The Hidden Cost of Finance: Why Wall Street’s Talent Grab Is Slowing Innovation

Over the last few decades, the financial sector has ballooned in size and influence, becoming a dominant force in the economy. While finance provides essential services, its rapid expansion has had a less visible but significant impact: a talent drain from startups and entrepreneurial ventures. Andrew Yang’s Smart People Should Build Things articulates this phenomenon with clarity and urgency.

Between 1975 and 2008, Wall Street employment nearly tripled, drawing in not only MBAs but also PhDs in science and engineering. These graduates are lured by salaries multiple times higher than those offered by startups or academic positions. This disparity creates a powerful incentive to join finance, leaving nascent companies starved of the very talent needed to innovate and grow.

Entrepreneurship rates among young adults, particularly those aged 18-24, have declined sharply since 2007. This drop is alarming because startups have historically been the primary source of net new jobs in the U.S. economy. Without a steady influx of talented founders and employees, the pace of innovation slows, and economic dynamism suffers.

Startups face a daunting challenge: they cannot match the recruitment budgets, prestige, or compensation packages of large financial firms. As a result, many promising ventures fail to attract skilled personnel, limiting their potential and contributing to higher failure rates.

Yang argues that this talent misallocation is a systemic problem reinforced by cultural norms and economic incentives. The prestige of finance careers, combined with risk aversion and social pressures, discourages many from pursuing the uncertain path of entrepreneurship.

Reversing this trend involves creating supportive ecosystems, mentorship programs, and financial incentives to make building companies more attractive and feasible for talented individuals.

Understanding this dynamic is critical for policymakers, educators, and entrepreneurs who seek to foster a more innovative and inclusive economy.

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