OPINIONS

Op-ed: Stop the Wall Street recruitment

The growing Occupy Wall Street (OWS) movement has focused national attention on the financial industry’s power over American politics and policy. But it doesn’t end there — Wall Street also has extensive influence over the U.S. higher education system, especially at universities like Stanford.

 

Three years after the financial industry nearly caused a second Great Depression, our nation’s top universities remain the primary training and recruiting grounds for these same reckless institutions. This is antithetical to the civic mission and responsibility of higher education, and it is time for the academic community to seriously address this problem.

 

The financial industry’s influence over higher education is deep and multifaceted, including student choice over majors and career tracks, career development resources, faculty and course offerings, and student culture and political activism. In 2010, even after the economic crisis, the financial services industry drew a full 20 percent of Harvard graduates and over 15 percent of Stanford and MIT graduates. This represented the highest portion of any industry except consulting, and about three times more than previous generations.

 

As the financial industry’s profits have increasingly come from complex financial products, like the collateralized debt obligations (CDOs) that ignited the 2008 financial meltdown, its demand has steadily grown for graduates with technical degrees. In 2006, the securities and commodity exchange sector employed a larger portion of scientists and engineers than semiconductor manufacturing, pharmaceuticals and telecommunications.

 

The result has been a major reallocation of top talent into financial sector jobs, many of which are “socially useless,” as the chairman of the United Kingdom’s Financial Services Authority put it. This over-allocation reduces the supply of productive entrepreneurs and researchers and damages entrepreneurial capitalism, according to a recent Kauffman Foundation report. Many of these finance jobs contribute to volatile and counter-productive financial speculation. Indeed, Wall Street’s activities are largely dominated by speculative security trading and arbitrage instead of investment in new businesses. In 2010, 63 percent of Goldman Sachs’ revenue came from trading, compared to only 13 percent from corporate finance.

 

Why are graduates flocking to Wall Street? Beyond the simple allure of high salaries, investment banks and hedge funds have designed an aggressive, sophisticated and well-funded recruitment system, which often takes advantage of student’s job insecurity. Moreover, elite university culture somehow still upholds finance as a “prestigious” and “savvy” career track.

 

But university administrations are also responsible. At best, they have passively allowed the largest banks to dominate student recruitment; at worst, they have enthusiastically promoted these companies and encouraged students to enter finance. To this day, career development offices accept donations from the wealthiest banks in exchange for special recruitment access. For example, until recently, Stanford’s Career Development Center featured Goldman Sachs as a “Gold Partner,” despite the company being under federal investigation for criminal trading practices.

 

The higher education community needs to begin a serious discussion about how to ensure checks and balances against finance, and prepare more students for socially productive careers in public service, entrepreneurship and scientific research. Some recent trends have been positive, like loan forgiveness for law school graduates entering public service. Universities should consider similar incentives for undergraduates, designing proactive, long-term strategies to encourage alternative career tracks.

 

Let us be clear: pursuing a job on Wall Street isn’t evil, and it goes without saying that we need a strong and efficient financial sector. But our generation cannot afford to continue shipping our best and brightest off to Wall Street. The United States and the world face enormous challenges in our lifetimes — from climate change to global poverty — and we need our top talent focused on solving these problems.  America’s university system is one of our most prized national assets, benefiting from taxpayer support and providing invaluable public goods in the way of knowledge and human capital. It should stop serving as the vocational training center for reckless banks and hedge funds.

 

This process will be difficult for many of us with friends and colleagues in finance. But those of us privileged enough to attend top universities should have the courage and responsibility to recognize the hard truth: an academic community that actively supports the same financial institutions whose rampant greed caused untold national hardship is a community on the brink of moral bankruptcy.

 

TERYN NORRIS ‘12
Truman Scholar

 

ELI POLLAK ‘12
Mayfield Fellow

Contact terynnorris@stanford.edu for comments.

  • http://twitter.com/DannyCrichton Danny Crichton

    I wrote a response to this on my blog: http://www.informedskeptic.com/2011/10/why-stanford-students-should-work-on-wall-st/ Quote: “I used to be more service-oriented.  I wanted to work in government, to improve the process, to make a difference.  It might be surprising for those outside the Cardinal Bubble, but many of Stanford’s top, top students wanted the same thing.  I know them, and I have talked to them.  But America is not Japan (or really any industrialized country) where top students are automatically funneled to positions of bureaucratic power.  Instead, they compete with everyone.  America’s top firms are offering you authority over millions of dollars, and the government wants you to prove knowledge of file attachments.  It’s insulting, and it’s over, at least for me and my friends.”

  • http://www.tariqwest.com/ Tariq West

    Well put Danny. Terryn and Eli certainly make valid and important points about misplaced cultural priorities, resources, incentives and therefor talent, but you shed some light on who actually creates (and fails to create) the right incentives and not just in terms of compensation.

  • http://www.facebook.com/terynnorris Teryn Norris

    Danny, thanks for writing this response.  You make some good points about the recruitment process which help explain why so many best and brightest choose to take this route, and hopefully this can help us address the problem.  

    For right now, I’ll just point out that we did indeed acknowledge the easier application process when we noted the “aggressive, sophisticated and well-funded recruitment system.”  But this ultimately says nothing about the broader normative questions at hand related to social and economic productivity, which you fail to address, let alone the questions regarding morality and civic duty for the most privileged young members of society.  Your response essentially says, “we deserve to be treated like elites, and public service organizations should shut up until they give us more elite treatment.”  And I imagine that the vast majority of academics would take part with your assertion that banks like Goldman Sachs and JP Morgan are the “only ones that understand the value of an elite education.”

  • http://www.stevebartz.com/ Steve Bartz

    Finance is too broad of a categorization. There are many players within the industry who have completely different roles. Most of the evil that people refer to comes out of investment banking, which is not the same as algorithmic trading (or high-frequency trading as it is known in the media). From talking to one recruiter, there is a huge difference between the attitude towards financial companies at Stanford versus Ivy League schools. People actually challenge these companies to find out what good they do for the world. I think this is what makes Stanford unique amongst top-tier schools.

  • Chris M.

    Intelligent students may want to pursue what they love, but most follow where the money is. 20 years ago, that was medicine, but the skyrocketing litigation and malpractice insurance in America made that sector less attractive to students. If the government really cracks down on banks, effectively holding them responsible for their own “malpractice”, they won’t be able to pay employees (read: management) such high amounts and students will move on to another sector where the pay is better.

  • http://pulse.yahoo.com/_5RNEZF2YTWM6OYYA26PCJO3VH4 Jai

    Danny, I feel like you are setting up a false dichotomy.  There’s a whole world of options besides finance/consulting and public sector service and Teryn & Eli included some of them as “semiconductor manufacturing, pharmaceuticals and telecommunications” in their list of brain drained industries. 

    Honestly, in Teryn’s comment below, the value of “social and economic productivity” is more relevant to me than “moral and civic duty”.   Its not clear to me that pharmaceuticals are more moral than wall street firms, but they are (hopefully) producing something of value.  And engineering students in particular are definitely facing a choice between tech and banking.

    I think it is always going to be a challenge for public service to compete with the $$$ at Ibanks, but it may not be a competition worth undertaking.  There is a good chance that the % of candidates interested in both fields is actually pretty low.   Danny, I think you’re an unusually eclectic case, and even you were applying to Bain, not a true financial institution. 

  • Tahira Adaya

    “Beyond the simple allure of high salaries, investment banks and hedge funds have designed an aggressive, sophisticated and well-funded recruitment system, which often takes advantage of student’s job insecurity.”
    …I feel like a similar thing can be said about elite schools. Students at top universities are used to being the best and accustomed to competitive environments. Of course they would be attracted to “sexy” careers in finance.

  • Guest

    Seriously – the evil comes out of investment banking?  You are mistaken.  It’s the trading activities of firms in various complex financial products (CLOs, CDOs) that contributed to the crisis, NOT investment banking.  And you are quite naieve to believe what the recruiter espoused about the attitude at Stanford vs. Ivy League schools.  Stanford students want to go into investment banking just as much as other students at top tier schools.  G

  • Guest

     You are quite mistaken.  It’s the trading activities of firms in various complex financial products (CLOs, CDOs) that contributed to the crisis, NOT investment banking.  And you are quite naieve to believe what the recruiter espoused about the attitude at Stanford vs. Ivy League schools.  Stanford students want to go into investment banking just as much as other students at top tier schools.  G

  • Guest

    Response to Steve Bartz:  you are quite mistaken – it’s the trading activities of firms in various complex financial products (CLOs, CDOs) that contributed to the crisis, NOT investment banking.  You are quite naive to believe what the recruiter espoused – Stanford students want to go into investment banking just as much as other students at top tier schools. 

  • Curious student

    here’s my question: HOW do these wall street banks have all this capital?  I’ve heard it has something to do with the Federal Reserve and low interest rate policy- what does this mean?  Is the government’s fault?

  • Guest

    Response to Steve Bartz:  you are quite mistaken – it’s the trading activities of firms in various complex financial products (CLOs, CDOs) that contributed to the crisis, NOT investment banking.  You are quite naive to believe what the recruiter espoused – Stanford students want to go into investment banking just as much as other students at top tier schools. 

  • http://www.facebook.com/terynnorris Teryn Norris

    FYI, the New York Times DealBook published some coverage on this op-ed today, along with a couple similar op-eds across the country:

    “Wall Street Protests Inspire Ire Over Bank Recruiting”
    http://dealbook.nytimes.com/2011/10/11/wall-street-protests-inspire-ire-over-bank-recruiting/

  • dude

    Ridiculous article that betrays a complete lack of understanding of the financial sector:”Three years after the financial industry nearly caused a second Great Depression”–Right it was all the banks fault. People never borrowed more than they every should have to put a minuscule down payment on a house that they fallaciously believed could only go up in value. Regulators never messed up and certainly the Fed and government acted responsibly the whole time.”complex financial products, like the collateralized debt obligations (CDOs) that ignited the 2008 financial meltdown”–Pray tell how CDO’s ignited the meltdown? Is it rather the failure of America’s housing sector the result of an over leveraged economy that allowed these securities to lose value? All CDO’s did was combine multiple loans into one package to facilitate investment and loans—they were tools not facilitators of ultimate collapse. “Indeed, Wall Street’s activities are largely dominated by speculative security trading and arbitrage instead of investment in new businesses. In 2010, 63 percent of Goldman Sachs’ revenue came from trading, compared to only 13 percent from corporate finance.”This shows a complete ignorance of how financial service firms work. Trading at places like Goldman Sachs is not speculative usually, but rather it services clients. In other words, they allow for the market to function by the selling and buying of securities. Only a minuscule portion of that profit comes from prop trading which IS SPECULATIVE. Not all trading is the same. “For example, until recently, Stanford’s Career Development Center featured Goldman Sachs as a “Gold Partner,” despite the company being under federal investigation for criminal trading practices.”Hardly. Absent the recent SEC case which alleged certain failures of disclosure, there is no concrete case for systematic criminal trading practices. Indeed just because a company is accused of wrong doing (innocent before proven guilty….) does not mean Stanford should lock their doors to aspiring students seeking careers.In the end, these two just don’t know enough about what they are talking about to make a cogent argument. Perhaps, it is unfair how disproportionate recruiting is to these banks and that is a fair point, but they go way to far in trying to show that.

  • http://www.facebook.com/sceth Sceth StXellus

    Danny’s piece doesn’t claim, “We deserve to be treated like elites.” But it is the responsibility of public service organizations to market their positions to those they would like fit them, and they often don’t do that, and that fact is eager to show itself.

    Even without the data you present, perhaps most people would suspect
    that the growth of trading economics is “socially useless” and “damages
    entrepreneurial capitalism,” as it deals primarily with exploiting the
    kinetics of wealth as opposed to production. Thank you for outlining
    that.

    However, the rest of the article is a normative moral call without
    pragmatics. Moralizing is often a nice garnish for the way we talk about
    history, but it has (arguably) neither contributed to the argument’s
    substance nor made it compelling. People generally do not go saying,
    “Investment Banking is so good for the world!” The moral questions are
    pretty much settled. But the moral questions haven’t brought elite grads
    to act morally en masse – and focusing on ‘civic responsibility’
    ignores (non-absolutist) moral nihilists, who abound at least as far as
    actions are concerned.

    Do you expect to see (or will you act towards) a fall in Wall Street
    firm recruitment on campus? Perhaps as a result of Faculty Senate and
    board action? Have you, on the opposite end of action, just attempted to
    preach to some choir? I don’t see a deficit of public service
    initiatives supported by Stanford students, although, of course, it is
    definitely more productive to think in terms of positive action and what
    we can do than we need or can inhibit.

  • Avneesh

    As someone who can directly relate to this (B.S. Electrical Engineering ’07, went to work for Goldman Sachs for 2 years as a trader, hated it and have returned to academia, currently working on a PhD) I applaud the authors for bringing this issue to light in the Stanford community.  However, I only wish they had done more research before writing, as the op-ed betrays a complete misunderstanding of how the industry works, most notably, the egregious error of equating “trading” with “speculation”.  Very little trading that happens at an investment bank like GS is proprietary or speculative, most of it is market-making, or servicing clients and providing liquidity to the market.  They could have made a much stronger case with a better researched article.  The way it stands now, people who actually have an understanding of the markets and are ambiguous on this issue will automatically dismiss this op-ed.  

    Nonetheless, I do agree with a lot the authors have to say.  When I was in undergrad (03-07), getting into Finance was yes, about the money (it always is to an extent), but more importantly I would say that the industry had a certain “prestige” to it which attracted people like me, at least.  I feel that most undergrads at Stanford are more concerned with the “prestige” factor than the actual amount of money they will be making per se.  If we can address these misconceptions, that would be the best way out of this brain drain.    

  • http://www.facebook.com/terynnorris Teryn Norris

    This is a pretty nit-picky set of points rather than any sort of comprehensive and coherent critique, and offers essentially zero citations or substantive evidence for its claims.  (And pray tell, who is the anonymous “dude”?)  I’ll just quickly address a couple things for the benefit of the confused reader.

    (1) The outsized role of the U.S. financial sector in causing the crisis is well established (except perhaps among the most libertarian and dogmatic economists).  The relevant point here isn’t that bank practices were solely responsible (that’s obvious), but that they played a major role (perhaps we should have said “helped cause” just for the sake of clarity).  It’s not worth rehashing all of the debate here, but just for the benefit of those who aren’t familiar, one of the most authoritative accounts is the Financial Crisis Inquiry Commission’s final report.  It concludes:

    “We conclude [that] collapsing mortgage-lending standards and the mortgage securitization pipeline lit and spread the flame of contagion and crisis… This report catalogues the corrosion of mortgage-lending standards and the securitization pipeline that transported toxic mortgages from neighborhoods across America to investors around the globe… When borrowers stopped making mortgage payments, the losses—amplified by derivatives—rushed through the pipeline. As it turned out, these losses were concentrated in a set of systemically important financial institutions… OTC derivatives contributed to the crisis in three significant ways. First, one type of derivative—credit default swaps (CDS)—fueled the mortgage securitization pipeline… CDS were essential to the creation of synthetic CDOs… They amplified the losses from the collapse of the housing bubble by allowing multiple bets on the same securities and helped spread them throughout the financial system.”

    http://fcic-static.law.stanford.edu/cdn_media/fcic-reports/fcic_final_report_conclusions.pdf

    (2) Nobody here has suggested that Stanford “lock their doors to aspiring students seeking careers.”  What we suggested is exactly what we stated in the op-ed: “The higher education community needs to begin a serious discussion about how to ensure checks and balances against finance, and prepare more students for socially productive careers in public service, entrepreneurship and scientific research.”

    (3) For background on some of the cases against Goldman, see (a) http://on.wsj.com/cuArtN and (b) http://nyti.ms/bV7dVp

    (4) Without getting too far into the weeds about what exactly constitutes “speculation” and what doesn’t, this argument still doesn’t refute the central claim: much of what these firms do isn’t socially or economically productive.  I’d encourage the basic reader to see John Cassidy’s piece on the subject: http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_cassidy?currentPage=all

  • http://www.facebook.com/profile.php?id=1572360078 Alex Chen

    I think everyone has missed the point of this article. Let me point it out:

    “In 2010, even after the economic crisis, the financial services industry drew a full 20 percent of Harvard graduates and over 15 percent of Stanford and MIT graduates. This represented the highest portion of any industry except consulting…”

    Wow. Consulting? And we’re sitting here complaining about finance?

    Really now, the true tragedy here is that over 15-20% of our nation’s best and brightest students enter consulting after college. Nearly a fifth of Stanford, Harvard, and other top-tier university graduates are applying their education and brainpower towards building excel sheets to apply statistical methods that they don’t understand in order to advise clients in industries that they have no experience or training in.

    How can we even consider limiting Goldman Sachs or Morgan Stanley from recruiting on campus without first barring the door to McKinsey?

  • Curious student

    Sure, Wall Street is at fault, but I think the intelligent observer must ask, How did/does Wall Street get the MONEY?

    Where do all these billions and trillions come from?  I’ve heard something about the Federal Reserve’s low interest rate policy being the root cause.  Also, maybe Fannie and Freddie- weren’t those government supported institutions whose debt was risk-less because it was backstopped by the government?

    So, maybe Stanford should be also discouraging government recruiters (though one might argue that Wall Street is now an extension of the finance arm of the government).

  • none

    The talent will follow the money. The biggest problem is the lack of regulation upon incentive structures for Wall Street Employees. The whole reason why mutual funds bought these crap CDO’s is because the fund managers were paid based on assets under management. So their sole purpose was to grow the total size of these assets even if they knew they were buying total crap (which they did — ratings be damned).  We need regulate incentive structures for employees to promote the optimization of long-term risk adjusted returns.

    It is never the problem of the banks or the students — they will always act in their own rational self-interest. 

  • 2009

    I’m a Stanford engineer by training. I am also a trader on Wall St. right now. I happen to love math and science. I love my job but could see myself being an academic or working in engineering. The difference is Wall St. pays me sooo much more for the same amount of effort. It’s not even close. 

    How do we fix that problem and bring me back into the “productive” part of society again?

  • Guest 1

    I understand the sentiment, but pointing the blame at Stanford’s CDC and, more broadly, at Stanford is misguided. The real brain drain to finance is a systemic issue far beyond the scope of Stanford, and it only makes sense that students, who have grown up in an economy of prestige, would be tempted by these jobs deemed competitive and prestigious. Stanford would be remiss to not give its students the same opportunity and access to such organizations, and has to play into the system. For better or worse, would you actually want Stanford to limit its students’ access to these corporations, when the university my face some backlash for what many might consider a sanctimonious stance? 

    Stanford is part of a competitive elite education system and must afford its students access to the opportunities they are here for, and pay great sums for.  The article lashes out at the CDC’s policies rather than suggesting that other companies and organizations might instead choose to keep up with the timeline and effectiveness of the finance/consulting world’s recruiting. 

  • http://www.facebook.com/profile.php?id=1092540185 Eli Pollak

    Thanks for the thoughtful comments Avneesh. That said, I have to disagree with the premise that “very little trading that happens at an investment bank like GS is proprietary or speculative.” 

    A topical piece of evidence is the current discussion over implementation of the Volcker Rule — a  rule designed to “restrict banks from making speculative bets and trades with their own capital” (prop trading).[1]  GS and MS are fighting the rule tooth and nail —  no surprise because JP Morgan estimated that “limits on pure proprietary trading are likely to reduce earnings per share at Goldman Sachs and Morgan Stanley by an average 14% on 2012 estimated earnings per share.”[2] Translation: 14% of GS and MS’ revenue comes from prop trading. That sounds like a lot more than “very little,” and the banks primal scream against implementation of the Volcker Rule seems to speak for itself in refuting the notion that — as you stated — “Very little trading that happens at an investment bank like GS is proprietary or speculative, most of it is market-making, or servicing clients and providing liquidity to the market.” If the dollar amount was so little, they could hardly be expected to care so much about the issue. 

    None of this current discussion even takes into account the massive hedge-fund style prop trading divisions that GS and Morgan Stanley have shuttered over the past 2 years. According to Forbes, “Banks made huge profits on what’s known as proprietary trading in the years leading up to the financial crisis (over $15 billion by some measures).”  Again, that sounds like a lot more than “a little.”

    [1] http://www.forbes.com/sites/halahtouryalai/2011/10/07/volcker-rule-will-hit-goldman-sachs-morgan-stanley-hardest/
    [2] http://www.efinancialnews.com/story/2011-01-13/jp-morgan-goldman-sachs-volcker-rule

  • none

    More money (all other things being equal) is usually a better situation than less money. As pointed out by the Stanford engineering grad who is a wall street trader — Wall street gives engineers/math people interesting problems to work on. I can attest to this fact.  
    The problem is that Wall Street is allotted enough capital to be able to compete against other firms that do some more socially beneficial task. The career growth curve for an engineer is not the same as for a trader on wallstreet.

    There are a few people who are SO passionate about something that they go for it regardless of money. But at Stanford a lot of kids just don’t have enough passion or see enough upside to working as a random engineer vs. making bank at a hedge fund.

  • none

    More money (all other things being equal) is usually a better situation than less money. As pointed out by the Stanford engineering grad who is a wall street trader — Wall street gives engineers/math people interesting problems to work on. I can attest to this fact.  
    The problem is that Wall Street is allotted enough capital to be able to compete against other firms that do some more socially beneficial task. The career growth curve for an engineer is not the same as for a trader on wallstreet.

    There are a few people who are SO passionate about something that they go for it regardless of money. But at Stanford a lot of kids just don’t have enough passion or see enough upside to working as a random engineer vs. making bank at a hedge fund.

  • Jajohn

    “economic safety”

  • Alex Trembath

    People seem to be mistaking this post for a criticism of young grads who go into the finance industry — it’s not. It’s a discussion of the role of universities and what kind of workforce we want as a country. Finance has excellent recruitment capabilities and they can offer spectacular salaries, which is a symptom of the status we’ve elevated finance to over the last three decades. It’s unfortunate that the same industry that can best attract young college graduates is also the most dangerous and one of the least productive sectors of the national economy. 

    Contrast this to China and India, where the priority is training future scientists and engineers. This was a tactic pioneered by the United States federal government during the Cold War, when the creation of engineering and computer science departments around the country created the workforce that powered the IT economy. 

    That generation created the Internet, the personal computer, cell phones, GPS, and all the countless innovations and inventions on top of those platforms (communications, e-business, commerce, gaming, social networking, music, movies, etc.). This generation is being lured into finance, an industry that has been allowed to write its own checks by decades of deregulation and which produces very little of value. 

    If the United States wants to compete internationally and grow as an economy, it needs to train a workforce in productive and innovative sectors that create real value-added services and products that can be consumed, traded, and exported. By funneling our top talent into finance, where innovation equals CDOs and mortgage-backed securities, we will suffer more as we already have.

  • http://twitter.com/strobist David Hobby

    The profit motive will always favor Wall Street over other, more productive industries because the playing field is not level. After the too-big-to-fail US bailouts of major financial institutions, it is clear that that investment banks have privatized their profits and socialized their risks.

    Paychecks and bonuses are calculated on an annual basis, while the ultimate risk is just rolled forward until it ultimately shows up later. If Wall Street is going to play this way, they should fund their own super “re-insurance” pool, so they can cover their own screw-ups instead of asking us to do it for them.

    As the article above deftly states, they are not only pulling capital out of the rest of society (in exchange for producing *nothing* but are also siphoning valuable human capital from society as well. 

    Silicon Valley attracts a lot of very smart, albeit nonstandard thinkers. But at least the world gets something in return.

  • Sun Rainedout

    There are roughly 75 million people in school including children. The government is paying out almost 250BILLION for financial aid, reading programs, NCLB, and other educational funding..There are 107,000 schools in this country, 7.2 million teachers…ADD IT UP…That’s Free Education!!!!Where is the other 200 billion or so going??????They could give each school, each student, each teacher a million dollars..A YEAR and still only pay out about a billion..

  • http://twitter.com/FroggyFrog4 Froggy Frog

    Art Pope, a millionaire in North Carolina, is doing many of the tactics described above to influence Universities in his region.

    http://www.npr.org/2011/10/06/141078608/the-multimillionaire-helping-republicans-win-n-c

    While this article mostly looks at the how Republican money is spent to unseat Democratic members of NC’s local governments, there is a brief segway in the discussion in how also this money is also influencing Universities.

    In brief, the moneys give the donor a seat at the table when faculty is chosen. And from the description, a very powerful seat. Often swaying any opposition. Also, the donations steer the University in what schools they will focus on or how entire departments interact dynamically. How? Slowly and over time, choosing new faculty and purging nonconformists. Also in the steering of University building and expansion funding.

    The transcript and audio is both available and I hope you will take the time to review. Using “university” as your key word will quickly take you to the area of the transcript that I am referring to.

  • http://twitter.com/FroggyFrog4 Froggy Frog

    Wait, wait, let me get this strait. So your saying “Investment Banking” and “Trading” (robo or otherwise) are not the same. Really.

    I disagree. I say they are one on the same. Maybe now, robo-traders only have access to private funds. But give it time. These banks cannot wait to more aggressively apply those techniques and methods.

  • http://www.facebook.com/terynnorris Teryn Norris

    Terrific points Alex – many thanks!

  • Guest

    I love how quick we are to jump to ridiculous conclusions about the entire banking industry after we go through any kind of financial downturn. We are so quick to blame financial firms for the crisis we’re in right now, but refuse to acknowledge that we, as consumers, are just as much to blame. Overspending and undersaving=credit crunch. It’s really that simple. Not to mention, how will the real issues of the banking industry be solved without the innovation and initiative of our country’s most educated graduates? Call me naïve, but that’s exactly what I’d call the approach to this heavy-on-liberal-ranting light-on-facts article. 

  • Yet another guest

    “We are so quick to blame financial firms for the crisis we’re in right now, but refuse to acknowledge that we, as consumers, are just as much to blame.”
    I agree that consumers are equally to blame, for there are two sides to a transaction. However, I think we should distinguish between blame and responsibility. The financial industry is *responsible* in addition to blameworthy, while the average consumer is to blame but is not necessarily responsible, or at least to the same extent. I don’t think this is a particularly controversial distinction: after all, finance industry workers are, by definition, responsible for finance. If the whole infrastructure of liquidity, lending, trust, etc. suddenly collapses, ought we not to identify those ultimately responsible, correct their failure, and then see what must be done to assure the failure won’t happen again?

    In any case, this article addresses a slightly different issue. The issue is not that we should deprive the financial industry of a *sufficient* workforce — for, after all, the industry has the worthwhile purpose of making a market efficient — but rather that we should correct for an alarming loss of talent in the marketplace itself, where things actually get done, to a bloated financial industry. I agree with an earlier poster who remarks that the recruiting yield for consulting firms is equally alarming. Seriously, fellow STEM students, when we were kids, did we play with Legos pretending we were dressing up in expensive suits and making clever (devious?) financial transactions and marketing portfolios, or were we pretending we were exploring new planets, digging up dinosaur bones, building underwater cities? (FYI: The last one turns out to be not such a good idea.)

  • cuauhtemoc

    Nice!

  • http://www.facebook.com/joftius Joshua Loftus

    I’m overjoyed to see this being talked about.

    And I’m still terrified that such a large percent of our “economy” consists of jobs where people never actually *do* anything. I can’t help but wonder whether some of these “best and brightest” actually deserve the compliment. Stanford grad? Great. Satisfied with a vacuous career doing “integrative crossplatform business solutions” or tweaking high frequency trading algorithms? Uhh…

  • Curious student

    Sure, Wall Street is at fault, but I think the intelligent observer must ask, How did/does Wall Street get the MONEY?

    Where
    do all these billions and trillions come from?  I’ve heard something
    about the Federal Reserve’s low interest rate policy being the root
    cause.  Also, maybe Fannie and Freddie- weren’t those government
    supported institutions whose debt was risk-less because it was
    backstopped by the government?

    So, maybe Stanford should be also
    discouraging government recruiters (though one might argue that Wall
    Street is now an extension of the finance arm of the government). 

    Perhaps govt jobs are also truly worthless

  • worried

    This is the voice I’ve been waiting to hear since the depression began a few years ago.  Thank you for speaking out against the greed on Wall Street and suggesting an alternative career choice to the privileged students at Standford and the other elite universities.   The country needs a new direction and focus to get us out of this mess, and it’s got to come from people like you.

  • worried

    This is the voice I’ve been waiting to hear since the depression began a few years ago.  Thank you for speaking out against the greed on Wall Street and suggesting an alternative career choice to the privileged students at Standford and the other elite universities.   The country needs a new direction and focus to get us out of this mess, and it’s got to come from people like you.

  • worried

    This is the voice I’ve been waiting to hear since the depression began a few years ago.  Thank you for speaking out against the greed on Wall Street and suggesting an alternative career choice to the privileged students at Standford and the other elite universities.   The country needs a new direction and focus to get us out of this mess, and it’s got to come from people like you.

  • http://www.facebook.com/profile.php?id=519745019 Howard Covitz

    As an Econ grad student at Brown, I saw half the positions filled by students emigrating from the Physics Department. 

  • http://twitter.com/FroggyFrog4 Froggy Frog

    I see. My view point was macro and not focused at the institutional structure.

  • Kpo

    I think this is exactly what the author is encouraging: instead of having a brain-drain into this sector of the society, it may be time for us to reconsider doing something that produces. One of those include working as a policy maker. 

    There is a difference when the author says that Wall street is a problem and you say that the government is a problem. The author tries to point out that there is something morally/socially wrong with the financial sector of the society and reduction of scale of the industry is crucial to the development of a bigger economy. Government’s problem, however, does not originate from the philosophy of the institution itself, but for its inefficiency in implementation, and therefore, needs repair not demolition.

  • William J Roberts

    I just want to challenge the notion that interns and 1-2 year analysts at bulge bracket investment banks don’t do anything/don’t understand what they’re doing. I spent the past summer on a trading floor at a bulge bracket firm in Europe and I assure you, the responsibility was real. While the moral/social value-add may not be there, we are put in situations with substantial responsibility. My best friend did I-banking at GS this summer and worked with Fortune 500 CEO’s providing crucial services to their growth and profitability. Meanwhile I was trading CDS indices for clients not just in hedges funds but also in pensions, insurance companies, and all the less glamourous asset managers. We understand what we’re doing, we’re paid very well (although our pay is minuscule compared to what they could pay us) and the majority of us sincerely enjoy what we’re doing. I agree with Eli (a good friend of mine) and Teryn, that the prominence of BB firms and consulting dominates the college recruiting landscape (it’s the same at my University) but most of us enjoy what we’re doing and gain a massive amount of knowledge from it. 

  • http://twitter.com/FroggyFrog4 Froggy Frog

    So, what you’ve just told me is that you know the mechanics of the task. That you can wake up early and can be at work on time. They like you and therefore place “substantial responsibility” on to your shoulders. Yet, as an intern, you are still directly supervised and expected to perform as told. You are fiercely loyal.

    Well, my dear friend, don’t be so quick to give yourself away. Napoleon was highly charismatic. His troops loved him and also displayed immeasurable loyalty. Yet, and on more than one occasion, he led them to battle and then abandoned them to be slaughtered (North Africa and Russia).

    http://en.wikipedia.org/wiki/Napoleon

  • http://twitter.com/FroggyFrog4 Froggy Frog

    Wait, wait. Your handle is “Grow The Hell Up” and then begin your rant with “Go pound sand.”

    Wow.

    There are so many things here I am sorry you feel. However, I, and many here, do not appreciate you projecting them on to the authors of this editorial.

  • Justin4liberty

    Climate change??! Really??! So we should shift all of the greatest minds of our generation over to solving a non existent problem made up by the pseudo intelligentsia as an excuse to filter government grants and tax payer money to themselves. A fake scam to scare the populous into supporting carbon legislation and taxes on all human activity. Oh yeah… With NO LEGITIMATE SCIENTIFIC EVIDENCE to support the theory. Brilliant idea fellas. A typical reaction from someone who despite all of your over education, you still don’t know jack and are totally out of touch with reality.

  • John

    Compelling argument.  I think a large chunk of Stanford grads will begin to look beyond the financial services/consulting world once the price tag of a Stanford degree goes down.  You can’t blame grads for following the pay check when it costs 150k+ to get a bachelors anymore.  Stanford Univ can encourage grads to follow the public service route by cancelling debts for grads who spend a certain period of time (say, 5 years) in a public service job after graduation.  Many law schools already do this.

  • Shahryar Malik

    Stanford does a pretty good job keeping kids away from finance.

    For example, the economics major (where you would suspect all your Wall Street enthusiasts to be) barely scrapes the surface of anything remotely related to investment banking. In fact, there is a hard policy that the few accounting and finance courses offered at Stanford cannot be counted towards the major. Furthermore, either because of the offer acceptance policies of the CDC, retention of Stanford summer interns at the banks or Stanford’s west coast roots, few banks even consider Stanford a core or target school.

     I have noticed that the pool of Stanford students who end up working on Wall Street is rather self selecting, The students who apply typically already have some idea that they want to work in the financial services sector before coming to Stanford. I would say a minority of Stanford students who discover finance after coming to Stanford, spend their Stanford career developing a passion for working on Wall Street.

    I think a lot of the debate here has focused on how lucrative Wall Street can be for college graduates, however the debate does not address the structured training, mentoring and exit opportunities that come with such a career. Few programs provide such a clearly defined structure of learning and advancement. In reality, these entry level programs in both banking and consulting can turn out to be a very natural a continuation of your college career.

    Every year MBA programs (Stanford and HBS included)  take in a slew of graduates from the investment banks. I think if incentives are to be aligned, business schools might want to make a more concerted effort at offering seats to students from non-traditional careers like banking or consulting.

  • Brentan Alexander

    I have been thinking a lot about this article since it was posted a few days ago.  As an MIT graduate with many friends in the banking sector, and now as a Stanford graduate student watching some of the excellent undergraduates I have worked with in various student organizations making the same choices to choose financial services and consulting, I have been troubled for a while about the movement of bright, talented people to industries and services that provide marginal societal benefit, all under the (mistaken) impression that other careers in more constructive fields do not or cannot provide a solid paycheck or job.  I understand the argument made in some comments that students, in this economy, are looking for steady employment.  It is an argument I dont buy, as when I left MIT in 2007, job options were plentiful and still a large portion of graduates ended up on Wall Street.  Something else is afoot.

    And I wonder whether Wall Street is the whole picture.  Wall Street surely plays a strong hand to snatch bright students into their industry.  But the problem extends further.  In the 60s we had rocket scientists, and in the 80s it was brain surgeons.  Today? Steve Jobs and Mark Zuckerberg round out the nerd royalty.

    And therein lies a substantial problem: just as I worry about the best and brightest moving to wall street or consulting, I worry equally about our best and brightest minds choosing to build the next Angry Birds or Farmville.

    I thank these authors for speaking up and talking about this moral bankruptcy, which is very real on our campuses.  The support offered for wall street recruitment on campus is a symptom of this failure; our academic institutions have lost sight of their missions and responsibilities to provide knowledge for the betterment of mankind.  Until Stanford and its counterparts make a concerted effort to instill these values in their student bodies, we will continue to find our brightest minds shying away from the big problems.