Tyler Cowen sheds light on an issue which has puzzled many of us over the past 20 years. Here is the conundrum: in the West, over the past 20 years, a peculiar trend has emerged wherein the brightest graduates aspire to enter Finance, Management Consulting and Law. (India too has seen the onset of this trend over the past decade.) And yet, around the world, “Why are so many people in top positions, whether in the public or private sector, so old?”
Part of the problem seems to be the complex skills now needed to occupy senior roles. “Many tasks have become increasingly complex in America, often more complex than people can learn in just a few years. By the time you have experience enough to perform them, you are less interested in taking risks. In your young adventurous years, by contrast, the only jobs you can get are those that don’t reward (or allow) adventure… there are idiosyncratic, difficult, high-paying and rewarding jobs out there — editor of a major national news organization, for example, or head of a Washington think tank…But school doesn’t necessarily train you for them. Furthermore, you need to know about many aspects of American life to execute them well. The more complicated America’s society and economy become, the more it will be necessary to select for people who have many diverse kinds of experience, and that makes it harder for the relatively young.”
As a result of the difficulty of rising to the top in these complex jobs, youngsters tend to choose easier, safer options. “Instead, the smart graduates of America’s top universities will seek relatively thick, liquid job markets, with high upside but also protection on the downside. Management consulting is perfect. If you are intelligent and hard-working, you can signal that quickly, and the entry-level tasks are sufficiently anodyne that few very specific skills are required. These jobs are designed to attract talent, so the consulting companies have an eventual option on promoting the best candidates. The same is true of law and the less quantitative parts of finance.
In the short term, this system seems to work for everyone. If you don’t like those vocations after a few years of trying, you still have elite connections and credentials that you can take somewhere else.”
But the focus that youngsters put on getting jobs in straightforward professions like consulting, finance and law creates a peculiar dynamic which hurts the economy and hurts the youngsters as well: “It might be better for the country if more of these individuals started businesses, tried their hand at chemistry or materials science, or worked in obscure corners of manufacturing in the Midwest. Of course, rates of failure or stagnation are higher in those areas, while glamour is often lower. Who wants to work on mastering a complex task for 10 or 15 years, with no real guarantee of commercial success?
The integrated nature of America’s predicament now comes into clearer focus. As more and more experience is required for many of America’s top and most influential jobs, fewer and fewer young people qualify. Those same young people move into low-return, high-stability, establishment-oriented activities. At the same time, the elevation of so many senior individuals may erode risk-taking and creativity, as they fail to bring fresh perspectives to their jobs.
The slower rates of growth in scientific progress are part of this picture. Older scientists are more likely to be in charge, but they also make fewer conceptual breakthroughs. Younger scientists are more temperamentally inclined to be revolutionaries, but that is hard when it may take you until your late 20s just to learn the basics of your field. Most areas are too complex for a 23-year-old to make new scientific advances, no matter how brilliant he or she may be.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.
