For as far back as I can remember, I knew I wanted to be a businessman. Never mind that I really had no idea what kind of business career I would pursue, or what business people actually do each day. I simply understood that business people wore important clothes, were well respected, and, well, made lots of money.
This lack of understanding persisted through college, where the most I did to prepare for a career in business was to study economics, rather than, say history or English. Nevertheless, late in my senior year I received a job offer from an investment bank in New York. The role sounded important, paid well, and was focused on two industries that I was told were good places to be – health care and high tech. Sold! I was now a global financier (not really – I mainly made PowerPoint slides and bound “pitch books”).
Many of my classmates took similar jobs. While we all found our own way to New York, there very well should have been a convoy of buses taking us from graduation to Wall Street.
This brings me to the subject of this post: Amidst today’s global state of affairs, do talented young graduates have a moral imperative to consider more deeply the implications of their career choices on our nation’s future? Mankind’s future?
I believe they do, and that they will find personal fulfillment as a result.
Too Many Talented Graduates Head Off to Wall Street
The United States is at a critical juncture where individual career choices will greatly impact our ability to compete in the global economy. Too many of our most talented young people are choosing lucrative careers in finance, but fail to make a positive impact on our country’s global competitiveness. These future leaders could start exciting new companies and create new jobs. They could lead innovative manufacturing companies and design revolutionary new products and services. Instead, they are opting for “golden crumbs” – the fees they earn for managing other people’s money.
Certainly plenty of idealists and altruists walk across the graduation stage each spring. Some become doctors, educators, activists or environmental engineers. This post isn’t about them. I’m focused on the graduates who pursue a career in business, broadly defined.
These young capitalists have the right to pursue wealth creation, and in the United States we applaud their success, with only a secondary consideration of what path they take to achieve their prosperity.
However, this is changing, and for good reason. Since the financial crisis of 2008, investment bankers have fallen from grace as a result of their industry’s complicity in creating the whole mess (and not paying the consequences). By association, their colleagues in hedge funds, private equity and other fields of finance took plenty of heat as well. Perhaps only venture capitalists escaped the heat, because without them we might not have Facebook, right?
Nevertheless, thousands and thousands of our most talented graduates are still angling for a career with Goldman Sachs, Morgan Stanley and JP Morgan. Many of these financiers then move up the chain to work at hedge funds and private equity shops.
The Argument for High Finance is Losing Steam
Traditionally, there was a good argument to be made for the virtues of these financial jobs. These firms manage money for important limited partners (“LPs”), such as pension funds and universities. Ideally, their smart investments lead to strong returns that help pension funds meet their obligations or support research at leading universities.
However, the field has become crowded and competitive. Too many funds chasing too few opportunities have led to lower returns for LPs. Meanwhile, many funds have increased their carried interest – the percentage of profits they keep – to 25 or 30 percent from the traditional 20 percent. Finally, with armies of lawyers and accountants, these investors have figured out how to pay only 15 percent capital gains tax on the bulk of their earnings rather than the ordinary income taxes of up to 36 percent that the rest of us pay.
There’s a place for high finance – and some people are born with that calling. But the market is saturated and too many people are chasing the wrong dream. Given the long hours, grueling pace and stress in finance, I don’t think it’s worth it unless you are among the best in the industry.
Another popular argument for the industry is that these firms create essential liquidity in the market. After all, there must be a healthy amount of activity if a market is to function properly. By trading actively, these firms help make the market.
Well, at this point these firms trade in such volume and at such speeds that the market has achieved hyperliquidity – a viscosity that sinks the average investor. Most individual investors or even small funds cannot keep pace with automated trading platforms driven by huge computers running complex algorithms.
Meanwhile, when it comes to liquidity for consumer and small business lending, big banks are sitting still, failing to make a market for the little guy. They view it as too risky – despite having their balance sheets bolstered by taxpayer bailouts.
The liquidity argument doesn’t hold water.
Finally, too many investment strategies are now built on the greater fool theory. Within private equity, more and more deals consist of one investment firm selling a portfolio company to another – each one leveraging the investment with piles of debt to juice their returns. The focus is on financial engineering for deal returns, rather than growing the company, creating jobs and innovating.
A more egregious strategy was evident as the sub-prime crisis unfolded. Goldman Sachs was packaging securities that bet against the mortgage market. One very smart client, hedge fund manager John Paulson, conceived of the securities, while Goldman’s sales force actively promoted the other side of the deal to less sophisticated investors. It’s every man for himself in the free market and Paulson’s insight was prescient, but Goldman failed the less sophisticated investors who bought the securities – clients who pay Goldman for good investment advice.
A Framework for Finding Career Fulfillment
Well this has been a heck of a rant for an ex-banker… So what is the right career choice for a talented graduate?
Well, I think we need to start with a framework for career fulfillment. Borrowing from Maslow’s hierarchy of needs, I’ve sketched out my own hierarchy for a fulfilling career.
In my framework, making money is critical – the foundation of a capitalist career. Beyond that, each step should serve to advance the career through continued learning and growth. However, it won’t be long before any introspective person needs more than money and career progression. They will want to be passionate about what they do. This might not mean they love the subject matter or day-to-day activities, but they must be impassioned by the momentum and progression of their job.
Most successful business people will stop right there. However, the more altruistic and evolved businessperson will start to look beyond themselves. They will take time to explore the next questions: Are my activities creating opportunities for others? Am I creating jobs?
An entrepreneur can create new jobs, define new markets and revolutionize industries. Companies like Apple, Google and Facebook are hiring like mad. Steve Jobs, Larry Page and Mark Zuckerburg can feel good about the jobs and growth they drive, while making decent money in the process (understatement).
But now let’s take it one step further. Are these companies making the world a better place? Arguably, yes. By making people more efficient in their daily lives, organizing the world’s information and connecting people socially, these firms may well be making the world better off. Meanwhile, other entrepreneurs are making an even bigger positive impact, but aren’t a household name.
Are these executives doing all of this in a sustainable way? In some cases yes. In others no. Internet-based businesses are relatively resource efficient, but they do burn up a fair bit of energy and natural resources to keep those data centers running. And Apple’s rapid product obsolescence cycle burns through a lot of material items faster than necessary. Few of those old iPhones get recycled or reused.
Overall, however, these are inspiring people driving revolutionary companies. They’re very valid role models.
To wrap this up, however, I want to highlight three entrepreneurs who – while still very young – have ascended to the highest level of my framework, in my opinion. They may not be people you’ve heard of, but I’ve stumbled across their ventures one way or another. Interestingly, each of them had a paved path to success in the financial world. They opted for starting their own “double bottom line” venture. These pursuits not only generate profit, but positively impact the world around them.
Kristin Richmond, Founder & CEO, Revolution Foods
A former investment banker with an MBA from Berkeley, Kristin started Revolution Foods with her partner Kirsten Saenz Tobey to deliver fresh, healthy food to as many students as possible. Administrators at Rev Foods’ client schools report noticeable improvements in their students, including higher attention levels in class, fewer disciplinary problems and an increased interest in healthy eating. Since founding the company in 2006, Kristin has created nearly 1,000 jobs – all above minimum wage and with full health benefits. The company is for-profit and backed by prominent venture capitalists, so Kristin stands to achieve personal gain, in addition to helping children live healthier, productive lives.
Lynn Jurich, Founder & President, SunRun
A former venture capitalist with an MBA from Stanford, Lynn started SunRun with her partner Ed Fenster to make solar energy panels affordable for homeowners. The high upfront cost of solar panels keeps many homeowners from investing in this important clean technology. Through innovative finance, Lynn and her team have been able to put solar systems on well over 7,000 homes since founding SunRun in 2007, without requiring large up-front expenditures from homeowners. The company has raised over $85 million in venture capital from big name investors like Accel Partners and Sequoia Capital. Like Kristin, Lynn stands to benefit personally, while knowing that she has done more than her part to address our World’s energy and climate change challenge.
Tom Szaky, Founder & CEO, TerraCycle
Tom was just 20 years old and a Princeton freshman in 2001 when he had the wacky idea to start an organic fertilizer company. Since that time, Tom has grown TerraCycle into multiple categories of sustainable, recycled products. TerraCycle creates recycling programs for hard-to-recycle waste – and then turns this waste into over 1,500 different products that it sells at the likes of Walmart and Whole Foods. TerraCycle has diverted billions of units of waste and is setting an example for the next generation of product manufacturers. The company has raised over $12 million in venture capital and made Szaky a hero in environmental circles.
Personally, I have not ascended my own career fulfillment hierarchy. I’ve gotten to the point of creating jobs and growth, but I’ve got a ways to go before I can change the world for the better. Regardless, moving up the rungs has always been fulfilling, and I hope to continue the progression. I’d encourage any talented young business person to aim high – not just for wealth creation, but for the ultimate fulfillment that comes from reaching the peak.