The best and brightest are turning away from Wall Street | Hacker News Reader

The best and brightest are turning away from Wall Street

cnbc.com

36 pointsmathattack42 comments

Good because fewer smart people will be going to Wall Street where they will be tempted to think they can outsmart the market with elaborate financial engineering that crashes the market.

Good because brilliant engineering types who would have been "Quants" on Wall Street will go and be actual brilliant engineers.

Possibly bad because these Harvard MBAs (and their ilk) haven't magically become passionate about technology. They are simply following the money. So, we'll have more of "that kind" of people in tech.

Not to say there are no talented, technically savvy elite MBAs who do care about tech. I know some of them. But plenty more may just be mercenary types, going where the money goes.

Wall Street includes the IPO and M&A bankers who make large exits possible and the advisors who patch together the modern marvel of multi-billion dollar VC funds. The other side of this reductionist lack of systems thinking are the traders I've heard spouting tripe about the "kids fooling around on glorified iterations of MS Paint to make cat pictures zoom around the world faster".

I agree that the equilibrium is for a smaller Wall Street and larger Silicon Valley. But shrinking finance does not come free - it shifts the same systemic power to fewer hands.

Not everyone sees a "large exit" as the end goal of their work.

If by "brilliant engineers" you mean, finding new ways to display ads and bill people for displaying ads, which is what counts for "brilliant engineering" in Silicon Valley these days.

Putting aside the fact that Silicon Valley is doing a lot more than whatever makes the front page of TechCrunch today, there's still the fact that in order to get an ad impression you have to provide something that an actual person somewhere ostensibly finds useful. At it's worst this is orders of magnitude more useful than Wall Street's endless arbitrage seeking to benefit the richest of the rich without actually providing anything that is useful to someone with less than 10M dollars.

AdTech is a broken industry with most participants providing zero to negative value to the world. They are basically just nodes in a messy, unregulated, scam-ridden chain of players moving an ad from technically illiterate buy side to an equally illiterate sell side, taking something like 70% of the money in the process. Zero value for humanity, no comparison to Wall Street...

But Silicon Valley !== AdTech.

Journalism is in a tailspin because the eyeballs they used to sell for a dollar are worth two cents now. There's a lot of good things that used to be free with ads support - if an engineer can work on a project that gets them the same money they used to, they've done a lot of good.

Yes, Harvard MBAs suddenly become "brilliant engineers" when they take the Google offer vs the Goldman one :)

I think the signal here is that Harvard MBAs are great monetizers and optimizers. They go to Wall Street to buy companies, optimize them (operational or financial improvements) and then sell them. They don't go to Google to program a better search, they go there to help Google capture the value of the search.

Not sure I agree 100% about them just following the money. Isn't there just as much earning potential now as there ever was for "America's best and brightest" on Wall Street? Maybe more accurately stated as them following prestige and social capital, since Wall Street has become decidedly less popular in public opinion since the mortgage meltdown.

Or maybe they feel more fulfilled in working for companies that "make" something, rather than just finding ways to turn some rich guy's money into more money.

If you work for any company, or have any external investment in your own company, you are "just finding ways to turn some rich guy's money into more money".

The best and brightest = MBA people?

Im not saying that is not, or that it is.. But the "best and brightest" its very subjective and cant be measured by objective means; and why by their vision the "best and the brightest" are MBA's and not people from Physics, Enginnering or Social Sciences?

Its ok to say that people with MBA do not like the financial sector anymore, and are going to other hot sectors.. but that headline are pretty much misleading;

I know bright, as i know stupid people with MBA , and the MBA itself doesnt happen to change the stupidity case..

You are not wrong. Journalists playing their game.

"The best and the brightest" has been a backhanded complement for quite some time now: http://en.wikipedia.org/wiki/The_Best_and_the_Brightest

The analysis is a little flawed in that it assumes the composition of the incoming class has remained consistent each year. In fact, Dean Nohria, who took over in July 2010, shifted the composition of the incoming class (the class of 2013) away from finance (finance as a pre-MBA industry showed a decline of 7%pt vs 2012 class[1]).

This in part explains the shift in choice of career post-HBS.

[1] http://poetsandquants.com/2011/06/06/harvard-down-on-finance...

The Harvard MBA Indicator gives "long-term signals based on the relative attractiveness of Wall Street jobs. The more grads that are enticed to go there, the more bloated Wall Street becomes and the more likely the market is nearing a top. When stock markets are doing poorly, fewer grads want to enter the sector." The indicator "gave sell signals in 1987 and in 2000, which were both terrible years for the stock market."

http://www.investopedia.com/terms/h/harvardmba_indicator.asp

I'd like to find out if this is a negative indicator for other fields too. Is it a negative indicator for financial services because HBS produces general managers? Or because they're chasing what's already hot?

Bull markets precede bear markets, and bull markets attract more HBS graduates into finance. That would be my guess for the mechanism.

It's easy to see why this is the case: it's another, unexpected, result of ever-increasing regulation in financial markets. The best and the brightest are often driven to innovate, but if regulation becomes so stifling as to reduce the opportunities (or perceive opportunities) to innovate then those with the drive will go elsewhere. Having worked in banking, I can assure you that the environment is often (though not always) very stifling. There is often a constant pall over the entire organization...stemming from the constant sense that you're owned (in every way that matters) by the regulator, and that the "free market" as it pertains to the financial world is, in fact, largely an illusion. In fact, in one position I worked in, most of our efforts where directed at satisfying the regulators NOT producing any analytics of value to the business.

Now I recognize this isn't true of all financial institutions, and I suspect those that survive and thrive will be those who innovate effectively even within the stifling constraints of recent regulation. That said, it's just become a very difficult space to work in, especially in comparison to the freedom offered by the tech space.

Please note too, that I'm not arguing whether or not the additional regulations were necessary and effective; I'm simply stating that they are having the effect of raising the cost of doing business for financial institutions, and also tightening the constraints they operate under which has the indirect result of making it difficult to innovate, reducing the desire among the best and the brightest (i.e., those who I suppose might be the most driven to innovate and harvest the appropriate rewards for their efforts) to work in those institutions.

Can you explain a bit on what innovation means in financial industry? This is not a sarcasm or a mockery, but a serious question. I have a friend in financial industry who works for Barclays and she always complains that the regulations are getting tougher, and it's hard to innovate. With you saying that, it starts to make me wonder what kind of innovation one could possibly create in banking other than loaning out money in various forms, and insuring assets.

With people like Sheryl Sandberg getting paid hundreds of millions of dollars, I'm not so sure I can blame them. This forum is heavily engineering focused, but the technology industry is paying some of these MBAs extraordinary sums.

it's for the good of the world that wall street is no longer the #1 desired employer.

let's consider two types of innovation: (1) eliminate complexity, streamline processes, lower expenses, and lower costs to consumers, and (2) increase complexity, obscure details, and raise prices to consumers. Both are considered optimizations; technology tends to affect #1 and MBAs like to increase #2. (this also helps explain why my toilet paper now costs $15 for a pack of 9, but you can get an old model iphone for free.)

Truth is - 27% is still too high - finance should be just another sector, of say, 10 major categories. only 10% should be going into finance. and it really doesn't matter a hoot if the smartest people go there. ultimately finance is a relationship business - knowing the people who have the money and getting them to trust you.

we should probably be more worried about the influx of MBAs into tech. there are definitely a lot of rockstars who get MBAs, start great companies, etc - and i don't want to take anything from that - but once the law of large numbers start to apply, you inevitably get departments full of folks cranking about powerpoints on strategic mumbo jumbo and that can be one of many elements turning innovative companies into bureaucratic messes.

I think the "best and the brightest" turning away from Wall Street will leave it open for new ideas to play out.

And Google's beloved margins are about to be destroyed with the big three all developing hardware. All the cash GOOG, MSFT and APPL have been hording is about to be returned to the market.

For the optimist undergrad...less competition for the next-best and next-brightest to get jobs on Wall Street

Most MBA programs seem to teach you how to run an existing business, versus how to create something people want. The first is much much easier than the first. A cynical part of me wants to call it leeching off the hard work of those who came before them. Somebody already did the hard part of starting the business.

There is no quantifiable way you can say that running an existing business is easier than starting one.

They may require different skill sets or have different challenges but claiming 1 is harder than the other is a particularly ignorant bias.

"They may require different skill sets or have different challenges but claiming 1 is harder than the other is a particularly ignorant bias."

I don't know; it seems like a position someone could conceivably support with evidence and analysis, but that certainly wasn't presented in the parent. In principle it could have been done by the parent and not presented - I leave it to others to make conclusions as to the likelihood of that.

Consider the failure rate of startups vs. those of established businesses.

There are many ways of defining success vs. failure, there are many ways of defining difficulty, and there are very different barriers to entry.

It's a fair statement to say that most MBAs learn more about optimizing than creating. I'm not sure if it's fair to say which part is harder or easier.

I've seen a lot of MBAs flame out in technology, but I also watched a cohort of Harvard MBAs in the mid-90s do a lot of great things in technology. In that case I think they were technologists at heart who got there just before the boom.

This is bad for both wall street and the technology sector.

Since when have been been assuming that Harvard Business School students are the best and brightest? That's never been my impression...

About damn time.

Mirabile dictu!

1. Harvard MBAs aren't the "best and the brightest". Top-20 graduate programs in CS, math, and physics, are far more selective. Possibly a quarter of the CS students at Stanford are legitimately smarter than I am; in top MBA schools, there might be one or two per year who ties me.

2. The good MBAs from Harvard still go to hedge funds and private equity firms, because those pay $500k+ right out of school. (No startup comes close.) The mid-grade MBAs go to venture capital and large banks and corporate senior management. The ones who end up in venture-funded startups as VP/Finance are the leftovers. Bossing nerds around is not what these people want to be doing. They want to work on the billion-dollar deals and at the currency arbitrage desks.

Trust me. While there are good MBAs out there, the ones who end up managing startups are the ones who ended up falling to their third or fourth choice. And to fall that far from a prestigious MBA (like Harvard or Columbia) means the person really fucking failed.

3. What this means is that, when MBAs invade VC-istan (as they do during bubble times, like now) is that the best of the colonized tribe (technologists) must answer to the worst of the colonizing tribe (MBA-land business types)-- the ones sent out into the hinterlands because they weren't good enough to make it in the mother country. The dynamics that emerge from this are, from a distance, hilarious.

  Harvard MBAs aren't the "best and the brightest" [...] in 
  top MBA schools, there might be one or two per year who 
  ties me.

While I was in engineering graduate school sneering at people who entered the finance industry and made triple what I did, I had a revelation: If people dumber than you are getting paid more for less work, who's really the dumb one?

> If people dumber than you are getting paid more for less work, who's really the dumb one?

If your only concern is making money, you are.

But then, that's a big if.

EDIT: And, of course, the above also presumes that the making more money doesn't have to do with family connections or other factors that have nothing to do with intelligence.

Technology's more of a calling than a choice. I just really love the work.

I don't begrudge the private equity people making $1 million per year at 25. Good for them. As long as they stay out of my way and let me do my job, it's not my issue what they are paid.

Technology is our territory, though. Not theirs. If they want to come in, they best respect the natives.

I'd blame it on HFT.

There are lot of things to blame, but I don't think HFT is one of them. Harvard MBAs rarely go into that field. They're much more likely to do M&A, Research, Investment Management or Private Equity.

You need to be actually best/bright to do well in HFT, not 'MBA best/bright'.

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