General premise exists that science and technology majors are going into investment/banking rather than research, depriving the economy of innovation and research. Research by Harvard economist Pian Shu on MIT science and tech grads and extended to students who participated in Putnam competition doesn’t appear to support the premise. Best and brightest STEM students are not going to Goldman Sacs et al but rather to research. Discusses type of student who ends up going each direction. Brief discussion at end on why students to go Wall Street careers. Interesting article
Guessing they go for the $? Goldman Sachs is not a hotbed or intellectual scientific research, so it doesn’t interest students who are STEM bc the are interested in the pure sciences. Instead, they get the STEM kids who do it specifically for that reason $. I doubt they were going to do any valuable research anyway.
On the margin are the kids who want to the pure stuff, but borrow too much for undergrad, or who have family obligations requiring $.
I’m not sure the pure sciences outside of math and physics do much good to Goldman. And if we are going to call them a giant vampire squid, they would want us to spell Sachs correctly at least! :))
But note that this is a study of MIT graduates. The “lower achieving” MIT graduates who choose finance more often may still be pretty strong compared to the overall pool of college graduates, due to MIT’s admission selectivity.
I guess I take a different view of the author in that they seem to imply bright minds should enter research. Like this is somehow a more noble calling and would benefit society as a whole better than if those minds went into finance. I just do not see it. These STEM geniuses are needed to produce some of the most complex and arcane financial products humans have ever seen. Without them wall street would be unable to achieve the goals they have made. I am not sure it is productive to pit one profession against another. If one follows their dreams, then that should be what we are all after.
I question whether the conclusions can be generalized to students who don’t go to MIT.
Typically, students who choose MIT anticipate that they will go into STEM careers. But of course, some may discover along the way that STEM is not for them. They would then look for other alternatives, and Wall Street might very well be attractive.
Things may be different among students at universities that are not so strongly STEM-focused. The students at these schools who choose Wall Street may not be those who found that they dislike STEM or can’t do well in it. Indeed, they may never have considered STEM at all. Wall Street may have been their goal – or one of the career paths they had been considering – all along.
A position as tenured Professor in a top-25 college can be a great life. You essentially have a secure job for life, and considerable freedom to research whatever your interests are.
It is also one of the most difficult jobs to get in the world. If you are one of the very top students in the country in your field (e.g. a Putnam participant or equivalent), then you have a real shot at getting at these prized academic positions. But otherwise, you could very well end up as one of the highly intelligent PhDs that slave away for years after getting their degree, only to end up as adjunct faculty at some mid-ranked school without any job security whatsoever.
I think that the lower level students are, to some extent, looking at the carnage on the road to tenure and wisely staying away. Some of them consider research positions in industry, while others look at the higher financial rewards in finance and go that direction instead.
Useless article. Far too narrow in scope to be of value. Unless of course, you are only interested in one school and a narrow focus. Very misleading.
“Really smart” people do not only attend MIT, or any other school on the east coast etc. Someone would have to research where the highest test scoring (grades may be lower for bored kids), gifted, students choose to attend colleges (if at all). Then they would need to sort out majors and career paths. They would look for trends now and in the past. Do today’s smart young adults choose grad school as often as past generations (such as ours)? All sorts of ideas for research- good luck to finding funding…
This study is weak. The main explanatory variable is “standardized GPA.” The authors never made it clear about what is standardized GPA. It simply states again and again “Standardized GPA is cumulative GPA standardized within the engineering and science majors in each cohort.”
Furthermore, a good research usually has a summary statistics table in which the mean and the standard deviation of main variables will be reported. But this is not the case. We do not know the mean or the standard deviation of “standardized GPA.”
Now let me assume standardized GPA has a mean of about 3.4. When standardized GPA is reduced by 1, the probability of taking a finance job is increased by 2.2% (the coefficient is -0.022 in the author’s legit model). That is, an MIT kid with a GPA of 2.8 is on average has a 2.2% higher chance getting a finance job than an MIT kid with a GPA of 3.8. I do not really care about statistical significance (the reported p value is 0.008). Junior researchers would care more about this kind of thing. When you do enough research, you care more about economic significance. That is, in this case, just think how many MIT kids are going to graduate with a GPA no more than 2.8. Also here we are talking about a difference of only 2.2% probability between a big gap of GPA of 2.8 vs. 3.8! I just do not think there is a story here at all.
I have reviewed close to 400 journal article submissions in the past 2 decades. On my book, from 1 (a very weak paper) to 10 (a very strong paper), this paper will earn 4 from me. It is a 4 because it has a unique dataset, not because the author demonstrated good research skills.
I reject the notion that serving GS’s and WS’s financial interests has done much of anything to serve the USA overall. Giant money sucking machine producing little of actual value to society. .
If you really are unaware of the real benefits that Wall Street provides to the country, it is best to ask a question such as “Does Wall Street provide any value?”, rather than to show your lack of understanding by making the statement you did.
Try moving to a country which does not have a functioning capital markets system. Outdated ports so container ships can’t dock limiting trade in and out. A stagnating economy because a factory owner can’t finance his/her receivables to buy raw materials. Bad roads- no mechanism for a healthy bond market to allow cities to invest in infrastructure, so it could take three hours to travel 5 miles to get to a hospital in an emergency.
What usually accompanies this mess is a kleptocracy political system- a rich family and their cronies running the country, buying apartments in Paris and houses in the Caymans while their countrymen suffer with a non-functioning society. The families which can afford to, stuff their cash in countries WITH a functioning capital markets system and buy Gucci shoes and BMW with hard currency.
Barrons- your post is unusually ignorant for you since I’ve always found you very well read and aware of current affairs. Go move to a country without a “Wall Street” and you will discover that our banks and our system are still the envy of the world.l
In the old days (pre 80s) WS provided a service and helped companies get financing and that was it. It was a small boutique business. Then making money for the firm became paramount and churning cash was most important. Underwriting and real credit analysis were thrown out in favor of “deal-making”. Yes I read the books and they do WS no favors. Most do not even understand the derivatives they sell and their actual economic value is zero.
We need good capital markets–not rip-off artists
Not to mention creating the last two recessions.
There’s more then helping companies get financing. Ask someone living in a country where they buy cellphone minutes with cash because middle class people can’t get credit cards or get financing to buy a plan. Ask someone living in a country where the top 5 or 10% owns real estate and everyone else is either a tenant or a sharecropper. Ask someone living in a country where a small farmer rents his/her equipment at an exorbitant rate because there is no such thing as a personal or small business loan (even a collatoralized loan) and thus will never climb out of poverty.
People with credit cards, cellphone plans, mortgages, etc. are always quick to yearn for the good old days. Try living in a part of the world where only the ruling class gets the advantages of a functioning banking system. And they DON’T bank in their own country- they own dollars, euro’s and gold.
a. The finance industry is necessary for a well functioning economy. Otherwise, there would have been no need to rescue it.
b. The finance industry needs to be overseen carefully so that it does not cause crashes that endanger the rest of the economy, or use its power (due to being essential to the economy) to privatize an outsize share of the economy’s gains to itself while socializing its losses to everyone else. Obviously, this was unsuccessful leading up to 2008.
I think financial industry has gotten too big for the size of economy it serves. It is not an economy standing on its own. The industry is possible when there is an economy to serve. When they create its own product like CDS that doesn’t serve the economy, to sustain their industry, it doesn’t have a leg to run and bounds to collapse. Yes, it is necessary at the right size but if allowed to get too big they may interfere with the economy like grease on wheels. Grease lubricates wheels to run smoothly if applied sparingly. Too much grease, wheels will slip. It looks to me, we are debating if grease is good for the wheels or harmful without taking the amount of grease in consideration. I think it’s time to disincentivize. Maybe by taxing endowments in Ivies where the majority have their ambition in the industry. Give that money to State Us.
Goldman Sachs internships and jobs are popular among MIT’s Sloanies (MIT Sloan School of Management) student, not STEM majors. Don’t forget that MIT has the second (after UPenn) strongest business school. Not all MIT STEM students are interested in research as well.
Mist of the comments on this post are ignorant. Yes, folks, Wall Street finance can be interesting work and adds value to the economy. Not every top student who works on Wall Street “caved” for the money.
Agree with the posts who say to visit countries without a functioning capital markets!
2008 was bad. But for most of the Fortune 1000 which needed currency, lockbox, bond issuing, etc. the banking system worked. For most people with mortgages the banking system worked. For most people with credit cards, savings accounts, car loans, etc. the system worked. A lot of people lost their jobs but you could still walk into a supermarket and buy fresh milk, fill your car with gas, get treated at a hospital without worrying that the lights would fail during surgery or that you’d need to provide your own antibiotics and units of blood from a family member.
Do you not understand that there are places in the world where NONE of these things function- at all- except for the ruling class who get to stash their money in Luxembourg and Switzerland?