the psychology of ivy league grads on wall street

Ezra Klein interviews Kevin Roose, who has a new book about young Ivy League graduates who work on Wall Street. The take home point is simple: people who graduate from competitive schools graduate toward these jobs not because they love business, but because they want security. Wall Street jobs are high paid, require little experience, and have a bit of prestige. On the origins of the short term Wall Street job:

Wall Street invented this new way of recruiting in the early 80s. Before that they hired like any other industry. If you wanted to be a banker you applied for a job at a bank and they hired you or they didn’t. But in the early 80s Goldman Sachs and others figured out they could broaden their net and get lots of really smart people if they made it a temporary position rather than a permanent one.

So they created the two-and-out program. The idea is you’re there for two years and then you move onto something else. That let them attract not just hardcore econ majors but people majoring in other subjects who had a passing interest in finance and didn’t know what else to do. People now think going to a bank for two years will help prepare them for the next thing and keep them from having to make these hard decisions about the rest of their life. It made it like an extension of college. And it was genius. It led to this huge explosion in recruitment and something like a third of Ivy League graduates going to Wall Street.

Of course, it’s a mixed bag for the grads:

EK: So after writing this book, what would you say to a college senior thinking of going to Wall Street?

KR: First I would ask them why they wanted to work in an investment bank. If the answer is “because I’m tremendously in debt and need to pay it out” or “I’ve been reading Barron’s since I was 12 years old and I desperately want to be an investment banker” then those are legitimate reasons. Go ahead. But if it’s just about taking risk off the table and doing the safe prestigious thing, I’d tell them first that it will make them truly miserable, the kind of miserable it could take years to recover from, and that it also no longer has that imprimatur. It can actually hinder you. I’ve spoken to tech recruiters who say they only hire bankers in their first year or two because after that banking ruins them.

EK: How does it ruin them?

KR: It makes them too risk conscious. It gets them used to a standard of lifestyle they may not be able to replicate in any other industry. And it has a deleterious effect on creativity. Of the eight people I followed, a few came out very damaged by the experience. And not in a way a vacation can cure. It’s not about having bags under your eyes. It destroys your ability to think in creative ways about what it means to build something of value. The people I followed would admit they got a lot out of being a banker but I don’t think they’re all that tuned into the ways the experience changed them.

Check it out.

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