January 30, 2011

The elite firm-elite college connection

Steve Hsu, professor of physics at U. of Oregon, blogs about a recent study of hiring at firms like Goldman Sachs, McKinsey, and Wachtell, Lipton, documenting their obsession with hiring from only the top half of the Ivy League universities. He draws the following conclusions:
See earlier post for Lauren Rivera study of recruitment at elite law firms, consultancies and I-banks. I refer to these as "soft" elite firms, whereas I will refer to hedge/venture funds, startups and technology companies as "hard" elite firms. ... In the latter category performance is a bit easier to measure, and raw prestige plays less of a role in marketing to customers or clients -- i.e., the customer can directly tell whether the gizmo works ("these search results suck!") or the fund made money. Whether or not the advice received from a law/consulting/M&A firm is any good is much more nebulous and, well, soft. 

1) Rivera's work confirms that in the real world, people believe in folk notions of brainpower or IQ. ("Quick on the uptake", "Picks things up really fast", "A sponge" ...) They count on elite educational institutions to do their g-filtering for them. In the past, as noted by one commenter, firms often asked for SAT scores.

Why don't firms that hire 22-year-olds ask college seniors to take the GMAT or GRE or LSAT and have those scores sent to them?

2) Elite soft firms generally want people who are smart, but not too smart. Other factors, like personality, communication and leadership skills, etc. are valued as well. Startups, hedge funds, MSFT/GOOG, etc. generally want the smartest people they can get their hands on, at least for technical roles.

3) The soft firms know that what they do isn't "rocket science" -- it just isn't that hard, and any academic admit to a top university is smart enough. They just have to appear elite and smart enough to snow their clients and sell the work. Thus the emphasis on factors other than intelligence, once the threshold requirement is satisfied. Someone who appears smart and inspires confidence in clients is better than a smarter person who doesn't get along with (often middlebrow) clients.

4) In Rivera's research school prestige was the number one signal used by soft elite firms in evaluating prospective hires. Extracurricular activities came in second, but this is probably just a way to differentiate between applicants who have already been filtered using school prestige.

5) It is odd that the soft firms, which market themselves to clients as being super-smart repositories of brainpower (of course this is largely a fiction; see point 3 above), would rely so heavily on university admissions committees. They effectively outsource a big chunk of due diligence on their most important investment (human capital) to a group of people whose judgement they somehow trust, but perhaps without detailed understanding. When I was on the faculty at Yale I knew people in admissions and it's not clear to me that they were the best able to spot potential in 18 year olds. In studies of expert performance admissions people are less good at predicting UG GPA than a simple algorithm. (The "algorithm" is simply a weighted sum of SAT and HS GPA!)

But this doesn't matter if the success of HYPS grads becomes a self-fulfilling prophecy. Once soft elite firms and large parts of the rest of society (in particular, clients) have accepted the idea that elite universities should be trusted to do the filtering, these schools will automatically produce large numbers of successful alumni -- the imprimatur itself has value.  

I've met a lot of College Admissions staffers over the years, and most of them struck me as very nice young ladies. I finally met the top guy at a top ten small liberal arts college and was impressed by him, so I guess there are a few people in the system who understand how things really work.

Still, another oddity here is that elite firms are hiring 22-year-olds based on how college Admissions Committees feel about them at age 18. That's kind of like the NFL drafting college players based on their ranking by Rivals.com when they were in high school.

When I was in charge of introducing personal computers to the marketing research firm where I worked in 1986, I put an ad in the Chicago Tribune asking for somebody who could solve PC problems. I specified "must have college degree," because ... well, I'm not sure why I did that. I got 400 resumes from college graduates.

Fortunately, I didn't throw out a detailed letter sent me by one high school grad -- a farm boy who had enlisted in the Navy's nuclear submarine powerplant engineering program out of high school. He explained the problems I was encountering and how he would solve them for me. I called him in for an interview, and he was so much sharper than anybody else I'd talked to -- hell, he was a lot sharper than I was -- so I put aside my college-only rule and hired him.

He was ridiculously good at dealing with personal computers, and he went on to make a lot of money. A decade later he was living on the North Shore two houses down from Scottie Pippen. He was a handful to manage, a little ornery, which caused me some office politics problems. Four years of college might have put a little more social polish on him. But, basically, so what?

I can only recall one specific time that my six additional years of higher education taught me anything that he didn't know. He came in one day convinced that we could save money by buying all the parts for PCs and assembling them ourselves instead of buying them from Dell. Being an Econ major, I said that the PC business was highly competitive, so the cost of assembling them ourselves would no doubt be slightly higher than what we could buy them from an assembler like Dell for. He went off and spent two hours building a spreadsheet with the prices for all the parts ... and found my top-of-the-head guess based on economic theory had been right.

But, that's the only time my half dozen years of expensive higher education (BA triple major and MBA double concentration) taught me something that would have saved him a few hours.

91 comments:

Bostonian said...

Being a Harvard graduate may help you get a job from Goldman Sachs or McKinsey, but when I was at grad school at the University of Illinois at Urbana-Champaign about 15 years ago, those two firms WERE recruiting undergraduates from UIUC.

Florida resident said...

Indeed,
"If you are not smart, you should better get an education".
Mr. Sailer is both, educated _and_ smart.
Respectfully, F. r.

Anonymous said...

OK, when I want someone to invent the poison pill antitakeover measure, I'll just hire some random high school kid.

Anonymous said...

It's obvious why these firms don't ask for GMAT scores: because the EEOC will go all disparate-impact on their butts.

Simon in London said...

"elite firms are hiring 22-year-olds based on how college Admissions Committees feel about them at age 18"

Plus they have to be diligent enough to have successfully graduated, right?

I think an important factor re US "soft elite" hiring is that the Ivy League applications system filters for social class as well as ability, so you can be fairly sure that graduates have the right attitudes, if white gentile they have an upper-middle-class or upper-class background and accent, etc. Bright lower-class, lower-middle-class, Southern, and rural whites are excluded from admission to the Ivies, so the soft-elite firms don't then have to apply an additional filter layer to exclude them from hiring.

By contrast, here in the UK, elite University admission is by academic ability at 18, with a bonus for not having gone to a private school - ie for not being upper-middle-class. Lots of non-elite whites still get to go to elite Universities, though the death of the Grammar School system pretty much eliminated lower class whites.

The result is that UK soft-elite hirers pay a lot less attention to what University you went to, as it does not guarantee you will have the right accent, attitudes and social class. Instead, University can act as a first-filter, excluding non-Russell Group Unis, then there is a lengthy interview process designed to identify and exclude lower-middle-class applicants.

Accent is very much critical in the British system - eg it's very important that Diversity hirings have the right 'posh' accent.

I expect that's similar in principle in the US, a New York soft-elite firm is not going to hire someone with a Southern redneck or working class Italian-American accent, no matter their academic credentials. But the Ivy League filter means they rarely have to worry about this, since the Ivy League will not accept Bubbas or Guidos to begin with, no matter how high their SAT scores.

Le Sigh said...

I got lucky with my college placement. If you don't have a degree from a respected North-East or Californian university, life on the coasts (especially Manhattan) will be very difficult for you.

Taking the New York example, Columbia and NYU open doors (even before you graduate), CUNY and SUNY not so much. The East Coast Media/Advertising/PR world is even more picky on college pedigree than Big Law and investment banking. I'd tell those going to North Eastern public institutions to stop wasting their time.

I'm not entirely sure how it works on the West Coast and what the hierarchy is over there. Steve?

In contrast, I'm sure University of Michigan degrees go a long way in Ohio and Oklahoma.

bjdibble said...

This guy is interesting.

http://poetsandquants.com/2010/09/23/the-rebel-savant-of-mba-admissions-consulting/

What's interesting about Harvard MBA admissions is that they don't want anybody even a little different. A Harvard MBA is not for somebody smart from U Iowa with a high GMAT and grades and a job at an ordinary co, like Cargill. According to Kreisberg, unless you've been to the Ivy League, or a job at a firm like Google-Disney-GS, you're not getting in. Harvard is not looking for interesting oddballs or entrepreneurs, but for people who already know the secret handshake and will be good partners at a PE firm in 10 years. A Harvard MBA isn't for Michael Dell or people who need a little polishing, it's for people who are already polished. That's what's surprising.

So what is an MBA for then? The point is to bring a group of smart young people together for an intense experience, sort of like basic training/serving in combat. That's why they want people under 25, when they can form strong relationships. A Harvard MBA is not for 30 year olds who already have families.

Anonymous said...

He must be smart, University average IQ must be around 130, so this wiz-kid must have had clearly a higher IQ.

Anonymous said...

Steve,
This is an excellent thread.

Let me put forth as a hypothesis that a reader of Isteve is wealthy and successful and wants to maximize the profits of each of the businesses he owns.

Let's assume that he owns a hedge fund similar to RenTech, a hedge fund that depends for its success exclusively on the raw IQ of its employees. For that business, the isteve reader wants to hire on the basis of IQ tests. For that business you can ignore HYP degrees. And in fact in real life the owner of that business (who takes home more than a billion a year personally) does laugh at the HYP pedigree and has publicly stated that he won't even consider hiring an MBA. Will only hire raw talent

Let's assume that the isteve reader also owns an investment bank. This investment bank depends on convincing the heads of University endowments and public pension funds to invest in products that don't really produce investment alpha. For this investment bank, the isteve reader is well advised to hire people with the HYP pedigree. In the investment banking role the isteve reader gets to bank on the prestige of the HYP brand.

I would caution you, Steve from assuming that all hedge funds depend purely on raw brain power. There are of course many hedge funds like RenTech in which a young man with no social skills whatsoever and no pedigree whatsoever can earn hundreds of millions a year for his employer and thus be paid in the tens of millions per year.

On the other hand, many other hedge funds depend on their analysts and portfolio managers having great social skills. Portfolio managers and analysts need to look in to the eyes of the management teams of the companies they invest in and know who to trust and who not to trust. And in many other times they need to use networking to legally access the right pieces of information.

In fact some hedge fund analysts that lack the right social skills to get information through networking instead turned to illegal means and paid cash for the info, and hence they will go to jail (the Galeon case)

Bottom line, it is totally rational for some successful businesses to hire from HYP and totally rational for other successful businesses to not hire from HYP. Depends on the business

Nanonymous said...

Almost everyone seems to conclude that employers hire using admissions to elite colleges as a proxy for IQ. Problem with this explanation is that those same employers don't value much better proxy for an IQ: they rank standardized test results far below in importance than the fact of admission to elite colleges. In fact, a lot lower than extracurriculars, grades and current employment prestige. (See the graphics in Hsu's post).

So, most likely, instead of looking for IQ, the "elite" employers are simply be looking for those who are most like them. That's all.

TokkinTrashWifTrolls said...

In the past, as noted by one commenter, firms often asked for SAT scores.

"Why don't firms that hire 22-year-olds ask college seniors to take the GMAT or GRE or LSAT and have those scores sent to them?"

These scores aren't job-specific, and they are pretty much destined to create "disparate impact" (i.e., demonstrate the lower abilities of NAMs), so I don't understand how firms can get away with this in view of the Duke Power legislation. Err, I mean, the Duke Power ruling.

Anonymous said...

A little-commented on phenomenon is how the Navy manages to get so many bright young men to staff their nuclear propulsion program, given the relative attractiveness of college as an alternative. From what I've seen, recruiters specifically go after the high SAT score/low GPA combination-- high IQ screwups. They seem to figure that the most important thing they need is raw brainpower-they can knock some discipline into the underachievers. And at least anecdotally, the Navy did wonders for straightening out the lives of my 1450 SAT/1.8 GPA high school friends.

slumber_j said...

Judging from the many McKinsey/Goldman types I know from college, the analysis of their raw intelligence vs. that of the hedgies/techies is right on target. Not that they would ever admit it: in most cases (in my experience), they don't even seem to know it. Many of these people really do seem to think they're the smartest people in any given room, even when it's obviously, demonstrably false.

Anonymous said...

One thing to remember about a lot of "elite" firms is that their executives and employees together ran them right into the ground in 2008, so the firms only exist because they ran to Congress and the Fed with their hands out. People in financial services have a lot of money but they'll never again have any respect, because everyone knows that they're no more talented or innovative than welfare queens.

Anonymous said...

Read both your account of Hsu's post and Hsu's post and it sounds a lot like the US and A is lot more like the mother country with it's Oxbridge credentialed elite running everything from City of London to the BBC than we have been lead to believe: The more things change, the more they stay the same.

jody said...

rivals.com is pretty much garbage.

Matt said...

Steve was hiring somebody to do something hard.

Elite firms are hiring people to retain their aura of credibility while they use their government-mandated permits to print money.

That's the difference.

Thripshaw said...

What, besides Economics, were your majors and concentrations?
From reading your stuff for a few years, I get the impression that you've always been a pretty right-wing guy, which comports with you being a hard-nosed MBA.
I suspect that, like me, many of your readers considered themselves to be political liberals as young adults. Even though I knew as early as 1990 that immigration was THE Problem and supported Buchanan in '92 and '96, I still considered myself mostly "liberal." It took me a while to realize that everything on the left is identity politics driven by anti-white, anti-male rage.

Hail said...

Steve Sailer wrote: Why don't firms that hire 22-year-olds ask college seniors to take the GMAT or GRE or LSAT and have those scores sent to them?

Cold Equations goes further: "They might as well eliminate the universities except for the admissions committees".


In the past, as noted by one commenter, firms often asked for SAT scores.
I wonder, when did this stop and why?

Tino said...

Some of what the guy writes are questionable:

1. "Thus the emphasis on factors other than intelligence, once the threshold requirement is satisfied."

There is no "threshold". The elite firms want people who are as smart as possible. It's just that they trade-off IQ with other desirable traits. A lot of high IQ people are not lazy, autistic, bad in teams, not creative, not self-driven, lack of character, too beta or otherwise incompetent.

But high-IQ guys who also have good personality traits are the stars of these firms.

Some investment Banks in London still have IQ-tests. Consultants use "case interviews" to measure problem solving ability. This is superior to using IQ, since it contains both IQ-itself and other abilities that make you good at doing your job.

2. College is better than just IQ, again because getting through college measure *both* IQ and a lot of other desirable traits, such as consciousness.

Also, it's cheaper to just go by college than Steve's method, which is much more time consuming and demanding of the firm.

When recruiting though Iyv-Leauge schools, there is also consistency. The firms knows roughly how median graduates from NYU turn out.

And let's not forget the social equilibrium. These days almost all smart people go to college, regardless if we think this is efficient or not (it probably is, since college is also consumption for smart people). You are not going to find a lot of diamonds in the rough among high-school dropouts.

Tino said...

Another way to express this:

Instead of relying only on a 3 hour IQ test, firms are relying on 4 year tests of IQ and work ability, which is doing well in Ivy-league schools. The 3 hour IQ test is part of the package.

This method of recruiting doesn't refute IQ theory, it just a more sophisticated version. The firms care so much about cognitive ability that they want a broader, more time consuming but more reliable test, which is how well you do in 4 years of college plus 2 years of graduate school.

If Goldman and Boston Consulting were interviewing a lot of community college kids with great personality traits, that would be an argument against IQ-theory.

Bob said...

The problem with hiring smart 18-year-olds is that they lack maturity. Indeed, not wanting to go to college itself, given its huge signaling value, could be a sign of immaturity.

You could redesign your company to have entry level jobs for smart 18 year olds where immaturity is not a big issue, but that takes a lot of management effort.

Bob said...

Many people without an elite education like to think Harvard students don't do much besides write papers about gender identity.

That's not true, but if it makes you feel better....

Bob said...

"Why don't firms that hire 22-year-olds ask college seniors to take the GMAT or GRE or LSAT and have those scores sent to them?"

Actually, they do ask you to send your scores. Go to any of these firms' online application websites and you'll see a spot to fill in your standardized test scores.

Even if you have no intention of going to grad school, if you want to get a job at McKinsey, you'd be well advised to study hard and take the GRE, GMAT, or LSAT.

McKinsey doesn't have to "ask" people to take it, because this is common knowledge at the schools they recruit from. And if you don't go to one of these schools, there are now message boards where these things are discussed.

Five Daarstens said...

Steve:

Your story of the navy submariner reminds me of a book I read that influenced me very much. I tried to google this but couldn't find it. A guy who was very much a slacker in high school in the 1960's joined the Navy's nuclear program and became very disciplined because of the nature of the job. He later left the Navy and breezed through college and medical school and wrote an account of a salvage operation in the cold war.

Anonymous said...

What I want to know is what is the shelf life of a high SAT score. Thirty years received a 1500 on the combined SAT and attended a prestigious Ivy League college -- but after there decades of dedicated drinking, a sedentary occupation, thousand of hours of television, and a high trans fat diet, can I still pass myself off as smart? Or have I receded into the cognitive proletariat. I find myself reading pretty much the same books I was reading when I was 20 and my 7 year old is beating me at chess.

Anonymous said...

"People in financial services have a lot of money but they'll never again have any respect, because everyone knows that they're no more talented or innovative than welfare queens."

This comment points to something important: The dynamic evolution of business. When I hear 'prestige firms' I keep thinking Enron, Arthur Anderson, Lehman Bros. Today's high fliers are tomorrows wrecks. My advice to young high GMAT State U guys is start your own business, work harder and smarter than the big dumb companies and sit back and hire yourself a few Ivy league MBAs. Of course then you'll be on your way to becoming another BDC.
Gilbert Pinfold

Formerly.JP98 said...

I'm a partner in a mid-sized law firm that draws from elite law schools. (Take my word for it.) I also do a lot of interviewing and am on my firm's hiring committee.

One tweak on Steve's post -- law firms aren't evaluating candidates "based on how college Admissions Committees feel about them at age 18." There's college GPA, the LSAT, and (some) law school in there. What we're mainly doing is using law school prestige as one proxy for intelligence. (We could ask for LSAT scores, but they'd be useless unless sent directly by the LSAC. And since we're competing with firms that don't put candidates through that trouble, we can't afford to be the bad guys.)

The author's point about "hard" vs. "soft" service firms is exactly right, IMO. With elite law firms, signaling that you've got big brains is as almost important as producing big-brain results.

However, I disagree regarding not wanting candidates who are "too smart." I've never met a candidate who was too smart. What I have met are very smart candidates who are too weird or too obnoxious or too apathetic.

Anonymous said...

"A Harvard MBA isn't for Michael Dell or people who need a little polishing, it's for people who are already polished. That's what's surprising."

There are two ways to get to run a large company:

1). Found one and make it successful.
2). Get an MBA from a famous university, get hired by an already successful company, spend X years sitting at meaningless meetings and pretending to understand stuff you couldn't care less about, get ahead of your peers in what would interest you most - office politics - so that you can get to the top and finally get a share of the loot. You've got to do it all before others like you suck the company dry of course.

The skill sets for 1) and 2) are obviously very different. These aren't even the same professions.

europeasant said...

Being smart is nice, but without ambition you might as well work for sanitation or streets or Borders or Burger king.

Truth said...

"since the Ivy League will not accept Bubbas or Guidos to begin with, no matter how high their SAT scores."

You don't read this site much, do you?

Truth said...

"I find myself reading pretty much the same books I was reading when I was 20 and my 7 year old is beating me at chess."

Dude, you HAVE a 7 year old; that alone marks you as a negligible prole amongst most of the people who read this site.

Anonymous said...

Greater intelligence solves all known problems. Let's figure out which of his genes made him special and give them to everyone.

Anonymous said...

I think it's pretty clear that from a Moneyball standpoint the Ivies are overpriced, I suspect massively so.

A Moneyball approach would probably be to look at what the educational background of the Fortune 500 CEOs are, and better yet the educational background of the Wilshire 5000 CEOs, if that data is available. The theory behind this would be similar to that of Moneyball: why look at measures of potential (speed, "looks good in a uniform", admitted to Princeton) when you can look at actual results, like their ability to run a company? This assumes that the CEOs are operating in a relatively meritocratic environment and that their rise to the top reflects this.

A quick google shows that about 10% of F500 CEOs had an undergraduate degree from an Ivy. That's much higher than their representation in the overall pool of undergraduates, of course, but the takeaway should be that there's a very large pool of people not from the Ivies that can run a company. Odds are there's a lot of untapped talent in that pool.

The most common undergraduate major: Engineering.

http://content.spencerstuart.com/sswebsite/pdf/lib/2005_CEO_Study_JS.pdf

Anonymous said...

"From reading your stuff for a few years, I get the impression that you've always been a pretty right-wing guy..."

"I suspect that, like me, many of your readers considered themselves to be political liberals as young adults."

Same here. Most right-wingers were liberals when young. Steve, I'm sure that many of your readers would be curious to know to what you attribute the fact that you've always been a conservative. Having a conservative father doesn't guarantee it, since most teenagers "rebel". How did you escape the brainwashing?

beowulf said...

Fortunately, I didn't throw out a detailed letter sent me by one high school grad -- a farm boy who had enlisted in the Navy's nuclear submarine powerplant engineering program out of high school.

The ASVAB is a great signaling tool for brainpower (and the Army's new TAPAS psych test appears to be useful as a signaling tool for emotional stability and conscientiousness).
http://isteve.blogspot.com/2010/11/how-obama-could-improve-economy.html?showComment=1289426638681#c3989412936900763802

Since these are tests developed at great cost by the US Government to make job-specific career decisions, it'd be rather difficult for the US Government to argue (were a private employer to use ASVAB or TAPAS) that these tests violate Duke Power restrictions.

Simon in London said...

Me (exaggerating slightly):
"since the Ivy League will not accept Bubbas or Guidos to begin with, no matter how high their SAT scores."

Truth:
"You don't read this site much, do you?"

Why the sarcasm, Truth? I believe it's well-established that of the ca 20% of Harvard intake comprised of white gentiles, many are legacy admits or rich-family future donators, almost all the remainder are upper-middle-class north-easterners. Effectively none are lower-class whites.

"Bubbas or Guidos" was ironic of course. My in-laws are Bubbas. I'm an Ulsterman, the Brit version of a Bubba. I went to Oxford due to that admission-on-academic-ability thing, but I didn't like it much.

Anonymous said...

He must be smart, University average IQ must be around 130, so this wiz-kid must have had clearly a higher IQ.

Inductivist, converted from WORDSUM on the GSS:

http://inductivist.blogspot.com/2008/06/mean-iq-of-college-grads-dropped-9.html

"Mean IQ--white college grads

1960s 113.72
1970s 110.59
1980s 108.04
1990s 104.42
2000s 105.12"

105 is not too high. Suggests to me that these days college is increasingly about ambition, and probably conscientiousness, decreasingly about having a particularly high IQ (perhaps ambition and conscientiousness would be a better predictor of college attendance than IQ, though I doubt it). Though certainly it's never been an institution with a particularly stellar IQ entry threshold, if we compare it to some idealised fantasy of university life where every student is potentially a groundbreaking pioneer in their field (not surprisingly).

Audacious Epigone on IQ by occupation, based again on GSS Wordsum:

http://anepigone.blogspot.com/2011/01/average-iq-by-occupation.html

Whiskey said...

The Moneyball approach is already visible in Hedge Funds. There, considerable attention is paid on managers who can generate above market index returns while managing large amounts of money (meaning a deal has to be "big" rather than small, limiting investment opportunities).

Hedge funds generally select for ability. Some founders/managers like John Paulson are out of NYU and Harvard (MBA). Jim Chanos (Yale) also fits the bill. Michael Burry (not very socially skilled) came out of Vanderbilt and Stanford Med Schools.

Filtering effect: you need to be able to generate investments, meaning some social connections.

Anonymous said...

Whiskey is only partially right about hedge funds.

Some types of hedge funds depend entirely on raw IQ. No social skills needed. Mike Burry famously had only one eye, lacked social skills etc. Still earned huge returns.

Other hedge fund managers depend 80% on social skills and 20% on IQ.

There are a few ways to skin a cat.

If you are a person who can demonstrate IQ in the top 1% of the top 1%, in other words if you can demonstrate that out of 10 thousand random americans you have the highest IQ of the ten thousand it is a smart move to try to develop quant strategies. There is a demonstrated path to billionaire status for those that do well with this.

On the other hand if you are not in the top 1% of the top 1% best to focus your time and energy on something else. Don't apply for a job at Ren Tech or its ilk they won't consider you

Anonymous said...

Truth speaks the truth.

There are bubbas at the ivies.

Remember, Yale Law school accepted Bill Clinton.

You can look up the geographical distribution of the students from Harvard Yale and Princeton and see some whites like Bill Clinton who are from the deep south.


There seems to be a meme thrown about a lot here at Isteve that if a white non jewish male is born in america to middle class parents that he has very little chance of getting to be successful.

Take a look at the list of CEOs of the fortune five hundred companies. The majority of them actually are white non jewish males born in to middle class white families.

Look at who is making the real money in CEO and other C level executive positions. Overwhelmingly white non Jewish males.

I think there is tremendous denial going on here, with the typical I steve reader born white and middle class, and failing to become rich, and coming on this web site complaining about how unfair America is.

Sort of silly when you look at the real numbers. Take a look at the list of people that work directly for John Paulson. Paulson pays them each more than $10 million a year to do their jobs. Most of them are white non jewish males born in to the middle class

silly girl said...

Seems to me they are looking for the very most compliant yet intelligent folks they can get. They want the intelligence but don't want to put up with attitude. Redneck whites have lots of attitude, the smart ones do, too. They want high work ethic boot-lickers not rowdy cocky dudes.

Severn said...

I think an important factor re US "soft elite" hiring is that the Ivy League applications system filters for social class as well as ability, so you can be fairly sure that graduates have the right attitudes, if white gentile they have an upper-middle-class or upper-class background and accent, etc.

More importantly than their accents, they think the "right" thoughts and hold the "correct" social, cultural, and political views. That's what you really pay for when you hire an Ivy grad.

Severn said...

Greater intelligence solves all known problems.

This is patently untrue.

ben tillman said...

"Why don't firms that hire 22-year-olds ask college seniors to take the GMAT or GRE or LSAT and have those scores sent to them?"

These scores aren't job-specific, and they are pretty much destined to create "disparate impact"....


But so does everything else. Requiring a college degree, recruiting at Harvard but not at UTEP (379 of 405 B-school students are Mexican), UNH (93% White), Lake Superior State (18% Indian), or Texas Southern (87% Black), etc. -- everything's goint to create a disparate racial impact.

Anonymous said...

Law firms want someone who is pretty bright, hardworking, and driven. Law itself is pretty technical, detail-oriented, and long hours. Good grades at a top law firm are an indicator of this.

Investment banks don't need a super smart individual, but they need people that can hammer 80-100 hours a week. They also care for some degreee of detail orientation. Recruting Ivy League kids and semi-Ivies, with high GPAs, helps get that type of person.

Private equity groups typically take people with prior investment banking experience and MBAs from top schools. PE is all about due diligence, which isn't hard..... but PE groups are very prestige oriented and want their clients to trust them. So they bring on board Ivy guys.

Going into venture capital, either as an entraprenuer or a financier, requires proven track results. You've got to show that you have the experience and expertise to generate high returns for a VC fund. Typically, VCs take people with tech backgrounds who've excelled in a critical role in a startup. Sometimes, they may take people with other pertinent work experience. Rarely do they just take an inexperienced hire on the basis of IQ and education. It's more about a track record than an Ivy League pedigree, but Ivy League helps.

Hedge funds hire a lot of quantitative analysts to help automate computer-based trading. These are typically peope with PHDs in something quantitative (physics, math, computer science, economics, finance) and very strong programming skills.

Starting your own hedge fund is not about moving up the ranks. More typically, someone with a lot of experience and connections in the finance world will reach out to their contacts - and leverage those contacts to generate a large capital pool. Those sort of hedge fund managers are not super smart geninuses neccessarily (there are exceptions, like DE Shaw), but they have a good understanding of the markets and can sell.

Anonymous said...

From that Spencer Stuart study:

For the second year in a row, the University of Wisconsin joins Harvard as the most
common undergraduate university attended by S&P 500 CEOs.


Let me spell it: Other than this fact, there is hardly anything in common between Harvard and University of Wisconsin.

Anonymous said...

A little-commented on phenomenon is how the Navy manages to get so many bright young men to staff their nuclear propulsion program, given the relative attractiveness of college as an alternative. From what I've seen, recruiters specifically go after the high SAT score/low GPA combination-- high IQ screwups.

Does the Navy recruit mostly from bookstore owners? Shave their beards, get rid of their cats, and they become nuclear engineers?

Anonymous said...

The most overrepresented ethnicity, if you're wondering, are people of Jewish origin. Probably around 40-60 percent of the finance elite are Jewish. The next best represented group are Indians, who form around 10 percent in the entry level positions and maybe 5 percent in senior management. After them, East Asians are around 5-10 at entry level, but maybe 2-3 percent in the senior management. Iranians, Russians, and especially Lebanese are pretty well represented too. A fair number of immigrants from other backgrounds too.

Anonymous said...

I had a friend years ago who had studied econ or something like that and he interviewed with a bank in Chicago. He said he wanted to go into international finance. They said: Oh, we only interview at Princeton for those positions."

ben tillman said...

There seems to be a meme thrown about a lot here at Isteve that if a white non jewish male is born in america to middle class parents that he has very little chance of getting to be successful.

Take a look at the list of CEOs of the fortune five hundred companies. The majority of them actually are white non jewish males born in to middle class white families.


Current CEO's grew up decades ago, before the attack on the middle class had progressed maybe 15% as far as it has now come.

You're looking backward; we're talking about the present and future.

Anonymous said...

the US and A is lot more like the mother country with it's Oxbridge credentialed elite running everything from City of London to the BBC

I think that's much less true in the US. Among other things, the US is so huge that the Ivies simply don't have the capacity to generate enough graduates to fill all the slots.

The state schools churn out a lot of grads and the business world seems to be relatively good at identifying those who were slackers at 17 or 18 but got their act together a few years later. I suspect the top ranks of the US business are more educationally diverse than in the UK, where the route to the top is clearly Cambridge/Oxford, or the French of course where if you're not from a Grand Ecole you're sunk.

You can make a better case for the professional schools ruling things--the top MBA programs and Law programs. The large number of engineering undergraduates as F500 CEOs surprised me. Engineering is not an Ivy strong suit, and is more the domain of the state schools, albeit often the "public Ivies" like the UC system.

beowulf said...

"Does the Navy recruit mostly from bookstore owners? Shave their beards, get rid of their cats, and they become nuclear engineers?"

Engineers are officers, we're talking about people who work for a living. :o)
Nuclear-trained ETs [Electronics Technicians] perform duties in nuclear propulsion plants operating reactor control, propulsion and power generation systems. The character of NF jobs is mentally stimulating and offers career growth. The NF provides opportunities to work closely with specialists in the nuclear, technology, and engineering fields.
http://usmilitary.about.com/od/enlistedjob1/a/etn.htm

beowulf said...

This is a better link, sorry. Navy nuclear school transfers out as 77 college credits, almost 5 semesters worth.
http://usmilitary.about.com/od/enlistedjob1/a/nf.htm

Anonymous said...

the Navy manages to get so many bright young men to staff their nuclear propulsion program

A good deal of the Armed Forces recruiting is straight from the middle of the SES bell curve. The bottom 20% is largely excluded by the AFQT, and a good deal of the top 20% (mostly upper middle class) goes to college. That concentrates the nuke enlisted recruiting on bright working class kids who were maybe more interested in cars and girls than the PSAT and extracurriculars, or went to college for a while but were irritated by it for various reasons. Maybe they were just restless at the idea of sitting in class and having zero responsibility for anything of note until they're 30.

And, yes, the military is very good at instilling diligence in recruits. The military has several hundred years of experience in doing that to young men.

Truth said...

I'm sorry you took offense, Simon. I understand that going to Oxford is highly impressive. However, one of the corresponding posters got it completely right, there is no nefarious bias to keep 'Guidos / Bubbas' out of the Ivy league. If anything, the bias is to keep Jews and Asians out (they are overrepresented because the excel on all of the matrices)

http://www.harvarditalianamerican.org/#officers

Clinton is a good example, so is Antonin Scalia.

In the course of my lifetime white males have gone from owning 99% of America, to probably, 95%. I don't see that as unfair, and the whole "the world is biased against me because I'm white" thing, truly is tired. The world is biased against you because you haven't put the requisite work in. It's as simple as that.

Having worked in 9 different industries, in the public and private sector, it is my educated opinion that a fairly intelligent, likeable, middle-class white man who works fairly hard, and doesn't make too many waves, will almost always find a soft landing spot. Generally above the effort he has put in. I'm not angry about this, it's just the way America works, and good for them (you?).

Anonymous said...

I scored 770 on the GMAT but never applied to b-school because I knew I couldn't get into a good one.

Simon in London said...

Anon:
"Truth speaks the truth.

There are bubbas at the ivies.

Remember, Yale Law school accepted Bill Clinton"

Ivy demographics were very different in the '60s than today, though. In Clinton's day it was more like 60% white gentile and most of the rest Jewish (prob less at Yale). I recall Harvard's current figures were around 30% affirmative action admits, 25% Asian, 25% Jewish, and just over 20% white gentile.

Simon in London said...

Re University of Wisconsin creating vast numbers of leading CEOs. On a course I teach we study the writings of this guy at the University of Wisconsin, Stewart Macauley:
http://www.law.wisc.edu/facstaff/macaulay/index.html

He describes businessmen's culture from a legal perspective. How they trust each other, do business on a handhake, avoid bringing in the lawyers. On Thursday one of my students pointed out he was describing a particular business culture, that of Wisconsin.

Could it be that this state with a high trust business environment resulting from a largely Germanic-Scandinavian culture, combined with Anglo-Americam business dynamism, is the perfect breeding ground for future top CEOs?

Simon in London said...

Truth:
"The world is biased against you because you haven't put the requisite work in. It's as simple as that."

I'm not complaining about _my_ achievements, which are quite satisfactory. I am a bit annoyed that if we move to the US, my 'Bubba' son almost certainly won't be able to go to an Ivy League school on account of his white skin colour, I'm guessing his few % of black genes probably don't count. Whereas if not for AA and Legacy he'd probably be able to get in on ability.

OTOH Oxford didn't do me much good, and maybe he'll do better in a good State school anyway. Better to be a big fish in a small pond and all that.

Anonymous said...

I'm not exactly a bubba. My father graduated from Harvard and his father from Princeton, and I scored higher than the mean at Harvard and all other US schools on all of my college entrance exams, but all the elite schools I applied to rejected me.

To say that those with grades below what might be expected from their test scores are "screw ups" ignores that

1) The US and Canada are the ONLY countries in the world that rely on internal assessment in college admissions.

2) The public high schools in the US are so horrible that it is a wonder anyone shows up.

The US elite is not as smart as that of other developed countries as a result of its unique college admissions. America's problems are cultural and cannot be solved with politics. That is, they cannot be solved; leave if you can.

ben tillman said...

However, one of the corresponding posters got it completely right, there is no nefarious bias to keep 'Guidos / Bubbas' out of the Ivy league. If anything, the bias is to keep Jews and Asians out (they are overrepresented because the excel on all of the matrices).

No, there is a concerted effort to keep the White middle class out of the Ivies. Some are discouraged from pursuing admission at the off-campus interview stage. Others are turned away by biased admissions committees. And if you manage to get an offer of admission, you get slammed by the price of attending and blatant discrimination in the award of financial aid.

Black kids essentially get full rides, while White kids may actually get NEGATIVE financial aid; i.e., White kids may have to subsidize their classmates with extra contributions to the school's financial aid pool in addition to paying full tuition.

I know. It happened to me. The scholarships I had won on my own -- Tri-County Scholar Athlete of the Year, etc. -- were confiscated and redistributed.

White kids from low- and middle-income families cannot afford to attend the Ivies (unless perhaps they play football), and the pricing and financial aid decisions that preclude them from going have to be deliberate.

ben tillman said...

...there is no nefarious bias to keep 'Guidos / Bubbas' out of the Ivy league. If anything, the bias is to keep Jews and Asians out (they are overrepresented because the excel on all of the matrices)

http://www.harvarditalianamerican.org/#officers

Clinton is a good example, so is Antonin Scalia.


What is it with you people and the inability to distinguish the past from the present?

You say there "is" no bias, and then you refer to a couple of data from 40 or 50 years ago! Moreover, the presence of a few people like Clinton in the Ivies even today hardly disproves the existence of bias.

Half Sigma said...

The hardest part of running a hedge fund is getting people to give you their investment money.

The investment-picking part of the hedge fund can be run by monkeys, because studies show that hedge funds, on average, don't outperform the S&P 500. You just need to convince people that there's some sort of "strategy" other than monkeys.

Truth said...

Simon:

The statistics culled from Harvard' minority recruitment website itself tell a different story:

http://www.admissions.college.harvard.edu/apply/hrp/minority_recruitment/index.html

It says that Harvard's student body is "nearly 40 percent" minority...and that includes Asians which probably make up at least half of that percentage. The bottom line is that if your son is part of the top 2% in SAT score, outside activities, and GPA he is a viable candidate, if not he is not...unless that is, you truly believe that there is not one single "unconnected" white male enrolled at Harvard.

Svigor said...

Having a conservative father doesn't guarantee it, since most teenagers "rebel". How did you escape the brainwashing?

I've never been a liberal. I was raised in a strange, quasi-libertarian, Christian, southern, both-parties-suck kind of household. Racially aware, but not especially so (my politics would curl the hair on my dad's head if he were alive to see them). Critical & independent thinking was the only thing my dad ever really drilled into me.

And I never rebelled, not politically. Rebellion's about becoming your own person, coming to grips with your own identity, not picking the opposite of what dad believed.

Why don't kids rebel against the same horseshit they've been getting fed by the tv and mass culture for FIFTY YEARS NOW? You'd think they'd all be reactionaries, if they really wanted to rebel. Leftism as rebellion is a fricking JOKE.

Truth said...

Ben, please.

What exactly is an "inabillity to distinguish the past from the future" concerning the link to the Harvard society of Italian-American students?

I haven't posted examples of famous 'guido' and 'bubba' 25 year olds who attended Harvard because, by and large, 25 year olds AREN'T FAMOUS YET.

And Ben, with all due respect, if you allowed your hallowed scholarships to be confiscated, that says more about you than it does about the Ivy league.

Simon in London said...

Truth:
"The bottom line is that if your son is part of the top 2% in SAT score, outside activities, and GPA he is a viable candidate..."

Well he's only 3. If he's like his parents I expect he'd be ok on 'top-2% SAT & GPA', but we're not pushy/upper-middle-class enough for what I understand is required by 'outside activities' these days. And as a white boy, my understanding is he wouldn't be eligible for financial aid.

BTW are you sure Harvard count Asians as 'minority'? They get treated as whites for application purposes.

...Y'know, I think I'm just arguing about the principle of the thing. I hated Oxford, and I don't really want my son to go to some poncy New England Ivy, anyway. Sorry about that. >:)

Simon in London said...

Truth:
"I understand that going to Oxford is highly impressive"

I worked hard to get in, because my parents wanted me to & because both my father & paternal grandfather had done so. And I was miserable for three years, I had no idea what to do when I got there.

Getting my PhD (from a different University) felt like a much bigger achievement. That and winning the love of a good woman. :)

Anonymous said...

The hardest part of running a hedge fund is getting people to give you their investment money.

The investment-picking part of the hedge fund can be run by monkeys, because studies show that hedge funds, on average, don't outperform the S&P 500. You just need to convince people that there's some sort of "strategy" other than monkeys.


Half Sigma, what do you think about quant hedge funds? Are they any better at using abitrage and high volume to make money? I would think so.

Anonymous said...

If the statistics on minority enrollment in the Ivies and hiring of Ivy grads as signifiers are true, then the Ivies may be headed for an interesting market niche: they graduate people destined to be window dressing. Rather than producing graduates for the top slots, they graduate certified diversity hires headed for middle management and glad-handing.

sad said...

"There are a few ways to skin a cat. "

Sadly yes. A few of those brilliant Koreans and Chinese do so while it's alive. Something about the medicine they make being better for it.

Silver said...

The investment-picking part of the hedge fund can be run by monkeys, because studies show that hedge funds, on average, don't outperform the S&P 500. You just need to convince people that there's some sort of "strategy" other than monkeys.

That's only true over the long-term. In the short-run -- which can last years -- plenty of hedge funds totally whip the indexes. They're not engaged in "picking investments" (like a mutual fund), either.

True enough, plenty of investors in hedge funds don't necessarily have a very good idea of what they're getting themselves into, but it's not overly difficult to sell them on the notion that they have a real shot at making some stupendous returns.

Anonymous said...

Svigor, if you're old enough to have lived through it, what were relations like between blacks and whites in the pre civil-rights South? How'd whites treat and view blacks? I've heard pretty good from some, but the general consensus is that things were oppressive. Hearing the perspective of a conservative southerner would be interesting.

I'd also be interested to know if race relations varied among the states (ie was Mississippi better than Georgia) and between rural and urban.

Difference maker said...

Come now Truth, I am more manly, athletic, and good looking than my ivy league peers of high school, and better at speaking and physics too. And music. How can I countenance a culture that nurtures them over me?

Anonymous said...

If a hedge fund selects a high beta during the market run up, it can show strong gains.

Anonymous said...

Great post but some perspective:

Those who overlook the state schools are being short-sighted. First, SAT+GPA required to get into Berkeley are off the charts, especially post-209. Second, people seem not to understand the difference in difficulty between Berkeley undergrad and HPYS.

Anecdotal: I entered Cal in 1987. I had not applied to Stanford (was rejected by HYP). I certainly would not get into Cal today with the same HS GPA and SAT scores.

Be that as it may, I had a few friends and family members who went to Stanford. Being only ~40 minutes away, I went down there a lot, and they came to visit me a lot. I was overcome by a sense of profound envy. Nobody at Stanford undergrad had to work hard at all. OK, maybe in the hard sciences. But I didn't know any of those people. (I knew lots of them at Cal however, and they worked like slaves. It was incredible.)

I was in humanities (history, English, Philosophy) and I got worked to death too. Plus they graded really, really hard. At Stanford, a B+ was functionally an F. Formally, there was no F. That's right, they didn't even confer F as a grade. It had been scrubbed from Stanford's books.

(My mother worked with a Stanford grad who had been a star athlete in the '70s, very handsome, not so bright. I told here, indigantly, about the F. She needled him once saying "Did you know they got rid of the F at Stanford?" And he replied, "They're calling it Stanord?" True story.)

All this is to say nothing of the absurdly low unit requirement per quarter (we were on the semester system), the paucity of requirements overall, the ability to drop classes 24 hours before the final, and on and on. At Cal, you had to drop OUT OF SCHOOL if you were having a tough time. Forget about dropping one class at the last second.

Then there were the lines ... the interminal lines! Every lower division class (frosh/soph) was horribly oversubscribed. To just get enrolled in many REQUIRED courses, you had to sleep outside on Sproul in a bag in a line to have any shot.

I'm sure there were many reasons for this, but the biggest I think was the California Master Plan for Higher Education. The brainchild of Clark Kerr and Pat Brown, one element of this plan decreed that those who put in two years at a junior college were guaranteed admission to a UC campus. Moreover, it linked specific junior colleges to specific UC campuses. This link no longer exists, but the element of the plan which guarantees a jc student a place at a UC does.

So how do they find the space? Simple! By making it brutally hard for undergrads in the lower division. The point of the curriculm, the grading, everything, is to flunk out or just drive to despaire hoards of kids who will simply ... leave, opening up spots for the guaranteed transfers. Brilliant!

I concluded quite early that I was foolish for not trying harder for a private college. They coddle you. They give you As for showing up. (If you doubt this, Google "grade inflation" and "Harvey Mansfield.") They want your money. They will go to great lengths to keep you there and keep you (and more importantly, your parents) happy.

Cal on the other had was a brutally Darwinian enviornment. Kids who can survive that have something going for them beyond mere brain power, which most of them also have.

Then again, back then Cal cost literally $1,400/year in-state (not including dorms, etc.).

I have heard similar stories--at the time and later--about UCLA, UVA, Ann Arbor and Chapel Hill, which were the four other public schools that we at Cal respected as our peers, or not quite, but at least worthy of being discussed in the same breath.

Truth said...

"Come now Truth, I am more manly, athletic, and good looking than my ivy league peers of high school, and better at speaking and physics too. And music. How can I countenance a culture that nurtures them over me?"

By performing like it.

Truth said...

There was a great 60 minutes piece on Willie Gary, the richest tort lawyer in America (black) a few years ago. Mr. Gary attended Shaw University (an HSBC in Raleigh, NC) then got his JD from UNC.

During the interview, Ed Bradley asked Gary "how do you feel about Ivy League lawyers who look down upon you"? He responded "I LOVE Ivy league lawyers, I've hired plenty of them."

Anonymous said...

Half Sigma is right about hedge funds. With the exception of some (but not all) quant funds, hedge fund managers are salesmen first and oracles second if at all.

Buffett and Soros cannot be explained as lucky, and there are a few more like them.

Nanonymous said...

Buffett and Soros cannot be explained as lucky

Why? With so many trying, few have got to get lucky.

Anonymous said...

For their streaks to appear by chance would require trillions of people trying at least.

ben tillman said...

For their streaks to appear by chance would require trillions of people trying at least.

Their streaks could appear by chance even if they were the only ones who ever tried. You don't seem to understand what "chance" means. You're conflating it with "probability" and what we should expect based on the laws of probability.

For heads to come up 40 times in a row is not probable unless there are more than a trillion instances of people flipping a coin 40 times. However, it could happen by chance the very first time someone tries it.

David Davenport said...

Hedge funds generally select for ability.
...

The hardest part of running a hedge fund is getting people to give you their investment money.


My suspicion is that hedge funds and some law firms like to hire people who have wealthy and/or well-connected relatives.

In other words, the hiring process is also a customer recruiting process.

Luke Lea said...

Since the Ivies are elite gateway institutions that are tax exempt and the recipients of government largess,
a case can be made for more bias not less. They need student bodies that reflect the full geographic and ethnic diversity of America, which is far from the case currently. Affirmative action for all would make a good slogan. A student body of the best and the brightes, by all means, but one that looks like America because it is drawn from a cross-section of the American people.

Personally I am in favor of flash mobbing the homes and offices of Ivy League presidents to insist on these reforms.

Evil Sandmich said...

On the one thing that you got right, I'm rather surprised that your computer guy thought that was a good idea. Computer guys would build their own for two reasons, in the past: put together a neat machine that wasn't possible off-the-shelf, and avoid the 'Microsoft tax' by running bootleg software.

Avoiding that 'tax' is what makes homebrew systems cheaper for home. (Even without the Microsoft tax, the nightmare of supporting homebrew in a business environment makes them prohibitively expensive).

Anonymous said...

"You don't seem to understand what "chance" means."

I think that's you. Soros, Buffet, Peter Lynch and all the others with long track records aren't impossible according to the random walk model, but nothing is impossible according to the random walk model. The empirical distribution of returns of money managers simply doesn't fit the distribution predicted by the random walk model.

Svigor said...

Svigor, if you're old enough to have lived through it, what were relations like between blacks and whites in the pre civil-rights South? How'd whites treat and view blacks? I've heard pretty good from some, but the general consensus is that things were oppressive. Hearing the perspective of a conservative southerner would be interesting.

My father was nursed by a black woman, mostly raised by black maids, etc. Upper middle class southern standards, maybe? I'm no authority on where to put whom on that scale (don't get me started on the American-British differences).

I don't really have any lore about what it was like back then. I do know my dad's relationship/attitude toward blacks was HBD-aware, but a touch paternalistic, too. He was gregarious and got along well with blacks AFAIK. He did way more laughing at black antics than he did cussing them for anything. Like most southerners, he could talk in a way that non-southerners take as "ebonics" but really is more of a shared dialect (or overlapping dialects) between southern blacks and whites. I was fairly close with his father growing up, and I can't recall ever hearing anything on racial subjects from him.

For whatever that's worth...

I'd also be interested to know if race relations varied among the states (ie was Mississippi better than Georgia) and between rural and urban.

Hell if I know anything empirical. I do know that population density and social harmony are inversely correlated. I'd bet dollars to doughnuts blacks and whites get along better in rural areas than urban, ceteris paribus.

P.S., I'm not a conservative. I'm politically eclectic, but I'm closer to a founding liberal than a modern conservative. Biological survival & freedom for all flavors (but particularly my own) of man is my core tenet.

Svigor said...

Since the Ivies are elite gateway institutions that are tax exempt and the recipients of government largess,
a case can be made for more bias not less. They need student bodies that reflect the full geographic and ethnic diversity of America, which is far from the case currently. Affirmative action for all would make a good slogan. A student body of the best and the brightes, by all means, but one that looks like America because it is drawn from a cross-section of the American people.

Personally I am in favor of flash mobbing the homes and offices of Ivy League presidents to insist on these reforms.


I tend to agree. Let's force them to keep doubling down. "Affirmative Action For All!" indeed. AA broken down by religion and ethnicity (and language/dialect?), as well as sex and race. AA is good. AA is justice. Who has ever been harmed by "more justice," or "more good"? More good and more justice is always the right choice. AA should divvy everything up much more carefully. We have computers now. :)

John Thacker said...

Why don't firms that hire 22-year-olds ask college seniors to take the GMAT or GRE or LSAT and have those scores sent to them?

The Supreme Court case Griggs v. Duke Power, that's why.

none of the above said...

The value of an ivy league education is often said to lie in the network of contacts you make while there. Presumably, hedge funds, big banks, consulting companies, etc., hire at the ivies partly to buy access to those networks.