The problem with the U.S. economy, Andrew Yang writes in his book Smart People Should Build Things, is that too many of the United States’ best students choose to attend law school, enter the medical field, or go to work in finance. To help address the problem, Yang founded the nonprofit Venture for America (VFA). What follows below are bolded prompts I wrote to outline some of the content of the book. The bulleted quotations come directly from the pages of Smart People Should Build Things.
What percentage of students are choosing finance, consulting, medical school, or law?
- In 2011, 29 percent of employed Harvard graduates went into finance or consulting, while 19 percent of the class applied to law school and 18 percent applied to medical school. That’s a majority of the class.
Why are so many students, who seem like they could succeed in any career, choosing such a small variety of professions?
- Ambitious college students have no real idea what to do upon graduation, but they’re trained to seek the ‘next level.’ Many apply to law school, grad school, or even medical school because of a vague notion of status and progress rather than a genuine desire or natural fit. Those who try to do something independently often find themselves frustrated by their lack of rapid advancement, and so default to a more structured path of law school, business school, or graduate school. The concentration in professional services leads our national university graduates to congregate in a handful of metropolitan areas—primarily New York City, Silicon Valley, Boston, and Washington, DC.
- If we want today’s graduates to take risks and build new businesses, we can’t have them systemically graduating with tens of thousands in debt that will take years to pay off in the best of circumstances.
Yang, himself, went to law school. What’s wrong with that?
- Bloomberg Businessweek has projected a surplus of 176,000 unemployed or underemployed law graduates by 2020.
- If year after year we send our top people to financial services, management consulting, and law schools, we’ll wind up with the pattern we’re already seeing: layers of highly paid professionals working astride faltering companies and industries. But if we send them to startups, we’ll get something else. Early-stage companies in energy, retail, biotech, consumer products, health care, transportation, software, media, education, and other industries would have a better chance of innovating and creating value.
What can possibly be the problem with a lot of talented students entering medical school?
- From a value creation standpoint, it’s not ideal for a massive level of talent to be going to existing enterprises that have captured large economic rents or where people are fighting for a set of finite slots. The rents and slots will stay essentially constant. Contrast this with new business formation.
Yang uses that word value a lot. What does he mean?
- The economy needs more companies to start, grow, and thrive in order for the service organizations themselves to prosper. For example, if Mark Zuckerberg had become an investment banker or gone to work in a bank’s information technology department, then the bankers wouldn’t have had Facebook to take public. It’s actually far better for the investment banks (and everyone else) that instead of heading in their direction, he started his own company.
- People and companies around the country are solving real problems right now. For example, in New Orleans, Venture for America works with a company called Kickboard that provides a software application to help teachers track student performance. Kickboard was founded by Jen Medbery, who studied computer science at Columbia University and taught middle-schoolers through Teach for America. Jen created the product that she wished she’d had as a teacher. Now she’s building a company; Kickboard has dozens of school districts as clients and has grown to more than twelve employees.
What are some of the other problems caused by so many talented students going into these professions?
- The concentration in professional services leads our national university graduates to congregate in a handful of metropolitan areas—primarily New York City, Silicon Valley, Boston, and Washington, DC. Those who become bankers or consultants are highly paid and heavily socialized, yet many become disaffected due to a lack of purpose or unsustainable lifestyle, and some simply discover they don’t enjoy their roles.
- Our identification and distribution of talent in the United States has gone from being a historic strength to a critical weakness. We’ve let the market dictate what our smart kids do, and they’re being systematically funneled into obvious, structured paths that don’t serve them or the economy terribly well.
If we want to change the system that causes so many people to choose so few career paths that don’t create value, what are we up against?
- A friend who works in financial services recruiting estimated that her firm spends $50,000 per recruit. If you project the analogous expenditures from every major bank and consulting firm to develop talent pipelines, you have tens if not hundreds of millions being spent each year at major campuses across the country. One hedge fund spends so much on recruitment that it offered to pay Dartmouth students a hundred dollars each to tell the company why they chose not to participate in its recruitment process.
- The financial services industry has mushroomed in size, with Wall Street firms employing 191,800 at their peak in 2008, up from only 65,300 in 1975.4 The growth in professional services has given rise to an accompanying set of recruitment pipelines only in the past several decades.
So what’s the solution? Yang founded the nonprofit Venture for America (VFA) with plans to accomplish the following:
- Our immediate goal would be to help create 100, 000 new US jobs by 2025. To do that, we would provide to startups and growth companies around the country the talent they needed to expand and hire; and we would train a critical mass of our best and brightest to become business builders and entrepreneurs.
Check out some of the possibilities if college graduates begin to choose a more diverse set of fields:
- What if the same level of talent that is currently heading to finance or law school or management consulting instead went to starting or developing growth companies? … What if 25 percent of our top graduates went to startups around the country each year instead of to Wall Street? How long would that take to generate thousands of new jobs, companies, opportunities, and even industries?
How does Venture for America work?
- The first ever five-week Venture for America training camp started at Brown University in June 2012. The VFA team and I moved into apartments and dorm rooms in Providence to prepare.
- The best way to become an entrepreneur is to learn from a more experienced leader as he or she builds a company. We provide that operating experience, as well as training, networks, and support for enterprising college graduates who are accepted into our two-year program. We also offer seed funding to some of the Venture Fellows who perform well and want to start their own businesses. Our goal is to make it as straightforward to become a startup manager or entrepreneur in Detroit or New Orleans as it currently is to be a professional in New York
- If the US economy had generated as many startups each year for 2009–12 as it had in 2007, the country would have produced almost 2.5 million new jobs by 2013.5 If we’re interested in spurring long-term job growth, we want as much talent as possible heading to new firms so that more of them can succeed, expand, and hire more people.
Has Venture For America Been Successful? This answer comes from the VFA website.
- VFA fellows have contributed to the growth of over 450 startups. There have been 365 jobs created by 129 fellow funded companies, and VFA has provided 50 million dollars in seed funding. VFA has received over 10,000 applications from people interested in becoming fellows.
Thank you for taking the time to read about Andrew Yang’s Book Smart People Should Build Things. If you found this post informative, please share it by using one of the social media buttons on this page or by copying and pasting the link. If you have thoughts in response to this post, I’d love to hear from you in the comments section. If you have requests for future posts or story ideas, pass them along.
Coming soon: The War on Normal People.