Wall Street as the low-risk option for recent elite graduates

Interesting:

EK: This seems really at odd with finance’s vision of itself as a world of capitalist cowboys.

KR: We think of Wall Street as being full of these crazy risk takers. But in a lot of schools it’s these scared organization kids going to Wall Street. One thing Wall Street does that’s really smart is they actually tell you way earlier than other industries if you got a job. They’ll let you lock the job down in the fall of your senior year. So you can take that job on Wall Street or you can gamble on getting something after you graduate.

EK: One of the other programs that uses that model is Teach for America. And it’s amazing, anecdotally, how often you see college seniors deciding between making huge money on Wall Street or making almost nothing with Teach For America. It really suggests to me that this isn’t nearly as much about the money as people think.

KR: The lesson of that is you don’t have to pay people a ton of money to come to your program after college if what you’re giving them still offers prestige and structure and the sense that they’re not signing up for something forever. Teach for America has really approximated the banking model without the money. If what you’re seeking is short-term rewards there’s no way you’d choose teaching in the Mississippi Delta over working at Goldman Sachs but there’s something calling people to do work they find meaningful.

EK: Wall Street seems particularly good at both valuing the skills and managing the fears of liberal arts majors. A lot of kids graduated with a degree in sociology or English literature and feel they don’t know any skills that will help them get a job. Wall Street both seems to see the value of that kind of learning and see how to position themselves as a kind of continuing-education program.

KR: It’s amazing. They have turned investment banking into this two-year bootcamp for adulthood. They teach you to make powerpoint slides and Excel spreadsheets. But if you ask the banks what’s interesting is they see this as a labor advantage: they can get not only the smartest econ majors but the smartest history majors. Lloyd Blankfein was a history major, for instance. And they view this as a source of prestige. They’re not just getting finance-minded kids but they’re getting the smartest kids from all fields. That lets them broaden their intellectual inputs. A history major might have different perspectives on a trading desk than an econ major.

EK: I think the conventional wisdom in Washington is that Dodd-Frank didn’t do much to structurally change Wall Street. But your book argues that Wall Street really feels like a different place to the people on it. The salaries are still high by any reasonable standard, but the insanely good times feel, to the participants, like they’re over.

KR: You could argue at a systemic level that not enough has changed. But on a cultural level it’s just not the same place. You could talk to 100 people who’ve been on Wall Street for years and they’ll all tell you it’s very different from before the crash. People just don’t believe things will ever get back to where they were before the crash. They don’t think the banks will ever make the kind of money they did before the crash. So what you’re seeing now is banks are making themselves smaller and safer. Barclays is shedding its investment bank. Morgan Stanley has gotten into safer lines of business. Prop trading is going away among the big banks. So the young people have had to resign themselves to this being a safer and more austere place to work.

I should also say that I think the bigger factor in causing disillusionment among young people is the rise of Silicon Valley and other parts of the economy growing much faster than Wall Street.

EK: Google and Apple and Facebook and Twitter now seems to occupy the place in the Ivy League firmament that the major banks once did. It’s the place where everyone envies you for getting to work.

KR: College students basically want a couple of things out of their job. They want money. They want structure. And they want respect when they tell people where they work. And Google now has that in a way the banking industry doesn’t. There’s a lot of risk aversion in that. You get the sex appeal and allure of the tech industry without taking on the personal risk of starting your own company.

EK: Have you been watching HBO’s Silicon Valley?

KR: Yes, I love it. But the part it gets wrong is that if you look at who actually works in Silicon Valley now, the geek contingent – the stereotypical socially awkward hackers – is no longer the dominant phenotype of SIlicon Valley. Now it’s people who are well adjusted, good looking graduates of elite institutions. It’s gone from weirdos in pocket protectors to the guys who used to go to Wall Street.

I talked to one guy who’s a former Goldman Sachs guy who left to go to the tech industry who said the adage in the tech world now is “be wary when the pretty people show up.”