The Need for Balanced Recruitment

One of the central missions of Venture for America is to make it easier for top college graduates to work for start-ups and early stage companies throughout the country.

At present, banks and consulting firms have (to their credit) built very successful recruitment infrastructures to draw in hundreds of top graduates each year. This in turn has made it more difficult for smaller, emerging organizations to compete for talent.

Here are two passages that illustrate the recruitment and acculturation process.

1. The first is from James Kwak, an author who graduated from Harvard and later worked at McKinsey and Company, a top consulting firm, before attending law school:

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 bond with you over the recruiting period. If you get an offer, they find out what your other options are and have partners call you to explain that those are great options, but Goldman/McKinsey is better, and you can do that other thing later, anyway. For people who don’t know how to get a job in the open economy, and who have ended each phase of their lives by taking the test to do the most prestigious thing possible in the next phase, all of this comes naturally. (Graduate schools, which also have well-defined recruiting processes, are the other big path to take.) The fact that most companies don’t want new college graduates makes it easier to go to one of the few that do.

The third selling point — not the top one, but it’s there — is the money. Or, more accurately, the lifestyle. The glossy brochures never say how much money you can make. But they make it clear that you will be part of the well-dressed, well-fed, jet-setting elite. When people walk into those offices, with fresh flowers and all-glass walls and free food and modern technology everywhere, they get seduced. Last summer one person wrote to my school’s email list about how wonderful his office was, with its view of Central Park. I mentioned this to an old friend who used to work at McKinsey, and he said, “he fell for the office.”

The same factors are also largely true for top law school graduates, although for them the money is understandably more important. Law school costs close to $200,000 for three years, and I believe the average graduate has about $100,000 in debt. So another major inducement is the idea that you will work at a corporate law firm for three or four years, pay off your debt, and then go work for legal aid or the U.S. attorney’s office.

But the other factors are also very important. If you go to a top law school, it is simply easier to get a corporate firm job than any other job. They all come to campus at the beginning of your second year, most people can get a job simply by following the interview process, you work there for one summer, and then you get an offer to come back. Even if you don’t want to work at a firm, it makes rational sense to do it for that summer to get the offer as Plan B.

By contrast, it’s hard to get a public interest job. Most public interest organizations don’t have the money to hire a lot of people, and many don’t want people right out of law school. So the usual route is you have to apply for a competitive fellowship to work at a public interest organization, and then you have to hope they’ll hire you for good after that year. It’s hard. And that’s how Plan B becomes Plan A. And besides, many prominent corporate lawyers have gone on to important positions in Washington, so there is still the possibility of future greatness.

And once you’re in the door, the seduction begins. . .

It’s just human nature. Your expenses grow to match your income. As the decades pass and you realize that no, you’re not going to save the world, the money becomes a more and more important part of the justification. And when you have kids, you’re stuck; it’s much easier to deprive yourself of money (and what it buys) than to deprive your children of money.

More importantly, you internalize the rationalizations for the work you are doing. It’s easier to think that underwriting new debt offerings really is saving the world than to think that you are underwriting new debt offerings, because of the money, instead of saving the world. And this goes for many walks of life. It’s easier for college professors to think that, by training the next generation of young minds (or, even more improbably, writing papers on esoteric subjects), they are changing the world than to think that they are teaching and researching instead of changing the world.

Sure, there are self-parodying, economically delusional, psychotherapy-needing, despicable people on Wall Street . . . But there are also a lot of people who went there because it was easy and stayed because they decided they couldn’t afford not to and talked themselves into it.

A college student asked me at a book talk what I thought about undergraduates who go work on Wall Street. And individually, I have nothing against them, although I do think they should do their best to keep their expenses down so they will be able to switch careers later. But as a system, it’s a bad thing that a small handful of highly profitable firms are able to invest those profits into skimming off some of the top students at American universities — universities that, even if nominally private, are partially funded by taxpayer money in the form of research grants and federal subsidies for student loans –and absorbing them into the banking-consulting-lawyering Borg . . .

2. The second account is an interview with a Harvard grad who’d gone to Wall Street by Ezra Klein of the Washington Post.

What did you study at Harvard?

I focused on history and government and political philosophy.

And why did Goldman Sachs think that would be good training for investment banking?

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.

How did you end up going to Goldman, though? Presumably, as a social sciences major, you hadn’t meant to head into the financial sector.

Investment banking was never something I thought I wanted to do. But the recruiting culture at Harvard is extremely powerful. In the midst of anxiety and trying to find a job at the end of college, the recruiters are really in your face, and they make it very easy. One thing is the internship program. It’s your junior year, it’s January or February, and you interview for internships. If all goes well, it’s sort of a summer-long interview. And if that goes well, you have an offer by September of your senior year, and that’s very appealing. It makes your senior year more relaxed, you can focus on your thesis, you can drink more. You just don’t have to worry about getting a job.

And separate from that, I think it’s about squelching anxiety in general. It checks the job box. And it’s a low-risk opportunity. It’s a two-year program with a great salary and the promise to get these skills that should be able to transfer to a variety of other areas. The idea is that once you pass the test at Goldman, you can do anything. You learn Excel, you learn valuation, you learn how to survive intense hours and a high-pressure environment. So it seems like a good way to launch your career. That’s very appealing for those of us at Harvard who were not in pre-professional majors.

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.

Exactly. I wouldn’t speak for everyone and there certainly are people who want to be in finance, but a large portion are intrigued by these jobs for those reasons. I think that’s a majority, at least at Harvard. And the same goes for consulting jobs . . . It’s this limited-time commitment, the ability to get new skills. These aren’t the types of things you grow up dreaming of doing, but you wear a business suit, you meet clients. It’s a way of growing up very quickly. And investment banking has the added advantage that you can make money very quickly and afford a great apartment in New York, which is very expensive.

Does that trap people? It’s common to talk about “golden handcuffs” in law, where people go to law school and want to do public interest law but decide they’ll go to a corporate firm for a few years first. Then they get used to the lifestyle the corporate money provides and never really give it up.

The law comparison is a good one. That’s the risk of it. As you said, when people leave law school with a lot of debt, they figure they’ll get some good skills and good money at a top-tier firm before going to save the world. But then you have a great apartment, more responsibilities, kids . . .

And I think it’s important to point out, that things happen very quickly. Private equity firms were trying to recruit us in the first year of my two-year training program. There’s this notion of the accidental banker, people who get caught up in that world and get more and more pay and find it harder to justify leaving. But the cultural effect of all of this — and even with regulatory reform, we need to think about that — is that a lot of people decide to sacrifice much more time than they normally would because the money is so good, and then they believe they deserve extremely high pay because they’re giving up so much time. It’s not malicious. But there are a lot of unhappy people who end up in that situation . . .

The above accounts illustrate how high-resource organizations invest heavily in recruiting top college graduates and convert specific paths into the most clearly identified options. We have to make working for a start-up in one of our communities just as attractive and easily accessible if we want to change the flow of talent.

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Eric Stromberg’s 5 Reasons to Join a Startup After Graduating

Great blog post message to college graduates by Eric Stromberg of Hunch NYC:

 

5 Reasons to Join a Startup After Graduating

After I wrote my last post, a surprising number of people emailed me asking why I decided to join a startup after graduating from Duke. Many of those I heard from face similar decisions today: either they are college seniors choosing between a big company and a startup, or they are recent graduates who work at a big company and are thinking about making the switch. What’s interesting is that most are already leaning towards the startup career path: it seems they just want someone to assure them it’s a rational move. Their friends and family are skeptical: “How can you turn down a job at Morgan Stanley for a 10-person startup?” Hopefully this post will give those who want to join startups some good points to bring back to the skeptics as to why it’s a good idea to join a startup early in your career.

First, an important point: As much as I’d like to say that everyone should join a tech startup as soon as they graduate, I don’t think it’s that simple. People have different passions, and I’m not a fan of projecting my own interests onto others and assuming that what I did was somehow the “right” thing to do. So, the first piece of advice I’d give is to pursue whatever you are passionate about. What is passion? In defining it, I’ll take inspiration from Steve Blank’s recent graduation speech at Philadelphia University. This quote caught my eye:

It’s your curiosity and enthusiasm that will get you noticed and make your life interesting.

I think he nails it: passion is enthusiasm coupled with curiosity. Which leads me to the first reason to join a startup early in your career:

1. Passion is the ultimate competitive advantage – When I was an intern on Wall Street, I took a look around the room of my peers and thought, “What is my competitive advantage here? Everyone is smart and works hard, right?” What I quickly found was that those who excel in that job are passionate about financial markets. I thought finance was interesting, but didn’t have the same level of enthusiasm and curiosity about it as my peers did. I didn’t have a competitive advantage in the Wall Street world. However, I did have a passion for technology and for startups. If I could work for a startup, I could use this to my advantage.

A nice way to tell if you have a passion for what you are working on is to ask this: Do your weekends look a lot like your weekdays? When you get home from work, do you find yourself wanting *more*? Do your ears perk up whenever someone talks about a certain subject? Do you feel compelled to ask questions and really listen to the answers? That’s passion, and it fuels a competitive advantage that can’t be faked. It’s what drives you to work when you don’t have to, to think about new solutions to old problems when everyone else is spending the weekend flipping the “work” switch off.

2. Startup years are like dog years – One year at a startup is like seven anywhere else. In Hackers and Painters, Paul Graham writes, “Economically, you can think of a startup as a way to compress your whole working life into a few years. Instead of working at a low intensity for 40 years, you work as hard as you possibly can for four.” For a young and hungry person, startups provide an awesome opportunity to accelerate your career. By their very nature, high growth startups always have more tasks to be done than people to do them. This necessarily results in a lot of employee “stretching.” By this, I mean being put in a situation where you have to do work that you might not be quite ready to do. This is the best way to learn.

Companies tend to change most in their earliest stages (as opposed to later when they are executing a proven model). As an early employee, you have a front row seat to this evolution. Because your role, and perhaps even the role of the company in the market, changes at such a rapid pace it is much harder to reach a point of diminishing marginal returns at a startup.

3. Sunk costs only grow with time – A lot of people I meet reason that joining a big company will de-risk their career path. If they can get a brand name on their resume, even if they join a startup and the startup fails, they will still have that brand name to fall back on. There is a recurring question: “When do I cash in the chips I’ve accumulated and do something I really want to do?” In reality, what I’ve found in talking with older friends in other career paths is that the further you go down one path, the harder it will be to make the switch to another. The weight of momentum can be overbearing, especially when the skills accumulated in most industries outside of tech are little transferable to tech startups.

4. If you want to start a company, a startup is the best place to learn – I’ve long known that at some point in the future I want to be a founder. It’s hard to describe the effect that working at a startup has to help move that aspiration from abstract to real. Before working at Hunch, I’d always think about starting a company, but it would be in an “armchair” fashion, where I’d be thinking of everything in theoretical terms. Working at a startup allows you to observe how one startup is run, and help shape a concrete vision of how you would want to run your company. What type of person do you want to hire? What kind of culture do you want to set? How do you onboard new employees efficiently? I don’t have perfect answers to every question, but these are the types of things I’ve been obsessing over for the past year, whereas prior to joining Hunch I didn’t even know the right questions to ask.

All of this stems from the fact that at a startup you have greater access to and can better observe the actions of the founding team. At a big company I’d likely be several levels of management removed from the people I work with at Hunch everyday. I’d wager that more than half of what I learn is through observation, and its tough to learn how to be a founder sitting in a cubicle where you don’t interact on a daily basis with the people who shape the vision of the company.

5. Your experience is subject to greater variance – At a big company, your role is usually defined for you. The analyst program you go through is identical to the program the kid last year went through. Not the case at a startup. In many cases you define your role, and no two people have the same experience. If you see a problem and have a solution to fix it, you’ll likely get ownership of that problem. But that’s the key: you have to own it. Nobody will tell you exactly how to do your job, or hold your hand. Your peers at big companies will likely not be afforded the same responsibility in the earliest stages of their career. This is an incredibly exciting thought for some, and super terrifying for others who have moved from institution to institution, brand name to brand name, their whole life. But, if this idea excites you it can be incredibly rewarding, both in terms of what you can get done and what you can learn.

Final Thought – Clearly I have a ton of bias here because this is the route that I chose. And, I’m sure there are benefits to joining a big company as well. But, if you are someone who wants to join a startup but just needs an extra nudge, hopefully the above points will give you some ammunition to take back to your friends and family who tell you that you are an idiot for turning down a job at a brand name company for the chance to work at a startup.

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