by Andrew Yang
February came, our revenue shot back up, and I put the contingency plan away, adopting only one item from it that seemed like a good thing to do.
Dan Gilbert once said to me, “I’ve always told my teams that if you have one choice, choose growth.” The way management teams work is that we generally try to grow and take advantage of opportunities. We try to operate efficiently, but it’s not our number one priority all of the time. We also don’t walk around trying to be jerks in periods of relative prosperity.
When things get tight, however, management teams start to scrutinize everything in the name of cost discipline. People, processes, technology, vendors, suppliers, partners, leases, holiday events, you name it—it all goes on the table. If it’s not nailed down, we look at ways to make it cheaper or do without it. And even if it is nailed down, we might look for a nail remover.
If you look at the histories of layoffs, they maintain a fairly normal pace until a recession hits. Then employers go wild looking for efficiencies and throwing people overboard.
The real test of the impact of automation will come in the next downturn. Companies will look to replace their call centers and customer service departments with artificial intelligence and hybrid bot-worker arrangements. Fast food CEOs will experiment with robot burger flippers. Freight companies will embrace cost savings. Large companies will question why their accounting and legal bills are so high. And on and on. Cost-cutting knives will come out, turbocharged by new automated tools. Productivity will then shoot up in the worst way possible as companies accomplish the same tasks with many fewer workers. Our public sector will also be faced with dramatic new needs even as tax revenues decrease.
In the introduction, I said that we were the frog and the water’s getting hotter. It might be more accurate to say that we’re the frog and the grill is being preheated.
PART TWO:
WHAT’S HAPPENING TO US
NINE
LIFE IN THE BUBBLE
SIX PATHS TO SIX PLACES
We’ve talked a little bit about what I’ve termed “normal” Americans. Before starting Venture for America, I spent six years running a national test prep company that served college graduates, so I’ve also been highly exposed to what highly educated Americans are doing. Their paths are quite predictable and consistent. Whether they realize it consciously or not, many educated Americans have been shifting their studies and career intentions toward paths that seem more sustainable amid a narrowing job market.
We joked at Venture for America that “smart” people in the United States will do one of six things in six places: finance, consulting, law, technology, medicine, or academia in New York, San Francisco, Boston, Chicago, Los Angeles, or Washington, DC. Conventional wisdom says the “smartest” things to do today are to head to Wall Street and become a financial wizard or go to Silicon Valley and become a tech genius.
The finance and technology industries spend tens of millions each year to build massive talent recruitment pipelines. They hang out on college campuses and essentially stalk top prospects, throwing at them food, money, drinks, flights, prestige, status, training, network, peer pressure, and anything else that might be considered enticing. A friend in financial services estimated that her firm spends $50,000 per high-end hire just on sourcing and recruiting. One hedge fund paid Dartmouth students $100 each to tell them why they decided not to engage in its recruitment process. There is even a Goldman Sachs room at Columbia’s career services office. A friend of mine at a Wall Street bank commented that he felt funny recruiting PhDs from Caltech to write trading algorithms for him. “I feel like they should be working on the mission to Mars or something.” But he keeps doing it every year.
In Silicon Valley, many young people, generally from very good colleges, are making more money in a year than normal Americans will see in a decade. Even summer interns—non-engineers—at tech companies might make $7,000+ a month and get perks like free flights home to visit on weekends. Bidding wars and five- and six-digit signing bonuses are being paid out for freshly minted engineering grads; Google recruits the heck out of Stanford, Berkeley, Carnegie Mellon, MIT, and other top schools, offering six figures to start, plus bonuses. Facebook sponsors hackathons at the top schools, stays in touch with professors, and invests tons of resources in order to be the most visible and obvious employer. Average salaries are inching close to $200,000 in Silicon Valley, to say nothing of the upside of equity-based compensation (aka stock options), which can be dramatically higher.
Don’t think that the smart kids haven’t noticed—the proportion of Stanford students majoring in the humanities has plummeted from over 20 percent to only 7 percent in 2016, prompting panic among history and English departments, whose once-popular classes no longer have students. One administrator joked to me that Stanford is now the Stanford Institute of Technology. Here’s the latest available data on what graduates of various high-end universities are doing after graduation:
Popular Job Destinations for College Graduates
School: Harvard
Finance: 18%
Consulting: 21%
Tech & Eng: 18%
Grad School: 14%
Law: 13%
Med School: 16%
School: Yale
Finance: 16%
Consulting: 13%
Tech & Eng: 15%
Grad School: 12%
Law: 15%
Med School: 17%
School: Princeton
Finance: 15%
Consulting: 9%
Tech & Eng: 9%
Grad School: 14%
Law: 11%
Med School: 12%
School: Stanford
Finance: 11%
Consulting: 11%
Tech & Eng: 16%
Grad School: 22%
Law: 6%
Med School: 17%
School: UPenn
Finance: 25%
Consulting: 17%
Tech & Eng: 15%
Grad School: 12%
Law: 9%
Med School: 13%
School: MIT
Finance: 10%
Consulting: 11%
Tech & Eng: 51%
Grad School: 32%
Law: 0.4%
Med School: 5%
School: Brown
Finance: 13%
Consulting: 10%
Tech & Eng: 17%
Grad School: 15%
Law: 9%
Med School: 17%
School: Dartmouth
Finance: 17%
Consulting: 14%
Tech & Eng: 8%
Grad School: 16%
Law: 10%
Med School: 14%
School: Cornell
Finance: 19%
Consulting: 16%
Tech & Eng: 18%
Grad School: 19%
Law: 9%
Med School: 17%
School: Columbia
Finance: 23%
Consulting: 11%
Tech & Eng: 19%
Grad School: 19%
Law: 12%
Med School: 16%
School: Johns Hopkins
Finance: 14%
Consulting: 19%
Tech & Eng: 13%
Grad School: 28%
Law: 7%
Med School: 31%
School: University of Chicago
Finance: 27%
Consulting: 11%
Tech & Eng: 16%
Grad School: 14%
Law: 11%
Med School: 11%
School: Georgetown
Finance: 23%
Consulting: 17%
Tech & Eng: 9%
Grad School: 7%
Law: 20%
Med School: 15%
School: Average
Finance: 18%
Consulting: 14%
Tech & Eng: 17%
Grad School: 17%
Law: 10%
Med School: 15%
Sources: The Career Servi
ces Office of the colleges.
Not only do grads from national universities do the same things, they also do them in the same places. Eighty percent of graduates of Brown University, my alma mater, moved to one of four metropolitan areas after graduating in 2015: New York City, Boston, San Francisco, or Washington, DC. Similarly, more than half of the graduates in the class of 2016 at Harvard University had plans to move to New York, Massachusetts, or California. Seventy-four percent of Yale seniors in the United States reported accepting jobs in one of the following places last year: New York, California, Connecticut, Massachusetts, and Washington, DC. MIT graduates preferred to stay in Massachusetts or move to California or New York. Stanford’s class of 2015 showed a strong preference for staying in California.
Our national universities are effectively a talent drain on 75 percent of the country. If you’re a high achiever from, say, Wisconsin or Vermont or New Mexico and you go to Penn or Duke or Johns Hopkins, the odds are that you’ll move to New York or California or DC and your home state will never see you again.
Most Popular States for Post-Graduation Employment
School: Harvard
New York: 24%
Massachusetts: 20%
California: 15%
DC: N/A
Total: 59%
School: UPenn
New York: 38%
Massachusetts: N/A
California: 11%
DC: 6%
Total: 55%
School: MIT
New York: 8%
Massachusetts: 44%
California: 23%
DC: N/A
Total: 75%
School: Stanford
New York: 7%
Massachusetts: N/A
California: 75%
DC: N/A
Total: 82%
School: Brown
New York: 36%
Massachusetts: 20%
California: 19%
DC: 8%
Total: 83%
School: Dartmouth
New York: 25%
Massachusetts: 16%
California: 15%
DC: 6%
Total: 62%
School: Georgetown
New York: 30%
Massachusetts: 3%
California: 6%
DC: 24%
Total: 63%
School: Yale*
Total: 74%
* 74.2% of the Yale seniors residing in the United States reported accepting jobs in one of the following states: New York, California, Connecticut, Massachusetts, and Washington, DC.
Sources: The Career Services Office of the colleges.
Financial services and technology are absorbing most of our top educational products. They are like twin cannons on opposite sides of the country continuously pushing for increased profitability and efficiency. The normal American is meant to benefit through increased access to technology, capital gains, and more streamlined businesses. Unfortunately these benefits are now being counterbalanced by a dramatic reduction in opportunities. Cheap T-shirts, a booming stock market, and a wide array of apps are cold comfort when you don’t own any stock and your local factory or main street closes.
Why are so many bright people doing the same things in the same places? They are driven by a desire to succeed, and there are only a few clear versions of what success looks like today thanks to the built-up recruitment pipelines. Money, status, training, a healthy dating market, peer pressure, and an elevated career trajectory all seem to lead in the same directions.
Also driving the uniformity is a pervasive anxiety and scramble that prioritizes credentialing and market success over all else, in part because failure seems to bring catastrophic economic and social consequences. Instead of seeing college as a period of intellectual exploration, many young people now see it as a mass sort or cull that determines one’s future prospects and lot in life.
One reason students feel pressured to seek high-paying jobs is the record level of school debt. Student debt levels have exploded relative to other forms of debt over the past decade in particular. Educational loan totals recently surpassed $1.4 trillion in the United States, up from $550 billion in 2011 and only $90 billion in 1999. The average level of indebtedness upon graduation is $37,172 and there are 44 million student borrowers. Default rates have crept up steadily to 11.2 percent.
Among children of even successful and highly educated families, there are sky-high levels of anxiety and depression. The use of prescription drugs is at an all-time high among college students, as is the use of college counseling offices, which report being overwhelmed. Demand for counseling increased at five times the rate of enrollment over the last 10 years. Waitlists to see a counselor at USC, a well-resourced private school, were reported as being 6 to 8 weeks long for non-emergency cases, and many schools had similar difficulty meeting demand. Julie Lythcott-Haims, a dean at Stanford, wrote a book in 2015 about the changing character of the students she was seeing, who had gone in one generation from independent young adults to “brittle” and “existentially impotent.” In 2014, an American College Health Association survey of close to 100,000 college students reported that 86 percent felt overwhelmed by all they had to do, 54 percent felt overwhelming anxiety, and 8 percent seriously considered suicide in the last 12 months.
Relationships have changed as well. Gender imbalances on many campuses—women now outnumber men 57 percent to 43 percent in college nationally—have helped lead to a “hookup culture” that erodes a sense of connection. One in three students say that their intimate relationships have been “traumatic” or “very difficult to handle,” and 10 percent say that they’ve been sexually coerced or assaulted in the past year. The academic Lisa Wade describes an environment where the prevailing norm is to downgrade your partner for days afterward to make sure that they don’t “catch feelings.” What was a couple generations ago an environment to find love and maybe even a partner is now a place where you prove yourself detached enough to ignore someone the next day.
When I applied to college in 1992, my parents were pumped that I got into Stanford and Brown, schools that had acceptance rates of 21 and 23 percent, respectively, at the time. Today, the acceptance rates at those schools are only 4.8 percent and 9.3 percent. What was once very difficult now requires planning and cultivation from birth. This competition breeds a need for constant forward momentum. “I feel this constant pressure to make something of myself,” relates one Venture for America alum who now works at a startup after interning at an investment bank. “Even during celebrations, it’s like we’re all plotting the next competition. My friends have a ton of ambition and no clear place to channel it. I get the sense that we’re all trading happiness to run a little faster, even if we’re not sure where.”
“If you’re not the cream of the crop, why be in the crop at all,” said a recent graduate of Northwestern who grew up in Westchester County.
Of course, some young people dislike the conformity and yearn for a sense of choice and exploration. One college senior at Princeton remarked to me, “Once you’re here, you become awfully risk-averse. It’s more about not failing than doing anything in particular.” Another said, “I’m so busy here. I’d love some time to think,” as if thinking and college didn’t belong in the same sentence.
In his book Excellent Sheep, William Deresiewicz describes the current generation of strivers as “driven to achieve without knowing why.” And then they become paralyzed when they’re not sure how to proceed. I remember when I was growing up, I’d study for days trying to get good grades. If I got an A, I’d feel elation for about 30 seconds, and then a feeling of emptiness. I called the hang-ups associated with a drive to succeed the “achievement demons.” Thousands of young people share the same thirst to achieve that I had—rising out of a combination of family pressures, alienation, and an identity that they’re smart or talented or special or destined to do something significant—all on top of a dread that failure to stay in the winner’s cir
cle leads to an unimaginably dire fate.
You might be thinking, “Who cares if the coddled college kids are depressed?” One reason to care is that private company ownership is down more than 60 percent among 18-to 30-year-olds since 1989. The Wall Street Journal ran an article titled “Endangered Species: Young U.S. Entrepreneurs,” and millennials are on track to be the least entrepreneurial generation in modern history in terms of business formation. It turns out that depressed, indebted, risk-averse young people generally don’t start companies. This will have effects for decades to come.
But more profoundly, there is something deeply wrong if even the winners of the mass scramble to climb into the top of the education meritocracy are so unhappy. They are asking, “What are we striving and struggling for?” No one knows. The answer seems to be “to try to join the tribes in the coastal markets and work your ass off,” even as those opportunities become harder to come by. If you don’t like that answer, there are very few others.
I tried to provide a new answer when I started Venture for America in 2011. The new path would be to build businesses in diverse places around the country. I thought that would be productive and character-building. Our mission statement read in part:
To restore the culture of achievement to include value creation, risk and reward and the common good.
Upon joining Venture for America, we ask our fellows to adopt the following credo:
My career is a choice that indicates my values.
There is no courage without risk.
Value creation is how I measure achievement.
I will create opportunity for myself and others.
I will act with integrity in all things.
The credo is awfully lofty and idealistic. When I stood in front of the first class in 2012 to discuss these values, I’ll admit to feeling a little bit self-conscious.
I shouldn’t have worried. Venture for America’s sense of purpose and community has been like water to very thirsty people. So many VFAers have developed close friendships and relationships based on shared values and trying to do difficult things together. Venture for America has filled a void in many people’s lives in supporting individual paths and choices. But for every person in Venture for America, there are about 10,000 other young people who want the same things.