Triumph of the Yuppies

To explain how we got here, we must go back to 1980. That pivotal year, Ronald Reagan was elected president, poised to unleash a slew of economic reforms — chief among them drastic tax cuts, primarily benefiting the wealthy, and deregulation across the board. The year titles Part I of Tom McGrath’s book Triumph of the Yuppies, a comprehensive profile of the Young Urban Professionals, the subset of Baby Boomers whose characteristic candid obsession with money and status left a lasting mark on American culture.

As the postwar economic boom began to die down in the 1970s and the New Deal coalition began to unravel, the promise of financial security, if not comfort, was no longer guaranteed. At the same time, McGrath cites research indicating that the 1970s saw a growing emphasis on individual happiness over the collective well-being that was celebrated by the hippie counterculture and New Left social movements of the ’60s. For a subset of the population, these factors combined manifested in the open, shameless desire to make and accumulate money above all else.

The number of students graduating with MBAs began to skyrocket in the 1970s. At the same time, more and more young people gravitated toward cities in pursuit of a cosmopolitan experience, chic with a touch of urban grit. More importantly, though, major cities began to host the burgeoning so-called “ideas industry,” which included financial services, and the Yuppies wanted in.

While investment banks had played a key role in raising capital for industrial growth during the postwar era, the economic downturn in the 1970s fomented uncertainty within the industry. Deregulation and technological advances, combined with this “rush of new blood” as McGrath calls it, incentivized investment banks to lean into money-making operations, using their own money to buy and sell securities to generate profits.

Triumph of the Yuppies describes the advent of shareholder primacy — the idea that corporations’ sole responsibility is to their shareholders — as a useful justification for corporations to abandon social responsibility. An important piece of the puzzle that McGrath leaves out, however, is the memo “Attack on the American Free Enterprise System,” which Lewis Powell authored in 1971, months before acceding to the Supreme Court. The confidential memo advocated for a more aggressive approach to instilling free-market values in the face of what he considered to be a broad-based attack on corporate freedom.

Powell’s memo calls out college campuses as a major ideological battleground. Its publication helped establish a framework for organizations like the Federalist Society and Young America’s Foundation, which undertook to infiltrate college campuses and promote right-wing economic ideas. Their campaigns were extraordinarily successful in breaking the Left’s political hold over elite universities’ student bodies. By the mid-1980s, McGrath writes:

Fifteen years earlier, graduates of the country’s most elite colleges had often been concerned with trying to improve the state of the world. Now, the focus was different: How can I be as financially successful as possible?

And financial institutions were there on the other end to reap the rewards, funneling the burgeoning Yuppies into a career best suited to their new values.

The Finance Corps

Investment banks like Goldman Sachs and J. P. Morgan began to offer the first entry-level analyst positions in the early to mid-1970s, intending to capitalize on an influx of new talent and groom them for success. The applicants flooded in, but spots were limited. The appeal was straightforward: the position paid well, and analysts could count on attending the business school of their choice after a two-year commitment or, in exceptional cases, promotion directly to associate.

McGrath cites several news features from the time, such as a June 1986 New York Magazine piece entitled “The Young and the Sleepless,” which detailed the sacrifices that these young analysts made in pursuit of a high-rolling future. The work itself, despite their titles, rarely involved analysis — many of them were glorified secretaries, or they put together “presentation books” for clients, the slide decks of the day. It’s worth mentioning too that given the extreme weekly time commitments, their hourly wages were not exorbitant, and they barely had time to spend any of it.

Nevertheless, a feedback loop generated prestige around these positions. The money was still better than what most college grads were making. And, as McGrath describes, the ritualistic culture, promise of high-level business exposure, and competition for limited positions naturally fostered exclusivity. This cycle was further legitimized by the elite universities whose graduates were the targets of the initial recruitment efforts, and later, whose business schools would accept any applicant coming from a two-year analyst role. Those graduates would become alumni, players in the all-important networking charade.

The graduates who went to work as financial analysts in the 1980s had given up the notion that they should be making a positive contribution to society, once taken for granted among graduates of top schools. To illustrate the point, the Peace Corps was enrolling fifteen thousand graduates per year in the 1960s and ’70s, but only five thousand by the end of the 1980s. It had been replaced by the Finance Corps, where nobody even pretended to be making the world a better place.

But that doesn’t mean they had no impact on the world. On the contrary, these young professionals participated in the redefinition of “value” solely in terms of maximizing shareholder returns. Many of the mergers and hostile takeovers of the mid-1980s made little to no strategic sense, primarily taking place in order to dissect and sell the resulting entities for parts, largely to pay off the debt that the buyer incurred by pursuing the deal in the first place. Wall Street investment firms were both “the instigators and the beneficiaries” of these deals, as McGrath describes, since the payout in fees for facilitating them was considerable.

The stock market improved 27 percent in 1985, but most of that “growth” resulted from merger activity rather than increases in productivity. With the antitrust apparatus defanged, no one asked questions about whether this was good for the economy overall. The hundreds of thousands of people who were laid off during this time, though, would likely give a different answer from the average Yuppie. The winners and losers had never been clearer, the gap between them never wider, and nothing was trickling down.

Classroom to Bullpen

The prestige of financial services firms took a slight hit in the late 1980s. A series of insider trading scandals, the crash of the overvalued stock market on Black Monday in 1987, and the general sense that the rise of Wall Street had something to do with declining living standards for average Americans all started to inspire a backlash. Perhaps the young Icaruses had flown too close to the sun.

The backlash could have led to a profound reckoning. Instead, finance doubled down. While the industry curried favor with successive post-Reagan presidents — just as much with Bill Clinton as with George H. W. Bush — it continued to wage its charm offensive on US campuses. Many of the entry-level analysts of the 1980s were now well-heeled alumni, which made the task significantly easier.

A remarkable reputation laundering effort was underway. For example, at Georgetown, my graduate program was housed in the Mortara Center for International Studies. Michael Mortara featured prominently in Liar’s Poker: Rising Through the Wreckage on Wall Street, Michael Lewis’s semi-autobiographical account of his time within the money-obsessed culture at Salomon Brothers.

Steven Mnuchin, who worked under Mortara at Goldman Sachs starting in 1985, singled him out during his 2017 Senate confirmation hearing for “starting the mortgage-backed securities market.” Mortara died tragically in 2000, before he could see the destruction that his invention wrought in 2008. And yet his name graces the global studies center at Georgetown, despite his never having positively influenced international affairs. The strategy is modeled after that of the robber barons, who slapped their names on colleges across the nation during the Gilded Age.

In my experience, there is much less discussion than there should be about what graduates entering finance are doing on the macro level — that is, beyond making a prudent personal career move and earning a lot of money right out of the gate. Questions about who these employers are and what they stand for, and what they plan to use these young people’s labor for, seem to belong to a bygone era when people felt compelled to answer for the social import of their postgraduate career choices. Now, no justification is required — the money and prestige speak for themselves.

For finance-oriented elite university grads, the ultra-prestigious Goldman Sachs is the next Harvard to get into. But Goldman is also a particularly heinous example of how the profit incentive characterizes the contemporary financial services industry. In addition to its role in the 2007–8 global financial crisis, Goldman was also implicated in the sprawling, multibillion-dollar 1MDB scandal, a corruption, bribery, and money laundering scheme into which investigations are ongoing.

There is reason to believe that criminality is baked into its business model, given the sheer amount of disciplinary actions and lawsuits that federal regulators have brought against it over the last few decades. The fines that Goldman has been obligated to pay as a result of its crimes pale in comparison to the amount of taxpayer funds it has received from government bailouts, implicitly validating its illegal and immoral behavior.

None of this, of course, makes it to the ears of college students interested in breaking into the industry — or, if it does, misdeeds are brushed aside as a series of exceptions to the rule.

Like the younger Baby Boomers who graduated college in the late 1970s and early 1980s, Gen Z is emerging into a precarious economy amid a culture of arch-individualism, this time driven by self-promoting influencers and entrepreneurs. While it is considered more gauche for Gen Z to embrace the fashion and luxury goods that once signaled membership within a status-driven and money-crazed ingroup, the Yuppies nevertheless blazed a clear, well-trodden trail to “success,” which strikes many new elite college grads as irresistible.

But there are some crucial differences between the Yuppies and the Gen Z Finance Corps, too — namely, the financial pressures on the latter are far more intense. While real estate in urban centers was cheap for young professionals in the late 1970s and early 1980s, as McGrath describes, the pattern that they set off means that rent in major cities is now prohibitively expensive for those who aren’t working in high-earning industries. Post-grads still want to live a cosmopolitan lifestyle, but they can hardly afford to do it if they don’t trade their soul for a high-earning job.

In addition, college is harder to get into and more expensive every year, so there is tremendous pressure to make a college degree “worth it” by pursuing a lucrative entry-level role. University career centers are more than happy to shepherd risk-averse students down these paths, especially since their own metrics of success are largely dictated by the earnings of their graduates. Likewise, their finances mean they are increasingly beholden to their wealthiest donors, many of whom are likely at this point to have made the leap from the classroom to the bullpen.

Not every college grad going into finance hopes to stay in finance. Investment banking is perceived as one of the early-career fields with the most future optionality for anyone interested in the broader corporate world. By way of illustration, only about a third of 2022 Harvard grads going into finance hoped to remain in the industry ten years after graduation. The other two-thirds presumably viewed it instead as a stepping stone — perhaps even one they privately found mildly distasteful, albeit not enough to avoid altogether. Then as much as now, exposure and connections are even more valuable than the exorbitant salaries. The prestige factor is also perceived similarly; long hours and high expectations, even for what is often mindless work, are a test of one’s fortitude and commitment.

The incentives themselves are not college graduates’ fault. Nevertheless, when many of the nation’s top universities’ most intelligent, ambitious, and hard-working graduates get funneled into Wall Street each year, their talents are wasted. The cumulative opportunity costs of each student who enters finance, instead of a career path that contributes meaningfully to social good, are staggering. Each new incoming class of entry-level finance analysts further cements the premise of wealth accumulation as an all-encompassing goal.

It’s par for the course for top-school graduates to go into finance now. But when we adopt a broader perspective on the industry’s role in reshaping society and its values, it really shouldn’t be.