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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The Life of a programmer on Wall Street

Here’s a great article about an inside look at being a technologist on Wall Street.


Programming for Dummies: Dissastisfied, Some Wall Street Technologists Flee for Start-Up Life

By Leon Neyfakh
September 21, 2010 | 5:21 p.m

Programming for Dummies: Dissastisfied, Some Wall Street Technologists Flee for Start-Up Life

“I mean, no one was being held with a gun to their head and forced to work at Morgan Stanley,” said Andrew Montalenti. “It was a very good job by any objective measure. But a lot of people did feel like if you just kept working there and pursued the career path that was laid out for engineers, you could blink and all of a sudden 15 years would have passed and you wouldn’t have anything to show for it.”

Mr. Montalenti joined Morgan Stanley as a software engineer in 2006, after graduating from N.Y.U. with a computer science degree. He had applied after seeking the counsel of a friend from his department who had been working in a similar job at the firm for just over a year. “He told me that he really liked it there,” Mr. Montalenti said. “He said it was a very hacker-oriented shop, and that you had a really good environment for doing software engineering.”

Mr. Montalenti took the job, and, for awhile, he had a ball with it. The team he was placed in was made up of “extraordinarily smart” people, and the project they were working on–revitalizing the firm’s trading infrastructure–seemed exciting. But soon the work grew redundant, Mr. Montalenti said, and the problems he was asked to solve as part of his day-to-day responsibilities started to seem technically uninteresting. Like many other creatively inclined, intellectually ambitious programmers who took high-paying jobs on Wall Street after college, Mr. Montalenti found himself disillusioned and restless.

Then, in March of last year, he did something very few people in his predicament have the guts to do: He quit his job and founded a company of his own with one of his best friends.

“I’d just like to be able to point to at least one thing after 15 years of working as a software engineer and say, ‘I built that thing,’” said Mr. Montalenti, who, at 26, is now happily running, a Web-based recommendation service. “In one sense, a Wall Street firm is a hacker’s paradise, in that you can go to a job every day and get paid very well and not actually have to be that ambitious. If all you really want to do is sit there coding, but you don’t really care what you’re coding, then it can be a form of paradise. But that’s really where it broke off for me.”

There are other engineers like Mr. Montalenti in the New York tech scene, who initially gave in to the temptations of Wall Street but ended up leaving it all behind in pursuit of more rewarding work. But there are many more who remain in their finance jobs, earning enviable salaries but suffering as their energy and talent are expended on work that requires no technical creativity and affords them little autonomy.

“At my workplace, I did not know one single person who was happy with what they were doing–not even one,” said Puneet Mehta, who was a VP of technology with Citi Capital Markets before quitting and, along with two other Wall Street refugees, founding the mobile app start-up MyCityWay. “Each one of them was just getting through it because they had to pay the bills.”

Mr. Mehta and his co-founders, Archana Patchirajan and Sonpreet Bhatia, did not mask their contempt for Wall Street recently as they sat in their Flatiron office and described how financial firms are able to seduce the most gifted and ambitious computer scientists and mathematicians into coming to work for them after college. The firms carry out such robust and effective campus-recruiting efforts, they said, that start-ups are unable to compete for top talent. This is not only because they can’t afford to send their people, but because a lot of times the best engineers receive and accept offers from banks and hedge funds many months before they graduate–something start-ups can’t do because they simply can’t plan that far ahead.

In the process of recruiting, standout engineers–the kind of people who want to intellectually stimulating jobs–are often told that the programming positions on offer on Wall Street involve sophisticated engagement with cutting-edge technology, only to find that that’s not necessarily true.

“That’s how they attract top talent,” said Mr. Mehta. “Going in, most people do not expect to be bored. I’ve worked outside of Wall Street and I’ve seen how attractive it is from the outside and how most people just dream of getting one of these jobs.”

Mr. Montalenti said that when he was applying to Morgan Stanley, recruiters played up the bank’s “hacker credentials.”

“They talked about how it’s an entirely Linux shop, which resonates with hacker types,” he said. “They talked about how they had these millions of trades that they had to process every day, and how this was a major data-processing challenge that required deep understanding of algorithms.”

Often the malaise doesn’t set in until after a few years. The source of it is multifaceted, and varies depending on the function of the group an engineer is placed in after college. But the most common complaint, based on interviews with individuals who left finance for start-up life, is that the work they’re asked to do there is repetitive and boring.

“From a software standpoint, it’s still fundamentally a very basic set of operations that banks have to do,” said Mr. Montalenti. “Basically they have to book orders and they have to fulfill orders. Sometimes they have to do that kind of quickly, but it’s not really that crazy.”

According to Matthew Rathbone, who spent two years at UBS and is currently in grad school at N.Y.U. for computer science, engineers who want to do anything that involves real thinking must become “quants”–meaning they have to get into “how everything is priced and how certain risk values are calculated.” Quants are mathematicians with programming skills who have an interest in financial modeling, Mr. Rathbone explained, and they are distinct from regular developers, whose entry into computer science is motivated by a desire to build software. “If you want to be doing more than just connecting system A to system B, which is what 90 percent of developers do in finance, the way to progress technically is to become a quant and to have a higher competency in the financial markets side of it,” said Mr. Rathbone, who is also on the staff of file sharing start-up

But even quants are not immune to the feeling that what they’re doing for a living is not adding up to anything–that when all is said and done, their professional achievements will have only mattered to other people in their company and perhaps a few investors.

“There are a lot of people like me there who somehow wander into the space thinking there must be some intellectual merit to it because so many smart people are going there,” said Mario Schlosser of the social gaming start-up Vostu, who studied computer science in college before ending up at Bridgewater Associates. “But literally the feeling I always had is that it was basically moving things from left to right or from right to left. And those things would move just fine even if we didn’t move them. … If we hadn’t been there, the world would not be any worse off.”

“I remember overhearing people who were like, ‘Why should I really work hard on this, when all I’m doing is making some extra money for some rich guys who are investing in a bank?” said Mr. Montalenti. “I can tell you from experience that most software engineers I know really, truly want to have an effect on people’s lives with their work.”

There are certain coping mechanisms that make life on Wall Street more bearable for creatively inclined engineers. Some develop iPhone apps in their spare time; some attend hack-a-thons after hours. Some participate in internal group emails where they discuss technical problems with one another, and some work in private, solving computational mathematical problems on sites like to keep their skills sharp.

And while some driven individuals find their outlets in the development of personal projects that will ultimately serve as their escape hatch–see Joshua Schacter, who worked at Morgan Stanley while building the pioneering social bookmarking app Delicious–there are many more whose dreams remain fantasies, and who stay in finance because they can’t bring themselves to give up their massive salaries or yearly bonuses.

Mr. Montalenti said he and his girlfriend now refer to his finance days as “the gilded age.” “Back then I was actually getting paid really well, I didn’t have to worry about health insurance–all that stuff,” he said. “Nowadays I make close to nothing and just scrape by.”

Nevertheless, he and others who have taken the plunge and found success on their own terms are unequivocal in encouraging other dissatisfied Wall Street engineers to consider doing the same.

“I really am blooming as an engineer,” said Mr. Montalenti. “I never wake up dreading my day of work.”

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Banking vs. Start-up for a recent grad

Here’s a phenomenal blog post about one person’s transition from banking to start-up life.  Breaks it down into useful principles.  It’s a fantastic read for an insider perspective.  A worthy quote:


“The best thing Banking did for me was put me across the table from CEOs at companies like TheLadders and Rosetta Stone. It soon became clear to me that the jobs of these CEOs was to create value where there was none, and that my job was to help move that value around. This is a worthy calling, but not one that I was particularly fond of.

When I lost interest in my boss’s job, and his boss’s job, and all the way on up to John Mack, I quickly lost interest in my job and started treating it as a means to an end – “I just have to get through my analyst years and then I can do whatever I want.” This attitude it toxic when you’re at the same time asked to give up your nights and weekends.”

“I met with about 8 people. Every single person, VC and entrepreneur alike, said the exact same thing: “if you want to learn how to run an internet company, go work at an internet company.”

Much more good stuff in there too.  Thanks for putting it out there!

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Wall Street Journal reports Big U.S. Companies Prefer Hires from State Schools

Wall Street Journal reports Big U.S. Companies Prefer Hires from State Schools

Posted: September 14th, 2010 | Filed under: Economy, Wall Street
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The Wall Street Journal recently published a survey showing that many big companies prefer to hire from big public schools rather than Ivy League institutions.

What’s interesting is that it makes complete sense.  Big companies need people who will commit to their organization and hunker down in order to operate a business.  Ivy League kids would be likely to show up for a couple of years and then depart for something (very likely professional or graduate school).  It underscores the need to get Ivy League graduates engaged in building something that they can commit to, as big companies have figured out that they’re not a natural fit.

Employers Favor State Schools for Hires


U.S. companies largely favor graduates of big state universities over Ivy League and other elite liberal-arts schools when hiring to fill entry-level jobs, a Wall Street Journal study found.

Jennifer Merritt discusses a new Wall Street Journal survey, which reveals recruiters are shifting their attention away from elite private schools to focus instead on state universities.

In the study—which surveyed 479 of the largest public and private companies, nonprofits and government agencies—Pennsylvania State University, Texas A&M University and University of Illinois at Urbana-Champaign ranked as top picks for graduates best prepared and most able to succeed.

Of the top 25 schools as rated by these employers, 19 were public, one was Ivy League (Cornell University) and the rest were private, including Carnegie Mellon and University of Notre Dame.

The Journal research represents a systematic effort to assess colleges by surveying employers’ recruiters—who decide where to seek out new hires—instead of relying primarily on measures such as student test scores, college admission rates or graduates’ starting salaries. As a group, the survey participants hired more than 43,000 new graduates in the past year.

The recruiters’ perceptions matter all the more given that employers today are visiting fewer schools, partly due to the weak economy. Instead of casting a wide net, the Journal found, big employers are focusing more intently on nearby or strategically located research institutions with whom they can forge deeper partnerships with faculty.

The Journal study didn’t examine smaller companies because they generally don’t interact with as many colleges. In addition, the survey focused on hiring students with bachelor’s as opposed to graduate degrees.

The research highlighted a split in perception about state and private schools. Recruiters who named an Ivy League or elite liberal-arts school as a top pick say they prize their graduates’ intellect and cachet among clients, as well as “soft skills” like critical thinking and communication. But many companies said they need people with practical skills to serve as operations managers, product developers, business analysts and engineers. For those employees—the bulk of their work force—they turn to state institutions or other private schools offering that.


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