The elite students and no-hopers of Goldman and JP Morgan

If you were wondering what the balance between fear and greed is in today’s youth, statistics on graduate applications to investment banks might shed some light. For one thing, since this time last year, banks have rapidly and repeatedly raised the salaries they offer new hires. On the other hand, a career in banking looks a bit riskier than 12 months ago, and publicity about working conditions hasn’t improved. So which of the two effects won out?

The answer is…ambiguous. According to data analyzed by Financial News, nominations at Morgan Stanley, Credit Suisse and HSBC were down, while Goldman Sachs and JP Morgan were up last year, Citi was flat and Bank of America declined to comment. Since there were likely company-specific perception issues at play — constant bad headlines at CS, geopolitical uncertainty regarding Hong Kong at HSBC — it seems the kids are still passionate about the industry.

But the real question that might be raised when looking at the data might be something more: do any of these numbers make sense? For Goldman Sachs, the global internship program received 236,000 applications for 3,000 places. At JP Morgan, there are 270,855 applications for 4,604 positions, including 54,000 applications for the 480 positions in investment banking. Industry-wide, even in companies that have seen slight year-over-year declines, the norm seems to be that the raw percentage chance of being accepted into a graduate program in investment banking is just over 1%, but well below 2%.

In comparison, the acceptance rate at Harvard is 5%, Oxford University is 17.5%, and for Navy SEALs it is around 6%. This could be seen as a good thing for the industry, as it represents a conscious attempt to broaden the pool of candidates and bring out the best of the best from a wider range of young people. On the other hand, there has to be a reality check here – in any given year, does it really seem likely that there will be close to a quarter of a million graduates who would stand a chance realistic to pursue a career at Goldman Sachs?

And if the answer is no, then the challenge for graduate recruiters is next to impossible. No matter how hard they work, there must be some degree of arbitrariness in the process by which the mountain of applications is whittled down to a manageable number that can be given serious consideration. It is highly likely that those who are accepted are, indeed, among the best. But when you have so many applications to reject, you can be sure that there are also excellent candidates among those who were thrown out without a proper look.

No wonder there is such a growing industry in algorithmic scoring, video interviewing, and artificial intelligence for recruitment. It’s perhaps the modern equivalent of the process used apocryphally by a famous hedge fund manager, who used to toss requests up in the air and pick up those that landed right side up. His reasoning was simple – “the last thing I need are unlucky traders”.

Elsewhere, it’s a bit cliché to compare securities trading to a video game. But according to William Archbell, engineering team leader at Citadel Securities, developing high-performance systems for market making is really like developing video games. And he should know; after a decade in the games industry, he left a Microsoft-backed studio to work in finance.

The video game industry is notorious for its working practices, and indeed it seems that Archbell is one of the few people in the world who can honestly say that he went to work for Citadel in search of a better job. work-life balance. But his main idea seems to be that the real difference between trading systems and games is that the platforms are “optimized for P&L” rather than “optimized for fun”. Other than that, it’s all in C++ and it’s all about user testing, iteration, and latency reduction. It almost sounds like a shame – wouldn’t you like to use banking software optimized for fun once in a while?

Meanwhile

The Intern Class of 2022 partied on TikTok, making videos showing off the lifestyle, parties and free food. There is also a growing number of junior bankers/influencers, although they seem to be a bit more cautious about disclosing which bank they work for. (Bloomberg)

Sam Trabuco, co-CEO of Alameda Research and Sam Bankman-Fried’s right-hand man, resigned in order to focus on “travelling, visiting friends and family, working on myself and so on.” »; he also bought a boat. (Twitter)

ESG investing cynics often suggest that the “sustainability” factor is really nothing more than “short oil and gas”. Given this, it is perhaps understandable that Strive Asset Management decided to capitalize on the success of its first “anti-ESG” listed index fund by launching another one. Every flight delay seems to mean the bar is running out of champagne. (Bloomberg)

Despite ‘non-financial misconduct’ being an enforcement priority for City of London regulators, Freedom of Information requests reveal neither the FCA nor the Bank of England fired anyone for abuse of drugs or alcohol since 2018. There has been some use of employee support lines (which they are understandably reluctant to elaborate on), but very little mandatory drug testing. (Financial News)

As more and more people find clever hacks and premium credit cards that allow them access to airport lounges, the conditions are getting more and more crowded and unpleasant for road warriors and bankers alike. investment who see them as their own territory. (Bloomberg)

A bizarre story of someone who suffered a traumatic brain injury and found it made her less inhibited and more outgoing – rather than trying to recapture her old self, she decided to use it as an opportunity for reinvention . (CABLE)

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