Ten Miles Square


February 16, 2012 9:00 AM Harvard’s Liberal-Arts Failure Is Wall Street’s Gain

By Ezra Klein

In recent years, many top universities have tried to guide their students into careers other than finance.

In 2008, Drew Gilpin Faust, the president of Harvard University, went so far as to give a speech to graduating seniors asking them to stand fast against Wall Street’s “all but irresistible recruiting juggernaut.” Tufts University is paying the student loans of graduates who go into public service.

The efforts seem to be failing. In December, the New York Times’ Catherine Rampell asked Harvard, Yale and Princeton for data on the professions their graduates were entering. As of 2011, finance remained the most popular career for Harvard graduates, sucking up 17 percent of those who went from college to a full-time job. At Yale, 14 percent of the 2010 graduating class, and at Princeton, 35.9 percent, were headed into finance.

At Harvard and Yale, at least, the numbers have drifted down in recent years. Harvard’s 2008 class sent 28 percent of its gainfully employed graduates to Wall Street, while Yale sent 26 percent. Whether the recent decline reflects an enduring change or a recession-induced blip remains to be seen. I’m betting blip, but perhaps I’m wrong.

Yet even the lower figures for graduates heading to Wall Street are sort of weird. No high school senior gets her acceptance letter from Harvard and begins thinking about the exciting life she will lead constructing credit derivatives. But that’s where many students end up. Even after the financial crisis. Even after the bailout of Wall Street. Even after the dominant cultural metaphor for Goldman Sachs became a money- sucking vampire squid.

Two Explanations

Explanations for why so many Ivy League graduates rush into finance — along with law and consulting — tend to fall into two camps.

The economic determinists say this is no mystery. Finance, law and consulting pay high salaries — much higher than most other options on the table. It would be strange, given the financial incentives, if these graduates weren’t going into such high-paying fields.

The social determinists say these students are simply following their tribe. Finance, law and consulting employ smart, high-status individuals in desirable urban locales. Because Ivy League graduates are smart, high-status individuals who generally want to work and live among people like themselves, it makes sense that they take the road more traveled.

These two camps are not mutually exclusive. You can follow the money while you follow your friends. But I’m young enough to know a lot of these graduates, or at least a lot of their recent predecessors. In conversations with them, I’ve come to favor another explanation: Their educations are failing them.

In effect, Wall Street — like a few other professions, including law, management consulting and Teach for America — is taking advantage of the weakness of liberal arts education.

For many kids, college represents an end goal. Once you get into a good college, you’ve made it, and everyone stops worrying about you. You’re encouraged to take classes in subjects like English literature and history and political science, all of which are fine and interesting, but none of which leave you with marketable skills. After a few years of study, you suddenly find it’s late in your junior year, or early in your senior year, and you have no skills pointing to the obvious next step.

What Wall Street figured out is that colleges are producing a large number of very smart, completely confused graduates. Kids who have ample mental horsepower, incredible work ethics and no idea what to do next. So the finance industry takes advantage of that confusion, attracting students who never intended to work in finance but don’t have any better ideas about where to go.

Familiar Applications

It begins by mimicking the application process Harvard students have already grown comfortable with. “It’s doing a process that you’ve done a billion times before,” explains Dylan Matthews, a Harvard senior. “Everyone who goes to Harvard went hard on the college application process. Applying to Wall Street is much closer to that than applying anywhere else is. There are a handful of firms you really care about, they all have formal application processes that they walk you through, there’s a season when it all happens, all of them come to you and interview you where you live. Harvard students are really good at formal processes like that, and they’re less good at going on Monster or Craigslist and sorting through thousands of job listings from thousands of companies whose reputations they don’t know. Wall Street and consulting (and Teach for America, too) turn applying to jobs into applying to college, more or less.”

Yet that’s only half of it. A bigger draw, explained a recent Harvard graduate who majored in social science and worked at Goldman Sachs for two years, is how Wall Street sells itself to potential applicants: As a low-risk, high-return opportunity that they can try for a few years and, whether they like it or hate it, use to acquire real skills to build careers.

In other words, Wall Street is promising to give graduates the skills their university education didn’t. It’s providing a practical graduate school that pays students handsomely to attend. Sometimes, the enrollees end up liking their job in finance, or liking the lifestyle that it affords them, so they stick around. Sometimes, they don’t. Either way, Wall Street is filling a need that our educational system should be filling.

So it seems universities have been looking at the problem backward. The issue isn’t that so many of their well-educated students want to go to Wall Street rather than make another sort of contribution. It’s that so many of their students end up feeling so poorly prepared that they go to Wall Street because they’re not sure what other contribution they can make.

My hunch is that we have underemphasized the need to learn skills, rather than simply learn, while in college. The fact that Teach for America — which pays almost nothing and can place its hires far from cosmopolitan hot spots — is one of the few recruiting systems competitive with Wall Street suggests that graduates are open to paths that aren’t remotely as remunerative as finance and aren’t based in New York or San Francisco. They’re just not seeing all that many of them.

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Ezra Klein is a columnist for Bloomberg View.


  • SqueakyRat on February 17, 2012 3:37 AM:

    What skills do you think Wall Street can teach that a liberal arts education ought to teach instead?

  • SteveT on February 18, 2012 4:16 AM:

    So our country's best and brightest are going to Wall Street and using their considerable talents to figure out clever new ways to trick consumers into paying higher, or even unnecessary, fees.

    Is it any wonder the United States is in decline?

  • dervin on February 18, 2012 11:28 AM:

    Interesting take, but I think you've answered your own question. The vast majority of professions have high barriers to entry. You'll either need a Master's Degree, or a BA that was your sole focus for 4 years, or you would need to pick up your bosses laundry for two years before you are considered for any real responsibility.

    It seems like the finance industry is doing it right, find smart, talented people; train them and pay them a good wage and give them the freedom to excel in their jobs and careers.

    Teach for America is successful because of the same mentality.

    Public Service (or government work) can't offer the challenges because everything is seniority or degree based (ie No master's no promotion).

  • InDefenseoftheLiberalArts on February 20, 2012 4:15 PM:

    "But graduating students are often unaware, until much later, of the valuable skill they made their own, a thinking mind, their inexhaustible capacity to think on their own feet -- to invent ideas, organize them, draw deductions, and make articulate proposals -- in short, to engage their imagination and feed their creativity. In this way they are more resourceful than her or his rivals without Liberal Arts education. It gives them an edge, and that edge is the ability to think well. So, they advance more quickly in their chosen career, whatever it is; they succeed better..." --T. Kaori Kitao

    From: http://www.swarthmore.edu/Humanities/tkitao1/useless.html

  • Neal Hogan on February 20, 2012 10:46 PM:

    There is always a post college employer. That employer must teach liberal arts graduates the skills needed in the professional workplace. This is not news. In fact, ask a law firm how well prepared law graduates are in their first year in the firm. Talk to an attending about a first year resident. Education is a continuous process, and does not magically end with the acquisition of a sheepskin.

  • RM on February 21, 2012 10:21 AM:

    "classes in subjects like English literature and history and political science, all of which are fine and interesting, but none of which leave you with marketable skills"

    If anyone thinks that, they aren't thinking very hard: the humanities and social sciences train students critical analysis of a wide range of information from a range of sources, in argumentation and logic, in writing, in research skills, in creative problem-solving--these are all highly transferable skills, with the advantage that they are not narrowly directed at a specific career and thus can be adapted to many different situations. And that's not even addressing the more direct connection between these fields and work in the culture industry, in political organizations and non-profits, in journalism and publishing. It's true there may be no "obvious next step" but that's because a liberal arts education is not the same as vocational training--however, that doesn't mean it does not provide valuable skills.

  • CC on February 21, 2012 3:38 PM:

    Most liberal arts schools have career services offices that provide information beyond the financial sector, consulting, and the big organizations that come to campus to recruit. There is a great need for these services to be recognized and referred to by faculty (who of course are the students' primary advisors during their four years on campus).