Why ‘smart guys’ headed to Wall Street
TEXT OF INTERVIEW
Kai Ryssdal: The lasting question of the financial crisis goes something like this: Why? What happened to bring the big Wall Street banks to their knees? We could trot out the usual answers here about misplaced faith in the housing market and flat-out greed.
Or, we could talk to author and humorist Calvin Trillin. He wrote a column for The New York Times earlier this week offering another theory. His, that smart people finally started going to work on Wall Street. Which is funny, because I’m pretty sure the assumption has been the smart guys were always working on Wall Street.
Calvin Trillin, good to have you with us.
Trillin: Thank you.
Ryssdal: Listen, if the smart people weren’t always working on Wall Street, then you have to help us understand who was.
Trillin: Well, it’s fairly easy. The lower third of the class was working on Wall Street.
Ryssdal: And the top of the class was doing what?
Trillin: The top of the class were professors, judges, people who by Wall Street standards were making tip money, really.
Ryssdal: So how did you have this idea to go researching this income and standing in the class then?
Trillin: I used my usual scientific controls, which is to say, I made it up.
Ryssdal: Perfect.
Trillin: But I’m pretty sure that it’s roughly correct. I mean, when you think about it, why wouldn’t it be? The lower third of the class probably was there because of who they were rather than how they performed, so they didn’t have any particular incentive to do well. They knew they would just go on to the firms their fathers had worked for.
Ryssdal: So the lower third of the class sits in the back of Geology 101 and gets the gentleman’s C’s and then goes to Wall Street because dad and granddad did?
Trillin: Of course, there were many, many exceptions, but I think that was the general rule. And as I say in the piece, they were pleasant fellows. And also, by today’s standards, they weren’t really greedy. I mean, they wanted a nice house in Greenwich, a sailboat. No, they didn’t need three ocean-going yachts or anything like that.
Ryssdal: So what happened that the smart kids started going to Wall Street? How did that come to pass?
Trillin: Two things happened. One is that the money on Wall Street became simply absurd. And at the same time tuition went up so much that even people from relatively prosperous families were graduating from college with large debts, and so it was much more tempting. And that’s when you started to see these stories about MIT geniuses who were, instead of going to physics graduate school, were going down to calculate arbitrage statistics in Wall Street.
Ryssdal: I’m almost afraid to ask this, but is there any chance we can revert to the mean here and get the dumb guys back on Wall Street and the smart guys doing something else so that the financial system will get normal again?
Trillin: Well that would be good, but one of the problems I think in the last year or two, is that the lower third of the class by that time were actually the heads of these firms. So the people who actually ran the firms didn’t understand what was going on. They had no idea of how derivatives worked or anything like that. All they knew was that they were getting filthy rich. So I don’t know what would have to happen to get everything back in order again.
Ryssdal: Taking tongue out of cheek for a second, this column is all over Wall Street, it’s all over the blogosphere and obviously people like to read about their own professions. But are you surprised at the play that this thing’s getting?
Trillin: Yeah, I was surprised at the play and I was also surprised that, purely by accident, it seems to have struck some people as what happened. Somebody told me that a friend of hers, who’s a distinguished economist, said that “Yeah, that really explains it pretty well.” And I said, “Well, in that case, I think I’ll tackle molecular biology next week.”
Ryssdal: Author, journalist, humorist Calvin Trillin. Thanks so much for your time.
Trillin: Thank you.
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