Wall Street’s Great Migration

Courtesy of Wall Street Journal.

Written by Jeff Zhou

If Wall Street has lost its prestige due, in great deal, to automation, then it makes sense why countless of elite college graduates are flocking into the tech sector.

The 2008 financial crisis severely damaged the public perception of Wall Street. 1.2 million households were lost to the recession, and although the American economy continues to steadily improve, the anger still remains. On the surface, this widespread disdain of corporate greed hasn’t appeared to dissuade ambitious, young adults from pursuing a career on Wall Street. In 2013, Goldman Sachs received 17,000 applications for 350 summer internships, prompting Goldman President Gary Cohn to declare that “we have no problem attracting people”.

However, upon closer examination of millennials’ career aspirations, it becomes evident that the popularity of Wall Street among the youth is waning. A recent nationwide LearnVest survey discovered that only 2% of respondents desired to be a banker. Working at a big investment bank in the Financial District no longer seems to be the epitome of professional success in America. But why, and what has taken over its place?

Before determining which sectors are pulling talent away from Wall Street, it’s critical to first understand the reasons more and more bankers are leaving their jobs. One factor that could contribute to the fading appeal of the finance industry is the hemorrhaging of jobs from Wall Street banks in the immediate aftermath of the financial crisis. Lavish compensation packages were also cut down to lower costs for firms. However, salaries have largely bounced back and companies are desperately trying to bring in motivated individuals through high bonuses. Thus, money alone is insufficient in explaining this current phenomenon.      

A more likely factor driving Wall Street’s brain drain is the rise of automation. According to venture capitalist Marc Andreessen, “100,000 financial workers aren’t needed to keep money flowing.” Advanced software and robots are more efficient and less troublesome than the average laborer. Additionally, unlike teachers and counselors, bankers don’t engage in a lot of social interactions, spending most of their time behind a computer screen. This means the majority of work they do can be automated. Indeed, many hedge funds are already utilizing predictive analytics for duties such as timing stock purchases and evaluating risk based on market liquidity, decreasing the importance of human involvement.

If Wall Street has lost its prestige due, in great deal, to automation, then it makes sense why countless of elite college graduates are flocking into the tech sector. In 2013, 32% of new graduates from Stanford Graduate School of Business accepted tech jobs, while 26% headed into finance. For the first time, tech companies overtook financial services in attracting new talent. Startups in particular are the new rage, as an increasing number of top young professionals choose to work in a bulge bracket for a couple years before starting their own businesses. Not even big paychecks can convince these individuals to stay.

The future of the finance industry is uncertain. It will be interesting to see how multinational investment banks respond to the soaring popularity of the tech sector; will they adapt or will they crumble? It would be foolish to assert that Silicon Valley has already won the battle, but Wall Street is definitely in trouble.

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