There is a fascinating discussion unfolding across the Internet that reaches into all kinds of interesting nooks and crannies. Its origin is a paper from Lauren Rivera, "Ivies, Extracurricular and Exclusion: Elite Employers' Use of Educational Credentials." Rivera, a professor at Northwestern's Kellogg School of Management, spent several years interviewing "elite" professional service firms, meaning investment banking, consulting and law firms. Her conclusions, which have been batted around the blogosphere, come down to a handful of talking points: These elite employers primarily recruit from roughly four "super-elite" universities (these differ slightly depending on the area or the individual, and include both undergraduate and graduate recruiting, though it's amazing to see the schools that are considered "second-tier") and care more for the school than for the academic record; busy evaluators have a lot of leeway in deciding who to interview and who not; and (as in college admission) extracurricular activities have become a key secondary filter, but only if they're out of the norm -- playing college lacrosse, say, as opposed to intramural football.
Reading Rivera's paper is a revelation -- and shocking. "Evaluators," she writes, "relied so intensely on the criteria of 'school' as a criterion of evaluation not because they believed that the content of the elite curricula better prepared students for life in their firms -- in fact, evaluators tended to believe that elite and, in particular, super-elite instruction was 'too abstract,' 'overly theoretical,' or even, 'useless' compared to the more 'practical' and 'relevant' training offered at 'lesser' institutions -- but rather due to the strong cultural meanings and character judgments evaluators attributed to admission and enrollment at an elite school." Rivera quotes a recruitment manager at an investment bank who talks about schools that aren't in the super-elite category: "I'm just being really honest, it pretty much goes into a black hole. And I'm pretty open about that with the students I talk to. It's tough. You need to know someone, you need to have a connection, you need to get someone to raise their hand and say, 'Let's bring this candidate in.' ... Look, I have a specific day I need to go in and look at... the Brown candidates, you know the Yale candidates. I don't have a reason necessarily to go into what we call the 'best of the rest' folder unless I've run out of everything else. ... Unfortunately it's just not a great situation. There's not an easy way to get into the firm if you're not at a target school."
Not surprisingly, the paper has created a stir. Bloggers Bryan Caplan, Megan McArdle, Fabio Rojas, Steve Hsu and Jim Manzi have offered up perspectives on an issue that speaks to everything from the crisis in higher education to increasing inequality to the size and influence of finance. Perhaps because of the subject matter, the comments on many of these posts are well worth reading as well.
I'm not going to run through all of these intersecting threads. But I want to focus on a several issues that come out of this.
On the face of it, there's a quality to Rivera's conclusions that seems pretty obvious. Anyone who's been around Wall Street and consulting -- or anyone with a teenager suffering through college admissions -- knows the pressure that exists to get students into "elite" schools, however defined, in order to slot them onto a transmission belt to high-paying jobs, mostly at what Rivera calls the elite professional-services firms. This is the core of the myth that drives so much of upper-middle-class child rearing: the necessity of getting the tyro into Harvard or other elite universities, not for any educational attainments (so impractical), but for the effect it supposedly has on future prospects. Rivera is essentially putting flesh on those ghostly bones; she's arguing that decisions made in college admissions -- good, bad or indifferent -- play a determinative role in where you go to work and how much money you make. She is not only offering empirical backing to the mania for, say, elite kindergartens and endless tutors, but she's significantly raising the stakes: only the "top" matters. This is remarkable if only for the fact that college admissions, for all its importance, is about as scientific as necromancy.
This by itself has all kinds of important implications. If you accept the research that higher socioeconomic status is the single greatest factor in academic performance, then Rivera is outlining a process that not only bakes in inequality, but deepens it over time. If elite recruiters are too busy to vet effectively, but rely on signaling from universities that are based on admissions not academics (grade inflation, particularly at elite schools, blurs that signal), they will tend to recruit from the same elite schools -- and they will lean toward recruiting over time people just like themselves. Her field observations suggest all of that. It also gives credence to the notion that these young souls possess potential fixed at, say, 18 -- a reality adult performance belies -- or that exogenous factors such as health, family issues or personal preferences play no role in where you go to school. Brand becomes paramount. Rivera's description of the recruiting process mirrors the college admission rat race: the accumulation of "essential" credentials, from grades, to AP courses, to extracurricular activities to "interesting" interests. Each of these can be accumulated by students with money -- from test tutors to tennis instructors to physics camp to internships -- by students and parents perfectly aware of how the game is played. (Fabio Rojas, in another post, links to another study that suggests that 15 percent of students at the top 146 schools get in with less-than-minimum standards of the school. These are mostly athletes, legacies or children of potential benefactors: the Boston Globe calls them the "dim white kids.") By the time elite undergrads (or M.B.A. types) begin to look for jobs, they are masters of credentialism. And why not? Their value, they realize because they're not stupid, is simply the aggregation of brands.
It's worth noting too that the process Rivera describes eerily resembles the quantitative systems of the big banks. Given the scale, the banks model everything. No one is going to physically go pawing through individual loans or through the bonds of a CDO anymore; it's too labor intensive. Instead these firms extrapolate from a smaller sample, plugging numbers into models based on past performance. That's not unlike hiring based on a few parameters: test scores, college, extracurricular, a few answers to questions tossed at you in interviews. The option, which represents the default: Will they fit in? Are they one of us? And my favorite: Will they make us look good?
Rivera does get some pushback on the details, and this discussion eventually settles on the larger question of how we're defining "intelligence." Manzi started it off at the American Scene blog. A former management consultant, who was involved in recruiting, Manzi questioned the exclusivity of Rivera's super-elite and argued from personal experience that consultants at least do demand not just high course and test scores, but a certain rigor in course selection, particularly in math and science. Hsu, a physicist at the University of Oregon, then offered a further distinction between hard and soft firms, which are looking for subtly different skills. His distinction turns almost entirely on quantitative abilities. Hard firms, like hedge and venture firms and tech startups, demand sheer mathematical brainpower and will take it where they can find it. Soft firms such as investment banks, law and consulting firms that sell services, like advice, that is more "nebulous" and harder to measure, and where "prestige" matters more, embrace the elite-school brand more readily. Hsu, who has started several tech companies and hired both engineers and M.B.A.s, can't help but give more value to those measurable standards, although a number of his commenters argued with him on that point.
What lies behind this deification of quantitative skills? Manzi argues that it began several decades ago, though I think it goes back a bit further. "This [Hsu's] distinction is a useful starting point, but what has been happening over the past 20 years or so is the increasing migration of value from soft to hard; basically, to math, technology and analytics-intensive work. This is happening within firms and industries -- the emphasis on math ability was growing within consulting in the period I worked in it, as it was within banking -- and across sectors such as technology start-ups and math-intensive finance became the most obvious ways to make real money in America. This isn't random, but is happening because these are huge opportunities to create value." This trend, Manzi suggests, may not last forever. But he essentially argues that these firms know what they need, know how to find it, and that explains and roughly justifies the system, with some alterations, Rivera describes.
Manzi makes some excellent points, although he probably takes it too far. The subject here is the role of finance in the larger society. Vast amounts of money have been made -- and, of course, lost -- in finance. The big banks have shifted from a predominance of "soft" to "hard" as intermediary businesses have been commoditized and as the power at these institutions have swung to trading, structured finance and principal investing. Arguably, the financial crisis was brought on by quantitative finance that significantly overreached. (That's a kind way to say it.) There is a sense that some sort of balance has been lost -- a kind of intellectual discrimination and centeredness that depends less on math and more on "soft" perspective, historical or moral. You can debate many aspects of the financial crisis, but it's hard to find anyone who will say that "Wall Street," meaning finance, is not a nastier, more self-interested, chillier and amoral place today than, say, in 1975. It's a little difficult to discern in the final settling of accounts whether these huge opportunities to create value ended up in the black or not -- and for whom. It's also tough to tell how many of the vast hordes recruited into finance actually exploited those opportunities creatively and how many simply rode along, getting their gentleman Cs and coasting on the miracle of admission to a super-elite school. Like Hsu and his meritocratic hard talents, everyone in this game -- recruiters and the recruited -- accept the terms of the deal: that wealth should reward the ability to get admitted to a certain school.
Debates over education always speak to larger social issues. By narrowly focusing on the creation of value, it's not hard to justify this system of recruiting and hiring, particularly at such a large scale. It becomes more difficult, however, as you widen the lens to include university admissions, the increasing emphasis on math as the answer to all problems and to the sheer size of finance in the overall economy. But what do I know? After all, I was an English major who never had a chance to blow an analytical brainteaser in an interview with a big bank. Personally, I've always been grateful for that.
Robert Teitelman is editor in chief of The Deal magazine.