Transcriber: Kristaps Kadiķis Reviewer: Ilze Garda
(Piano music)
Okay, enough of that.
Hi, it's a pleasure to be here.
I'm going to talk about investment decision.
I'm going to talk about the choice.
What is the single most important investment decision in your life?
Audience: (Unclear)
Daniels Pavļuts: Maybe.
My answer -
education.
An investment in yourself. Probably the most important,
the most useful - or not - investment decision in your life.
Okay, now let's do a quick poll now.
How many of you now are in the profession
that you studied for in your first undergraduate degree,
your first bachelor's?
Roughly a half or a bit less, right?
More or less.
Okay, according to hard data -
poll of the last year -
43 percent of people in our country do not work in their profession,
the profession they studied for.
Does that make them a failure?
Jānis Holšteins - Goran Gora - spoke today and he said,
well, he didn't get the musical training properly.
He's a musician.
Well, I got a music education - I'm not a musician.
Does that make us both a failure?
Probably not.
Okay, now the question is –
the question we're going to explore today is
how do make this decision,
how do we make the choice, how should we approach a problem.
Okay. Now there's one option –
listen to others.
A popular one.
You could actually call it differently,
I think the typical way of calling this is
common sense, right?
Common sense a.k.a. listening to what others say,
listening to what their experience has been,
what their information is about what you should do.
Some examples of common sense –
you might hear this from your parents, from teachers, from your peers,
from people you study with.
Now, learn a good profession and you're set for life.
Probably still true.
I mean, we still need dentists, we still need lawyers
and all sorts of our professional lives could still be true to that respect.
Now, be good at something, not everything – focus.
Yes, but –
and we're going to talk a bit more about that –
if you are very focused,
there are certain consequences to that.
Now, one lifetime – one career.
How real is this?
Yesterday as I was coming in
at the opera house here, through the backdoor,
I met a lady, and she still remembers me
working here 12 years ago.
She's still here – I've had three professions in the meantime.
Now, I guess that depends, right?
There's no one answer for everyone.
So how could other people's information be so much useful to you?
Okay, let's see the data again.
Now, this is a comparison of future occupation preferences
among high school students in Latvia.
50 years in between, 1965 – last year.
Stare at it for a second.
Okay, I've done it easier for you.
So, doctors and pilots, and creative professions,
like artists and writers,
show remarkable resilience.
Okay, I understand about movie stars and doctors.
Of course, pilots is cool, it's, I mean, all the sexy uniforms,
you get to fly big planes.
Not that we need many pilots really.
But that's kind of clear.
Now, I'm actually a bit worried about these people here.
We badly need them these days.
They were popular in 1965.
They're firmly gone –
engineers and scientists are firmly gone from the top choices in 2011.
That's a problem.
Another interesting thing is
that these days we have still popularity for lawyers, financiers, PR people.
Nothing wrong with that,
but I guess we have produced far too many of these in the last 20 years anyway.
And still young people's choices now reflect that old information.
This is not very useful going forward.
What else could you do?
Instead of replicating other people's choices, of course.
You could try and predict the future.
With the information you've got, you could try to look ahead.
You could try to extrapolate the past, past experience,
and predict what's going to happen.
And you could. I've already said – engineers.
If you want to become an engineer
and it's good for you, and you like it,
you are probably going to be set for life.
It's a good one.
But should you become an engineer,
because it is expected that we'll need engineers?
Let's see!
Now, if you try and predict the main sectors of an economy,
and make it out where should you invest in your education,
well, it's hardly very easy to do.
Now, see what has happened to agriculture.
It's gone down. It's not such a long period of time.
It's gone down dramatically. Where is it going to go?
Not much further.
Manufacturing. Well, decreased substantially.
Given what I know as a minister of economy
about economic policy of our country, where we're going,
we're probably going to see more employment in manufacturing in the future,
but not dramatically more.
Certainly not as much as in 1985.
Now, what really worries me in this slide is the "Other".
What is the "Other"?
That's everything else,
that's where the growth is, where the creativity is,
that's all the services sectors, that's where the ICTs are.
Cleantech, greentech, whatever tech.
All of these things are in this one aggregate "other".
And this would be so complicated now to tell
what is going to happen,
what specific skillsets you might need,
what profession you might be in.
So, not such an easy task to look at the past data
and predict with what you know today, what is going to happen.
Some things you can predict, but certainly not everything.
What else can you do?
You can listen to yourself, talk to yourself.
Now, should you meditate on your future profession?
Not necessarily, but not that it's a bad idea.
I mean I encourage you to do so,
but the important thing is to find out
what is it that you really want,
what is it you think you could be good at,
what do you enjoy doing.
I'm sure everybody has read or heard
Steve Jobs' famous Stanford graduation speech.
Right?
So, basically, what he did at a certain point in his education,
had no hope of practical use at the time he did it,
he just felt like doing it.
Well, my Jobs' moment came 6 years ago at Harvard
when I decided to take an energy class,
energy policy class with John Holdren,
who is now chief scientific advisor to Barrack Obama.
Now, there was no way of knowing for me at that time
that today it will be half of my job content – energy.
Back then, with all the public administration, leadership,
all sorts of other classes that I took – all the economic classes –
energy wasn't really an obvious one.
So you never know.
If you feel like it,
chances are it's going to be useful.
Skill versus competence.
An old story, isn't it?
Skills are, have been and will be certainly useful.
Now, but which should you invest in?
Skills or a broader competence?
We've heard about importance of philosophy, importance of humanities.
Now, could it be that broader competences could actually be the way forward
in an environment which we do not really predict?
Okay, skills are going to be important,
skills like analytical skills, like math -
might be useful to everyone to a certain degree.
But at the same time we clearly see
that even in the professions which are a lifetime careers,
increasingly broad competences are very important.
This is how you actually prepare yourself for various changes.
Now, this is blah blah blah, but let's look at the data.
This graph, this analysis,
has been put together by a very interesting man –
Professor Hanushek from Stanford University.
I had a privilege of meeting him this year at the Munich Economic Conference,
and he was talking about
the different employment expectations which you might have,
given the general education or vocational education in your background.
So, basically, broader competence versus skill –
specific labour market-related skill.
So, apparently - shouldn't come as a big suprise -
if you learn a trade,
you learn skillset which is specific enough,
you easily get – you have 80 percent chance
of getting quickly employed as you go out of school.
With general education, it's much lower,
comes up gradually.
But look what happens towards the end of your career.
With a specific skillset,
it declines dramatically towards the end of your life.
Towards the retirement period,
you are actually much more likely not to have a job.
And it's the vice versa for a broader skillset.
Well, I clearly agree - I mean, of course we need people in the professions,
but I guess the challenge here is for people
who get the skillsets early on,
to also learn to learn,
to get a competence of learning in mid-life, to reorient themselves.
So, that's part of what policy makers really have to struggle with.
There's a lot of uncertainty.
There are various studies that indicate
that about 40 percent of the jobs of tomorrow
are as of yet unknown.
We don't know what they are going to be like.
So there's massive uncertainty about what you should do today
to become the next Steve Jobs.
Impossible to tell that.
So, is that a problem?
Well, probably not!
A famous professor Richard Zethhauser from Harvard University
has famously stated
that unknowable situations have been and will be associated
with remarkably powerful investment returns.
Do you think that the gentleman who lent money to Mark Zuckerberg
– I think about 20,000, was it? –
and ended up with a couple of billion.
Did you think he expected it to happen?
Maybe, probably not.
Would you do it if you were asked by Mark Zuckerberg,
would you give him 20,000 dollars?
You wouldn't? Okay.
Probably I wouldn't either.
Anyway, so this is the power of unknown.
And that is also true about skills, about competences,
about choosing your education choices.
So what is the point of reference here?
We come back to the fact that the only point of reference is really yourself.
Chances are if you invest in yourself, invest wisely,
you might be faced with massive returns.
So, obviously,
as you see I'm indicating,
that first choice wasn't really a choice – listening to others.
The more you listen to others,
the more difficult it is to decide for yourself.
So, there are really two choices.
Investing into the known or investing into the unknown.
One is related with probably lower risk,
probably also low yield.
Well, of course, you might strike gold and predict everything,
and do something that will probably happen,
such as technological breakthroughs et cetera.
But in general, if you invest into the known,
you have low-risk, low-yield strategy.
If you invest into the unknown, if do it wisely –
you don't have to be blind, you have to listen to yourself –
that's probably a high-risk and a very high-yield strategy.
So, what is my recommendation? Get to know yourself.
You have to know how much risk you're willing to take.
You have to know how much peer group pressure you can take.
People are going to talk to you
and say that this is a foolish thing to do.
In fact, Richard Zethhauser said,
"If you haven't ever made an investment decision
that looks like a foolish thing to do,
you probably haven't really utilized your potential."
Identify and develop your skill – with that I agree.
What could that skill be?
Well, I think my skill is, probably, whatever I do -
NGO management, whatever it is, whatever I've done in my past,
it's communication.
Actually, I acquired a skill early in life – playing piano.
Not very practical being a minister, not very practical in economic policy,
but it has taught me certain competences.
A sense of form, spacing, rhythm,
maybe patience and certainly ability to communicate,
reach out to people, get my message across in various ways.
Another thing, get diverse experiences.
You never know which experience is going to be useful.
With hindsight, they all are.
Whatever you've done, it has probably made you what you are today.
So, you'll need courage,
but if you want to do something that's never been done before,
there's only one way –
you'll have to do something that's been never done before.
Thank you very much.
(Applause)