Inside the Beltway
Wall Street’s Loss May Be the Nation’s Gain
by Michael S. Lubell, APS Director of Public Affairs
Washington may hold the levers of power, but it’s Wall Street that makes them move. And these days, that nexus isn’t sitting too well with the American public. It’s not just the “Occupy Wall Street” movement–which has now spread nationwide–but also the drumbeat emanating from Main Street for hiking taxes on millionaires and billionaires that is dulling the gloss on the canyon walls of lower Manhattan.
And if the Street loses some of its lure for the brightest graduates of the Ivies, it may not be such a bad thing. Just before the banking sector imploded in 2008, Harvard was sending almost 6 out of 10 of its newly minted bachelors degree job seekers to financial services firms, with Goldman Sachs the commencement trophy of choice.
Today, Goldman no longer sports the gold medal, having agreed last year to pay a $550 million Securities and Exchange penalty for misleading investors on subprime mortgages, and announcing this past October that it had lost $393 million in the third quarter of 2011. It’s true that bonuses on Wall Street have nearly reached their pre-recession peak, but New York financial firms have shed nearly 22,000 jobs since then, and they predict they will eliminate 10,000 more in the next two years.
These days, if you’re a smart cookie, you might not want to bet your smarts on the financial Svengalis. You might just want to consider a career that creates something of worth beyond a pile of chips in a Wall Street casino. You might just want to try your skills at discovery, innovation and entrepreneurship. You might just want to help grow the economy and create jobs. You might just want to consider a career that uses your science and engineering abilities to build a better America.
It wasn’t too long ago that the American Physical Society was featuring Wall Street as an avenue for alternative careers in science. I recall attending the 2000 APS March Meeting in Minneapolis. It had been an usually warm winter, and by the time 5,000 physicists had descended on the City of Lakes, the snow had melted and the buzz of discovery was in the air.
A few weeks before the meeting convened, APS News had featured several sessions in its front-page article, “APS Gears Up For Minneapolis March Meeting Madness.” One item had caught my eye. Session P5, scheduled for Wednesday afternoon, carried the enticing title, “Bullish on Wall Street,” and I had marked it on my calendar as a must attend.
The APS News article had observed, “Over the last decade, the number of PhD physicists employed in the financial community has increased dramatically. Once considered something of an anomaly, physicists have become a critical element to successful investment strategies.” The item concluded with a summary of the session: “[A] broad range of recent research centered on econophysics: critical phenomena in economics, the growth of complex organizations, the application of random matrix theory to economics, and elements for developing a theory of financial risk.” With hindsight and the financial collapse still evident in a rear view mirror, the final words carry with them more than a tinge of irony.
As usual, I was running late that Wednesday afternoon. But I had assumed that “Bullish on Wall Street” would be no match for the hard science sessions with which it was competing, and that I would have no trouble finding a seat. That proved to be an immense miscalculation.
By the time I had arrived, a few minutes before the session was scheduled to begin, the hall was filled well beyond its capacity. There was so little space between people, it was hard to estimate how large the crowd actually was, but I came up with a figure well in excess of 500, most of them very young.
A decade ago, physicists fresh out of graduate school, many of them with exceptional credentials and capabilities, viewed Wall Street as an exciting and very lucrative career opportunity. The American Institute of Physics estimates that at least 1,000 of them are still employed in the financial services industry today–although no hard figures are available–and I am sure they are well compensated for their work.
A decade ago, I was far less concerned with America’s ability to innovate and compete globally than I am now. I was less concerned with an economy that was becoming increasingly focused on services, especially financial services and health care, and much less on manufacturing. In 2000, the job market was robust, and the federal government was running such large surpluses that Alan Greenspan, then chairman of the Federal Reserve, worried that the elimination of the nation’s debt could lead to instabilities in the bond market.
The world is much changed. Today, manufacturing accounts for about 12 percent of U.S. GDP, about half of what it did four decades ago, and its share continues to shrink. And the financial services sector, which today garners an 8 percent slice of GDP, has seen its contribution double over the same period, and its share is still rising. Many economists believe the trends hold warning signs for America’s future.
So Wall Street’s loss of gloss could be Main Street’s gain, if the brightest college graduates begin to pursue high-paying careers that lead to greater prosperity for all Americans rather than simply outsized gains in their own personal wealth.