First, Know Yourself

When it comes to career reinvention, too many people make a fundamental mistake: They don’t know themselves.

So when I talk to people about making a career change, I always suggest first doing a few self-assessment exercises. Career self-assessment is the process of getting acquainted with what you like — and don’t like — in a work environment.

You can do this by simply making a list of your skills and interests, and asking yourself questions such as “What type of work would make me sit in traffic for hours just for the privilege of showing up?” and “What energizes me at work?” Increasingly, though, career changers are drawing guidance from more sophisticated tests.

Entrepreneurial Bent

After getting laid off from an investment bank in New York, 25-year-old Alan Katz worked with career counselor Claudine Vainraub to determine his next steps. He completed a 360-degree survey, in which he collected feedback about himself from friends, co-workers, and family, as well as assessments about his work behaviors and career interests.

“The assessments helped me understand my skills, specific roles I play effectively and career interests,” says Mr. Katz, who paid a total of $2,500 for the tests and professional consulting over a six-week period. “The results prompted me to investigate entrepreneurship, and I’m now developing a start-up company in manufacturing.”

Many experts agree that assessments are best used in conjunction with an experienced career counselor who can hand-select tests for you — and help you interpret the results. Ms. Vainraub, who is based in Miami, chose the 360-degree questionnaire for Mr. Katz to better define his work priorities. “We found that his personal vision of leading an enterprise forward was, in fact, quite different from his current career in finance,” she says.

People described Mr. Katz as enjoying managing and motivating others, and driven when involved in a project. “Those are very much the qualities of an entrepreneur,” Ms. Vainraub says.

Online Tests

If you can’t afford or aren’t sure you want to invest in a personalized assessment, start with free assessments online, including the Coach Compass Assessment (coachcompass.com) and the CareerLink Inventory (www.mpcfaculty.net/CL/cl.htm). Most take around 10 minutes to complete.

Ms. Vainraub recommends starting with free assessments from O*NET(online.onetcenter.org),a source of occupational information, and from Rutgers University (careerservices.rutgers.edu/OCAmain.html).

When completing these, make sure you keep your expectations in check. It’s unlikely that one test will result in career fulfillment, so take several and see if you can detect patterns in the findings. Should you need something more precise, it may be in your best interest to contact a professional.

Mr. Katz says he would go through the self-assessment process again. “Self-assessment is great for people who are unsure of the correct career move to make,” he says. “I now have a lot more confidence that I’m headed in the right direction.”

.

Alexandra Levit (reinvent@wsj.com)

CAREERS - www.online.wsj.com

Filed under: Business , assessment, recession, yourself

With Jobs Tight, M.B.A.s Head for Home

After working in public accounting for three years, Joe Fusco, wanted to become an investment banker. So he invested more than $70,000 and two years into an M.B.A.

But as he prepares to graduate from the University of Notre Dame in Indiana next month, Mr. Fusco, 27 years old, hasn’t had any luck landing a position in finance. The only solution he has is to go back to his accounting roots. “It’s a tough pill to swallow, but I’ve come to the conclusion that I can’t sit and wait and cross my fingers,” he says.

The majority of students at top business schools attend the programs as a way to boost their skills to change careers. This year, making that happen has turned into a nearly impossible task. And that means a significant number of soon-to-be grads who entered school back in 2007 are being forced back to their pre-M.B.A. careers in the hopes of finding a job.

“Career switchers are getting hit the hardest,” says Kristen Lynas, associate director of career management at Georgetown University’s McDonough School of Business. Those looking to switch fields make up the majority of each incoming class at the school, she adds. “When the market is hot, employers are more willing to take the risk … [now] employers tend to go with the safe choice.”

Steve Canale, manager of recruiting and staffing services at General Electric Co., in Fairfield, Conn., says that with so many applicants, previous experience is getting a bigger emphasis when the company weeds out candidates. “That’s the sweet spot — people who have industry expertise in the industries that we’re strong in,” says Mr. Canale, who hires about 120 M.B.A. students each year for a sales and marketing program.

In past years, GE would have been more open to M.B.A.s who were less of a match. But applications for the program grew 30% this year and Mr. Canale was able to be more experience-selective, he says.

With firms like Lehman Brothers and Bear Stearns — which used to bring on upward of 800 M.B.A.s combined every year — now defunct, and fewer finance jobs around, more business-school graduates are leaning on their experience to get them in the door. For example, the University of Chicago’s Booth School of Business has typically placed 50% of its M.B.A. alumni in finance, most at large investment banks. This year, students in all majors have been turning back to their previous fields to find work, says Char Bennington, Chicago’s senior associate director of career management. Ms. Bennington says other industries, like consulting and marketing, are also hiring fewer people and looking for experience.

After Johnson & Johnson didn’t extend an offer to Jareer Oweimrin, a second-year M.B.A. at the University of Illinois Urbana-Champaign who worked as a strategic marketing intern with the company, Mr. Oweimrin is putting his plans to get a health-care marketing role on hold for the time being. He is now trying to capitalize on his background in pharmaceutical sales and is in talks about returning to a sales job at a former employer, a major drug maker. He hopes such a move will eventually help him move into marketing. “The motto here [at school] is ‘take what you’ve got,’” says Mr. Oweimrin, who spent about $70,000 on his degree. “You can’t be as picky as you want to be.”

Even consulting firms — known for hiring career switchers — are looking for M.B.A.s with previous experience to hire.

Brianne Shally, 29, who graduates from Northwestern University’s Kellogg School of Management this spring, says she feels safer going back to a consulting job in Chicago for Deloitte Touche Tohmatsu, her previous employer, rather than make a career change. “I have a proven track record, if it comes down to names on a board” for a layoff or hiring, says Ms. Shally. She says consulting jobs haven’t been easy to land for fellow classmates, though. This year, she says, firms “were not willing to take a risk on students who did not have previous consulting experience.”

Patricia Phillips, executive director of career management at University of Rochester’s Simon Graduate School of Business, says students are beginning to recognize that these days, it could take two or three career moves to make a switch.

That’s how Abhishek Sunkersett is approaching his first post-M.B.A. job. Instead of landing a job in strategy consulting or finance, Mr. Sunkersett, 28, a second-year student at the University of Texas-Austin McCombs School of Business, says his engineering background and technical experience working in the Mumbai office of Deloitte helped land him a position at the Chicago office of Infosys Technologies Ltd., an Indian information-technology services vendor. For now, Mr. Sunkersett says he’ll focus on consulting projects involving technology, with hopes of pursuing more strategy-related projects in the firm. “My experience was a big advantage,” says Mr. Sunkersett.

But the idea of returning to an old career has some soon-to-be grads questioning the value of their degrees. A traditional post-M.B.A. position increases a degree-holder’s salary by 74% according to an annual survey from the Graduate Management Admissions Council.

Besides being unable to use his newly honed marketing skills, Mr. Oweimrin, says he is worried that he’ll be earning the same as he did as a pharmaceutical rep — about $60,000 — instead of the $100,000 marketing job he expected to land after the M.B.A. program.

And Mr. Fusco says he is less certain his investment in the degree was worthwhile. Many of the auditing positions that he is finding don’t require a graduate business degree. “These are positions that I was pretty qualified for even pre-M.B.A,” he says.

By ALINA DIZIK

Printed in The Wall Street Journal, page D6. (www.onlin.wsj.com)

Filed under: student , home, job, MBA, tight

Bankers vs. Economists: Who deserves more blame for the global economic collapse?

This is adapted from Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation , which is now available in paperback.

Which profession bears more blame for the global credit meltdown and its ensuing gazillion-dollar bailouts: bankers or economists?

This isn’t a trick question.

So far, bankers have been getting most of the opprobrium. Yes, there are a few solid bankers who didn’t destroy their firms. But pretty much all the prominent bankers failed. And their failures are writ large on the pages of the Wall Street Journal every day. They’ve been hauled before Congress, deposed and fired, lost vast fortunes, and been the targets of populist rage. By common consensus, bankers (and by this I mean the term as it’s used in the tri-state metro area, to describe anybody who works at a relatively high level in the financial services industry) blew it.

But they couldn’t have created the Dumb Money debacle without a substantial assist from economists. Toiling in government and academia, at trade groups and Wall Street firms, practitioners of the dismal science provided the intellectual ballast and justification for much of the insanity of this past decade. At every step of the way, as an Era of Cheap Money devolved into an Era of Dumb Money, and then into an Era of Dumber Money, Ph.D.’s led the cheers. And when things started to go bad, they failed to grasp just how bad things would get.
In February, I recounted some of the economists’ most egregious errors. Alan Greenspan, chairman of the Federal Reserve system, was easily the most influential economist of the last quarter century. His intellectual virtues were many. So, it turns out, were his intellectual sins. Greenspan spent his career evangelizing for the Holy Trinity of low interest rates, deregulated markets, and the ability of financial innovation to insulate markets from calamities. Oops! The persistence of low interest rates sparked a speculative orgy in securities and derivatives. The tools that were supposed to help people manage risk instead created systemic risk.  And deregulated, free, and open markets blew up so badly they required massive government interventions. The disaster was a feature of the financial operating code Greenspan had helped write, not a bug. (Bonus Greenspan screw-up: telling borrowers in the February 2004 that adjustable-rate mortgages could help people save money—just as he was about to start boosting short-term rates.)  Greenspan wasn’t the lone academic economist at fault. During the credit bubble, Greenspan’s successor and many other prominent economists, provided intellectual cover for our vices, failure, and greed. Ben Bernanke helped assuage concerns that interest rates were dangerously low by arguing first that interest rates should be low if deflation is nearly as much a worry as inflation and then that low rates stemmed from a global savings glut. David Malpass, chief economist of Bear Stearns  said we shouldn’t fret about the pathetically low national savings rate at a time when everybody owned stocks and houses. Rising asset markets would do the heavy lifting of savings. Late into the housing boom, David Lereah, chief economist of the National Association of Realtors continually urged Americans to buy houses. After all, he promised, they’d rise in value at least through the end of the decade.

While the performance of many prominent economists during the boom was poor, their performance after it ended may have been worse. As a class—again, with significant exceptions–they failed to recognize that the fall of housing, which started in the summer of 2006, would have negative effects on the economy (“The worst may be over for housing,” Greenspan declared on October 9, 2006) and on the financial system. In November, 2007, Bernanke estimated the losses stemming from subprime as being “in the ballpark” of $150 billion  (Must have been a really big ballpark). Neither of the nation’s chief economists, despite spending their days poring over economic data and meeting with professional economists inside and outside the Fed, seemed to have a clue that the virus of bad lending had spread far beyond subprime, and far beyond housing, and far beyond America’s borders.

Economic forecasting is hard. But the dismal scientists collectively did a horrific job of prognostication as the economy shifted into recession and then plummeted into a sharp contraction. The recession, we now know, started in December 2007. The Blue-Chip forecasters surveyed by the Philadelphia Fed in the fourth quarter of 2007, when the recession was about to start, projected the economy would grow by 2.5 percent in 2008 and that the economy would add more than 100,000 jobs each month in 2008. (Instead, the economy lost jobs every month in 2008 and ground to a halt). In the middle of the fourth quarter of 2008, one in which the economy was shrinking at a 6.3 percent annual rate, they took down their forecast for the quarter from 0.7 percent growth to a decline at a 2.9 percent annual rate. They projected the unemployment rate would be 7 percent in the first quarter of 2009. By March 2009, it was up to 8.5 percent.

Clearly, economic forecasters weren’t asking the right questions, or looking at the right indicators. Economists also didn’t always help the private sector companies with which they were associated. Martin Feldstein, president and CEO of the National Bureau of Economic Research, the official arbiter of recession dating, sat on AIG’s board for two decades, and in 2008 was on the board’s finance committee and on its regulatory, compliance, and legal committee—areas in which AIG had catastrophic breakdowns. Legendary Wall Street economist Henry Kaufman was chairman of Lehman Brothers’ finance and risk committee when it went tapioca.

Is it unreasonable to expect that very smart—even genius—economists would have insights into complicated businesses that the CEOs and other bankers lacked? Perhaps. But the economists’ failures may have been less human ones than professional ones. It turns out that the worldview that many economists hew to—a system of efficient markets, populated by rational actors and by owner/managers who naturally take action to preserve the value of their companies—can’t really account for the actions during  the credit bubble (or in any other bubble, for that matter). The set of theories upon which many economists rely—again, I know I’m painting with a really broad brush here—is out of vogue, and is being replaced by a set of funkier ones, which draw from sociology, anthroplogy and psychology, as well as classical economics. The behavioral economists who are in the ascendance will tell you that the irrational behavior on display came as no surprise to them.

So, back to our original question. Bankers or economists?

Bankers have clearly suffered more financial damage—they had a lot more to lose. But when it comes to reputation, I think it’s a draw. One similarity between the two professions’ reaction to the meltdown is that it doesn’t seem to have occasioned much self-examination. The best Greenspan could muster was that he had “found a flaw” in his theories.

From Newsweek-Money Culture, www.newsweek.com

By Daniel Gross

Apr 14, 2009 | Updated: 12:13  p.m. ET Apr 14, 2009

Filed under: Uncategorized

It Doesn’t Have To Hurt

Government should use the lessons of behavioral economics to get us to invest more for retirement.

By Richard Thaler | NEWSWEEK

Published Apr 11, 2009

From the magazine issue dated Apr 20, 2009

Illustration by Edel Rodriguez for Newsweek

Aging Americans are facing a perfect storm when it comes to retirement. Many have done little saving over the past two decades and have now seen what they have saved, either in their 401(k) or their home equity, decline sharply in value. Once they face these facts, Americans will have to relearn the saving habit.

To figure out how, we need more than standard economic thinking, which is based on an idealized conception of behavior. Instead we need to focus on how people actually behave—a sensibility that defines the new field called “behavioral economics.” Traditional economists bestow upon humans the mind of a computer and the willpower of a saint; I like to call these imaginary creatures Econs. These Econs have no difficulty saving because they rationally calculate how much wealth they need for retirement, reduce their consumption accordingly and then invest optimally. Econs never splurge or speculate. But the world is not populated by Econs—and if we understand how humans really behave, we can come up with ways to get them saving again.

It wasn’t so long ago that Americans were good savers. From 1950 to the early 1980s the saving rate was a satisfactory 8 to 10 percent. But even then, Americans never showed much willpower for stashing away cash. The most important ways households saved were in pensions, cash-value life insurance, and by paying off their home mortgage. What these have in common is that the saving occurs automatically and effortlessly.

But institutional changes have made saving more difficult. Under old-fashioned pensions, employees didn’t even have to sign up—much less make investment choices. The new 401(k)-style plans require both the willpower to put money away and deliberation about how to invest it. Meanwhile, financial institutions have made it easier to borrow and more difficult to stick to a budget. The old habit of “saving up” for a purchase was replaced by the credit card. Likewise, home-equity loans and easy mortgage refinancing eliminated the social norm of paying off the mortgage by retirement—once a key source of automatic savings.

In getting us back on the savings track there are two basic principles of behavioral economics to remember. First, make saving automatic. Second, put savings away in a specially designated account, such as an IRA or 401(k). These accounts, like piggy banks, help reduce the temptation to spend. Families, companies and governments can all make use of these concepts.

Workers should make sure they enroll in their company’s retirement plan or arrange to have deductions from their paycheck deposited into an IRA. Also, those who take advantage of low-interest rates to refinance their mortgages should consider a shorter-term loan (15 years instead of 30), with the goal of reducing mortgage debt as much as possible before retirement.

Companies can help their employees get on the right path by good design of their 401(k) plan. Firms should make sure the plan has a solid, low-cost, diversified investment strategy that can serve as the default fund for employees who have no idea what to do. Then, employers should also automatically enroll employees, giving the employees the option to opt out. Next, give workers the option to increase their contributions automatically whenever they get a raise, a program my colleague Shlomo Benartzi and I have called Save More Tomorrow. Employees love this, and it works.

As for the federal government, many good steps have already been taken. One excellent example is the Pension Protection Act of 2006 that included a provision meant to nudge firms to incorporate desirable features into their retirement plans. Specifically, any company that includes a suitable match, automatic enrollment and a primitive form of Save More Tomorrow gets a free pass from an annoying compliance report. Going forward, the Obama administration has announced its blueprint to create a national 401(k) plan for workers whose companies do not offer such a plan, and to automatically enroll people.

Policies like these will help households navigate the complex financial world. If employers, financial-services companies, policymakers and individuals keep in mind that we are all humans, not Econs, we’ll have a better chance of restoring our economy to solvency and prosperity once the current crisis ends.

Thaler is a professor at the Booth School of Business at the University of Chicago and the coauthor (with Cass Sunstein) of “Nudge: Improving Decisions About Health, Wealth and Happiness.”

© 2009

Filed under: Uncategorized