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July 2009

Holding Out for the Perfect Job

According to the New York Times, some college graduates are holding out for the perfect job - turning down job offers despite the current economy to wait for something better (In recession, optimistic college graduates turn down jobs, July 24, 2009). Many college grads have long faced that dilemma when they are offered entry-level jobs that support more senior staff - for instance, business analysts in consulting crunch numbers for associates - while they know they could contribute much more if the company let them.

Some people turn down offers with no backup plan in the hope that something better will come about. The gamble can pay off: someone I know refused to work for a company that planned to pay him as if he only had a Master's degree when he was about to graduate with a doctorate, and ultimately found a much more lucrative job, in a research group with only PhDs, at an internationally-known firm. But he was a soon-to-be doctor, not a twenty-two-year-old with a Bachelor degree.

College grads sometimes have to put up with not-so-interesting tasks in order to move up the ladder, simply because they start at the bottom. This is the main reason why I often advise students to stay in school for a Master's degree. If a manager wants to give one of the young hires more responsibilities, and has the choice between someone with a BS and someone with a MS, everything else being equal (length of time in the workforce etc), I do believe he'll go for the person with the advanced training. One way around that for BS holders - and possibly the only way - is to work for the company they interned with in the summer between their junior and senior years, because the people there will already be aware of the students' potential.

On the other hand, studies indicate that entering the workforce at a time of economic crisis can have a lasting impact on graduates' earnings power, and not in a good way (see this old post of mine for more details). So it is hard to blame recent graduates for their reluctance to accept offers that are not quite right on their standards. For instance, the NYT mentions a U.Wisconsin graduate who "turned down one $23,000-a-year offer to become a research assistant at a magazine because she did not want to move to Chicago and another because she did not want to work nights." Instead, she moved back with her parents and is waiting tables. Living in Chicago on $23,000 a year would give pause to a lot of people. Working nights is not easy. I don't blame the girl for not being ready for that. Waiting tables is not a viable long-term solution, though.

Harder to understand is the reaction of a finance major from Syracuse University who "rejected a $50,000-a-year job as head of technology for a consulting company because he did not get a good vibe from his potential bosses." Did the student feel the company's executives were being dishonest, or exploiting their employees? If so, I commend him. But maybe they simply were not willing to give him as many responsibilities as he wanted - instead of accepting the offer, he decided "to get two technology companies of his own off the ground".

There are many stories of young entrepreneurs who made it big without waiting for their elders to give them the nod (Bill Gates, Michael Dell, Sergey Brin come to mind). But how many more leaders slowly rose through the ranks, while maybe never achieving fame?

The NYT points out that "college career advisers are noticing that many recent graduates do not seem to comprehend the challenging economic world they have just entered." An interviewee wonders what is going to happen when October comes around: what will former students do when they still don't have jobs while the next wave of soon-to-be graduates starts interviewing?

Some students find themselves accepting low offers when they will be able to live with their parents - a graduate from the University of Arkansas "is moving home to Houston to take a $30,000-a-year job [...], the only offer he received in seven months of searching." He recognizes this is not what he had initially in mind - he says he had to "rearrange the game plan."

It is difficult for counselors to give any advice, because students are facing an economic crisis of unprecedented proportions in recent memory. Nobody has any prior experience of similar conditions. I think that students should give themselves a timeframe to search for a job they really like, and a deadline after which they will take the best job they can find, even if it does not exactly match their interests. Abiding by a deadline determined in advance also removes the stigma of being a quitter. This way students will not feel they gave up on their dreams too early, but will remain realistic about their options.


High-Frequency Trading

The July 23 edition of the New York Times has an outstanding article on high-frequency trading. ("Stock traders find speed pays, in milliseconds.") High-frequency trading is a computer-based approach to trading, which uses sophisticated algorithms to spot - and take advantage of - price anomalies before anyone else has a chance to act.

The key is speed, which is measured in milli- or even microseconds. What matters is for one's orders to be processed before competitors', which has triggered a "technological arms race", to quote an executive at NYSE Euronext. This idea of arms race is echoed in an April post by Rick Bookstaber ("The arms race in high-frequency trading") and in a July post by Tracy Alloway ("The Cold War in high-frequency trading") on their respective blogs. Bookstaber is the author of A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. Alloway is a contributor to the Alphaville blog for the Financial Times.

It turns out that high-frequency traders can, for a fee, receive early notification of other people's buy orders, thus getting a sense of the market's direction. This practice is known as "flash orders". Although we are only talking about an advantage of thirty milliseconds, such a short timespan is enough for the high-frequency traders to start buying, at lightning speed (and hence still at a low price), shares of the stocks others want to buy, and resell them at the higher price created by the high demand they just caught a glimpse of. The NYT article gives an example using Broadcom, a semiconductor company.

Senator Charles Schumer recently proposed banning flash orders in a letter to the Securities and Exchange Commission. ("High-frequency trading faces challenge from Schumer", Bloomberg, July 27, 2009) He "raises the stakes in a debate over whether computer-driven trading by hedge funds and Wall Street firms gives them an unfair advantage over other investors."

Goldman Sachs is noted in the Bloomberg article as not using flash-order systems. High-frequency trading, however, is said to account for a sizable part of Goldman's profits ("Rivals play catch up as Goldman thrives", Wall Street Journal, July 13, 2009); this fact came to the fore a few weeks ago when a former employee was arrested for allegedly stealing trade secrets before changing jobs. His expertise was in, you guessed it, high-frequency trading. Alloway of the Financial Times mentions the case in the post I linked to above, as well as here and here; more information can also be found here and here. The ex-employee "told the FBI he “only intended to collect ‘open source’ files on which he had worked, but later realized that he had obtained more files than he intended.”" (from this source)

This at least sheds some light on Goldman Sachs's extraordinary success despite the crisis. But the reliance on computer codes for competitive advantage and the recent accusations of theft, which GS says could cost it billions (because the software was uploaded to a server, where others may have found and downloaded it) also raise the question of how to protect key intellectual property. The days where traders only relied on hard-to-steal gut feelings are gone. 


On Masters of Arts

One of the New York Times blogs recently asked the question: "What is a Master's Degree Worth?" (Room for Debate, June 30, 2009, with a follow-up on July 4) The focus was on Masters of Arts rather than Masters of Science or Masters of Engineering, although some of the commenters referred to M.S., M.Eng. and even J.D. in their replies.

In the June 30 post, four education specialists shared their wisdom, including the chairman of the religion department at Columbia University, who wrote an op-ed in April for the New York Times about "the end of the university"; as I wrote here, the change he advocated was so radical that "I wondered whether he wasn't simply trying to get attention, which is one way to make people take notice." I found his comments on the worth of a master's degree much more pertinent.

In his latest essay, he argues that people try to improve their situation by going back to school in times of crisis, but they should think hard about what a master's degree will bring them. In addition, "one of the dirty secrets of many research universities is that they treat master's students as cash cows that fund other activities." While I disagree with master's students being viewed as cash cows, it is clear that master's programs are revenue generators - undergraduates often receive financial aid from the school, making the amount they pay for their education much lower than the sticker price, and doctoral students' training is funded by Teaching and Research Assistantships.

Research Assistantships are made possible by outside grants from companies or governmental agencies (so the university does receive money for those students), but Teaching Assistantships - the main source of funding in the arts and humanities - are provided by the university itself, which must come up with the money somehow. Master's students, in contrast, are generally self-funded. Some people conclude that master's students tuition funds doctoral students' assistantships. I think the situation is more complicated, because the money paid in tuition by master's students does not necessarily go back to those students' department; the university can use it for many other purposes.

At the same time, master's students do risk being treated as second-class citizens compared to doctoral students; applicants should scrutinize the programs they apply for. A curriculum where master's students take the same courses as first- or second-year PhD students might put master's students at a disadvantage: the course material will often be geared toward their classmates in the doctoral program, to prepare them for doing research - in engineering, such courses might be highly theoretical and proof-heavy, and master's students will struggle to understand how this knowledge can help them in the workforce after graduation. The best programs offer courses attended almost solely by master's students, and some courageous undergraduates. This allows the instructor to tailor the course to their needs, and students to get the most out of their money.

The president emeritus of George Washington University - the second educator to provide his insights on the NYT blog - points out: "[A M.A.] does allow one to upgrade one’s alma mater" by pursuing a master's degree at a better-known institution. That is an excellent point. It also opens the doors to a second alumni network. The author's defense of M.A. is a bit lukewarm, though - he refers to degree inflation and, to counter cynics' criticism that the M.A. degree "is increasingly a commodity offered by universities in order to earn tuition dollars devoted to the Ph.D. programs", comes up with: "it adds to one’s personal narrative. It makes one more interesting." Is the goal of higher education really to make people more interesting? It seems that the author could not come up with any reason to get a M.A., could not pinpoint any need they fulfill in the workforce. At the very least, he could have referred to the love of learning and never-ending self-improvement - but adding to one's personal narrative? I did not see that one coming.

In the second half of the post, a personal finance columnist for MSN Money writes that "certain graduate degrees just don’t seem to pay off," while an economics professor cautions: "not all degrees are equal." The four essays elicited over seven hundred comments on the NYT website, some of which were gathered in the July 4 follow-up post.

The NYT editors write there: "Many said earning an advanced degree was a wasted effort that did not enhance their skills or make them more attractive to employers." A number of people out there seem to view the Master of Arts degree as a way to sit out the recession, but doubt it brings much to one's career prospects, especially in light of the additional debt.

A NYT reader, who has just received a degree in higher education, explains: "The market is flooded with master’s degree holders hammering for a job at the same time thousands of higher education professionals have been laid off." Another calls her Master of Fine Arts a "gift-wrapped empty box". A M.A. student in English points out she is not doing this for the money. That woman is on to something.

Overall, commenters did not sound overly positive regarding the benefits of holding a M.A. degree. While the people who felt strongly enough about the topic to leave a comment are more likely to have been the disappointed ones, departments might want to invest more time and effort in showing they value master's students - keep track of what their graduates do after they receive their degree, partner with career services to provide professional development seminars tailored to their needs, overall do more to make sure M.A. students benefit from the extra education and gain better employment opportunities.


Cyberattacks and the two Koreas

The New York Times published an interesting article last week about the "denial-of-service attack that briefly knocked offline the Web sites of some United States and South Korean government agencies and companies" during the Fourth of July weekend and the following week ("Internet's anonymity makes cyberattack hard to trace", July 16, 2009).

The attack has led to "South Korean accusations that the attack had been conducted by North Korean military or intelligence agents." What impressed me most in the article was the cautionary words of cyberwarfare specialists: "attributing the source of cyberattacks and other kinds of exploitation is difficult at best and sometimes impossible"; despite the rumors, "the consensus of most computer security specialists is that the attackers could be located anywhere in the world."

Experts emphasize that responsibility for this kind of attack is extraordinarily difficult to establish; when the culprit is caught (which rarely happens), it is usually because he made the mistake of talking about his actions - read for instance the paragraph about the "15-year-old Canadian high school student who was identified as a suspect only after publicly bragging about [high-profile denial-of-service attacks against Amazon.com, eBay and the like in 2000] in an online forum."

The difficulty in tracking down cyberattackers opens the door to potential abuse; government officials in fragile democracies (or plain authoritarian countries) could orchestrate an attack against their own websites, blame their neighbor or main enemy, and create a backlash against that other country to manipulate public opinion. One could also imagine a situation similar to the Gulf of Tonkin incident during the Vietnam War. Lyndon Johnson used the August 4, 1964 alleged attack against USS Maddox "to persuade Congress to authorize broad military action in Vietnam, but most historians have concluded in recent years that there was no second attack [the first attack was on August 2]" ("Vietnam Study, Casting Doubts, Remains Secret", New York Times, October 31, 2005) Experts say Johnson did not deliberately mislead the public; intelligence analysts had misinterpreted Vietnamese communications and, when they realized their mistake, covered their tracks by distorting the information instead of coming clean (source: NYT). About fifty-eight thousand American soldiers died in Vietnam.

One could also imagine a cyber-attack being incorrectly attributed to someone who has nothing to do with it. For instance, a Democrat running for reelection could accuse of his Republican challenger of bringing his website down during the electoral campaign, when it would in fact be the handiwork of his teenage daughter's disgruntled ex-boyfriend, who doesn't care one bit about politics but enjoys computer science. (I'm making that one up, but you get the idea.)

To give one more example, Estonia was the victim of a large-scale cyberattack two years ago and publicly blamed the Kremlin, which denied the charges. (The attacks happened after Estonia decided to move a Soviet World War II memorial away from downtown Tallinn, Estonia's capital.) To this day, Estonia has been unable to provide evidence to support its hunch, and one can assume it tried very, very hard. But the cyberattack could also have been the brainchild of computer whizzes who acted without the Kremlin's knowledge. After all, about a third of Tallinn's population is Russian.

It amazes me to think that even the top computer experts in some of the most technologically advanced countries - South Korea is known for its consumer electronics and Estonia has one of the highest Internet penetration rates in the world - have been unable to pinpoint the true source of their respective cyberattacks so far. This speaks volumes about the complexity of the World Wide Web.


Training School Leaders

Lehigh University has partnered with the School District of Philadelphia to create the Philadelphia School Leadership Project, a unique program whose goal is "to identify and train a cohort of highly skilled teachers who have the potential to become effective school leaders in high-need Philadelphia high schools." The project is funded by a $3 million grant from the US Department of Education, which subsidizes the tuition costs of the participants, among other things.

According to the Lehigh news release, the program will "recruit exemplary teachers [...] and provide them with collaboratively designed and individually-tailored graduate-level coursework and internship experiences to prepare them for principal or assistant principal positions." The requirements for the two related programs, Aspiring Leaders and Developing Leaders, include a minimum five years of full-time, certificated teaching experience. (The first program is for people who do not yet hold a principal certificate in Pennsylvania - see for instance this site for a description of what a principal certificate is - and the second one is for those who do. A third program, Emerging Leaders, is aimed at participants who successfully complete the Developing Leaders curriculum.)

I thought it was an excellent idea to require a minimum teaching experience. The experience in New York City, where inexperienced "young graduates from top colleges" have replaced "middle-aged teachers promoted through the ranks", suggests experience can matter as much as pure brainpower (New York Times, "Principals Younger and Freer, But Raise Doubts in the Schools", May 25, 2009). In the NYT's words: "[S]chools run by graduates of the celebrated New York City Leadership Academy — which the mayor created and helped raise more than $80 million for — have not done as well as those led by experienced principals or new principals who came through traditional routes."

In particular, "[t]eacher turnover has been higher at schools run by Leadership Academy principals — over the summer of 2007, nearly a quarter of these principals lost at least a third of their teachers, compared with 9 percent of other principals." While "some see that as evidence the new leaders are shaking things up," the situation can become a lot murkier on occasion, especially in one well-publicized case the NYT mentions briefly - that level of antagonism and tension between teachers and principal is not good for the school, no matter who ends up being right. A point that comes up frequently in blog posts covering the situation is that the principal has never taught.

(The links above are to posts by a union member of the United Federation of Teachers, which opposes the principal. To understand what New York teachers mean when they talk about "the rubber room", read Where Teachers Sit, Awaiting Their Fate from the New York Times, October 10, 2007. My only comment is: wow. I did not realize the room existed. I thought it was a metaphor... For additional sources of information, check out this blog post from a New York teacher and this letter from another teacher in support of his former colleague. I have not found any account taking the side of the principal, but maybe I didn't go far enough in the results of my Google search. The accused teacher's work visa is said to expire August 3; since principals have to sign off on visa applications, it is doubtful her work visa has been renewed - the confrontation is fast coming to an end. Given the other allegations against the principal and the high turnover of her staff, I'm inclined to believe the teacher against her boss. It's a very sad story.) 

In addition, "[t]he Times’s analysis shows that Leadership Academy graduates were less than half as likely to get A’s as other principals, and almost twice as likely to earn C’s or worse," although the grading accounts for the fact that "Academy graduates do tend to be placed in some of the city’s lowest-achieving schools." The main offering of the New York Academy is the Aspiring Principals program, which sounds a bit like Philadelphia's. Hopefully, the teaching requirement for the Philadelphia School Leadership Project will help achieve a middle ground between the New York Leadership Academy and the more traditional ways of becoming a principal, produce better leaders, and improve the public high school system in Philadelphia.


PhD Comics

Today's post is for my readers who need a bit of cheers to start the week, especially those in academia or graduate school. The links below all redirect to PhD Comics, by Jorge Cham.

And also:

Enjoy!


Real Life and Formulas

NPR ran an interesting feature recently, criticizing the use of the Body Mass Index to evaluate Americans' health and determine medical insurance premiums (Top 10 reasons why the BMI is bogus, July 4, 2009). Many of the reasons mentioned in the article reminded me of caveats I have heard in other contexts, especially regarding the current economic meltdown. Here are a few:

  1. The person who created the formula (two centuries ago!) "said explicitly it could not and should not be used to indicate the level of fatness in an individual." This echoes David Li's warnings about placing too much trust in the models he had pioneered to price credit-debt obligations. (See my old posts: Part 1 and Part 2 of "Finance's Gaussian Copulas", March 2009.)
  2. According to the journalist, it has no scientific motivation but was created to fit the data. (The BMI is the ratio of weight to height-squared, times a scaling factor because the formula was initially in metric units. Why the height should be squared is a bit of a mystery.)
  3. "It makes no allowance for the relative proportions of bone, muscle and fat in the body. But bone is denser than muscle and twice as dense as fat, so a person with strong bones, good muscle tone and low fat will have a high BMI. Thus, athletes [...] tend to find themselves classified as overweight or even obese."
  4. "Because the BMI [...] comes from a mathematical formula, it carries an air of scientific authority. But it's mathematical snake oil."

I'll let you read the rest. The author makes excellent points: it is not enough to have a mathematical formula - it should be built on solid ground. Otherwise you get nothing more than fake "insights". (Also see the second paragraph of this July 2008 post for a related story).

In the meantime, the fascination for mathematical formulas is alive and well, as demonstrated by this New York Times article on the injuries of baseball players (Seeking a Way to Predict Baseball Injuries, July 7, 2009). The Dodgers' director of medical services, Stan Conte, "is trying to build a formula that will give teams a competitive advantage and help them avoid players who spend their days in the training room and not on the field."

He has accumulated large amounts of data over his 15 years as trainer, and "draws on the analytical prowess of David Zes and Adam Sugano, statisticians who teach at U.C.L.A., and Matt Marks, an employee in the Dodgers’ baseball operations department. They are building mathematical formulas that they hope will show the chances a player will be injured within the next season." (Emphasis mine.)

The article mentions a personnel decision for which Conte's analysis ultimately proved correct, and a personnel decision for which it did not - a good reminder that models will never be 100% accurate. It is not clear whether these models will become widely implemented beyond a few teams, although "the formulas could become lucrative if successful". To use an expression found twice in the NYT article, statistical analysis to predict baseball injuries is used by "progressive medical staff"; not all trainers will see value in such mathematical techniques. That could become a new slogan, though: "Be progressive! Use math!"


Girl Power

These two articles from the New York Times are both about a teenage girl outperforming boys in sport, and the resulting tensions:

  • "Scary, isn't she?" (September 11, 2008) is about Jaime Nared from Portland, Oregon, who was "kicked off a boys’ basketball team for being too good." ("[T]he last time she played organized ball against girls her age, the final score was 90-7. [Her coach] described the dynamic as “like having Shaq on a high-school team.”") Jaime was banned from competing with the boys after scoring 30 points in one game, which apparently did not endear her to the parents' of the boys on the losing team; gym management suddenly "cited a previously unenforced rule against mixed-gender play." The behavior of the other parents, at one point described as "sexist rage", reminded me of the parents' screams and shouts in a New Yorker's article by Malcolm Gladwell on innovators - the innovator in question was the coach of their opponents, also in basketball, who used a little-known technique called the full-court press and was making their kids lose (see this old post of mine). Jaime Nared then had to play with high school girls, which was not ideal because of the age difference. About a day after the NYT article appeared (including the words "[Jaime's mother] is considering a civil claim"), Jaime was allowed to play with the boys again. 
  • "She plays with boys, and rivals don't like it" (June 1, 2009) is about Hannah Berner from New York, NY, who plays tennis on the boys' team because her school has no girls' team and "help[ed] her team sweep the city’s three major high school tennis tournaments this year". ("Thanks to her play and the complaints of some of her opponents, [Ms Berner] may have moved her high school closer to securing approval to field a girls’ tennis team. After Ms. Berner won one recent game, the coach of the opposing team complained that she should not have been allowed to play with the boys because her gender unnerved her opponents." One boy whom she had defeated "shattered his racket in anger.") Hannah Berner will join the University of Wisconsin in the Fall, where she will finally play tennis on the women's team.

Unemployment Numbers

The Local Area Unemployment Program of the Bureau of Labor Statistics offers comprehensive data on employment rates in the US. I wanted to look at the numbers after the latest news on the joblessness rate, which recently reached 9.5% - I was wondering whether the average was driven up by the high unemployment rates in a few states, or whether the unemployment situation was homogeneous throughout the country. (See this old post of mine about issues in using the average to describe the main trend in the data, and the benefits of using the median instead.)

You can find a table of the latest unemployment rates by state including historical highs and lows here; California, Florida, Georgia, Nevada, North Carolina, Oregon, Rhode Island and South Carolina all reached a new historical high in unemployment in May. ("Historical high" means "highest since 1976", which is when the BLS started tracking unemployment numbers. Data for June is not yet available on the site. For comparison purposes with the data by state, note that the national unemployment rate in May was 9.4%, not 9.5%, which is for June.) The BLS also ranks the states by increasing unemployment rates here. This reordering makes it easy to see that the median unemployment rate by state for May was 8.2%, which happens to be the jobless rate of Arizona, Massachusetts, Minnesota, New York and Pennsylvania. (The median is the point in the middle of the data. The table includes the 50 states and the District of Columbia, so the median is the 26th rate, but because of the tie the 26th rate falls in the middle of the 5-way tie.)

Only 17 states and the D.C. had an unemployment rate equal to or higher than the national average - in other words, two thirds of the states have unemployment rates below average. As expected, the (populous) states with high unemployment rates drive the national number up. The states with a rate exceeding 10% are: Illinois, Florida, Indiana, Kentucky, Tennessee, Ohio, North Carolina, Nevada, California, Rhode Island, South Carolina, Oregon, Michigan and also the District of Columbia. Michigan, at 14.1%, has by far the highest unemployment rate.

What puzzled me most about this data is that a handful of states have much lower unemployment than I anticipated. Specifically, Nebraska, North Dakota, South Dakota, Wyoming and Utah all had unemployment rates below 5.5%. I cannot quite understand why those five states are weathering the recession so much better than their neighbors, but this short analysis by a DC think tank offers some answers, although it leaves a lot unexplored. (As an aside, make sure to click on "Play the timeline" on the US map.) Reuters published an article about the low unemployment rate in North Dakota in March, praising its diversified economy and its stable housing market; Standard & Poor's upgraded North Dakota's credit rating around the same time. MainStreet.com ranked North Dakota #1 in its Job Opportunity Index in May. Wyoming and Virginia followed closely behind. (Virginia's unemployment rate in May was 7.1%.) 

More data and charts about the evolution of the US unemployment rate since 1999 are provided by the BLS here; the scale of the upward trend over the past year is sobering. The BLS also provides plenty of unemployment maps for each state by county, for instance for New Jersey and Pennsylvania. I was shocked to learn that Cameron County in Central PA has an unemployment rate of 18.2%. (The county has about 6,000 residents, according to Wikipedia.) Neighbor Elk County, with about 35,000 residents, has the second highest rate of 14.9%. But those numbers pale in comparison to those of California, where many counties have rates exceeding 15%, with even a staggering 26.8% for Imperial County.

Economists surveyed by the Wall Street Journal in April said that "it won't be until the second half of 2010 that the economy recovers enough to bring down unemployment." That is a long time to wait.