What happens when the kids go for startups?

For the last 20 years or so, it has been an ongoing struggle at the Kennedy School to keep up the numbers in terms of our master's graduates going into the public or nonprofit sectors for their first jobs. The salary gap between working at a private-sector firm and working for government or most nonprofits grows by the year. The prestige of government employment continues to take a beating. And, as if all of that isn't enough, government proceeds to shoot itself in the foot with an employment system that keeps applicants waiting for offers months longer than they do with leading private employers. Government also often fails to provide young people exciting first jobs.

Since we are a school for public service, we have taken proactive steps against these trends, including loan forgiveness for students taking low-salary jobs, scholarships tied to public service and efforts by the school leadership to promote a culture of public service (we have a public service day shortly after students arrive, and all the entrances to the School, as well as our website, feature the quote from John F. Kennedy "ask what you can do.") Depending on the year, we often succeed fairly well, all things considered – a clear majority of our master's of public policy graduates take their first jobs in government or a non-profit.

I have noticed, however, an interesting trend among my students in recent years that has now been discussed in a Boston Globe article called "Launching startups while the ink on their diplomas dries." (The article unfortunately is not available online.) The story presented a survey that found "millenials" are more than twice as likely to start their own business immediately on graduation than any previous generation surveyed.

"I absolutely think it's true that there are more people wanting to start companies right out of school," a local venture capitalist was quoted as saying. "The Facebook phenomenon has fueled that."

During the past few years, I have noticed that my students are less and less inclined to want to work for any big organization at all, government or not. Courses on "social enterprises" are flourishing, and more students are entering the Harvard Business School startup contests. Some of the startups students have in mind are businesses that would be supported by revenues, while others might be startups trying to deal with some social problem.

The nice way to look at this – and I typically try to see the nice side of things, especially where our students are concerned – is that this is just a new way for students to show their social engagement. Having said that, though, there's no denying that this trend is yet another roadblock government faces in trying to attract smart young people. I don't have a solution for this, but it is yet another problem – assuming you believe, as I do, that it is important for government to successfully attract a solid share of the most talented young people into its ranks.

This trend also creates a challenge for the way we teach management, not only at public policy or public administration schools but also at most business schools. We have adapted our management curriculum somewhat with courses on social enterprises and nonprofit management. But our central courses still are focused on large organizations. This is increasingly creating relevance problems for our students – even though I think the reality remains that most will end up in large organizations.

One may also ask about this trend from a societal point of view. Our entrepreneurship tradition is one of the U.S. economy's great strengths. The vast majority of startups fail, but we accept a lot of failure because it is voluntarily assumed and because society reaps enormous benefits from the few successes.

However, one may question whether this cost-benefit ratio applies without end. At some point, the likelihood of failure – and thus of wasted resources – may become so high that it would be better for society to have a lower rate of entrepreneurship. I don't know if we're there yet, but I do know that other institutions in society besides startups need smart young people to join them.