My wife and I recently went to see The Big Short after work. It brought back memories. We lived in Phoenix during the housing boom, and I can remember:

  • How one of my employees and his wife owned so many houses and apartments that I lost count. Granted, they were essentially slumlords, but owners of multiple houses nonetheless.
  • The way we, as a one-income family, had no hope of affording one of the $500,000 three bedroom entry-level homes that looked exactly like all of the other $500,000 three bedroom entry-level homes in the neighborhood.
  • The time I read that top business schools were offering classes and even whole degree programs in "financial engineering", which still sounds like the Harvard Business Review  term for "money laundering".
  • The way so many people we knew - including my friend, former employee, and now ex-slumlord - were ruined when the bottom fell out of the market.

Right after the crash I also remember reading article after article about how many graduates of top colleges and business schools were aspiring to go into finance before the crash.

Today graduates of top business schools are foregoing finance to found or work for startups. In fact, according to The Economist  the number of Harvard MBAs entering finance has fallen by almost 20 percent since 2007. The phenomenon isn't just limited to Ivy League MBA programs. Students at universities across the country are starting everything from t-shirt companies to donut shops.

The fact that more and more recent college grads want to join startups says some really good things about the future of our economy.

Here are a few of those things:

1. We've figured out that making things matters.

My firm rents space in OPO Startups, an incubator based in St. Charles, Missouri. My wife also manages the incubator. Everyday we are greeted by the sight of people making everything from apps to lingerie.

It is inspiring to be around so many people creating their future.

The fact that more graduates are headed to startups says that we are realizing our economic future lies in people making things. Those "things" may be websites, new social networks, or sandwiches. Whatever it is, a lot of recent graduates (and a lot of other people, too) want to be a part of making stuff, not moving money around.

2. We're realizing that we need to be a meritocracy.

I was a student during the housing bubble, getting both my bachelor's degree and an online MBA while working full-time. I was never going to be recruited by McKinsey or be an executive at JPMorgan Chase. I got that MBA in 2006 and I remember reading about the signing bonuses top-tier MBAs (which my MBA definitely wasn't) were getting from McKinsey, where they might be creating new debt models to fuel the housing boom, or JPMorgan, where they would be implementing those models.

We saw how that turned out.

You do not get ahead in a startup based on where you got your degree from, or even if you have a degree at all. Success depends on talent, drive, and creating real value. That's a great thing.

3. We believe in a bright future.

It's a presidential election year. That means we get to hear a lot of gloom and doom about where we as a society and economy are headed. While we do have challenges, the rush of new graduates into startups speaks to a fundamental optimism and a belief in a better future. Why go through the blood, sweat, and tears of building a new business if you believe the apocalypse is nigh?

The apocalypse is not nigh, and people going all-in on their futures in the form of starting a business is a testament to the fact that we believe in a brighter tomorrow.

And that's a great thing.

Published on: Jan 27, 2016