Rhodes Secretary: Wall Street Megabonuses Draining Our Young Talent

In the op-ed pages of The Washington Post today, Elliot Gerson--the American Secretary of the Rhodes Trust--takes a bold stand:

Tonight, 32 young Americans will win Rhodes Scholarships. Their tenures at Oxford are funded by the legacy of the British imperialist Cecil Rhodes, a man whose life would not be honored today were it not for his vision that young people of outstanding intellect, leadership and ambition could make the world a better place.

For more than a century Rhodes scholars have left Oxford with virtually any job available to them. For much of this time, they have overwhelmingly chosen paths in scholarship, teaching, writing, medicine, scientific research, law, the military and public service. They have reached the highest levels in virtually all fields.

In the 1980s, however, the pattern of career choices began to change. Until then, even though business ambitions and management degrees have not been disfavored in our competition, business careers attracted relatively few Rhodes scholars. No one suggested this was an unfit domain; it was simply the rare scholar who went to Wall Street, finance and general business management. Only three American Rhodes scholars in the 1970s (out of 320) went directly into business from Oxford; by the late 1980s the number grew to that many in a year. Recently, more than twice as many went into business in just one year than did in the entire 1970s.

This break in an almost century-old pattern coincided with great increases in occupational earnings differentials, which have continued to grow, seemingly exponentially. It seems quaint, if not unfathomable, that just three decades ago the differentials in earnings -- generally two- to fivefold between business leaders and doctors or lawyers, or five- to tenfold with professors, scientists and public servants -- were often rationalized by Rhodes scholars as reasonable additional compensation to balance the lower standing of business jobs among their peers.

When differentials could become a hundredfold or far more -- and as investment banking and similar firms started to recruit young Rhodes scholars who had degrees in math, physics or even history, English and theology -- the yawning prospective wealth chasm understandably became impossible for many to ignore. Even for a few of those most deeply committed to other, more public-spirited pursuits, the lure of such rewards, especially as they are reasonably attainable for people of such high abilities, became much harder to resist.


Many thought a silver lining of last year's financial crisis -- or from the populist rage that flared against Wall Street excess and to profits born not from creativity but from leverage -- would be that earnings differentials would return from obscene to merely enormous levels, if not to the very generous multiples that had long been adequate to fuel a vibrant economy. Well, the hyper-bonuses are back -- astonishingly having been made even easier to achieve with taxpayers socializing the downside risks. And the crisis? What crisis?

So how many more of America's young and brightest will ask themselves what kind of chumps they are to give up the chance to earn 100 or 500 times as much as their mentors, their doctors, their favorite professors, their idols and heroes?

It's not that I even find that there's much controversial about Gerson's stance (In the end, who could fundamentally disagree?), but it is significant coming from so high up in the Rhodes Scholarship administration. So, I commend Elliot Gerson for taking such an important public stand.

So many of my colleagues have gone on directly to lucrative jobs in finance (or management consulting). Although I disagree with their choice (especially in light of the greater responsibility that their prestigious scholarship implies), it's hard to fault them considering the extreme levels of compensation they are offered. Truly this is a sick system that needs to change.

Hat tip to Andy Kim.

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Truly this is a sick system that needs to change.

For a very wide definition of this.

By Pierce R. Butler (not verified) on 21 Nov 2009 #permalink

These times certainly give one a new perspective on the Antikythera mechanism, don't they?

By Zaph Chancery (not verified) on 21 Nov 2009 #permalink

Who makes better imperialists these days?

By Abdul Alhazred (not verified) on 21 Nov 2009 #permalink

Why doesn't the programme request a signed declaration of career intent, with a request that any scholar who fails to abide by this repay the funds received? I would have happily signed and upheld a commitment to limit my career to certain fields in order to obtain the scholarship.

Most of those committed to mammon know so early on and would potentially fess up, and if not, at least the foundation is able to recoup some of the funding for future years.

On the other hand, there are potential arguments that are overlooked:

1) It could be argued that to truly change the financial system, more executives of these companies need to recognise the impact of their institution on society and value non-financial careers. Presumably the Rhodes programme should prepare noble-minded executives who can change the system. Therefore Rhodes Scholars going into finance should be applauded if this is the area of society most in need of reform.

2) On the other hand, while of course no causation could be proved, the funnelling of Rhodes Scholars into finance has coincided with the divergence of pay scales. Is the Rhodes programme still playing a significant role in instilling a sense of commitment to community, scholarship and altruism? Maybe instead they have walked away feeling they are entitled to the millions on offer in fiancial institutions. Perhaps the programme should evaluate how it can better prepare its influential graduates to impact society, given that so many give in to the temptation of finance and somehow seem to be allowing the system to change them rather than the other way around.

3) Alternatively, assuming functioning of supply and demand in labour markets, shouldn't the divergence of pay scales indicate that more and more people prefer a career of scholarship or altruism and that it is taking more and more financial incentive to persuade them to look after the practical requirements of societies needs and wants instead? We should be thankful for and recognise the contribution of those who remain on the path of serving the common good despite compelling incentives to take another.

4) Finally, there are increasing opportunities given current market dynamics to have a two-pronged career. The first stage is one of personal pursuit, accumulating training and personal wealth through corporate largesse. The second is benevolence or pursuit of idealistic aims, empowered by that wealth, rather than being beholden to institutional or governmental support for research or scholarship. Unfortunately some fall captive in stage 1 and never complete stage 2. It could be argued that Rhodes Scholars view themselves the same as a professional athlete, who could be considered foolish not to first collect the exorbitant payday and then pursue their educational or philanthropic goals.

Interested to know your further thoughts as an insider.

Only fair to disclose: back to work at the bank... but I would happily trade places.

Thanks for your comments, Matt. The issue, of course, isn't that some Rhodes Scholars are going into finance/business, but that such an inordinate number are. Surely there's a role for good, ethical people in these fields, but I don't see any indication that the large numbers being recruited into these fields are having a tangible beneficial impact on the field. In Gerson's op-ed, the solution he proposes is more-or-less that pay scales need to change--although that's not anything that the Rhodes Trust has any influence over, and it's hard to see how that would actually be accomplished. Your suggestion of a signed career declaration of career intentions is an interesting one. Of course, the Rhodes Trust would never go for this, I think, because one thing that Rhodes does to maintain its prestige is not put any preconditions on the selection of the Rhodes Scholars, except for those of geography and age. Beyond that, though, I don't know how effective it would be for two reasons. Firstly, I don't think that many scholars come into Oxford planning a career in finance or management consultancy, but rather they are lured to these fields while there. So, such a statement wouldn't necessarily weed out those who would follow these paths later. It might instill in the scholars a greater sense of responsibility, but at the same time I think that most come in with that sense of responsibility and get moved away from it over time by the relentless recruiting and promise of material rewards. And, secondly, paying back the scholarship would be no problem for someone in one of these jobs, so that wouldn't be a great deterrent. One thing that Rhodes could do, though, and I would be strongly in favor of this, would be to limit the access of corporate recruiters to the current scholars.

..this is priggish and silly, who cares?...clucking and moralizing just short circuts (literally in our brains actlly) understanding this all as a symptom and not the cause/problem...

...money is just a proxy for the environment's resource optimization signaling...is that good or bad?...who the heck can say?...our brains evolved in environments of imminent starvation....more ALWAYS feels good/right/logical!...

...more money is also the best way to get the highest resources mates.....mate...

.....from a song: "...girls don't like boys, girls like cars and money..."

...our brains also have absolutely no way to assess future consequences...although doing the opposite of what feels best and everyone believes, works most of the time...

...as the best/brightest/billions of wall st. proved agin...

...it does appear that sending the highest IQ folks to wall st. does speed-up the increasingly needed "getting back to reality"/marking to market adjustments needed...

Frankly I think that if science were more interesting, then people would pay more for it. Ergo ipso, students would be more attracted to it. Maybe stop working on honey bees and start working on interesting things like NASA, okay?