Why Do Harvard Kids Head to Wall Street?
By James Kwak
That’s the title of a post a couple weeks ago by Ezra Klein, in which he interviewed a friend of his who went to Wall Street after Harvard. Having seen this phenomenon from a couple of different angles, I’d say the interview is right on. This is how Klein summarizes the central theme:
“The impression of the Ivy-to-Wall Street pipeline is that it’s all about the money. You’re saying that it’s actually more that Wall Street has constructed a very intelligent recruiting program that speaks to the anxieties of the students and makes them an offer that there’s almost no reason to refuse.”
When I graduated from college, I had no interest in investment banking or its close cousin, management consulting. But I went to McKinsey for reasons that were only slightly different than those of the typical Ivy League undergrad; after getting a Ph.D. in history, I discovered that I was unlikely to get a good academic job and was pretty much unqualified for anything else, and McKinsey was one of the few places that would hire me into a “good” job with no discernible qualifications (other than academic pedigree). Now that I’m at Yale Law School, where maybe 15% of students (my wild guess) come in wanting to be corporate lawyers but 75% end up at corporate law firms (first job after law school, not counting clerkships), I’m seeing it again.
The typical Harvard undergraduate is someone who: (a) is very good at school; (b) has been very successful by conventional standards for his entire life; (c) has little or no experience of the “real world” outside of school or school-like settings; (d) feels either the ambition or the duty to have a positive impact on the world (not well defined); and (e) is driven more by fear of not being a success than by a concrete desire to do anything in particular. (Yes, I know this is a stereotype; that’s why I said “typical.”) Their (our) decisions are motivated by two main decision rules: (1) close down as few options as possible; and (2) only do things that increase the possibility of future overachievement. Money is far down the list; at this point in their lives, if you asked them, many of these people would probably say that they only need to be middle or upper-middle class, and assume that they will be.
The recruiting processes of Wall Street firms (and consulting firms, and corporate law firms) exploit these (faulty) decision rules perfectly. The primary selling point of Goldman Sachs or McKinsey is that it leaves open the possibility of future greatness. The main pitch is, “Do this for two years, and afterward you can do anything (like be treasury secretary).” The idea is that you will get some kind of generic business training that equips you to do anything (this in a society that assumes the private sector can do no wrong and the public sector can do no right), and that you will get the resume credentials and connections you need to go on and do whatever you want. And to some extent it’s true, because these names look good on your resume, and very few potential future employers will wonder why you decided to go there. (Whether the training is good for much other than being a banker or a consultant is another question.)
The second selling point is that they make it easy. Yes, there is competition for jobs at these firms. But the process is easy. They come to campus and hold receptions with open bars. They tell you when and how to apply. They provide interview coaching. They have nice people who went to your school
We need to fix this problem. Big time.