Whenever we hear the term ‘Brain Drain’, we usually think in terms of migration of labor to developed economies. We associate it in terms of geographical movement of ‘brain’. However, equally important is the phenomenon of Brain Drain between industries, though it is much less talked about.
Automobile sector to IT sector
I remember receiving a chain mail long ago which compared the rate of innovation between the automobile industry and the IT industry. It went on to say that if the pace of innovation in automobile was as good as IT, then the current generation cars would be much better than what they are.
IT sector to Finance sector
When I first learnt about the securitization business, I was dumbstruck. In the traditional model of banking, banks acted as the intermediaries between people with surplus cash, and people who needed cash. They used to take deposits from the public, and use the same to make loans. The sole purpose for the existence of banks was the match the source and need of funds – and they earned a margin for this. Also, they used to bear the counter-party risk in case of default, and the world largely was unaffected.
In the world of securitization, the banks sold-off these loans to institutions as well as public – in various forms (but lets not get into that). So, essentially, banks were accepting deposits as earlier, but not giving out loans in the same way. They used to give loans, but later sell them off to get the money which they further lent (and it went on and on). So, in the current scenario, banks weren’t matching those who had cash with those in need of it, but rather they redistributed everything. So, it was like a giant network where everything was connected to everything else. And banks were just acting as agents providing operational support to the whole system. In this system, everyone depended upon others, and if one link failed, the whole system would collapse. This was the ultimate dream for any bank – a vast ocean of people who lent money to each other, more directly than ever before – and these guys just controlled this massive spider web. In terms of IT sector, this is very close to the concept of Grid Computing. And whereas the concept is still in early stages in the IT industry, it has been done to death in the financial circles. And if the brain drain continues, very soon IT sector would also be left to the same fate as that of Automobile sector – and die a slow death.
Over the last few years, the financial industry has been the top choice for most of the fresh graduates and post-graduates. Hence, its no wonder that they have been miles ahead of other sectors in terms of innovation.
Automobile sector to IT sector
I remember receiving a chain mail long ago which compared the rate of innovation between the automobile industry and the IT industry. It went on to say that if the pace of innovation in automobile was as good as IT, then the current generation cars would be much better than what they are.
If automobile technology had improved at the same rate since 1960, a new car would cost less than an entry fee to the cinema hall, and we could drive through the length of our own country on less than a litre of petrol or diesel.There was a huge shift in skilled labor from the automobile industry to the IT industry in the 1960s– and this led to the huge growth in technology over the past few decades. No other sector was able to match the rate of innovation, and companies came out with real surprises every now and then. However, now the IT industry finds itself in the shoes of automobile industry, and it too has been relegated to the ‘second choice’ employer status. Currently leading the pack are Goldman and the likes. And if we see the innovation across different sectors, we realize the impact of these changes.
IT sector to Finance sector
When I first learnt about the securitization business, I was dumbstruck. In the traditional model of banking, banks acted as the intermediaries between people with surplus cash, and people who needed cash. They used to take deposits from the public, and use the same to make loans. The sole purpose for the existence of banks was the match the source and need of funds – and they earned a margin for this. Also, they used to bear the counter-party risk in case of default, and the world largely was unaffected.
In the world of securitization, the banks sold-off these loans to institutions as well as public – in various forms (but lets not get into that). So, essentially, banks were accepting deposits as earlier, but not giving out loans in the same way. They used to give loans, but later sell them off to get the money which they further lent (and it went on and on). So, in the current scenario, banks weren’t matching those who had cash with those in need of it, but rather they redistributed everything. So, it was like a giant network where everything was connected to everything else. And banks were just acting as agents providing operational support to the whole system. In this system, everyone depended upon others, and if one link failed, the whole system would collapse. This was the ultimate dream for any bank – a vast ocean of people who lent money to each other, more directly than ever before – and these guys just controlled this massive spider web. In terms of IT sector, this is very close to the concept of Grid Computing. And whereas the concept is still in early stages in the IT industry, it has been done to death in the financial circles. And if the brain drain continues, very soon IT sector would also be left to the same fate as that of Automobile sector – and die a slow death.
Over the last few years, the financial industry has been the top choice for most of the fresh graduates and post-graduates. Hence, its no wonder that they have been miles ahead of other sectors in terms of innovation.
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