Every election campaign sounds remarkably similar. Politicians promise better schools, better healthcare, more efficient public administration, and greater investment in science. Almost everyone agrees that these are among the pillars of a prosperous civilization. Parents want excellent teachers. Patients want excellent doctors. Citizens want competent public officials. Every country hopes for groundbreaking scientists whose discoveries improve lives and strengthen the economy.
Yet almost nobody asks the obvious question.
If these professions are truly among the most important in society, why do they so rarely attract the most capable people?
This is perhaps the greatest paradox of modern states. We claim that education, healthcare, scientific research, and public administration are our highest priorities. Yet our economic system consistently directs much of the world’s exceptional talent somewhere else. The brightest graduates are disproportionately drawn toward investment banking, consulting, venture capital, entrepreneurship, politics, lobbying, and the technology sector. Whether one likes these industries or not is irrelevant. They have one undeniable advantage over most public institutions: they compete aggressively for talent.
Readers of this website know that I have little sympathy for the contemporary political right-left shift. I support democracy, regulated capitalism, scientific progress, and an economy designed to improve human well-being rather than maximize consumption. I reject authoritarian systems such as those of China and Russia and some of BRICS countries, and I have no desire to replace capitalism with socialism or communism.
Nevertheless, intellectual honesty requires admitting when one’s ideological opponents are correct.
On this issue, many right-wing economists have a compelling argument.
The free market is far from perfect. Left unchecked, it produces monopolies, inequality, environmental damage, and many other market failures. Governments must regulate it. Yet the market performs one function astonishingly well. It continuously tests people’s ability to create value under competitive conditions. It is a far harsher and more realistic examination than any university could ever design.
That is because success in the real world depends on much more than IQ.
Modern education often treats intelligence as though it were the ultimate measure of human ability. It is not. High intelligence is enormously valuable, but it is only one ingredient of competence. Real success also depends on personality traits, ambition, discipline, creativity, emotional stability, communication skills, resilience, leadership, practical judgment, risk assessment, talents, and countless mental strategies that no standardized examination can fully capture.
A student may possess an IQ of 150, graduate with distinction from an elite university, and still become an entirely average professional. Another individual with a lower IQ but extraordinary conscientiousness, social intelligence, perseverance, and entrepreneurial instinct may create thousands of jobs, transform an industry, or revolutionize an entire field. Psychometrics is not an exact science.
Universities are excellent at measuring academic performance. They are far less successful at predicting who will become exceptional professionals.
That distinction matters because taxpayers finance the entire process.
Every year, billions of dollars, euros, and pounds are invested in educating future doctors, teachers, scientists, judges, civil servants, and countless other professionals. Society expects this investment to produce excellence. Instead, it often produces something much less impressive.
We educate many people who successfully navigate an academic system but later become mediocre professionals. They obtained degrees, passed examinations, and collected credentials, yet never developed the qualities that distinguish truly outstanding physicians, inspiring teachers, innovative researchers, or competent administrators. Some are not merely average—they are genuinely ineffective. They struggle to communicate, avoid responsibility, resist innovation, make poor decisions, or simply perform the minimum required to retain their position.
Society does not merely finance their education.
It continues paying their salaries for decades through public funds.
This observation is uncomfortable because it challenges a deeply rooted assumption: that academic success naturally leads to professional excellence. It often does not. Educational systems reward a relatively narrow range of abilities, while real-world competence depends on a much broader combination of intelligence, personality, motivation, experience, and judgment.
None of this is an argument against public education. Quite the opposite.
Public education is one of humanity’s greatest achievements. Every advanced civilization depends on it. The problem is not that we educate people. The problem is that our current selection mechanisms are surprisingly poor at identifying those most likely to become exceptional professionals. We often mistake examination performance for overall competence.
The private sector exposes this weakness every day.
Now let’s dive into some old interview: I asked, “What Microsoft competitor worries you most?”
“Goldman Sachs.” I gave Gates a startled look. Was Microsoft about to try the investment banking business? “Software,” he said, “is an IQ business. Microsoft must win the IQ war, or we won’t have a future. I don’t worry about Lotus or IBM, because the smartest guys would rather come to work for Microsoft. Our competitors for IQ are investment banks such as Goldman Sachs and Morgan Stanley.”
Investment banks such as Goldman Sachs and JPMorgan do not recruit people simply because they possess impressive diplomas. Venture-capital firms do not invest millions because someone earned excellent grades. Successful entrepreneurs do not build companies by relying on IQ alone. Competitive markets reward those who consistently create value. They reward people who solve problems, persuade investors, organize teams, innovate, manage uncertainty, recover from failure, and make difficult decisions under pressure.
In other words, the market tests whether intelligence is merely a number or whether it can be transformed into tangible results.
That is why so many exceptionally capable individuals leave the career paths that arguably matter most to society. They do not become elementary school teachers. They do not remain in basic scientific research. They do not spend entire careers as ordinary civil servants. Instead, they are recruited by Goldman Sachs, JPMorgan, McKinsey, venture-capital firms, technology companies, successful start-ups, or eventually enter politics and lobbying, where the rewards are incomparably greater.
One can hardly blame them.
People respond to incentives.
If we genuinely believe that teachers shape future generations, doctors determine public health, scientists create tomorrow’s discoveries, and public servants govern institutions affecting millions of lives, then these professions should not consistently lose the competition for talent.
That is not a problem of intelligence. It is a problem of incentives.
Until we recognize this reality, we will continue asking why schools underperform, why healthcare systems struggle, why bureaucracies stagnate, and why scientific progress often depends more on private corporations than on publicly funded institutions.
The answer may be simpler than we would like to admit.
The best people are not where society needs them most. They are where society rewards them most.
We educate the wrong people
The title of this chapter will undoubtedly offend many readers.
Good.
Some ideas deserve to make us uncomfortable because they force us to question assumptions that have become almost sacred. One of those assumptions is that our educational systems are highly effective at identifying future excellence. I believe they are not. They identify certain kinds of intelligence remarkably well, but they often fail to identify the broader combination of abilities that predicts outstanding professional performance.
That distinction is enormously important because education is not free.
In most developed countries, taxpayers finance years of schooling and university education. Society collectively invests vast amounts of money in future physicians, teachers, scientists, engineers, judges, psychologists, and public administrators. The expectation is simple. We are investing in people who will later improve society.
But what if our selection mechanism is fundamentally flawed?
Universities reward students who perform well within an academic environment. They reward memorization, analytical thinking, examination performance, discipline, and the ability to satisfy institutional expectations. These are valuable qualities. No serious person would deny that.
The problem is that professional excellence requires much more.
A brilliant physician needs empathy, emotional stability, rapid decision-making, practical judgment, communication skills, intellectual curiosity, resilience under pressure, and the willingness to continue learning throughout an entire career.
A brilliant teacher needs charisma, patience, creativity, adaptability, emotional intelligence, organizational ability, and the capacity to inspire children who may have completely different personalities and learning styles.
A brilliant scientist requires originality, intellectual courage, persistence, skepticism, imagination, and often an extraordinary tolerance for repeated failure.
A brilliant public administrator must understand economics, psychology, law, negotiation, organizational management, and political realities while remaining resistant to corruption and short-term political pressure.
None of these qualities can be measured particularly well by written examinations.
Consequently, we often confuse academic achievement with professional potential.
The two are correlated.
They are not identical.
An individual may obtain outstanding grades while lacking many of the characteristics necessary to become an exceptional professional. Another person may earn merely above-average grades but later become one of the most effective doctors, teachers, or entrepreneurs of an entire generation.
Our educational institutions often struggle to distinguish between the two.
This problem becomes even more serious because intelligence itself is frequently misunderstood.
People often speak about IQ as though it were the ultimate measure of human capability. It is certainly one of the strongest predictors of educational and occupational success discovered by psychology. However, IQ is only potential. It does not automatically produce valuable outcomes.
Two people may both have an IQ of 145.
One builds a revolutionary biotechnology company employing thousands of researchers.
The other spends an entire career doing the absolute minimum required to retain a secure public-sector position.
The difference is not intelligence. The same IQ itself may produce different outcomes.
But the difference also lies in ambition, motivation, personality, resilience, creativity, conscientiousness, leadership, emotional regulation, and countless other psychological characteristics that determine whether intelligence is converted into real achievement.
This is why I reject the simplistic idea that education should merely identify the highest IQ individuals.
Society does not need people who simply score well on cognitive tests.
It needs people who consistently solve difficult problems.
Those are not always the same individuals.
Unfortunately, our educational systems often reward exactly the wrong incentives.
Students quickly discover that obtaining excellent grades is usually more important than genuine curiosity. Passing examinations matters more than understanding reality. Following established procedures is often safer than questioning them. Avoiding mistakes frequently receives greater rewards than taking intellectual risks.
These incentives may produce competent graduates.
They rarely produce extraordinary ones.
The consequences become visible after graduation.
Some graduates become outstanding professionals whose contribution justifies every cent invested in their education.
Others become merely average. Some become surprisingly ineffective.
Yet society continues financing all of them. Taxpayers first pay for years of education. They then pay their salaries. They may continue paying pensions decades later.
This is not simply an educational issue. It is an economic issue.
Every mediocre doctor may affect thousands of patients during a career.
Every mediocre teacher influences hundreds or even thousands of children.
Every mediocre scientist consumes research funding that could have supported someone producing genuinely important discoveries.
Every mediocre public official can waste millions through poor decisions, unnecessary bureaucracy, or inefficient administration.
When millions of professionals are involved, even small differences in competence become extraordinarily expensive.
Notice that I am not arguing that public professions are filled with incompetent people.
Far from it.
Many teachers sacrifice enormous amounts of personal time for their students. Many doctors perform miracles under impossible conditions. Many scientists devote decades to advancing human knowledge despite limited funding. Many public servants work honestly and efficiently.
They deserve enormous respect.
The real problem is systemic rather than personal.
Our institutions are surprisingly poor at ensuring that the very best people enter these professions in the first place.
That is why the world’s most competitive industries rarely rely solely on academic credentials.
Investment banks, leading consulting firms, successful technology companies, venture-capital funds, and ambitious start-ups evaluate far more than university transcripts. They test problem-solving ability, communication, leadership potential, resilience, strategic thinking, adaptability, and performance under pressure because they understand something universities often overlook.
The best predictor of future success is not simply intelligence.
It is the ability to transform intelligence into value.
That raises an uncomfortable question.
If the private sector has become better at identifying exceptional people than the institutions responsible for educating society’s future teachers, doctors, scientists, and public servants, should we really be surprised that the best talent increasingly chooses the private sector instead?
The answer, I believe, is obvious. The problem is not that society lacks talented people. The problem is that it rewards them elsewhere.
High IQ is not enough
Intelligence is among the most extensively studied human characteristics, and the evidence is remarkably consistent. Higher IQ predicts better academic performance, faster learning, greater occupational complexity, higher average income, and, in many cases, better health outcomes. Anyone who denies the importance of intelligence is simply ignoring decades of psychological research. A society that deliberately ignores cognitive ability when selecting physicians, engineers, scientists, judges, or pilots would quickly become dysfunctional. Intelligence matters enormously.
The mistake begins when people assume that intelligence is all that matters.
Public debate often treats IQ as though it were a complete measure of human ability. It is not. An IQ score estimates a person’s general cognitive ability—the capacity to reason, recognize patterns, solve unfamiliar problems, and learn efficiently. These abilities are exceptionally valuable, but they represent only one dimension of human performance. Success in demanding professions depends on many additional characteristics that IQ tests were never designed to measure. IQ tests are not exhaustive.
This distinction explains why two individuals with nearly identical IQs may achieve completely different outcomes. Imagine two university graduates, each with an IQ of 145 and equally impressive academic records. One becomes the founder of a biotechnology company employing thousands of researchers, develops a revolutionary medical treatment, and creates enormous economic and social value. The other spends an entire career doing little more than the minimum required to remain employed. Their intelligence is virtually identical. Their contribution to society is not. Something beyond IQ explains the difference.
Psychologists have identified many of these additional factors. One of the most important is conscientiousness. People who score highly on this personality trait are generally disciplined, organized, dependable, persistent, and willing to work toward long-term goals. Numerous studies have shown that conscientiousness predicts job performance across a wide range of occupations. A physician who continuously studies new medical evidence for decades will almost always outperform another physician with identical intelligence who stopped learning after graduation. The same principle applies to teachers, scientists, engineers, and public administrators. Intelligence determines how quickly knowledge can be acquired, while conscientiousness often determines whether it will be acquired at all.
Another crucial characteristic is openness to experience. Individuals high in openness tend to be intellectually curious, imaginative, and willing to question conventional wisdom. These qualities are particularly important in science, where progress depends on challenging established ideas rather than merely repeating them. Many revolutionary discoveries initially appeared absurd because they contradicted accepted beliefs. Researchers lacking intellectual curiosity rarely become pioneers. They may competently conduct routine work, but transformative breakthroughs usually require people willing to think differently and explore unconventional hypotheses.
Emotional stability is equally important, although it receives far less attention. Many professions require individuals to make difficult decisions under intense pressure. Surgeons cannot panic during complicated operations. Firefighters cannot become overwhelmed by fear. Political leaders cannot afford emotional collapse during international crises. Entrepreneurs frequently experience repeated failures before achieving success. In all these situations, the ability to remain calm, evaluate evidence objectively, and continue functioning despite stress may be just as important as raw intelligence.
Ambition represents another characteristic that educational systems struggle to measure. Some people are satisfied with stable careers and modest achievements, while others are driven by an almost obsessive desire to improve existing systems, solve difficult problems, or build something entirely new. Ambition can motivate individuals to work longer hours, acquire new skills, accept uncertainty, and continue pursuing goals despite repeated setbacks. It is impossible to understand exceptional achievement without acknowledging the role of motivation. Intelligence creates potential; ambition determines how much of that potential is actually realized.
Leadership and communication also separate extraordinary professionals from merely competent ones. A brilliant scientist who cannot manage a research team may accomplish less than a slightly less intelligent colleague capable of coordinating dozens of talented researchers. An exceptionally knowledgeable physician who cannot communicate effectively with patients may produce poorer outcomes than a doctor whose explanations inspire confidence and encourage adherence to treatment. Likewise, a school principal with excellent organizational and interpersonal skills may improve an entire institution despite not being the most intellectually gifted person in the building.
Creativity presents another challenge for educational systems. Traditional examinations primarily reward correct answers to predefined questions. Real life is very different. Entrepreneurs create products that previously did not exist. Scientists formulate entirely new hypotheses. Engineers invent technologies that solve problems nobody had previously considered. Public administrators occasionally redesign inefficient institutions rather than merely managing them. These achievements require creative thinking that standardized examinations often measure only imperfectly.
Practical judgment deserves equal attention. Throughout history, many highly intelligent individuals have made astonishingly poor decisions because they lacked common sense, misjudged human behavior, or ignored obvious risks. Conversely, some people with only moderately high intelligence repeatedly make excellent decisions because they accurately assess situations, recognize long-term consequences, and understand how people actually behave. Psychologists sometimes distinguish between intelligence and wisdom for precisely this reason. Solving abstract puzzles does not necessarily translate into making consistently sound decisions in complex real-world environments.
These observations reveal an important limitation of modern education. Universities primarily evaluate performance within universities. Students attend lectures, complete assignments, memorize information, analyze theoretical problems, and pass examinations. Such activities certainly require intelligence and discipline, but they represent only a subset of the challenges encountered outside academia. Professional life demands leadership, negotiation, adaptability, resilience, ethical judgment, creativity, communication, and the ability to perform under uncertainty. Educational institutions measure some of these characteristics reasonably well, but others receive surprisingly little attention.
The private sector often evaluates candidates very differently. Investment banks, technology companies, venture-capital firms, consulting companies, and successful start-ups rarely rely exclusively on academic transcripts. They conduct multiple interviews, case studies, group exercises, personality assessments, and practical simulations because they understand that exceptional performance depends on much more than examination results. Their objective is not merely to identify intelligent individuals but to identify those capable of transforming intelligence into measurable value.
This does not mean that markets are infallible. Luck influences careers. Family background matters. Personal connections matter. Timing matters. Markets sometimes reward speculation more generously than genuine innovation, and monopolies can distort competition. Nevertheless, competitive markets possess one characteristic that public institutions often lack: they continually test whether individuals can convert ability into results. Companies that repeatedly hire ineffective employees eventually lose to competitors. Entrepreneurs who consistently make poor decisions usually fail. Investors who repeatedly allocate capital badly eventually disappear from the market. Performance is continuously evaluated.
Public institutions operate under very different conditions. Many perform extraordinarily well, but they are often protected from the same competitive pressures. Promotion may depend more on seniority than measurable achievement. Bureaucratic procedures sometimes discourage innovation rather than reward it. Job security can reduce incentives for continuous improvement, while salary structures frequently fail to distinguish adequately between exceptional and merely adequate performance. None of this means that public institutions are inherently inefficient, but it does mean that they often struggle to identify and reward excellence as effectively as highly competitive markets.
The conclusion is not that intelligence is overrated. Quite the opposite. Intelligence remains one of the strongest predictors of success ever identified by psychology. The real lesson is that intelligence is only the foundation. Without conscientiousness, ambition, creativity, emotional stability, leadership, practical judgment, and the motivation to produce value, even extraordinary cognitive ability may remain largely unrealized. Universities often identify intelligent people. Society’s far greater challenge is identifying those who can transform intelligence into exceptional performance. As the next chapter will argue, the free market—despite all its imperfections—has become remarkably effective at making precisely that distinction.
The free market: The ultimate test of competence
The claim that the free market is the ultimate test of competence will undoubtedly provoke criticism. Many readers will immediately point out that markets are imperfect. They reward inherited wealth, allow monopolies to emerge, produce externalities, create inequality, and sometimes enrich individuals who contribute little to society. I agree with all of these criticisms. Markets require strong regulation, effective antitrust enforcement, consumer protection, and governments willing to correct market failures. The purpose of this chapter is not to defend laissez-faire capitalism. It is to explain why, despite all its flaws, competitive markets remain remarkably effective at identifying one particular thing: people who can repeatedly create value.
That distinction is crucial because value creation requires much more than intelligence. A competitive market does not ask how many degrees someone possesses or how prestigious their university was. It asks a far simpler question: can this person consistently produce something that other people voluntarily pay for? That “something” may be a technological innovation, a financial strategy, a successful company, a life-saving medicine, a new manufacturing process, or an efficient organization. Whatever the product, the market eventually judges whether it solves real problems better than competing alternatives.
This is fundamentally different from most educational systems. Universities evaluate students in controlled environments with clearly defined rules, known criteria, and predetermined answers. The market offers no such certainty. Entrepreneurs do not know whether customers will buy their products. Investors do not know whether a company will succeed. Scientists founding biotechnology companies have no guarantee that years of research will produce commercially viable therapies. Every important decision involves uncertainty, incomplete information, competition, and substantial personal risk.
That is precisely why success in competitive markets requires such an unusual combination of abilities. Intelligence remains essential, but it must work together with conscientiousness, emotional stability, communication skills, leadership, creativity, resilience, practical judgment, and the willingness to make difficult decisions under uncertainty. Someone who lacks these qualities may perform exceptionally well at university while struggling once academic structure disappears.
Failure is also treated very differently. In education, failure usually means receiving a lower grade or repeating an examination. In competitive markets, failure may involve losing millions of dollars, closing a company, disappointing investors, or spending years building a product that nobody wants. These consequences create extraordinarily powerful incentives to improve. Successful entrepreneurs rarely survive because they never fail. They survive because they learn faster than their competitors. Markets reward adaptation rather than perfection.
This process also exposes an uncomfortable truth about human ability. Many people possess impressive credentials but create surprisingly little value once they enter professional life. Others, whose academic records were merely above average, repeatedly outperform their more academically gifted colleagues because they communicate better, identify opportunities more quickly, organize people more effectively, or make better strategic decisions. Employers eventually notice these differences because they directly influence profitability, innovation, and long-term survival.
Financial markets provide an especially demanding example. Institutions such as Goldman Sachs or JPMorgan do not remain globally competitive by recruiting individuals who simply perform well on examinations. They search for people capable of making sound decisions under enormous pressure, processing vast quantities of information, identifying hidden patterns, communicating effectively with clients, and adapting continuously to changing economic conditions. These organizations certainly value intelligence, but intelligence alone is never enough. Every year, thousands of academically brilliant applicants compete for a relatively small number of positions because these firms understand that exceptional performance depends on a much broader combination of characteristics.
The same principle applies to venture capital and entrepreneurship. Venture-capital firms evaluate hundreds or even thousands of proposals while investing in only a tiny fraction of them. Entrepreneurs repeatedly compete against rival companies, changing consumer preferences, technological disruption, and uncertain economic conditions. Success rarely depends on one brilliant idea alone. It requires persistence, adaptability, leadership, negotiation, financial judgment, and the ability to attract talented employees. Those qualities cannot be reduced to a university transcript.
Even politics, despite its many flaws, demonstrates similar selection pressures. Winning elections requires persuasion, strategic thinking, communication, coalition building, fundraising, media management, and an understanding of public opinion. One may dislike many politicians—and often for good reason—but reaching positions of national leadership generally requires abilities extending far beyond academic intelligence. The same is true for lobbying, where success depends upon negotiation, relationship building, legal knowledge, strategic planning, and influencing decision-makers. Whether these activities benefit society is a separate ethical question. The important point is that they demand abilities that educational institutions seldom measure directly.
The contrast with many public-sector careers is striking. Public institutions certainly contain exceptional professionals, but competitive pressure is often weaker. Salary progression may depend primarily on seniority. Promotion may follow formal procedures rather than measurable achievement. Poor performance is frequently more difficult to address than in private companies, while outstanding performance may receive only modest additional rewards. The result is not universal incompetence, as critics sometimes caricature it, but weaker incentives to distinguish extraordinary performers from merely adequate ones.
This difference gradually influences career choices. Imagine a highly intelligent university graduate who also possesses exceptional leadership skills, creativity, ambition, emotional resilience, and entrepreneurial instincts. Such an individual receives multiple opportunities. They could become an elementary school teacher, a hospital physician, a civil servant, or a basic researcher. Alternatively, they could join an investment bank, a leading consulting firm, a technology company, or a rapidly growing start-up. They might even establish their own company. From a purely economic perspective, the second group of careers usually offers substantially higher financial rewards, greater autonomy, faster advancement, and more opportunities to influence large-scale decisions. Society should not be surprised when many of its most capable individuals make what appears to be the rational choice.
This is exactly where I find myself agreeing with many economists from the political right. Competitive markets, despite their undeniable imperfections, perform an exceptionally effective selection function. They continually test whether people can transform ability into value. They expose weaknesses quickly, reward innovation, encourage adaptation, and place extraordinary value on competence. These mechanisms explain why the private sector often attracts individuals possessing not merely high intelligence but also the personality traits required for exceptional achievement.
Acknowledging this reality does not require embracing free-market fundamentalism. On the contrary, recognizing how effectively markets identify talent should encourage governments to rethink their own incentive structures. If competitive markets consistently attract the world’s most capable people, the obvious question is not whether markets should be abolished. The obvious question is why society’s most important professions struggle to compete for the same talent.
That question leads directly to the next chapter. If competitive markets identify and reward exceptional people so effectively, where do those people actually go? More importantly, why do they so rarely choose the professions upon which every successful civilization ultimately depends?
Where the best actually go: Goldman Sachs, JPMorgan, venture capital, and startups
If competitive markets reward competence more effectively than most public institutions, another question immediately follows.
Where do the most capable people actually end up?
The answer is remarkably consistent across much of the developed world. They do not disappear. They simply migrate toward professions that offer the greatest combination of financial rewards, intellectual stimulation, influence, autonomy, and opportunities for advancement. Society often assumes that the brightest graduates naturally become physicians, teachers, scientists, or public administrators because these professions are among the most important. In reality, many of the world’s most talented individuals pursue entirely different careers.
Consider the graduates of elite universities. Every year, institutions such as Harvard, Stanford, MIT, Oxford, Cambridge, the London School of Economics, or the University of Chicago produce thousands of exceptionally capable graduates. These individuals are not merely intelligent. Many combine outstanding cognitive ability with ambition, resilience, leadership, communication skills, creativity, and extraordinary work ethic. They are precisely the people every school system, hospital, research institute, and government agency should desperately want to recruit.
Yet many of them never seriously consider these careers.
Instead, they receive offers from Goldman Sachs, JPMorgan Chase, Morgan Stanley, BlackRock, McKinsey, Bain & Company, Boston Consulting Group, Google, Microsoft, Meta, NVIDIA, OpenAI, or rapidly growing technology startups. Others establish their own companies, launch venture-capital firms, or move into private equity. Some enter politics, while others eventually become lobbyists, advising governments and multinational corporations on legislation that may affect billions of dollars.
This pattern is not accidental.
These organizations understand that exceptional people produce exceptional results. A brilliant investment banker may structure transactions worth billions of dollars. A talented software engineer may create products used by hundreds of millions of people. An outstanding entrepreneur may establish a company employing tens of thousands of workers. A successful venture capitalist may finance technologies that transform entire industries. From the perspective of these organizations, paying enormous salaries is entirely rational because extraordinary employees often generate value far exceeding their compensation.
Public institutions rarely operate according to the same logic.
An elementary school teacher may shape the intellectual development of hundreds of children over a career, yet their salary often remains modest compared with graduates entering finance or technology. A physician responsible for saving lives may earn less than someone designing advertising algorithms or optimizing financial portfolios. A brilliant scientist conducting basic research may spend years competing for grants while equally talented university classmates receive several times their salary working in investment banking or consulting. Public administrators responsible for managing billions in taxpayer funds frequently earn less than middle managers in large multinational corporations.
These comparisons are not arguments that financiers or entrepreneurs are overpaid. They illustrate something much more important.
Markets allocate compensation according to economic value as perceived by buyers, investors, and employers. Society, however, depends on forms of value that markets frequently underestimate.
A primary school teacher who inspires future scientists, engineers, and physicians may generate enormous long-term benefits for civilization, yet these benefits are difficult to monetize. A researcher studying fundamental physics may produce discoveries that remain commercially useless for decades before revolutionizing technology. A public-health official preventing disease outbreaks may save thousands of lives without anyone realizing what disasters never occurred. Because these contributions are indirect and often invisible, markets naturally struggle to reward them appropriately.
This creates what might be called a talent allocation problem.
The market successfully identifies highly capable individuals. It then directs many of them toward sectors where their abilities produce the highest private returns rather than the highest social returns. From the perspective of individual career choices, this is perfectly rational. From the perspective of society, however, it may be deeply inefficient.
Imagine two equally gifted graduates in mathematics. One joins a hedge fund and develops algorithms that increase annual returns by two percentage points. Investors become wealthier, and the graduate receives an extraordinary salary. The other becomes a secondary-school mathematics teacher and inspires hundreds of students to pursue engineering, medicine, artificial intelligence, and scientific research over the next thirty years. Which individual contributes more to civilization?
The same principle applies to medicine. An exceptionally capable physician may decide to leave clinical practice for the pharmaceutical industry, biotechnology, consulting, or healthcare management because these careers offer better working conditions, greater autonomy, and significantly higher incomes. Such decisions are entirely understandable from an individual perspective. Unfortunately, every departure also represents a loss for patients who might otherwise have benefited from exceptional medical care.
Basic scientific research faces an even greater challenge. Many of the world’s brightest physicists, mathematicians, computer scientists, and engineers eventually leave academia for technology companies or financial institutions. This is not because they have lost interest in science. Rather, they encounter unstable funding, bureaucratic grant systems, uncertain career progression, and salaries that cannot compete with the private sector. Society repeatedly declares that science is essential for progress while simultaneously creating incentives that encourage many outstanding scientists to leave basic research altogether.
Politics presents a more complicated picture. Some exceptionally talented individuals genuinely enter politics out of public service. Others are attracted by power, prestige, or influence. After leaving office, many move into lobbying, strategic consulting, or corporate advisory roles where their knowledge of legislation, regulation, and government decision-making becomes commercially valuable.
Critics may object that many teachers, physicians, scientists, and public servants are themselves extraordinarily talented. They are absolutely correct. Every country contains remarkable educators who inspire generations of students, physicians who dedicate their lives to patients, researchers who expand human knowledge despite limited resources, and civil servants who manage complex institutions with exceptional competence and integrity.
The problem is not that these professions lack talented people.
The problem is that they often fail to attract as many of the very best candidates as they should.
If society genuinely believes that educating children, advancing science, protecting public health, and governing effectively are among civilization’s highest priorities, then these professions should be competing successfully for the world’s most capable individuals. Instead, they frequently lose that competition before it even begins.
This is not because talented people care only about money. Meaningful work, intellectual freedom, prestige, work-life balance, and personal values all influence career decisions. However, financial incentives remain extraordinarily powerful. They signal what society truly values, regardless of what politicians say during election campaigns.
As long as the largest financial rewards, fastest career progression, and greatest professional opportunities remain concentrated elsewhere, many exceptionally capable people will continue making entirely rational decisions. They will choose careers where their talents receive the highest return. The result is that investment banks, consulting firms, technology companies, venture-capital funds, and multinational corporations continue winning the global competition for talent, while schools, hospitals, research institutes, and government agencies struggle to recruit enough exceptional people.
The irony is difficult to ignore. The professions that determine how well future generations are educated, how healthy populations remain, how efficiently governments function, and how rapidly science advances are often not the professions that attract the strongest competition for human talent. That contradiction lies at the heart of one of the greatest policy failures of modern societies.
Why teachers, doctors, scientists and public servants lose the competition
At this point, the problem should be clear. The world’s most important professions are not necessarily losing talented people because they have become less meaningful or less respected. They are losing because they operate under incentive structures that are fundamentally different from those of the private sector. Human beings respond to incentives. They always have, and they always will. Ignoring this basic economic principle has produced one of the greatest talent allocation problems in modern societies.
Many politicians respond to shortages of teachers, physicians, scientists, or civil servants with recruitment campaigns, advertising, or symbolic gestures. They speak about the nobility of public service, the importance of education, or the moral duty to contribute to society. Such rhetoric may sound inspiring, but it rarely changes career decisions. A graduate choosing between two professions does not compare speeches. They compare salaries, working conditions, career opportunities, autonomy, bureaucracy, prestige, and long-term prospects. If one profession consistently performs better across most of these dimensions, it will attract more applicants, particularly among the most capable.
Teaching illustrates this problem perfectly. Every politician claims that teachers shape the future of the nation. The statement is true. Every engineer, physician, entrepreneur, scientist, judge, and prime minister once sat in a classroom. No profession influences more future professionals than teaching. Yet many educational systems continue treating teachers as though they were easily replaceable employees rather than one of society’s most valuable long-term investments.
The consequences are predictable. Highly intelligent graduates who also possess ambition, leadership, creativity, and exceptional communication skills often discover that they can earn substantially higher salaries in consulting, finance, technology, or business while enjoying greater professional autonomy and faster career progression. Those who genuinely love teaching frequently remain despite these disadvantages, but relying solely on idealism is not a sustainable recruitment strategy. Passion can compensate for low salaries only up to a certain point.
Medicine follows a similar pattern. Becoming a physician requires years of demanding education, enormous personal sacrifice, and continuous professional development. Doctors make life-and-death decisions under immense psychological pressure. They work nights, weekends, and holidays while accepting legal responsibilities that few other professions face. Despite this, many healthcare systems burden physicians with excessive paperwork, administrative tasks, staff shortages, and growing bureaucratic requirements. Unsurprisingly, some of the most capable doctors eventually move into pharmaceutical companies, biotechnology firms, private healthcare management, or consulting, where they often enjoy better working conditions together with significantly higher compensation.
Basic scientific research may represent the greatest paradox of all. Nearly every technological revolution originated from fundamental research that initially appeared commercially useless. Electricity, quantum mechanics, antibiotics, semiconductors, molecular genetics, the internet, artificial intelligence, and countless other breakthroughs began as curiosity-driven investigations with no immediate commercial application. Civilization depends upon researchers willing to spend years investigating questions whose practical importance may not become apparent for decades.
Yet these researchers often face temporary contracts, uncertain grant funding, intense competition for limited resources, and salaries that cannot compete with those offered by major technology companies or financial institutions. The result is hardly surprising. Many exceptionally talented mathematicians, physicists, chemists, computer scientists, and engineers eventually leave academia for industries capable of rewarding their abilities more generously. Society celebrates scientific discoveries while simultaneously creating incentives that encourage many outstanding scientists to abandon the environments where those discoveries are most likely to occur.
Public administration faces different but equally serious challenges. Managing a modern state is an extraordinarily complex task. Public officials oversee healthcare systems, transportation networks, taxation, education, environmental policy, digital infrastructure, national security, and countless other functions affecting millions of citizens. Competent administration requires analytical thinking, organizational ability, legal knowledge, negotiation skills, strategic planning, and ethical judgment. These are precisely the qualities that are also highly valued in multinational corporations, consulting firms, and financial institutions.
Unfortunately, governments often struggle to compete. Salary structures are frequently rigid, promotion may depend heavily on seniority, innovation can be discouraged by bureaucratic procedures, and exceptional performance may receive relatively little additional reward. Highly capable graduates therefore compare two career paths. One offers greater flexibility, higher compensation, and faster advancement. The other offers stability but substantially weaker incentives for extraordinary performance. The outcome should surprise nobody.
This does not mean public institutions are filled with incompetent people. Such a conclusion would be both unfair and factually incorrect. Every country possesses exceptional teachers who transform children’s lives, physicians who save thousands of patients, scientists whose discoveries advance human knowledge, and civil servants who modernize inefficient institutions despite limited resources. These individuals deserve admiration precisely because they often succeed despite incentive structures rather than because of them.
The problem is statistical rather than individual. If one sector consistently attracts a larger proportion of exceptionally capable individuals than another, differences in average performance will eventually emerge. This is exactly what economic theory predicts. Talent follows incentives. If the strongest incentives exist outside the public sector, the public sector will gradually lose the competition for many of its most capable potential employees.
Another factor receives surprisingly little attention: opportunity cost. Every exceptionally talented graduate who becomes an investment banker is simultaneously someone who did not become a physician, researcher, teacher, or public administrator. Society usually celebrates successful careers in finance or technology while rarely asking what alternative contributions those same individuals might have made elsewhere. This is not an argument that they have chosen incorrectly. From their perspective, the decision is often entirely rational. The question is whether society has made the right decision by creating incentives that encourage this outcome.
Perhaps the most revealing thought experiment is remarkably simple. Imagine that salaries, working conditions, career opportunities, and professional prestige suddenly became comparable across all professions. Would the distribution of talent remain the same? Would as many outstanding graduates choose investment banking over medicine? Would as many mathematicians leave universities for hedge funds? Would fewer exceptional communicators become elementary school teachers? It is impossible to know the exact answer, but it would be astonishing if career choices remained unchanged.
This demonstrates that the shortage of exceptional professionals in education, healthcare, science, and public administration is not primarily an educational problem. Universities continue producing intelligent graduates every year. The deeper problem lies in what happens after graduation. Our economic and institutional incentives systematically channel many of the most capable individuals toward sectors offering greater rewards.
For decades, governments have attempted to solve these shortages through recruitment campaigns, teacher appreciation days, loan forgiveness programs, or temporary salary adjustments. These measures may provide modest improvements, but they rarely address the underlying economic reality. As long as the most capable graduates perceive that other sectors offer substantially better opportunities, the migration of talent will continue.
The uncomfortable conclusion is that public institutions are competing in a market for talent while behaving as though that market does not exist. Private companies understand that exceptional people generate exceptional value, so they compete aggressively to recruit them. Governments often acknowledge the importance of teachers, doctors, scientists, and civil servants while failing to compete with equal determination.
Until that contradiction disappears, the world’s most important professions will continue losing many of the people they need most.
Basic research: Civilization’s foundation, yet not its destination
If there is one profession that demonstrates the contradiction between what society says it values and what it actually rewards, it is basic scientific research.
Nearly every politician praises science. Governments proudly announce investments in innovation. Companies advertise themselves as being “science-driven.” Citizens expect better medicines, cleaner energy, faster computers, safer transportation, and revolutionary artificial intelligence. Everyone wants the benefits of scientific progress.
Far fewer people are willing to create the conditions necessary for that progress to occur.
This misunderstanding begins with a failure to distinguish between basic research and applied research. Basic research attempts to understand reality without necessarily having an immediate practical objective. Applied research uses existing knowledge to solve concrete problems, develop products, or improve technologies. Both are indispensable, but they play fundamentally different roles.
History demonstrates that many of civilization’s greatest technological revolutions originated from research that initially appeared to have little practical value. When physicists investigated quantum mechanics during the early twentieth century, few imagined that their discoveries would eventually make modern computers, smartphones, lasers, magnetic resonance imaging, GPS technology, and countless electronic devices possible. When molecular biologists studied DNA, they were not trying to establish a biotechnology industry worth hundreds of billions of dollars. When mathematicians developed abstract theories of number systems, they could hardly have predicted that their work would later become essential for modern cryptography and internet security.
The lesson is remarkably consistent.
Society often cannot predict which scientific discoveries will transform civilization.
That is precisely why basic research is so valuable.
Unfortunately, basic research operates within an incentive structure that frequently discourages many of the very people capable of making the next revolutionary discovery. Young researchers often spend years on temporary contracts, moving between universities and countries while competing for limited grant funding. Success increasingly depends not only on scientific ability but also on writing grant proposals, navigating administrative requirements, building professional networks, and publishing a constant stream of papers. These activities are necessary, yet they consume enormous amounts of time that could otherwise be devoted to actual research.
The financial comparison with the private sector is equally striking. A brilliant computer scientist completing a doctorate may choose between remaining in academia or accepting a position at Google, NVIDIA, OpenAI, DeepMind, Meta, Microsoft, or another major technology company. A gifted mathematician may receive offers from quantitative trading firms, hedge funds, or investment banks. An exceptional chemist may join the pharmaceutical industry. A talented engineer may enter the aerospace sector or launch a startup. None of these decisions is irrational. In many cases, they offer higher salaries, greater access to resources, better equipment, larger research teams, and significantly greater financial security.
The result is that universities frequently lose precisely the researchers they should be trying hardest to retain.
This does not mean that industry performs less valuable research. Quite the opposite. Private companies have become extraordinary engines of innovation. Artificial intelligence, electric vehicles, biotechnology, semiconductor manufacturing, robotics, and renewable energy all benefit enormously from private investment. Modern civilization depends upon companies willing to invest billions in technological development.
The problem is different.
Private companies naturally focus on projects that are expected to generate commercial returns. That is exactly what companies should do. Their responsibility is to create value for customers and investors. Governments and universities, however, have a different responsibility. They must support research whose benefits may not become commercially valuable for decades, or perhaps even generations.
If governments fail to fulfill this role, nobody else reliably will.
This creates another paradox. Politicians frequently describe science as the foundation of economic growth while simultaneously evaluating scientific institutions according to short-term economic outcomes. Universities increasingly compete for measurable performance indicators, publication counts, grant income, citation indices, and international rankings. Although these metrics are useful, they can unintentionally encourage incremental research rather than genuinely revolutionary ideas. Researchers become less willing to pursue ambitious, uncertain projects because failure may damage their careers.
Innovation becomes safer.
History suggests that genuine breakthroughs rarely emerge from safety.
Albert Einstein developed the theory of relativity while working in a patent office rather than as a celebrated professor. Gregor Mendel conducted his pioneering work on genetics in a monastery. Alan Turing transformed computer science despite operating outside today’s modern research bureaucracy. Their circumstances were very different, but they shared one characteristic. They pursued questions because they believed those questions mattered, not because they optimized performance metrics.
Modern science cannot simply return to that era. Contemporary research is vastly more complex, expensive, and collaborative. Particle accelerators, genomic sequencing, space exploration, and advanced medical research require enormous institutional support. Nevertheless, the underlying lesson remains relevant. Scientific progress depends upon creating environments where exceptionally talented people are free to pursue difficult questions without being overwhelmed by bureaucracy or forced to justify every idea through immediate commercial application.
Another problem receives surprisingly little public attention. Society often celebrates successful entrepreneurs who commercialize scientific discoveries while forgetting the scientists whose decades of basic research made those discoveries possible. Steve Jobs could not have built the iPhone without generations of physicists, chemists, materials scientists, engineers, and computer scientists whose work created the underlying technologies. Elon Musk could not develop advanced electric vehicles without centuries of research in physics, chemistry, metallurgy, and electrical engineering. Every technological revolution stands upon an enormous scientific foundation built largely by researchers whose names most people will never know.
Ironically, many of these researchers earn only a fraction of the incomes later generated by the technologies they helped make possible.
This is not an argument against successful entrepreneurs. Commercialization is itself an extraordinary skill requiring vision, leadership, organization, and risk-taking. Without entrepreneurs, many scientific discoveries would never improve everyday life. The problem is that society frequently rewards the final stage of innovation far more generously than the earlier stages upon which it entirely depends.
The same pattern appears in artificial intelligence. Public attention focuses on technology companies announcing new models and products, while far less attention is given to decades of publicly funded mathematics, statistics, computer science, neuroscience, and engineering that created the theoretical foundations of machine learning. Basic research once again supplied the raw material from which private innovation emerged.
This brings us back to the central argument of this article.
The issue is not that brilliant scientists disappear. The issue is where they choose to work.
Many exceptionally talented researchers conclude that they can pursue intellectually fascinating problems while earning substantially higher salaries, enjoying greater research budgets, and facing less administrative uncertainty outside traditional academia. From their perspective, this decision is entirely rational. From society’s perspective, however, it represents another example of the same talent allocation problem discussed throughout this article.
If civilization genuinely wishes to accelerate scientific progress, it cannot simply praise science. It must compete for scientific talent with the same seriousness that technology companies, pharmaceutical corporations, and financial institutions already do. Until that happens, many of the world’s most capable researchers will continue viewing basic science not as the destination of their careers, but merely as the starting point toward more rewarding opportunities elsewhere.
We educate talent, then subsidize mediocrity
One of the most overlooked inefficiencies in modern economies is not found in taxation, welfare systems, or public debt. It lies in the way societies invest in human capital.
Every developed country spends enormous sums educating future professionals. Taxpayers finance kindergartens, primary schools, secondary schools, universities, scholarships, laboratories, teaching hospitals, and countless other educational institutions. These investments are entirely justified because an educated population produces higher productivity, greater innovation, stronger democratic institutions, and better health outcomes.
The problem begins after graduation.
Society assumes that once individuals receive their degrees, the system has accomplished its task. In reality, education is only the first stage. The second stage is determining where this newly developed human capital will be used. It is here that many governments fail spectacularly.
Imagine society as an investor.
An investor spends hundreds of thousands of dollars educating an exceptionally talented student. That investment includes years of publicly funded schooling, university education, infrastructure, teaching staff, research facilities, and often subsidized tuition. The expectation is obvious. Society hopes that this individual will later create substantial public value.
Instead, the graduate joins an investment bank, a consulting firm, a technology company, or establishes a successful startup.
From the individual’s perspective, this decision is perfectly rational.
From society’s perspective, the return on its investment is often much smaller than it could have been.
This observation is frequently misunderstood. I am not suggesting that entrepreneurs, financiers, or technology companies do not benefit society. They obviously do. They create employment, generate tax revenue, produce innovation, and improve living standards. The problem is not that talented people enter the private sector.
The problem is that public institutions repeatedly lose the competition for the people they need most.
The opposite problem also exists.
Public institutions often retain individuals who would struggle to survive under stronger competitive pressures.
This is perhaps the most controversial argument in this article.
Many public-sector employees perform their jobs competently. Many perform them exceptionally well. However, every large organization also contains people who contribute remarkably little while remaining employed for decades. Bureaucratic procedures, rigid employment protections, automatic salary progression, and promotion based primarily on seniority rather than measurable achievement can make removing persistently ineffective employees extremely difficult.
Taxpayers therefore finance two separate inefficiencies.
First, they educate highly capable people who later choose careers elsewhere because those careers offer substantially stronger incentives.
Second, they continue paying salaries to individuals whose performance often remains mediocre because public institutions frequently lack effective mechanisms for rewarding excellence and addressing persistent underperformance.
No private company could survive indefinitely under such conditions.
Suppose a technology company repeatedly lost its best engineers to competitors while simultaneously retaining employees who consistently produced below-average results simply because dismissing them was administratively inconvenient. Investors would quickly recognize the problem. Competitors would eventually overtake the company.
Governments rarely face comparable competitive pressure.
Schools continue operating even if many excellent teachers leave.
Hospitals continue functioning despite physician shortages.
Government agencies continue existing regardless of whether administrative efficiency improves.
Citizens often experience the consequences gradually rather than immediately. Waiting times become longer. Bureaucratic procedures become more complicated. Educational outcomes stagnate. Scientific productivity slows. None of these developments usually produces dramatic headlines, yet together they impose enormous long-term costs upon society.
Another issue receives surprisingly little discussion.
Public institutions frequently evaluate employees using criteria that only partially reflect actual performance. Years of service may matter more than measurable outcomes. Formal qualifications may outweigh innovation. Compliance with procedures may receive greater recognition than solving problems. Employees quickly learn which behaviors the system rewards, and rational individuals adjust accordingly.
This phenomenon has been recognized in organizational psychology for decades. People optimize for the metrics by which they are evaluated.
If promotions depend primarily upon seniority, employees naturally emphasize longevity.
If promotions depend upon publication counts, researchers maximize publications.
If promotions depend upon avoiding mistakes, innovation becomes risky.
If promotions depend upon satisfying bureaucratic requirements, bureaucracy expands.
In other words, institutions often receive exactly the behavior they incentivize.
The tragedy is that many exceptionally capable individuals recognize these incentive structures very early in their careers. They understand that extraordinary effort may produce only modest additional rewards, while bureaucratic constraints limit opportunities for creativity and innovation. Consequently, many conclude that their abilities would be more effectively rewarded elsewhere.
Society then loses not only their labor but also their future ideas, leadership, mentorship, and institutional improvements.
The economic consequences extend far beyond salaries.
An outstanding teacher may inspire hundreds of future engineers and scientists.
An outstanding physician may improve hospital procedures affecting thousands of patients.
An outstanding civil servant may eliminate inefficiencies saving taxpayers billions.
An outstanding scientist may produce discoveries that transform entire industries.
When such individuals choose different careers—or never enter these professions in the first place—society loses benefits that are extraordinarily difficult to quantify but impossible to ignore.
This explains why the problem cannot be reduced simply to education spending.
Many countries already invest heavily in education.
The deeper question is whether they allocate the resulting human capital wisely.
Developing talent is only half the challenge.
Creating institutions capable of attracting, rewarding, and retaining exceptional people is the other half.
Without that second step, societies repeatedly make the same costly mistake. They invest enormous public resources developing human capital, only to watch much of their strongest talent flow elsewhere while continuing to finance institutions that too often fail to distinguish excellence from adequacy.
That is not merely an educational problem.
It is one of the largest inefficiencies in modern public policy.
Why quotas cannot solve the problem
Whenever governments face shortages of teachers, physicians, nurses, scientists, or other essential professionals, the proposed solutions are remarkably predictable. Politicians announce new recruitment campaigns. Universities increase enrollment quotas. Public institutions advertise more aggressively. Scholarship programs are expanded, and admission requirements are sometimes relaxed to fill vacant positions. These measures may temporarily increase the number of graduates, but they do remarkably little to improve their average quality.
This is because they address the wrong problem.
The central issue is not that societies produce too few educated people. Most developed countries educate millions of university graduates every year. The real problem is that the most capable graduates often choose different careers. Increasing the number of graduates does not automatically increase the number of exceptional graduates willing to enter public service.
This distinction is fundamental.
Suppose a country faces a shortage of mathematics teachers. One solution is to educate more mathematics teachers. Another is to make teaching sufficiently attractive that exceptionally capable mathematics graduates voluntarily choose schools over investment banks, consulting firms, or technology companies.
These are entirely different strategies.
The first increases quantity.
The second improves quality.
Governments overwhelmingly focus on the first because it is politically easier. Opening additional university places, introducing scholarships, or lowering admission requirements produces immediate statistical improvements. Politicians can announce that thousands of additional students have entered teacher-training programs or medical schools. Unfortunately, such numbers reveal very little about the future competence of those graduates.
Quantity and quality should never be confused.
In fact, emphasizing quantity can sometimes reduce quality.
If admission standards fall significantly, universities may produce more graduates while simultaneously lowering average competence. This observation is not elitist. It simply reflects a basic statistical reality. Every demanding profession requires a certain level of cognitive ability, motivation, emotional stability, and practical judgment. Expanding enrollment without considering these factors may solve numerical shortages while creating new problems decades later.
The same principle applies to medicine.
Many countries respond to physician shortages by increasing medical-school enrollment. This policy certainly has merit if enough highly capable applicants already exist. However, if the profession itself remains less attractive than careers in biotechnology, pharmaceutical companies, finance, or consulting, increasing enrollment alone will not prevent many of the best graduates from leaving clinical practice shortly after qualification.
The shortage simply reappears further along the pipeline.
Scientific research demonstrates an even clearer example.
Governments frequently announce ambitious targets for increasing the number of doctoral students or research positions. Yet they often leave untouched the incentive structures that encourage talented scientists to move into industry after completing their education. Producing more PhDs does not guarantee more world-class researchers if universities continue losing many of their strongest candidates to sectors offering better salaries, greater research budgets, and clearer career progression.
Public administration faces the same challenge.
Lowering recruitment standards may fill vacancies more quickly, but it does not necessarily produce more competent institutions. Managing healthcare systems, taxation, infrastructure, national security, environmental policy, or digital transformation requires exceptionally capable people. These responsibilities become more—not less—complex as societies grow wealthier and technologically advanced.
Another popular proposal involves diversity quotas or demographic targets. These policies deserve careful discussion because they are often presented as solutions to institutional underperformance. Diversity may provide genuine benefits. Teams composed of individuals with different experiences and perspectives can improve creativity, decision-making, and problem-solving under certain conditions. Expanding opportunities for historically disadvantaged groups may also increase fairness and help identify talented individuals who were previously overlooked.
However, quotas alone cannot solve the problem described in this article.
A quota changes who enters an institution.
It does not necessarily change how attractive that institution is to exceptionally capable people.
Imagine two identical hospitals. One introduces demographic quotas while the other does not. If both hospitals continue offering relatively modest salaries, excessive bureaucracy, limited autonomy, and weak incentives for exceptional performance, both will still struggle to recruit many of the world’s most capable physicians. The underlying economic incentives remain unchanged.
Exactly the same logic applies to schools, universities, research institutes, and government agencies.
Institutions compete in a labor market.
People compare alternatives.
Changing recruitment procedures while ignoring compensation, working conditions, prestige, autonomy, and career opportunities resembles trying to repair a leaking roof by repainting the walls. The appearance changes. The structural problem remains.
There is another reason quotas cannot solve the problem.
The competition for talent is international.
A brilliant Czech physicist does not compete only with other Czech researchers. They may receive offers from universities in the United States, laboratories in Switzerland, technology companies in California, or artificial intelligence firms in London. Likewise, an outstanding physician may move abroad, while an exceptional software engineer may establish a startup serving customers worldwide. Human capital has become increasingly mobile, particularly among highly educated professionals.
Governments therefore compete not only with domestic companies but also with foreign employers capable of offering even stronger incentives.
This reality makes the challenge considerably more difficult.
It also explains why symbolic political gestures rarely produce lasting improvements.
None of this means governments should abandon recruitment programs, scholarships, or initiatives promoting equal opportunity. These policies can certainly help. They simply cannot substitute for the one factor that consistently determines where exceptionally capable people choose to build their careers.
Incentives.
If a society genuinely wants outstanding teachers, physicians, scientists, and public administrators, it must become one of the most attractive employers for such people. That attractiveness depends upon far more than salary alone, but financial rewards remain an indispensable component because they communicate something deeper.
They reveal what society truly values. Politicians often declare that education is the nation’s highest priority.
Healthcare is the nation’s highest priority. Science is the nation’s highest priority. Public administration is the nation’s highest priority.
If those statements were reflected in economic reality, the labor market would look very different.
Until incentives change, governments will continue trying to solve a problem of quality with policies primarily designed to increase quantity. That strategy may fill vacancies, but it will not consistently attract the exceptional individuals capable of transforming schools, hospitals, research institutes, and public institutions.
The solution therefore lies elsewhere. It lies in redesigning the incentive structures that determine where talent ultimately decides to go. That is the subject of the next chapter.
Financial incentives determine where talent goes
Throughout this article, I have argued that the central problem is not education itself. It is not the number of universities, the number of graduates, or even the overall supply of intelligent people. The real problem is that society has created incentives that systematically direct many of its most capable individuals away from the professions upon which civilization ultimately depends.
This conclusion should not be controversial.
It is one of the oldest and most robust principles in economics.
People respond to incentives.
Unfortunately, public debate often treats financial incentives as though they were somehow immoral. Teachers should teach because they love children. Doctors should become physicians because they want to help patients. Scientists should pursue knowledge for its own sake. Public servants should dedicate themselves to the common good regardless of personal sacrifice.
These expectations sound noble.
They are also profoundly unrealistic.
No one expects software engineers, architects, investment bankers, airline pilots, or entrepreneurs to ignore financial incentives simply because their work is socially valuable. Yet society repeatedly expects exactly this from teachers, physicians, scientists, and civil servants. We praise their dedication while simultaneously accepting compensation systems that often make these professions economically less attractive than countless alternatives.
Admiration is not an incentive.
Salary is.
Career progression is.
Professional autonomy is.
Research funding is.
Working conditions are.
Prestige is.
The opportunity to shape institutions is.
Human beings naturally compare these factors when making career decisions. This does not make them greedy. It makes them rational.
Imagine two equally talented graduates completing university. Both possess exceptional intelligence, ambition, leadership ability, emotional stability, and creativity. One chooses investment banking and receives an excellent salary, generous bonuses, rapid promotion, extensive professional development, and opportunities to manage billion-dollar projects before turning thirty-five. The other becomes a secondary-school teacher, earning a fraction of that income while facing growing administrative burdens, political interference, increasing class sizes, and limited opportunities for advancement.
Which decision should surprise us?
Certainly not the first.
The surprising question is why we continue pretending that such incentives have little influence.
The same comparison appears throughout the public sector.
A brilliant mathematician can design algorithms for quantitative trading.
A brilliant computer scientist can develop artificial intelligence at a leading technology company.
A brilliant chemist can work in pharmaceutical development.
A brilliant physician can move into biotechnology or healthcare consulting.
A brilliant economist can join Goldman Sachs or JPMorgan.
A brilliant lawyer can become a corporate partner.
None of these individuals behaves irrationally.
They simply respond to the incentives society has created.
Critics sometimes object that raising public-sector salaries would be prohibitively expensive. This argument deserves careful examination because it appears persuasive at first glance.
Suppose a government substantially increased salaries for teachers, physicians, researchers, and senior public administrators. Public expenditure would certainly rise in the short term.
But what happens over the following twenty or thirty years?
Better teachers produce better educated citizens.
Better physicians reduce long-term healthcare costs by improving diagnosis, treatment, and prevention.
Better scientists generate discoveries that increase productivity and create entirely new industries.
Better public administrators reduce waste, improve infrastructure, simplify bureaucracy, and allocate public resources more efficiently.
In other words, exceptionally capable professionals rarely represent ordinary expenditure.
They are investments.
Governments readily spend billions constructing highways, airports, hospitals, and digital infrastructure because these assets generate long-term economic returns. Human capital deserves exactly the same perspective. A brilliant teacher may influence two thousand students during a career. A brilliant physician may improve the lives of tens of thousands of patients. A brilliant civil servant may save taxpayers billions through better policy design. A brilliant scientist may create knowledge upon which entire industries later emerge.
Few infrastructure projects produce returns comparable to these.
Another common objection is that public institutions cannot compete with multinational corporations because governments will never match the salaries offered by investment banks or technology companies.
This criticism is partly correct.
Governments do not need to become the highest-paying employers in society.
They simply need to become competitive enough that exceptionally capable individuals no longer dismiss public service before seriously considering it.
Many people willingly accept somewhat lower incomes in exchange for meaningful work, greater social impact, job security, intellectual freedom, or improved work-life balance.
The problem arises when the gap becomes enormous.
If an exceptionally capable graduate can earn three or four times more elsewhere while also enjoying better working conditions and greater professional autonomy, idealism alone rarely overcomes such differences.
Financial incentives therefore perform another important function.
They communicate respect.
Politicians frequently declare that teachers are the foundation of democracy, physicians are heroes, scientists drive progress, and public servants protect the public interest. These statements may be sincere.
Budgets reveal whether governments truly believe them.
Every budget is ultimately a moral document.
It shows what a society values once speeches have ended.
If governments genuinely believe education determines national prosperity, schools should compete aggressively for outstanding graduates.
If healthcare is considered essential, hospitals should become some of the most attractive workplaces for exceptional physicians.
If science drives innovation, researchers should not spend years worrying about temporary contracts and unstable grant funding.
If effective government matters, public administration should recruit managers capable of competing with the private sector rather than hoping idealism alone will fill vacancies.
Financial incentives are not the entire solution.
Poor management cannot be compensated merely by higher salaries.
Excessive bureaucracy discourages talented people regardless of compensation.
Limited autonomy frustrates ambitious professionals.
Political interference damages institutions.
Promotion based on seniority rather than merit undermines motivation.
These problems must also be addressed.
However, financial incentives remain the foundation because they influence every subsequent decision. They determine who applies, who remains, who leaves, and who never even considers entering a profession in the first place.
The central lesson is remarkably simple.
Human talent flows toward opportunity.
For decades, governments have attempted to persuade exceptionally capable people to choose education, medicine, science, and public administration while offering weaker incentives than many competing industries. The outcome should never have been surprising.
People did exactly what economics predicts they would do.
If society wants different results, it must create different incentives.
Otherwise, it will continue producing the same outcome generation after generation while wondering why the professions that matter most struggle to attract the people who could transform them.
A science-oriented economy that truly benefits society
One misconception has followed this article from the very beginning, and it should now be addressed directly. Some readers may conclude that I am arguing for a society in which everyone should become an entrepreneur, investment banker, or technology executive. Others may assume that I have suddenly adopted a free-market ideology. Neither conclusion is correct.
I remain convinced that the purpose of an economy is not simply to maximize GDP, stock-market valuations, or consumption. Economic growth is valuable only insofar as it improves human well-being. An economy should help people live longer, healthier, happier, and more intellectually fulfilling lives. It should encourage scientific progress, reduce unnecessary suffering, protect democracy, and create opportunities for future generations. Wealth is a tool, not an objective.
That is precisely why I find the current allocation of talent so irrational.
Today’s economy often rewards activities according to their short-term market value rather than their long-term contribution to civilization. Financial engineering may generate enormous profits without producing comparable social benefits. Advertising companies compete to persuade people to consume products they often do not need. Entire industries invest billions in capturing attention, increasing engagement, or encouraging consumption that contributes little to human flourishing.
At the same time, professions that genuinely determine the future of civilization frequently struggle to attract the strongest competition for talent.
There is something deeply contradictory about a civilization in which designing advertising algorithms may be rewarded more generously than educating children, preventing disease, conducting fundamental scientific research, or improving public administration. This does not mean advertising has no value or that finance is inherently harmful. Efficient capital allocation is essential for economic growth, and successful companies create enormous prosperity. The problem arises when relative incentives become so distorted that they systematically direct exceptional people away from activities generating the greatest long-term public benefit.
In my view, a truly advanced economy should become increasingly science-oriented rather than consumption-oriented.
Scientific knowledge is unique because it generates cumulative progress. Every important discovery becomes part of humanity’s permanent intellectual capital. Once we understand electricity, genetics, antibiotics, quantum mechanics, or artificial intelligence, that knowledge can continue benefiting civilization indefinitely. Scientific progress compounds over generations in ways that consumption never can.
Education functions similarly.
Every exceptionally capable teacher influences hundreds or thousands of students throughout an entire career. Some of those students become physicians, engineers, entrepreneurs, researchers, or political leaders. Their own achievements then influence thousands of additional people. The benefits multiply across generations. Few economic investments produce comparable long-term returns.
Healthcare follows the same principle.
Healthier populations are more productive, more innovative, and generally happier. Preventing illness is usually far less expensive than treating it. Outstanding physicians therefore contribute not only to individual patients but also to national productivity, scientific progress, and economic development. Yet despite these enormous social returns, healthcare systems in many countries continue struggling to compete for the very best professionals.
Public administration may appear less exciting than technology or entrepreneurship, but its influence is equally profound. Efficient governments reduce unnecessary bureaucracy, simplify regulations, improve infrastructure, protect the rule of law, and allocate public resources intelligently. Poor governments waste extraordinary amounts of human talent through inefficient institutions, corruption, excessive regulation, and short-term political thinking. Exceptional public administrators therefore create value extending far beyond their own offices.
Notice what these professions have in common.
They generate positive externalities.
Economists use this term to describe activities whose benefits extend beyond the individual directly performing them. An entrepreneur may enrich shareholders while simultaneously creating employment, innovation, and tax revenue. Likewise, an excellent teacher improves future generations. An outstanding scientist expands humanity’s knowledge. A brilliant physician improves public health. A competent civil servant strengthens institutions serving millions of citizens.
Markets often struggle to price these externalities correctly.
That is why governments exist.
Their purpose is not merely to regulate markets or redistribute income. One of their most important responsibilities is correcting situations where private incentives diverge from social interests. Education, basic research, healthcare, environmental protection, and effective public administration all belong within this category because their long-term benefits extend far beyond the individuals immediately involved.
Ironically, many governments acknowledge this principle in theory while undermining it in practice.
They praise teachers while underpaying them.
They celebrate scientific achievements while reducing research budgets.
They describe healthcare as a national priority while allowing physician shortages to worsen.
They demand more efficient public administration while creating bureaucratic systems that discourage innovation.
Their rhetoric and their incentives point in opposite directions.
A science-oriented economy would approach these priorities differently.
Instead of asking which professions generate the highest quarterly profits, it would ask which professions generate the greatest long-term improvements in human well-being. Instead of concentrating exceptional talent wherever immediate financial returns happen to be highest, it would deliberately create conditions allowing education, healthcare, science, and public administration to compete for the world’s most capable people.
This does not require abolishing markets.
Quite the opposite.
Markets remain indispensable for innovation, entrepreneurship, competition, and efficient allocation of many resources. They have produced extraordinary technological progress and lifted billions of people from poverty. My argument is not against capitalism. It is against allowing market incentives alone to determine where civilization’s greatest talent ultimately ends up.
A healthy economy requires both dynamic markets and intelligent public institutions.
Markets generate innovation. Governments correct market failures. Science expands knowledge. Education develops human capital. Healthcare preserves it.
Public administration coordinates the institutions upon which all of them depend.
None of these sectors should exist in opposition to the others.
They should reinforce one another.
The tragedy of many modern societies is that they often treat these sectors as though they were competing interests rather than complementary parts of the same civilization. The consequence is a systematic misallocation of talent that weakens every one of them.
If we genuinely believe that the purpose of economic development is to improve human lives rather than simply increase consumption, then our incentive structures should reflect that belief. They currently do not. Until they do, society will continue directing too many of its most capable people toward activities with the highest private returns rather than the highest long-term public value.
That is not merely an economic inefficiency.
It is a failure of civilization itself.
How to attract the best back into the professions that matter most
Identifying the problem is relatively easy. Solving it is considerably more difficult.
There is no single reform capable of transforming education, healthcare, science, or public administration overnight. Human behavior is influenced by many different incentives, and no government can simply order exceptionally talented people to become teachers or scientists. Nor should it try. Free societies depend upon individual freedom of choice. The objective is not to force career decisions but to make society’s most important professions genuinely competitive once again.
The first and most obvious reform concerns financial incentives.
Throughout this article I have argued that salaries are not everything. That remains true. Nevertheless, they are far from irrelevant. Compensation sends a powerful signal about what a society truly values. If politicians repeatedly describe teachers as the foundation of democracy while paying them substantially less than many private-sector professions requiring comparable ability, people eventually conclude that the speeches are merely symbolic.
Governments should therefore stop viewing higher salaries for exceptional professionals as ordinary expenditure. They should view them as long-term investments. Paying an outstanding mathematics teacher twice as much as an average one may appear expensive in the annual budget. Over the following thirty years, however, that teacher may inspire hundreds of future engineers, physicians, scientists, entrepreneurs, and innovators. The return on investment could easily exceed that of many infrastructure projects receiving far greater political attention.
The same principle applies to medicine, scientific research, and public administration. Exceptional people create disproportionate value. A brilliant physician may improve an entire hospital. A brilliant scientist may establish a research group producing discoveries for decades. A brilliant civil servant may redesign administrative systems saving taxpayers billions. Treating such individuals as ordinary employees rather than extraordinary assets is economically irrational.
However, salary alone cannot solve the problem.
Working conditions matter almost as much.
Many teachers do not leave education because they dislike teaching. They leave because bureaucracy increasingly consumes the time they would rather spend educating children. Many physicians do not abandon clinical practice because they dislike patients. They leave because administrative paperwork, staff shortages, and organizational failures gradually replace medicine itself. Researchers often complain less about science than about spending months writing grant applications with little guarantee of success.
Reducing unnecessary bureaucracy may therefore attract talent just as effectively as increasing salaries.
Professional autonomy also deserves greater attention.
Highly capable people generally prefer environments where they can make meaningful decisions rather than simply follow procedures designed decades earlier. They enjoy solving problems, improving institutions, and experimenting with new ideas. Excessive centralization discourages precisely the individuals society most wants to recruit. Schools should trust excellent teachers. Hospitals should trust excellent physicians. Research institutions should trust outstanding scientists. Governments should trust competent administrators instead of surrounding them with layers of unnecessary regulation.
Promotion systems require equally fundamental reform.
Many public institutions continue rewarding seniority more consistently than performance. Experience certainly matters, but experience alone does not guarantee excellence. Institutions should identify, promote, and reward individuals who demonstrably improve outcomes rather than merely accumulating years of service. This does not mean adopting simplistic performance metrics. Teaching quality, scientific creativity, medical judgment, and public administration cannot always be reduced to numerical indicators. Nevertheless, organizations can become much better at recognizing genuine excellence than many currently are.
Leadership represents another overlooked issue.
Outstanding institutions rarely emerge by accident. They are usually built by exceptional leaders capable of attracting talented colleagues, establishing ambitious goals, protecting professional standards, and creating cultures where excellence becomes the norm rather than the exception. Selecting school principals, hospital directors, university rectors, research managers, and senior civil servants should therefore become one of government’s highest priorities. Mediocre leadership inevitably produces mediocre institutions regardless of how much money governments invest.
Governments should also rethink how they identify talent.
Educational credentials undoubtedly remain important, but they should not become the only criterion for recruitment or promotion. Leadership ability, creativity, emotional stability, communication skills, practical judgment, integrity, and long-term achievement deserve much greater attention. The goal should not be to recruit people with the highest IQs. It should be to recruit individuals most likely to become exceptional professionals.
This distinction cannot be emphasized strongly enough.
Society does not need every elementary-school teacher to possess an IQ of 170.
It does not need every physician to become another Jonas Salk.
It does not need every scientist to become another Albert Einstein.
It does, however, need public institutions capable of attracting a significantly larger proportion of highly capable, ambitious, conscientious, and creative individuals than they currently do.
Another reform concerns prestige.
Prestige may appear superficial, yet it strongly influences career choices. In countries where teaching, science, medicine, or public administration enjoy exceptional social respect, recruitment tends to become considerably easier. Governments cannot manufacture prestige through advertising campaigns alone. Prestige follows excellence. As institutions become more selective, more competitive, and better rewarded, public perception gradually changes as well.
Technology offers another opportunity.
Artificial intelligence, automation, and digital administration should not replace teachers, physicians, scientists, or civil servants at this time. Instead, they should eliminate routine tasks allowing professionals to devote more time to the work that actually requires human expertise. A physician should spend more time treating patients than completing paperwork. A teacher should spend more time educating children than filling administrative forms. A scientist should spend more time conducting research than managing bureaucracy. Technology should amplify human talent rather than wasting it.
Finally, governments must begin thinking about human capital with the same seriousness that successful companies already do.
Large corporations understand that exceptional employees are their greatest competitive advantage. They identify talent early, invest heavily in development, reward outstanding performance, and compete aggressively to retain their strongest people. Governments often speak about human capital while behaving as though talented professionals are an unlimited resource that will somehow appear regardless of institutional quality.
They will not.
The global competition for talent is becoming more intense every year. Artificial intelligence, biotechnology, quantum computing, robotics, climate science, and numerous other fields will require unprecedented numbers of highly capable people. Countries failing to compete for this talent will gradually fall behind—not because they lack natural resources or financial capital, but because they failed to attract and retain the people capable of transforming those resources into long-term prosperity.
Ultimately, the question is surprisingly simple.
What kind of civilization do we want to build?
One that merely accepts where markets happen to allocate exceptional people, or one that deliberately creates conditions encouraging the world’s most capable individuals to educate children, cure diseases, expand scientific knowledge, and manage public institutions?
The answer will determine far more than the future of public-sector employment.
It will determine the future quality of civilization itself.
Conclusion: Society gets the incentives it creates
This article began with a simple question.
If teachers educate future generations, doctors preserve human health, scientists create tomorrow’s technologies, and public servants manage the institutions upon which civilization depends, why are these professions so often unable to attract the strongest competition for talent?
The answer, I believe, has become increasingly clear.
The problem is not that society lacks intelligent people.
The problem is not that universities produce too few graduates.
The problem is not even that public professions have become less meaningful.
The problem is that our incentive structures systematically direct many of the most capable people somewhere else.
For decades, governments have responded to shortages by increasing university enrollment, introducing recruitment campaigns, creating scholarship programs, and debating quotas. These measures may increase the number of graduates, but they do remarkably little to change where the best graduates ultimately choose to build their careers.
The private sector understands something that governments too often forget.
Exceptional people generate exceptional value.
Consequently, investment banks, technology companies, consulting firms, venture-capital funds, pharmaceutical corporations, and successful startups compete relentlessly to recruit the most capable individuals. They offer higher salaries, greater autonomy, faster career progression, stronger incentives, and environments where outstanding performance is rewarded rather than merely appreciated.
Public institutions frequently do the opposite.
They speak constantly about the importance of teachers, physicians, scientists, and civil servants while expecting many of them to accept lower salaries, heavier bureaucracy, fewer opportunities for advancement, and weaker recognition of exceptional performance. They praise excellence while building systems that often struggle to distinguish extraordinary professionals from merely adequate ones.
No economist should find the outcome surprising.
People respond to incentives.
The irony is that I do not consider myself a supporter of free-market fundamentalism. I believe strongly in democracy, regulated capitalism, public education, universal access to healthcare, and government investment in science. I reject the authoritarian economic models represented by China, Russia, and many other countries that subordinate individual liberty to state power.
Yet intellectual honesty requires acknowledging an uncomfortable truth.
Many economists on the political right correctly understand how incentives shape human behavior.
Where I disagree with them is in the conclusion.
Many free-market advocates argue that because markets allocate talent efficiently, governments should simply step aside and allow this process to continue. I reach the opposite conclusion. Markets successfully identify and reward exceptional people, but they do not necessarily allocate them where they generate the greatest long-term benefit for civilization. That responsibility belongs to democratic governments.
The objective should therefore not be to weaken markets but to strengthen public institutions until they become genuine competitors in the market for talent.
Governments cannot force exceptional people to become teachers, physicians, scientists, or public administrators.
Nor should they.
They can, however, create conditions under which these careers become genuinely attractive to ambitious, intelligent, creative, and highly capable individuals. They can reduce bureaucracy, reward excellence, improve professional autonomy, increase research funding, modernize public institutions, and offer compensation reflecting the enormous long-term value these professions create.
Perhaps the most important lesson of this article is that human capital is not simply another budgetary item.
It is the foundation of civilization. Natural resources can be exhausted. Factories become obsolete. Infrastructure eventually requires replacement. Knowledge, however, accumulates.
Every outstanding teacher influences future generations. Every exceptional physician preserves human potential. Every brilliant scientist expands humanity’s understanding of reality. Every competent public servant strengthens institutions that may endure for decades. These are investments whose returns compound across generations.
The greatest mistake modern societies make is not failing to educate people.
It is educating highly capable individuals while systematically encouraging many of them to devote their talents elsewhere. At the same time, public institutions often tolerate mediocrity because their incentive structures make excellence surprisingly difficult to recognize and reward. Taxpayers therefore finance both sides of the problem. They invest enormous sums developing human capital, yet too often fail to ensure that this capital serves the areas where it is needed most.
That situation is neither inevitable nor irreversible.
Economic incentives are human creations.
They can be redesigned.
If governments genuinely believe that education, healthcare, science, and effective public administration represent the pillars of a prosperous civilization, then their budgets, employment policies, and institutional structures should reflect that belief. If they do not, speeches about national priorities become little more than political theatre.
Civilizations rarely decline because they completely run out of talented people.
More often, they decline because they fail to use those people wisely.
In the end, societies do not simply get the governments they deserve or the economies they build.
They get the incentives they create—and those incentives ultimately determine where their best people choose to go.
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