Chinese Students: 'We like how you guys were making money, and profiting immensely without benefit to others, how did you do that?'
Wharton Profs: 'Yeah, we've found that does not work so well.. at least for the last few months. I guess if you do not want to provide value to others you could figure out a good way to steal.. that has worked before'
Chinese students, to each other: 'Thanks for nothing..'
Wharton Profs, to each other: 'They seem to have the notion that because all of our students are making huge iBanking bonuses, we can tell them how to make a fortune without delivering any kind of value. Surely they could not have learned that from us?'
I don't quite follow: how were the profs making money without benefiting others? Profs don't make that much money, or do they? Also stealing was just one of three ways for getting rich they suggested.
I can't imagine business schools are to blame, much more likely seeing people get rich in banking is to blame.
Honestly, the problem isn't restricted to Chinese students. A lot of the US students that these Professors teach at Wharton and other comparable business schools see I-Banking and finance jobs as the path to personal wealth, not as a way to create value in the economy.
But what would you expect when finance industry jobs pay so much more than anything else.
I think you're right. I recently graduated from one of the nation's top universities and I can tell you first hand that only a couple years ago, you could ask almost any ambitious student what their aspirations were after college and the default answer for many of them would be banking or consulting. I think this default position can be partly explained by the large salaries attached to these jobs and partly explained by students not knowing what exactly they wanted to do with their lives. If they were going to do anything, they should be well-compensated for it...right?
It is surprising, however, that graduating students are still gunning for these i-banking jobs given current industry conditions. If you're bright, ambitious, and hard working, I would think the odds of procurring some measure of wealth from some form of entrepreneurship would be on par with i-banking. Students lack foresight if they don't see that the banking industry will be drastically changed given current events.
I think they think it's going to come back within a year or two or five at most.
I think they are being delusional. For the next twenty years, minimum, bankers in general and investment bankers in particular should come to expect that if anybody's making lots of money, they're going to get scrutinized. Not just by the government and not just by the people, but by the banks themselves. The banks have seen what happens when you pay too much money to those people, and while the upper echelon shall always be handsomely paid, I think the rank and file are going to see a severe and long-term pay cut.
At this point, you tell an investment bank that if they don't pay a lot they aren't going to get the smartest possible people and the reaction is likely to be "Thank god! At least when they make mistakes they won't make really smart mistakes! Those are the worst." Why should they pay someone five million to destroy the company when they can find people for $200,000 who will do quite adequately? (Recall that "beating the market" is very hard and that an index fund is generally an astonishingly good investment, all things considered.)
It will come back, though. It will come back when those who remember how we got here are flushed out of the system and the people of 2040 or 2050 make the same damn mistake and fall into the credit bubble trap again, as the balance of the workforce tilts away from those who are at least 20 today. But that's probably not soon enough for the students of today.
I don't think the investment banks will be back for a while because all of the action is moving to smaller firms. There will be a shakeout in the hedge fund industry, but there will continue to be successful firms that do very well. Believe it or not there is still a lot of money out there looking for investments. I already see what looks like a bull market in the creation of financial startups trading markets that are not related to fixed income. These people will not have the government looking over their shoulder on compensation so they will be able to attract the best young talent that is sick of the uncertainty over pay and firm performance at a big institution.
Why is it be surprising? We just witnessed these banks lose hundreds of BILLIONS of dollars, hundreds of billions of dollars of shareholder wealth, probably hundreds of billions of dollars of bondholder wealth... and bonuses fell by half. With incentives like that, anybody would be a fool not to at least consider it.
Edit: and while I hope so, and we'll deserve what we get if we don't take action, it's actually not at all clear that the finance industry will be massively regulated after this, at least not in the right way. Many congresspeople are a combination of incompetent and outright owned by the finance companies and people.
"The other thing is a survey that I just read about in the Times. Over six in ten Americans think that someone in their household will lose their job in the next year. That means six in ten people won't buy anything other than basics. The economy comes to a full halt even worse than now."
I thought these "very intelligent" Chinese students wanted to know how to start businesses. Then I read this line:
"How can I get that job? How can I get a high-paying job in investment banking now?"
How disappointing. It seems that these "very, very goal-directed" dudes are more interested in a cushy job at some shiny office than in doing new things, cool things.
This entrepreneurship attitude differs from country to country. In many socialist countries people like jobs in the government - it is cushy, extremely stable and offers excellent benefits.
In other societies risk taking are discouraged (through various means). You should also take into account the difficulty of starting a business when you do not have access to capital.
The USA is one of the few countries that almost seems to reward risk taking and is not over-regulated (thereby cancelling out small companies). This is fairly unique and is probably a part of what make the USA great.
China is right now an excellent place for entrepreneurs, especially young, local ones. What is a _real_ barrier for these students is expectation and prestige. They just finished at the most prestigious schools in China. The only thing their families will accept is a great salary from a well know company.
The good news is this isn't hurting entrepreneurship in China. There are far too many smart young Chinese that do not have these outsized expectations...and maybe more important have nowhere to turn but to start something themselves.
Maybe another way to summarize this article is "Wharton profs' only interactions with Chinese students is at the top .0001% of the class."
One of the most striking things to me about my two three-year stays in Taiwan (in the '80s and around the turn of the last century) is how much more entrepreneurial I became just by living there. The Taiwanese have a proverb, "Better to be the head of a chicken than the tail of a buffalo," and they strongly value being business owners rather than employees of large organizations. In the 1980s, the development pattern of Taiwan and Korea, otherwise rather comparable countries, was quite different because most Taiwanese worked in small, family-owned enterprises while most Koreans worked in giant industrial conglomerates.
Today, Taiwan's economy is HAMMERED by the worldwide recession, but I think the response will be to find more ways to do more entrepreneurial business formation, and Taiwan will be all right. China is in serious danger of unrest, by contrast,
Gosh, that attitude couldn't be more different in Beijing. Here in the PRC, business owners and entrepreneurs are viewed with some suspicion, a holdover from the revolutionary days. For example, Li Ning was a national sports hero, and he really sullied his reputation by going into business and founding a big sports clothing brand. Folks just don't believe that you could get that successful honestly. The expectations of corruption are too high.
Sure, people want money, but most believe that the only real way to get it is through some kind of graft or payoffs. Thus, the way to get wealthy is to get a high job in a large and established company or government organization, and put themselves in a position for the inevitable kickback. They may not paint it in those terms, but that's basically what those students were asking for.
Now for the caveats: There is an AMAZING amount of entrepreneurial activity at the bottom of the food chain, and there is definitely an emerging entrepreneurial class. China's also a huge and diverse country, and there's definitely pockets of Silicon Valley-like activity. However, culturally they're swimming upstream.
Frankly, I fear for the economic future of China unless they kickstart some more private business activity (particularly startups). The majority of economic activity here is in massive sluggish state owned enterprises, and that's a recipe for disaster if this economic downturn is long and nasty.
well said. Entrepreneurial activity is more embraced in Shanghai, as opposed to Beijing. This thread now says Taiwan, Beijing, and Shanghai all have different attitudes. So much for lumping the Chinese in one bucket ;).
Spot on. Sometimes I get the feeling that China isn't one country, but a loose confederacy stitched together by military and propaganda. Taiwan might as well be another planet.
I've only spent a little bit of time in Shanghai, but I believe you. The unfortunate thing is that the top universities are mostly concentrated here in Beijing, and thanks to the hukou system, the best and brightest tend to stay here.
The proverb is, it's better to be the head of a chicken than the BACKSIDE of a buffalo. Meaning it's better being a small leader than a large underling.
Trust me, there's no shortage of entrepreneurialism in China.
Insert something about sufficient sample size and selection bias here. Is there something hard wired in Americans' (specifically white Americans') brains that assume that anything they read about a few Chinese people automatically apply to the entire country?
Please read my comment again and tell me where I generalized to all Chinese. The article's author claimed that the guys were very "bright", and I was expecting him to write on their entrepreneurial spirit... and, lo and behold, all they wanted was a safe status job that pays well. So predictable. So boring. I said nothing on the other 1+ billion Chinese. I did not comment on the entrepreneuralism (or lack thereof) in China...
PS: Though you guessed right that I am a white male, I must say that I am not American.
I don't agree with your line "specifically white Americans". I'm a white American and have lived in Shanghai 9 years. Of all the various types I see coming into Shanghai, the type that seems to have a very hard time assimilating is the "ABC". The American Born Chinese. This is a multi-faceted problem. But to be sure, there are many white Americans that "get it" and assimilate quite well.
Your point about sample size and selection bias is right on. This is the real take away from the article.
China has well over a billion people. You'll find a lot of ANYTHING in China, including entrepreneurialism. However, in my experience, most Chinese don't believe that starting a business is the best way to wealth.
Of course, I'm a white American (that happens to live in China). Perhaps you have some insights that I'm lacking.
You're right. I've met many Chinese people who think the way to wealth is to get a cushy government position with some kind of power over others so you can get bribes or to be a purchaser for a company due to a similar reason.
I believe that this group of Chinese students are brilliant as I used to be one of them. They all have goals, some goals are even ambitious. They want to help poor people, make a more balance world. The thing of why they want to make money by making illusion because they see money as a method to achieve their goal, that to say, the process to make money is irrelevant to what they really want to do. They just want to get rich quickly and then distribute the wealth. Of course now I know that it is a naive thought but many still believe this kind of financial freedom. They have to be given more time to figure out that by distributing money will do nothing to the world as this happened all the time. By making real thing, through value creation, in the process of making huge amount of money, the world become much better.
Your thoughts are very nice and I know there are many that think like you. Unfortunately, the path to riches, as these students depict, almost never leads to wealth redistribution.
I live in Shanghai. All I see the new wealthy do is park their cars illegally in the bicycle lanes.
As a Wharton student, I feel that contrary to what the professor says, top business school students (Wharton students) are still interested in creating another paper monster, because historically finance offered a much greater salary for the individual.
Operations, marketing, and the other essentials have a much lower salary and potential to growth. I feel that the traditional product-making firms should offer more "fast-track" positions to attract top students to create real products.
I feel that in our global society today, people are more interested in me than we.
Making things, aka being an engineer, is an art and a craft that takes time to master. Even if you work in software, there are no quick routes to riches. Zuckerberg may have been young when he hit it big, but he had been programming for a long time. I can't imagine that physical engineering takes less time to master (but hey, I don't really know.)
My point is "traditional product-making firms" probably fail to offer fast-track positions because there is no fast track to being good at traditional product making.
I think there is a difference between the engineers making the products and the people marketing and managing the companies. I acknowledge that it is not likely that the engineer will add huge value without substantial time to master his field, but I do feel that a bright creative business person could add substantial value. Unfortunately, I feel that they are lured away by the finance riches, so we never are able to see their impact.
Interesting insight into a small section of China's best and brightest.
I am certain though these people are the minority, just like the rest of the world I'm sure some students want to just make money and the others want to create wealth and products. And with the recession more people are wising up to it.
The financial mess sort of reminds me of the space shuttle disasters.
I remember thinking after the Columbia tore apart that space travel would be finished. How could we possibly risk more people in space after such a horrendous event? And that happened twice. There were lots of smart people working on those projects, doing lots of complicated work that few could understand. Did it affect millions of people? Other than emotionally, no. Were there immoral people working for NASA? Probably.
My point is that it took about 3 years after the Challenger disaster, and another 3 years after the Columbia disaster to get things moving again. Many changes were implemented. But rockets still flew.
The science didn't get any easier, and neither did the math. Rocket science and materials science are still chalk-full of tough, unpredictable problems, but that doesn't scare people away from being employed in those industries.
I-banking needs some sweeping changes. Perhaps the compensation will change as a result. At the end of the day though, financial engineering is still needed, and intelligent ethical leaders will be more in demand than ever.
Wharton Profs: 'Yeah, we've found that does not work so well.. at least for the last few months. I guess if you do not want to provide value to others you could figure out a good way to steal.. that has worked before'
Chinese students, to each other: 'Thanks for nothing..'
Wharton Profs, to each other: 'They seem to have the notion that because all of our students are making huge iBanking bonuses, we can tell them how to make a fortune without delivering any kind of value. Surely they could not have learned that from us?'