Occupying Wall Street

It’s Monday, July 10, 2006, and I’m wearing a dark suit and pantyhose, standing in a sea of dark suits, all nervous and fidgety.  It’s the first time I’ve worn something from the Misses section at TJ Maxx, and it feels like a personal milestone.  Goodbye, Juniors, with your bedazzled t-shirts and l.e.i. jeans with patches on them: I’m a suit n’ pantyhose woman now.  And why wouldn’t I be, here, in midtown Manhattan, standing in the marbled lobby of a $40 billion company on the first day of my summer internship, the first job to pay me more than minimum wage, the first place where I’ve spent a whopping $89 on a suit jacket to still look like a street urchin in a Brooks Brothers catalog.  I’ve made it, Ma, I’ve made it!

As our group of eighty-or-so interns is herded into the auditorium for orientation, we pass through sleek elevator banks hidden by translucent glass panels, the ultimate markers of lobby opulence.  I never thought I’d end up in this kind of fancy place; in fact, my almost-Marxist teenage self would’ve totally pooh-poohed it: “Ugh, so corporate.  Gross.”  But now, sitting in a plush leather chair, facing a gourmet spread, I’m thoroughly ready to drink the hoity corporate Kool-Aid: drink it, guzzle it, pour it into an IV bag and take it intravenously, whatever.  All I know is that I have just one goal now: do well this summer and get a full-time offer, ‘cause this is where I want to be.  Maybe, just maybe, I could work here for the rest of my life.

“Hello, summer analysts,” the HR rep says. “Welcome to Lehman Brothers.”

HILARITY ENSUES

My mom always says that you don’t know what you like until you try it.  This is her rationale for why “trying out” Wall Street would be a good idea (although this doesn’t seem to extend to drugs, skydiving, or black guys).  In truth, I’m totally up for it.  All my friends are working in banks, so Wall Street sort of becomes our white-collar pregnancy pact.  We get the chance to live in New York, make money, and piss it away like spoiled-rotten socialites–what could be better?  Plus, there’s a certain prestige that comes with working on the Street: If you manage to land an internship at one of the big investment banks, you earn 50 douche points for Gryffindor, and everyone at Harvard wants to be Head Douche.

So that’s how I end up at Lehman: eager, young, impressionable, and in search of shits and giggles.

After our week-long orientation, I’m placed in the Equity Research group, reporting to a man who is the spitting image of Mr. Bean (perhaps with less charm).  His second-in-command, and the guy who is in charge of dealing with me, is a big, rotund, former offensive lineman who I call Diabetes, but not to his face.  While they’re nice, well-mannered, aromatic men, I get the feeling that despite my best efforts, giggles will be hard to come by.

Once I start the job, Mr. Bean and Diabetes have this crazy notion that I’m actually interested in what they do.  So they regale me with stories about free cash flows and outsize valuations and setting appropriate price targets for the stocks they cover.  Diabetes gives me a stack of research reports to read, which I use to create a little fort in my cubicle to play Berlin Wall (“Left hand, tear down this wall of annual reports!” “Okay, right hand!” *Crash.* And that’s the end of the game).  I find ways to amuse myself, because while Lehman might have a lot of money (in 2006), it’s severely lacking in personality.  At one point I try to joke around with Mr. Bean: “You’re such a lucky guy, getting to play around with all these models.”  Blank stare.  “Like, financial models.”  Blank stare.  “It was a joke.”  Curt nod.  “Okay, if you need me, I’ll be at my desk, trying to draw a pterodactyl in Windows Paint.”

I have a feeling this will be a long summer.

DEPRESSION HITS

As the weeks go by, I start to understand why bankers have such a high suicide rate.  The job is a depressing combination of number crunching and Powerpoint presentations.  Sometimes the highlight of my day is doing extensive data entry.  Other times, I get the privilege of formatting a chart.  I’m beginning to think that my job can be filled by a seventh-grader with basic typing skills and a knack for bar graphs.

Soon I realize that I can get by with minimal effort as long as I present something that already confirms Mr. Bean’s hypothesis: “You were right again, the lagged NASDAQ index is a better indicator for revenue trades.”  This strategy seems to work well, especially when combined with my flowery new finance vocab.  Still, even though I’m barely working, often eating, and most likely napping in the handicapped stall with the bench in it, I’m in the office past 9 pm every night.  Because despite the Wall Street stranglehold on words like “optimization” and “efficiency”, the mantra of “face time” rules over them all.*

In my last week at Lehman, I’m given an offer to return full-time.  At the start of the summer, I would’ve been ecstatic.  Now, I’m not so sure.  Diabetes takes me out to lunch to discuss “my future at the company.”  His argument is a good one: it’s a great offer, at a prestigious company, in the best city in the world.  But I have spent the last eight weeks painstakingly manufacturing fun in a job I hate.  I know now that no gourmet spread will be able to sway me.

So, I decline my offer.  Two years later, Lehman declares bankruptcy.  I guess it was a good decision.

SHITS AND GIGGLES

I never foresaw the economic crisis that would lead to Lehman’s demise.  As much as I like to think that I psychically predicted this, I simply left because I didn’t enjoy the work.  And since that summer, I’ve been detached from the turmoil that’s surrounded Wall Street.  I can sympathize with both the protestors and the good people I used to work for.  Ultimately, though, I hope that both sides can see that we’re in this slog together: We need our banks to efficiently allocate capital, and we need an informed public to keep it in check. We need enthusiastic young people to work hard and kick out those caught napping in the bathroom.

But no matter how much we compromise, everyone—people and institutions—must recognize the human fallacy that can be the source of our problems: it’s much harder to take a stand on your own, and it’s much easier to blindly follow the crowd.  That’s how I ended up shoveling shrimp cocktails into a TJ Maxx power suit, and that’s how our country got stuck in this current financial mess.

When I was at Lehman, our group published a 100-page research report in August 2006.  In the report, we predicted that one of the stocks we covered would be trading at $32 by next year, based on our sophisticated (financial) models.  Diabetes had wondered if we were being too bullish, so Mr. Bean asked me to compare our target to that of the other banks.  After a thorough Bloomberg inquiry, I found that we were right in line with the Street: all the other big firms (Fidelity, Moody’s, Merrill, etc.) were giving targets within spitting distance of $32.  So we went with it, confident that we were in the ballpark.  Make little ripples, not waves, they say.  All these smart people can’t be wrong, right?

A year later, the purported $32 stock was at $3.

Oops.

————————

^{*Also, in most big banks, if you work past 8 pm, you can order dinner. If you work past 9, you can get a black car to take you home. So if you’re already there at 7:30, why not stick it out for another half-hour and get some food out of it? Resourcefulness.}

The World According to Google

Classic debates, as settled by Google:

LIBRARIANS vs. ACCOUNTANTS: Maybe you hate fun.  Perhaps you just can’t sleep. If you’re in search of a good cure for insomnia, you should reach out to a librarian or an accountant.  One good story about the Dewey Decimal System and/or GAAP accounting should put you right to bed.  But which of these trusty professions is LESS boring and MORE fun?

GOOGLE SAYS: Librarians, with a whopping 2.6 million hits vs. a paltry 1.7 million for our accountants.  They might be ordering an audit check on this one.  (And, in an amazing twist, it turns out that librarians may actually be more fun than clowns. Shame on you, clowns.)

WALL STREET vs. MAIN STREET: It’s the age-old battle between khakis and jeans, white collar and blue collar, Madoff and low-life petty thieves.

GOOGLE SAYS: Wall Street…  Is this at all surprising?

BEAUTIFUL PEOPLE vs. UGLY PEOPLE: Are human beings really that superficial?

GOOGLE SAYS: Yes…  Beautiful people get 7.7x more hits than ugly people. If this is applicable to real life, then you should never, ever, go to a bar with a beautiful person.  She’ll get 7.7 free drinks to your measly one.  I would de-friend anyone who is more beautiful than you.

CALIFORNIA GIRLS vs. CALIFORNIA GURLS: One contains the correct spelling of the word “girls.”  The other doesn’t.  This should be easy, right?

GOOGLE SAYS: What the…  From now on, I am blaming teenage illiteracy on Katy Perry.  You don’t know how distressing this result is for me.  What’s next?? Are “gurls” going to “twurl” around school?  Will we be ordering ice cream with chocolate “swurls”?  Is Maytag going to be challenging “Whurlpool”? Kill me now.

DEMOCRATS vs. REPUBLICANS: Just in time for midterm elections: Let’s settle this once and for all.

GOOGLE SAYS: A resounding victory for Democrats!  Of course, this very scientific approach may have some flaws.  It could simply be that Dems are more computer/tech savvy than their Republican counterparts.  Or it could be that Republicans simply prefer using old school communication methods (perhaps carrier pigeons and/or messages in a bottle).  And, of course, a direct translation of this result would presume that Communists actually outnumber Republicans.  Just another example of the dirty, liberal media, right?…OR, is (Commie) Red the new black?  Google never lies…

Glass Ceilings Could Be Shattered With Glass Bathroom Walls

It’s a known fact that finance is a male-dominated industry.  There’s Buffett, and Soros, and Madoff, and the banker on Deal or No Deal: all men.  In the sausagefest of finance, the only female presence is the wife, the mistress, or the diversity-hire (who, even if she is competent, will be forever tarnished by the suggestion of affirmative action).

Of course, this goes beyond finance — there are far more male CEOs, politicians, movie producers, and leaders not only in the United States, but in the rest of the world.  There are no women in the Forbes 50 richest Americans who made her money outside of inheritance.  Even though women make up half of the world’s population, most of the power is held by men.

Social scientists have long theorized about the existing power gap between men and women.  Some explanations are cultural.  Some are steered in tradition.  And some resort to “biological differences.”  That is, women build consensus; men build tall buildings to showcase their phallic power.

My theory is simple: it’s partly biological, and partly environmental.

I believe that men are more powerful because they pee standing up.

Think about it.  From a very young age, men are trained to pee into a urinal.  They are brought up in a world with literally no walls: there is very little privacy between them.  And if you head into a stall, everyone knows what kind of business is going on.  The result?  Reduced inhibitions from a world with no boundaries, and greater camaraderie with your fellow man.

Meanwhile, there are metaphoric and physical walls that separate women from each other.  The physical act of releasing waste is incredibly private.  Outside of her feet, you don’t tend to see other women in the act of peeing.  I even cringe when I write “releasing waste” — because unlike men, most women don’t feel as comfortable talking about these things.  At least not with strangers.

So, from this theory, men are more comfortable in their own skin, more sociable with strangers, and more likely to take risks.  Women are walled in, siloed, and discomfited by others knowing all of their business.  It’s no wonder why men enjoy finance: they’re used to whipping ’em out and measuring ’em, whereas women don’t/can’t really do that.

Of course, like any good theory, there are its notable exceptions.  I’m guessing that Oprah would have no qualms about peeing in front of other women.  And there are incredibly awkward yet successful men who don’t fit the mold.  In 2006, I got rejected by then-college-president Larry Summers when I asked if I could “lei” him at a campus BBQ/luau — I was holding a lei of flowers… He just turned around and walked away.

Doesn’t seem like a guy who’s comfortable in his own skin… Perhaps some of these things, we simply have to blame on inherent biological differences.

Work Diary, Sept. 24, 2009: Babies and Marriage

Female, 24, Midtown Manhattan, working in corporate finance.  Just a note: I include “waking up” and “getting dressed” as part of my work day, because if I were unemployed, I would do neither of these things.  Well, I might wake up, but definitely not at 7:30 AM.

7:30 AM – Fired Up to Start the Day. This morning, I awake to a marriage proposal on the radio.  This is pretty much how it went:

Man: “Will you marry me?”

Woman (matter-of-factly): “Yes.” (Silence)…

Radio show hosts: “What?!?” and then proceed to berate the woman for her lack of emotion.

“I just woke up,” she insists, saying “I’m excited…” with all the conviction of a death row inmate heading to the chair.

But girlfriend, I’m with you.  If my hypothetical boyfriend asked me to marry him on a radio show, I would say “Yes” as icily as possible, if at all.  A marriage proposal by radio is almost as insulting as proposal by email or proposal by ballpark jumbotron.

8:15 AM – I Definitely Have to Do Laundry Tonight. I’m down to my last pair of underwear.  (Sorry if this is TMI.)  I briefly consider buying underwear just to delay the laundry…  However, I immediately scrap that idea, since there are no clothing stores on my direct route to work.  (I must admit I contemplated going to Duane Reade.)  I still have swimsuit bottoms though, so I might make it to the weekend.

9:35 AM – First Thought of the Day on Leaving Finance. My co-worker sends me a WSJ article about a Wall Street trader-turned-waiter.  He and I talk about career issues all the time… We’re like third-graders: “How cool would it be if people could fly?? How cool would it be if people actually liked their jobs??”

11:12 AM – Clock-Watching. Today is just crawling.  Our internet is down, so I take my allotted “online browsing” time to doodle and to eavesdrop on my co-workers’ conversations instead. 

1:30 PM – I’m Thinking About Weight Watchers. I meet the President of Ad Sales at a diversity fair, which I attend because there is free food.  I shake his hand while trying to balance my heaping plate of pizza, pasta, salad, and fudge brownies.  I hope that my firm handshake will distract him from my pile of brownies, inadvertently drizzled with Caesar dressing.

2:07 PM – We’re No Longer Friends… One of my best friends sends me a message over Gchat: “Something for you to write about that annoys me: co-workers responding to e-mails and ending them with ellipses. WTF.”  I realize I do this all the time…

 4:46 PM – Not a Fan of Office Baptism. Maybe it’s just me, but I always feel really awkward when someone I don’t know brings a baby into the office.  Showing off a baby at the office has become a sacred ritual.  Everyone gathers around the baby, as if it’s the second (or third?) coming of Jesus.  They all coo over the baby, and tell the parent how beautiful the baby is, even if it looks like a wrinkly prune.

Today, one of the salesmen brings in his baby.  I hear the festivities in the hall, with the usual “Oh my God!  He’s so big!” comments.  But since I don’t know the proud papa, I feel strange about joining the crowd.  At the same time, it seems sacrilegious to avoid baby Jesus.

So, I play it by the same rule that I employ when I meet people at bars: if he doesn’t come over to me, then he doesn’t exist.  As the baby never made his way over to my desk today, he didn’t get the pleasure of my company.  Take that, baby.  (I’m going to end up old and alone, with cats, aren’t I?)

6:36 – I May Be Out of a Job Soon.

Right before I’m about to head out, my redheaded Irish co-worker pings me on our company instant messaging system:

JM: this will be your child [he sends over a link to this picture]

Me: thanks honey

Me: but won’t my baby have red hair?

And with that, I sign off.  I love sexually harassing co-workers at the end of the day.

TOTALS: Two non-encounters with babies (one imagined, one real), three Facebook Scrabble games finished, four brownies guiltily consumed, two inappropriate messages to co-workers, one possible case of sexual harassment, and the omnipresent gnawing feeling that I’m going to end up old and alone with cats, unless I say “yes” to marriage on the radio.

Wall Street vs. Main Street? I’ll Take Main Street

It’s pretty easy to get caught up in the hype. There’s the wining, the dining, the company-sponsored boozing, the free meals, the car service home, and most alluring, the potential of making six-figures right out of college. Of course, there are also the 100+ hour weeks, the requisite face time, the Blackberry taking over your life, the tacit no-vacation clause, and the fact that your six figures all depends on your bonus (and thus, the volatile market).

Ah yes, the life of an investment banker on Wall Street is a charmed one indeed.

The opposite of investment banking.

Yet, even with the soul-sucking work and grueling hours, there are still thousands of recent college grads scratching and clawing for i-banking jobs every year. Some may want to put in their two years to land a cushy PE/corporate job. Others may want to prove to themselves that they can survive the torture. Still others may just want to hit on girls with the line, “I’m an investment banker”… which, oddly enough, seems to work just as well as “secret agent,” and much better than “consultant”.

But now, given the recent financial crisis, many of the remaining investment banks are cutting their recruiting budgets and giving out fewer full-time offers and coveted internships. Plus, with the plethora of ex-Lehmanites floating around in the pool of unemployed, getting that entry-level banking job will be much tougher than in previous years. Unless you’ve spent your summers running DCF models or honing your valuation skills, you may want to abandon your childhood dream of becoming an i-banker. So, here are some (mildy exaggerated) tidbits about the Street life that may help you cope:

• Accounting for hours worked, an investment banker probably makes about the same hourly wage as the IT tech support guy in Mumbai. With an annual coup of $120,000 a year ($60K base salary + 100% bonus), 100-hr work weeks, for 52 weeks of the year = $23.08 average hourly rate.  And this is before taxes.
• On a related note, Brooks Brothers suits start at $898, and you’ll still look cheap compared to your MD, your clients, and the club owner at Lace.
• At most bulge-bracket firms, Big Brother will be keeping tabs on your email and web searches for signs of insider trading. Swearing is strictly prohibited through email messages (but strongly encouraged in everyday conversation). Most websites will be blocked as well, so not only will you never get to see your friends, but you won’t be able to keep up with their status updates on Facebook either.
• If you are female, prepare to enter a world where men are vulgar and crude by default. If you are male, prepare to enter a world where there are no females.
• Asking about work-life balance is akin to putting on a tutu and galloping through the office singing “Somewhere Over the Rainbow”. That is, it’s frowned upon.
• You will likely spend the majority of your 15-hour days sitting in a chair, sitting in a black car, or sitting on the toilet from scarfing down your latest SeamlessWeb order. So, if you don’t gain at least 20 lbs in your first year on the job, then la cocaina must be working wonders.

Finally, one last reason why i-banking on Wall Street may not be the best move? Two words: job security.

Isn’t Main Street starting to look more attractive?

Will Today’s ‘Stupid’ Become Tomorrow’s ‘Smart’?

Back in November, both presidential candidates acknowledged that we had to reform our education system. Like most everything else, Obama and McCain naturally disagreed on how to solve this issue. Perhaps we need to pay teachers more and get the best-qualified educators to head our classrooms. Perhaps we need to have more vouchers and charter schools to foster competition. Perhaps we just need parents to get more involved in building shoebox dioramas and helping their kids with algebra problems.

Or, perhaps we’re just getting dumber. (After all, we elected George W. Bush twice. Enough said).

Now that Obama’s education team is in place, here is my billion-dollar proposal: tell smart people to start making babies. Seriously. Set up some mood music in grad school dorms, dim the lighting in the labs, and arrange for some conjugal visits at the space station. Let’s do everything we can to encourage reading and breeding amongst the nation’s intellectual elite.

Why? Consider this: over the past few decades, we have seen significant declines in the birth rates across the country. As more and more young people started going to college, and women became more prevalent in the workplace, births in the U.S. have naturally declined. With that, the composition of mothers has also changed:

“Fertility tends to decline as education level increases. Women may put off marriage and children to further their education, then to get established in the labor force. Women age 40 to 44 with no high school education had about 2.5 children in 2004, compared with 1.6 children among women with a graduate or professional degree.” – Mary Kent, Population Reference Bureau

So keeping this in mind, let’s look at the following charts from the National Center for Health Statistics, which show the birth rates by state in 2002.

In this graphic, the blue states are the most fertile, while the green states are the most sterile (somewhat ironic).  We can see that the states with the highest birth rates are typically in the Midwest and South, whereas East Coasters and Californians are apparently too busy to procreate.  The state with the highest birth rate was Utah (20.9 for every 1,000 people), which may not be all that surprising. (Go to full report)

Now here is a graph from a U.S. Census report, on the percentage of college graduates by state:

So it looks like the states with the most college grads are also the states which tend to have the lowest birth rates.

Hmm…

Consider if this trend continues: the least-educated areas of the country are popping out babies like hotcakes, while the sterile Ivy Leaguers in the Northeast are busy trading mortgage-backed securities on Wall Street. Thus, the composition of the American population is skewed towards those with parents who are less educated. One may argue about the degree to which parents’ educational attainment affects their children’s test scores, but there is undoubtedly a correlation between the two. And while Texans and Idahoans may rightly argue that causality cannot be determined by a few colorful graphs, the data is in line with what we know: women who attain less education have more babies. There is a greater likelihood then that their kids will get less education than children born to snooty PhD candidates in Washington. And their kids will have more kids and more kids, while the slice of snooty intellectuals gets smaller and smaller.

So what can turn this around? In the end, we need to build a universal culture that values learning, instead of a dumb-is-cool culture that values a self-righteous idiocracy. We need to get students excited about education, and close the achievement gap that too often divides along racial and socioeconomic lines. We may need to rehaul our schools, implement student incentive programs, or pay our teachers more…

And we could also start encouraging smart people to make some babies, too.

Rising to #1 on the Billboard Charts: TARP Commentary from Flo Rida and Britney Spears

Throughout the history of music, we’ve always had a knack for uncovering subliminal messages hidden in our favorite songs. Sometimes the discovery was subtle and unexpected, like playing the Beatles’ record backwards to hear “Paul is dead.” Sometimes the messaging was not as subtle, like hearing Britney Spears beg for someone to “If You Seek Amy” in her new salacious (and radio-censored) song.

Most of the time, pop music is like Brit-Brit: it’s quite literal. Thus when the pop diva asks us to satisfy her penchant for four-letter words, we know what she means. When Beyonce implores the male species to “put a ring on it,” she’s giving our deadbeat boyfriends a pretty clear directive. And when Lady Gaga sings “Just Dance”, well, we…just dance. But for every straight shooter in the music business, there’s always someone out there who just wants to if-you-seek-ay-with our heads.

The following are some examples of masterful, even Shakespearean, trickery; behind the poppy lyrics and tempo beats, we have discovered their true intentions:

Burnin’ Up (Jonas Brothers): “I’m slipping into the lava / And I’m trying to keep from going under / Baby who turned the temperature hotter / ‘Cause I’m burning up, burning up”

• Take it literally: The musically-gifted but awfully-coiffed trio is on the precipice of an exploding volcano. An exploding volcano of love.
• Think about it: If the brothers were to actually slip into lava, they would immediately die. So this song isn’t about love at all; it’s about an extreme fear of love. After all, who wants to burn to death in a pool of flaming magma? Not anyone I know.

Right Now (Akon): “I wanna make up right now na na / I wanna make up right now na na / Wish we never broke up right now na na / We need to link up right now na na”

• Take it literally: Akon wants to make up right now… how sweet.
• Think about it: This is Akon we’re talking about… he’s probably just Lonely or Locked Up. You really Don’t Matter to him. He’ll probably just say “I Wanna Love You“ and Smack That on your way out.

Right Round (Flo Rida ft. Katy Perry): “You spin my head right round / Right round / When you go down / When you go down down”

• Take it literally: So yeah, it sounds like he maaayy be talking about fellatio… Or stripping.  Either way, adult activities.
• Think about it: It’s a recession, people. And Katy Perry clearly has a thing for girls. So what else is going down down, and making our heads spin right round? Of course… the stock market. The Dow just can’t keep it up, and with all the painful pullbacks, it’s been one wild ride on the Street. There’s nothing sexual about it. And if you seek proof, just ask for Amy.

Thanksgiving on Wall Street

With the holiday season rapidly approaching, we are all looking forward to seeing our loved ones.  Thanksgiving is a time to catch up with old friends, hang out with obscure members of the family, and gorge ourselves on mashed potatoes, pumpkin pie, and turkey and tofurkey.  Of course, Thanksgiving is also a time to stretch the truth about how amazing our lives actually are, in order to one-up our cousins and give our parents something to brag about.  So, in order to impress Uncle Jerry and crazy Aunt Lisa, here are some responses that may be better than the cold hard truth.

Crazy Aunt Lisa: “So, what are you up to these days?”

You: “Well, I’m working in New York at [prestigious company] as a credit derivatives trader.” 

(Translation:  I’m probably going to be unemployed soon.)

Crazy Aunt Lisa: “Wow, that sounds mighty impressive!  So you work in one of those tall, shiny skyscrapers?  What do you do as a trader?”

You: “Essentially, we run complex financial risk models and look for arbitrage opportunities.  My personal responsibility is to oversee all the trades that come through my desk.  Right now we’re in a bit of a liquidity crunch, as I’m sure you’ve heard, so even though it’s been tough, we are working through it.”

(Translation: I spend most of the day trying to break down the firewall that prevents me from checking my fantasy football stats.  At lunch, I serve as the designated pizza bitch for the traders on the floor who are actually making trades.  A few months ago, I used to carry six or seven pizza boxes back to the office.  Now, given the tanking credit markets, I’m ordering by the slice.  The rest of the day, I take bathroom naps and think about how I spent $120,000 on my education to get to this point: where, after a year on the job, I am a glorified delivery person with a Brooks Brothers suit and the financial modeling skills of an orangutan.) 

Crazy Aunt Lisa: “My goodness… and at such a young age!  So do you get to see friends a lot, given your busy job?”

You: “Even though the job is demanding, I definitely try and make time to see my friends.”

(Translation: If I didn’t see my friends, I would jump out the window of my shiny office building.)

Uncle Jerry: “How are you all liking New York?  Are you staying out of trouble?”

You: “Oh, of course.  My friends and co-workers are all young professionals, and we are always trying to do something different in the city.  There is so much culture in New York.”

(Translation: Yesterday I woke up sprawled outside my apartment door with the imprint of my floor mat on my cheek.)

Crazy Aunt Lisa: “That sounds like so much fun!  You are just so accomplished already… I hope [your screwup cousin] can follow your lead. Do you know of any job openings there?”

You: “I can talk to the HR rep about it.  Getting into the business is tough right now given the market, but I will check, definitely.”

(Translation: I would not wish this job on anyone.  Not even my screwup cousin.)

Uncle Jerry: “So, do you think this is it?  Found your calling?”

You: “Well I’ve enjoyed the work, and it’s been a great learning experience so far… I’m not sure I want to settle on anything just yet, because I’m still young, but I’ve learned a lot about myself.”

(Translation:  I’m peacing out after two years.  I have no idea what I’m going to do, but I know that it’s not this…)

Crazy Aunt Lisa: “Sounds like you have it all figured out!  To be so young and so driven… what a success!”

You: “Yep, that’s me… Could you please pass the sweet potatoes?  And take some more of my BS… I’ve had too much.”

Crazy Aunt Lisa: “Of course, dear.

Pretty Soon, Today’s ‘Stupid’ Will Be Tomorrow’s ‘Smart’

Last week, both presidential candidates acknowledged that we had to reform our education system. Like most everything else, Obama and McCain naturally disagreed on how to solve this issue. Perhaps we need to pay teachers more and get the best-qualified educators to head our classrooms. Perhaps we need to have more vouchers/charter schools to foster competition. Maybe we just need parents to get more involved in building shoebox dioramas and helping their kids with algebra problems.

Or, perhaps we’re just getting dumber. (After all, we elected George W. Bush twice. Enough said).

Consider this theory: over the past few decades, we have seen significant declines in the birth rates across the country. As more and more young people started going to college, and women became more prevalent in the workplace, births in the U.S. have naturally declined:

“Fertility tends to decline as education level increases. Women may put off marriage and children to further their education, then to get established in the labor force. Women age 40 to 44 with no high school education had about 2.5 children in 2004, compared with 1.6 children among women with a graduate or professional degree.” – Mary Kent, Population Reference Bureau

So keeping this in mind, let’s look at the following charts from the National Center for Health Statistics, which show the birth rates by state in 1990. The chart on the top shows the birth rate, while the chart on the bottom shows the growth in births from 1990 to 2002. The state with the highest birth rate was Utah (20.9 for every 1,000 people), far surpassing Texas as the place where the most babies are made (or at least birthed). (Go to full report)

The states with the highest birth rates are typically in the Midwest and South, whereas East Coasters and Californians are apparently too busy to procreate. Unsurprisingly, these are the same areas where birth rates have declined the most in the past ten years, whereas states like Texas, Oklahoma, Utah, Georgia, and North Carolina have stepped up their baby-making game.

Now here is a graph from a U.S. Census report, on the percentage of college graduates by state:

So, the states with the most college grads are also the states which tend to have the lowest birth rates.

Hmm…

Consider if this trend continues: the least-educated areas of the country are popping out babies like hotcakes, while the sterile Ivy Leaguers in the Northeast are busy trading mortgage-backed securities on Wall Street. Thus, the composition of the American population is skewed towards those with parents who are less educated. One may argue about the degree to which parents’ educational attainment affects their children’s test scores, but there is undoubtedly a correlation between the two. And while Texans and Idahoans may rightly argue that causality cannot be determined by a few colorful graphs, the data is in line with what we know: women who attain less education have more babies. There is a greater likelihood then that their kids will get less education than children born to snooty PhD candidates in Washington. And their kids will have more kids and more kids, while the slice of snooty intellectuals gets smaller and smaller.

So what can turn this around? In the end, we need to build a universal culture that values learning, instead of a culture that values moose huntin’ and a self-righteous idiocracy. We need to get students excited about education, and close the achievement gap that too often divides along racial and socioeconomic lines. We may need to rehaul our schools, implement student incentive programs, or pay our teachers more…

And we could also start encouraging smart people to make some babies, too.

Random Thoughts on… Reason (and the Financial Crisis)

^{Reason: (noun): a basis or cause, as for some belief, action, fact, event, etc. Logic. (From Dictionary.com)}

Reason tells us that 1+1=2. It tells us that if you leave milk out for too long, it will spoil. It tells us that cars need gasoline in order to run.

But, what if the milk spoils even though we’ve kept it in the fridge all this time? What if our car doesn’t start even though we have a full tank of gas? We might tell ourselves that maybe it’s one bad sample, or an issue with our engine. And so we get another carton of milk at the store, and we bring our car in to the shop. But this second glass of milk is spoiled too, and the mechanic says that while our car is a bit nicked up, he has no clue as to why it isn’t starting. And so we think to ourselves, what the hell is going on?

Welcome to the financial crisis of 2008.

Reason would tell us that Thursday ought to have been a good day for the markets. The Fed announced that it would cut its short-term rates by 0.5% to 1.5% (a four-year low). Because lower rates diminish the cost of borrowing (thus encouraging liquidity), usually such a move would cause the markets to jump. The last rate cut in April was only 0.25%, and the Dow jumped 100 points the next day. The previous rate cut of 0.75% on March 18 caused the Dow to jump 420 points. So, with Thursday’s cut, we could have reasonably expected the Dow to rise anywhere from 100-400 points… or, at the very least, be slightly up.

Similarly, reason would tell us that if a big, blue-chip company hits its earnings targets, the market should respond favorably. After market close on Wednesday, IBM announced that it beat third-quarter expectations and would maintain its year-end target. The stock naturally went up 6% in after hours trading. With this good news, we could reasonably expect that the market would at least calm down on Thursday, and rampant fears about tech stocks would be lessened.

Finally, reason would tell us that if the first two instances occurred (big rate cut, strong earnings from a Dow Jones stock), AND no negative news was reported–then we could expect the market to move up, or at least stay somewhat steady.

But instead, on Thursday, we saw the Dow Jones Industrial Average fall 679 points, closing about 7% lower than it opened. We saw IBM rise and then drop, finishing right about where it was before it announced earnings, at $90. Staying flat was good comparatively, however, as the tech-heavy Nasdaq index dropped more than 5%. In the month of October, the broad S&P 500 index has fallen 22%, which means that Joe Six Pack’s pension may have just lost a fifth of its value. And all of this is happening on the heels of the $700b bailout that was passed last Friday, which should have moved the market up as well, as it was essentially a capital injection and a government promise to buy up poisonous mortgage-backed assets. So now we’re left to wallow in our shrunken net worth, and play guess-where-the-Dow-will-bottom-out.

What is the reasoning behind this recent freefall? According to the Wall Street Journal, “this week’s relentless selloff has been driven by deepening fears about the banking system, and the spillover effects it may have on the rest of the economy.” So, the market did not mysteriously tank on Thursday because something fundamentally bad was uncovered; it tanked because we think something bad is going on, and our thinking that it’s bad has just made it worse. We might be right, or we might be wrong–either way, it’s like we’re saying that the milk has spoiled because everyone thinks it will spoil, or that the car won’t start because everyone believes that a nicked-up car can’t run anymore. Thursday shows us that reason has taken a backseat, and our questions, fears, and now lack of greed are just leading to greater volatility and uncertainty. Furthermore, this dangerous, immeasurable force of fear also has huge implications on what the Fed, the Treasury, and Congress can do to solve this crisis. If the market won’t act rationally to potential solutions, then what’s the point?

Many in the finance industry would likely agree that our world seems fundamentally different than it was even just a week ago. Pretty soon, 1+1 might not equal 2 anymore… instead, it’s whatever we think it is. Any guesses on what that might be?