Why so much focus on prestige in IB?

Because they want the best people. Image & reputation is everything.

During my career across multiple countries and industries I have noticed that people from "less prestigious schools" may not be as skilled. This can be their network, their family background, their technicals, etc

To a degree it is also about hiring people that feel comfortable being around other successful people. An inferiority complex might be a strong motivating force but can also be a bit awkward around rich/powerful/successful people. We are products of our environment.

I think two key points also haven't been mentioned so far: recruiting capacity and risk aversion on the employer side.

1) Recruiting capacity. Banks only have capacity to assess and interview a certain number of applicants. If you can get significant multiples of applicants for a position (10x, 20x or whatever the number is) just from a few top schools, out of which 5x would be more than qualified to do the job, why expand the search outside those schools? You don't have capacity to interview everyone anyway. I remember when I started in big4 audit in London, there were 10 applicants per open position. One of the ways to reduce the volume of applications to check is school cutoffs and GPAs.

2) Employer risk aversion. Given you can't get to know how a prospective employee can perform until they actually work for you, you try to rely on some signals or prior selections to form a view (apart from the interviews and assessments of course). One common assumption is that, on average, students from top schools are better than students from lower tier schools. This is a generalization, but is used by banks as a way to increase their chances of getting only top employees. That's why networking is key is these jobs if you came from a non-target. The bank has a bit more information on you to go own, making someone who networked well a more known quantity.

And a final point, which can be important at times, people are still more comfortable hiring someone from a similar background, school. For example, I come from Eastern Europe. I can assess very well the quality of a student from my country, without looking at what a certain GPA might mean or random rakings of universities. Someone else in my team might just not even consider them because they couldn't assess the quality of their education or potential skills.

Disagree with the above posters. I think it comes down to making the bank seem more competent to clients. It’s as simple as that. A large corporate is only going to pay for advice from those who they perceive as a smart group of people. Hence why they pursue advice from EBs and BBs who are on average, mostly Ivy league students.

The way I've always seen it is that many industries (CS, engineering, etc.) are looking for a specific skillset that is learned through classes and extracurriculars. Companies in these industries can offer candidates things like coding challenges to judge their usefulness in the role without relying on prestige. In fields like IB/consulting, firms are looking for a much more intangible kind of raw intellectual capacity/work ethic in new hires. This is much harder to test, and one of the simplest proxies is probably the prestige of your undergrad degree.

Not in the industry so maybe someone can inform me, but if you're majoring in Econ/Finance at a target and are majoring in the same at a non-target, what is the difference in recruiting? I understand the prestige factor of the schools, but if you are supposedly learning the same curriculum, what gives?

I understand the factor of hiring those who came from the same UG, background, etc but besides that, what is the deciding factor in my question above?

A lot of it is just recruiting efficiency, the bank needs a ready backlog of new analysts and they don't have the time to do a million campus visits and superdays. So they count on a handful of schools to provide most of the supply.

That said, smarter analysts have value. You can have two analysts who are both capable of doing the tasks, but the smarter analyst is going to be more efficient and resourceful and make better decisions with his time. The odds of Analyst X vs Analyst Y getting you a good model that doesn't need a ton of checking, can vary a lot even though all of the analysts are technically able to do it.

Cuz IB has the largest concentration of prestige-whores

Most of Investment Banking is a service business. You are hired by your client to perform a service (M&A Advisory, Restructuring, etc.) that the client's in house team is not equipped to handle on their own. Clearly the client is going to want to hire the smartest group on the street, so given that it's common for people to associate intellectual capacity with academic backgrounds, it makes sense that companies would want to work with banks that have employees from top academic institutions. Banking is just as much about continously winning clients' business as it is about doing the work, so for better or for worse, banks want employees with "winning" backgrounds.

So think in this way. Let’s say two analyst made identical projections turned out to be wrong. One from Harvard, the other from some random no name school. If you hire a Harvard kid, you can say, “hey that kids from Harvard, who can make a better one?” But for other kid, boss will say shit like “this is why we shouldn’t hire kids from third tier school”

I’m not saying kid from third tier school won’t do well on the job, but as an interviewer or recruiter, it’s safe option for them I think.

One of my HS buddies grew up to be a senior person (above MD level) at a BB. We discussed this very topic frequently. Over his career, he interviewed/ hired hundreds if not thousands of candidates. They rarely looked outside of top target schools (back then it was an even thinner list). I used to ask him if he ever thought they missed a good opportunity by not interviewing that diamond in the rough from school X. He consistently would answer, "No, I'm sure there are many talented kids from those type of schools but why would you assume they were better than the targets? We pick the best of the best from the best schools. The admissions offices have already vetted a lot of this stuff for us. Why would we swim in a different pond?"

I used to sell enterprise type computer systems and there was a saying that a MIS (now IT) director never got fired by buying IBM. Meaning the quality is proven so why stray from it?