The Graduates

Busted banking careers, crashed consultants, and shrunken incomes: the author attends her 10-year business-school reunion for lessons on how M.B.A.s can survive a recession.

In part that’s because the worst of the layoffs occurred in that critical first year of our careers. But of course, that also happened to the class of 2008. No, the real reason we suffered such attrition is that we had herded ourselves like deranged lemmings into the financial sector. “Forty-one percent of your class went into banking,” Morton told me. That’s an astonishing proportion, though it didn’t seem so at the time, when employment in the securities industry was near its peak and the banks were so flush that Merrill Lynch flew us to Nantucket on a private jet for a recruiting event. When the money went away, so did a lot of those jobs.

But even after securities employment recovered, Chicago M.B.A.s never again crowded into the sector with such intensity. Only about 25 percent of last year’s class went into banking, which is a little lower than is now normal. More of today’s new M.B.A.s are doing what our finance classes should have taught us to do: diversifying. So a contraction in the finance sector is terrible for that 25 percent, but it doesn’t devastate an entire class stuffed with bankers, consultants, and dot-commers. When the few get laid off, they have a lot more employed classmates to help them find new jobs.

Employers, too, may have learned their lesson. A current second-year student says consultants tell him that they learned hard lessons from what happened to my class: firms that fired all the people at the bottom of the pyramid had no one in the middle to manage projects when business improved.

But consulting employment has been roughly stable; that’s not where the unbanked have gone. Instead, many people are pursuing careers in alternative energy, or trying to start their own firms; to my surprise, many are also heading into the corporate-management rotation programs, with firms such as Dow Corning and Sears, that most of my class shunned.

Indeed, if Booth is any indication, the complaint that “the best and the brightest” are being siphoned off into consulting and finance is less true today. One of the four “distinguished alumni” honored that weekend was Pat Basu, Class of 2005, an M.D./M.B.A. who became a White House fellow in the Obama administration, where he worked on health care. Morton told me that current classes don’t talk as much as mine did about money; they talk about the things they want to make and do.

Of course, these days, there’s also less money to distract them. Financiers are still rich—in 2010, the industry accounted for 5.3 percent of New York’s private-sector jobs, but 23.5 percent of its private-sector wages. But despite all the news about their huge bonuses, they aren’t as rich or as numerous as they used to be. By the end of 2012, New York’s Office of the State Comptroller expects the post-crisis job losses on Wall Street to top 30,000. Finance-related activities used to account for about 20 percent of state tax revenues; they now account for about 13 percent.

Other data back this up. At some point in the weekend—probably after that second round of shots—someone said, “We are the 1 percent!” I pointed out that this is not literally true, since the entry point (as of 2009) for the top 1 percent is $343,927 a year. (In Washington, but not in Chicago, this is what passes for amusing cocktail chatter.)

However, those of us who left finance can take heart, because we are a lot closer to the top 1 percent than we used to be. In 2007, the entry point was $410,096. The top 1 percent’s share of national income has also dropped recently, as the finance professor Steven Kaplan pointed out when I ran into him. In fact, for all the fanfare greeting recent studies by the Congressional Budget Office on rising income inequality from 1979 to 2007, according to Kaplan’s calculations, between 2007 and 2009 the share of adjusted gross income that went to the top 1 percent dropped from 23.5 percent to 17.6 percent—the largest two-year drop since 1928–30.

A few years back, Kaplan and the economist Joshua Rauh compared the incomes of Wall Street executives, “Main Street” executives, and celebrities such as professional athletes. They found that much of the rise in income inequality between 1994 and 2004 was due to the jump in Wall Street incomes: those of investment bankers, venture capitalists, hedge-fund managers, and top securities lawyers—the incomes that so many in my class were chasing.

Income inequality usually falls during recessions: top incomes are more tightly linked to volatile capital gains and corporate profits. And because the IRS takes a long time to compile tax data, we won’t know for a while what 2010 and 2011 look like; probably, incomes rebounded at least somewhat.

On the other hand, as New York’s comptroller suggests, 2011 wasn’t so hot. While it’s too early to tell how everything will shake out, 2008 was a major discontinuity; there’s no reason to assume that previous trends in income are going to continue forever, unchecked. In the third quarter of 2011, Goldman Sachs posted a loss for just the second time since going public in 1999, prompting TheNew York Times DealBook to talk about “change unlike anything since the Great Depression,” a new era of “boring businesses” and “tempered” risk taking. “It’s hard to make much money,” said an institutional-fund manager at the reunion. “The correlations are too tight—you’re just trading the spread” between assets in different risk classes.

With even quite conservative economists agreeing that the financial sector got too large and too risky, that’s not a bad thing—not even for my classmates. A banker who parachuted into equity research years ago said frankly, “I wish I made more money.” On the other hand, he pointed out, waxing on about the shorter hours and lower stress, “the lifestyle is much, much better.”

My classmates and I might not all have 1 percent–level incomes, but almost everyone seemed to have what Occupy Wall Street says it wants: stable, interesting, well-paying jobs … and a clear future. The few people who are still in finance are the ones who really like it, and are presumably really good at it. And the rest of us are probably better off than if we’d bartered away every waking moment of our 30s.

The most remarkable thing about my business-school reunion was, in fact, how little people talked about money or jobs. They talked about family, friends, the trips they took, and the houses they were turning into homes. According to the behavioral economist Daniel Kahneman, they were talking about what is really important: “It is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you.” Now, that’s a universe worth mastering.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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