As if we didn’t have enough problems.

Now we learn, through the Kauffman Foundation’s recently published research, that the ever-expanding financial sector is depleting the talent pool of potential high-growth company founders.

While all entrepreneurs need capital and an effective financial sector to fund the start-up and growth of their businesses, they’ve never received the support, or access to capital that allows them to contribute their maximum potential to our economy.

We now find that the financial industry’s growing size is potentially suppressing entrepreneurship. The financial services industry and new companies compete daily for many of the same staff, The Kauffman Foundation’s study found.

Recently, the financial sector has generated enormous profits by creating virtually no value through collateralized debt obligations. The research noted that, “These new products require such sophisticated engineering that the industry now focuses its recruiting on new master’s- and doctoral-level graduates of science, engineering, math and physics, and pays them starting wages that are five times or more what they would have earned had they remained in their own fields.”

“Because these new hires are often the very individuals who otherwise would have comprised the most robust pool of prospective founders of high-growth companies, the financial services industry’s steady rise has had a cannibalizing effect on entrepreneurship in the U.S. economy,” said Paul Kedrosky, Kauffman Foundation senior fellow and one of the paper’s authors. He continues: “Excessive financialization exacerbated and distorted the flow of capital in the economy, potentially suppressing entrepreneurship by drawing away entrepreneurial talent.”

New ways, you might not have known about that the world of finance has become a weapon of mass destruction.

 

Share This