The job market – like any other – is imperfect and somewhat inefficient, argues James Whiteman. This creates an opportunity for employers to access an overlooked and untapped talent pool, and improve social mobility outcomes in the process.
In my more positive moments, I reflect on how much has changed since I started working on social mobility within the investment and savings industry. It has gone from an after-thought, to being firmly on the diversity, equity and inclusion agenda.*¹
There is a darker side too, though. I can’t help but dwell on the sheer scale of the challenge and how much remains left to do. The gap between aspiration and reality is still gaping. Indeed, professionals from working-class backgrounds are paid an average of £6,287 – or 12% – less per year than their more privileged counterparts in the same occupation.²
What drives action, then? I should know this, being a communications professional and all. But moving people to act is hard and complex. Knowing when to pull on the moral and business case chord strings is as much an art as it is a science.
The moral case, we hope, is clear: equality of opportunity; talent and potential can be found anywhere; not to mention the societal, health and economic benefits of greater social mobility.
Acutely aware of the need to influence logic-driven leaders, we have frequently pointed to a severe mispricing of talent. So, with that in mind, what if we try using the language of economics and finance to underscore what is really going, and to make it more relatable to leaders in finance?
Here goes…
There’s no monopoly on human potential
The board game Monopoly has surprising origins. Originally called the “Landlord’s Game,” it was created in 1903 by Lizzie Magie, a progressive activist who wanted to demonstrate the negative aspects of land monopolism.
Magie designed two sets of rules. The first was an anti-monopolist version where wealth creation benefited everyone. The second was the monopolist version where players crushed opponents and created monopolies. Her vision contained a deliberate tension between opposing philosophies. Unfortunately, it was the monopolist rules that captured the public’s imagination and became the game we know today.
Students of perfect competition will find a deep irony with labour markets here. Structural advantages result in the same few groups consistently winning, not through superior performance, but through a strategy that would make any antitrust regulator reach for their enforcement toolkit. When it comes to human talent, a handful of elite institutions and social networks have cornered the supply chain of opportunity.
Fooled by randomness: What are the chances?
Let’s run the numbers on coincidence. What are the statistical odds that the most brilliant financial minds just happen to come from a handful of schools or elite universities? Indeed, what are the chances that genius conveniently clusters in the postcodes of privilege?
Nassim Taleb’s central insight in “Fooled by Randomness” was that we often mistake luck for skill; correlation is not causation. When investment committees across major firms show remarkable demographic homogeneity (same schools, similar backgrounds, comparable upbringings), we are not witnessing the meritocratic cream rising to the top. We’re observing what statisticians call “selection bias” operating on an industrial scale.
Michael Sandel explores how “meritocratic hubris” leads many to believe their success is their own doing and to look down on those who haven’t made it, creating what he calls the tyranny of merit. In finance, this manifests as the dangerous assumption that current leadership represents the optimal allocation of talent rather than the predictable outcome of biased selection processes.
Yet more irony: Michael Young, who coined the term “meritocracy” in 1958, actually intended it as a dystopian warning, not an aspirational goal. Young feared the new meritocrats would wield their authority with the assurance that, unlike the aristocrats of old, their success was genuinely earned.³
Compounding problems and path dependencies
Consider the concept of “helicopter money” in economics, i.e., direct cash transfers to stimulate economic activity. The financial sector has perfected its own version: helicopter advantages from helicopter parents dropped on the children of existing elites. Unpaid internships function like helicopter money in reverse, as only those who can afford to work for free can access the launch pad to financial careers.
This creates what economists call “path dependence”, where small early advantages compound over time into insurmountable leads. A student or school leaver who can afford unpaid summer internships at Goldman Sachs doesn’t just gain experience; they gain access to networks, mentors and cultural capital that becomes their permanent competitive advantage.
It is not a million miles away from what Charles de Gaulle once called America’s “exorbitant privilege” in having the world’s reserve currency. The exorbitant privilege of inherited social, cultural and financial capital automatically compounds irrespective of effort or merit.
The result is a system where those born into financial comfort can also take the career risks necessary for extraordinary success, while those without family wealth must (often) choose safer, more predictable paths. It’s not that the wealthy are more talented. Instead, they simply have a better risk-adjusted return on career decisions because their downside is protected.
Signals, noises and lemons
Michael Spence’s groundbreaking work on market signaling revealed how employees send signals about their ability to employers through academic achievements, where the informational value comes from the cost differential between high and low-ability workers. In Spence’s model, education functions as a signal precisely because it is more costly for less capable individuals to obtain.
But finance has somewhat corrupted Spence’s elegant theory. The signal was supposed to separate workers into high and low-productivity categories based on their differential costs of acquiring credentials. Instead, the industry has created a system where the primary cost differential isn’t ability, but socioeconomic background. Elite credentials now signal wealth as much as they do talent.
Yet equally strong signals of capability go unrecognised: the student who worked part-time throughout university while achieving solid grades demonstrates time management and pressure handling that might surpass someone whose only pressure was choosing between skiing destinations. Meanwhile, the graduate who navigated complex financial aid processes shows systems thinking and problem-solving skills directly applicable to finance. Contextual hiring practices could be a counterbalancing force here.
More perniciously, George Akerlof’s Nobel Prize-winning work on “The Market for Lemons” reveals how asymmetric information can cause market failure. When buyers can’t distinguish quality goods from “lemons,” the entire market deteriorates.
A parallel dysfunction occurs in recruitment: talented individuals from non-traditional backgrounds lack information about industries such as finance, and lack the confidence or awareness to apply. On the flip side, firms lack information about this hidden talent pool.
This creates what Akerlof called “adverse selection”, but in reverse. The industry signals (consciously or not) that it values certain backgrounds through its job descriptions peppered with ‘cultural fit’, its recruitment events at select universities and its prevalence of unpaid internships. Prospective candidates from lower socioeconomic backgrounds, unable to verify whether they’d truly be welcome, rationally conclude the risk isn’t worth it.
The tragedy is that both sides would benefit from the transaction, but asymmetric information prevents the market from clearing.
The market correction
The solution isn’t to abandon merit, it’s to define it more honestly. True meritocracy would recognise that talent is distributed far more broadly than opportunity, and that current selection mechanisms are capturing privilege as much as ability (and/or potential).
Forward-thinking firms are beginning to debug their talent allocation algorithms. They are removing certain grade thresholds, partnering with non-elite universities and offering paid internships. Just as Albert Einstein supposedly called compound interest the eighth wonder of the world, they recognise that diverse perspectives in investment decision-making can create exponential value over time.
Ultimately, the investment and savings industry stands at an inflection point. It can continue operating as a closed system, gradually losing relevance as more diverse fintech companies capture markets it has failed to understand. Or it can recognise that its greatest untapped asset class isn’t exotic derivatives or alternative investments, it’s the vast pool of human talent that its current selection mechanisms systematically overlook.
¹NB. I shall resist the urge to descend down a DEI backlash rabbit hole.
²The Class Pay Gap, Social Mobility Foundation, 2024 https://www.socialmobility.org.uk/campaign/the-class-pay-gap
³How We Came to Misunderstand Meritocracy, VICE, June 6, 2013.
https://www.youtube.com/watch?v=cn1_jhqqNQ0 (Michael Young ref – 4min 30 secs.)
- Quote from John Kaag – P.11 of Sick souls, Healthy minds
NNB. Michael Sandel quote – P.138-140 of Tyranny of Merit
