Thursday, May 16, 2013

To the brainy, the spoils

Economist: ... Big trends that befuddle clients mean big money for clever consultants. Barack Obama’s gazillion-page health reform has boosted health-care consulting; firms would rather pay up than read the blasted thing. The Dodd-Frank financial reform has done the same for financial-sector work. Energy and technology are hot, too.

Companies are reluctant to talk about their use of consultants, and consultancies are relentlessly tight-lipped. Bain is said to use code-names for clients even in internal discussions. Such secrecy makes this a hard industry to analyse.

It also lets stereotypes flourish. McKinseyites are said to be “vainies” (who come and lecture clients on the McKinsey way). BCG people are “brainies” (who spout academic theory). And the “Bainies” have a reputation for throwing bodies at delivering quick bottom-line results for clients. ...
See here for discussion of hiring practices at what I refer to as "soft-elite" firms such as consultancies.

4) In Rivera's research school prestige was the number one signal used by soft elite firms in evaluating prospective hires. Extracurricular activities came in second, but this is probably just a way to differentiate between applicants who have already been filtered using school prestige.

5) It is odd that the soft firms, which market themselves to clients as being super-smart repositories of brainpower (of course this is largely a fiction; see point 3 above), would rely so heavily on university admissions committees. They effectively outsource a big chunk of due diligence on their most important investment (human capital) to a group of people whose judgement they somehow trust, but perhaps without detailed understanding. When I was on the faculty at Yale I knew people in admissions and it's not clear to me that they were the best able to spot potential in 18 year olds. In studies of expert performance admissions people are less good at predicting UG GPA than a simple algorithm. (The "algorithm" is simply a weighted sum of SAT and HS GPA!)

But this doesn't matter if the success of HYPS grads becomes a self-fulfilling prophecy. Once soft elite firms and large parts of the rest of society (in particular, clients) have accepted the idea that elite universities should be trusted to do the filtering, these schools will automatically produce large numbers of successful alumni -- the imprimatur itself has value. The outsourcing of human capital filtering is more dangerous for hard elite firms, with their more objective criteria: if they find that Yale grads aren't actually any good at pricing derivatives, writing code or designing chips, then they'll have to adopt a different filter. Fortunately, since even the dumbed down SAT is still pretty g loaded, hard elite firms can be confident that the lion's share of top talent is at elite universities.
An excerpt from Lauren Rivera's article on elite firm hiring:
... In addition to such an intelligence-based perspective on university admissions, evaluators frequently adopted an instrumental and unconstrained view of university enrollment, perceiving that students typically “go to the best school they got into” (lawyer, Hispanic, male). Consequently, in the minds of evaluators, prestige rankings provided a quick way to sort candidates by “brainpower.” When sorting the “mock” resumes, an investment banking recruiter (white, female) charged with screening resumes at her firm revealed how such assumptions played out in application review. She remarked, “Her [Sarah's] grades are lower but she went to Harvard so she's definitely well-endowed in the brain category…Jonathan… went to Princeton, so he clearly didn’t get the short end of the stick in terms of smarts.” This halo effect of school prestige, combined with the prevalent belief that the daily work performed within professional service firms was “not rocket science” (see Rivera, 2010a) gave evaluators confidence that the possession of an elite credential was a sufficient signal of a candidate's ability to perform the analytical capacities of the job. Even in the quantitatively rigorous field of consulting [HA HA HA], a junior partner (white, male) asserted, “I’ve come to the stage where I trust that if the person has gone to Wharton, they can do math.”

By contrast, failure to attend an “elite” school, as conceptualized by evaluators, was an indicator of intellectual failure, regardless of a student's grades or standardized test scores. Many evaluators believed that high achieving students at lesser ranked institutions “didn’t get in to a good school,” must have “slipped up,” or otherwise warranted a “question mark” around their analytical abilities. ...


HughLygon said...

"Fortunately, since even the dumbed down SAT is still pretty g loaded,
hard elite firms can be confident that the lion's share of top talent is
at elite universities."

Huh? Doesn't follow at all. Journalists are so dumb.

"...the success of HYPS grads becomes a self-fulfilling prophecy..."

Got that right.

Anonymous said...

Surely that Stephen Small guy isn't smart enough for Bain. I mean, he didn't even go to HYP!

tractal said...

Pretty weird they're using the SAT's as a primary proxy but not even looking at the SATs. Another arbitrage opportunity?

HughLygon said...

You've hit the nail on the head to be trite. The US is SHIT!

HughLygon said...

Well, high IQ Americans of high rank means high IQ plus obedience.

Riordan said...

"Even in the quantitatively rigorous field of consulting [HA HA HA]"

I thought Big 3 consulting is indeed quantitatively intense, even for students of top Ivy League schools or public flagships like Cal, let alone your average Joe at podunk Midwest State U. Unless your judging by the standards of a theoretical physicist.....

steve hsu said...

Do you think "top students" have trouble running Excel? ;-)

In ordinary business and accounting (as opposed, say, to derivatives pricing or HFT trading) there is a limit to the level of quantitative tools that are actually useful. Most of the time some basic statistical analysis plus back of the envelope estimates (maybe, wow, a linear or gaussian model) are all that can be justified given the unquantifiable residual uncertainties. Further sophistication just lends a "spurious air of technicality" -- useful only to snow clients ;-)

Really cynical people would suggest that what I wrote above even applies to finance, but then again you have Renaissance / Jim Simons as a counter-example...

HughLygon said...

Rentec is HFT, which is to finance what roaches are to architecture.

Yan Shen said...

Here's an article written by a former MIT grad who burned at out BCG.

"Stretching reality

The first clue that my mental picture of consulting was off came with “training” in Munich. I expected instruction in Excel programming, data analysis, and business theory. Instead, Munich turned out to be little more than a week long social outing with other recently matriculated consultants and analysts within the BCG’s European branches. We donned name tags, shook hands, and drank often. Classes were fluffy, and mostly consisted of discussion of high-level, almost philosophical topics. I got along well — as both an American and a member of the Dubai office, I was doubly foreign and therefore double the curiosity.


Despite having no work or research experience outside of MIT, I was regularly advertised to clients as an expert with seemingly years of topical experience relevant to the case. We were so good at rephrasing our credentials that even I was surprised to find in each of my cases, even my very first case, that I was the most senior consultant on the team.

I quickly found out why so little had been invested in developing my Excel-craft. Analytical skills were overrated, for the simple reason that clients usually didn’t know why they had hired us. They sent us vague requests for proposal, we returned vague case proposals, and by the time we were hired, no one was the wiser as to why exactly we were there.

I got the feeling that our clients were simply trying to mimic successful businesses, and that as consultants, our earnings came from having the luck of being included in an elaborate cargo-cult ritual. In any case it fell to us to decide for ourselves what question we had been hired to answer, and as a matter of convenience, we elected to answer questions that we had already answered in the course of previous cases — no sense in doing new work when old work will do. The toolkit I brought with me from MIT was absolute overkill in this environment. Most of my day was spent thinking up and writing PowerPoint slides. Sometimes, I didn’t even need to write them — we had a service in India that could put together pretty good copy if you provided them with a sketch and some instructions."

David Coughlin said...

I have to confess that writing Excel macros is miserable, and I fail at it regularly. VBA does absolutely nothing of what I want it to do, so everything I do with it is a jury rig.

Mulcaster said...

A drop out from a physics PhD program at Northwestern, a Japanese American BTW, asked me to look at some Excel VBA code he'd been unable to debug for a year. With no more experience than one course in C++ and another in FORTRAN I found the error in an hour. I told him. He insisted I write a flow chart explaining the error he'd made. I was fired from that job for being too stupid to do the work.

Iamexpert said...

This makes me want to puke. High IQ people should be successful because the market rewards intelligent behavior in the real world, not because the market rewards high IQ credentials from school. That's just a self-fulfilling prophecy which takes all the fun and fascination out of capitalism. Please boycott Ivy League universities and anyone who graduates from them.

Jay Yoon said...

It is certainly true that someone who got into a school with greater selectivity has a statistically significant chance of having "slipped up LESS", having been "MORE of an intellectual success versus someone who didn't get into that school. But to look two talent pools and reject one of them outright on that basis is foolish. What a rational hiring manager would do would be to weight each university's graduates and make the standards for graduates at less prestigious universities meet a higher standard (whether it be undergrad GPA/standardized test scores), rather than discounting them outright or making decisions on basis of unquantified biases.

The best employers (and organizations) are highly selective, and also highly rational about their selection process. These consulting companies are lacking in the second. Whenever someone openly admits that they reason and make decisions from assumptions as consulting companies do, I see that as a "proxy" for that company also making the same decisions when it comes to their actual consulting work; sloppy assumptions covered up under a facade of prestige and competence.

Mulcaster said...

You're wrong.

Academic performance, even as measured in the typically retarded American fashion, isn't just a matter of how difficult or competitive the institution. I for one have always performed at a higher percentile when the competition was stiffer.

As usual Americans think that as things are done in America is as they are done absolutely.

The gpa is totally meaningless as it is merely a mean of short term subjective measures.

The smart hiring manager, none of whom are native born Americans, will look at test scores only.

tractal said...

Come on, GPA is not totally meaningless. If you're below 3.5 outside of STEM you're either struggling or lazy. Maybe you're just lazy because you're not challenged, but its still good data. I wouldn't want to hire a high score low GPA kid. I'd probably take him over a high GPA low score kid, but of course in the end you hire the kid with both. The problem with Jay's plan is that grade inflation is so high across the board that you couldn't effectively set a standard threshold for performance. Inflated grades are a decent way to sift out the lazys, but you can't really distinguish between strong candidates when the top 25% are all lumped into the same pile. The best hiring algorithm would be something like GPA 3.5+?--> SAT weighted .7, GPA weighted .3.

Mulcaster said...

You're an example of the stupid pushy American. "lazy" is a meaningless word to people who aren't retarded.

The best hiring algo would be SAT, ACT, CBATs, APs, GRE general and subject, LSAT, GMAT, etc.

American grades are totally meaningless.

Jay Yoon said...

I have a feeling you're closer to the truth than I am.

Mulcaster said...

I'm just a vulgar alcoholic with absurdly high test scores, so if I am closer to the truth it's by accident.

One issue which is rarely bruted especially in America is the "fit". Even if the hire has everything cognitive going for him, including passion for the subject and expertise, he may not fit. In general people work best with, marry, are friends with, etc. people like themselves. There is a pretense of meritocracy in America.

dwbudd said...

With all due respect, computer programming - and more specifically debugging - is really a commoditised, entry-level task. At one of my prior jobs, I was tasked with developing algorithms in C++, and I had -zero- courses in CS. I learnt what I needed from a couple of hours spent with a book.

Of course, that doesn't speak terribly well of the guy who could *not* find the error.

Mulcaster said...

"if one candidate had a GPA of 3.9 and the other at 2.9, that would tell you nothing about the two?"

It would tell you something, but IMHO it would tell you that the 3.9er was a pushy striver. What ever happened to a gentleman's C?

In the rest of the world academic success is better correlated with raw ability than it is in the US. American academia selects for IQ to be sure, but it also selects for obedience and pushiness.

dwbudd said...

I think that the 2.9 tells you a hell of a lot more about that guy than the 3.9 tells you about the other. That's what I meant, I guess. When I was a grad student at Stanford (more than 20 years ago now), the undergrads were incredibly grade-conscious, and a, shall we say, "liberal" drop/pass/fail policy had a ratchet effect on grades. I don't know that I would say that all Stanford undergrads with high marks were "pushy strivers" (and implicitly, is there something wrong with "striving," versus "slacking?" All else being equal, I would rather hire the guy who wants to do "better"), but a lot were. OTOH, you had to more or less work at getting bad grades, and that reveals something valuable, I think.

Your other point about whether academic success is better correlated "in the rest of the world" with raw ability is at this point, conjecture. If you want to see a culture where success selects for obeisance, you could hardly find a better model than Japan. Maybe if you would circumscribe "the rest of the world" a bit more carefully (NB: 'the rest of the world' includes not only Singapore and Taiwan, but also Mexico and Upper Volta), and supply some data, an intelligent comparison could be made.

Finally, the "gentleman's C" gave us the two nitwits of 2000 (Al Gore and George W Bush). Hardly something to recommend.

Mulcaster said...

Wrong again.

By "the rest of the world" I mean the ENTIRE rest of the world. The only exceptions would be countries where cums aren't the measure of a degree's quality. I believe there is ONLY one other country like this, and it's even worse than the US. That country is Canada. How many times have I met a foreign student who does very well in the US by its own measure but came here because he COULDN'T get the score in his home country.

You're VERY wrong about Japan. The deference to one's betters in Japan is more ritual than conviction, tatemae vs honne. Admission to U Tokyo, etc. is determined EXCLUSIVELY by objective standardized tests. Grades select for pushy strivers who may or may not be smart. Promotion furthermore was, maybe it's changed, based solely on seniority in Japan's large corps. The Japanese salary man isn't competing with his fellow salary men, and competition isn't required to prevent "slacking".

It's AMAZING how American's really believe they live in a meritocracy even though of ALL developed countries the US has the LEAST social mobility and the GREATEST inequality.

"slacker" is a word only a pushy vulgar American would use. The American character is perfectly reflected in its ugly junky cars, its fast food, its obesity, its patriotism. The US is a joke.

And BTW, I am an American born and bred and of exclusively W European descent.

dwbudd said...

Sound and fury, signifying while not quite nothing, very little.

The comment about "choosing the guy who isn't a pushy striver" reveals that either you didn't read the point I made, or failed to understand it. If you still cling to the belied that one ought to consider a college grad with a 2.9 GPA the absolute equivalent of the graduate with a 3.9 - the undeniable, absolute logical consequence that grades are "totally meaningless" the way a child clings to a blanket for protection against monsters under the bed...

That test-based admissions (for example, the famous Gao Kao (高考) plainly sort more objectively on ability than grades. It would be a fool's errand to argue to the contrary. THAT sort of system will never be accepted here for obvious, political reasons. The SAT as even a significant component of the admission process is already controversial, so as much as you or I might want to move to a testing scheme like China, it is not going to happen. The closest simulation we have here as far as I know are the admissions to the magnets in New York City (Stuyvesant High School and Bronx School of Science at the top), and there is intense and shrill screeching every year about how "unfair" that is.

As to Japan, your comments are askew to the point. If one focuses solely on the admission to schools, which is based on testing.... That's a slice of "success," but hardly all of it. But you mentioned obedience as the way forward. The salary man in Japan may not be "competing" against the guy next to him, but implicit in your response is the quite real phenomenon that you will go along with your "better" (as you put it). If you do not obey - nod along with a smile to what your better(s) say - you will fail. Plain and simple. For the record, I wish that this were the case, but it isn't.

My comment was:

"If you want to see a culture where success selects for obeisance, you could hardly find a better model than Japan."

In Japan, you don't question the teacher or the boss. THAT is obedience. "Success" is measured by a different metric perhaps - sitting at your desk long enough to get a promotion to the next peg on the ladder. Your point was:

"American academia selects for IQ to be sure, but it also selects for obedience and pushiness."

The word "obedience" was chosen by you. The result is a crony capitalism that has not served the Japanese particularly well for the past 20 or so years.

Much of the rest is little more than argumentum ad hominem (ugly cars, fat people, vulgarity, etc.) with a truly bizarre comment about inequality, which I fail to see as relevant to the discussion - at all. Maybe you could connect the logical dots as to how "meritocracy" should strongly correlate with equality of outcome?

Mulcaster said...

"... truly bizarre..."

Not at all. Have you seen the data on IQ vs income? Have you seen the data on the heritability of psychological traits other than IQ (it's lame). I've gone to school with pushy strivers and smart people. To be sure some were both. I know he is the bogeyman for conservatives, but here's a man who agrees with me:

You showed me yours, now I'll show you mine. Maybe you were one of my profs. My BSc was in maths, got the high score in the country on the old exam 100 of the SoA. Pretty easy of course, definitely not the Putnam, but still...And my Mom's cousin is a math prof at UWash. My grandfather was a bookie and invigilated (by that cousin) mental arithmetic prodigy, for what its worth.

" hominem..."

Ugh. I guess you didn't score 800 on the old GRE verbal. Of course it's ad hominem. That was the whole
point. Americans ARE pushy strivers or as Gore Vidal put it hucksters. Americans confuse effort and accomplishment.

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