Economics and Career
by Ken Allen
“What would optimize flexibility with family, optimize income, and maximize positive impact, either at home or internationally?” Those questions that were asked by my son when starting college are tough but good questions, because there is no right nor wrong answer. There isn't any one direction; only personal biases. It depends on what a person likes to do.
To make an impact, first decide whether to try to do it on a large scale or one person at a time. Consider whether to be an adviser or a prime mover. An adviser must have expertise and credibility to be sought out. The prime movers are the business owners, political leaders and the financiers who put their lives and careers at risk to try to make a difference. There may appear to be a wider impact by starting at the top, but it is a very slow process. By contrast, the Latter-day Saint Mission experience, the Peace Corps experience, and numerous other humanitarian efforts can have direct personal impact by dealing directly with individuals. That is very satisfying. It may seem slow, and often it may take a generation to make real differences, but the differences can be profound, life-changing, and long-lasting impacting generations.
Now a short lesson in economics:
There are three types of careers:
1. Wealth creation careers,
2. Support service careers, and
3. Wealth distribution careers.
Then there are just plain "jobs" where work is done for someone else.
Virtually every enterprise, whether commercial or charitable, has careers in all of these categories. As a patent lawyer, I assist scientists and engineers who create value through new inventions to protect those inventions through accepted legal means. Research scientists and engineers are wealth creators, as are businessmen who provide a primary service such as food, raw materials, manufactured goods, entertainment, or property development. I am in a support service career.
Wealth is created by creating "order" (scientifically, reducing entropy) in some form that has value, often where there is a scarcity resulting in demand that increases value, so that others will exchange what value they may possess. It is the input of "order" and the rate of turnover of value, or rate of exchange of order, that creates wealth. That is basic capitalist theory, and it is virtually a law of physics. There are ways to direct that "order." The two principal techniques, or economy types, are "market" and "command." "Government planned" economies are of course basically command economies, and they are less efficient theoretically than pure market economies. However, market economies tend to create imbalances in wealth distribution when participants do not have sufficient value generation potential to be self-sustaining or participants abuse their positions of power and responsibility. There are risks. Businesses fail, even nonprofit businesses, if they cannot participate in wealth generation. People go hungry if they don't have a labor skill or a talent for which others are willing to pay value.
Market economies can be viewed as one form of "free agency," or freedom of choice. But not everyone will make it in a pure market economy. Responses to those who are at the edge of an economy may vary. If the economy is sufficiently healthy, there is often enough surplus to subsidize the lives of those who are not making it in a market economy. Charities, insurance companies and governments are all in the business of taking the rough edges out of a market economy.
Governments that involve themselves in controlling economy are mechanisms by which wealth is distributed and are by their nature exercising a command economy. Often, they are extremely inefficient and actually destroy wealth through revenue distribution inefficiencies (tax mechanisms and poorly directed programs and subsidies), by controlling interest rates to slow the flow of wealth imbedded in debt financing, or by using inflation to reduce their own cost of running a government. However, governments can be sources of wealth creation. (Research grants and economic subsidies for infrastructure such as transportation and telecommunication are examples). No matter what the form or label, governments have by nature (at least in my lifetime) command-type mindsets. Governments are very good at telling other people how to spend their money. And that causes resentment.
Governments, like lawyers, accountants, insurance providers, human resource management, plumbers, gardeners, doctors, dentists, even teachers and clergy, fall in the category of "services" to or for wealth creators.
The wealth distributors are the traders, the marketers, the sales people, the retailers, the investors and the bankers of the economy. They create wealth by identifying needs, communicating the needs to the wealth creators, selling and distributing the fulfillment of needs and providing the resources (capital and cash -- they are different concepts) to enable the efficient distribution of goods and services. The faster and more efficient the distribution, the more wealth that is created. If an economy "slows down," the wealth associated with the value/rate portion of the economy is lost forever.
Productivity also impacts wealth. The more productive an individual, the greater amount of wealth is created, and the more valuable the services of the person. As demand for goods or services increase, so does price. So long as overall productivity matches prices, there is stability in the economy. If prices creep ahead of productivity, then inflation occurs, or markets collapse. (A good example of an imbalance resulting in an economic correction is the 1999 major fall in the stock market for high-tech stocks.) There are dynamics and time constants, short-cycle linearizations and theories of local concentration of decision-making, and biases created by command economy components. However, some of the most instructive education one could have in how economy works is to try to run a company that has products or services to deliver, employees to pay, money to collect, supplies to inventory and financing to secure. Every entity, from a sole proprietorship to a church to a multinational corporation to a government, must deal with all of the same issues of operating a self-sustaining "business." The more one understands one's own role in any entity of the economy, the more control one can develop over one's own life within that context. (I have a theory. It is that Soviet-style communism failed as an economic system not only because Marxist theories of capitalism were fundamentally flawed, but because the economy was closed and the tax rate was so high that it drained all the productivity and incentive and wealth creation out of its economy. Even now the effective tax rate of the current government in Russia probably exceeds 100% for most people. Russia is a country incredibly rich in natural and intellectual resources, but lack of trust and motivation and basic business sense and corruption is sapping the economy. There are solutions, but many of them are painful.)
As for my career, it turns out I got lucky. I am doing something I really like doing--and I am really good at it. I probably would not have done anything else quite as well. Electrical engineering, advanced degree, telecommunications specialty, law school, patent law, further specializing in writing and obtaining patents. I get to work with some of the best and brightest in the world in this field, and they are very upbeat in all their work with me. For me it is great. But for some people it would be incredibly tedious and boring, and the level of care and detail work required would be stressful.
If I were not really good at what I do, what might I have done? I might have continued in science or computer science, using the flexibility that six semesters of undergraduate applied math and two semesters of graduate math gave me as prerequisites to technical areas like basic physics. (As an aside, it is sad that math is so poorly taught in most high schools and in college. It is kind of like having language classes in grammar all the time, instead of literature. In fact, math can be as exciting as any literature course.) Beyond the first-year level of college math, the typical student doesn't really need to solve hard math problems but will need to understand the vocabulary. Courses in statistics and all the economics, finance and accounting are useful in careers in business. Accounting is the language of business. It is not high math, but to someone who can get through calculus, it shouldn’t be too hard. I would not push science on someone who doesn’t enjoy it, but students should be aware that the majority of high value career opportunities in the future are for those with technology backgrounds or are in technical fields in support of new technology, so that it is worth at least considering those career options. There is no reason to cut oneself off from opportunities simply out of fear and laziness. It is more likely than not that the non-technical person is going to end up working for someone with a technical background. Wouldn't it be better to be in a position to lead rather than merely to follow?
An undergraduate degree, any degree, except perhaps a specialty trade, such as plumbing or piano tuning, merely prepares one to work for someone else. Many have discovered all too late the limitations on a career path by having only a technician's background. For some it is appropriate; for others it is a source of regret.
A master's degree is nearly essential today for any sort of career growth potential. A professional degree is qualification for many leadership and autonomous positions that allow growth, flexibility and income potential. PhD’s often end up as college teachers. They often enjoy maximum flexibility but relatively low income from their institution, but they can often make money on the side by consulting in their field of expertise. So look around for unfilled needs and then work to fill it.
A master's degree in business is often a great entrée for helping people. It takes only 18 months of classes beyond a bachelor's degree, although it is also helpful to have a technical master's or another specialty such as accounting before the MBA. I thought seriously about an MBA, especially after seeing what the students at Harvard and Stanford Business Schools could do right out of graduate school. But I had already set my course, eliminating both the interest in a PhD and an MBA.
Where to do graduate work is often important. Whole vistas open up to those who get a Master's in business at a Stanford or a Cal or a Harvard. Some of the top-tier firms recruit only at so-called top-tier schools. The schools often look for people with unusual backgrounds during the business school admissions process. Good grades may well qualify for admission right out of undergraduate school. And even if admission is denied at first application, it is worth applying again it after completing a master's program or working for a while.
Today even nonprofit and charity organizations have adopted the vocabulary of business as they realize that they too are businesses. They have to generate more revenues than they expend. The more revenue they get, the more they can help others and the easier it is to get quality people to work for them. Advising such service providers, or even governments, given an appropriate range of interests and talents and desire to serve, is itself a career choice.
In science and technology, an undergraduate science degree can be leveraged into a lot of very interesting careers. In the life sciences area, the hottest fields of the twenty-first century are in biotechnology. It is not particularly math intensive, and it is going to be incredibly lucrative. Treatments, diagnostic tools, and new products will soon become available that will change the world as much as the birth control pill has transformed society since 1960: perhaps cure cancer, provide more and better foods and improve personal health, fight pandemics. People will be needed to deliver and support these products and services. Nearly all of the business leaders have doctorates too, and they are riding herd on other doctorate types in biotech.
Then there are more mundane careers. One of my colleagues suggested a career that provided flexibility of hours, good income and which has a significant human impact for good is orthodontia, a specialty after completion of a degree in dentistry.
A good approach is to decide what to do from the point of view of some need that is to be filled. Economics and finance are good basic training in any field. Learning how an economy really works and how to help people develop self-sufficiency is a good background for either a business degree or a law degree. Then teach, consult, advocate, counsel--and get paid for doing it.
One interesting field of law is immigration law. An interesting specialty within the US Government is as an asylum officer for the INS. A possible summer job or even a career as a loan manager of micro loans to individuals in third world countries, one of the most exciting and effective fields of direct foreign aid ever devised. Some universities are actively involved in this in South and Central America and in the Philippines. It all started through a small bank in India. It has a lot of what makes a job exciting--flexibility, impact, and potentially a wealth generator.
While I was lucky enough to self-finance my career, it was out of necessity. A young person with ambition and support has virtually unlimited opportunities. This is a time to explore and come to understand the world and oneself. And don’t compromise your most valuable asset: your integrity.
Palo Alto, CA
July 17, 2000
(Six years after this letter was written, my son had graduated with a degree in Spanish and South American Studies, had completed law school, and become an immigration attorney. As of 2020 he advises agencies of the US Government on immigration matters.)