If you were asked which company is nobler, Goldman Sachs or Google, which company would you chose?
Robert Shiller, the Nobel-Prize winning economist best known for his work on real estate prices (i.e. the Case-Shiller index) recently suggested that Goldman Sachs would be a better employer for young college graduates with a “moral purpose” than a company like Google would.
With the finance world seemingly always operating in the realm of “disapproval” in the public’s eye (at least that’s what many in the journalism world would like to believe), the idea of finance representing a more “morally sound” career choice over the likes of Google apparently dumbfounded some, including Vivek Wadhwa, vice president at Singularity University.
In Wadhwa’s own words: “Would you rather have your children going and cooking up the financial system, engineering the financial system, and creating more bubbles for us? More bubbles like the ones my esteemed friend is famous for? Or would you rather have them saving the world? I can’t even believe I’m having this debate with a Nobel Prize winner.”
Mr. Shiller, on the defensive after Wadhwa’s attack, made a straightforward case for finance: “We need more engineers than we need finance people. But we need finance people to provide the resources for them to do these things. It’s not a choice between Google and Goldman.”
Who is right?
Well, in the world of image branding, Google is the winner hands-down. The question, though, requires a good deal more thought than what complaining engineers (and the public) are willing to put into it. Let’s look at the issue through three dimensions: productivity, people helped, and international competitiveness.
First, productivity. Here is what the data look like. Overall, the financial industry, as measured by the commercial banking proxy, held an advantage until the mid-1990s, after which engineering, as measured by software production, saw its workers produce more per hour than the financial industry. What do we take from this? Well, as of now engineers are generally more productive than financial professionals.
Is that it? No, that’s not it. The data also show that productivity changes over time according to demand and supply for the industry’s output. Essentially, although the financial industry has lost the edge right now, it likely will not always be the case. The financial industry held the advantage for the 80s and half of the 90s.
Second, the engineering and the financial worlds both help a lot of people.
How many? Well, in terms of numbers, the financial world touches at least 90 percent of the western world’s citizens directly, and pretty much everybody in an indirect manner. In contrast, the engineering world indirectly touches pretty much everybody, although directly the figure is a good deal less. Mr. Shiller puts it succinctly: “Anyone who lends money and asks for it back is going to look greedy, you’ll never be loved the way Mother Teresa was. But you’ll know inside you’re a good person.”
Third, international competitiveness. What is meant by international competitiveness? Well, it means a country’s exports. For countries like the United States and England, the finance industry is a main export. Why don’t people talk about the export component of finance? The simple answer is that it doesn’t show up in official statistics (at least not in a way that’s statistically defensible). Essentially, management and financial consulting is still clustered in the western world, and the advice western bankers give to other businesses across the world matters a lot. Does the engineering industry export a lot of its know-how to the international markets? They sure do, although not as much as the financial industry.
Overall, the debate surrounding the usefulness of the engineering and financial professions continues to survive. The bottom line, though, depends on what you’re talking about, whether it be productivity, people helped, international exports, or a plethora of other potential measures.
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