The role of PhDs in Financial Services: Innovating with Purpose

Kimberly WestFLOCK Notes

February 19, 2024

The title of a recent article in The Economist caught my eye – “How universities contribute to slow economic growth[1].  I have crossed the semi-permeable membrane between academia and the private sector twice, effectively participating in both the “supply” side and “demand” side of university products (e.g., published research, newly minted graduates, executive training).  So, I found myself reading this article with a split personality – both feeling a bit defensive as well as nodding in agreement.  The article centers around the fact that higher education employs 15MM researchers (almost all of whom have PhDs) – up from 4MM in 1980s – who are receiving immense resources from their universities, as well as government and public sector entities like the NSF and the NIH, to produce innovative, groundbreaking ideas.  As the theory goes – these ideas are published and disseminated into the public domain, available to all, and can then be applied to create benefits to society including increases in economic growth.  In theory.  In practice, as the article points out, the rise in the number of researchers and their publications has correlated with a decrease in productivity and worker output – “…universities’ blistering growth and the rich world’s stagnant productivity could be two sides of the same coin…”.

In the 1950s and 1960s, US companies like AT&T, GE, IBM, and Dupont were leaders in innovative research.  These companies hired PhD researchers and then rewarded them for peer reviewed articles and patents.  Bell Labs – once part of AT&T – won 10 Nobel Prizes in Physics and Chemistry, 22 IEEE Medals of Honor (highest award in Electrical Engineering) and produced thousands of peer reviewed articles.  This research was firmly grounded in the needs of the business, leading to profitable growth and expansion.  On that other side of “the coin”, in the 1980s and 1990s, university research investments tripled and then doubled, respectively.  In 2022, R&D spending by US universities reached over $100 Billion (yes…that is a “B” not an “M”).  There was a corresponding reduction in the amount of funding invested in research by the private sector and reduced investment in “corporate research labs”; corporate patent applications have consistently declined at a rate of 1.5% per year over the last 2 decades.  Shouldn’t the increased output from the institutions of higher learning benefit the economy and the private sector?  Why are those papers not being put into innovative action in business?  While the answers are many, one point is that corporate research has a specific aim – the researchers at Bell Labs were innovating for the benefit of their company and their country.  In contrast, the author writes, “…(university) research focuses more on satisfying geeks’ curiosity or boosting citation counts than it does on finding breakthroughs that will change the world or make money…if everyone is arguing over how many angels dance on the head of a pin, the economy suffers”.

Institutes of higher learning in the US are producing more PhDs than ever – with the number of PhDs entering the private sector over academia at an increasing rate – 31% of graduates with PhDs entered the private sector in 2022.  This is particularly true in Financial Services – 35% of PhDs in Analytics/Data Science work in Financial Services[2].  I think this is great news – with economic promise.  Companies like Equifax, Wells Fargo, VISA, and Capital One are reinstating the concept of the “corporate research lab” and hiring PhDs at an impressive rate and incentivizing researchers to innovate, patent, and publish…with purpose.  At Flock Finance, two members of our C-Suite have PhDs – and a recent peer reviewed research publication[3].  We are approaching complex problems with an eye towards creative and novel solutions…and innovating with purpose.

For more information about Flock Specialty Finance, contact Jennifer Lewis Priestley, CDO (



[3] Priestley, J., VonDohlen, E. (2024) Propensity score matching: a tool for consumer risk modeling and portfolio underwriting, Journal of Applied Statistics, DOI: 10.1080/02664763.2024.2302058