The majority of this forum all has the same hopes and dreams of landing a job on wall street, and ultimately becoming sucessful making millions of dollars. I recently began reading Moneyball by Michael Lewis who also wrote Liars Poker, its a story about Billy Beane, General Manager of the Oakland A's and how he transformed front office roles in baseball.
So how does this relate to the finance community? The focus on the book is about scouting and building the most effective team for the lowest amount of money possible. This is essentially what the banks are looking for in their recruiting. While we all want to make millions odds are that many of us wont last very long. Just like the average professional athlete has a short lifespan so often does the wall street community.
The gist of the first part of the book is that when asessing talent we often overlook the most key aspects because the way our minds have been trained. Professional sports have become more and more about speed and power over the years. These are the current buzz terms that will create a flashy individual. In the finance community these are your superstar Premier target recruits that are sifting through many offers because all the BBs want to recruit them.
The bottom line is, on each individual its very much a crapshoot on who turns out and who doesnt, the banks are merely playing the expected value game looking to hire the people that best fit into the mold they are looking for.
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Of course...this is why banks prefer to recruit at big name colleges and often screen based on GPAs. They are playing the odds, and the odds are better that a student from Harvard with a 3.8 GPA is going to be be highly motivated and competent than perhaps any other student. Wall Street figured this out long ago, and it's fairly obvious...Billy Beane is a genius because he discovered that some statistics are more explanatory than others when it comes to assessing a player's contribution to a team's wiind/losses, and managers often ignore this fact in favor of "intangibles" because they think they are smarter than everyoe else.
And you dont think that banks often ignore intangibles. Theres a reason why Goldman is so far ahead of the other BBs as a whole. Goldman has figured out something that the other firms have not. The purpose of this thread was not to say harvard 3.8 is the key but rather they could actually blow up in your face like certain first round draft picks. The rules are different in finance of course but flashy is not always better. The best performers often are late bloomers and often are overlooked.
That 3.8 in harvard will come in handy but once you are in it means nothing anymore, its totally up to you perform.
Ok...so are you proposing that there are better explanatory variables than those already used?
Here's why the GPA screen is so important. It gives an indication of a person's drive to excel and ability to focus for long periods of time--qualities loved by BBs. Anyone can get A's in classes they like. Only the top people at a school have the continuous commitment to succeed, regardless of the subject matter or other obstacles. That is why certain BBs have strict cutoffs and do not interview anyone below those levels. Yes, the Harvard 3.8 may not pan out, but the odds of him succeeding are much higher than a Harvard 3.0 or a non-target 3.5. Also, GS particularly searches for people who have extraordinary extracurriculars or qualifications (class presidents, highly successful athletes, Marshall/Rhodes scholars, Olympians, marathon runners, etc.). Technically, they are intangibles, but I think it’s easy to assume that some who’s a world-class swimmer is more competitive and driven than most people.
Of course, intangibles matter, but being a nice, personable guy means nothing if you're the type of person who has trouble focusing or is somewhat lazy, because, while your colleagues may love you, your work product won't be as good.
GS is better than the others because of group think. It's been the best industry performer by far since most of us started following this stuff. Hence, the apex of success for us is receiving a GS offer. I have found that most of the people who intern at GS over the summer either return or join PEs or HFs full-time. They do not look at other BBs. Over a short period of time, this is a crucial advantage. GS is considered by every talented applicant. Therefore, they get the best people when recruiting and, when talented senior people are looking to switch firms, they will always listen to GS. Also, they pay more in compensation per person than anyone else. Simply put, top to bottom, GS gets marginally better people and keeps many more of them than the comp. That advantage translates to higher profitability.
yes I am, the problem is these variables are often expensive in terms of recruiting and being time consuming. The methods the banks use in general is probably the most effective.
"the odds are better that a student from Harvard with a 3.8 GPA is going to be be highly motivated and competent than perhaps any other student."
I disagree with that statement, having a 3.8 from harvard does not say they are motivated to suceed in finance. It means they excelled in their class work. I think you can tell more about a candidates motivation by a 10 minute interview than you can by a quantitative measure like School & GPA. Quantitative measures will never catch intangibles. I really believe that intangibles more than anything else are the most important. Keep in mind I am speaking more in terms for S&T than I am ibanking, but i wanted to post this thread on the forum that gets the most hits and most of the S&T forum people also use this section.
No, what the 3.8 tells you is that the person is highly motivated to achieve a goal (in this case, securing an offer from a top BB) and will sacrifice other aspects of college life to get it done. This same skill set is demanded by firms, who spend boatloads of money training people in finance. The finance skills can be taught, but the internal drive to succeed cannot be--that's what GPA shows. The fact is, people with 3.8+ GPAs have the personality charateristics demanded by this industry.
Which measure is more reliable? 4 yrs of demonstrated academic success from a reputable institution or one person's perception of a candidate during a 30 min interview? Anyone can fake passion during an interview or superday. I will grant you that trading is a different ballgame, but you have to have skills that back up the passion needed to be a good trader.
How do you propose developing a system that recognizes/measures/ranks intangibles while limiting the amount of hiring mistakes?
I dont know the answer to that question. Its not an easy question to answer. Banks play the odds and expected value game on candidates period. The reason why I get so heated over this is because it has effected me. I dont go to a good school and I dont have good grades, and unfortunately this is perceived as me being lazy and not a candidate. Sure i realize the costs associated with more detailed recruiting and afterall thats what networking is for.
Bottom line is I was shafted and I disagree with how recruiting is done however I have no viable alternatives for fixing the process. I will now digress as to why I believe that going to an IVY school with a high GPA doesnt prepare you to trade.
The following Except is from New Market Wizards by Jack Schwager in an interview with Victor Sperandeo, regarded as one of the great equity options and index futures traders. Theres a reason why I like to quote this book and its because the material is just so powerful.
Victor Sperandeo- I discovered that you cant train people on how to trade by just imparting knowledge. The key to trading sucess is emotional discpline. Making money has nothing to do with intelligence. Think of all the bright people that chose careers on wall street. If intelligence were the key there would be a lot more people making money trading.
Jack Schwager- You almost seem to be implying that intelligence is an impediment to sucessful trading. How would you explain that?
Victor- Assume that your a brilliant student who grades Harvard summa cum laude. You get a job with a top investment house, and within one year they hand you a $5 million portfolio to manage. What would you believe about yourself? Most likely, you would assume that you're very bright and do everything right. Now assume you find yourself in a situation where the market is going against your position. What is your reaction likely to be "I'm right." Why? Because everything you've done in life is right. Youll tend to place your IQ above market action. To be a sucessful trader you have to be able to admit mistakes. People who are very bright dont make very many mistakes. In a sense they generally ARE correct. In trading however the person who can easily admit being wrong is the one who walks away a winner.
THIS IN ITSELF IS WHY I BELIEVE WHAT I BELIEVE.
Don't you think you could apply the same type of emotional discipline needed in trading to schoolwork? If you know that you want to go into a certain line of work and know that companies in that industry value measures like GPA highly, then wouldn't it be safe for firms to assume that, if you really wanted that job, you would work hard to maximize your grades. Low grades show a lack of career commitment to them. Once you know that, you really can't complain about the effects of having a low GPA, because, unless your're making money trading your own book in your spare time, you don't have anything to stem the tide in your favor.
The arrogance that may land an intelligent trader in hot water is the same arrogance that he/she needs in order to maintain his/her discipline when the market is going the other way. You need to be confident in order to be a good trader. There are two sides to this story here. Bright people make mistakes like everyone else. Hopefully they learn from them and, over time, they will be winners.
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