'm helping them perfect their recruiting machine, which is exactly what we were doing," Keegan tells weekends on All Things Considered host Guy Raz.
Bridgewater confirmed that it does hold these focus groups. It's a small but telling window into the way big banks and consulting companies recruit at top-tier schools.
Ever since she got to Yale, Keegan was bombarded with emails from banks, consulting firms and hedge funds, begging her to consider working for them; same with her friends.
At some Ivy League schools last year, up to half of the graduates went into finance or consulting, a move that could have a profound effect on the economy in the years to come.
Shortly after Keegan went to the Bridgewater focus group, she wrote about it in a Yale student magazine. She found out that a quarter of her classmates were heading into banking and consulting. She was surprised and even a little angry.
A Campus Backlash
Craig LeMoult of member station WSHU reports that Keegan was not alone in her anger, and that the sentiment has fulminated into protests on some of the most elite campuses in the country.
Student protesters recently got into a Goldman Sachs recruitment session at Princeton University to tell student attendees they were listening to a "carefully crafted recruitment pitch" and that they could "do better for society."
Similar protests have been held at Harvard University, and at Stanford University, where Teryn Norris was a student. Norris and a classmate wrote an op-ed in the student paper.
"When we, sort of saw the Occupy Wall Street movement rise this fall ... we felt like it was a really important time to step out and say this is how we think this is impacting universities across the country and why it's relevant to students today," Norris tells NPR's Raz.
After he wrote the op-ed, Norris teamed up with a politically focused network for young people called Our Time to expand on that idea. They started the Stop the Brain Drain campaign to call attention to the issue and encourage public service and entrepreneurship as an alternative to the financial world.
So far, more than 1,400 people have signed a petition on their website supporting that goal. Norris stresses, however, that they're not against all financial institutions.
"The problem is that when you've got 20 to 30 percent of some of the top talent in this country going into a sector that is not necessarily contributing to economic and social productivity," he says. "That's a problem for the country at large and it's something that we should all be concerned about."
According to university surveys of the class of 2010, more than half of respondents from the University of Pennsylvania are working either in finance or consulting. At Harvard it was 49 percent, and more than a third of respondents at Cornell University started out their careers in the field. Norris says so many idealistic young people start college wanting to change the world.
"Then four years later, they go to work for Goldman Sachs and JP Morgan," he says. "What is going on there? I think that's what we're trying to figure out and trying to address."
Goldman Sachs declined to be interviewed for this story, but Morgan Stanley sent a written statement saying:
"Because a healthy banking and capital markets system is vital to economic growth, joining the industry at this time is a unique chance to shape how we contribute to a healthy economic environment."
The Stop the Brain Drain campaign is only partly about the demand for new finance employees. It is also targeting the supply, and that focuses its attention on the career-development centers at the top universities. The campaign says the schools are too focused on funneling graduates into these jobs.
Economist Paul Kedrosky with the Kauffman Foundation says elite schools sending a bigger share of their graduates into finance and consulting is not new; they've been doing it for at least two decades.
Kedrosky tells NPR's Raz that what's different now is that those students have essentially used their talents to grow the financial sector in ways that are unhealthy for the overall economy.
"It's grown as a proportion of the economy in a way that we haven't seen since the years leading up to the Great Depression," Kedrosky says.
The other thing that is happening, Kedrosky says, is that the financial sector is drawing in scientists, engineers and mathematicians and moving them to a use that no one really ever imagined. He says it is one of the reasons why the rate at which new companies are created in the U.S. has flatlined.
"These entrepreneurs ... [are] getting yanked off into the financial sector never to be seen again," he says.
There's good news, however, as Kedrosky points out that last week's jobs numbers showed a sharp decline in employment in the financial sector and an increase in areas like manufacturing.
"We finally saw the beginnings of a contraction, not to do with the crisis, but to do with the restructuring and a change in the role of financial services," he says. "It points to a much happier future for the U.S. economy."
GUY RAZ, HOST:
From NPR News, it's WEEKENDS on ALL THINGS CONSIDERED. I'm Guy Raz.
Last May, Marina Keegan, a student at Yale University, got an email from one of the largest hedge funds in the world: Bridgewater. And the email politely stated:
MARINA KEEGAN: We noticed that you didn't apply for our internship this summer. And we'd love to talk to you about why, if you meet us here at this time. And we will compensate you for your time with a hundred dollars.
RAZ: A hundred bucks - just to tell them why she didn't want the job. Since her sophomore year at Yale, Marina has been bombarded with emails from banks, consulting firms and hedge funds, begging her to consider working for them - same, by the way, with all her friends. And Marina is an English major. Anyway, she decided to take Bridgewater up on their offer.
You were like, I'll take a hundred bucks.
KEEGAN: Yeah. Exactly. And I think a lot of students did that. And it was only sort of once I was inside the room that I realized, oh, my gosh, maybe I'm helping them perfect their recruiting machine - which is exactly what we were doing.
RAZ: Bridgewater confirmed to us that it actually does hold these focus groups. It's a small but telling window into the way big banks and consulting companies recruit at top-tier schools. And last year at some Ivy League schools, up to half of the graduates went into finance or consulting - and it's a kind of brain drain that may end up hurting our economy in ways we won't see for years. Even President Obama weighed in on it, at a speech in December.
(SOUNDBITE OF ARCHIVED SPEECH)
PRESIDENT BARACK OBAMA: And by the way, if we don't have an economy that's built on bubbles and financial speculation, our best and brightest won't all gravitate towards careers in banking and finance.
(SOUNDBITE OF APPLAUSE)
OBAMA: Because if we want an economy that's built to last, we need more of those young people in science and engineering.
RAZ: Our cover story today: the brain drain to finance and consulting - the consequences, and signs that it may be ending. Now, shortly after Marina went to the Bridgewater focus group, she wrote about it in the Yale student magazine. And she found out that a quarter of her classmates were heading into banking and consulting. She was surprised, and even a little angry.
And it turns out, she's not the only one. Reporter Craig LeMoult, from member station WSHU, went to Yale to find out how widespread the anti-finance and consulting backlash has become at some universities.
(SOUNDBITE OF CAMPUS PROTEST)
UNIDENTIFIED STUDENTS: (Chanting) Don't go into finance. Take a stance. Don't go into finance. Take a stance. Don't go into finance...
CRAIG LEMOULT, BYLINE: These kinds of protests have been springing up on some of the most elite campuses in the country. Student protesters got into a Goldman Sachs recruitment session at Princeton, and can be seen in a YouTube video addressing the student attendees in the call-and-response, mic-check style of the Occupy movement.
(SOUNDBITE OF VIDEOTAPED PROTEST)
UNIDENTIFIED WOMAN: What you've been listening to is a carefully crafted recruitment pitch.
UNIDENTIFIED STUDENTS: What you've been listening to is a carefully crafted recruitment pitch.
UNIDENTIFIED WOMAN: You can do better for yourself.
UNIDENTIFIED STUDENTS: You can do better for yourself.
LEMOULT: Similar protests have been held at Harvard and at Stanford, where Teryn Norris was a student. Norris and a classmate wrote an op-ed in the student paper.
TERYN NORRIS: When we - sort of saw the Occupy Wall Street movement rise this fall, and saw that this was an issue that the nation was really taking seriously, we felt like it was a really important time to step out and say, you know, this is how we think this is impacting universities across the country and why it's relevant to students today.
LEMOULT: After he wrote the op-ed, Norris teamed up with a politically focused network for young people, called Our Time, to expand on that idea. They started the Stop the Brain Drain campaign, to call attention to the issue and encourage public service and entrepreneurism as an alternative to the financial world. Norris stresses they're not against all financial institutions.
NORRIS: But the problem is that when you've got 20 to 30 percent of some of the top talent in this country going into a sector that is not necessarily contributing to economic and social productivity, then that's a problem for the country at large, and it's something that we should all be concerned about.
LEMOULT: According to university surveys of the Class of 2010, more than half of respondents from the University of Pennsylvania are working either in finance or consulting. At Harvard, it was 49 percent. And more than a third of respondents at Cornell started out their careers in the field. Norris says so many idealistic young people start college wanting to change the world.
NORRIS: And then four years later, they go into work for Goldman Sachs and J.P. Morgan. What is going on there? I think that's what we're trying to figure out, and trying to address.
LEMOULT: Goldman Sachs declined to be interviewed for this story. Morgan Stanley sent a written statement saying, quote: Because a healthy banking and capital markets system is vital to economic growth, joining the industry at this time is a unique chance to shape how we contribute to a healthy economic environment.
(SOUNDBITE OF STUDENT PROTEST)
UNIDENTIFIED STUDENTS: (Chanting) ... Not money. Make change. Make change. Not money. Not money. Make change...
LEMOULT: The Stop the Brain Drain campaign is only partly about the demand for new finance employees. It's also targeting the supply, and that focuses their attention on the career development centers at the top universities. They say the schools are too focused on funneling graduates into these jobs.
Career centers at several schools say they confer employer-in-resident status on some employers. That gets them discounts on fees for on-campus events, and those events are promoted to students through emails, online job databases and social networking. Allyson Moore is the director of the career services office at Yale.
ALLYSON MOORE: The vast majority of organizations that recruit on campus here at Yale, and at other college campuses across the country, are definitely within financial services and management consulting.
LEMOULT: Moore says they're just really good at working with career centers. She says the percentage of Yale students going into business and finance dropped last year - in part because with the economy, firms have been scaling back their hiring.
(SOUNDBITE OF TRAFFIC)
On a chilly evening recently, Yale junior Jordan Orosz walked out of a recruiting session that was hosted by the consulting firm Bain and Company. She says the protests and op-eds have raised a topic that students weren't talking about before.
JORDAN OROSZ: You know, I think it's a really great movement, and I think that it really has started a lot of great conversations on campus about what we are doing with our time, and what we are deciding to do with the opportunities that Yale has given us.
LEMOULT: Orosz says growing up, she wanted to be an astronaut. But now that the space program isn't as active as it used to be, she's thinking consulting is looking like a pretty good second choice.
(SOUNDBITE OF MUSIC)
RAZ: That's reporter Craig LeMoult, in New Haven. Economist Paul Kedrosky says elite schools have been sending a bigger share of their graduates into finance and consulting for at least two decades; that's not new.
But what's different now, he says, is that those students have essentially used their talents to grow the financial sector, and in ways, he says, are unhealthy for the overall economy.
PAUL KEDROSKY: So that's one - is that it's grown as a proportion of the economy, in a way that we haven't seen since the years leading up to the Great Depression. And then the second thing that's gone on, that's really unusual, is that it's drawing in scientists and engineers and mathematicians, pulling in all of these very bright people - and moving them to a use that no one really ever imagined.
RAZ: Well, what are the consequences of that, if any?
KEDROSKY: Oh, they're immense. So, you know, one of the strangest puzzles in sort of recent economics of entrepreneurship is why the rate at which we create young companies in the United States has actually flatlined despite, you know, immense increase in venture capital, all kinds of entrepreneurship programs around the United States. We're spending so much more, and yet we're not seeing any benefit.
And so one of the reasons why is because of these entrepreneurs - in particular, in science, engineering, mathematics - getting yanked off into the financial sector, never to be seen again.
RAZ: I mean, I'm just thinking about the last - sort of 10 years; I mean, the iPod and Facebook and Google, and all of these incredible innovations. That doesn't seem to reflect what you're arguing.
KEDROSKY: No. But you have to - sort of look at it the other way around and say, how quickly has productivity grown over the period compared to prior decades? And the answer is, slower. How quickly has the economy grown? And the answer is, slower. One of the more remarkable things in last week's jobs data was for the first time, a sharp, sharp decline in employment in the financial sector.
So despite rapid gains in almost every sector of the economy, including - you know, wonderfully - manufacturing, which is, you know, hugely important, we finally saw the beginnings of a contraction not to do with the crisis, but to do with the restructuring and a change in the role of financial services in the U.S. economy. And I think it points to a - you know, a much happier future for the U.S. economy.
RAZ: That's economist Paul Kedrosky. OK. Here's a pop quiz, courtesy of David Leonhardt, the Washington bureau chief for the New York Times: What do the CEOs of Boeing, GE, Morgan Stanley, the prime minister of Israel, Chelsea Clinton and R&B star John Legend all have in common?
DAVID LEONHARDT: They all worked for one of the three big, most prestigious consulting firms, which would be BCG.
RAZ: Boston Consulting Group.
LEONHARDT: Yup. Bain, which is where Mitt Romney spent a few years before going to Bain Capital.
LEONHARDT: And McKenzie. All of them.
RAZ: What did John Legend do there - do you know?
LEONHARDT: I don't, really. I mean, he spent a few years...
RAZ: Leonhardt says consulting, like finance, is still a top career choice on many elite campuses, but it's no longer gaining in popularity as it did all through the 1990s.
LEONHARDT: I think some students are saying, wait a second; if I want to make money, I want to make real money. And they're going to hedge funds.
LEONHARDT: And I do think there are probably some students who are basically taking the advice of the president of Harvard, Drew Gilpin Faust, who's saying, hey - you know - I talked to a lot of students who tell me they don't actually enjoy this work.
You know, I think probably on the margins, you have a few kids on either end - some of whom want to go make more money, and some of whom realize they don't actually want to do this.
RAZ: Well, to me, one of the most glaring statistics to come out of the financial crisis was the extent to which the financial sector was such a huge part of our economy.
RAZ: I wonder if some of that creativity went into some of the - let's say destructive creativity that we saw on Wall Street in the 2000s - you know, credit default swaps and so on.
LEONHARDT: Paul Volcker, the former Fed chairman, had this line that drove people in finance absolutely nuts. He said the only invention for modern finance that has improved people's lives is the ATM - because, of course, high finance didn't spend a lot of time working on the ATM, right? If you think about how much finance has expanded as a share of our economy and then you say, show me the fruits of that, show me the way that has improved our lives; well, you can't point to a huge number of ways in which it has.
To be clear, you can create enormous social good in the right environment, at an investment bank or a consulting firm. Maybe you are an investment bank, and you steer an investment to its most productive use, which is a cure for a disease. Maybe you're at a consulting firm, and you help a pharmaceutical company figure out a new way to do things that makes life a lot better for people. It's a matter of scale.
But one of the interesting things is, people now asking, wait a second; do the people who go into these fields actually enjoy it? There is no doubt that some number of them do. But I think you can make a pretty good argument that more people go into this field than enjoy it - which is another way of saying, more people go into this field than probably should.
RAZ: David Leonhardt, Washington bureau chief for the New York Times. You also heard from Paul Kedrosky, of the Kauffman Foundation. By the way, Marina Keegan, the Yale student we heard from earlier, she's graduating in May. And she is actually heading to New York - but not to Wall Street - as a playwright. And a play of hers is going up at a festival in New York this summer.
What did you do with the hundred bucks?
KEEGAN: I don't remember.
(SOUNDBITE OF LAUGHTER)
RAZ: You didn't like, blow it on a bottle of champagne and caviar?
KEEGAN: Yeah, I - actually, I invested it in a hedge fund.
(SOUNDBITE OF LAUGHTER) Transcript provided by NPR, Copyright NPR.