Wall Street and the Ivy League: Readers respond

Thursday’s column argued that Wall Street’s recruiting machine is aided by failures in the traditional liberal arts education. One recent graduate disagrees:

I graduated from Brown last year and jumped right into law school back home after a couple of internships here and there over the summers. I quickly became disillusioned when I learned about the starting salaries in every other industry. It just never made mathematical sense for me to choose a career pathway that wasn’t going to help me reap the returns of my family’s financial investment, at least in the near future.Every Brown grad feels the need to try out consulting (Bain takes like apps from one of every three or four graduating seniors), whilst the rest of us will most definitely shoot our resume over to Goldman and Morgan Stanley even if we spent our college lives condemning Wall Street (as Brown kids are naturally inclined to do, despite the fact our President was on GS’s Board of Directors). All my friends are in investment banks/consulting/law/medicine.

Having said that, I think you might be reading TFA the wrong way. As much as I think there is something great about the scheme, I think TFA is not very different from banking. While it doesn’t have such great returns early, I honestly feel that TFA is just a way for most talented college grads to try to grab hold of something that’ll improve their chances of making bank in the future. I might be totally wrong, and I’m sure there are some wonderful people in TFA, but I wouldn’t say they were all motivated by the fact that it’s a more “socially-responsible” choice. Leaving this here for your perusal: http://www.laprogressive.com/teach-america/

Another:

I would argue that for many grads there is actually a driver that you did not mention and that is the fact that there are very few careers where at such a young age you will not only be surrounded by a remarkable density of extremely bright, highly educated people (a reward unto itself, which you do touch on), but also - more uniquely - have access to and exposure with the most senior executives in corporate America as you work on complex problem-solving and action-oriented transactions that are of critical importance to your client firms (such as advising and executing on financings, acquisitions, expansion plans, etc.) as you can in investment banking or private equity (or in some cases, corporate consulting).

Going the corporate route or moving to Cincinnati to grow detergent sales for P&G just can’t compete. That said, what can compete - and clearly is taking mindshare - is technology. The fact that Wall Street recruiting is way down (probably both cyclically and secularly, as you note), in many cases in favor of technology careers (at real companies this time, as opposed to the absurd non-starters of the late-1990s dot.bomb bubble) is a good thing for our country, as it is an industry of critical value and continued importance and promise to the U.S. and it needs and deserves (and is getting!) its share of our nation’s brightest young people.

There’s no doubt that technology can compete in terms of sex appeal, and salaries, but my understanding is that you actually need to know how to code to go work in Silicon Valley. That narrows the pool of possible recruits quite considerably. Goldman Sachs, conversely, will happily take graduates in English literature. At the end of my article, I said we need to do more to teach skills in college. I would make a yearlong computer programming class a prerequisite for all freshman. On that same note, another reader wonders if this is really about the liberal arts:

I have a question about your contention that the reason why able young people from prestigious universities are heading to Wall Street. If the driving key factor is a tangible skills, then shouldn’t this propensity be markedly lesser among individuals with those skills? So, shouldn’t say it be liberal arts people heading to Wall Street, and other kids doing something else? This doesn’t seem to square the anecdotes about STEM quizzes on Wall Street. However, that could just be anecdotal. Surveys of graduates from MIT, though, argue against that being the whole explanation.

17% of MIT grads from 2010-2011 went into finance, and 18% went into consulting. Link.
Other evidence also suggests that finance careers are popular among individuals with credentials desired in science. See this blog posting as well. If the problem is a lack of paths from a liberal arts education, then how does this happen?

I would love to see data on which majors feed most aggressively into Wall Street. On another note:

Hey Ezra, long-time reader first time e-mailer. FYI Teach for America doesn’t pay “almost nothing.” According to their website, you get $30-$50k depending on where you’re placed. You can get more if you’re in an urban school, I know someone in DC that got more like $65. Compare to an entry-level job at, say, IBM consulting or accenture, which pays probably $60 and doesn’t have the same prestige.

Good point. I had meant that Teach for America pays fairly little relative to Goldman Sachs, but the way I wrote that was tone-deaf. Next up:

Although I agree with many of your points, I end up with a different conclusion. It’s companies that need to change the way they view skills, not colleges. I started applying to jobs with a finance degree from Drexel and two respectable internships on my resume, yet as you point out, many investment banking jobs are going to liberal arts students from Ivy League schools. You posit the lack of skills and direction these students receive is what leads them there, but I think the banks have it right; all employers should go after the most talented and develop them into successful employees despite their choice of major. Companies should treat new hires as investments rather than classify them as detrimental to the bottom line.

That was a common theme in the responses: Wall Street has it right. Their willingness to train should serve as an example to other industries. I wonder how much of that, however, is due to their enormous profits. Industries with tighter margins can’t afford to take a chance on scores of graduates, train them, and see who turns out to be worthwhile.

I have worked on Wall Street for 25 years, and it is clear to me that college students who major in economics or business degrees often do so because they have no other passionate interests in topics such as history, literature, math or science. Economics and business are the “default” majors if you don’t have significant passion in other subject matters. For such kids lucky enough to attend elite colleges, the high cost of attending (think student loans) can be mitigated by high earning potential of working in consulting or Wall Street. In virtually no other industries can you be completely mediocre and earn a king’s ransom in pay.

I don’t think it is the university’s liberal arts focus that is failing the graduates. It is their lack of personally fulfilling alternatives and the need to justify their high price education that creates the dynamics you mention in your article. In Wall Street, younger bankers need to be bright and hard working. They don’t need to think. Everything they do has already been done before and is codified in “template” analyses and presentations. You just change the names of the clients, plug a few different assumptions into a model, and voila, you have a product. Schools that teach kids to think and stretch their boundaries, and employers that do the same, can create a fabulous feedback loop (the inverse of which is the Wall Street world you describe).

Another reader wondered whether I was too quick to dismiss the appeal of a life in investment banking:

I enjoyed reading your column on the career choices of Harvard students, as a 2009 graduate who went to graduate school (which only a fraction of us do), I found it very interesting. However, I think one premise of your argument deserves more scrutiny: “No high school senior gets her acceptance letter from Harvard and begins thinking about the exciting life she will lead constructing credit derivatives.”

Economics is by far the most popular concentration at Harvard. From 2006 to 2010, an average of 715 students concentrated in Economics. The class size is targeted by the Admissions Office to be 1640. This means roughly 44% of Harvard graduates in a recent, given year are economics students, who were probably inclined upon admission to be interested in financial markets. A finance job easily gives the highest returns for that degree. The question should not be, why do so many go to Wall Street -- but why so few? The fact that only 17 percent in 2011 went to Wall Street is probably (mostly) the result of fewer jobs in banking and finance to go around, with Teach for America and President Faust’s (commendable) message being more minor factors.

Along the same lines, some readers noted that Wall Street is unusually focused on ranking achievement, which is something that might appeal to Ivy League graduates:

I can see why Millenials (even more than Gen X or Y) would be attracted to Wall Street for two reasons: structure and rank. In addition to teaching skills like Excel and valuation, the formal training programs of these established companies take the step (which only people with experience can do) of saying “here’s what you need to know in order to get on the road to success.” Even if one of these grads did fish through Monster and find a lead that that resulted in an interview and an offer, how do they know it’s a road that will take them anywhere? I’ve been an attorney for 10 years, and have spent time at a large law firm, and I can tell you that (sadly), large law firms often play, for lawyers, a role similar to that of Wall Street firms for undergrads. They offer high pay (for high hours), and the reassurance that regardless of the shape you are in when you are inevitably spit out by the firm (which happens for the overwhelming number of associates who don’t make partner), you’ll know enough to figure out your own path from that point on. You’ll have “played major league baseball,” so to speak, and won’t have to be worried that you’ll be forever limited by an underwhelming initial pedigree. But, like you pointed out in your article, it’s not just about money. Because the structure and training of the Honors (read: new attorney) Programs of DoD, DoJ, and other agencies, as well as the various JAG Corps programs, have a strong draw on graduates too.

But I also think it’s worth considering the importance of rank to highly driven, highly competitive grads as well. These kids want to know how well they’re doing, and their status compared to their competitors. I grew up with U.S. News and World Report, but didn’t have the internet as a teenager. These kids do, and they’re bombarded with top 10 lists, lists of who’s hot and who’s not, and other zero-sum status indicators. They watch reality shows where quantitative vote totals decide winners and losers from week to week. And I think they want to know how they stack up. Going to the Street gives them an opportunity to value themselves and their potential. And even if it’s sad that they have to use an external means to do that, and substitute the Street’s arbitrary selection process for a more grounded self-confidence, that’s what they’re used to. They looked at colleges based on rank, and their parents may have looked at private high schools based on status and rank. Competitive people don’t like to be in a vacuum when it comes to performance evaluation, and if they’re used to depending on external sources for validation (like acceptance by a brand-name institution like a Goldman), getting in there can be pretty exciting, I’m sure. (I’ll admit that now that I’m in a work environment where I don’t get to have one-on-one competition with my peers, sometimes I watch Top Chef and wish I could settle things with a competition like that!) It also relieves these new grads from the need to develop and structure their own learning and career paths for another few years, something which they haven’t been well trained to do, and which is tough, because it seems like they have so many choices.

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