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    The Ivy League/Wall Street Connection

    Ezra Klein recently tried to answer the question "Why is Goldman Sachs full of Ivy Leaguers?" by interviewing a Harvard/Goldman alum. (h/t to a righteously repulsed DougJ). But Wall Street's love affair with Harvard and Yale isn't just a question of why Ivy Leaguers go to Wall Street (the question Ezra begins with). It's also a question of why Goldman Sachs and other Wall Street firms works so hard to recruit Ivy League undergraduates. And Ezra’s interviewee only deepens the mystery:

    Why Goldman thought I'd be good for investment banking is a very fair question. There are a lot of Harvard people at Goldman and they've put a lot of effort into recruiting from the school. They really try to attract liberal arts backgrounds. They say this stuff isn't so complicated, that you'll pick it up as you go along, that it's all about teamwork, that they have training programs. That being said, it would be very hard to get a full-time job there without a previous summer internship.

    So, Goldman Sachs is putting forth serious effort to recruit undergraduates with no particular academic preparation for banking, and to train them. The training is relatively uncomplicated. (It's a two-month summer program, over July and August; they give new recruits June off.) The wooing is aggressive ("in your face" in the word's of Ezra's source) and protracted, beginning by the recruit's junior year at the latest. And the pay scale is easily enough to attract smart and talented people from across the country. But clearly, Goldman Sachs attaches a specific premium to the Ivy League degree. And it’s not just Goldman Sachs; an acquaintance who once worked for a hedge fund tells me that the hiring there was driven by an almost obsessive focus on pedigree (not only undergraduate pedigree, in this specific case, but even prep school pedigree).

    Now, almost all Ivy Leaguers are bright, but they’re not an intellectual breed apart. Every college in America has some students smart enough to thrive at an elite university. What’s different about the Ivy League classroom (or a Duke or Chicago or Stanford classroom) is that it contains nobody but those students. A roomful of Ivy League students and a roomful of students from a more typical university aren't like a major league team and a minor league team, but like an All-Star team and an everyday team. The everyday team has its stars, who could easily be on the All-Star team, but the All-Stars have dispensed with the average players. Goldman could get equally smart and talented newcomers without spending two years luring each new kid from Princeton, Cambridge, or New Haven. And they might get people who were actually interested in the business. So why the Ivy fixation?

    I have three thoughts:

    1) Investment Banks Are Looking for Aggressive Competitors
    Ivy Leaguers are smart, and "hard-working," in the white-collar elite's sense of that word: able to focus obsessively on complicated tasks for long stretches of time. But the things that really set elite undergraduates apart from other student bodies are their competitiveness and ambition. Those are the traits that motivated them to go to the Ivy League in the first place, and being on a campus filled with other ambitious and competitive people reinforces them. Such students are ambitious in many different ways, some laudable and some not, some of their ambitions exclude investment banking. (Some want to be great artists, or great surgeons, or world-changing philanthropists.) And their competitive drive is expressed (or politely concealed) in many different ways, some more evolved and some not. But the one thing that is true of every Harvard undergraduate, by definition, is that they applied to Harvard College, knowing that it had the harshest acceptance rate in the country. They have an easy time imagining themselves overcoming extremely stiff competition.

    Not all of those kids fit into particular stereotype, and some wouldn't be caught dead in Goldman Sachs. But among them are an unusually high concentration of people who will set out to win any competition that is proposed to them, and to pursue any end that it is set as a goal. They might have no intrinsic interest in banking per se, but once you talk them into becoming a banker (because it seems like a safe job, and you're offering), many of them will set out to become the best banker in their recruiting class, or their department, or their firm, simply because they will always try to be the best. And alumni of famous schools are accustomed to competing intensely against challenging competitors; they adjust to cutthroat Wall Street fairly smoothly. Employees who are motivated by their own competitive tendencies are relatively easy to motivate, and they stay motivated even after they have gotten personally rich. Goldman Sachs traders try to rack up more and more enormous bonuses for the same reason pro athletes look for bigger and bigger contracts long after they have any need for more money: because it's a way of keeping score.

    2) The Clients Like It
    Princeton grads might not be any better at the business of banking than alumni of Inglorious State, but they have more practice talking to other people who went to Princeton. Whether an Ivy League student started out from a privileged background or not, by graduation most of them can get along smoothly with privileged people. They make the same chit-chat, they watch the same movies and read or pretend to have read the same books, they like to shop and eat and vacation in the same places that their bosses and most of their clients do. That tends to make things smoother, both with the Ivy-educated bosses, who naturally tend to hire and promote junior employees who resemble themselves, and with the clients, who are reassured by bankers who have been socialized in very particular ways. More than they should, some clients tend to trust Ivy Leaguers, because off the signs of social class and because of the Ivy League credentials themselves. Clients can't ascertain how good every employee of a firm is at his or her job, but the exclusivity of the firm gives them the sense of dealing with highly qualified people. When even the interns went to Dartmouth and Yale, the clients assume that everyone at the firm is very bright, even though another firm full of CUNY night school grads might get the same results. That impression of brilliance is a marketable commodity.

    Goldman Sachs trades on that air of exclusivity and excellence, even when they've deliberately taken advantage of their clients. Here's part of an e-mail from the loathsome Fabrice Tourre, explaining how some Goldman clients responded to being sold junk that Goldman Sachs wanted off their own books:

    ...I feel very strongly it binds clients even closer to the firm, because the alternative of take ur money to a finn who is an under performer and not the best, just isn’t reasonable. Clients ultimately believe association with the best is good for them in the long run.

    In this case "association with the best" is what customers were paying for at the expense of their own portfolios, which their "elite" bankers deliberately undermined. Note the lack of irony with which Tourre describes rival firms that don't profit at their own clients' expense as "not the best." Clearly, "the best" has a very peculiar meaning here.

    3) Expectation of Entitlement
    Tourre's world view, in which a high-powered firm is worth your business even if it loses you money, exemplifies the value system of Wall Street corruption: one expects rewards not so much for particular results, but for one's elite own status. The clients, like the world, are imagined as owing the bankers a living, and a princely one at that. It's easier to bring young bankers and traders into a corporate culture of outsized entitlement if they had a privileged educational background first. Ivy Leaguers are used to being told that they are the elite, and that their privileges are a reward for their own specialness and brilliance. Not every Ivy Leaguer comes to believe in their own massive entitlement, but most of those who do not either don't go to Wall Street or don't stay. And the Ivy League does make it all too easy to believe that you are special, and that getting into such a school entitles one to success. It's easy for the Lloyd Blankfeins of the world, who sold hot dogs in Yankee Stadium as a kid and then got into Harvard, to imagine that once he got to Harvard he was a made man; that's why some people apply to Harvard in the first place. If you're running the kind of shop that Goldman Sachs has evidently degenerated into, where profits are put above everything else, hiring some kids who already think they deserve millions of dollars for getting high SAT scores makes sense. Those kids won't question what the firm is doing; they'll simply fight each other to earn the highest commissions every quarter, schmooze the clients, and take their obscene financial rewards as a reflection of their own wonderfulness.

    Of course, not every graduate of Harvard or Princeton or Cornell suffers from such a grotesque sense of personal entitlement; but all the Wall Street firms need is a share of the percentage of Ivy League kids who do. Not everyone with a Harvard degree turns into Lloyd Blankfein. Many other people have used their Yale or Dartmouth education in decent or admirable ways. Those schools give their students enormous opportunities, and their alumni choose how to use them. A fancy college won't make you an amoral and elitist greedhead unless you choose to become one. But if an amoral, elitist greedhead is what you really want to be, the Ivy League will make becoming one easier. And if that's what you want to do with your life, Goldman Sachs might have a job for you.


    For once, I think that you're over-analyzing. I went to a preppie liberal arts college which probably sends an even higher percentage of its graduates to Wall Street than the Ivy's. Some of my friends went that route; others went for management consulting, which is really the same track. Top consulting firms are also full graduates from the Ivy's and top liberal arts schools.

    I think that there are three reasons, in order of importance:

    1) Perception of superiority. While you are completely correct that Ivy Leaguers are not "an intellectual breed apart" from other students, many employers do not share that opinion. They assume that students at the top schools are the country's best and brightest and think that if they hire the smartest ones among them, then they're getting the best of the best. This attitude extends well beyond Wall Street, but Wall Street can pay top dollar for the perceived best of the best.

    2) Old boy network. Almost all the people at top investment banks went to top schools, and people like to hire applicants whom they see as having similar backgrounds to their own. This behavior is not unique to Wall Street either. What is unique is that top banks and consulting companies send their employees interview and recruit from their own alma maters, which institutionalizes the old boy network.

    3) Feeder schools. There's a whole system in place to deliver graduates from top schools into the waiting arms of Wall Street. My college's career center had abundant resources available to help students become investment bankers or management consultants, and frankly, the career center staff didn't know diddly about anything else. Likewise, the HR departments at the banks and consulting firms have relationships with the career centers, though which they schedule information sessions and interviews.

    Maybe you're right, G. Perhaps it's simpler than I make it. But certainly, the factors I discuss play a big role in how the Ivy League recruits operate on Wall Street.

    You're absolutely right that many industries attach a premium to graduates of highly selective schools. Consulting is another excellent example. And it's not really a coincidence that almost all of the Atlantic blogroll, including alumni, have Ivy or Oxbridge degrees. (The superb Ta-Nahesi Coates is the big exception, and an example of how good you have to be to crack that list without the fancy sheepskin.) I'm not saying that the Atlantic bloggers aren't very good at what they do (although what McArdle is good at doing ought not to be done). I'm saying that there's an intense Ivy premium there. TV writing is

    But not every industry attaches as much of a premium to Ivy credentials. Some attach much less, and some have come to attach less of a premium over time. The CIA was initially something like a chapter of the Yale alumni club; by the nineties, evidently, it was not so any longer. From what I can see, Wall Street currently appears to attach an even higher premium to elite schooling than academia does, and I find that odd.

    It's especially strange that finance, which is imagined as"practical" and "real-world" and "results-oriented" should be so in thrall to social prestige. It's a sign that perceived value has partly eclipsed real value, so that "association with the best" is more important than the bottom line. And it's a symptom of a financial sector that is no longer strictly capitalist, because privilege is more important than productivity.

    The finanical sector was never strictly capitalist. It has always been a notorious old boys network of prep schools and colleges. It is a bit more merocratic than it used to be only because the colleges themselves are more merocratic. It used to be that you had to have pedigree to be a Wall Street player.

    Consider - when people apply to graduate programs, they submit grades, test scores, and recommendations, and they are evaluated more or less anonymously. When people apply to i-banking and management consulting jobs, they try to connect with friends and aquaintances, frat brothers and teammates. If they have no closer relationship at the firm, they contact an alum. Connections and interviews are far more important than at graduate programs. It's a recipe for clubbiness. The Atlantic is a much better comparison than academia. For a non-ivy example, look at The Onion, and ask why so many of its writers are Wisconsin alumni.

    All the more reason to regulate this pseudo-capitalism, which is more deeply connected to preserving the entitlement of a small, privileged caste than it is to actually capitalizing useful businesses.

    (On a side note, the power of academic pedigree is somewhat stronger than you represent it as being, and almost inevitably so. How much it matters depends on who you ask: people within the system assign various weights to pedigree, and it counts more or less at various points in an academic's career. But Goldman Sachs believes in the value of Ivy League degrees even more than the people who confer those degrees do.)

    Regulating banks to keep them from wrecking the economy and breaking up the old boy networks are entirely different matters. The first is an economic necessity, the second is not really the government's purview. The old boys networks suck, but that's not grounds for federal intervention--at Goldman Sachs no more than at the Atlantic or the Onion.

    (I'm not sure how you're measuring the perception of academic pedigree other than by the homogeniety of employees' backgrounds, which is partly due to factors other than perception. But my point was that academics also use alternative measures that are more meritocratic. The banks do not.)

    No, of course not. I didn't mean to propose that the government try to break up old boy networks.

    I guess what I was trying to get at, or what was getting at me, is the notion that the insider perspective of Wall Street is contributing a larger problem, in which the finance sector is not merely dysfunctional, but views its own dysfunction as normal, necessary, and admirable.

    One can have an old-boy recruiting network for a business that works well. The Onion can have its Wisconsin pipeline, and The Simpsons can keep its Harvard Lampoon pipeline. But both of those businesses remain focused on putting out good material. Wall Street isn't anymore. It's moved from taking a bunch of bright kids from competitive schools and putting them rich by making the clients money (which makes the financiers money in the bargain, and builds the economy), to ensuring that a bunch of insiders make the money to which they feel entitled, clients and the economy be damned. Somewhere along the line Goldman Sachs stopped imagining itself as the service provider it properly is and imagined itself as an institution that its clients are obligated to enrich.

    So I think that your notion is wrong, or at least unsupported. There is no evidence that Wall Street is any more of an old boys network than it used to be, and if anything, it's probably less. Nor is it possible to document a growing sense of selfish entitlement. (I don't deny the pervasiveness of selfish entitlement on Wall Street, just the idea that it was ever any different.)

    Thus, your notion that a cultural or psychological transformation at the big banks significantly contributed to the crash is at best unsubstantiated speculation. And it seems to me like an unnecessary stretch. The recent crash was really not much different from boom-bust cycles that have occurred in various nations and eras since the dawn of global capitalism. Last year, it was derivatives, ten years ago it was tech startups, a century ago it was railroads, two centuries ago it was tulips. I'm skeptical that one can fix the culture of any given industry, and I'm skeptical that it would help avoid the cycles even if one could.

    I'll go further and suggest that the idea that the whole idea of enlightened investors is a dangerous one. It's when we think that these folks know what they're doing and that their actions are good for the community that we get into bubble trouble in the first place. Not very long ago, people thought that derivatives were clever and that the housing boom was helping the poor realize the American dream.

    So I say, just assume that whenever there is an opportunity to make money, greedy people will fill the gap, whether they come from the Ivy League or community colleges. Given this assumption, the only realistic solution is to increase transparency, prosecute fraud, and minimize the fallout from business cycles. This solution offers no one-time fix. You have to constantly adjust to the regulation to handle innovations and changes to the business environment. But the approach does work. The massive global market today would be far more precarious than it was in 1929 were it not for the safeguards that we've already put in place.

    While I usually really like your writing, in this piece, there is no there there. 

    Did you maybe miss among your three points the real 1., which is, like all top-end employers in finance, law, etc., they want to hire really smart people, and trolling for Ivy Leaguers, while not the only way to do so, is more reliable than many other means of hiring really smart people in their early 20s?  (And I disagree with your "competitive" thing.  If you want the truly sharklike people, get the very tops from lesser institutions, not some kid who finished in the middle at Harvard College.)

    So people from Ivy League schools do both good and bad things.  Not sure what the point is here, or what the point was in Klein's crosslinked piece.  It seems to be, on both your and his part, talking around associating Ivy Leaguers with the concept of Goldman Sachs as a talisman of evil, but being too intellectually honest to write a column condemning them all as Gordon Gekkos.  Which is a souffle that doesn't really rise.


    Meh. If I've got a point buried in here, I'm going have to get it across in another post, it seems. Thanks, guys.

    I would go as far as to say the simple reason for recruiting comes down to one thing, and its not intelligence (although that tends to go hand in hand (most of the time) with an Ivy League is simply that most (not all) but most who have an Ivy or Prep pedigree come from a moneyed background.  Quite simply, most parents of these recruits have money and are successfull in their own fields.....have friends who have money..thus their children are all friends who went to the same schools and country clubs etc   and it just perpetuates the network...more money, more clients, more network...I guess that was a long winded way of defining the Old Boys network.  Believe me, just because you went to Princeton doesnt mean you are automatically in the club either.  There are infinite hierarchies within hierarchies at these places.  The underpriveleged student who got into Harvard on their own merit, but comes from a middle class family in bumble fuck has nothing to offer an Investment Bank (ie network of rich friends).  Maybe they will get hired as a back office grunt but they will not get into the right club etc etc....Wall Street is just an incestuous horrible place....really no different than any other aristocratic entity.

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