More comments on credentialism and elite hiring practices.
See earlier post for Lauren Rivera study of recruitment at elite law firms, consultancies and I-banks. I refer to these as "soft" elite firms, whereas I will refer to hedge/venture funds, startups and technology companies as "hard" elite firms. (Goldman is a mix of the two; hence the internal battles between traders and bankers. I welcome comments from insiders on this particular issue :-) In the latter category performance is a bit easier to measure, and raw prestige plays less of a role in marketing to customers or clients -- i.e., the customer can directly tell whether the gizmo works ("these search results suck!") or the fund made money. Whether or not the advice received from a law/consulting/M&A firm is any good is much more nebulous and, well, soft. ***
1) Rivera's work confirms that in the real world, people believe in folk notions of brainpower or IQ. ("Quick on the uptake", "Picks things up really fast", "A sponge" ...) They count on elite educational institutions to do their g-filtering for them. In the past, as noted by one commenter, firms often asked for SAT scores.
2) Elite soft firms generally want people who are smart, but not too smart. Other factors, like personality, communication and leadership skills, etc. are valued as well. Startups, hedge funds, MSFT/GOOG, etc. generally want the smartest people they can get their hands on, at least for technical roles.
3) The soft firms know that what they do isn't "rocket science" -- it just isn't that hard, and any academic admit to a top university is smart enough. They just have to appear elite and smart enough to snow their clients and sell the work. Thus the emphasis on factors other than intelligence, once the threshold requirement is satisfied. Someone who appears smart and inspires confidence in clients is better than a smarter person who doesn't get along with (often middlebrow) clients.
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.
*** Although I have assigned hedge and venture funds to the hard category, cynical or rigorous readers will note that in most cases there is insufficient data to actually determine the alpha (risk adjusted performance) of a fund manager. Thus prestige and other soft factors may have as much impact as real performance.
Pessimism of the Intellect, Optimism of the Will Favorite posts | Manifold podcast | Twitter: @hsu_steve
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14 comments:
I have a friend who is an officer at at third-party-logistics operator. They have a wonderlic subscription. The IQ test wasn't especially enlightening, but the personality portrait that painted of me was spot on. The IQ part said, "Too smart to be a sales rep." The personality part said, "Too smart to be a sales rep. Will get bored easily. Will wander aimlessly looking for something to sink his teeth into. Will challenge management authority." Maybe it was a horoscope but it struck home. I'm a better employee now for having had the assessment. I find myself asking, "Is this *really* something to agitate over, or is it just me being me?"
The threshold for too-smart-for-sales wasn't especially high, and the best fit for that particular sales job was one notch above average.
That's mostly BS invented by industrial psychologists to gyp people, I think. "Too smart to be in sales" might mean "will be miserable in sales" rather than "will be bad at sales".
Interesting OECD story on mobility, but isn't it just saying "all-white all-protestant societies closed to immigration aren't like large open diverse societies like the U.S."? Looking from left to right on that soical mobility graphic sure looks just like a diversity metric to me.
But if you call me an Americanophile, I plead "guilty as charged". If your family is dark skinned and poor, go try your luck in "highly socially mobile" Denmark.
I would like to see the biker bar experiment tried ... I do wonder. I would have some of the subjects try without preparation, and others I would allow to adopt their clothing ...
Real academic admits (see link below; type 1 = first rate scholar) are extremely smart but only a small fraction of, e.g., the Harvard class. These are people who are so strong they would be admitted even if other aspects of their application are pretty weak. For example, an IMO gold medalist might fall into this category. More typical merit admits (but not including athletes or legacy admits) are academically strong but need some additional boost from extracurriculars; those I would not strictly refer to as "academic admits", but they contribute the roughly the upper half of the HYPS class being pretty strong academically.
http://infoproc.blogspot.com/2009/11/defining-merit.html
"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."
The issue isn't that the firms that have to trust the elite college's judgment - they could probably do a better job on their own and get smarter people. The issue is that the clients of the firm have to be able to trust that the firm has the best people because they can't directly observe the quality of professional performances, so they can evaluate how elite the firm is by looking at the credentials of its employees and clients can trust the reputations of elite colleges more easily than they can trust the firm management (which has incentives to look for cheaper, less qualified talent otherwise).
I'm also inclined to think that there is a significant difference between finance and non-finance jobs at hedge funds/start ups, etc. The relationship between a hedge fund or start up's finance team and its investors is "soft" just like other soft elites, so prestige certified by honest third parties matters more. The other relevant point in "hard" fields is that compensation is often performance based, so investors and clients can trust incentives to secure elite performances, while in many "soft" fields compensation is not performance based (the billable hour being a classic example) so alternative measures are necessary.
The number of elite law firms where junior associates have significant autonomous judgment making authority is small. Associates do legal research, due diligence review of documents, fit form contracts to particular cases, take depositions of secondary figures in litigation, and hussle to get everything in order for lead counsel at rare trials. The associate isn' the mastermind of the billion dollar merger, the associate is the guy assigned to look into regulations on transfer pricing regulations in light of the tax treaty with Bangaldesh for automotive parts businesses and report back to the tax group coordinator on the deal. This isn't easy, but any graduate of an elite law school can handle it.
The decisions made by an associate in a small or medium sized divorce firm or civil general practice are actually far more demanding and less structured and more likely to call upon talents not actually acquired in law school through direct instruction, which probably makes them more g intensive. But, ability to pay is a much bigger factor in determining which graduate is doing what than the necessity involved in doing the job.
A problem with the American economy in general, is that our big businesses and their professional servants don't trust their very bright and fired up junior employees with very much autonomy or decision making authority, thereby wasting their talents on less tasks. For example, the average age of people making major commercial real estate construction decisions is older in the United States than almost any other economy on the planet. In China the decisions that we entrust to sixty-five year old plus senior executives are being routinely made by up and coming thirty-somethings.
Predominantly merit based admission in the U.S. is itself only about 50 years old and that trend hadn't fully run its course until about 40 years ago.
"At a certain point A grades on enough A-levels gets anyone into Oxbridge"
Not for medicine it doesn't. 2 A*s and 2 As won't get you in unless you interview well.
I also interviewed at one hedge fund with a very high g ceiling and I
didn't get passed on to the 2nd round. I am confident that I can make
it as a quant, but this particular firm was definitely looking for much
smarter people. My social skills got me the first round interview.
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!)
They effectively outsource a big chunk of due
diligence on their most important investment (human capital) to a group
of people whose judgement they
levitra
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
I was on the faculty at Yale I knew people
in admissions and it's not clear to me that
levitra
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
See earlier post
for Lauren Rivera study of recruitment at elite law firms,
consultancies and I-banks. I refer to these as "soft" elite firms,
whereas I will refer to hedge/venture funds, startups weight loss pills and technology
companies as "hard" elite firms. (Goldman is a mix of the two; hence the
internal battles between traders and bankers. I welcome comments from
insiders on this particular issue :-)
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