Buying at the Top: Labor Market Edition
James Kwak pithily notes that once more, young Wall Streeters are headed to technology (meaning software and consumer Internet startups) for the same reason as the 1990s: it seems more lucrative. His conclusion is too good not to quote:
Wall Street has always attracted a particular kind of person: ambitious but unfocused, interested in success more than any achievements in particular, convinced (not entirely without reason) that they can do anything, and motivated by money largely as a signifier of personal distinction. If those people want to work for technology startups, that means two things. First, they think they can amass more of the tokens of success in technology than in finance.
Second—since these are the some of the most conservative, trend-following people that exist—it means they’re buying at the top.
The last statement is powerful and very likely true, which means it should be examined for anything it might predict. It certainly predicts lower salaries in non-technical roles at tech companies, as these roles are flooded with hardworking and highly-motivated twentysomething high-achievers. This is certainly happening today, as these types of high-achievers are realizing that tech is “cool” and are flooding in to positions lower and lower on the totem pole in order to get a foot in the door. Just today I was corresponding with a former consulting colleague considering giving up her six-figure salary to be a customer support representative at a not-particularly-impressive startup that is an “online offline social club”.*
Other miscellaneous corollary hypotheses: It will be a good time to be a manager in technology, because your dollar of comp will buy more talent. This trend is bullish for public technology companies, as they will sweep up more hard-working and smart young people in non-technical roles for lower salaries. This trend is bearish for private consumer internet companies, since there will be more non-techies founding startups and more well-connected non-techies sweeping up VC money at inflated valuations, all chasing low-hanging fruit. Wall Street is a better opportunity for a career than it was five years ago as the hard-working status-seekers flee to Silicon Valley.
And as always, the best opportunities are in areas that don’t seem sexy yet.