Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance

from NYTs

This is a bittersweet time on campus. Seniors are beginning to find jobs, and while their enthusiasm is infectious, some of their choices give me pause.

Many of the best students are not going to research cancer, teach and inspire the next generation, or embark on careers in public service. Instead, large numbers are becoming traders, brokers and bankers. At Harvard in 2014, nearly one in five students who took a job went to finance. For economics majors, the number was closer to one in two. I can’t help wondering: Is this the best use of talent?

Of course, these are intensely personal choices as young people chase their aspirations and dreams. But if a favorite student of mine comes up to me and says, “I just got an offer at this investment bank and I’m going to take it,” I want to know how should I feel about it. I will be happy for her individually, but still I wonder: Is this a good decision for society as a whole?

More here.

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8 Comments

  1. This article raises in issue not with the field of finance but with society as a whole. Often in the article the author will talk about how he feels his students under-utilizing their potential by pursuing jobs that lack any societal benefit. This phenomenon is nothing new and this type of behavior is largely encouraged starting at a very young age. If you ask a small child what they want to be when they grow up often they’ll say they want to be something heroic like a police officer, firefighter, superhero, etc. The point being that the moment in life where we possess the most innocence, when asked what we want to choose for a career we end up choosing something that contributes to a societal benefit. Then at some point we’re told we have to “grow up” and choose something that will make us successful. That moment is the beginning of the end because while a child’s idea of success might be to help others authority figures explain that their previous visions are incorrect and that they must change it. This idea is then further supported though media and advertisements portraying wealth equaling success. So of course when people finally make through college with a degree in their hands and they’re asked to make a choice they make the one they’ve been told to make their whole life.
    When the author’s students make their choice it shouldn’t be held against them because it largely isn’t their fault. There are plenty of philosophy courses throughout high school and college that preach about the dangers about this rationale but by then it’s too late, a couple classes aren’t going to change their mind on something rooted so deep in their psyche. It’s easy for someone to say that they’re wasting their lives from the outside looking in but to them they’re just trying to provide for their family as best they can and no one should be blamed for that. In the mind of a hedge fund manager or stock broker all they know is they can put food on the table and put their kids through college and that’s good enough to justify the choices they’ve made. Yes, maybe if they dedicated their talents to helping non-profits or working to help shatter communities recover financially they could do some good. Though if they choose that root they might not be able to give their kids the advantages they could have gave them and if you happen to be a parent I feel it’s hard to legitimize that decision. I understand where the author is coming from but at the end of the day the student are doing not only what’s best for them and their future families but what they’ve been told to do so if he really cares about them, which it sounds like he does he should rejoice in that fact but work towards trying to organize people to find a solution for this systemic problem.

  2. I find this article by Sendhil Mullainathan very entertaining because I am a finance major. I understand his concerns whether entering the world of finance “is the best use of talent”. Mullainathan makes good points that finance may not have good benefits for society as a whole, and jobs that help benefit society should be more lucrative, but learning Finance helps individuals learn how to work smart in addition to working hard by using their money wisely, in addition to being the backbone of the economy.
    Mullainathan has a point in trading that investors can be “rent seeking” by buying and selling stocks based on values that are off of companies. At times it seems like transfers of wealth from one hand, taking the other, but Finance has many upsides to society from this. Companies are looked upon based on stockholders’ opinions. When investors buy enough shares they have a say in the company, and how that company influences society.
    One reason people learn finance is to use their money wisely. It is not just about working hard, but also working smart. Having cash sitting under your bed will lose value overtime, and not make the money worthwhile. Understanding how to invest and selling financial services allows people who do not understand Finance, earn interest on their money. Helping others invest puts more money into the market allowing greater circulation and inflation. Bankers also help start-ups and every-day people purchase goods they otherwise could not obtain without a loan. Investors help start-up companies gain capital that hey could not otherwise obtain also by buying stocks and bonds. Yes, people can take advantage of the ones who do not understand, but hopefully ethics take a place in doing good for society. In these ways, Finance is a huge contributor to the economy as a whole.
    In addition to the benefits of Finance, I believe some jobs that are not as lucrative maybe should be more rewarding monetarily. Jobs Mullainathan mentioned such as inventors are good examples. Teachers are as well. They bring great deeds to society that do not get paid in some eyes as much as they deserve. It is unfortunate they are not as represented which is why some of the talent goes into the Finance field. They are smart enough to go to where the money is. From there, they can give back to society how they choose.
    In conclusion, Finance can show some unethical issues, but it is the backbone of business for business to expand, invest, and properly allocate their resources. I may have a different view than most being a Finance major but there are benefits to society, if used ethically. Many people create negative views of brokers and bankers based on history, but there is so much benefits Finance graduates bring to society. I for one want to join the investing world and build a nest egg so I can comfortably live my life and pass on to generations while settling down giving back to society in different ways such as teaching or investing in start-ups or charity. I understand Mullainathan’s concerns for bright minds all going to finance; however, unless situations change, people want to get the most out of their return for college and many see it most fit to go into the Finance world.

  3. I absolutely loved this article about how finance could be about so much more than just making money, but rather solving real world problems. The perspective of Harvard Professor Sedhil Mullainathan is quite intriguing and inspiring. Being a junior in college and approaching graduation as a Finance major, I am not quite sure what career I want to pursue with my degree. I have many other interests I might even be better at than finance but my motivation behind the choice was a guarantee to make a good amount of money; I agree with professor Mullainathan that a lot of very bright students that could be of better use with their talents in other careers choose finance careers on the basis of private returns. When Mullainathan stated that economists termed “rent seekers” as people who don’t create wealth, but instead transfer wealth from other onto themselves and that you wouldn’t be able to tell if someone is a rent seeker by their job title it made me question ethics of certain careers. I didn’t realize how many rent seekers there really are out there and how many careers and industries use this to gain wealth. I liked Mullainathan’s metaphorical comparison of the stock market to a big casino where the skilled traders derive money; I also like how he points out that arbitrage and the stock market actually gets the low prices back up to the right prices. I’ve never thought of arbitrage as helping investors avoid misplacing their investments. I like how he also clarifies even though arbitrage can do good things, it is only helpful to a certain point because it has a “gold rush element” it turns into rent seeking when arbitrageurs are fighting to get to the gold before everyone else. I agree with Mullainathan that banks creating wealth by charging hidden fees to their clients, loan lenders taking advantage of the poor by using business schemes that push high chances of nonpayment, and debt collection agencies using wicked propositions is creating a rent seeking society instead of a society that uses finance to help the world. I believe this article should be presented in front of finance majors so we can be the generation that changes the finance field to be used to do greater good to society and make money.

  4. I enjoyed this article a lot. Being a student, I would never think that there are times where a career was pointless, even detrimental to the world. As a someone who studies finance with hopes of working with stocks, it is a hard pill to swallow. This article gave me a different perspective of how people work the system.

    I do not agree however where the article states that arbitrage is not beneficial to society. As the author states, arbitrage can help raise the value of deserving companies.

    Yes, it is an easy way to get rich quick, but the money made can be used constructively in a few ways. First, the money made can be used to reinvest and continue the cycle of raising stock prices. Second, money made can be used for financing other goods and services, strengthening the economy. It is essentially a variation of “trickle down economics”. The money will find it’s way through the economy to the right hands. Eventually.

  5. It took only a few sentences for this article to really grab me and standout, not only because I felt that it was interesting but I felt I could relate to what this professor was saying. Having a few friends in the finance industry currently working on wall street I always came up with asking the same question, why? What is so luxurious about working on wall street crunching numbers all day, and I would always get the same answer, money. I feel like in today;s age we have become a little bit lazier, there are many people out there who I feel just maybe go the easier route and go into the finance field because it’s a very quick and easy way of making a lot of money fast right out of college. I feel that these people don’t have the passion that a doctor has everyday when he walks into his practice. What I am trying to say is that I feel many people who may have had that passion of being a doctor or lawyer, look at the finance industry as a quick easy escape to making a lot of money really fast.

    I respect this professor for caring about this kind of situation, I feel that he feels the same way that I am feeling. Every time I speak with someone they talk about how they want to go into finance and then when I ask them want do you want to do, and they always say I am not sure. I wonder how much this is impacting our society as a whole and the return on college students who are going in to different occupations then business. Over the past 10-20 years the idea of studying business has grown, and a lot of it being with the growth of markets and competition. The drive to becoming a doctor or lawyer isn’t a quick or easy one and I think that is what is becoming more appealing to students. As students the more years we are in school it seems the less interested we have, to be able to walk out of college with a starting salary of $90,000 is almost every college kids dream and kids are starting too see that the financial industry can offer that. This professor only wants too see his Harvard students use there absolute potential, and like stated before I respect his honesty and courage to say that he wishes more students wouldn’t come up to him and say ” I got a job offer in investment banking and I am taking it”.

  6. While browsing the blog my attention was immediately grabbed the title: “Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance.” Of course most people would guess that it’s because I’m a finance major and while that does somewhat contribute to my interest, I was mainly struck by the stance that Mullainathan presents. At first, I started to side with his general view that students who take finance jobs are mostly enticed by the large paychecks and commissions rather then helping a common good. Like most of society I thought back to the financial crisis in 2008 as a prime example of corporate greed. While I grit my teeth thinking about the situation, I also think of the thousands who worked in the industry and genuinely thought that they were providing a good to many Americans. Even though these events happened, I still stand strongly being a finance and IT major because I think that I can still provide a service to others both directly and indirectly. One person who really influenced my decision was my parent’s financial advisor because from a young age he taught me the value of money and was able to create retirement funds for those who never thought it would be possible. To me I think that his position was one of the noblest causes because your personal contact with someone has the ability to effect the rest of their life. Also for my future, I don’t even see myself working at a big bank because I would rather work face to face with clients. Working as an advisor for a small business or non-for-profit would be even more of an impact because I can help expand a project that could potentially create hundreds of jobs.
    Overall it depends on the angle you take when looking at these jobs that have these stereotypes. A marketing job could be taken to the same effect because a misleading message may result in an adverse effect. What if I told you about someone who markets for a cigarette company and whose source of income is from people that buy cancer causing products? Most likely you would associate a negative connotation with the person. And I think the problem is that people are focusing on the macro view of the economy instead of realizing that every position in a company allows the economy to work more efficiently. Taxes are still taken out of paychecks and there is still consumer spending. Overall if the velocity of money does not slow then, then overall economy can benefit from these activities.

  7. In the article, “Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance” demonstrates a one-sided view in the work field. The prestigious title of a Harvard professor gives this man the power to influence many people that are reading this article. Even though, the brilliant minds at Harvard University are capable of being much more successful than working at an investment bank as a banker, or an equity researcher, but everyone’s story will be different. There is nothing wrong with working a fulltime job from 9 to 5 for the first few years after graduation. The reasoning for this is to build up principle in order to start your career as an investor. Becoming an employee will also give you a huge learning experience on what it’s like to be a slave to the money, or working for money every day. Once you stop working, the money will stop coming in. However, there are many ways to manipulate money, by making it work for you rather than you working for the money. After building up your foundation of capital, you can then start your life as an investor, or a business owner. It’s clear that this Harvard professor dislikes the idea of being an employee and essentially staying in the “Rat Race” of working long hours for money every day. The most lucrative occupation that is known in the world is investing in real-estate. Of course, many will fail when attempting to enter this industry, that’s the nature of the game, but the ones that do come out on top will leave everyone in the dust. There’s a reason why most millionaires achieved their status from entering the real estate market. Although the real estate industry seems as if it’s the best option for people looking to become truly wealthy, there are many other options out there. Investing in the stock market, and buying and selling futures or options are great to build wealth. Many people assume that the financial markets are just a big casino. However, that is not the case if you are well informed with what moves the market, and how to manage your portfolio.

  8. What an excellent article on the issues with the industry in finance. This issue is not only relative to the finance industry though, but you can also see evidence of this mindset throughout any career field. Doctors, lawyers, and engineers are all pursuing the highest paying jobs available. Public service positions are harder to fill than ever before. Look at the average salary of an attorney who is working as a public defender, then compare this salary to an attorney working for a large corporate office. The corporate attorney’s salary will be multiplied many times over the public defenders. This issue results from a change in society’s view in addition to the inability for public service positions to offer an acceptable salary.

    The need for highly skilled personnel in finance and other positions is increasing. Increasing even faster is the tuition rate need to pay for these skills. Comparing the rate of inflation over the past 20 years to the rate of increase in college tuition is just depressing. Universities are allowing students to become further in debt with student loan bills than ever before in history. With such large financial burdens on them, students are naturally going to seek the highest paying opportunity that they are offered. For finance majors, an investment banker is going to offer a substantially higher starting salary for talented candidates, as opposed to a financial coach or planner. The coaching/planning positions have a greater personal connection or social reward than the other, but choosing this path puts the individual in a position of holding student debt longer. We have to find ways to incentivize talented candidates to take these needed positions other than salary. If not done through salaries, there are other options available. The student loan forgiveness program is one that offers an avenue for people who wish to serve in public positions, but as we have found out many of people who thought they were eligible to have been told that even though they served in these positions for the required years, certain hidden requirements have limited the ones who actually received it. With knowledge of this now, this is a deterrence for many candidates to seek these public positions.

    While I do believe the rising debt for graduates is something to consider when seeking employment, I believe the author of this article is right expressing the need for societal gains. For people to chase a career field that gives back to society rather than only relying on their personal gains. Trying to find that perfect balance of these gains with the appropriate compensation can be tough. As mentioned, the salary benefits of the investment banker heavily outweigh the alternative, it should be stated the investment banker’s hours worked, the stress associated with the job, and personal enjoyment are much worse than the other. Yet, they are still a more attractive option for many finance professionals.

    Finance is a unique industry though. Many people can make huge salaries by taking advantage of the desire for their clients to make money. This is just a small part of this huge career field though. Many jobs in finance not only help individuals manage and grow their wealth but assist companies in ensuring sufficient capital is available to continue growth. These jobs in finance offer great social rewards by ensuring employment rates, and company revenue which trickles down to greater income for the workers.

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