I just remembered how many statistics, python and VBA extracurricular classes I took because a lot of bankers prefer people with those skills over traditional finance graduates. I was told it would make you "quicker on the job" and "automate repetitive tasks" and thought I would be seriously behind my peers because I did not know how to run a fucking Monte Carlo Simulation or could not use Numpy.
I finally made it into banking and all of these skills are useless on the job and I just realised I wasted a whole lot of money and time learning them when most of what I am doing is making Powerpoint Presentations, updating financial models and listening to earnings calls.
I remember regretting studying Finance and wishing I studied Engineering, Math or Statistics when I could only get a big 4 audit offer and my peers with STEM degrees found it easier to break in.
When I was in Big 4 Audit, I was still grinding to learn all this shit until I hit my desk at my bank and realized all you need to know is basic finance to do a good job, no one is going to ask you to reprogram Excel on your banks computer to run more efficiently and good luck getting IT to grant you permission to do ANY programming on their systems.
I saw a job posting for an entry level IB job and it had a preference for STEM degrees yet again alluding to the potential person being hired needing them on the job for some reason.
Imo there is a conception that STEM majors are smarter/sharper than other majors (idk how true this actually is, I know some fucking dumbasses who studied math/science in college). I guess because the classes tend to be more rigorous and involve more memorization/deeper understanding of niche topics.
I think that’s why banks recruit STEM majors - because they are supposed to be smart and have analytical/critical thinking abilities.
I agree though that it’s really kinda BS and you mostly just need to be able to work long hours to survive in this job, but obviously if banks can choose (like top universities) who they hire, they want to hire the “best and brightest.”
what about the social skills of STEM?
The idea is a few people within STEM will have good social skills and those are the ones getting offers after interviewing (hopefully). Best of both worlds approach I suppose.
There is still this belief that STEM majors are somehow harder and the people that do them are smarter. Is engineering more difficult than say history? I would say so. Does that mean everyone that majors in engineering is automatically smarter than someone that majors in history? Absolutely not. But that's the thinking behind it anyway.
You might be alluding to this, but its just a talent distribution difference. Similar to Target vs. Non-target, if you are optimizing for ability to work hard and learn fast, the distribution for STEM majors will sit to the right of social sciences/Business. Again, similar to target v non-target dynamic, the tails have SIGNIFICANT overlap, but banks save time and resources just recruiting from the STEM or analogously a target talent distribution.
it's a signaling trait. Kind of like if you see someone from Harvard that graduated with a 3.6+, you can assume they're smart and work reasonably hard, regardless of their major.
I am an engineer (electrical) and banks were falling over each other to hire me. All technical, scientific, or similar majors are seen as requiring a certain work ethic or approach in order to make it through - I have to admit it wasn't easy to study. My other, more finance related subjects were easier.
also, STEM is a good fit for certain areas in finance. If you know how to analyze large amounts of data in mathlab, you may be able to transfer that skill set to ER or similar.
if a STEM degree was a bank you would all be here complaining about the horrible culture and lack of work life balance at STEM Capital Markets. Would you rather take the guy who is used to working in a sweatshop for 4 years already or take the finance kid that wants to leave work early to "explore NYC" and is more likely to quit in a year.
The person with the stem degree would be overqualified for banking, unless he/she was truly interested in banking.
You definitely missed the point he/she was trying to make lmao
This is because the gatekeepers of investment banking do not know what investment banking is. They do not take the time to find out what bankers do on a day to day basis. There are so many people who think IBD is a cross between rocket science, wolf of wall street and a think tank. In reality, it is excel , PowerPoint presentations and clerical work. There is nothing wrong with that but that is not everyone's cup of tea. Working 80 hours in something you love in an environment you love could be awesome. But if it is not something you are into, it could be hell. Hiring and engineer for banking is like hiring a chemist for a paralegal job. Yes the stem major is smart but may not be the right fit for the job. What also upsets me is that the recruiters build up banking to be this glamorous version of NASA to get the "Best and the Brightest", but they should be focusing on getting the best fit. If you are a stem major that knows the the realities of banking and is still interested in that career, by all means go for it. But lets stop pretending that banking is this complex job. It is interesting, but the basics in finance, accounting, PowerPoint, Excel is needed, not a 4.0 in organic chemistry.
I fully agree with your points and deep down I always thought it was something similar. Another fallout for this is its squeezing out people who actually had passion for the job and replacing them with people who heard about it on campus and want to make a quick buck, of course for a quant role and others like it STEM grads are needed but vanilla IB and Finance do not need those skills at all in any way shape or form.
We already have people complaining about diversity hires, why shrink the spaces available even more by allowing literally any major to apply to banks and other financial companies. Not just STEM grads are a problem but people studying Philosophy and other social sciences shouldn't get a chance either.
What is happening is the people who thought to study accounting or finance or economics now find it hard to get jobs in their own fields, when most gatekeepers do not even understand a lot of the date output from quantitative analysis I think it is quite a stupid practice and might explain why after a few years on the job some people start to feel like they do not have a purpose and are unhappy.
For example if you studied Civil Engineering or Physics or Politics and History at an Ivy League and are all of a sudden you apply and get into GS/MS/JPM obviously you would never feel fulfilled because you had a passion at a young age that got sidelined by something you were just exposed to.
I have had people with engineering internships at Shell and BP and degrees from Oxford and Cambridge who studied English and Philosophy cold email me to break into my bank and quite honestly, I never give them a response and don't think I ever will.
Would rather speak to and help someone who had to initiative to study what we do and not help someone who clearly has no interest other than a quick buck.
Awesome. I hope you are enjoying investment banking. Congrats on the switch from the Big 4. It is a bit misleading that people would tell you to learn Monte Carlo simulation for banking. That is more for Market Risk roles which deal with trading. Also, I do not have a problem with a STEM major or a philosophy major going into Investment Banking if they are doing it for the right reasons. They did their internships. They took accounting an and finance classes ( you can take them cheap on Coursera and Udemy). There should not be preference towards stem and or Ivy League schools. IBD hiring should be similar to tech. Create a portfolio of personal sample projects, understanding what you are getting yourself into( having honest passion to learn IBD) and technical questions. I keep hearing "well rounded student" is the reason for hiring ivy league grads. Two problems with that. All accredited universities provide a well rounded education. Even if you major in accounting. ( My friend double majored in accounting and music at a non-target). Another issue is that most hiring managers do not care if you have a well-rounded background. They just want you to be technically competent. Many of these campus recruiters are 24 and worked in retail as a previous job, so do not take it personally.
I'm a STEM student and can guarantee you I know technicals better than most finance students applying for the same jobs. Corporate finance/accounting isn't really that hard to learn. Throw in a class or two as an elective and do some reading on your own and you can pass 95% of interviews at the BBs. Why shrink the spaces even more? Because I will work harder than you and am coming in with a genuine interest in a sector I cultivated through my engineering degree (think electrical to P&U, mechanical/chemical to industrials, civil to transportation). Meanwhile all the finance kids want to do TMT/Tech (bEcAusE iT hAs tHe bEsT eXitS) where I just want to work in a sector I appreciate and am familiar with. There's usually no genuine sector interest from the finance kids, they're just worried about exits.
I'd say it's the exact opposite actually. Tons of finance students have no clue what investment banking is and are just drawn to it by muh goldman sachs and the fact everyone else wants to do it. The STEM kid that had to find it on his own organically, have no friends in finance (so you know it's actually his interest not others), and overcame gatekeepers like you is going to do a much better job.
100% Agree.
The accounting required in IB, most of the time, is not that complex, unless you work on a hairy M&A deal or some holysh*t restructuring deal. Nevertheless, I guarantee you those concepts are not hard to grasp compared to ordinary differential equation.
STEM majors have this natural edge because it is a fact that if you spend an entire semester on say bond math, you can have a good handle on it, maybe not great, but you know the basic thing like yield, YTM, interest rate, coupon, maturity, etc.
Not necessarily true for math. A couple of my classmates had absolutely 0 idea what ODE was until the end of that semester. It's not something you can remember like the inverse relationship between interest rate and bond price and you get 4 points off of that fill-in the blank or MC.
I'm a STEM major who got all enamored with "investment banking". I don't regret it but I also don't see myself working on boring shit forever. Plenty of people choose STEM majors because of intellectual stimulation.
Honestly in my bank is because STEM = hard = putting in hours (so may adapt more easily).
As an engineer myself, however, I will say that many, many times STEM = 0 social skills = weird ppl to work with.
A finance major has to convince me they'll put in the hours. An engineering major that they are not weirdos.
I'd say its a mutually beneficial thing among 3 groups of people (schools, companies, worker/students).
Schools main job is to procure more students. Without students, it doesn't matter. So if Princeton just took everyone, they wouldn't be an Ivy league, they would just be the college of Princeton. So, to procure more students, they need to establish themselves as feeders to good jobs, hence, they try to get history majors into Goldman Sachs. Same thing with sports in a way, athletes go to Alabama to play football (or USC, Texas) because it gives them the best possibly to get to the NFL.
Companies want the best talent, and by talent, mainly the kids who are focused and work hard. So they go to the institutions that have the highest bar to jump over.
Students/workers benefit from higher pay. Really want a student/worker is saying by getting a STEM major is they are willing to put in time and effort to get something done.
Maybe make the dots smaller next time they're a bit large in this pic
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