Grads: Skip the Bank Job, Join a StartupEzra Klein
June 14 (Bloomberg) -- Dartmouth College has four valedictorians this year: Wills Begor, Glynnis Kearney, David Rogg and Jie Zhong. They are impressive kids. All have stratospheric GPAs. Most pulled off two majors and a minor. One developed a new social networking platform for the iPhone.
So what are they doing next? Investment banking, mostly. Begor is headed to Morgan Stanley. Rogg and Zhong are headed to Goldman Sachs Group Inc. Kearney is the rebel. She’s going to McKinsey & Co.
That’s no surprise. After all, 39 percent of Harvard’s 2010 graduating class went to work in finance or management consulting. At Columbia, it was 34 percent. Nothing against finance or management consulting, but do they really need such a big chunk of our best and brightest?
Two years ago, Mike Mayer appeared headed in the same direction. A high school valedictorian, he attended the University of Pennsylvania. As a sophomore, he worried he wasn’t learning usable skills, so he switched into an undergraduate program at the Wharton School and, as he puts it, “followed the herd into the finance concentration, and then into New York and Wall Street.” Last summer, he worked at Credit Suisse Group AG as a research analyst. They quickly offered him a job, which he turned down. Instead, Mayer signed on with Venture for America, a young startup with a slightly odd mission.
Venture for America is the brainchild of Andrew Yang, a charismatic former lawyer. “We’ve got the best universities in the world,” Yang says. “We have the talent. But our best and brightest are being absorbed by what I call ‘the meta economy.’ They’re heading into professional services and transactions and optimizing but not into direct value creation. If you can imagine a country where the equivalent wave of talent currently heading to professional services was heading to fast-growing companies, think about what that would do for job creation.”
Yang got the idea for Venture for America while running Manhattan GMAT, a test-preparation company that was acquired by the Washington Post/Kaplan in 2009. (I work for the Washington Post.) “I saw there was a huge pool of investment bankers and management consultants who weren’t very happy in their jobs and didn’t know what they wanted to do next,” he said. “So they would come to us because they were taking the GMAT to go to business school. Then, after business school, they would have a debt load to pay off and would end up being recruited to the same firms. But they were looking for something.”
Perhaps it’s a sign of the times that enticing Ivy League graduates to work at a for-profit business can now be sold as a way to “give back” to the community -- on the grounds that the job isn’t in finance or management consulting and isn’t in New York or Boston. Yet that’s Yang’s pitch. “Let’s say you were to place 20 teachers in Detroit,” he says. “That would be a great thing. But if you could place 20 entrepreneurs in Detroit and have each start a business, that would also be incredible for Detroit. These regions need our top people helping to build businesses and create opportunities.”
The conventional wisdom is that the flood of top students to management consulting and finance is basically irreversible. Those industries pay so much, are in such desirable cities, can hire so many graduates, and have such deep alumni networks on campuses that small businesses simply can’t compete with them for top talent.
At least, that was the conventional wisdom. Then Teach for America came along and upended it, attracting 48,000 applicants -- including 12 percent of Ivy League seniors -- for 5,200 annual spots, none of which pay well and most of which are in cities that are decidedly not New York or Boston. The electric response to Teach for America convinced Yang that graduating seniors wanted more options. They just weren’t sure how to find them.
Venture for America intends to correct that. You might have heard that small businesses create the majority of jobs. Recent research by John Haltiwanger, Ron Jarmin and Javier Miranda for the U.S. Census Bureau disproved that. It’s young businesses that create jobs. “Once we control for firm age there is no systematic relationship between firm size and growth,” the authors conclude.
Think about a young business. Usually, it’s small and obscure, with little brand equity. Its founders are probably extremely busy, particularly if their business is succeeding and has the potential to create a lot of jobs in the future. And the company probably has only a couple of positions to be filled at any given time.
That’s pretty much the opposite of big banks and management consulting firms, which have many open positions, many employees who can do recruiting and deep brand equity on every Ivy League campus. “It’s the organizations with the most resources that get the best talent,” Yang says, “while the young businesses that will be creating all the jobs don’t get the talent they need.”
Teach for America solved that problem by providing schools across the country with the recruiting capacity and brand equity they lacked, enabling them to pool resources to attract top students. Venture for America is eager to play a similar role, serving as the middleman between small, growing businesses and students who might want to work for them.
In its first year, Yang estimates that Venture for America received about 500 applications for 40 slots. The jobs are in fast-growing companies that are less than 10 years old, and they pay from $32,000 to $38,000. Right now, Venture for America is working with companies in Cincinnati, Detroit, Las Vegas, New Orleans and Providence, Rhode Island. Next year, the organization expects to have more than a thousand applicants for 100 positions, allowing expansion to Baltimore; Cleveland; New Haven, Connecticut; Pittsburgh; and Raleigh-Durham, North Carolina.
As for Mike Mayer, he’s finished with Wharton and heading to New Orleans to work at a small software company. “There is a sense of creating something, of creating real tangible value,” he says. “A big bank does create value for our economy, but as a first-year analyst among 80 or 90 peers, you’re not seeing it. At a startup, you’re seeing it every day.”
(Ezra Klein is a Bloomberg View columnist. The opinions expressed are his own.)
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