The new Veblen Profession

Veblen goods are generally referred to commodities where demand increases as price increases. This occurs when the increase in price is linked to a good being exclusive and hence prestigious. However I would argue this extends even in education.

Having a ethnic background being south-east Asian means that there are two main occupations which are highly valued:

• Medical Doctor Lawyer

This prestige around the world is highlighted by the sheer difficulty in completing and earning their respective titles. Although not a comprehensive argument; I would argue that both of these professions would be what I define to be a Veblen Profession.

After all;

What do you call a doctor who finishes last in their class? A doctor.

Within Sydney, there is probably another profession which has begun to rise (though not as prestigious as the two mentioned) - the Actuary.

How did this happen? Historically to study actuarial, one needed to enroll within a bachelor’s of commerce degree at UNSW or the actuarial degree at Macquarie University (which is more difficult than their commerce offering). This recently changed at UNSW, having their own actuarial degree and pushing the entry requirements to be almost as high as their law offering. This increase in required marks was followed by an increase in demand - the sign of the Veblen effect.

Cause and effect

The presence of the actuarial degree has had the unintended consequence of restricting access to other degrees; most severely mathematics. There are falling enrollments and narrower concentration streams. This has forced mathematics departments to reinvent themselves, offering Quantitative risk specializations and new degree offerings, in an attempt to entice people into the degree.

This isn’t necessarily a “bad” thing, however anecdotally it means that many of the mathematicians the university would produce would end up being from the actuarial faculty. If we compare this with mathematicians which are produced elsewhere, these mathematicians would generally have a wide and diverse background. In fact one could probably select at random several mathematicians who followed the same program at the same university and arrive at two very different mathematicians. However this would not be the case due to the influence of actuarial science. Instead students would be influenced into taking courses which are complementary to their studies, leading to a homogenous environment.

Career and Onward

One of the common cited challenges in hiring and creating a team for any profession is diversity. With two universities creating actuaries where would they all go? The solution from the institute is to push actuaries into increasingly “non-traditional” roles These would include the previously mentioned Quantitative Risk fields, and technical pricing.

Currently as a quant, you will meet many different kinds of quants, with backgrounds in areas such as hard (Physicists, Chemists) and soft sciences (Econometricians), engineers, computer scientists - basically anyone from a STEM background. In contrast technical pricing within Sydney in particular has been solely reserved for the large influx of actuaries, again anecdotally making it very hard for anyone without an actuarial background to enter.

On Hiring

Even though I have never been formally involved in hiring, I have advised on the process and talked extensively to others particularly on the screening process. I don’t intend on speaking about all the solutions in the world but simply suggesting some of the difficulties of both being a candidate and being the employer.

Let me begin by saying all companies want to hire the best. That is a given. There are of course many restrictions, with regards to salary, and the reality where there is rarely a candidate who is a perfect fit. Even within my own company, I truly believe if I was to interview for my own current role, it would be a coin flip whether I could receive my own position - not because my resume is poor, but simply because technical interviews are so difficult and mind-draining.

I would not at any stage shy from the reality that my actuarial background and the fact that I’m for all intents and purposes an Actuary according to the Institute of Actuaries Australia was a huge bonus to my credentials. In fact, that was the initial label that was given to me - that I am an Actuary, despite literally having no work experience in anything resembling actuarial work.

Technical interviews

In the various positions which I have interviewed for technical components of the interview normally consisted of two parts:

• Knowledge
• Case studies

As I have become increasingly senior, I have noticed that the Knowledge portion has become increasingly shorter and a huge focus on case studies. Unfortunately in my opinion I see them to be ineffective; though I have little to offer in terms of alternatives. Often they are real analytical or technical challenges which the company has faced or currently facing and already working towards or completed a solution. The basic premise is to understand if the candidate will think in the similar way which the interviewer has approached the problem.

This unfortunately only encourages the homogeneity in the organization, as students of actuarial studies would be subjected to their own biases which the interviewee will also have. Of course leading to more hires with an actuarial background.

As an example this is how roughly one of my interviews went:

interviewer: Do you have any experience in motor pricing?
me: No
interviewer: Perfect. How would you determine motor pricing?

I’m sure that this type of question really isn’t that unexpected or unusual in a context of an interview however it simply shows the type of biases which people may be subjected to, more importantly as we try to hire the best think about the type of candidates who would be rejected from this interview due to their poor answers - basically anyone who has not been exposed to modelling from an insurance perspective!

All of a sudden the pool of candidates is much smaller.

So what?

What should we do about all this? Is it even a problem? Personally I think at the core of it; it is a cultural issue. A cultural issue not only at a company level but beyond that, within educational institutions and also the institute of actuaries themselves. It is a reflection of fundamental attribution problem which plagues so many of us. I don’t really have any solutions to this challenge, but I believe that recognizing it would indeed be the first step.

There are too many biases in the way that we approach hiring, I have heard the term “hit the ground running” far too often, where we hire for the now, not for the potential. In many regards, if we were to shift the focus to training and creating the best. Trusting and believing in our processes to make remarkable employees would be the ideal situation to be in, rather than restricting the pool of possible candidates which we are willing to accept.

All that being said, who am I to criticize? I’ve barely been involved in the hiring process!