Interesting article. Nice read, especially if you are not HBS material 
Why Harvard Is Bad for Wall Street Obscure Economic Indicators Part 6: Harvard Business School graduates on Wall Street. By Daniel Gross Posted Friday, Nov. 19,…
Interesting article. Nice read, especially if you are not HBS material :D
Why Harvard Is Bad for Wall Street
Obscure Economic Indicators Part 6: Harvard Business
School graduates on Wall Street.
By Daniel Gross
Posted Friday, Nov. 19, 2004, at 2:10 PM PT
Illustration by Mark Alan Stamaty
The bright young things from Harvard Business School
are making their way to Wall Street in droves. Some 26
percent of the HBS class of 2004 took stock-market
related jobs, up from 23 percent of the class of 2003.
I guess that means it's time to sell.
Consultant Ray Soifer (Harvard MBA, 1965) has been
tallying the career paths of fellow HBS alumni for
several years, and what he has discovered confirms
what every Yalie has always suspected: Harvard is bad
for America. (The raw data since 1998 can be seen at
the HBS Web site. Click here, pick a year in the left
window, and then select "by industry" in the right
window. Before 1998, the information was published in
an alumni magazine.) Soifer has found that the initial
career choices of HBS grads amount to a "rather
esoteric but nonetheless generally accurate long-term
indicator of the US equity market," he notes in his
most recent report.
Make that a contra-indicator. The more Harvard grads
on Wall Street, the worse the market does. Soifer
counts the proportion of the class that goes into the
six categories of jobs that "depend to a large extent
on the stock market": investment banking, investment
management, sales and trading, venture capital,
private equity, or leveraged buyouts. Historically,
when fewer than 10 percent of HBS grads go into these
fields, it's a signal that stocks are a long-term buy.
The figure last fell below 10 percent in the early
1980s, just before the great recent bull run began.
The worst year was 1937, when only 1 percent of alums
went into the securities industry. For long-term
investors, the late '30s turned out to be a great time
to buy stocks.
The HBS grads are an even better "sell" warning.
Soifer has found that when 30 percent or more of HBS
alums throng into the industry, it's a sell signal. In
1987, more than three of every 10 HBS grads rushed to
join the crowds playing Liar's Pokerjust in time for
the crash. In 2000, the year of the market meltdown,
30 percent of HBS grads went to Wall Street. In 2001
and 2002, as 32 percent and 36 percent of HBS grads
entered the sector, the malaise continued. HBS
students finally got wise in early 2003, as only 23
percent went into the industry. Soifer presciently
noted that this 2003 drop was an indicator that the
market was about to have a good year, which it did.
Soifer is quick to point out that the data are far
from perfect, and that nobody should go long or short
on the S & P 500 based solely on their release. But
while they might not tell us precisely when the market
will turn down or shoot up, the results do tell us
something interesting about HBS grads. HBS students
have always been the envy of other MBA students (for
the higher salaries they command) and of other Harvard
students (for the more sumptuous gym and cafeteria
they enjoy in their exclusive campus on the far side
of the Charles River). But the masters of the case
study aren't bold risk-takers. Despite their
reputation as future business leaders, they are
perpetually just a bit behind the curve. Mother
Harvard gives them the tools, connections, vocabulary,
and polish to climb the corporate ladder. They take
high-paying jobs in consulting, Fortune 500 companies,
and on Wall Street rather than striking out on their
own.
In the 1990s, for example, going into high-tech was a
brilliant move. But as late as 1998, only 11 percent
of HBS grads went to work in the exploding field. But
then 21 percent of the class of 2000 took a job in
high-techjust in time to get popped when the bubble
burst.
Why? HBS grads, like most businesspeople, have
short-term time horizons. They go where the money is
today, not where it might be three or five years down
the road.
And like most businesspeople, they respond to the
market. Companies and industries feeling flush will
likely increase their efforts to recruit HBS grads,
who are prestige hires. And as countless case studies
have shown, free-spending and complacency are
frequently precursors to a fall. Conversely, when
industries and companies are down on their luck or out
of fashion, they'll have a much tougher time luring
HBS grads. Essentially, the system encourages HBS
grads to join fields at the top of their cycle and
shun those that are poised for a turnaround.
"You would think that, given the finance they are
taught, would remember to try to buy low
and sell high," said Soifer. "But that's not the way
the world works."
Good masala.. 😁
Historically,
when fewer than 10 percent of HBS grads go into these
fields, it's a signal that stocks are a long-term buy.
The figure last fell below 10 percent in the early
1980s, just before the great recent bull run began.
The worst year was 1937, when only 1 percent of alums
went into the securities industry. For long-term
investors, the late '30s turned out to be a great time
to buy stocks.
but isnt it that ... more B School grads would go into Stock market jobs when Stock Market is up & since it is cycilical, sooner or later its bound to go down. When market's down, recruiters dont have money to pay their salaries so fewer ppl go there.
Is H-bashing the point here.
would be interesting to compare similar stats for other b schools. but who has the time
Yes capreal. H-bashing IS the point of the article . And I totally agree that the article has some circular reasoning .. full of flaws.
But yes, the interesting insight that this article provides, is a general truth about all business schools. Business school graduates, a vast majority of them, tend to be non risk takers.
They ( the majority ) are usually the followers, and not the leaders or the visionaries who can identify a future trend and get onto the band wagon early.The very fact that they needed to go to business school, to a large extent self selects a number of candidates who want a business degree for the safety factor they perceived in terms of its effect on their careers.
So, the point is, all the brouhaha about business school producing people who want to change the world ( this is more relevant to top US b schools, namely HSW ), is not necessarily true, and needs to be taken with a pinch of salt, a rather large pinch :)
just an example from familiar territory -
allwyn has done more to change the world in the little way he can, than a lot of stanford grads.
Fundoo Man
Guess we have a long way to go before such survey's are conducted on Indian B School's
finally something to think about for our elite instis
This is a brilliant example of the winners curse. It definitely gives an insight into the human mind. Its an eg. of a toss in which u would be better of if you lost.
Its culd also be seen in another light, soccer teams generally like to hire the highly talented ppl in their clubs, but the neutral audience generally supports the hard working and humble underdog for a win, completely leaving out the hard work those 'talented' players might have put in during their budding yrs. Is it possible that we are constantly against such achievers and ppl deride these guys because they feel that they culd be nuisance...???
This is a perspective which is surely open for debate.
:grab:
srikrishnan Saysfinally something to think about for our elite instis
u found a gr8 article mate. Superb work...