LinkedIn is the only social medium I use. And frequently on LinkedIn I see people expressing their opinions on why Internships need to pay the intern. And how companies “take advantage” of the intern by not paying them or not paying them enough.

Like this one:

And this:

There are first order effects and then second order effects and so on. For example, if the government forced airlines to reduce prices, the first order effect would be that consumers will benefit in the short term. But the second order effects would be that there were would be reduced competition in the airlines and airlines would stop investing in cleanliness, better services and maybe even safety. And in the long run the consumers will suffer.

Likewise, there are first order effects and second order effects of free internships. Let me share a story of Paul Williams, which in my opinion should settle the debate.

Back around the time of the First World War, a young black American named Paul Williams decided to become an architect – a virtually unheard of occupation for someone of his race at that time – and turned down the only paying job he was offered at an architectural firm, in order to go work as an office boy without pay in a more prominent architectural firm, from which he was expected to gain more valuable knowledge and experience. He was clearly thinking beyond the initial stage of his career.

As the later stages of his development unfolded, Paul Williams went on to have a long and distinguished career as an architect, in which he designed everything from mansions for movie stars to banks, hotels and churches and participated in designing the theme building at the Los Angeles International Airport. Like people who invest money in stocks and bonds, he has invested his time and labor to acquire human capital that paid off as his professional career unfolded.

-From Applied Economics by Thomas Sowell

I also have a personal experience to share. Back in 2017, when I was starting my career as an investor, I underwent an internship with Ankur Jain. Ankur was my junior at college but a senior when it came to investing. At the end of the course, as guru dakshina we had to make a donation of Rs 15,000 to Sulabh International. So not only, were we not getting paid for the internship, but also making a donation. And it wasn’t just me alone; there were a dozen of us. And there were dozens more who weren’t selected for internship. And even now, every year, a dozen students go through the internship do the same – pay/donate money to attend the internship.

Why? Because we were all long term greedy. We wanted to learn from Ankur and become successful investors and therefore were willing to undergo short term sacrifices. I am sure, if anybody was an able candidate but unable to pay, Ankur would’ve waived the fees too. So it wasn’t the willingness to donate, but the hunger to learn that was the criterion.

So how good was the internship? See for yourself:

Besides that internship, I did a number of other paid courses too. At one point, one of my friends asked “You are paying so much, are you seeing any value in them?“. My poor friend not only didn’t understand long term greed, but also asymmetric bets. In an asymmetric bet, the maximum you can lose is x, but there is no limit to how much you can gain; that is, its a bet with limited downside and unlimited upside. So if the course turned out useless, the maximum I would lose is the fees, but the maximum I could gain was unlimited.

So, an advise I would give my kids is – if the internship is beneficial and important to you, offer to work for free. Talking of working for free- even Mohnish Pabrai offered to work for Warren Buffett for free. I would maybe go one up and offer to pay Warren Buffett if he hired me. 🙂

Thank you for reading. If you liked this blog, you may also like the one I wrote on a similar topic last year.

-Cheers