The World Needs Engineers on Wall Street
But to make a difference there, our graduates will need financial skills.
Opinion By Peter Adriaens
A recent New York finance conference on sustainable infrastructure and the Internet of Things (IoT) revealed that 28 percent of incoming employees hired by the big brokerage houses were engineers and data scientists. Whereas in the past an overwhelming majority of new hires held an MBA or finance degree, engineers are now making significant inroads as Wall Street firms reinvent themselves as tech companies. MBAs are not trained to link financing models with advances in data science and the impact of climate change on investment portfolios. Therefore, these companies also need experts in machine learning, predictive analytics, cloud computing, automation, and robotics.
Data is upending traditional disciplines and opening doors for new engineering careers as finance becomes “a technology,” driven by algorithms and insights gleaned from data. At the same time, the role of engineering has grown beyond a narrow technical focus. Engineers are increasingly expected to manage change, and place their skills and inventions in a socioeconomic context. In today’s data-driven society, where technological innovations impact the way business is conducted and how people communicate, the digitization of finance is fundamentally transforming and leveraging the value of engineering education. It connects technology, data acquisition, processing, optimization, prediction, automation, and risk-based decision-making, all core engineering skills.
The vanguard of the engineering-finance nexus is the explosion of intelligent infrastructure systems and the data they generate. The emergence of smart cities has opened the door to exciting new uses of financial technologies. For example, smart streetlights equipped with 5G technology and wireless hubs unlock new value via data contracts. Bridge sensors can monitor structural health, informing capital requirements for operations and maintenance. Pressure sensors in water distribution pipes, along with smart meters in homes and businesses, can capture leak and consumption patterns, and inform the credit rating of utilities. Measurements at stormwater outflows in lakes and rivers can serve to control flood management and help to quantify contaminant discharges.
The performance of intelligent infrastructure systems, such as transit connections and delivery of electricity and water, can be assessed based on IoT measurements of how efficiently they work or how frequently they are used. Data can be categorized in “value pools” such as operational efficiency, new cash flows, and intangible benefits. Data packages can be priced, auctioned, sold, or licensed in data markets to businesses such as mortgage companies, insurers, or hedge funds. Intangible benefits, such as air quality, carbon or water emissions, user satisfaction, and worker productivity, can be valued in the market as factors contributing to economic resiliency.
In this manner, finance has become an extension of—and input in—engineering design specifications for infrastructure, whether it be social (schools, roads), regulated (water, energy, ports) or demand-driven (housing, transportation). The role of finance strikes at the core of whether and how our infrastructure is put to work for the betterment of society.
Yet, except for niche specializations, engineers have been largely on the sidelines of the financial technology revolution. Engineering students’ exposure to matters of money tends to be limited to undergraduate macro- and microeconomics courses, where they learn how decisions are made at a national, company, or individual level. This is a missed strategic opportunity for both society and graduating engineers.
Knowledge of finance will help engineers contribute their ingenuity toward building a more equitable and sustainable future. For example, the failure of public funding to provide adequate services has increased the participation of the private sector through public-private partnerships. Since engineers design, build, operate, and manage the systems that generate the data and insights for decisions on investment in public services, they can help spread the risks and rewards so that society as a whole benefits.
As an example of how engineering schools can meet this challenge, the University of Michigan launched a Master of Engineering in Smart Infrastructure Finance program in 2019 to enable new engineering careers in public or private finance, insurance, management consulting, and design engineering. Students learn how data and digital financing inform design specifications and business models for infrastructure systems. An environmental finance course shows the influence of climate-change data on fixed income, project finance, insurance, and blockchain financing.
If graduating engineers expect to make an impact in a digital economy, they will need an understanding of finance, whether they seek employment in the public or private sector. The post-World War II public funding model is broken, leaving key investment decisions on essential services—energy, water, transportation, and housing—up to financial institutions. These firms need new expertise to help them fill that role. If engineering schools can provide it, America will be better off.
Peter Adriaens is director of the University of Michigan Center for Smart Infrastructure Finance and a professor of environmental engineering and finance.